Thomas Sapio, former Head of the U.S. Repurchase Agreements Desk (Repo Desk) at Cantor, has agreed to a fine and suspension as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

Sapio first registered with FINRA in 1991. Between April 2004 and February 2023, Sapio was registered with FINRA as a General Securities Principal, among other capacities, through an association with Cantor Fitzgerald & Co. Since April 2023, Sapio has been registered through an association with another member firm.

During the relevant period, Sapio was Head of the U.S. Repo Desk at Cantor and the direct supervisor of Traders A and B, who sat on the Repo Desk. Traders A and B traded repurchase agreements, including forward start reverse repurchase agreements, on behalf of Cantor.

As Head of the Repo Desk, Sapio was responsible for ensuring that Traders A and B “marked to market,” or recorded the fair market value of, their positions in the firm’s electronic recordkeeping system every day.

Cantor used the marks entered by Traders A and B to calculate the profit and loss of the Repo Desk. Sapio then provided the Repo Desk’s weekly profit and loss to more senior management.

From April 2022 through August 2022, Sapio failed to reasonably supervise Traders A and B. Sapio failed to review the marks entered by Traders A and B. Further, Sapio failed to reasonably investigate or respond to red flags that Traders A and B were mismarking their positions.

Sapio was aware that market events could have reduced the value of each trader’s forward start reverse repurchase positions. He did not, however, see the traders’ profit and loss decrease in the wake of these market events.

Sapio spoke with each of the traders. One of the traders told Sapio that his marks were incorrect. The trader assured Sapio that he would correct his marks, but failed to do so. Sapio did not check the marks in the system or otherwise take any subsequent steps to ensure that Traders A and B entered correct marks going forward.

The market value of Traders A’s and B’s forward start reverse repurchase positions then continued to decline and, due to mismarking, millions of dollars of unrealized losses were not reflected in the Repo Desk’s profit and loss.

Eventually, in August 2022. one of the traders informed Sapio of the full scope of the unrealized losses on his trading book, and Sapio raised the issue to senior management at Cantor. Cantor then corrected the inaccurate marks, terminated one of the traders, and permitted the other trader to resign.

By failing to reasonably supervise two traders, and failing to reasonably investigate red flags, Sapio violated FINRA Rules 3110 and 2010.

For his violations of FINRA Rules 3110 and 2010, Sapio was suspended in all principal capacities for two months, fined $5,000, and required to complete ten hours of continuing education concerning supervisory responsibilities.