FINRA Hits BofA Securities with $24 Million Penalty for Spoofing Breaches

by Jared Kirui
  • BofA Securities neither admitted nor denied FINRA's charges.
  • The firm allegedly engaged in 717 instances of spoofing.
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The Financial Industry Regulatory Authority (FINRA) has imposed a fine of $24 million against BofA Securities. This action is a consequence of the firm's alleged involvement in over 700 instances of spoofing and related supervisory failures within the US Treasury secondary markets, spanning more than six years.

Spoofing involves placing deceptive orders to create a false impression of market activity. According to a statement by the regulator, BofA Securities utilized this tactic through two former traders in the US Treasury secondary markets from October 2014 to February 2021. The firm allegedly engaged in 717 instances of spoofing.

Bill St. Louis, the Executive Vice President and Head of Enforcement at FINRA mentioned: "Spoofing undermines the transparency and integrity of the markets by distorting the true nature of supply and demand. This action sends a strong message that FINRA will aggressively pursue firms that engage in spoofing, including cross-product spoofing."

FINRA Highlights Supervisory Failures

During this period, BofA Securities failed to establish and maintain a supervisory system capable of detecting spoofing activities in the US Treasury markets. In November 2015, the company implemented the system, but until mid-2019, it was insufficient. It was only designed to detect algorithmic spoofing and not manual manipulation by traders.

BofA Securities has agreed to FINRA's findings without admitting or denying the charges. Last year, FINRA fined the company $325,000 for allegedly publishing inaccurate monthly reports for order execution .

The watchdog revealed that between January 2014 and February 2022, BofA Securities inaccurately reported order execution statistics for its two market centers, MLCO and MLIX. The company allegedly flouted the requirement to report separate statistical information under Rule 605, leading to the publication of combined reports for both centers.

Heightened Regulatory Scrutiny in Brokerage Practices

In June, Credit Suisse came under scrutiny after FINRA imposed its US subsidiary a fine of $900,000 for lapses in regulatory reporting. The violations involved late trades and inaccurate Trade Reporting and Compliance Engine reports from November 2015 to March 2023.

Early this year, FINRA imposed a penalty worth $3 million against Webull. It highlighted the firm's oversight in onboarding options traders and a lack of adequate supervisory systems to identify and address customer complaints. This oversight resulted in the approval of approximately 9,000 unqualified traders, including over 2,500 customers under the age of 21 who lacked the requisite options trading experience.

The Financial Industry Regulatory Authority (FINRA) has imposed a fine of $24 million against BofA Securities. This action is a consequence of the firm's alleged involvement in over 700 instances of spoofing and related supervisory failures within the US Treasury secondary markets, spanning more than six years.

Spoofing involves placing deceptive orders to create a false impression of market activity. According to a statement by the regulator, BofA Securities utilized this tactic through two former traders in the US Treasury secondary markets from October 2014 to February 2021. The firm allegedly engaged in 717 instances of spoofing.

Bill St. Louis, the Executive Vice President and Head of Enforcement at FINRA mentioned: "Spoofing undermines the transparency and integrity of the markets by distorting the true nature of supply and demand. This action sends a strong message that FINRA will aggressively pursue firms that engage in spoofing, including cross-product spoofing."

FINRA Highlights Supervisory Failures

During this period, BofA Securities failed to establish and maintain a supervisory system capable of detecting spoofing activities in the US Treasury markets. In November 2015, the company implemented the system, but until mid-2019, it was insufficient. It was only designed to detect algorithmic spoofing and not manual manipulation by traders.

BofA Securities has agreed to FINRA's findings without admitting or denying the charges. Last year, FINRA fined the company $325,000 for allegedly publishing inaccurate monthly reports for order execution .

The watchdog revealed that between January 2014 and February 2022, BofA Securities inaccurately reported order execution statistics for its two market centers, MLCO and MLIX. The company allegedly flouted the requirement to report separate statistical information under Rule 605, leading to the publication of combined reports for both centers.

Heightened Regulatory Scrutiny in Brokerage Practices

In June, Credit Suisse came under scrutiny after FINRA imposed its US subsidiary a fine of $900,000 for lapses in regulatory reporting. The violations involved late trades and inaccurate Trade Reporting and Compliance Engine reports from November 2015 to March 2023.

Early this year, FINRA imposed a penalty worth $3 million against Webull. It highlighted the firm's oversight in onboarding options traders and a lack of adequate supervisory systems to identify and address customer complaints. This oversight resulted in the approval of approximately 9,000 unqualified traders, including over 2,500 customers under the age of 21 who lacked the requisite options trading experience.

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