Firm Settles Charges for Best Execution Failures

A firm settled FINRA charges for failing to ensure best execution for certain customer orders in over the counter ("OTC") securities.

According to the settlement letter, during the relevant period, the firm had a manual process for comparing customer executions with prices available at the same time from other dealers, but that the firm did not effectively integrate these other dealer prices into the order management system used to execute orders. FINRA found that the firm "did not provide best execution in connection with 2,395 orders in OTC securities."

FINRA also found that the firm's best execution supervision review "had unreasonably narrow parameters and was not functional for the entire period." FINRA said the firm's supervisory review was limited to trades executed within specific hours and under certain conditions, which excluded many transactions from being assessed. FINRA also found that the system had a technical issue, which resulted in no data being generated for 75 trading days.

As a result of its findings, FINRA determined that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110(a) ("Supervisory System") and 5310 ("Best Execution and Interpositioning").  

To settle the charges, the firm agreed to (i) a censure, (ii) a $100,000 fine, and (iii) restitution of $51,214 plus interest.