FINRA Suspends Broker for Sharing Block Trade Information

FINRA suspended a broker for sharing material, confidential information related to imminent block order transactions.

According to the AWC, the broker shared material nonpublic information regarding "imminent block order transactions" with multiple institutional customers before those transactions were completed and publicly reported. FINRA stated that after receiving this information, the customers submitted 111 orders "for execution in the same security" ahead of the block trades. FINRA determined that the broker earned $127,549 in commissions from these 111 transactions. FINRA found that in 35 instances, the activity led to "unfavorable prices" for eleven institutional customers, causing approximately $71,000 in harm. FINRA highlighted that the firm "voluntarily reimbursed all affected customers."

FINRA determined that the broker violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and Rule 5270 ("Front Running of Block Transactions").

The broker consented to (i) an 18-month suspension from associating with any FINRA member in any capacity, (ii) $7,500 fine and (iii) disgorgement of $127,549 plus interest.