Friday, September 4, 2009

FINRA Regulations

It's Friday morning and, as usual, I'm reading up on recent regulatory actions at the website. Reading the August recap, I see a pattern of firms being fined for failing to give customers a fair and reasonable price on transactions. But I also notice that often firms get fined by FINRA just for sloppiness. For example, NSM Securities in Palm Beach, Florida was just fined $50,000 for "failure to preserve all of its business-related electronic communications, including communications exchanged with its clearing firm for over a year." Institutional Capital Management of Houston, Texas was fined $10,000 for conducting business when their balance sheet (net capital) was insufficient. Prebon Financial Products, Inc. of Jersey City, New Jersey was fined $10,000 because it "failed to accurately report the execution time for corporate bond transactions to the Trade Reporting and Compliance Engine (TRACE); failed to accurately report the execution time for OTC equity transactions; and failed to accurately report the execution time or price for transactions in NASDAQ National Market securities. The findings also stated that the firm failed to include all of the terms and conditions of orders, the correct execution time on order tickets for equity securities transactions, and order tickets did not indicate whether transactions were long or short. The findings also stated that the firm prepared order tickets for transactions in TRACE-eligible securities that did not include the receipt time."
I am so glad I never did anything crazy like try and open my own broker-dealer. OMG, it would be a never-ending stream of fines and sanctions due to my decided lack of record-keeping skills. In any case, sanctions and fines often have little to do with malice or greed--it's just really hard to stay on top of all the details that need to be attended to in this industry.

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