A broker-dealer settled FINRA charges for incomplete and inaccurate Order Audit Trail System ("OATS") reporting.
In a Letter of Acceptance, Waiver and Consent, FINRA found that, in violation of Regulation NMS Rule 606 ("Disclosure of Order Routing Information") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), the broker-dealer reported inaccurate information regarding its routing of non-directed orders in covered securities. Specifically, the broker-dealer failed to (i) elaborate in the reports on the material terms of the order routing arrangements (e.g., disclosure of payment for order flow) and (ii) include its "Not Held" orders in the "Other" classification on the reports.
Additionally, FINRA determined that, in violation of FINRA Rules 7450 ("Order Data Transmission Requirements") and 2010, the broker-dealer (i) submitted Reportable Order Events (or "ROEs") to OATS with incorrectly designated account types, (ii) failed to submit a mandatory cancel/replace event to OATS and (iii) reported an incorrect price in an order record to OATS.
To settle the charges, the broker-dealer agreed to a censure and a $25,000 fine (allocated evenly between the Rule 606 violations and the OATS violations).
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