Merrill Lynch, Pierce, Fenner and Smith has been fined $2.8m by the Financial Industry Regulatory Authority (FINRA) for violations in systemic trade reporting, order audit trail system (OATS) reporting, books and records, and related supervisory failures.
FINRA accused the company, among other things, of reporting millions of trades inaccurately in which purchases were reported as principal sales and agency crosses, and millions of trades it was not required to report.
The watchdog also alleged the company of reporting inaccurate reportable order events to OATS such as inaccurate timestamps, broker-dealer orders reported as customer orders and failing to report millions of execution reports for a period of about five years.
Further, the regulator found that Merrill Lynch failed to record certain special handling instructions, and the correct receipt and route timestamps on order tickets for about three years.
FINRA executive vice president and head of market regulation Thomas Gira said: “A critical component of market integrity is the ability of regulators to rely on the accuracy of the information reported by broker-dealers.
“The failure to report accurate audit trail information adversely affects not only FINRA, but other market participants and the investing public.”
Merrill Lynch agreed to the settlement, without admitting or denying the allegations.