Broker-Dealer Fined for LOPR Reporting Failures

A broker-dealer settled FINRA charges for (i) deficient filing of Large Options Position Reporting system ("LOPR") and (ii) establishing certain options positions that exceeded OTC position limits.

In a Letter of Acceptance, Waiver and Consent, FINRA found that the broker-dealer technology failures resulted in missing or inaccurate OTC options positions reports. FINRA said that the broker-dealer booked OTC options positions on foreign securities that it intermediated between U.S.-based customers and foreign affiliates into the systems of those foreign affiliates. Due to technology errors, FINRA found that the broker-dealer failed to report those OTC options to the LOPR, and that the established OTC options positions exceeded the applicable position limits.

FINRA also found that the broker-dealer's systems reported inaccurate short-covered quantities to the LOPR. FINRA said that the broker-dealer's systems were programmed to report a default quantity to the LOPR because the broker-dealer "could not systematically determine the short-covered quantity of OTC options positions." In addition, FINRA found that (i) a coding error caused the broker-dealer to report inaccurate account names and account addresses for certain high-net-worth clients, and (ii) the broker-dealer failed to "reasonably investigate and act upon red flags of LOPR reporting deficiencies" even after identifying the reporting issues.

FINRA determined that the broker-dealer violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 2360 ("Options") and Rule 3110 ("Supervision"). To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a civil monetary penalty of $3,750,000.