FINRA Fines Firm for Reg. SHO Violations and Supervisory Failures

FINRA announced that it censured and fined Merrill Lynch Professional Clearing Corp. ("Merrill Lynch PRO") for violating Regulation SHO. Additionally, FINRA censured and fined the firm's affiliate for failing to establish, maintain and enforce supervisory systems and procedures related to Regulation SHO and other areas.

FINRA found that Merrill Lynch PRO did not take any action to close out certain fail-to-deliver positions, and did not have systems and procedures in place to address the closeout requirements of Reg. SHO.

Additionally, FINRA found that its affiliate's supervisory systems and procedures were inadequate and improperly permitted the firm to allocate fail-to-deliver positions to the firm's broker-dealer clients based solely on each client's short position without regard to which client caused or contributed to the fail-to-deliver position.

See: FINRA Press Release.