FINRA Fines MetLife $1.2M for Failing to Supervise Brokers’ E-mail

The Financial Industry Regulatory Authority (FINRA) said that supervisory failures at MetLife Securities allowed two brokers to engage in undisclosed outside business activities that cost clients millions of dollars.

FINRA has fined the firm and three of its New York-based affiliates—New England Securities Corp., Walnut Street Securities, Inc., and Tower Square Securities, Inc.—a total of $1.2 million for failing to establish an adequate supervisory system for the review of brokers’ e-mail with the public. The fine also resolves charges of failing to establish adequate supervisory procedures relating to broker participation in outside business activities and private securities transactions.

According to FINRA, from 1999 until December 2006, MetLife required that all securities-related e-mails from brokers be reviewed by a supervisor; however, the firm did not have a system in place to allow supervisors to monitor the e-mail, relying on brokers to forward the e-mails.

Brokers were able to dodge the rules, and in that period, two MetLife brokers did. The brokers engaged in undisclosed outside business activities and private securities transactions, reflected in more than 100 e-mails without detection by the firm. One of the brokers, Mark Salyer, stole nearly $6 million from his customers in connection with his participation in numerous private securities transactions to raise capital for real estate development companies, FINRA said.

Salyer has been barred from the securities industry. FINRA’s investigation of the other broker continues.

“Although FINRA’s rules afford firms the flexibility to tailor procedures that are appropriate for their particular business models, all firms must have the ability to flag emails that may evidence misconduct,” said Susan L. Merrill, FINRA executive vice president and chief of enforcement. “Relying on brokers to provide copies of their own e-mails to supervisors for review is hardly an effective means to detect such misconduct.”