U.S. securities regulators have sanctioned a trio of Wall Street titans for providing them with inaccurate trading data, which the regulators use to look for possible trading violations.
The U.S. Financial Industry Regulatory Authority (FINRA) announced Wednesday that it has censured and fined Barclays Capital Inc., Goldman, Sachs & Co., and Merrill Lynch, Pierce, Fenner & Smith, Inc., US$1 million each for failing to provide complete and accurate information about trades to FINRA, the U.S. Securities and Exchange Commission (SEC), and other regulators. The firms settled the allegations, neither admitting nor denying the charges, but consented to the entry of FINRA’s findings.
FINRA says that it found that the firms failed to provide complete, accurate data on trades performed by the firms and their customers, commonly known as “blue sheet” data. For example, it says that it found the firms’ submissions failed to include some customer names and contact information, failed to include some transactions, contained incorrect name and contact information for some customers, or contained inaccurate details of the transactions.
In addition to the financial sanctions, FINRA ordered the firms to certify that they have conducted a comprehensive review of their systems related to blue sheet submissions, and to certify that they have established procedures reasonably designed to address and correct the violations.
FINRA notes that blue sheet data provides regulators with detailed information about trades performed by a firm and its customers, including the security’s name, date traded, price, transaction size and parties involved. Regulators use the data to identify trading anomalies and investigate potential insider trading or other market manipulations, it says.
“Blue sheets are mission-critical to conducting reviews and investigations of suspicious trading. When firms fail to submit timely and accurate blue sheet data, it compromises the ability of every regulator to identify the perpetrators of illegal insider trading and other market abuses,” said Cameron Funkhouser, executive vice president and head of FINRA’s Office of Fraud Detection and Market Intelligence. “The actions announced today are a reminder to firms about their fundamental obligation to provide complete and accurate blue sheet data without exception.”
Along with the settled cases against the big three firms, FINRA also issued a complaint against Wedbush Securities, Inc., for failing to submit complete and accurate blue sheets. Those allegations have not been proven.