Among recent enforcement actions, the Securities and Exchange Commisison fined Citigroup $7 million for providing incomplete blue sheet information.
The Financial Industry Regulatory Authority, meanwhile, censured and fined BNP Paribas on overstated trade volumes; Goldman Sachs, in two separate cases, on reporting errors and transaction errors; and IFC Holdings on unit investment trust violations.
SEC Fines Citigroup Over Blue Sheets
Citigroup has agreed to pay a $7 million fine and admit wrongdoing on SEC charges that a computer coding error caused the firm to provide the agency with incomplete blue sheet information about trades it executed.
According to the agency, the coding error occurred in the software that Citigroup used from May 1999 to April 2014 to process SEC requests for blue sheet data, including the time of trades, types of trades, volume traded, prices, and other customer identifying information.
During that 15-year period, Citigroup consequently omitted 26,810 securities transactions from its responses to more than 2,300 blue sheet requests. After discovering the coding error, Citigroup failed to report the incident to the SEC or take any steps to produce the omitted data until nine months later.
“Broker-dealers have a core responsibility to promptly provide the SEC with accurate and complete trading data for us to analyze during enforcement investigations,” Robert Cohen, co-chief of the SEC Enforcement Division’s market abuse unit, said in a statement.
Cohen added, “Citigroup did not live up to that responsibility for an inexcusably long period of time, and it must pay the largest penalty to date for blue sheet violations.”
FINRA Censures, Fines BNP Paribas on Overstated Trade Volumes
FINRA has censured BNP Paribas and fined the firm $375,000 after finding that that it overstated its advertised trade volume in securities through Bloomberg.
According to the agency, the overstated trade volume resulted from a system issue that caused the firm to combine the advertised trade volume in unrelated securities that had the same trading symbol in the Canadian market and the U.S. market.
A second system error was caused by the way its customers identified common stocks and preferred stocks in the firm’s systems. This error caused the firm to inaccurately advertise volume in a common stock when the volume actually traded by the firm was in the preferred stock related to the same issuer.
FINRA also said that the firm’s supervisory system wasn’t up to ensuring compliance with requirements for accuracy in the firm’s advertising of executed trade volume.
The firm has neither admitted nor denied the findings but consented to the sanctions.
FINRA Cites Goldman Sachs for Reporting, Transaction Errors
Goldman Sachs was censured by FINRA and fined in two separate cases, the first for failing to submit required data to the Order Audit Trail System and the second for failing to accept or decline transactions within the required time in the FINRA/Nasdaq Trade Reporting Facility (FNTRF).
In the first case, the fine of $260,000 was imposed for the firm’s failure to submit special handling codes, accurate route prices, information for reportable events, accurate execution prices and an accurate limit price to OATS. FINRA found that the firm reported short sale transactions to the FNTRF without the required short sale modifier. It also found that the firm’s supervisory system wasn’t up to the task of compliance with regard to the reporting of correct short sale modifiers to the FNTRF.
In the second, the firm was fined $20,000 for failing to accept or decline in the FNTRF transactions in reportable securities within 20 minutes after execution. The majority of these transactions, FINRA said, were subject to a Qualified Special Representative agreement with an executing broker, which experienced a technology issue that prevented its automatic acceptance of trades on the firm’s behalf and required the firm to engage in a more time-consuming manual review process.
In each case, the firm neither admitted nor denied the findings but consented to the sanctions.
FINRA Censures, Fines Firm for UIT Sale Violations
FINRA censured Tampa, Florida-based IFC Holdings Inc., fined it $175,000, required it to pay $398,401.30, plus interest of $45,799.19, in restitution to customers and to report on how it has corrected systems and procedures with respect to the sale of unit investment trusts (UITs).
According to the agency, the firm failed to identify and apply sales charge discounts to certain customers’ eligible purchases of UITs, resulting in customers paying excessive sales charges of approximately $398,401.30. FINRA said the firm failed to have a supervisory system and written supervisory procedures that would ensure customers received sales charge discounts on all eligible UIT purchases.
The firm relied primarily on its registered representatives to ensure that customers received appropriate UIT sales charge discounts, even though it did not effectively inform and train representatives and their supervisors to identify and apply those sales charge discounts.
The firm has neither admitted nor denied the charges but has paid restitution and consented to the sanctions.
— Check out SEC Charges Advisor With Overcharging in Wrap Fee Program on ThinkAdvisor.