A firm settled FINRA charges for inaccurately coding options orders submitted by customers on the firm's online trading platform.
The alleged failures resulted in a violation of FINRA Rule 3110 ("Supervision"), among other securities regulations. FINRA Rule 3110 requires broker-dealers to establish, maintain and enforce both supervisory systems and written supervisory procedures reasonably designed to supervise broker-dealers' activities and the activities of their representatives.
According to the Letter of Acceptance, Waiver and Consent, the firm routed to options exchanges orders that were marked as "Customer" rather than as "Professional Customer." This resulted in the execution of approximately 500,000 mismarked options orders. FINRA alleged that the miscoding (i) led to inaccurate order records and (ii) potentially caused "those orders to be given undue priority for execution on the options exchanges." FINRA determined that the firm failed to implement (i) a supervisory system to detect whether customers' options orders were coded accurately and (ii) a written supervisory procedure for orders executed on the firm's online trading platform.
Without admitting to or denying the charges, the firm agreed to a censure and to pay a fine of $250,000.