Firm Fined for Market Access Control Failures

A firm settled FINRA charges for market access risk management control and supervision failures.

According to the AWC, the firm utilized "soft blocks" to reject orders exceeding risk limits, which only paused the orders for manual review. FINRA found that the orders that triggered these soft blocks could be released by reviewers without consistent documentation of their decision-making rationale. Further, FINRA found that in some cases, orders were amended after initial review and released without additional oversight.

FINRA also found that, for "low touch" clients, the firm's thresholds on orders priced significantly away from market rates were standardized, with no documented rationale for these thresholds or for client-specific adjustments. FINRA said that, for "high touch" customers, the firm applied insufficient risk thresholds based on traders' experience levels rather than on the characteristics of the customers placing the orders. 

FINRA determined that the firm "failed to perform reasonable regular reviews of the effectiveness of the firm's risk management controls and supervisory procedures." As a result, FINRA concluded that the firm violated SEA Rule 15c3-5 ("Risk management controls for brokers or dealers with market access"), FINRA Rule 3110 ("Supervision") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the firm agreed to (i) a censure and (ii) pay a $1 million fine.