The U.S. Financial Industry Regulatory Authority (FINRA) on Tuesday fined Merrill Lynch, Pierce, Fenner and Smith Inc. US$2.8 million for systemic violations of the rules regarding trade reporting and audit trail information, which the regulators rely on to conduct market surveillance.
The firm settled the allegations, neither admitting or denying the charges.
FINRA found that a system configuration error caused Merrill Lynch to inaccurately report millions of trades to the regulator’s trade reporting facility, and to report millions of trades that it was not required to report, the regulator says in a news release. It also found that other systems errors caused it to report millions of inaccurate orders to the audit trail system.
The firm’s supervisory systems in this area were not reasonably designed, FINRA adds.
“A critical component of market integrity is the ability of regulators to rely on the accuracy of the information reported by broker-dealers. The failure to report accurate audit trail information adversely affects not only FINRA, but other market participants and the investing public,” says Thomas Gira, executive vice president and head of market regulation at FINRA.