FINRA Fines Clearing Firm for Failing to Monitor Shorts
FINRA has fined a clearing firm $650,000 for allowing one of its correspondent firms to engage in improper short sales. FINRA alleges that the clearing firm did not properly vet the correspondent or monitor its trading activities. On the second day of trading, the correspondent failed to meet its obligations with respect to a large short position and the clearing firm was left with a $6.3 Million debit balance when it was forced to close out the position. FINRA charges the clearing firm for failing to conduct proper due diligence on its correspondents, monitoring trading on an intra-day basis, implementing trading parameters, and adopting proper procedures.
OUR TAKE: This case shows FINRA’s willingness to hold member firms accountable for wrongdoing by their customers. Using hindsight analysis, FINRA asserts that the clearing firm would never have incurred the loss on the short position had it conducted proper due diligence on the correspondent and limited trading.
Posted by Todd Cipperman at 3/29/2011 9:05 AM 
Categories: Compliance and Operations
Tags: finra clearing correspondent monitoring short sale
Categories: Compliance and Operations
Tags: finra clearing correspondent monitoring short sale
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