Broker-Dealer Fined for TRACE Reporting Violations

A broker-dealer settled FINRA charges for failing to accurately report non-broker-dealer customers' transactions to the Trade Reporting and Compliance Engine ("TRACE").

In a Letter of Acceptance, Waiver, and Consent, FINRA found that for numerous multi-leg transactions with its non-broker-dealer customers, the broker-dealer failed to apply the "No Remuneration" ("NR") indicator for transactions where the broker-dealer did not earn a mark-up or mark-down. FINRA stated that the broker-dealer operated an ATS and charged participants a non-transaction-based subscription fee to trade on the ATS, which meant the price of the transactions did not include a commission, mark-up or mark-down. Accordingly, these transactions would have required the NR indicator when being reported to TRACE, and FINRA said that the broker-dealer incorrectly determined that since one part of the trade would not be reported as NR, the whole trade would not be reported as NR. FINRA found that the broker-dealer also failed to establish supervisory controls designed to monitor TRACE reporting requirements.

As a result, FINRA determined that the broker-dealer 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 broker-dealer agreed to (i) a censure and (ii) a civil monetary penalty of $100,000.