FINRA fined an investment bank $12.5 million for significant supervisory failures related to research and trading-related information that it disseminated to its employees in the form of "hoots" or "squawks" over internal speakers better known as "squawk boxes."
FINRA found that the firm:
- knew that "hoots" involving research and trading could contain confidential and price-sensitive information;
- ignored red flags, which indicated inadequate supervision, that included internal audit findings and recommendations, multiple internal warnings from members of the firm's compliance department, and internal risk assessments; and
- failed to implement reasonable written policies, procedures and systems that would determine who should have access to "hooted" information, how employees should handle the information, and the ways in which supervisors should supervise said employees.
In addition to the fine, the firm also agreed to provide a written certification to FINRA that it has adopted and implemented supervisory systems and written procedures concerning hoots that are reasonably designed to achieve compliance with FINRA rules and federal securities laws.
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