Two Schools of Thought on Archiving

By Michael Osterman
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On Monday, May 24th, the Financial Industry Regulatory Authority (FINRA) announced that it had fined Piper Jaffray $700,000 for not retaining about 4.3 million emails for the roughly six-year period ended December 2008.  This followed a 2002 sanction against the company by the Securities and Exchange Commission, National Association of Securities Dealers (the precursor to FINRA) and the New York Stock Exchange for a failure to retain email.

So, should Piper Jaffray have retained its email?

  • Yes. It’s the law that broker-dealers and others retain their email, so they should.
  • Yes. Given that Piper Jaffray had 1,054 employees as of year-end 2009, their fine cost them $664 per employee—lots more than any archiving system would have cost them during the six years cited in the FINRA sanction.
  • Yes. The notion that any publicity is good publicity doesn’t quite cut it in an industry that deals with billions of dollars in investors’ money.

It’s important to note that the failure to preserve email may have been due to oversight on Piper Jaffray’s part and there may have been no malicious intent not to retain this content.

When it comes to email archiving, there are two schools of thought. In a recent study conducted by Osterman Research, we found that 11% believe that deleting all email content on a regular basis is the least risky option, since it reduces the likelihood that incriminating evidence will be found during legal discovery, a regulatory audit, etc. The second school of thought—held by 65% of the same survey sample—believes that archiving important content is the least risky option; another 23% are not yet sure.

So, should you archive email and other electronic content? Our advice is a definite yes, both because of regulatory requirements for most organizations to preserve business records (a growing proportion of which are stored in email and other electronic file stores), and because of legal reasons. The latter will be the more important reason for most companies that operate in lightly regulated industries, since at some point you will need to produce records in response to a wrongful termination suit, a product liability suit or some other legal action. Plus, if you suspect you might be sued, an archiving system is a great way to do an informal early case assessment to see where you stand.

Published May 24, 2010