Mizuho fined for not monitoring certain senior execs’ communications
Mizuho Securities USA LLC has agreed to a fine of $40,000 as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA). The settlement stems from Mizuho’s violations of FINRA rules regarding monitoring of the communications of management.
FINRA has found that for a period of approximately 13 years, Mizuho excluded the electronic communications of certain senior management from its supervisory review process. As a result, Mizuho violated NASD Rules 3010 and 2110, and FINRA Rules 3110 and 2010.
At the time an employee is hired, Mizuho decides whether to include that employee in its electronic communication monitoring. From 2007 through the present, Miizuho’s written supervisory procedures identified “non-producing members of senior management…that handle sensitive information” as persons whose electronic communications would be captured and retained but would not be monitored as part of the firm’s review process involving lexicon-based and random percentage reviews.
In excluding members of senior management from monitoring, Mizuho did not have a process in place for the review of communications of those senior management associated persons relating to its securities business. Nor did the firm establish a separate process by which it might effectively review “sensitive information” in the communications of senior management.
For example, from March 2017 through April 2020, Mizuho excluded the electronic communications of twelve senior executives, including the firm’s heads of the banking, equity, fixed income, and futures divisions, among others, from review. Mizuho failed to monitor communications that reflected these senior executives’ involvement with the firm’s securities business, including client transactions, hedging strategies, and deal approval.
On top of the fine, the firm has agreed to a censure.
Also, within 60 days of Notice of Acceptance of the Letter of Acceptance, Waiver, and Consent (AWC), Mizuho will have certify to FINRA in a submission signed by an officer and registered principal of Mizuho that, as of the date of the certification, Mizuho has revised its written supervisory procedures and implemented policies, procedures, and internal controls to the firm’s supervisory system reasonably designed to address and remediate the issues related to the review of electronic communications of its senior management as identified in the AWC.