FINRA Fines Firm for TRACE Reporting and Trade Confirmation Failures

A firm settled FINRA charges for failing to accurately report thousands of transactions to TRACE, omitting security prices from customer trade confirmations, and related supervisory failures.

According to the AWC, the firm reported its trading in debt securities, including 7,450 corporate debt and 440 U.S. Treasury transactions, as being in a principal capacity rather than agency capacity following a change to its booking model from principal trading to agency trading. The misreported trades were executed over a five-and-a-half-year period. In addition, FINRA found that the firm failed to report approximately 4,250 corporate debt and 355 U.S. Treasury transactions involving a non-member affiliate as a result of human error.

Further, FINRA found that the firm omitted the security price from 11,780 trade confirmations sent to institutional customers for fixed-income transactions due to a coding error.

FINRA also determined that the firm failed to establish a supervisory system reasonably designed to ensure compliance with customer confirmation requirements. FINRA stated that the firm’s procedures lacked a process to review confirmations for accuracy or completeness, and the firm failed to conduct such reviews.

FINRA concluded that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 2232 ("Customer Confirmations"), 3110 ("Supervision"), 6730 ("Transaction Reporting"), and Exchange Act Rule 10b-10 ("Confirmation of transactions").

To settle the charges, the firm agreed to (i) a censure and (ii) a $125,000 fine.