FINRA fines Vanguard Marketing Corporation for deficient option exercise
Vanguard Marketing Corporation (VMC) has agreed to pay a $50,000 fine as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
FINRA Rule 2360(b)(23)(A) generally prohibits firms from accepting option exercise instructions for expiring options after 5:30 p.m. ET. On May 22, 2020, VMC accepted instructions from a firm customer to exercise 190 expiring put option contracts in a publicly listed company after 5:30 p.m. The customer, whose contracts would have otherwise expired worthless, made a $32,710 profit from exercising the options after the company’s stock price decreased during after-hours trading following release of material news about the company.
By accepting a customer’s option exercise instructions after the exercise cut-off time, VMC violated FINRA Rules 2360 and 2010.
Additionally, from March 2015 to October 2020, VMC violated FINRA Rules 3110 and 2010 by failing to establish and maintain a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the requirements for handling option exercise instructions after the exercise cut-off time.
On top of the fine, the respondent has agreed to a censure.