Broker-Dealer Fined for Overstating its Daily Trading Volume

A broker-dealer settled FINRA charges for overstating its daily trading volume in advertisements provided by a third-party market data provider between January 2014 and February 2019.

In a Letter of Acceptance, Waiver and Consent, FINRA found that the broker-dealer's proprietary system suffered from several technology errors that caused inflated trading volume calculations. These calculations were then automatically transferred to the third-party without review, leaving the broker-dealer unable to identify and respond to the issue prior to transmission. FINRA said that the overstated volume included (i) trades that were subsequently cancelled or modified, (ii) transactions between the broker-dealer's affiliate that were counted as transactions with outside entities and (iii) transactions where a subsequent transfer of the same security in a riskless principal transaction was counted twice.

FINRA determined that the overstatement violated FINRA Rule 5210 ("Publication of Transactions and Quotations") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"). FINRA also found that the broker-dealer's supervisory system and written supervisory procedures were not reasonably designed to achieve compliance with FINRA Rule 5210, resulting in violations of FINRA Rule 3110 ("Supervision") and FINRA Rule 2010.

To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a $175,000 fine.

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