TD Securities (USA) censured and fined for alleged compliance failures connected to spoofing by a former trader
The trader, who worked on and became the head of the US Treasury trading desk, engaged in 813 instances of spoofing in US Treasury securities.
The spoofing followed a predictable pattern:
- A bona fide order to buy or sell would be placed – usually top of book price and with only the minimum size displayed (iceberg).
- One or more fully displayed non-bona fide orders on the opposite side of the market at different price levels in the same or correlated (cross product) security would be entered.
- The imbalance in the market caused other market participants to execute on the side of the market where the trader’s iceberg order was waiting.
- The non-bona fide orders were cancelled once the iceberg order had been executed.
The firm failed to establish, maintain and enforce a supervisory system reasonably designed to ensure compliance with rules and regulations prohibiting spoofing.
Although spoofing was prohibited by the firm’s policies, the firm:
- Had no written supervisory procedures addressing spoofing;
- Had no systems in place to detect spoofing;
- Was aware that it was not capturing the data needed to effectively supervise for it;
- Did not require business line supervisors to review for spoofing;
- Did not provide supervisors with adequate system access to review orders to evaluate trades; and
- Did not conduct any surveillance or supervisory reviews for potential cross-product spoofing in US Treasury markets.
The firm received an internal alert about the trader that it failed to investigate. It also received an inquiry from an electronic trading platform about the trader, but did not take any steps to verify the explanation provided by the trader and did not perform any additional reviews of the trading activity that the trader had engaged in.
A second inquiry from another electronic trading platform triggered an internal investigation and led to the termination of the trader.
The firm then proceeded to remediate its supervisory deficiencies by introducing in-house surveillance and also implementing a security spoofing surveillance system provided by a third-party vendor.
This interesting case is covered in more detail here.
FINRA Rule 2010
FINRA Rule 3110
Cambridge International Securities censured and fined for alleged failings in the supervision of foreign associates
The firm’s supervisory system was not reasonably designed to supervisory foreign associates because it:
- Lacked WSPs that included reasonable guidance for supervisors to assess whether the activities of the foreign associates exceeded the bounds of their registration;
- Did not reasonably monitor the securities activities of the foreign associates to determine the geographical location of their customers and counterparties;
- Did not consistently require foreign associates to complete:
- Annual compliance certifications;
- Outside business activity disclosure forms;
- Written disclosure of private securities transactions; and
- Did not respond to red flags in emails indicating that one of its foreign associates was facilitation securities transaction in the US.
The firm allows a foreign associate to use a personal email account for business-related communications and failed to capture and preserve these.
Finally, the firm permitted a foreign associate to engage in securities activities in the US, failing to either to restrict those activities or register them in an appropriate capacity.
The firm has agreed to an imposition of an undertaking requiring it to certify in writing the remediation of the issues identified.
FINRA Rule 1210
FINRA Rule 2010
FINRA Rule 3110
FINRA Rule 4511
SEA 1934 Rule 17a-4
Merrill Lynch censured and fined for alleged failings connected to TRACE and RTRS reporting
The firm failed to:
- Accurately report execution times for certain primary market transactions
- Report certain allocations of securities to client accounts
- Report the NR indicator for certain transactions in US treasury securities
The firm also reported certain transactions in municipal securities to RTRS that should not have been reported.
In addition the firm’s supervisory system was not reasonably designed to ensure compliance with TRACE and MSRB reporting rules.
FINRA Rule 2010
FINRA Rule 3110
FINRA Rule 6730
MSRB Rule G-14
MSRB Rule G-27
NASD Rule 3010
Former securities representative barred for allegedly refusing to provide documents and information
FINRA Rule 2010
FINRA Rule 8210
Former securities representative barred for allegedly refusing to produce documents and information
FINRA Rule 2010
FINRA Rule 8210
Product representative suspended and fined for allegedly falsely certifying that she had personally completed the continuing education required to hold an insurance license
Another person had completed 18 hours of insurance continuing education on her behalf.
FINRA Rule 2010
Products representative suspended and fined for allegedly borrowing from a firm customer without notice to or approval from the firm
The representative has made timely monthly payments and the customer has not complained about the loan.
FINRA Rule 2010
FINRA Rule 3240
Former associated person suspended and fined for allegedly cheating on an exam
The associated person possessed and repeatedly accessed a cell phone during two SIE examinations.
FINRA Rule 2010
FINRA Rule 1210.05
Former products representative suspended and fined for allegedly forging or falsifying customer signatures
The transactions and services requested in the documents were authorized by the customers, none of whom complained.
FINRA Rule 2010
NASD Rule 2110
Signet Securities censured and fined for alleged Reg BI failings
The firm’s due diligence for some of the private placement offerings that it recommended an sold was not reasonable.
The due diligence was limited to documents provided by the commercial real estate investment company and sold by its affiliates.
FINRA Rule 2010
FINRA Rule 3110
FINRA Regulatory Notice 10-22
SEA 1934 Rule 15l-1
SEC Reg BI
Associated person suspended and fined for allegedly falsely certifying that he had personally completed the continuing education required to hold an insurance license
Another person had completed 15 hours of insurance continuing education on his behalf.
FINRA Rule 2010
Associated person suspended and fined for allegedly falsely certifying that he had personally completed the continuing education required to hold an insurance license
Another person had completed 15 hours of insurance continuing education on his behalf.
FINRA Rule 2010
Former securities representative barred for allegedly refusing to appear for on-the-record testimony
FINRA Rule 2010
FINRA Rule 8210
Former products representative suspended and fined for allegedly engaging in an outside business activity without notice to the firm
FINRA Rule 2010
FINRA Rule 3270
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |