Firm Settles FINRA Charges for Market Access Rule Failures

A firm settled FINRA charges for failing to establish and maintain a system of risk management controls to prevent the entry of erroneous orders for its "low touch" and "high touch" order flows. 

According to the AWC, the firm’s Single-Order Quantity and Single-Order Notional Value ("SONV") controls were not reasonably designed to manage financial and regulatory risks. FINRA found the firm set thresholds that were too high to prevent significant adverse market impact. FINRA stated that the firm also failed to document the rationale for these thresholds or for its price deviation controls, which were set at or above industry-wide execution guidelines without justification.

In addition, FINRA found that the firm failed to conduct required annual reviews and maintain adequate written supervisory procedures. Consequently, the firm’s annual CEO certifications failed to include required statements confirming compliance with the Market Access Rule (15c3-5 "Risk management controls for brokers or dealers with market access").

FINRA concluded that the firm violated SEA Section 15(c)(3) ("Registration and regulation of brokers and dealers"), SEA Rule 15c3-5, and FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and 3110 ("Supervision"). 

The firm agreed to (i) a censure, (ii) a $75,000 fine, and (iii) an undertaking to remediate these issues within 60 days.