FINRA fines UBS Securities $12m
26 October 2011 Washington
Image: Shutterstock
The Financial Industry Regulatory Authority (FINRA) has announced that it has fined UBS Securities $12 million for violating RegSHO and failing to properly supervise short sales of securities.
As a result of these violations, millions of short sale orders were either mismarked, placed to the market without reasonable grounds to believe that the securities could be borrowed and delivered or both.
Reg SHO 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.
FINRA found that UBS' Reg SHO supervisory system regarding locates and the marking of sale orders was significantly flawed and resulted in a systemic supervisory failure that contributed to serious Reg SHO failures across its equities trading business.
Brad Bennett, FINRA executive vice president and chief of enforcement, said, "Firms must ensure their trading and supervisory systems are designed to prevent the release of short sale orders without valid locates, and properly mark sale orders, in order to prevent potentially abusive naked short selling. The duration, scope and volume of UBS' locate and order-marking violations created a potential for harm to the integrity of the market."
UBS neither admitted nor denied the charges but consented to the entry of FINRA's findings in concluding the settlement.
As a result of these violations, millions of short sale orders were either mismarked, placed to the market without reasonable grounds to believe that the securities could be borrowed and delivered or both.
Reg SHO 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.
FINRA found that UBS' Reg SHO supervisory system regarding locates and the marking of sale orders was significantly flawed and resulted in a systemic supervisory failure that contributed to serious Reg SHO failures across its equities trading business.
Brad Bennett, FINRA executive vice president and chief of enforcement, said, "Firms must ensure their trading and supervisory systems are designed to prevent the release of short sale orders without valid locates, and properly mark sale orders, in order to prevent potentially abusive naked short selling. The duration, scope and volume of UBS' locate and order-marking violations created a potential for harm to the integrity of the market."
UBS neither admitted nor denied the charges but consented to the entry of FINRA's findings in concluding the settlement.
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