<p>The Financial Industry Regulatory
Authority (FINRA) has slammed a $100,000 fine on Dealerweb Inc., operator of an
electronic interdealer platform for mortgage-backed securities.</p><p>The self-regulatory organization said
Dealerweb inaccurately reported approximately 180,000 transactions in
TRACE-eligible securities to its Trade Reporting and Compliance Engine (TRACE)
between July 2016 and December 2020. </p><p>FINRA, which supervises <a href=”https://www.financemagnates.com/tag/us-brokers/” target=”_blank”>brokerage firms in the United States</a>, added that Dealerweb reported these transactions without
including the ‘No Remuneration (NR)’ indicator when in fact they were qualified
for the tag.</p><p>The electronic marketplace operator’s
supervisory system was also not reasonably
designed between July 2016 and March 2022 to report TRACE-compliant securities
transactions, the watchdog said.</p><p>FINRA disclosed these
in an Acceptance, Waiver, and Consent (AWC) <a href=”https://www.finra.org/sites/default/files/fda_documents/2020067548401%20Dealerweb%20Inc.%20CRD%2019662%20AWC%20va.pdf” target=”_blank” rel=”nofollow”>agreement signed by Dealerweb</a> on
October 3 and accepted by the market supervisor on October 17.</p><p>More Details</p><p>According to <a href=”https://www.financemagnates.com/tag/finra/” target=”_blank”>FINRA</a>, Dealerweb operated an
alternative trading system (ATS) and a voice interdealer trading desk between
July 2016 and December 2020.</p><p>The regulator explained that the
electronic marketplace operator’s customers paid a non-transaction-based
subscription fee to trade on the ATS or trading desk. </p><p>This meant that the price of the
transactions on the ATS or trading desk did not include a commission, mark-up,
or mark-down, FINRA noted. </p><p>FINRA further explained, “Because the
majority of Dealerweb’s subscribers were other broker-dealers, most of the
firm’s transactions were subject to the inter-dealer exception to the NR
indicator requirement. </p><p>“In approximately 180,000 transactions
with non-broker-dealer (e.g., bank) customers, however, Dealerweb was required,
but failed, to report the transactions using the NR indicator.”</p><p>On the supervisory system failure, FINRA
noted that although Dealerweb performed supervisory reviews of its TRACE reporting
to identify late reported transactions, its supervision fell short. </p><p>Dealerweb’s supervision “was not
reasonable because it did not have a process to check the accuracy of
transaction information reported, including the NR indicator and other modifiers
and indicators required by FINRA Rule 6730(d)(4)”. </p><p>FINRA added that Dealerweb’s signature of the
AWC form means it has agreed to its sanctions including the $100,000 fine. </p><p>Background details in the agreement shows that Dealerweb paid $37,500 to FINRA for various TRACE violations
between September 2013 and October 2017.</p><p>FINRA and UBS</p><p>Meanwhile, earlier this month, FINRA slapped <a href=”https://www.financemagnates.com/institutional-forex/finra-penalizes-ubs-securities-25m-for-73000-naked-short-sales/” target=”_blank”>a $2.5 million fine</a> on UBS Securities for executing 73,000 ‘naked’ short
sales between 2009 and 2018.</p><p>The watchdog said the New York-based brokerage arm of Swiss banking group, UBS, violated
Rule 204 of the US Securities and Exchange Commission’s Regulation SHO (Reg
SHO).</p><p>Reg SHO regulates the practice of short
sales or the sale of borrowed securities in the United States. The set of rules
were introduced in 2005.</p>
This article was written by Solomon Oladipupo at www.financemagnates.com.
