Broker-Dealer Settles FINRA Charges for Inaccurate Reports on Order Execution Quality

A broker-dealer settled FINRA charges for publishing inaccurate data in required monthly reports on order execution quality. Regulation NMS Rule 605 ("Disclosure of order execution information") requires that "trades in NMS securities must be make available to the public in monthly electronic reports" and that they must contain uniform statistical measures of execution quality.

In a Letter of Acceptance, Waiver, and Consent, FINRA found that the broker-dealer (i) failed to publish separate reports for its affiliated broker-dealer and its affiliated Alternative Trading System ("ATS") and (ii) mislabeled certain orders, including ATS executions, canceled-and-replaced orders, inside-the-quote orders and other reportable orders. FINRA stated that the broker-dealer separated reports for the affiliated broker-dealer and its affiliated ATS, however, the reports were inaccurate as a result of technological and coding errors.

Additionally, FINRA found that the broker-dealer's supervisory systems were not adequate to verify the accuracy of the order execution information.

As a result, FINRA determined that the broker-dealer violated NMS Rule 605, FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade") and FINRA Rule 3110(a) ("Supervision").

To settle the charges, the broker-dealer agreed to (i) accept a censure and (ii) pay a $325,000 fine.