UBS Securities LLC agreed to pay a $12mn fine to settle FINRA charges that it mismarked short sale orders and/or failed to adequately conduct its affirmative determination obligations - i.e., that the securities could be borrowed and delivered. FINRA Findings. According to FINRA, UBS employed a significantly flawed supervisory system for monitoring compliance with Reg SHO - in particular, with regard to locates and the marking of sale orders.  This deficiency, in turn, resulted in a systemic supervisory failure that contributed to serious Reg SHO failures across its equities trading business.

• UBS allegedly placed millions of short sale orders to the market without locates, including in securities that were known to be hard to borrow.
• These locate violations extended to numerous trading systems, desks, accounts and strategies, and impacted UBS' technology, operations, and supervisory systems and procedures.

• UBS mismarked millions of sale orders in its trading systems.
• Many of these mismarked orders were short sales that were mismarked as "long," resulting in additional significant violations of Reg SHO's locate requirement.

• UBS had significant deficiencies related to its aggregation units that may have contributed to additional significant order-marking and locate violations.

As a result of its supervisory failures, UBS failed to detect or correct many of these violations until after FINRA's investigation - at which point, UBS conducted a substantive review of its systems and monitoring procedures for Reg SHO compliance. FINRA found that UBS's supervisory framework over its equities trading business was not reasonably designed to achieve compliance with the requirements of Reg SHO and other securities laws, rules and regulations, until at least 2009. FINRA Staff Credits.   Investigation by Jeanne Elmadany,  Conway Lee, under supervision of Richard Best, Enforcement Chief Counsel.   [FINRA News Release, 10/25/11]