The Financial Industry Regulatory Authority Inc. ended 2024 with penalties against the brokerage arms of large banks and financial institutions for a variety of technical and trading issues, ranging from sending mistaken trade information to customers to filing inaccurate Focus reports, an important listing of a firm’s financial information that includes its net capital.
Finra typically issues a flurry of significant settlements with broker-dealers when the calendar turns from one year to the next; both the self-regulator and the brokerage firms Finra oversees want to close lingering oversight and compliance issues by Dec. 31.
“Both sides, the firms as well as the regulators, want to clean up their books going into the new year,” said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “You also see that with the number of customer arbitration claims against firms. The percentage of client complaints that settle in December is probably the higher of the year.”
On Monday, Finra penalized UBS Financial Services Inc. with a censure and fine of $1.1 million related to inaccurate trade confirmations.
From February 2014 through November 2024, UBS sent its customers over 330 million trade confirmations that either disclosed that the price shown was or may be an average price when it was not an average price or failed to disclose that the price shown was in fact an average price, according to Finra.
“These failures occurred even though Finra notified UBS about its inaccurate average price disclosures in February 2014,” Finra stated. UBS accepted Finra’s finding in the matter without admission or denial.
Net capital is a measure of a broker-dealer’s liquidity; small broker-dealers sometimes run afoul of industry net capital requirement during times of intense market volatility or when a specific product fails.
According to a Finra settlement from Tuesday, between at least January 2020 and April 2021, Barclays Capital Inc. violated Finra industry rules by failing to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with rules relating to net capital set forth in the Securities Exchange Act of 1934.
Over that time, the firm filed 16 Focus with inaccurate net capital figures and maintained inaccurate books and records relating to net capital, according to Finra.
Barclays Capital was censured and fined $1 million in the net capital matter; the firm consented to the Finra settlement without admission or denial.
Meanwhile, Finra also on Tuesday censured and fined Citigroup Global Markets Inc. $100,000 for violating industry rules and standards involving municipal securities, specifically by permitting three brokers to act as municipal bond traders when they were not qualified, according to Finra. Citigroup Global Markets consented to the settlement without admission or denial.
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