Fines & Wines

In this episode, TRADEliance founders, Jesy and Kat, review a high-profile enforcement action with a lot to unpack.  So, pour yourself a glass of wine and listen as they discuss: 

• Failing to reasonably supervise the firm’s maintenance and reporting of accurate and complete trade, order, and position data such as: 
   
  • Blue Sheets. 
  • Reporting fractional shares to TRF and CAT reporting. 
  • Mismarking option orders origin code. 
  • Customer option positions to LOPR. 
  • The firm's short interest positions.
• Executing trades during trading halts and failing to comply with Reg NMS to address extraordinary market volatility.

Also, send your recommendations for new wine openers to [email protected]!

Read the FINRA Press Release here.  

TRADEliance consultants have the practical experience in Trading Operations & Compliance that help you achieve results.  For a free needs assessment, contact [email protected]

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The TRADEliance consultants have been hard at work this year, so it has been a while since we were able to make a new episode for you.   In this episode, Jesy and Kat share their observations regarding FINRA enforcement trends for 2024 in the Capital Market space.  Those trends include:

• Founders Jesy and Kat share updates from 2024
• Rule 605 & 606 reports
• Market Access
• Fixed Income Trade Reporting (TRACE and RTRS)
• Best Execution
• Trade Confirmations
• Prevailing Market Price
• Reg SHO
• Consolidated Audit Trail (CAT)

So sit back, pour yourself a glass of wine, and listen to us share our take-aways on the 2024 FINRA fines.   

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This episode focuses on the trends in FINRA Enforcement over the course 2023.  TRADEliance discusses a several high level trends before doing a more in depth discussion on two topics: Manipulative Trading and Market Access. 

•  Jesy and Kat crack open some mediocre bubbly to celebrate this episode.
• Firms should take note of conducting thorough testing to prevent and detect system issues.
• Many of the trends in enforcement also highlight the need for training.
• Other topics discussed include:
  • Trade Confirmations
  • Recordkeeping 
  • 605/606
  • TRACE Trade Reporting 
  • LOPR 
  • Private Placements 
  • Reg Sho 
  • Best Ex 
  • Market Orders for New Issues in the Secondary Market 
  • Marking to Market Surveillance 
  • CAT 
  • Oversubscription of Partial Tender Offers 

For information on any of the cases discussed, contact [email protected]

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Listen in as TRADEliance discusses considerations for a robust Testing Plan.

• Drink every time we say testing….  No, not really, don't do that!
• We encourage firms to create a testing plan that goes beyond a 3120/206-7 testing obligation
• Written Supervisory Procedures vs Supervisory Controls Procedures 
• Testing samples should be targeted and random and targeted 
• Think of testing vendors, systems and data as three of the pillars that will support a thorough testing plan

FINRA Guidance on Supervision Topics

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Totals in Fines:  Disgorgement: $11,000,000 + Prejudgment Interest $3,375,072, Firm Civil Penalty: $4,400,000, and Adviser Civil Penalty: $600,000

• Jesy is drinking wine in the laundry room 😊 
• Rules
  • Investment Advisers Act Rule 206-2
  • Investment Company Act Section 17(A)1 and 17(A)2
• Investment Adviser Act uses anti-fraud for Best Execution
• The Asset Management Company was pricing the bond trades, not the broker dealers 
• Asset Manager prices the executions, executions impact the evaluated pricing model, Net Asset Value (NAV) is calculated with the evaluated price, Asset Manager is paid a % of the NAV
• Good opportunity for both Broker Dealers and Investment Advisers to review their Best Execution and Fair Pricing practices

SEC Enforcement

SEC Risk Alert

SEC Statement on Investment Company Cross Trading 

Registration for TRADEliance's Upcoming Bullet Point Panel

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This episode takes a slightly different approach!  Listen in as TRADEliance discusses the difference between best ex, fair pricing and reasonable compensation while highlighting some cases that support these differences.  

• Best Execution:  How is the Order Handled ? 
• Fair Pricing: What is the actual price to the client? 
• Reasonable Compensation: What is the BD entitled to charge for that trade? 
• Are you supervising these topics separately?

 The disciplinary cases discussed in this episode are listed below:

• Best Execution Case #1
• Best Execution Case #2
• Best Execution Case #3  
• Fair Pricing Case #4
• Fair Pricing Case #5
• Reasonableness of Compensation Case #6 
• Reasonableness of Compensation Case #7 

Enjoy!

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Listen to Jesy and Kat discuss the 2023 Report on FINRA's Examination and Risk Monitoring Program!

We couldn't cover everything in the 75 page report, but we do manage to tackle the following topics: 

• Market Integrity 
• Books and Records 
• Firm Short Positions and Fails to Receive in Municipal Securities
• Reg BI
• CAT
• Best Execution 
• Disclosure of Routing Information 
• Fixed Income Fair Pricing, Fractional Shares and 
• Reg SHO.

Also - Jesy is sick and drinking boxed wine, while Kat gets fancy enjoying some Prosecco. 

The link to the AWC Jesy referred to during the podcast is here.

Enjoy!

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Listen in as TRADEliance brainstorms their comment letter for the Regulation Best Execution Proposal!  Topics discussed include: 

• The Antifraud Provisions of the Exchange Act as the mechanism for enforcement
• Conflicted Transactions
• Impacts to Introducing Brokers
• Use of Last Look 
• The need for consistency in definitions

Read the Proposal here.

www.tradeliance.com

TRADEliance consultants have the knowledge and first hand experience to improve your firm's trading operations or compliance processes.

https://www.buymeacoffee.com/finesandwines

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$675,000 fine for issues related to TRACE Trade Reporting.

• Let’s start a book club!  The ladies are currently reading the Bond King by Mary Childs and had a fangirl moment when she acknowledges them on Linkedin
• Kat and Jesy are on a quest for a good box wine
• Itemized TRACE Issues (It’s a lot)
   
  • Late Trades 
  • No Remuneration Indicator 
  • Non-member Affiliate trade reports
  • Factored corporate bonds 
  • Supervision
  • Major theme:   Systemic Issues
• Make sure you are supervising rejected trades
• How inclusive is your supervisory reviews?

Read the AWC here.

www.tradeliance.com

TRADEliance consultants have the knowledge and first hand experience to improve your firm's trading operations or compliance processes.

https://www.buymeacoffee.com/finesandwines

Support the show

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$850,000 fine for issues related to statements and required disclosures

• The ladies share their love of Snoop Dogg and the Bond Dealers of America National Fixed Income event
• Statements can be hard
• Vendor Oversight is harder
• Negligent is the case that they gave me, I’m fresh up out my certification to FINRA that my systems are compliant.

Read the full AWC here.
www.tradeliance.com

TRADEliance consultants have the knowledge and first hand experience to improve your firm's trading operations or compliance processes.

https://www.buymeacoffee.com/finesandwines

Support the show