Firm Settles FINRA Charges for Anti-Market Manipulation Notification Failures

A firm settled FINRA charges for failing to timely and accurately submit restricted period and trading-related notifications. 

According to the AWC, the firm acted as a manager for 47 securities distributions subject to the anti-market manipulation provisions of Regulation M ("Market Manipulation"). During the relevant period, the firm submitted untimely, inaccurate, or missing "restricted period" notifications in 55 instances. FINRA found that the firm submitted 21 restricted period notifications and 23 trading notifications late—some by as many as 101 days. Additionally, FINRA said the firm filed multiple inaccurate notifications that failed to identify all distribution participants, while failing to file others entirely based on mistaken beliefs regarding exceptions to Regulation M.

FINRA found that the firm failed to establish and maintain a reasonably designed supervisory system. FINRA said the firm’s written supervisory procedures lacked specific reviews to ensure notifications were filed timely, and that the firm’s review of notification accuracy was unreasonably narrow, verifying only the symbol and restricted period length. Further, FINRA said that during a certain period, the firm failed to monitor its own proprietary trading and error accounts to ensure it did not bid for or purchase covered securities during restricted periods.

FINRA concluded that the firm violated FINRA Rules 5190 ("Notification Requirements for Offering Participants"), Rule 3110 ("Supervision") and Rule 2010 ("Standards of Commercial Honor and Principles of Trade"). 

The firm agreed to (i) a censure, (ii) an $88,079 fine (part of a global resolution totaling $145,000), and (iii) an undertaking to certify the remediation of its supervisory system within 60 days.