Firm Settles FINRA Charges for TRACE and Muni Securities Reporting Violations

A firm settled FINRA charges for inaccurately reporting over two million transactions in TRACE-eligible securities and municipal securities.

According to the AWC, the firm misreported processing times as execution times because it did not adjust its reporting systems when these securities became TRACE-eligible. FINRA found that the firm also under-reported allocations of TRACE-eligible securities to client accounts by incorrectly aggregating block transactions. FINRA said the firm failed to include the required "No Remuneration" indicator in over 179,000 US Treasury transactions executed without transaction-based compensation.

In addition, FINRA found that the firm lacked an adequate supervisory system for ensuring the accuracy of its TRACE reporting and municipal securities reporting to MSRB's Real-time Transaction Reporting System ("RTRS"). FINRA said the firm failed to establish procedures that would have prevented both the under-reporting and over-reporting of transactions. FINRA found that these supervisory deficiencies continued for nearly a decade.

FINRA determined that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision") and 6730 ("Transaction Reporting") as well as MSRB Rules G-14 ("Reports of Sales or Purchases") and G-27 ("Supervision").

To settle the charges, the firm agreed to (i) a censure and (ii) pay a $2,000,000 fine.