Broker-Dealer Fined $1.75 Million for Inadequate Reg SHO Compliance Procedures
FINRA fined a large broker-dealer $1.75 Million for inadequate compliance procedures involving short sales. According to FINRA, the broker-dealer released millions of short sale orders to the market without having reasonable grounds to believe that the securities could be borrowed and delivered. FINRA charges that the firm did not have adequate technological and supervisory procedures necessary to comply with Regulation SHO, which requires firms to obtain and document â€œlocateâ€ information for short sales. FINRA uncovered the problem during an investigation.
OUR TAKE: Technical compliance violations can lead to significant fines even without a specific allegation of client or investor harm.