FINRA fines firm for alleged financial risk management failures

Securities FINRA Risk Management

On July 30, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver and Consent (AWC), fining a global securities firm $650,000 for allegedly failing to “establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial risks of its market access business activity.” As a result, because the firm’s controls allegedly failed to monitor and prevent (i) orders exceeding pre-set customer credit thresholds, or (ii) erroneous orders, the firm executed erroneous orders on “at least two trade dates.” Additionally, FINRA claimed that even though the firm knew internally of the potential issues in its financial risk management controls, in several instances it took years for the identified gaps to be fixed. The firm neither admitted nor denied the findings set forth in the AWC agreement but agreed to pay the fine and complete a review of its financial risk management controls and supervisory procedures to ensure compliance with SEC regulations.