The US Financial Industry Regulatory Authority (FINRA) has fined Virtu, an over-the-counter (OTC) and market-making services provider, with $175,000 for its failure to offer the best execution to its customers.
The fine was imposed for violating FINRA’s rule 5310 which dictates the offering of “the best market for the subject security”; rule 3110 under which the service providers need to make sure the businesses are compliant with the US securities law; and rule 2010 that “requires members to observe high standards of commercial honor and just and equitable principles of trade.” Notably, violation of any FINRA rule will automatically violate rule 2010.
Out of the total $175,000 fine, $100,000 was for the violation of rules 5310 and 2010, and the other $75,000 for breaking rule 3110 and 2010.
The regulator highlighted that the market maker violated the provisions from September 1, 2015, through August 21, 2017, while executing 13,136 customer orders received from two of its broker-dealer clients outside of normal trading hours.
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The company failed “to use reasonable diligence to ascertain the best market for the subject securities and by failing to buy or sell in such market so that the resultant prices to the customers were as favorable as possible under prevailing market conditions” and also “failed to establish and maintain a supervisory system reasonably designed to achieve compliance.”
Rushed to a settlement?
In the official response to the private self-regulatory organization, Virtu did not admit or deny the allegations but accepted the fine for a settlement.
“Virtu hereby accepts and consents, without admitting or denying the findings, and solely for the purposes of this proceeding and any other proceeding brought by or on behalf of FINRA, or to which FINRA is a party, prior to a hearing and without an adjudication of any issue of law or fact,” Virtu noted.
It also highlighted that since its establishment in 2009, it has no history of disciplinary actions by the Securities and Exchange Commission (SEC) or any other securities regulators.