FINRA Fines Four Big Brokers $4.75 Million

Financial Industry Regulatory Authority’s claims that they failed to have adequate risk controls

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC, and Interactive Brokers LLC have been censured and fined a total of $4.75 million for violations of various provisions of the market access regulations  and “related exchange supervisory rules,” according to reports.

Reportedly, FINRA is one of the censuring entities, along with the Nasdaq Stock Market, the New York Stock Exchange (NYSE), and the Kansas-based Bats Global Markets, acquired by Chicago Board Options Exchange Holdings, owner of the CBOE, in March of this year.

Of the $4.75 million total, which was “apportioned among FINRA and the Exchanges,” Deutsche Bank accrued the largest single fine, $2.5 million, and Citi was fined $1 million, while JPMorgan and Interactive Brokers were fined $800,000 and $450,000, respectively. The fines were assessed between May and July 2017, according to FINRA.

Deutsche Bank Securities, Citigroup Global Markets, JPMorgan Securities and Interactive Brokers  neither admitted nor denied the charges but consented to the entry of FINRA’s and the Exchanges’ findings.

FINRA says the four firms broke the rule that requires broker-dealers to access an exchange or an alternative trading system or provide their customers with access to these trading venues to adequately control the financial and regulatory risks of providing such access.

According to FINRA, “the purpose of this requirement is to prevent firms from jeopardizing their own financial condition and that of other market participants, while also ensuring the stability and integrity of the financial system and the securities markets.”

Reportedly, the firms, which collectively provided market access to numerous clients that executed millions of trades per day did not meet “one or more provisions” of rule 15c3-5 of the Securities Exchange Act of 1934.

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,” FINRA and the exchanges say in a joint statement.

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This information, which is publicly available on FINRA’s website has been provided by The White Law Group.

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