According to FINRA, CUNA Brokerage Services, Inc. was censured and fined $30,000 for failing to preserve approximately 14,000 records containing information collected from retail customers regarding retirement plan rollovers.
Under Regulation Best Interest (Reg BI), broker-dealers must act in their customers' best interests when making recommendations, including recommendations to roll over employer-sponsored retirement plans into individual retirement accounts (IRAs). Firms are required to collect and maintain records documenting the information they gathered to support these recommendations.
CUNA Brokerage inadvertently deleted these required records while transitioning its business away from providing services to retail customers. The deleted records contained important information collected pursuant to Reg BI, including whether a potential transfer was a forced distribution from the retirement plan, the importance to customers of protecting retirement assets from creditors or legal judgments, and the importance of flexibility in distribution options.
These records are essential for demonstrating that the firm properly evaluated whether rollover recommendations were in customers' best interests. Without them, it becomes impossible to verify that appropriate analysis was conducted before recommending that customers move their retirement savings.
This case illustrates the importance of proper records retention, particularly during business transitions. Retirement rollover decisions have significant long-term implications for investors, and the records documenting the basis for these recommendations must be preserved for regulatory review and potential customer disputes.