Firm Settles Charges for Supervisory Failures over Partial Tender Offers

A firm settled FINRA, NYSE American, Nasdaq ISE, Nasdaq Phlx and Cboe Exchange (collectively, the self-regulatory agencies or "SROs") charges for supervisory failures in connection with the Exchange Act's ban on tendering more shares in a partial tender offer than are owned by an individual.

In separate Letters of Acceptance, Waiver and Consent, the SROs stated that the firm did not have procedures for compliance with SEA Rule 14e-4 ("Prohibited Transactions in Connection with Partial Tender Offers") from June 2013 through February 2016. The SROs found that the firm's adopted procedures for tender offer-related customer instructions and proprietary accounts did not include an assessment of the net position of the firm or its customers with respect to the shares being tendered.

As a result, the SROs determined that the firm over-tendered shares in at least one partial tender offer because its operational procedures did not take into account a number of mandatory factors, including options positions or securities held in multiple accounts by the same individual. The SROs also found that the firm did not register one of its employees who executed, as a securities trader, a number of securities transactions related to the partial tender offer.

The SROs determined that the firm violated supervisory, fair dealing and registration provisions and SEA Rule 14e-4.

To settle the charges, the firm agreed to a censure and an $800,000 total fine, composed of (i) a $156,250 fine for each of FINRA, NYSE American, Nasdaq ISE and Nasdaq Phlx and (ii) a $175,000 fine for Cboe Exchange. In addition, the firm agreed to pay $6,581 in disgorgement to Cboe Exchange.