FINRA Fines Firm for Options Reporting Failures
A firm settled FINRA charges for failing to accurately report and supervise large options position reporting ("LOPR") submissions.
According to the AWC, the firm failed to report or inaccurately reported more than 1.4 million OTC options positions to the LOPR system due to multiple system and process deficiencies. FINRA determined that these violations stemmed from three issues: (i) reporting logic that overwrote existing position records when new identical contracts were executed, causing the LOPR to reflect only the most recent trade rather than the total aggregate quantity; (ii) unreported positions for accounts lacking Tax Identification Numbers, as these trades were quarantined internally and never reviewed or submitted due to human error; and (iii) system amendments that caused certain reportable positions to be omitted entirely from LOPR submissions. FINRA stated that the firm subsequently corrected these deficiencies by revising its reporting logic, updating account information, and enhancing internal controls.
FINRA also found that the firm failed to establish a supervisory system reasonably designed to ensure the accuracy and completeness of its LOPR reporting. FINRA highlighted that although the firm monitored daily submissions and rejections, it lacked procedures to verify reported positions or review quarantined trades. FINRA stated that this allowed inaccuracies to persist for more than six years and unreviewed transactions, with missing Tax Identification Numbers, to remain unresolved for nearly two years. FINRA noted that the firm has since strengthened its supervision by enhancing written procedures, adding dedicated oversight staff, and implementing daily reconciliations to ensure accurate reporting.
FINRA concluded that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 2360 ("Options"), and 3110 ("Supervision").
To settle the matter, the firm agreed to (i) a censure and (ii) a $425,000 fine.