|Barclays Capital Inc. Action|
Goldman, Sachs & Co. Action
Merrill Lynch, Pierce, Fenner & Smith, Inc. Action
Wedbush Securities, Inc. Complaint
Washington — The Financial Industry Regulatory Authority (FINRA) today announced it has censured and fined Barclays Capital Inc.; Goldman, Sachs & Co.; and Merrill Lynch, Pierce, Fenner & Smith, Inc., $1 million each for failing to provide complete and accurate information about trades performed by the firms and their customers, commonly known as "blue sheet" data, to FINRA, the SEC and other regulators. In addition, FINRA issued a complaint against Wedbush Securities, Inc., for failing to submit complete and accurate blue sheets.
Blue sheets provide 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. Federal securities laws and FINRA rules require firms to provide this information to FINRA and other regulators electronically upon request.
Cameron Funkhouser, Executive Vice President and Head of FINRA's Office of Fraud Detection and Market Intelligence, said, "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. The actions announced today are a reminder to firms about their fundamental obligation to provide complete and accurate blue sheet data without exception."
FINRA found the firms' violations included submissions that 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. The violations arose from problems with the firms' electronic systems used to compile and produce blue sheet data. FINRA also found that the firms failed to have in place adequate audit systems providing for accountability of their blue sheet submissions. 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.
Each firm has a prior regulatory history involving the submission of inaccurate blue sheet data.
In settling these matters, Barclays, Goldman Sachs and Merrill Lynch neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
The Wedbush complaint is not yet adjudicated. Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or expulsion from the securities industry; disgorgement of gains associated with the violations; and payment of restitution. The issuance of a disciplinary complaint represents FINRA's initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Because the complaint is unadjudicated, the respondents should be contacted before drawing any conclusions regarding the allegations in the complaint.
FINRA's investigation was conducted by the Office of Fraud Detection and Market Intelligence, and the Department of Enforcement.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2013, members of the public used this service to conduct 16.5 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.