A broker-dealer settled FINRA charges for Short-Term Obligation Rate Transparency ("SHORT") System reporting and related supervisory failures.
As described in a Letter of Acceptance, Waiver and Consent, FINRA found that on 3,710 occasions over a period of nine years, the broker-dealer violated MSRB Rule G-34 (specifically MSRB Rule G-34(c)(ii)) as a remarketing agent for variable rate demand obligations. FINRA found that the broker dealer failed to submit accurate minimum denomination and maximum interest rates to the MSRB's SHORT System. Specifically, FINRA found the broker-dealer failed to report the minimum denomination in 2,002 submissions and the maximum interest rate in 1,708 submissions.
FINRA stated that the broker-dealer also violated MSRB Rule G-27 (specifically MSRB Rule G-27(a)) by failing to implement a supervisory system, as well as written supervisory procedures, designed to prevent such reporting violations. Specifically, FINRA said the broker-dealer lacked a supervisory system to review whether the required SHORT system information was submitted, and the broker-dealer's written supervisory procedures regarding SHORT System reporting were "merely operational" (i.e., they only described the process for submitting information to the SHORT System).
To settle the charges, the broker-dealer agreed to a (i) censure and (ii) $47,500 fine ($30,000 for the MSRB Rule G-34 violations, and $17,500 for the MSRB Rule G-27 supervision violation).
Primary Sources
Originally Published 8 May 2020
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