NASD Regulation Censures and Fines E*TRADE Securities, Inc. for Failing to Submit Short Interest Reports to NASD Regulation for 28 Months
Nancy A. Condon
Washington, D.C.—NASD Regulation, Inc. announced today a settlement in which it censured and fined E*TRADE Securities, Inc. $20,000 for failing to report its short interest positions for a twenty-eight month period. Additionally, NASD Regulation, Inc. found that the firm failed to establish, maintain and enforce written supervisory procedures reasonably designed to ensure compliance with the short interest reporting rule.
NASD rules require each member firm to maintain a record of total "short" positions in all customer and proprietary firm accounts in securities listed on The Nasdaq Stock Market and report the information monthly to NASD Regulation’s Market Regulation Department. A short position occurs when a security is sold that the seller does not own. The security is ‘borrowed’ by, or for the account of, the seller. The seller maintains the short position until, at a later date, it is purchased and/or delivered for the account. These figures are reviewed by NASD Regulation and, on an issue-by-issue basis, released for dissemination to the public.
Without admitting or denying NASD Regulation’s findings, E*TRADE settled the NASD’s action which found that the firm failed to report its short interest positions to NASD Regulation, Inc. for the months of June 1996 through September 1998. Additionally, NASD Regulation, Inc. found that the firm, during the same time period, failed to establish, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with NASD Rule 3360 concerning short interest reporting. The failure to report its short interest positions to NASD Regulation caused inaccurate market data to be disseminated to the investing public.
Today’s action was brought by NASD Regulation’s Market Regulation Department.
Investors can obtain more information about NASD Regulation as well as the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through NASD Regulation’s Web site, www.nasdr.com.
NASD Regulation oversees all U.S. stockbrokers and brokerage firms. NASD Regulation, The Nasdaq Stock Market, Inc.; the American Stock Exchange, LLC; and NASD Dispute Resolution, Inc. are subsidiaries of the National Association of Securities Dealers, Inc., the largest securities industry self-regulatory organization in the United States.