Odeon Capital Group LLC has agreed to pay a fine of $75,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From July 2019 to the present, Odeon did not have a supervisory system, including written supervisory procedures (WSPs), reasonably designed to surveil for potentially manipulative prearranged trades.

The firm relied on its registered representatives to identify and escalate to supervisors potential prearranged trading, and on its supervisors to identify such transactions as part of their daily review of transactions using trade reports and summaries. However, those reports are not designed to surveil for potential prearranged trading.

The firm utilized a daily trade summary for fixed income transactions containing hundreds of rows in the body of an email, which cannot be filtered or sorted to identify patterns such as offsetting transactions executed in close proximity in the same security for the same quantity and does not reflect trading patterns over time.

A supervisor attempting to review for specific potentially manipulative trading activity would have to manually identify that type of trading activity across disparate rows of information in a daily report, without the ability to observe historical trends.

Further, the firm’s WSPs provided no information or guidance as to how to review for prearranged trading, what information to identify or evaluate in conducting such a review, or what steps were required to address indications of prearranged transactions.

As a result of the firm’s unreasonable supervisory system, Odeon failed to surveil for at least 138 instances of potentially manipulative prearranged trading. In most of these instances, Odeon’s registered representatives executed offsetting purchases and sales that were submitted for execution via email by one customer, often with Odeon buying from one counterparty and selling to the other, without the firm identifying the transactions as requiring supervisory review.

Therefore, Odeon violated FINRA Rules 3110 and 2010.

In addition, between December 2019 and December 2021, Odeon provided written trade confirmations to non-institutional customers that failed to disclose required mark-up and mark-down information on 717 municipal securities and corporate and agency debt transactions in violation of MSRB Rule G-15 and FINRA Rules 2232 and 2010.

Also Odeon failed to reasonably supervise to achieve compliance with mark-up and mark-down disclosure requirements, in violation of MSRB Rule G-27 and FINRA Rules 3110 and 2010.

For these violations, Odeon was censured, fined $75,000, and consented to an undertaking to remediate the issues.