The United States Financial Industry Regulatory Authority (FINRA) today published a notice of settlement with Tyler J. Forbes.

Forbes first registered with FINRA in August 2016 as a General Securities Representative through Merrill Lynch, Pierce, Fenner & Smith Inc. In May 2019, Merrill Lynch’s investment banking and trading divisions were reorganized as BofA Securities, Inc. As a result, Forbes’s registration with Merrill Lynch was terminated in a mass transfer on May 10, 2019, and he was registered with FINRA through BofA Securities from that date through September 20, 2019.

On September 20, 2019, BofA Securities filed a Uniform Termination Notice for Securities Industry Registration (Form U5) stating that Forbes had been terminated on August 22, 2019 for “conduct involving failure to observe the firm’s trading policy.”

Although Forbes is not currently associated with a FINRA member, FINRA retains jurisdiction over Forbes pursuant to Article V, Section 4 of FINRA’s By-Laws.

In the four months from February through June 2019, Forbes failed to observe high standards of commercial honor and just and equitable principles of trade by facilitating 194 instances of “spoofing,” a type of fraudulent trading involving the use of non-bona fide orders while simultaneously entering bona fide orders on the other side of the market.

Forbes began engaging in this course of conduct while trading US Treasury notes on Merrill Lynch’s Treasuries desk on behalf of the firm’s proprietary account, and his conduct continued after he was transferred to BofA Securities.

In each instance, Forbes entered a large, non-bona fide proprietary order to purchase or sell a U.S. Treasury note for display on electronic trading platforms while simultaneously entering a smaller, bona fide proprietary order on the opposite side of the market. This created a false appearance of market depth and activity so his bona fide proprietary order would receive a favorable execution. After receiving an execution of his bona fide order, Forbes cancelled his non-bona fide order.

Forbes’s non-bona fide orders sent false signals to other market participants concerning the natural supply and demand for U.S. Treasury notes on the electronic trading platforms on which U.S. Treasuries trade, which caused other market participants to (1) execute transactions on the opposite side of the non—bona fide order, (2) withdraw orders at the inside price opposite non-bona fide order, or (3) move the bid-offer prices higher or lower.

One example of Forbes’s violation occurred on May 13, 2019 when he “skewed the stack” by placing a $250 million buy order at the inside best bid price when at the time he placed the order he never intended to execute the order. Instead, he created the false appearance of more buy interest in the market. By engaging in this trading activity, Forbes received a favorable execution of his simultaneously displayed sell order resting at the inside offer price.

Forbes, by engaging in this conduct, contravened Section 17(a)(3) of the Securities Act of 1933 in violation of FINRA Rule 2010.

As a part of the settlement, Forbes consents to the imposition of the following sanctions:

  • a 16-month suspension from associating with any FINRA member in all capacities;
  • a $75,000 fine; and
  • a requirement to requalify as a General Securities Representative by passing the Series 7 examination prior to associating with any FINRA member firm.