Ally Invest Securities Fined $850,000 for Failing to Preserve 22.6 Million Business Communications

From September 2016 through November 2022, Ally Invest Securities LLC failed to preserve over 22.6 million business-related electronic communications, violating key federal securities laws and FINRA regulations. As a result, Ally has been censured and fined $850,000 by FINRA. The violations underscore how crucial it is for brokerage firms to maintain proper supervisory and recordkeeping systems — and how investors can be harmed when firms fail to comply with these obligations.

Background: Ally’s Compliance Failures

According to FINRA’s settlement order (FINRA Letter of Acceptance, Waiver, and Consent No. 2021071257201),  Ally’s recordkeeping failures spanned six years, from September 2016 through November 2022. During this period, Ally failed to preserve millions of customer and internal electronic communications related to:

• Trade executions
• Fund transfers
• Account activity
• Internal discussions about its securities business

The issue stemmed from technical and coding errors in multiple record-retention systems. In one example, Ally had relied on an automated copying process to capture communications to a dedicated retention mailbox. When the firm transitioned to a new records-retention platform, this process was inadvertently deleted — resulting in millions of emails never being archived.

Regulatory Violations and Consequences

These systemic failures violated:

• Securities Exchange Act of 1934 § 17(a)
• Exchange Act Rule 17a-4 (record preservation requirements)
• FINRA Rules 4511 and 2010 (recordkeeping and high standards of commercial honor)

FINRA also found that Ally’s written supervisory procedures (WSPs) were not reasonably designed to ensure compliance with record retention and supervisory review requirements, in violation of FINRA Rules 3110 and 2010.

Due to these deficiencies, Ally:

• Failed to preserve at least 22.6 million business-related electronic communications
• Failed to review at least 521,000 business-related emails and messages
• Could not fully respond to 39 regulatory inquiries from the SEC and FINRA

FINRA had previously warned Ally about communication-review deficiencies, magnifying the seriousness of this repeat misconduct. The resulting fine: $850,000, along with a public censure.

Why Recordkeeping Failures Matter to Investors

Recordkeeping isn’t merely an administrative task—it’s a cornerstone of investor protection. Proper record retention ensures that regulators, investors, and courts can:

• Verify trade instructions and authorizations
• Detect broker misconduct such as unauthorized trading or churning
• Ensure that firms supervise their brokers appropriately

When firms like Ally fail to preserve records, investors lose critical transparency and accountability, making it more difficult to identify and prove cases of negligence, fraud, or regulatory violations.

At Iorio Law PLLC, we frequently see cases where poor supervision and missing records lead to investor harm. FINRA Rule 3110 requires brokerage firms to implement reasonable supervisory systems to detect and prevent misconduct. When they don’t, investors have legal remedies through FINRA arbitration.

Ally’s Supervisory Failures

In addition to recordkeeping issues, FINRA found that Ally’s supervisory system for electronic communications review was inadequate. The firm’s procedures:

• Did not require all group mailboxes or user accounts on its customer-service software to be linked to the review system;
• Lacked clear processes for verifying whether these mailboxes were properly connected; and
• Resulted in no supervisory review of hundreds of thousands of emails.

This lack of oversight violated FINRA’s Rule 3110, which requires member firms to establish and maintain systems reasonably designed to achieve compliance with securities laws and regulations.

Key Takeaways for Investors

This case is a reminder that even large, tech-driven broker-dealers can fail in their regulatory obligations. Investors should remain vigilant when choosing brokerage firms and take steps to safeguard their investments:

1. Check your broker’s disciplinary history using FINRA BrokerCheck.
2. Maintain your own records of communications, trade confirmations, and account statements.
3. Report suspicious activity—such as unauthorized trades, missing statements, or unreturned calls—to FINRA or the SEC.
4. Consult a securities arbitration attorney if you believe your brokerage firm’s misconduct caused losses.

Recovering Investment Losses Caused by Broker Misconduct

If you suffered investment losses because your broker or brokerage firm failed to supervise accounts, made unsuitable recommendations, or violated regulatory obligations, you may be entitled to recover damages through FINRA arbitration.

At Iorio Law PLLC, we represent investors nationwide in claims involving:

• Failure to supervise
• Misrepresentations and omissions
• Unsuitable investment recommendations
• Breach of fiduciary duty
• Unauthorized trading
• Recordkeeping and compliance violations

Our founder, August M. Iorio, is an experienced New York securities arbitration attorney who has recovered nearly $100 million for investors nationwide. We handle all cases on a contingency fee basis, meaning you pay no legal fees unless we recover money for you.

Contact Iorio Law PLLC

If you suffered investment losses as a result of stockbroker negligence or misconduct, contact us today for a free, confidential consultation.

📞 Call: (646) 330-4624
📧 Email: info@iorio.law
📍 Location: One World Trade Center, 85th Floor, New York, NY 10007 (nationwide representation)
🖊️ Free Case Review: Contact Form

Free & confidential case evaluation. No recovery, no fee.