In a recent development, the Financial Industry Regulatory Authority (FINRA) has ordered a New York-based financial institution to pay more than $700,000 in fines and restitution for several alleged rules violations. The infractions, which occurred between 2006 and 2023, include sending customers inaccurate trade confirmations and failing to send confirmations altogether.
According to the letter of acceptance, waiver, and consent (AWC), the firm agreed to pay $375,000 for violating certain Municipal Securities Rulemaking Board (MSRB) rules. They also agreed to pay an additional $375,000 in restitution to affected customers and accepted censure from FINRA.
One of the most significant infractions involved the company sending approximately 940,000 trade confirmations to customers containing inaccurate information between 2010 and 2019. Furthermore, between 2006 and 2023, the firm failed to send millions of required trade confirmations to customers. In one instance, between 2010 and 2017, they sent 570,000 trade confirmations to customers incorrectly stating that the trades were made in an agency capacity rather than a principal capacity. FINRA attributed these errors to miscoding.
In addition to the trade confirmation issues, FINRA found that the company had violated the Federal Reserve’s Regulation T, which relates to the extension of credit to customers. The regulation requires that customers promptly pay in full for securities purchased through a broker-dealer before selling those securities. Failure to do so results in the loss of privileged delayed payment. Between 2012 and 2016, acting as a clearing broker for certain customer accounts and introducing brokers, allowed customers with cash accounts to sell securities without previously paying for them in full. However, they failed to withdraw the privilege of delaying payment for 90 calendar days following the sale date, as required by Regulation T.
This case serves as a reminder of the importance of accurate record-keeping and adherence to regulatory requirements in the financial industry. The substantial fines and restitution imposed on the firm underscore the severity of the consequences for failing to comply with these rules and regulations.
