A firm settled FINRA charges for failing to (i) properly designate personnel as either public side or private side, (ii) reasonably supervise communications between them and (iii) escalate communications that disclosed potential material nonpublic information ("potential MNPI").
In a Letter of Acceptance, Waiver and Consent, FINRA found that certain personnel in the same subgroup, consisting of public- and private-side employees, were improperly redesignated as private side in connection with a physical relocation. The firm then failed to train the redesignated personnel in their new responsibilities regarding potential MNPI.
According to FINRA, one of the redesignated employees discussed potential MNPI electronically with two public-side employees within the subgroup who did not "need to know" the information. Additionally, employees shared the potential MNPI externally through the firm's electronic platforms, and when an external recipient questioned the communications as potential MNPI, the communications were not escalated for further review.
As a result, the firm violated NASD Rule 3010 and FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the firm agreed to (i) a censure and (ii) a $450,000 fine. With regard to the fine, the firm shall pay $90,000 to FINRA and the remainder to NYSE Arca, Inc., the Nasdaq Stock Market LLC, Cboe EDGX Exchange, Inc. and Cboe EDGA Exchange, Inc.
Primary Sources
- FINRA AWC: Merrill Lynch, Pierce, Fenner & Smith Incorporated
- NYSE Arca, Inc. AWC: Merrill Lynch, Pierce, Fenner & Smith Incorporated
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