FINRA Fines Firm for Trade Reporting Failures

A firm settled FINRA charges for trade reporting failures on transactions in municipal securities and corporate and agency debt securities.

According to the AWC, the firm issued approximately 250 municipal securities and 150 corporate and agency debt confirmations to retail customers that did not include "any of the [required] mark-up or mark-down information." FINRA highlighted that these failures stemmed from "inadvertent errors made ... when manually entering the orders."

FINRA found that the firm failed to report the "time of trade to the second" for more than 7,800 municipal securities transactions to the Real-Time Transaction Reporting System ("RTRS"), and the "time of execution to the second" for over 1,000 TRACE-eligible transactions. FINRA stated that the firm "uniformly reported ‘00’ in the seconds field," despite having systems capable of "correctly reporting seconds" and despite the "time of trade execution [being] known to the second."

Further, FINRA determined that the firm’s supervisory system was "not reasonably designed to comply" with applicable disclosure and reporting requirements. FINRA found that the firm’s written supervisory procedures ("WSPs") "contained no procedures" detailing how to review mark-up disclosures, the frequency or responsibility for such reviews, or documentation methods. FINRA stated that the firm also failed to address the requirement to report time of trade to the second for RTRS and TRACE reports.

As a result, FINRA said the firm violated MSRB Rules G-14 ("Reports of Sales or Purchases"), G-15 ("Confirmation, Clearance, Settlement and Other Uniform Practice Requirements with Respect to Transactions with Customers") and G-27 ("Supervision") and FINRA Rules 2010 (“Standards of Commercial Honor and Principles of Trade”), FINRA Rule 2232 ("Customer Confirmations"), Rule 3110 ("Supervision")  and Rule 6730 ("Transaction Reporting"). 

To settle the charges, the firm agreed to (i) a censure and (ii) a $75,000 fine, ("$37,500 of which pertains to the violations of MSRB Rules").