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A broker-dealer settled FINRA charges for failing to establish controls and supervisory procedures reasonably designed to ensure compliance with Exchange Act Rule 15c3-5 (the "Market Access Rule").
In a Letter of Acceptance, Waiver and Consent, FINRA alleged that the broker-dealer did not implement credit thresholds for its customers, capital thresholds for itself, or controls to prevent duplicative orders. FINRA found that, although the broker-dealer had financial controls aimed at preventing the entry of erroneous orders, those controls involved only a warning for orders of over 10,000 shares that could be overridden without management review.
In addition, FINRA determined that in the years 2011 and 2012, the firm failed to (i) carry out an annual review to ensure its risk management controls and supervisory procedures were effective, and (ii) complete its CEO certification concerning compliance with the Market Access Rule. Moreover, though the firm's market access business started in 2011, FINRA found that the firm did not establish written supervisory procedures until the following year, which FINRA concluded were not reasonably designed for the foregoing reasons.
As a result of its conduct, the broker-dealer violated Exchange Act Rule 15c3-5, NASD Rule 3010 and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"). To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a $70,000 fine paid jointly to FINRA and NYSE Arca (with $35,000 allocated to FINRA).
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