Beta Capital Management, L.P. agreed to settle FINRA charges related to noted deficiencies in the way the firm handled post-execution allocation of trades.  According to FINRA, for at least 2 years, the firm’s 3rd-party order entry system permitted trades to be entered into the system without assigning an account to the trades. Operating and Disciplinary History. Beta Capital, a FINRA member since 1995, maintains its principal place of business and sole office in Miami, FL.  Beta currently employs 23 registered persons and 8 non-registered persons.  The firm conducts both retail and institutional securities brokerage business. In a separate disciplinary matter, the Firm agreed in April 2011 to pay a $20K fine to settle FINRA charges that it had issued 866 inaccurate and incomplete confirmations for equity transactions, in violation of SEC Rule 10b-10. Alleged Deficient Supervisory Systems. From at least 2006 through 2007, Beta failed to maintain an order entry system that was reasonably designed to prevent an improper post-execution allocation of trades.  The firm used a 3rd-party order entry system that permitted trades to be entered into the system, without assigning an account to the trades. In certain instances, the firm's operations department allocated trades in the system based on written order tickets it received well after the trades had been entered - and at times after the close of trading - thus after securities may have experienced intra-day up or down price swings. During this time period, Beta did not require its RRs to provide order tickets to Operations as soon as the trades were entered into the system. Instead, order tickets could be completed, and turned in later in the day.  This deficiency permitted the improper post-execution trade allocations, as detailed below.  As a result of the foregoing, Beta allegedly violated Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and NASD Conduct Rules 2120, 3010, and 2110. Alleged Improper Post-Execution Allocation of Trades. Throughout this 2-year period, the firm facilitated the improper post-execution allocation of trades at the direction, and to the benefit, of a particular customer, who directed and controlled 2 accounts at the firm - one in which the customer was the beneficial owner, and a second account for an institutional client. The customer would phone in orders throughout the day to Beta's trading desk.  At times, trades were entered into the electronic order entry system without account assignments.  In certain instances, near or after the close of trading, the customer instructed the firm how trades should be allocated between the accounts.  FINRA found that, in many instances, the more profitable and more favorably priced trades were allocated to the account for the customer’s personal benefit, while less profitable and less favorably priced trades were allocated to the institutional account. Over the 2 years, this allocation methodology resulted in widely disparate results for the 2 accounts.  In trades involving the same equities, the account for the benefit of the customer realized $586,000 in trading profits, while the institutional account realized just $51,000 in profits.  As a result of the foregoing, Beta, through certain of its RRs, violated Section 10(b) of the Exchange Act, Rule 10b-5, and NASD Conduct Rules 2120 and 2110. FINRA Sanctions. Beta Capital Management agreed to a $450K fine. For further details, go to:   [FINRA AWC #2010024016701] [Disciplinary Actions for November 2011]