More On Legal & Compliancefrom The Advisor's Professional Library
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- 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.
The Financial Industry Regulatory Authority announced Wednesday that it has censured and fined Barclays Capital Inc.; Goldman, Sachs & Co.; and Merrill Lynch $1 million each for failing to provide complete and accurate information about trades performed by the firms and their customers, commonly known as "blue sheet" data, to FINRA, the SEC and other regulators.
Each firm has a prior regulatory history involving the submission of inaccurate blue sheet data, FINRA said.
In addition, FINRA issued a complaint against Wedbush Securities Inc. for failing to submit complete and accurate blue sheets.
"Blue sheets are mission-critical to conducting reviews and investigations of suspicious trading,” said Cameron Funkhouser, executive vice president and head of FINRA's Office of Fraud Detection and Market Intelligence, in a statement. “When firms fail to submit timely and accurate blue sheet data, it compromises the ability of every regulator to identify the perpetrators of illegal insider trading and other market abuses. The actions announced today are a reminder to firms about their fundamental obligation to provide complete and accurate blue sheet data without exception.”
Barclays, Goldman Sachs and Merrill Lynch neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
The Wedbush complaint is not yet adjudicated, FINRA said. A request for comment from Wedbush by ThinkAdvisor was not returned by presstime.
Blue sheets provide regulators with detailed information about trades performed by a firm and its customers, including the security's name, date traded, price, transaction size and parties involved.
Federal securities laws and FINRA rules require firms to provide this information to FINRA and other regulators electronically upon request.
FINRA found the firms’ violations included submissions that failed to include some customer names and contact information, failed to include some transactions, contained incorrect name and contact information for some customers, or contained inaccurate details of the transactions.
“The violations arose from problems with the firms' electronic systems used to compile and produce blue sheet data,” FINRA said. FINRA also found that “the firms failed to have in place adequate audit systems providing for accountability of their blue sheet submissions.”
FINRA ordered the firms to certify that they have conducted a comprehensive review of their systems related to blue sheet submissions, and to certify that they have established procedures reasonably designed to address and correct the violations.
Check out FINRA Provides Free ‘Dark Pool’ Data to Investors on ThinkAdvisor.