Swedish regulator fines Nordnet for intraday short selling violations
26 May 2022 Sweden
Image: AdobeStock/Nuthawut
Finansinspektionen (FI), the Swedish financial services regulator, has fined Nordnet for failing to adhere to its terms of service relating to intraday short selling.
FI indicates that online broker and banking services provider Nordnet has offered to a small group of customers a wider range of shortable shares than is available to its wider customer base.
In offering this privileged service, available to Nordnet’s most active customers and those with larger capital amounts to invest, the financial watchdog finds that Nordnet failed to ensure adequate stock borrow was available before allowing these customers to short the stock.
This presented risk that the customers were short selling shares without adequate coverage, FI finds, causing it to violate rules banning naked short sales in the Nordic jurisdiction. “On one occasion it has been determined that naked short selling was widespread,” says FI.
In summarising its evidence against Nordnet, FI says that Nordnet had reported deficiencies in its procedures for intraday short selling in 2018, but the bank had continued to provide this service without taking necessary remedial measures.
FI also identified wider failings in Nordnet’s internal guidelines, procedures, risk management and risk assessment, as well as failing to fulfil its duty of care to customers.
Commenting on the case, FI’s deputy director general Susanna Grufman says that “Nordnet’s actions can have a negative impact on the confidence that the market is well functioning.”
FI’s decision, which was finalised by its Board of Directors on 24 May, has resulted in “a remark”, or censure, and a SEK100 million (approximately US$10 million) fine for the online bank and broker.
FI indicates that online broker and banking services provider Nordnet has offered to a small group of customers a wider range of shortable shares than is available to its wider customer base.
In offering this privileged service, available to Nordnet’s most active customers and those with larger capital amounts to invest, the financial watchdog finds that Nordnet failed to ensure adequate stock borrow was available before allowing these customers to short the stock.
This presented risk that the customers were short selling shares without adequate coverage, FI finds, causing it to violate rules banning naked short sales in the Nordic jurisdiction. “On one occasion it has been determined that naked short selling was widespread,” says FI.
In summarising its evidence against Nordnet, FI says that Nordnet had reported deficiencies in its procedures for intraday short selling in 2018, but the bank had continued to provide this service without taking necessary remedial measures.
FI also identified wider failings in Nordnet’s internal guidelines, procedures, risk management and risk assessment, as well as failing to fulfil its duty of care to customers.
Commenting on the case, FI’s deputy director general Susanna Grufman says that “Nordnet’s actions can have a negative impact on the confidence that the market is well functioning.”
FI’s decision, which was finalised by its Board of Directors on 24 May, has resulted in “a remark”, or censure, and a SEK100 million (approximately US$10 million) fine for the online bank and broker.
← Previous regulation article
J.P. Morgan processes transaction settlement using tokenised MMFs as collateral
J.P. Morgan processes transaction settlement using tokenised MMFs as collateral
Next regulation article →
SEC charges US-broker TradeZero with misleading customers over meme stock trading
SEC charges US-broker TradeZero with misleading customers over meme stock trading
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
