Broker-Dealer Settles FINRA and Nasdaq Charges for Submitting Erroneous Orders

A broker-dealer settled FINRA and Nasdaq charges (see here and here) for routing erroneous orders to the market.

In separate Letters of Acceptance, Waiver and Consent, FINRA and Nasdaq found that the routing orders were erroneous because they either (i) exceeded the appropriate price or size parameters on an order-by-order basis or (ii) were duplicative. FINRA and Nasdaq found that the broker-dealer’s risk management controls and supervisory procedures failed to prevent the orders being erroneously submitted.

FINRA and Nasdaq concluded that the broker-dealer violated Exchange Act Section 15 ("Registration and regulation of brokers and dealers") and SEA Rule 15c3-5(b) and (c)(1)(ii) ("Risk management controls for brokers or dealers with market access"). In addition, the regulators determined that the broker-dealer also violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade") and Nasdaq Rules 3010 and 2010A.

To settle the charges, the broker-dealer agreed to a (i) censure and (ii) $750,000 fine to be paid jointly to Nasdaq and FINRA, $187,500 of which is to be allocated to FINRA.