UBS settles at $8mn for RegSHO violation
11 November 2011 Washington
Image: Shutterstock
US regulator, the Securities and Exchange Commission (SEC), has announced it has charged UBS Securities for inaccurate recording practices when providing and recording locates to customers seeking to execute short sales.
UBS settled the enforcement action by agreeing to pay an $8 million penalty and retain an independent consultant to conduct a comprehensive review of the UBS securities lending desk’s policies, procedures and practices with respect to granting locate requests.
According to the SEC’s order instituting settled administrative proceedings, UBS employees routinely recorded the name of a lender’s employee even when no one at UBS had actually contacted the employee to confirm availability. The SEC’s investigation found that UBS employees sourced thousands of locates to lender employees who were out of the office and could not have provided any information to UBS on those days.
Without admitting or denying the SEC’s findings, UBS consented to the order which found the firm had violated the Exchange Act and RegSHO.
This settlement follows a $12 million fine imposed by FINRA in late October for similar violations. Since 2005, RegSHO, a regulation aimed at curbing naked short selling, requires a broker-dealer to have reasonable grounds to believe that the security could be borrowed and available for delivery before accepting or effecting a short sale order and requires a broker-dealer to mark sales of equity securities as long or short.
UBS settled the enforcement action by agreeing to pay an $8 million penalty and retain an independent consultant to conduct a comprehensive review of the UBS securities lending desk’s policies, procedures and practices with respect to granting locate requests.
According to the SEC’s order instituting settled administrative proceedings, UBS employees routinely recorded the name of a lender’s employee even when no one at UBS had actually contacted the employee to confirm availability. The SEC’s investigation found that UBS employees sourced thousands of locates to lender employees who were out of the office and could not have provided any information to UBS on those days.
Without admitting or denying the SEC’s findings, UBS consented to the order which found the firm had violated the Exchange Act and RegSHO.
This settlement follows a $12 million fine imposed by FINRA in late October for similar violations. Since 2005, RegSHO, a regulation aimed at curbing naked short selling, requires a broker-dealer to have reasonable grounds to believe that the security could be borrowed and available for delivery before accepting or effecting a short sale order and requires a broker-dealer to mark sales of equity securities as long or short.
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