FINRA Fines & AWC’S for Blue-Sheet Violations on Which SEC Sought Admissions


I wrote earlier that the SEC was wrong to extend its “admission of wrongdoing” policy (once reserved for extreme cases) to negligent software-glitch misreporting of trade-data in the Scottrade case. Burr blog here,  (April 17, 2014); Law360 Securities article here, (June 2, 2014).

On June 4, FINRA announced that its response to similar blue-sheet violations by three firms was a standard AWC (“neither admit nor deny”) with a fine of less than half the amount assessed Scottrade by the SEC.  As in Scottrade, the firms’ violations stemmed from software problems and FINRA also found each firm lacked adequate procedures to address and correct the problems.  Unlike Scottrade, each of the three firms had prior disciplinary issues involving inaccurate blue-sheet data.

In addition to undesirable mission-creep, the SEC’s mis-step in Scottrade now seems to reflect regulatory inconsistency in the treatment of similar violations as well.

FINRA also initiated proceedings against a fourth firm; they remain unajudicated.

FINRA’s release is here.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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