A firm settled FINRA charges for failure to comply with short interest reporting requirements, related supervisory failures concerning certain foreign-listed securities, and violating FINRA Rule 4560 ("Short-Interest Reporting") and Rule 3110 ("Supervision"), respectively.
FINRA Rule 4560 obligates firms to maintain a record of total short positions in all customer and proprietary firm accounts in connection with all equity securities (subject to certain exceptions). Rule 4560 also obligates firms to regularly report such short interest information to FINRA.
According to the FINRA Letter of Acceptance, Waiver and Consent, the firm:
- failed to report 3,129 short interest positions due to a system-related coding issue that excluded certain foreign-listed securities from the firm's short interest submissions; and
- incorrectly reported six short interest positions as totaling 6,790 shares when the short interest positions actually totaled 68,724 shares.
After FINRA notified the firm of the reporting errors, the firm corrected the coding issue in November 2015.
To settle the charges, the firm agreed to (i) a censure and (ii) a fine of $300,000 ($200,000 for the short interest reporting violations and $100,000 for the supervision violations).
Commentary
That seems a big fine for an inadvertent technology violation that did not benefit the firm.
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