FINRA fines Wolfe Research Securities for overstating its executed trading volume
Wolfe Research Securities has agreed to pay a fine of $100,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Between September 2017 and October 2020, Wolfe Research overstated its advertised trading volume through Bloomberg. The firm’s overstatements resulted from a flaw in the advertising logic of its third-party order management system (OMS). The firm relied on its OMS to automatically report its executed order flow to Bloomberg on the firm’s behalf.
In certain circumstances, when calculating trading volume for advertising purposes, the firm’s OMS incorrectly summed multiple fills for the same order, resulting in significant over-advertising of trading volume. As a result of this flaw persisting for more than a three-year period, Wolfe Research overstated its advertised trading volume through Bloomberg on 32 occasions and by 90,446,177 shares.
Wolfe Research’s supervisory system and written procedures were not reasonably designed to achieve compliance with FINRA Rule 5210. The firm did not have any procedures relating to how its trading volume should be collected and submitted to market data providers such as Bloomberg, or to how the firm should monitor its advertised trading volumes to ensure they were accurate.
Likewise, the firm did not have any supervisory system to ensure the accuracy of its advertised trading volumes.
Wolfe Research’s OMS generated a daily list of securities traded, total shares traded, and the number of shares advertised via Bloomberg. The firm, however, failed to review the report for the purpose of identifying instances of over-advertisement and, therefore, failed to identify any of the 32 instances.
Therefore, Wolfe Research violated FINRA Rules 3110 and 2010.
On top of the $100,000 fine, the firm has agreed to a censure.