The Financial Industry RegulatoryAuthority (FINRA) has slammed a $100,000 fine on Dealerweb Inc., an operator of anelectronic interdealer platform for mortgage-backed securities.
The self-regulatory organization saidDealerweb inaccurately reported approximately 180,000 transactions inTRACE-eligible securities to its Trade Reporting and Compliance Engine (TRACE)between July 2016 and December 2020.
FINRA, which supervises brokerage firms in the United States, added that Dealerweb reported these transactions withoutincluding the ‘No Remuneration (NR)’ indicator when in fact they were qualifiedfor the tag.
The electronic marketplace operator’ssupervisory system was also not reasonablydesigned between July 2016 and March 2022 to report TRACE-compliant securitiestransactions, the watchdog said.
FINRA disclosed thesein an Acceptance, Waiver and Consent (AWC) agreement signed by Dealerweb onOctober 3 and accepted by the market supervisor on October 17.
More Details
According to FINRA, Dealerweb operated analternative trading system (ATS) and a voice interdealer trading desk betweenJuly 2016 and December 2020.
The regulator explained that theelectronic marketplace operator’s customers paid a non-transaction-basedsubscription fee to trade on the ATS or trading desk.
This meant that the price of thetransactions on the ATS or trading desk did not include a commission, mark-up,or mark-down, FINRA noted.
FINRA further explained: “Because themajority of Dealerweb’s subscribers were other broker-dealers, most of thefirm’s transactions were subject to the inter-dealer exception to the NRindicator requirement.
“In approximately 180,000 transactionswith non-broker-dealer (e.g., bank) customers, however, Dealerweb was required,but failed, to report the transactions using the NR indicator.”
Regarding the supervisory system failure, FINRAnoted that although Dealerweb performed supervisory reviews of its TRACE reportingto identify late reported transactions, its supervision fell short.
Dealerweb’s supervision “was notreasonable because it did not have a process to check the accuracy oftransaction information reported, including the NR indicator and other modifiersand indicators required by FINRA Rule 6730(d)(4).”
FINRA added that Dealerweb’s signature of theAWC form means it has agreed to its sanctions including the $100,000 fine.
Background details in the agreement show that Dealerweb paid $37,500 to FINRA for various TRACE violationsbetween September 2013 and October 2017.
FINRA and UBS
Meanwhile, earlier this month, FINRA slapped a $2.5 million fine on UBS Securities for executing 73,000 ‘naked’ shortsales between 2009 and 2018.
The watchdog said the New York-based brokerage arm of the Swiss banking group, UBS, violatedRule 204 of the US Securities and Exchange Commission’s Regulation SHO (RegSHO).
Reg SHO regulates the practice of shortsales or the sale of borrowed securities in the United States. The set of ruleswas introduced in 2005.
The Financial Industry RegulatoryAuthority (FINRA) has slammed a $100,000 fine on Dealerweb Inc., an operator of anelectronic interdealer platform for mortgage-backed securities.
The self-regulatory organization saidDealerweb inaccurately reported approximately 180,000 transactions inTRACE-eligible securities to its Trade Reporting and Compliance Engine (TRACE)between July 2016 and December 2020.
FINRA, which supervises brokerage firms in the United States, added that Dealerweb reported these transactions withoutincluding the ‘No Remuneration (NR)’ indicator when in fact they were qualifiedfor the tag.
The electronic marketplace operator’ssupervisory system was also not reasonablydesigned between July 2016 and March 2022 to report TRACE-compliant securitiestransactions, the watchdog said.
FINRA disclosed thesein an Acceptance, Waiver and Consent (AWC) agreement signed by Dealerweb onOctober 3 and accepted by the market supervisor on October 17.
More Details
According to FINRA, Dealerweb operated analternative trading system (ATS) and a voice interdealer trading desk betweenJuly 2016 and December 2020.
The regulator explained that theelectronic marketplace operator’s customers paid a non-transaction-basedsubscription fee to trade on the ATS or trading desk.
This meant that the price of thetransactions on the ATS or trading desk did not include a commission, mark-up,or mark-down, FINRA noted.
FINRA further explained: “Because themajority of Dealerweb’s subscribers were other broker-dealers, most of thefirm’s transactions were subject to the inter-dealer exception to the NRindicator requirement.
“In approximately 180,000 transactionswith non-broker-dealer (e.g., bank) customers, however, Dealerweb was required,but failed, to report the transactions using the NR indicator.”
Regarding the supervisory system failure, FINRAnoted that although Dealerweb performed supervisory reviews of its TRACE reportingto identify late reported transactions, its supervision fell short.
Dealerweb’s supervision “was notreasonable because it did not have a process to check the accuracy oftransaction information reported, including the NR indicator and other modifiersand indicators required by FINRA Rule 6730(d)(4).”
FINRA added that Dealerweb’s signature of theAWC form means it has agreed to its sanctions including the $100,000 fine.
Background details in the agreement show that Dealerweb paid $37,500 to FINRA for various TRACE violationsbetween September 2013 and October 2017.
FINRA and UBS
Meanwhile, earlier this month, FINRA slapped a $2.5 million fine on UBS Securities for executing 73,000 ‘naked’ shortsales between 2009 and 2018.
The watchdog said the New York-based brokerage arm of the Swiss banking group, UBS, violatedRule 204 of the US Securities and Exchange Commission’s Regulation SHO (RegSHO).
Reg SHO regulates the practice of shortsales or the sale of borrowed securities in the United States. The set of ruleswas introduced in 2005.
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