The Financial Industry Regulatory Authority continues to take disciplinary actions against financial services firms for providing inaccurate securities trading information. Today, the industry’s self-regulatory authority ordered a unit of Merrill Lynch to pay a fine of $150,000 for various reporting lapses over a period of at least five years.
FINRA said Merrill Lynch’s supervisory system was not designed to achieve compliance with the federal requirements known as ‘Reg SHO’ from May 2012 to September 2017.
During this period, the company reported nearly 11,625 short sales to a Trade Reporting Facility (“TRF”) without a required short sale indicator, as well as marked thirty-two principal sell orders as long sales. This in turn led to the incorrect marking of Merrill Lynch’s customer transactions for at least ten months.
Further, the company violated some rules of Regulation SHO which imposes a circuit breaker on short sales that when triggered, permits short selling only at a price above the current national best bid. Specifically, the Rule 201(b)(1) requires trading centers in certain cases to prevent the execution of a short sale order at a price that is less than or equal to the current national best bid.
The Startup Helping Real Estate Websites Achieve ADA ComplianceGo to article >>
Many banlks were fined for similar lapses
Finally, the Wall Street’s independent regulator said Merrill Lynch had reported over 6 million non-media transactions with inaccurate capacity codes.
“The transactions were incorrectly reported as “principal” transactions, when they should have been reported as “riskless principal” transactions. As a result, the Firm violated FINRA Rules 7230A and 2010 (for conduct occurring on or after December 15, 2008) and NASD Rules 6130 and 2110 (for conduct occurring prior to December 15, 2008),” the Finra said.
The U.S. regulator said during the period of review that Merrill Lynch did not have adequate systems and controls in place to detect and prevent the violations. In addition, FINRA’s latest fine was stipulated on repeated failures in accurately submitting required trade reports to the appropriate FINRA Trade Reporting Facility (TRF).
Finra and the Securities and Exchange Commission (SEC) regularly request such information to help prevent and stop market manipulation and insider trading.
Merrill Lynch consented to the Finra’s order without admitting or denying the findings. In addition to paying the penalty, the company agreed to be censured and must cease and desist from further violations.