More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
The Financial Industry Regulatory Authority announced Tuesday that it has fined TD Ameritrade Clearing Inc. $1.2 million and SG Americas Securities, Inc. $675,000 for failing to report or accurately report certain large options positions and for related supervisory deficiencies.
FINRA found that from May 2007 to January 2010, TD Ameritrade failed to properly aggregate certain reportable positions as acting-in-concert, which impacted nearly 4,100 accounts and resulted in the firm failing to report approximately 1.4 million positions.
In addition, TD Ameritrade failed to establish and maintain reasonable supervisory procedures and supervisory systems to ensure compliance with rules applicable to the accurate reporting of options positions.
“It is essential that regulators receive accurate, timely and complete information about large options positions, particularly those positions that involve accounts trading in concert, because this information is necessary to conduct market surveillance and to protect the integrity of the marketplace,” said Thomas Gira, executive vice president for FINRA Market Regulation, in a statement.
In a separate case, FINRA said that it found that from December 2007 to January 2013, SG Americas failed to report over-the-counter (OTC) options positions in approximately 500,000 instances; failed to report the counterparty for OTC options positions or incorrectly reported its customers' OTC options positions in more than 600,000 instances; and failed to report or misreported OTC index options positions in more than 900,000 instances.
In addition, SG Americas failed to establish and maintain reasonable supervisory procedures and supervisory systems to ensure compliance with rules applicable to the accurate reporting of options positions, FINRA said.
In concluding these settlements, TD Ameritrade and SG Americas neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Check out 8 Critical Questions to Prepare for FINRA Suitability Exams on ThinkAdvisor.