Goldman Sachs Execution & Trading has been fined $800,000 by FINRA on trade-through failures, and FINRA also took action against ETF prospectus delivery failures by Investors Capital and supervisory failures related to the maintenance of private wealth management customer accounts maintained at a Swiss bank affiliate rather than in house at Morgan Stanley.
FINRA Fines Goldman Sachs Execution & Trading $800,000
Failure to prevent trade-throughs in its alternative trading system have gotten Goldman Sachs Execution & Trading a FINRA fine of $800,000.
According to FINRA, the firm, which neither admitted nor denied the charges, failed to have reasonably designed written policies and procedures in place to prevent trade-throughs of protected quotations in NMS stocks from November 2008 through August 2011 in connection with trading in its proprietary alternative trading system, SIGMA-X.
While the Order Protection Rule generally requires trading centers to trade at the best-quoted prices or route orders to the trading centers quoting the best prices, FINRA found that Goldman did neither. According to the agency, from July 29, 2011, through Aug. 9, 2011, there were more than 395,000 transactions executed in SIGMA-X where the execution traded through a protected quotation at a price inferior to the National Best Bid and Offer (NBBO).
During those eight days of trading, Goldman Sachs was unaware that in these instances it was trading through a protected quotation. The trade-throughs were caused by market data latencies at SIGMA-X and were not detected in a timely manner.
Goldman Sachs, said FINRA, failed to establish, maintain, and enforce written policies and procedures reasonably designed to prevent trade-throughs of protected quotations in NMS stocks. The firm also failed to regularly surveil to be sure its policies and procedures were effective in that manner.
In connection with the approximately 395,000 trade-throughs, Goldman Sachs has returned $1.67 million to disadvantaged customers.
FINRA Fines, Censures Investors Capital for ETF Prospectus Delivery Failures
Investors Capital Corp. was censured by FINRA and fined $100,000 for failure to ensure the delivery of prospectuses to customers of ETFs.
According to FINRA, the firm failed to supervise the sale of ETFs and the firm’s obligations to provide ETF prospectuses to customers. It also had no procedures directly concerning the sale of ETFs or prospectus delivery obligations, and even allowed its representatives to sell ETFs before completing any firm-mandated training.
The firm neither admitted nor denied FINRA’s findings. Morgan Stanley Fined $100,000 on Private Wealth Management Failures