A Florida-based brokerage firm will pay $500,000 to settle Financial Industry Regulatory Authority allegations it didn’t retain more than 10,000 business-related text messages over 10 years.
The settlement is against Dawson James Securities, a broker/dealer in Boca Raton, Fla., with three branch offices and about 35 registered reps, according to FINRA. The firm primarily sells private and public securities offerings, according to the b/d regulator’s settlement letter released Friday.
CEO Robert Dawson Keyser Jr., who founded the firm in 2002, was also named in the settlement. He’s been in the industry since 1984 and was registered with more than a dozen firms in New York and Florida, according to his BrokerCheck profile.
Starting in August 2011, Dawson James prohibited their employees from texting for business-related communications. The firm lifted this prohibition in December 2017, only to reinstitute it several years later in January 2021. However, the firm never had a system to “preserve or review” any business-related texting, according to FINRA.
The firm failed to capture and retain more than 10,900 business-related texts sent or received by at least 27 employees, including communications about the firm’s net capital computations, consumer complaints and client recommendations.
“The firm’s management knew that associated persons used text messaging for business-related communications, and during the period when the firm prohibited using text messaging for business purposes, Keyser Jr. used his firm-issued mobile phone to send and receive approximately 4,400 business-related text messages,” the settlement read.
The settlement sprang from a review FINRA examiners conducted of Dawson James. In addition to the alleged texting lapses, regulators also found the firm’s supervisory systems for due diligence of private placement offerings “deficient in several respects,” according to the settlement.
For one, Dawson James’ procedures didn’t address the conflicts raised when its investment bankers “conducted due diligence on offerings by issuers with whom they were affiliated.”
Though Dawson James didn’t admit nor deny the findings in the settlement, the firm agreed to the $500,000 fine, a censure, and to hire a third-party compliance consultant to analyze their procedures related to retaining and reviewing business-related texts, among other things. Keyser, Jr. agreed to a one-month suspension and a $10,000 fine.
Dawson James Securities did not respond to a request for comment as of press time.
The Securities and Exchange Commission is also cracking down on firms for not retaining business-related texts.
Last week, the SEC fined the New York-based RIA Senvest Management $6.5 million for not preserving business-related electronic communications. In all, firm employees sent and received thousands of off-channel business-related communications over two years, including discussions between senior officers, managing directors and other employees.
The commission’s waging a multi-year campaign against off-channel communications in the industry, starting with September 2022 penalties against 15 b/ds and one investment advisor totaling $1.1 billion. They followed those up with charges against HSBC in March 2023 and Wells Fargo and BNP Paribas in August of that year.
This past February, the SEC fined 16 more firms, including Northwestern Mutual and Guggenheim Securities. The firms collectively paid more than $81 million to settle the charges.
