FINRA fines RBC Capital Markets for reporting deficiencies
RBC Capital Markets, LLC has reached a settlement with the Financial Industry Regulatory Authority (FINRA) over alleged rule violations concerning reporting requirements.
From October 7, 2019, to March 17, 2020, the firm reported principal orders to trade reporting facilities from, among others, three internal accounts. However, the firm incorrectly marked the transactions from these three accounts due to a coding error that flipped the reported capacity from principal to agency. As a result, the firm reported 3,202,178 orders to the trade reporting facilities with an inaccurate capacity.
From August 28, 2015, to November 2, 2020, the firm sent orders on its own behalf as well as on behalf of certain affiliates using one of its proprietary order management systems.
Whether an order should be marked as principal or agency depends on the terms of the agreement between the market center to which the order is routed and the entity on whose behalf the order was being routed. At various times during this period, updates to the relevant agreements required the firm to change the capacity it reported for certain transactions.
The firm failed, however, to make corresponding updates to the order management system so that the correct capacity would be reported. Because the firm’s reporting logic relied on these outdated settings, the firm reported a total of 8,423,855 orders to the above-referenced trade reporting facilities with an inaccurate capacity.
Therefore, the firm violated FINRA Rules 7230A(d)(7), 7230B(d)(7), 7330(d)(7), and 2010.
The order memoranda for the above referenced transactions included the incorrect capacity. For example, at times the order memoranda indicated that it was a principal transaction when it was an agency transaction, or vice versa.
Therefore, the firm violated Exchange Act § 17(a), Exchange Act Rule 17a-3, and FINRA Rules 4511(a) and 2010.
Between August 28, 2015, and November 2, 2020, the firm supervised for the accuracy of the order capacities it reported with two exception reports. However, these exception reports did not include transactions from the proprietary order management system the firm used to route the 8,423,855 orders with an inaccurate capacity referenced above.
As a result, the firm failed to identify these inaccuracies. The firm has since remediated the aforementioned supervisory failure.
Therefore, the firm violated FINRA Rules 3110 and 2010.
RBC Capital Markets agrees to a censure and a total fine of $135,000, of which $67,500 will be apportioned to FINRA.