FINRA Fines Firms for Submitting Inaccurate Blue Sheet Data (with Lofchie Comment)

FINRA censured and fined Barclays Capital Inc., Goldman, Sachs Co. and Merrill Lynch, Pierce, Fenner Smith, Inc. for failing to provide complete and accurate information about trades, commonly known as "blue sheet" data, to FINRA and other regulators.

FINRA found that the firms' submissions failed to include certain customers' names, contact information and transactions. In addition, FINRA found that the erroneous submissions contained incorrect name and contact information for some customers, and inaccurate details for some of the transactions. According to the press release, the violations arose from problems with the firms' electronic systems, used to compile and produce blue sheet data, not having adequate audit systems to provide for the accountability of blue sheet submissions.

In addition to the monetary fines, FINRA ordered each firm to certify that it has conducted a comprehensive review of its system related to blue sheet submissions, and to certify that it has established procedures reasonably designed to address and correct the violations.

In a similar matter, FINRA issued a complaint against Wedbush Securities for failing to submit complete and accurate blue sheets.

Lofchie Comment:The fines seem high for violations that may have been committed unknowingly in many situations. It seems worthwhile for regulators to reexamine both the situations in which they impose fines and the levels of those fines. Regulatory fines in the aggregate, added to the cost of attempting to comply with an overly complex regulatory scheme, may become a threat to firms' ability to maintain their businesses.

See: FINRA Press Release; Barclays Capital Inc. Action, Goldman, Sachs Co. Action, Merrill Lynch, Pierce, Fenner Smith, Inc. Action, Wedbush Securities, Inc. Complaint.