Firm Settles Charges Over Inaccurate Trade Confirmations

A firm settled FINRA charges for failing to send or for sending inaccurate trade confirmations to customers.  

According to the AWC, the firm

• sent its institutional customers approximately 570,000 confirmations for fixed income transactions that inaccurately stated that the transactions were executed in an agency capacity, when they were executed in a principal capacity. Approximately 3,500 of the affected confirmations were related to municipal securities transactions. The inaccuracies stemmed from two coding errors in the electronic systems that the firm relied on for sending trade confirmations.
• sent its institutional customers approximately 370,000 trade confirmations for fixed income transactions that inaccurately stated whether the transactions were solicited or unsolicited.  
• failed to deliver approximately 267,000 trade confirmations to approximately 720 customers that had requested electronic delivery of trade confirmations. For certain customers, the firm failed to identify that the customers had traded products for which the systems used by the firm could not generate and send electronic confirmations. The firm also failed to send paper confirmations when the customers traded those products. 
• the firm failed to send trade confirmations for millions of dividend reinvestment plan ("DRIP") transactions in at least 285,000 accounts. The firm did not provide customers with a detailed written description of the DRIP prior to enrollment containing certain disclosures, as required by a 2006 No-Action Letter. The firm instead confirmed automatic dividend reinvestments pursuant to a DRIP through monthly account statements rather than trade-by-trade confirmations.

The firm also extended credit to certain customers and its introducing firms in violation of Regulation T ("Credit by Brokers and Dealers"). 

FINRA found that the firm violated Exchange Act Rule 10b-10 ("Confirmation of Transactions"), Exchange Act Section 17(a) and Rule 17a-3 ("Records and reports"), FINRA Rules 2232 ("Customer Confirmations"), 4511 ("General requirements"), 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade"), and MSRB Rules G-15 ("Confirmation, Clearance, Settlement and Other Uniform Practice Requirements with Respect to Transactions with Customers"), G-8 ("Books and Records to be Made by Brokers, Dealers, and Municipal Securities Dealers and Municipal Advisors") and G-27 ("Supervision") and NASD Rules 3010 and 2110. 

To settle the charges, the firm agreed to (i) a censure, (ii) to pay a $375,000 fine, and (iii) to pay $393,834 in restitution to its customers.