Firm Settles FINRA Charges for TRACE Reporting Violations

A firm settled FINRA charges for failing to accurately report transactions to the Trade Reporting and Compliance Engine ("TRACE") and for failing to re-report rejected transactions. 

According to the AWC, the firm failed to report "58 transactions in TRACE-eligible securitized products, 30 transactions in TRACE-eligible corporate bonds, and eight transactions in TRACE-eligible agency debt." FINRA stated that these transactions were initially reported by the firm, but the TRACE system rejected them. FINRA found that the firm did not re-report the transactions after notification of the rejections. Further, FINRA found that the firm inaccurately reported 35 transactions to TRACE, including misreporting the trade capacity in 24 transactions, the trade price in six transactions, the settlement date in four transactions and both the transaction size and trade date in one transaction.

FINRA determined that the firm failed to establish a supervisory system to ensure compliance with TRACE reporting requirements. FINRA found that the firm (i) lacked adequate WSPs, including providing clear guidance on how supervisors should review TRACE reporting for accuracy and timeliness, and (ii) did not properly investigate red flags associated with TRACE reporting failures. FINRA said that the firm failed to take sufficient steps to identify and remediate the underlying causes for the initial rejections. 

As a result, FINRA found that the firm violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 3110 ("Supervision") and Rule 6730 ("Transaction Reporting").

To settle the charges, the firm agreed to (i) a censure, (ii) pay a civil monetary penalty of $45,000 and (iii) an undertaking to remediate its supervisory deficiencies.