FINRA fines M1 Finance for Regulation SHO violations
M1 Finance LLC has agreed to pay a fine of $400,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From March 2016 through the present, M1 Finance violated Regulation SHO Rule 203(b)(1) and Rule 200(g), and FINRA Rule 2010, by effecting more than 12 million short sales without locating securities available for borrowing and by inaccurately marking those orders as long.
By inaccurately recording these short sales, and another 3.5 million principal buy orders, as executed in an “agent” capacity, the firm also maintained inaccurate books and records and violated Exchange Act Section 17(a), Exchange Act Rule 17a-3, and FINRA Rules 4511 and 2010.
Finally, from March 2016 to the present, M1 Finance violated FINRA Rules 3110 and 2010 by failing to establish, maintain and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the provisions of Regulation SHO’s locate and order marking requirements and applicable books and records rules and regulations.
M1 Finance, a FINRA member firm since March 2016, operates a retail and proprietary trading business.
On top of the fine, the firm has agreed to a censure.