The Financial Industry Regulatory Authority (FINRA) has slammed anotherfine on New York-based securities broker, UBS Securities (UBS-S). This time theself-regulatory organization hit the firm, which is the brokerage arm of the Swiss banking group, UBS, with a censure order and fine of$475,000 for publishing “inaccurate” monthly statistics on execution of itscovered orders between September 2015 and January 2019.
Details of the new fine, which UBS Securities has agreed to pay withoutadmitting or denying the allegations, are contained in a Letter of Acceptance,Waiver and Consent (AWC) filed by the broker andaccepted by FINRA on February 3.
The new action comes four months after the private industry regulator,which supervises brokerage firms in the United States, slapped a $2.5 million fine on UBS Securitiesfor routing or executing over 73,000 ‘naked’ shorts sales between 2009 and2018. Additionally, the United States Securities and Exchange Commission recently fined UBS Securities $125 million alongside 14 otherbroker-dealers and one affiliated investment advisor for using messaging appsto communicate official business.
FINRA Elaborates on New Fine on UBS Securities
According to FINRA, during the stated period, UBS Securities through itsalternative trading system, UBSA, released 41 monthly reports “that containedinaccurate order and execution quality statistics for covered orders.” This contravened Rule 605 of the Regulation National Market System (NMS) which requires broker-leaders to publish standardized monthly electronic reports of statistical information concerning the execution of covered orders they receive.
“Due to a coding error, UBSA’s Rule 605 execution quality statisticswere derived from the ‘parent’ orders originated at UBS-S’s broker-dealer,instead of the resulting ‘child’ orders that UBSA received,” FINRA added.
Watch the recent FMLS22 session on predictions for financial regulation in 2023.
Furthermore, the private regulator noted that UBS Securities improperly excludedexecution quality statistics for covered smaller or ‘child’ orders thatoriginated as non-covered large or ‘parent’ orders and whose covered ‘child’orders were routed to UBSA.
“As a result, from September 2015 through January 2019, the firm’smonthly UBSA Rule 605 reports significantly underreported the number of coveredorders and related shares it received, executed, and cancelled,” FINRAexplained, adding that the broker-dealer as a result of aseparate “coding error” double counted the number of canceled shares forcertain covered orders processed between September 2015 and January 2018.
“This resulted in UBS-S overreporting a portion of all covered cancelshares in the UBSA Rule 605 reports from September 2015 through January 2018,” FINRA said.
Moreover, the regulator noted that UBS Securities’ supervisory system was notreasonably designed to comply with Rule 605 of Regulation NMS as its sample ofcovered orders for supervisory reviews “was unreasonably small.”
“UBS-S also failed to reasonably investigate and act upon evidence ofRule 605 reporting deficiencies. UBS-S discovered the coding error relating to ‘parent’ and ‘child’ orders in September 2017 but did not correct the error untilFebruary 2019, 17 months after UBS-S became aware of this coding error,” FINRA explained.
The Financial Industry Regulatory Authority (FINRA) has slammed anotherfine on New York-based securities broker, UBS Securities (UBS-S). This time theself-regulatory organization hit the firm, which is the brokerage arm of the Swiss banking group, UBS, with a censure order and fine of$475,000 for publishing “inaccurate” monthly statistics on execution of itscovered orders between September 2015 and January 2019.
Details of the new fine, which UBS Securities has agreed to pay withoutadmitting or denying the allegations, are contained in a Letter of Acceptance,Waiver and Consent (AWC) filed by the broker andaccepted by FINRA on February 3.
The new action comes four months after the private industry regulator,which supervises brokerage firms in the United States, slapped a $2.5 million fine on UBS Securitiesfor routing or executing over 73,000 ‘naked’ shorts sales between 2009 and2018. Additionally, the United States Securities and Exchange Commission recently fined UBS Securities $125 million alongside 14 otherbroker-dealers and one affiliated investment advisor for using messaging appsto communicate official business.
FINRA Elaborates on New Fine on UBS Securities
According to FINRA, during the stated period, UBS Securities through itsalternative trading system, UBSA, released 41 monthly reports “that containedinaccurate order and execution quality statistics for covered orders.” This contravened Rule 605 of the Regulation National Market System (NMS) which requires broker-leaders to publish standardized monthly electronic reports of statistical information concerning the execution of covered orders they receive.
“Due to a coding error, UBSA’s Rule 605 execution quality statisticswere derived from the ‘parent’ orders originated at UBS-S’s broker-dealer,instead of the resulting ‘child’ orders that UBSA received,” FINRA added.
Watch the recent FMLS22 session on predictions for financial regulation in 2023.
Furthermore, the private regulator noted that UBS Securities improperly excludedexecution quality statistics for covered smaller or ‘child’ orders thatoriginated as non-covered large or ‘parent’ orders and whose covered ‘child’orders were routed to UBSA.
“As a result, from September 2015 through January 2019, the firm’smonthly UBSA Rule 605 reports significantly underreported the number of coveredorders and related shares it received, executed, and cancelled,” FINRAexplained, adding that the broker-dealer as a result of aseparate “coding error” double counted the number of canceled shares forcertain covered orders processed between September 2015 and January 2018.
“This resulted in UBS-S overreporting a portion of all covered cancelshares in the UBSA Rule 605 reports from September 2015 through January 2018,” FINRA said.
Moreover, the regulator noted that UBS Securities’ supervisory system was notreasonably designed to comply with Rule 605 of Regulation NMS as its sample ofcovered orders for supervisory reviews “was unreasonably small.”
“UBS-S also failed to reasonably investigate and act upon evidence ofRule 605 reporting deficiencies. UBS-S discovered the coding error relating to ‘parent’ and ‘child’ orders in September 2017 but did not correct the error untilFebruary 2019, 17 months after UBS-S became aware of this coding error,” FINRA explained.
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