Broker Fined for Failing to Include "No Remuneration" Indicator in TRACE Reports
Commentary by Steven Lofchie
A firm settled charges with FINRA for inaccurately reporting 600,000 transactions to the Trade Reporting and Compliance Engine ("TRACE") due to the broker's failure to include a "No Remuneration" ("NR") indicator.
In the Letter of Acceptance, Waiver and Consent, FINRA stated that firms are required to include the NR indicator which "provides more meaningful pricing information that better reflects comparable prices for principal and agency trades by identifying those trades where no commission, mark-up, or mark-down was charged or known when reported." FINRA stated that "a failure to accurately report the NR indicator, among other things, affects the audit trail and regulatory surveillance patterns."
FINRA found that the broker-dealer violated FINRA Rules 6730(d) ("Transaction Reporting"), 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the broker-dealer agreed to (i) a censure, (ii) pay a $400,000 fine and (iii) remediate the reporting issues and implement appropriate supervisory procedures.
Commentary
The trade reporting rules are quite complicated and not intuitive. A misinterpretation or a computer glitch can easily result in hundreds of thousands of "violations." Accordingly, this is an area where it may make sense for firms to do a close review of their trade reporting algorithms or bring in outsiders to have a second look.