Three broker-dealers agreed to settle SEC charges for failing to submit complete and accurate securities trading information on electronic blue sheets.
According to the three SEC Orders (see here, here and here), the firms each made inadequate blue sheet submissions containing inaccurate data. The SEC alleged that the broker-dealers had insufficient processes to detect the accuracy of its submissions.
The SEC took into account remedial acts and cooperation by the three broker-dealers. To settle the charges, the firms agreed to pay fines ranging from $1.4 million to $3.5 million.
Commentary / Conor Almquist
These SEC Orders serve as a reminder to firms that they can be found to have "willfully violated the broker-dealer books and records and reporting provisions" as a result of "undetected coding errors." Firms should consider working closely with regulatory technologists in designing their Electronic Blue Sheet ("EBS") reporting systems and establishing supervision and review systems. Preventative measures against undetected coding errors and other data issues include: sample-based testing; quality assurance testing; pre-submission validation processes; and automated reconciliations of EBS data with trade blotters and customer settlement data. Generally, firms should ensure they have sufficient formal EBS-related policies and procedures both for processing EBS requests and for reviewing the underlying systems.
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