Regulators say the Minneapolis-based investment bank failed to disclose record-keeping violations for years -- even after being disciplined earlier.
You might think Piper Jaffray & Co. would have known better.
The 115-year-old Minneapolis-based investment bank has agreed to a $700,000 fine for failing to retain millions of e-mails as required by securities laws and regulations, and for failing to inform regulators until after they had discovered the problem during an investigation of a former Piper Jaffray employee.
The company paid a $1.65 million fine in 2002 for failing to preserve its e-mails for three years as required by regulations. Piper Jaffray's president and CEO, Andrew Duff, said at the time that he was confident that the company's revamped archiving procedures and enhanced software would meet regulatory requirements. The company underscored then that its failures were not blamed for obstructing or impeding an investigation.
That may not be the case this time.
The Financial Industry Regulatory Authority, or FINRA, said Piper Jaffray's failures "potentially impacted" its investigation of a former employee of the firm, identified in public records only by the initials "DC." FINRA said in a news release Monday that the firm's e-mail retention problems may also have affected its abilities to respond fully to other regulators or parties to civil lawsuits or arbitration hearings.
Piper Jaffray issued a statement Monday minimizing its e-mail problems.
"Over the course of the several years reviewed by FINRA, Piper Jaffray experienced some inadvertent and isolated e-mail retention problems caused by technology issues," the company said. "As a result, over the entire period reviewed we retained approximately 98 percent of e-mails rather than 100 percent as we were required to do."
Investigators found that Piper Jaffray failed to retain 4.3 million e-mails, 3.8 million of them after adjusting for 550,000 that were recovered in 2007.
Piper Jaffray says its retention of e-mails now is "effectively 100 percent."
"Regarding the enforcement action cited, Piper Jaffray regrettably, due to technology issues, inadvertently made an incomplete e-mail production in January 2006; FINRA did later discipline the individual in question."
The settlement agreement Piper Jaffray signed casts the company's behavior in a harsher light, however. It says the firm began having problems with its e-mail retention system almost as soon as it was installed in 2002, problems that continued from time to time through 2008. Yet the firm failed to promptly report those problems to FINRA, the National Association of Securities Dealers or the New York Stock Exchange.
FINRA investigators tripped across the problem while searching for an electronic copy of a 2004 e-mail that Piper Jaffray had printed out in connection with the complaint about its employee, DC. Turns out, 7,217 of DC's e-mails were missing from the archives, or 15.8 percent of the employee's total. In addition, Piper Jaffray failed to turn over 6,382 of the employee's "Bloomberg messages" until January 2009, when FINRA was already in the process of settling the DC complaint with a $5,000 fine and three-month suspension.
Piper Jaffray discovered in September 2008 that nearly a million e-mails sent by its employees via Bloomberg terminals in 2008 were not ingested into the computer system Piper Jaffray uses to comply with its supervisory responsibilities. In addition, the firm discovered that from August 2002 through 2008, it failed to link certain Bloomberg accounts with specific Piper Jaffray employees. The company identified nearly 14.5 million Bloomberg e-mails that were affected by that problem.
As a result, FINRA said, the company couldn't possibly have complied properly with "extraction requests" for those employees' e-mails because any searches would not have produced their Bloomberg e-mails.
Dan Browning • 612-673-4493