- within Intellectual Property, International Law, Litigation and Mediation & Arbitration topic(s)
A firm settled FINRA charges for Order Audit Trail System ("OATS") reporting violations and written supervisory procedure ("WSPs") failings.
In a Letter of Acceptance, Waiver and Consent, FINRA found that the firm (i) transmitted over 1.5 billion reportable order events ("ROEs") to OATS with inaccurate information, (ii) transmitted approximately 71 million execution reports to OATS that failed to link to a media-reported trade report, (iii) failed to transmit over 2 million ROEs to OATS, and (iv) failed to repair over 3 million rejected ROEs. As a result, FINRA found that the firm violated FINRA Rules 7450(b) ("Order Data Transmission Requirements; Method and Timing of Transmitting Data") and 2010 ("Standards of Commercial Honor and Principles of Trade").
Further, FINRA found that the firm failed to maintain sufficient WSPs to ensure compliance with OATS reporting obligations. FINRA explained that the firm's WSPs provided that a designated reviewer sample a minimum of five orders "of various types" every quarter to establish the accuracy of OATS information. FINRA stated that given the approximately 9 billion ROEs the firm transmitted to OATS on a quarterly basis, the minimum sample of five order types was "unreasonably narrow." As a result, FINRA found the firm violated FINRA Rule 3110(a) ("Supervision; Supervisory System").
To settle charges, the firm agreed to (i) be censured, (ii) pay a $120,000 fine, and (iii) remediate the firm's supervisory systems so as to achieve OATS reporting compliance.
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