FINRA fines Natixis Securities Americas for short interest reporting deficiencies
Natixis Securities Americas LLC (NSA) has agreed to pay a fine of $400,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
In February 2013, NSA set up two trading accounts for its parent company. The firm’s legacy systems, however, were not updated to capture the two accounts in its short interest reports. As a result, from February 2013 through June 2019, NSA did not report any short interest positions in the two accounts, totaling 82,311 short interest positions and approximately 9.9 billion shares over more than six years (150 two-week reporting cycles).
In July 2019, the firm implemented a technology solution to include all relevant accounts for short interest reporting.
Therefore, NSA violated FINRA Rules 4560 and 2010.
NSA’s supervisory system, including its written procedures, was not reasonably designed to achieve compliance with its short interest reporting obligations. The supervisory system and written procedures were solely operational. The firm’s procedures listed the steps personnel were to follow to transmit the short interest report every two weeks but required no supervisory review to determine the accuracy of the reports.
As a result, the firm failed to detect the unreported positions until the issue was identified during a compliance review by an outside consultant. In July 2019, the firm implemented a supervisory review and related written procedures outlining the steps supervisors are required to take to review the accuracy of the firm’s short interest reports. Therefore, NSA violated FINRA Rules 3110 and 2010.
In resolving this matter, FINRA has recognized NSA’s extraordinary cooperation. NSA self-reported the violations shortly after they were discovered by an outside consultant, which the firm hired on its own initiative. The consultant reviewed all of the firm’s regulatory reporting processes, procedures, and controls, not limiting the scope of review solely to short interest reporting.
Subsequent to the initial self-report, NSA provided substantial assistance to FINRA in its investigation, including by fully identifying all short interest positions the firm failed to report during the relevant period, which FINRA used as the basis for the violation totals in this matter.
NSA also promptly corrected the error that caused the reporting issues and enhanced its short interest reporting supervisory processes and related written procedures.
On top of the $400,000 fine the company has agreed to a censure.