A broker-dealer settled charges brought by FINRA and several exchanges for failing to implement surveillance and supervisory procedures concerning potentially manipulative trading activity by the firm's direct market access ("DMA") clients.
According to the Letters of Acceptance, Waiver and Consent, the broker-dealer failed to sufficiently address numerous trading alerts triggered by its DMA clients between February 2011 and July 2014. FINRA and the exchanges determined that the broker-dealer failed to:
surveil and monitor for potentially manipulative trading by DMA clients;
implement sufficient management controls to prevent orders exceeding pre-set credit or capital thresholds;
conduct a thorough annual review of its risk management controls and supervisory procedures; and
create, maintain and enforce written supervisory procedures concerning DMA activities and relevant securities laws.
Without admitting to or denying the allegations, the broker-dealer agreed to: (i) a censure; (ii) to pay a $6,500,000 fine (of which $566,583 will be paid to FINRA); and (iii) to address its procedural deficiencies.