Liquidnet, Inc has agreed to pay a fine of $250,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From February 2018 through March 2024, the firm, a market center trading in NMS securities, published 74 inaccurate Rule 605 reports for its market participant identifier LQNT.

Specifically, the firm erroneously included in its Rule 605 reports approximately 67 million orders that required special handling because the firm incorrectly classified those orders as covered orders, which caused the reports to contain inaccurate order and execution quality statistics.

FINRA identified these inaccuracies during an exam in March 2023. By April 2024, Liquidnet implemented coding fixes for the erroneously classified orders and no longer reported them in the firm’s Rule 605 reports.

By publishing inaccurate monthly reports, Liquidnet violated Regulation NMS Rule 605 and FINRA Rule 2010.

From February 2018 through March 2024, Liquidnet failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with Rule 605. Specifically, the firm’s supervisory system was unreasonable because the firm had no procedures and no supervisory process to determine whether orders were properly classified as covered orders. By April 2024, the firm had updated its written supervisory procedures (WSPs) and implemented supervisory reviews addressing the proper classification of orders as covered orders.

By failing to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with Rule 605, Liquidnet violated FINRA Rules 3110(a) and (b) and 2010.

The firm has agreed to a censure in addition to the $250,000 fine.