FINRA Fines Broker-Dealer for Trading Notification Violations

A firm settled FINRA charges for reporting failures related to restricted period notifications on securities distributions. (See, Regulation M, "Unlawful Activity, Restricted Period").

According to the AWC, the firm submitted 64 restricted period notifications that were between one and seven days late and 75 that were inaccurate. FINRA said the firm "did not identify all the distribution participants," failed to confirm FINRA membership status, and omitted or incorrectly listed Central Registration Depository ("CRD") numbers. FINRA found the deficiencies stemmed in part from the firm’s transition to a new proprietary deal management system, during which it "did not ensure that the CRD numbers for certain distribution participants were included and correct." FINRA also found that the firm failed to review or amend notifications when new participants joined a distribution. 

Further, FINRA found that the firm submitted 13 trading notifications that were between one and 116 days late and failed to file one trading notification altogether. FINRA said the firm submitted 97 inaccurate trading notifications that "did not identify all the distribution participants," failed to indicate whether participants were FINRA members, or included “an incorrect CRD number for member firms.”

As a result, FINRA determined the firm violated Rule 5190 ("Notification Requirements for Offering Participants"), Rule 3110 ("Supervision") and Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To resolve the matter, the firm agreed to (i) a censure, and (ii) pay a $150,384 fine (settled simultaneously with related issues for a total resolution of $650,000).