Firm Settles Charges for Failing to Maintain Risk Management Controls

A firm settled NYSE charges for failing to maintain risk management controls and a supervisory system to prevent trading violations.

According to the Letter of Acceptance, Waiver, and Consent, the firm disregarded its own policies and procedures, and allowed customers to exceed their credit limits. The NYSE found the firm failed to document its rationale for exceeding the credit limits. In addition, the NYSE found that an affiliate of the firm had control and the ability to adjust the credit limits for the firm's customers.

The NYSE determined that the firm failed to "maintain a reasonable supervisory system" and failed to have sufficient surveillance parameters in place to detect trading violations. The NYSE said the firm failed to "enhance its post-trade supervision" when it became aware of trading violations. The NYSE also said that the firm failed to document its review of the effectiveness of its "risk management controls and supervisory procedures" as required.

As a result, the NYSE determined that the firm violated Securities and Exchange Act Rule 15c3-5 ("Risk management controls for brokers or dealers with market access") and NYSE (FINRA) Rules 3110(a) ("Supervisory System") and 3110(b) ("Written Procedures").

To settle the charges, the firm agreed to a (i) censure and (ii) pay a $135,000 fine.