[ by Howard Haykin ]

A Stamford, CT-based UBS trader agreed to settle FINRA charges that he failed to accurately mark his positions on a daily basis. 

FINRA Findings and Allegations.   The trader was associated with UBS From June 2009 through November 2010, where he specialized in trading sovereign debt issues. On about 10/1/10, UBS back office personnel apparently made operational errors during a sovereign bond exchange that affected the trader's book of positions.  From FINRA's vantage point, here's how the scenario played out:

• Operations personnel make mistakes that create an over-allocation of bonds in a trader's book.
• The impact of the errors is that it gives an impression of a large profit in the trader's book - one that apparently should not exist.
• Allegedly, rather than report the error, the trader instead allegedly lowered the value of several positions in his book outside of the market spread - this had the effect of wiping out the any so-called inappropriate profit. 
• Three days later, firm Ops personnel detect their original error and correct it;  that same day, the trader apparently corrects the marks in his books, as well.

Such alleged actions would cause a books and records violation - but from the information provided by FINRA, there's nothing to indicated the trader attempted to profit from the mechanical errors.  Instead, he appears to have compounded or created a problem by mismarking unrelated positions - according to FINRA.  While books and records errors are low in priority of violations, they are still violations when they occur.  UBS's policies and procedures require traders to mark the positions in their book on a daily basis, and failure to do so accurately - no offsetting reasons or excuses provided - is a violation of firm policy. 

Violations Charged and FINRA Sanctions.    In addition to violating UBS policies and procedures, such alleged actions would cause the Firm to retain false records - thus violating NASD Conduct Rule 3110 and FINRA Rule 2010.   The trader agreed to a $5K fine and a one-month suspension.

This case was presented in FINRA's Disciplinary Actions for January 2013.

For further details, go to:   [ FINRA AWC #2010025417401 ].