FINRA Fines Firm for Inaccurate Order Routing Reports

FINRA censured and fined a broker-dealer for publishing inaccurate and incomplete quarterly reports.

According to the AWC, the firm published quarterly reports that omitted or misstated required statistical information about the routing of held non-directed customer orders in NMS stocks as well as held and not-held non-directed customer orders in NMS option contracts. FINRA said the reports failed to accurately disclose the percentages of order types, the ten venues receiving the largest number of non-directed orders, venues receiving five percent or more of non-directed orders, and—for each identified venue—the net aggregate amounts of payment for order flow, profit-sharing payments, transaction fees paid, and transaction rebates received.

As a result, FINRA found the firm violated NMS Rule 606 ("Disclosure of order routing information"), which requires broker-dealers to publish quarterly reports containing statistical information on routing of non-directed orders in NMS securities to help customers understand how their firm routes orders and assess potential conflicts of interest.

FINRA also found that the firm failed to implement written policies and supervisory procedures reasonably designed to achieve compliance with the Rule.

FINRA determined that the firm violated Regulation NMS Rule 606(a), and FINRA Rules 3110(a) ("Supervision"), 3110(b) ("Written procedures"), and 2010 ("Standards of Commercial Honor and Principles of Trade"). The firm was censured and fined $225,000.