Broker-Dealer Settles FINRA Charges for LOPR System Failures

A broker-dealer settled FINRA charges for failing to adequately report OTC options positions to the Large Options Position Reporting system ("LOPR") and for related supervisory violations.

In a Letter of Acceptance, Waiver and Consent, FINRA found that the broker-dealer failed to: (i) report non-U.S.-based OTC options positions to the LOPR due to erroneous screening of U.S. customer trades with the firm's foreign affiliate; (ii) report accounts groups as "acting in-concert" to the LOPR in almost 1.4 million instances; (iii) report positions with an incorrect acting in-concert in approximately 20,000 instances; and (iv) report OTC options positions to the LOPR without the customers' tax identification number or tax type.

FINRA found that the broker-dealer did not maintain a supervisory system reasonably designed to achieve compliance with rules governing LOPR reporting. FINRA determined that while the broker-dealer maintained a supervisory system to monitor LOPR reporting, it did not conduct sufficient review to determine if the firm's LOPR reporting logic was sound and effective.

As a result, FINRA concluded that the broker-dealer violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 2360(b)(5) ("Options") and Rule 3110 ("Supervision").

To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a $325,000 civil monetary penalty.