Firm Settles FINRA and NYSE Arca Charges for Reg M Compliance Violations

A firm settled separate FINRA and NYSE Arca charges for failing to comply with the notification and supervisory requirements of SEC Regulation M, which governs trading during securities distributions to prevent market manipulation.

Regulation M requires a broker-dealer participating in a distribution of securities to notify regulators of its role and the timing of the distribution. Notifications must be accurate and submitted before the beginning of the applicable restricted period.

In two AWCs, (see here and here), FINRA and NYSE Arca found that the firm, among other things:

• failed to file more than 100 Regulation M-related notifications in a timely manner during the relevant period including notices filed after the restricted period had begun;

• submitted notifications containing inaccurate or incomplete information, including incorrect participant names or missing data fields;

• did not implement written supervisory procedures reasonably designed to ensure compliance with Regulation M; and

• failed to perform a supervisory review of its notification filings to verify timeliness and accuracy.

The regulators found that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and 3110 ("Supervision") and NYSE Arca Rules 14.3(a) and 11.18.

To settle the charges, the firm agreed to (i) a censure and (ii) pay $73,000 to FINRA and $59,500 to NYSE Arca. Both regulators noted that the matters were resolved simultaneously with similar matters for a total of $225,000.