The Financial Industry Regulatory Authority (FINRA) has slammed another
fine on New York-based securities broker, UBS Securities (UBS-S). This time the
self-regulatory organization hit the firm, which is the brokerage arm of Swiss banking group, UBS, with a censure order and fine of
$475,000 for publishing “inaccurate” monthly statistics on execution of its
covered orders between September 2015 and January 2019.
Details of the new fine, which UBS Securities has agreed to pay without
admitting or denying the allegations, are contained in a Letter of Acceptance,
Waiver and Consent (AWC) filed by the broker and
accepted by FINRA on February 3.
The new action comes four months after the private industry regulator,
which supervises brokerage firms in the United States, slapped a $2.5 million fine on UBS Securities
for routing or executing over 73,000 ‘naked’ shorts sales between 2009 and
2018. The United States Securities and Exchange Commission also recently fined UBS Securities $125 million alongside 14 other
broker-dealers and one affiliated investment advisor for using messaging apps
to communicate official business.
According to FINRA, during the stated period, UBS Securities through its
alternative trading system, UBSA, released 41 monthly reports “that contained
inaccurate order and execution quality statistics for covered orders.” This contravened Rule 605 of the Regulation National Market System (NMS) which requires broker-leaders to publish standardized monthly electronic reports of statistical information concerning execution of covered orders they receive.
“Due to a coding error, UBSA’s Rule 605 execution quality statistics
were derived from the ‘parent’ orders originated at UBS-S’s broker-dealer,
instead of the resulting ‘child’ orders that UBSA received,” FINRA added.
Watch the recent FMLS22 session on predictions for financial regulation in 2023.
Furthermore, the private regulator noted that UBS Securities improperly excluded
execution quality statistics for covered smaller or ‘child’ orders that
originated as non-covered large or ‘parent’ orders and whose covered ‘child’
orders were routed to UBSA.
“As a result, from September 2015 through January 2019, the firm’s
monthly UBSA Rule 605 reports significantly underreported the number of covered
orders and related shares it received, executed, and cancelled,” FINRA
explained, adding that the broker-dealer as a result of a
separate “coding error” double counted the number of canceled shares for
certain covered orders processed between September 2015 and January 2018.
“This resulted in UBS-S overreporting a portion of all covered cancel
shares in the UBSA Rule 605 reports from September 2015 through January 2018,” FINRA said.
Moreover, the regulator noted that UBS Securities’ supervisory system was not
reasonably designed to comply with Rule 605 of Regulation NMS as its sample of
covered orders for supervisory reviews “was unreasonably small.”
“UBS-S also failed to reasonably investigate and act upon evidence of
Rule 605 reporting deficiencies. UBS-S discovered the coding error relating to ‘parent’ and ‘child’ orders in September 2017 but did not correct the error until
February 2019, 17 months after UBS-S became aware of this coding error,” FINRA
further explained.
The Financial Industry Regulatory Authority (FINRA) has slammed another
fine on New York-based securities broker, UBS Securities (UBS-S). This time the
self-regulatory organization hit the firm, which is the brokerage arm of Swiss banking group, UBS, with a censure order and fine of
$475,000 for publishing “inaccurate” monthly statistics on execution of its
covered orders between September 2015 and January 2019.
Details of the new fine, which UBS Securities has agreed to pay without
admitting or denying the allegations, are contained in a Letter of Acceptance,
Waiver and Consent (AWC) filed by the broker and
accepted by FINRA on February 3.
The new action comes four months after the private industry regulator,
which supervises brokerage firms in the United States, slapped a $2.5 million fine on UBS Securities
for routing or executing over 73,000 ‘naked’ shorts sales between 2009 and
2018. The United States Securities and Exchange Commission also recently fined UBS Securities $125 million alongside 14 other
broker-dealers and one affiliated investment advisor for using messaging apps
to communicate official business.
According to FINRA, during the stated period, UBS Securities through its
alternative trading system, UBSA, released 41 monthly reports “that contained
inaccurate order and execution quality statistics for covered orders.” This contravened Rule 605 of the Regulation National Market System (NMS) which requires broker-leaders to publish standardized monthly electronic reports of statistical information concerning execution of covered orders they receive.
“Due to a coding error, UBSA’s Rule 605 execution quality statistics
were derived from the ‘parent’ orders originated at UBS-S’s broker-dealer,
instead of the resulting ‘child’ orders that UBSA received,” FINRA added.
Watch the recent FMLS22 session on predictions for financial regulation in 2023.
Furthermore, the private regulator noted that UBS Securities improperly excluded
execution quality statistics for covered smaller or ‘child’ orders that
originated as non-covered large or ‘parent’ orders and whose covered ‘child’
orders were routed to UBSA.
“As a result, from September 2015 through January 2019, the firm’s
monthly UBSA Rule 605 reports significantly underreported the number of covered
orders and related shares it received, executed, and cancelled,” FINRA
explained, adding that the broker-dealer as a result of a
separate “coding error” double counted the number of canceled shares for
certain covered orders processed between September 2015 and January 2018.
“This resulted in UBS-S overreporting a portion of all covered cancel
shares in the UBSA Rule 605 reports from September 2015 through January 2018,” FINRA said.
Moreover, the regulator noted that UBS Securities’ supervisory system was not
reasonably designed to comply with Rule 605 of Regulation NMS as its sample of
covered orders for supervisory reviews “was unreasonably small.”
“UBS-S also failed to reasonably investigate and act upon evidence of
Rule 605 reporting deficiencies. UBS-S discovered the coding error relating to ‘parent’ and ‘child’ orders in September 2017 but did not correct the error until
February 2019, 17 months after UBS-S became aware of this coding error,” FINRA
further explained.