Broker-Dealer Settles Charges for Over-Tendering Shares

A broker-dealer settled parallel charges brought by FINRA, NYSE Arca and NYSE American LLC for over-tendering shares on behalf of an affiliate and for failing to implement an effective supervisory compliance system.

In separate Letters of Acceptance, Waiver, and Consent, FINRA, NYSE Arca and NYSE American LLC found that the firm miscalculated the affiliate's long position for the partial tender offer ("PTO") by failing to subtract in-the-money call options sold on or after the company's PTO announcement date. FINRA and the exchanges determined that this miscalculation caused 85,000 shares that the firm tendered on behalf of its affiliate to be over-tendered.

As a result, FINRA and the exchanges found that the firm violated Exchange Act Rule 14e-4 ("Prohibited transactions in connection with partial tender offers"). The firm also lacked a supervisory system reasonably designed to achieve compliance with Rule 14e-4, and as a result violated FINRA Rules 3110(a) ("Supervisory System"), 3110(b) ("Written Procedures") and 2010 ("Standards of Commercial Honor and Principles of Trade"), NYSE American Rule 320 ("Offices—Approval, Supervision and Control") and NYSE Arca Rule 11.18 ("Supervision").

To settle the charges, the firm agreed to (i) a censure and (ii) a $125,000 fine.