The investment services arm of Arkansas-based Arvest Bank has agreed to pay a $150,000 fine to settle allegations that it failed to provide some of its brokerage customers with required privacy notices, according to the firm’s agreement with FINRA.
Arvest neglected to provide one of its two clearing firms with an initial privacy notice that the clearing firm would then provide to some 940 Arvest brokerage customers, FINRA claimed.
The lapses allegedly occurred between January 2009 and December 2014.
Broker-dealers are required to provide “clear and conspicuous privacy notices to their customers that accurately reflect the financial institution’s privacy policies and practices,” FINRA said, adding that they must be furnished when a customer relationship is initially established and annually after that.
Arvest also fell short on disseminating annual notices, according to FINRA. While some 146,000 brokerage customers received annual notices from Arvest Bank, the notices did not meet the requirements of a “joint notice” under SEC regulations. The notices were created for Arvest Bank customers and did not include any of the required references to the broker-dealer, FINRA claimed.
The flawed annual privacy notices went out between January 2009 and December 2013, according to FINRA.
The regulator also faulted the firm for allegedly neglecting during this period to provide some 34,400 annual privacy notices to brokerage customers who did not have a relationship with the bank and therefore did not receive any annual privacy notice at all.
FINRA noted that Arvest tried but failed to make amends. Beginning in December 2014, it provided all of its brokerage customers with Arvest Bank initial and annual privacy notices. These notices, however, were not compliant as a “joint notice” because they too failed to include required references to the broker-dealer.
As a result, between January 2009 and December 2016, the firm provided some 14,400 initial notices and some 68,000 annual notices that were not compliant, FINRA said.
In addition, the regulator chided the firm for failing to establish and maintain a supervisory system reasonably designed to ensure that it was meeting its privacy notice obligations. The firm’s written supervisory procedures, for example, did not reflect that either of its clearing firms or the bank had been delegated the responsibility of providing notices to Arvest brokerage customers, FINRA claimed.
Neither Arvest nor the firm’s attorney, Wagner Dias da Silva of law firm McAfee & Taft, responded to email or voice messages seeking comment. The firm agreed to the $150,000 fine as well as a censure without admitting or denying FINRA’s findings.