As part of settlements with the Financial Industry Regulatory Authority and Securities and Exchange Commission, broker-dealer SG Americas has agreed to pay $3.1 million in fines for providing inaccurate and incomplete securities trading information, known as “blue sheet data,” the regulators announced separately on Wednesday.
Without admitting or denying the findings, the New York-based subsidiary of Paris, France-based financial services firm Societe Generale, signed a letter of acceptance, waiver and consent in which it agreed to pay $3.1 million in fines. Half will be paid to FINRA and half to the SEC, as part of a separate SEC order.
The SEC alleged that SG Americas made many deficient blue sheet submissions with missing or inaccurate data, largely because of undetected coding errors. These problems involved about 27.6 million transactions, which demonstrated that the BD had inadequate processes in place to validate the accuracy of its submissions.
From Jan. 1, 2014 through July 31, 2019, SG Americas made 16,442 Electronic Blue Sheets submissions to the SEC — 13,656 of which contained deficient trade data, according to the order. The SEC also asked the firm to cease and desist from committing or causing any further violations of the Securities Exchange Act of 1934.
In addition, the firm agreed to certify, within 90 days of the settlement with FINRA, that it has conducted a comprehensive review and revised its systems and procedures related to the deficiency.
Role of Blue Sheets
FINRA and the SEC regularly request blue sheets to assist in the investigation of market manipulation and insider trading. The process provides “regulators with critical detailed information about securities transactions, including the security, trade date, price, share quantity, customer name, and whether it was a buy, sale or short sale,” according to FINRA.
That information is “essential to regulators’ ability to discharge their enforcement and regulatory mandates,” it added.
“Incomplete and inaccurate blue sheet information … compromises our ability to identify individuals engaging in insider trading schemes, market manipulation, and other fraudulent activity, ultimately interfering with our ability to protect investors,” according to Jessica Hopper, head of enforcement for FINRA.
More Details on Problems
FINRA found that for more than seven years, from 2012 through 2019, SG and Newedge USA (a firm that merged into SG in January 2015) submitted about 8,400 blue sheets with inaccurate information on about 4.2 million equity and options transactions.
In the process, the firm violated FINRA Rules 8211 (governing automated submission of trading data), 8213 (governing automated trading data for non-exchange-listed securities), 2010 (governing standards of commercial honor and principles of trade) and 3110(b) (governing supervision of written procedures) and NASD Rule 3010(b), which has since been superseded by FINRA Rule 3110.
Corin R. Swift, a partner at New York law firm Sidley Austin, which represented SG Americas in the FINRA dispute, did not immediately respond to a request for comment.