Wednesday, June 15, 2005
E-mails have played an important role in a number of cases, from the prosecutions of Frank Quattrone and Arthur Andersen to the broker analysts conflict-of-interest settlement. Brokers are required to maintain e-mails for three years, and Bank of America agreed to settle an SEC administrative proceeding finding that the company (through two investment adviser arms, Banc of America Investment Services and BACAP Distributors) failed to preserve e-mails from January 2001 through February 2004. According to the Cease-and-Desist Order (here):
In administering the software system that allowed for retention of electronic mail communications, Respondents failed to ensure that the software system captured all electronic mail for the required employees and associated persons. For example, when Respondents hired new employees, or transferred employees to a location with a different computer server, Respondents often did not take steps to ensure that the electronic mail retention software captured the electronic mail of the newly hired or transferred employee. As a result, Respondents failed to retain electronic mail communications of a significant number of employees and associated persons during the relevant time period. Although Respondents knew that the software system had not retained electronic mail communications for all required employees and associated persons, Respondents did not adequately address the deficiencies in their administration of the software system to ensure retention of electronic mail communications prior to February 2004.
Bank of America paid a $10 million fine in March 2004 for failing to produce documents and e-mail to the SEC in an investigation of possible illegal trading at the firm (order here), and the current proceeding arises out of problems with obtaining e-mail that first arose in an SEC investigation. Preserving e-mails is vital for companies these days -- just ask Morgan Stanley about the problems a failure to produce them can cause, to the tune of an $850 million punitive damages award. (ph)