In December, FINRA reported disciplinary actions against 26 member firms - 7 of the sanctions (27%) were for incorrect or untimely reporting of TRACE-eligible securities.  Which begets a number of questions: 

• Is FINRA judging its members too harshly for what, essentially, are human or mechanical errors? 
• Is FINRA using too low a trigger point - i.e., a de minimus number of exceptions - for determining whether to issue an AWC (fine) or a Letter of Caution (slap on the wrist)? 
• Is FINRA conducting a sweep investigation into the reporting TRACE-eligible securities transactions, or otherwise placing a "high price" on TRACE-related violations? 

Compliance Insights doesn't have the answers, but here are some of the cases cited this month.  For complete details, click onto:   [FINRA Disciplinary Actions for December].

    A.R. Schmeidler & Co. (New York, NY) agreed to pay a $15K fine and to revise its WSP's re: Trade Reporting and Compliance Engine (TRACE) reporting, to settle FINRA charges that it failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of execution time, and failed to report the correct trade execution time for transactions in TRACE-eligible securities to TRACE.  (FINRA Case #2009017180101)

     B.C. Ziegler and Company (Chicago, IL) agreed to pay a $10K fine, to settle FINRA charges that it failed to report the execution of TRACE-eligible transactions pertaining to certain “church” bonds to TRACE.  (FINRA Case #2009016357401)

     Berthel, Fisher & Company Financial Services (Marion, IA) agreed to pay a $12.5K fine, to settle FINRA charges that it failed to report the correct trade execution time for certain transactions in TRACE-eligible securities to TRACE.  The firm also failed to show the correct execution time on order tickets for securities transactions.  (FINRA Case #2009016255901)

     Citigroup Global Markets (New York, NY) agreed to pay a $400K fine and $11K in restitution, plus interest, to settle FINRA charges that it failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of execution time.  Further, the firm allegedly: 

• failed to report the correct trade time for transactions in TRACE-eligible securities to TRACE.
• failed to show the correct execution time on order tickets.
• failed to fully and promptly execute orders.
• failed to use reasonable diligence to ascertain the best inter-dealer market in transactions for or with a customer, and it failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. 

Note:  Citigroup allegedly committed other violations not having to do with TRACE reporting - e.g., traded for its own account vs. customer order in muni securities, and did not provide best execution.  (FINRA Case #2006004821501)

     Fox Chase Capital Partners (Metuchen, NJ) agreed to pay a $10K fine, to settle FINRA charges that it failed to report the correct trade execution time for transactions in TRACE-eligible securities to TRACE;  and for some, firm failed to report the transactions within 15 minutes of the execution time.   (FINRA Case #2009019332501)

     Knight Libertas (Greenwich, CT) agreed to pay a $15K fine, to settle FINRA charges that it failed to report the correct contra-party’s ID for transactions in TRACE-eligible securities to TRACE.  (FINRA Case #2009016807901)

     Wedbush Securities (Los Angeles, CA) agreed to pay a $28K fine, to settle FINRA charges that it failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of execution time, and failed to report the correct trade time for transactions to TRACE.

Note:  Wedbush allegedly committed other violations not having to do with TRACE reporting - e.g., firm transmitted reports to OATS that contained inaccurate, incomplete or improperly formatted data.  (FINRA Case #2008013225201)