While the end of the year typically sees the pace of work begin to slow, the Financial Industry Regulatory Authority (FINRA) has been as active as ever in tackling instances of recordkeeping noncompliance. The regulator has issued a $10,000 fine and 45-day suspension against an ex-B. Riley broker for using his personal email account to send business-related messages to a client – resulting in an off-channel communications breach.
Held to (personal) account
In a letter of acceptance summarizing the details of the investigation, FINRA noted that Roger D. Follis had exchanged over 1,900 emails with a client from October 2020 to March 2023. The contents of these emails included investment recommendations, details of the client’s portfolio investments and balances, and even client complaints against Follis concerning account activity.
B. Riley policies prohibited employees from using personal email accounts for business-related communications, instead requesting that any electronic business conversations be conducted using firm-sponsored systems. The company also had policies in place requiring employees to report any customer complaints for further review, as required by FINRA Rule 4530.2 on reporting requirements, which Follis disregarded.
Follis’s failure to communicate using business-approved channels also caused B.Riley to violate several recordkeeping rules applicable to all registered firms and members, including the Securities and Exchange Commission’s (SEC) Rule 17a-4 on recordkeeping and the preservation of communications. In turn, this also violated FINRA Rules 2010 and 4511:
- Rule 2010 requires that members observe “high standards of commercial honor” as well as “just and equitable principles of trade.” When conducting business, members are expected to maintain integrity, commit to upholding compliance with regulatory principles, and ensure ethical treatment when working with clients.
- Rule 4511 lays out mandatory recordkeeping requirements, necessitating that member firms maintain accurate and complete records in a format the complies with SEC Rule 17a-4. Original copies of electronic records must be kept for a minimum of three years.
Messages sent, lessons learned
Following these violations, B. Riley Wealth Management discharged Follis for multiple failures, including:
“Failure to communicate with clients in a firm-approved manner, failure to maintain books and records for a period of time, failure to timely report a customer complaint, [and for having] submitted incorrect information in compliance questionnaires.”
The broker also received a 45-day suspension from” associating with any FINRA member in all capacities.” Even post-suspension, FINRA stated that this acceptance letter would become a part of Follis’ permanent disciplinary record and could be considered in any future action – emphasizing the lasting consequences of noncompliant behaviors.
This past year has seen the spotlight move away from firms and toward individuals for infractions. Shifting administrative priorities across U.S. regulation have seen those like the SEC and Commodity Futures Trading Commission (CFTC) take their foot off the gas in issuing sweeping enforcements for compliance violations in favor of encouraging self-reporting and cooperation to handle compliance issues promptly.
On a recordkeeping regulation roll
Where enforcement activity from other federal agencies has slowed, it seems FINRA’s drive to fight against off-channel communications violations only continues to intensify. Over the course of 2025, the regulator has issued several similar fines, including a $10,000 fine against an ex-broker in October and a $65,000 fine against a member firm in November.
Among other emerging risks, FINRA has identified recordkeeping as a priority item in its recently released Annual Oversight Report for 2026. In the report, which uncovers insights from the regulator’s investigations to help firms strengthen compliance programs, the regulator noted that it found multiple instances of electronic communications capture failures, off-channel communications use, inadequate supervision procedures, and inadequate due diligence of third-party vendors.
FINRA identified three effective practices for members to consider where it comes to enhancing recordkeeping compliance, which include:
- Testing and verifying third-party vendors’ recordkeeping capabilities
- Ensuring there is a process to provide regulators appropriate access to firm’s books and records
- Monitoring for any indications of off-channel communications by revising and tailoring keyword searches within surveillance systems
Recordkeeping lapses may not be inherently indicative of misconduct, though time and again, investigations have uncovered that – where conversations are happening off-channel – there is always a risk of other suspicious activity, making comprehensive retention and monitoring policies vital to a strong compliance program.
Keep calm and capture on
FINRA’s ongoing battle against recordkeeping violations has made one thing abundantly clear – individuals that believe they can go undetected by communicating under the radar may soon find the consequences of enforcement catching up to them.
FINRA’s ongoing enforcement actions raise two important points: 1) individuals must always uphold high standards of conduct in line with regulatory expectations, and 2) firms that establish strong retention and monitoring systems will be in the best position to cooperate with regulators and weed out instances of noncompliance.
