A brokerage firm settled FINRA charges for failing to comply with Order Audit Trail System ("OATS") reporting obligations, as well as for supervisory failings with regard to the firm's written supervisory procedures ("WSPs").
In a Letter of Acceptance, Waiver and Consent, FINRA found that the firm failed to transmit any of its reportable order events ("ROEs") between September 1, 2018 and March 11, 2019. The result of this failure was more than 28,000 ROEs that went unreported. FINRA stated that the firm failed to report because it was unaware that, when its vendor was sold to a third party in September 2018, the vendor stopped reporting to OATS. The firm was also found to have failed to timely report trades when one desk, which reported trades manually, could not keep up with a substantial increase in the volume of OATS reportable trades leading to late reports. As a result, the firm was found in violation of FINRA Rules 7450 ("Order Data Transmission Requirements") and 2010 ("Standards of Commercial Honor and Principles of Trade").
In addition, FINRA found that the firm (i) failed to both verify the accuracy of OATS reports through periodic comparisons of OATS data and "reasonably tailor[]" its WSPs to its business, and (ii) did not designate a new OATS supervisor until nearly a year after the previous OATS supervisor retired. The firm was found in violation of FINRA Rules 2010 and 3110 ("Supervision") for failing to establish and maintain a reasonable supervisory system and WSPs with respect to its OATS reporting.
To settle the charges, the firm agreed to a censure and to pay a $30,000 fine ($10,000 for OATS violations and $20,000 for supervisory violations).
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