FINRA Fines Firm for Inaccurate TRACE Reporting
A firm settled FINRA charges for inaccurately reporting thousands of fixed-income transactions to TRACE and for related supervisory failures.
According to the AWC, the firm failed to apply required TRACE indicators on thousands of reports due to misinterpretations of FINRA rules. FINRA found that the firm omitted the NR Indicator on approximately 36,500 transactions executed without a mark-up, mark-down, or commission. FINRA also found that the firm failed to include the NMA-PT Indicator on roughly 22,500 of the reports missing the NR Indicator, causing trades to be disseminated publicly when they should not have been. FINRA noted that in reports of transactions in Corporate Debt securities, the firm omitted the NR Indicator "on 34,800 reports"—around "80 percent of [its] reportable transactions in Corporate Debt securities"—and failed to include the NMA-PT Indicator "on 21,500 of those reports." FINRA reported that the firm remediated these issues after being alerted to its misinterpretations.
FINRA also found that the firm’s supervisory system, including its written supervisory procedures ("WSPs"), was not reasonably designed to achieve compliance with related FINRA rules. FINRA determined that the firm had no process to review the accuracy of indicators on its TRACE reports. FINRA stated that the firm also lacked WSPs addressing the use of those indicators.
FINRA concluded that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision") and 6730 ("Transaction Reporting").
To settle the charges, the firm agreed to (i) a censure; (ii) a $50,000 fine; and (iii) an undertaking to have a senior-management principal certify within 60 days of the firm's acceptance of the AWC that the firm remediated the issues and implemented a supervisory system, including WSPs, reasonably designed to comply with FINRA rules.