A broker-dealer settled FINRA charges for failing to disclose material aspects of payment for order flow arrangements.
FINRA stated that the broker-dealer violated Rule 606 ("Disclosure of Order Routing Information") by failing to report in its quarterly reports the material aspects of certain payment for order flow arrangements the broker-dealer had with four venues, including the payment amounts per share and per order. According to FINRA, the broker-dealer incorrectly believed that Rule 606 did not require disclosures on a per-share or per-order basis regarding payments received.
In addition, FINRA determined that the broker-dealer violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), and 3110(a) and (b) ("Supervision"), by failing to implement a sufficient supervisory system and written supervisory procedures to ensure compliance with Rule 606. FINRA specifically noted that the broker-dealer's written supervisory procedures were focused "exclusively on the compilation and publication of the Rule 606 quarterly reports," and lacked any procedures requiring a review of the accuracy or completeness of the information in the reports.
To settle the charges, the broker-dealer agreed to a censure and $75,000 fine ($50,000 for the Rule 606 violations, and $25,000 for the supervision violation).
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