Firm Settles Charges for Calculation Failures Concerning Partial Tender Offers

A broker-dealer settled FINRA, NYSE Arca, Inc. and NYSE American LLC charges for supervisory failures in connection with partial tender offers.

In separate Letters of Acceptance, Waiver and Consent, FINRA and the exchanges found that the firm did not reasonably supervise the calculation of its net long position for the purpose of participating in the partial tender offer. According to the AWCs, the firm miscalculated its net long position by (i) missing a short position held in another system, and (ii) incorrectly treating its options positions. The firm was found to have failed to include a supervisory review regarding compliance with SEA Rule 14e-4 ("Prohibited Transactions in Connection with Partial Tender Offers").

As a result, the firm was found in violation of SEA Rule 14e-4; FINRA Rules 3110(a) and (b) ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade"); NYSE Arca Rule 11.18 ("Supervision") and NYSE American Rule 320 ("Offices - Approval, Supervision and Control").

To settle the charges, the firm agreed to (i) a censure, (ii) a $100,000 fine split between FINRA and the exchanges, and (iii) a $218,803.52 disgorgement split between FINRA and the exchanges.