A firm settled FINRA charges for maintaining inadequate supervisory procedures to prevent locking or crossing quotations in OTC equity securities.
In a Letter of Acceptance, Waiver and Consent, FINRA found that the firm locked and crossed quotations in OTC equity securities without either (i) contacting other market participants prior to the lock or cross in the market, or (ii) otherwise taking adequate steps to unlock or uncross the market afterward. FINRA said that the firm's policies and procedures did not include guidance to its traders (i) on avoiding or resolving a locked or crossed market, (ii) concerning such traders' responsibilities in entering quotations that might lock or cross markets, or (iii) on the actions that should be taken following the entrance of the quotations that locked or crossed the market. Additionally, FINRA found that the firm's supervisory manual did not specify how supervisors were supposed to monitor for, or review, instances of locked or crossed markets in OTC equity securities.
As a result of these findings, FINRA determined that the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision") and 6437 ("Prohibition from Locking or Crossing Quotations in OTC Equity Securities").
To settle the charges, the firm agreed to (i) a censure and (ii) a $50,000 fine.
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