FINRA slaps a $2.5 million fine on UBS Securities for Supervisory violations
The non-profit organisation has revealed that it has imposed a fine on UBS Securities LLC in the amount of $2.5 million. The watchdog stated that the penalty is a result of Regulation SHO and supervisory failures spanning a period of nine years.
Reg SHO regulates short sales, or the sale of borrowed securities.
The announcement explained:
The rule requires firms to take affirmative action to close out “failure to deliver” positions resulting from short sales in equity securities by borrowing or purchasing the securities by the beginning of regular trading hours the day after the settlement date.
If the firm fails to close out a failure to deliver, it is prohibited from accepting additional short sale orders in the security without first borrowing or arranging to borrow the security.
According to FINRA, between 2009 and 2018, UBS failed to close in time around 5,300 for failure to deliver positions. Additionally, more than 73,000 short sales in securities with an “unsatisfied close-out requirement”, were routed or executed.
The self-regulatory organisation pointed out three long standing issues which contributed to these violations. Among them is the broker’s use of revocable volume weighted average price (VWAP) transactions or limit orders to address buy-in obligations for ‘failures to deliver’.
UBS also used customers’ long sales segregated shares to close out ‘failure to deliver positions, FINRA noted. Furthermore, some of the brokers’ order management systems did not regularly restrict short sales when there was an unsatisfied close-out requirement,
FINRA stated that the broker agreed to settle the charges without admitting or denying them.
Meanwhile, the US SEC imposed a $25 million penalty on UBS Financial Services Inc. to settle fraud charges relating to a complex investment strategy Yield Enhancement Strategy (YES) earlier in June.
