According to FINRA, Justly Markets LLC (formerly DBOT ATS, LLC) was censured and fined $100,000 for failing to preserve memoranda of more than 95 million orders received from broker-dealer customers.

Initially, the firm failed to preserve memoranda for all orders received. Subsequently, the firm used a third-party vendor to preserve order memoranda, but when the firm changed third-party vendors, the original vendor deleted the firm's order memoranda. The firm had not otherwise preserved the records. The firm ultimately closed its alternative trading system and has since reorganized as a private placement agent.

Additionally, the firm failed to establish a supervisory system, including Written Supervisory Procedures, reasonably designed to achieve compliance with recordkeeping requirements. The firm had no policies or procedures and did not conduct any supervisory reviews to ensure that it made and kept current, reviewed the accuracy of, or preserved order memoranda.

Order memoranda are critical regulatory records that document the details of securities orders, including the time of receipt, the terms of the order, and how it was handled. These records are essential for regulatory examinations, investigations into trading irregularities, market manipulation, and customer disputes. The failure to preserve more than 95 million order memoranda represents a massive gap in the regulatory record.

This case highlights the importance of proper recordkeeping and the risks of over-reliance on third-party vendors without adequate backup procedures. When firms change vendors, they must ensure that critical records are properly transferred and preserved. The complete loss of records for such a large volume of orders significantly hampers regulatory oversight and the ability to investigate potential misconduct.

For investors, this case underscores the importance of maintaining personal records of all trades and communications with brokers. While firms are required to keep detailed records, failures like this demonstrate that investors should not solely rely on their broker to maintain documentation. Keep confirmation statements, account statements, and records of all transactions in your own files.