- within Intellectual Property, International Law, Litigation and Mediation & Arbitration topic(s)
A firm settled FINRA charges for failing to ensure the best execution of its customers' over-the-counter ("OTC") orders and related deficiencies in its supervisory system.
In a Letter of Acceptance, Waiver and Consent, FINRA found that the firm had a manual process for comparing customer executions with prices available at the same time through messages in an inter-dealer quotation system. FINRA concluded that the firm did not (i) take reasonable steps to execute against the market-maker's quotation within 30 seconds following its receipt of a customer's order, resulting in orders that were not promptly handled, or (ii) as a result of technology failures, promptly display customer orders.
FINRA stated that, as a result of the firm's inadequate related supervisory procedures, the firm did not provide best execution in connection with 41,505 customer orders. Additionally, the firm did not reasonably monitor limit order display requirements because its daily exception reports did not include orders that would have locked or crossed the market.
As a result of its findings, FINRA determined that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110(a) ("Supervisory System"), 5310 ("Best Execution and Interpositioning") and 6460 ("Display of Customer Limit Orders") and NASD Rule 3010(a).
To settle the charges, the firm agreed to (i) a censure, (ii) a $550,000 fine and (iii) $816,618.75 plus interest in restitution.
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