A broker-dealer settled FINRA charges for failing to (i) exercise reasonable diligence to ensure the best market for the execution of customer orders and (ii) conduct transactions in such a market to ascertain that resultant prices were "as favorable as possible under prevailing market conditions."
In a Letter of Acceptance, Waiver and Consent, FINRA alleged that the broker-dealer's order management system contained a programming error that resulted in the premature execution of hold and release orders received outside of normal trading hours. The programming error resulted in a failure to execute 13,136 such orders against each other at the National Best Bid and Offer (or "NBBO") midpoint, resulting in a violation of FINRA Rule 5310 ("Best Execution and Interpositioning"). As a result of its findings, FINRA also determined that the broker-dealer failed to establish and maintain a reasonably designed supervisory system and written supervisory procedures to achieve compliance with FINRA Rule 5310, violating FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade") as a result.
To settle the charges, the broker-dealer agreed to a (i) censure and (ii) $175,000 fine ($100,000 for violations of FINRA Rules 5310 and 2010, and $75,000 for violations of FINRA Rules 3110 and 2010).
Primary Sources
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.