Four U.S. firms fined combined total of nearly US$5M: FINRA

Four firms have been censured and fined a total of US$4.75 million for violations of various provisions of Rule 15c3-5 of the Securities Exchange Act of 1934 (known as the Market Access Rule) and related exchange supervisory rules, according to a release from the Financial Industry Regulatory Authority.

The following firms are involved in these matters.

• Deutsche Bank Securities Inc.
• Citigroup Global Markets Inc.
• J.P. Morgan Securities LLC
• Interactive Brokers LLC

FINRA notes that the actions against these firms were taken by FINRA along with Bats, a CBOE Holdings company; the NASDAQ Stock Market LLC; the New York Stock Exchange; and their affiliated exchanges.

In settling these matters for the sanctions below, which were apportioned among FINRA and the exchanges, the firms neither admitted nor denied the charges but consented to the entry of FINRA’s and the exchanges’ findings.

Between May and July 2017:

• Deutsche Bank was fined a total of US$2.5 million.
• Citigroup was fined a total of US$1 million.
• J.P. Morgan was fined a total of US$800,000.
• Interactive Brokers was fined a total of US$450,000.

FINRA says the SEC’s Market Access Rule requires that, among other things, broker-dealers that access an exchange or an alternative trading system, or provide their customers with access to these trading venues, must adequately control the financial and regulatory risks of providing such access. The purpose of the rule is to prevent firms from jeopardizing their own financial condition and that of other market participants.

In its release, FINRA says the firms involved in these matters collectively provided market access to numerous clients that executed millions of trades per day. Specifically, FINRA and the exchanges found that the firms failed to comply with one or more provisions of the Market Access Rule.

Additionally, says FINRA, the firms were found to have failed to comply with their obligations under the supervisory rules of FINRA and the exchanges to establish and maintain a reasonably designed system, including written supervisory procedures, to supervise the activities of their customers.

“It is important that firms have reasonable market access procedures in place to appropriately monitor for errors and risks that can be harmful to the integrity of our securities markets,” said FINRA and the exchanges in a joint statement.

The investigations that led to the actions set forth above were conducted by the Department of Market Regulation at FINRA and the exchanges.

Read the full FINRA release.

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