Nitwit - I'm Sure You Are Right! lol
OK - It's only a slap on the wrist - I'm not even sure FINRA has the authority to collect fines imposed - I wonder how much
UBS Securities netted ...
The system is not as transparent as some would like to believe.
Easy
*******
Regulation SHO Violations and Supervisory Failures
FINRA Fines UBS Securities $12 Million for Regulation SHO Violations and
Supervisory Failures
WASHINGTON--(BUSINESS WIRE)--October 25, 2011--
The Financial Industry Regulatory Authority (FINRA) announced today that it
has fined UBS Securities LLC $12 million for violating Regulation SHO (Reg SHO)
and failing to properly supervise short sales of securities. As a result of
these violations, millions of short sale orders were mismarked and/or placed to
the market without reasonable grounds to believe that the securities could be
borrowed and delivered.
In a short sale, the seller sells a security it does not own. When it is time
to deliver the security, the short seller either purchases or borrows the
security in order to make the delivery. Reg SHO requires a broker-dealer to
have reasonable grounds to believe that the security could be borrowed and
available for delivery before accepting or effecting a short sale order.
Requiring firms to obtain and document this "locate" information before the
short sale occurs reduces the number of potential failures to deliver in equity
securities. In addition, Reg SHO requires a broker-dealer to mark sales of
equity securities as long or short.
FINRA found that UBS' Reg SHO supervisory system regarding locates and the
marking of sale orders was significantly flawed and resulted in a systemic
supervisory failure that contributed to serious Reg SHO failures across its
equities trading business. First, FINRA found that UBS placed millions of short
sale orders to the market without locates, including in securities that were
known to be hard to borrow. These locate violations extended to numerous
trading systems, desks, accounts and strategies, and impacted UBS' technology,
operations, and supervisory systems and procedures. Second, FINRA found that
UBS mismarked millions of sale orders in its trading systems. Many of these
mismarked orders were short sales that were mismarked as "long," resulting in
additional significant violations of Reg SHO's locate requirement. Third, FINRA
found that UBS had significant deficiencies related to its aggregation units
that may have contributed to additional significant order-marking and locate
violations.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said,
"Firms must ensure their trading and supervisory systems are designed to
prevent the release of short sale orders without valid locates, and properly
mark sale orders, in order to prevent potentially abusive naked short selling.
The duration, scope and volume of UBS' locate and order-marking violations
created a potential for harm to the integrity of the market."
As a result of its supervisory failures, many of UBS' violations were not
detected or corrected until after FINRA's investigation caused UBS to conduct a
substantive review of its systems and monitoring procedures for Reg SHO
compliance. FINRA found that UBS' supervisory framework over its equities
trading business was not reasonably designed to achieve compliance with the
requirements of Reg SHO and other securities laws, rules and regulations until
at least 2009.
In concluding this settlement, UBS neither admitted nor denied the charges,
but consented to the entry of FINRA's findings.
FINRA's investigation was conducted by Jeanne R. Elmadany and Conway Lee
under the supervision of Richard R. Best, Enforcement Chief Counsel.
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 2010, members of the public
used this service to conduct 17.2 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.
CONTACT: Financial Industry Regulatory Authority (FINRA)
Nancy Condon, 202-728-8379
(END) Dow Jones Newswires
10-25-11 0948ET
09:48 102511
