Three Broker-Dealers to pay more than $6 Million in penalties
The Securities and Exchange Commission (SEC) announced that three broker-dealers have agreed to pay more than $6 million to settle charges for providing the SEC with incomplete and inaccurate securities trading information in required SEC productions known as “blue sheet data,” which the SEC uses to carry out its enforcement and regulatory obligations, including the investigation of insider trading and other fraudulent activity.
According to the SEC’s orders, over a period of several years, Citadel Securities LLC, Natixis Securities Americas LLC, and MUFG Securities Americas Inc. each made numerous deficient blue sheet submissions containing inaccurate or missing data; incorrect order execution times that failed to adjust for time zone changes; and incorrect or missing exchange codes, transaction type identifiers, opposing broker number and contra-party identifiers. Citadel, the largest provider of blue sheet data of the firms charged today, submitted incorrect data for nearly 80 million trades while Natixis and MUFG submitted incorrect data for approximately 150,000 trades and 650,000 trades, respectively. These deficiencies largely stemmed from undetected coding errors. None of the firms had adequate processes designed to validate the accuracy of its submissions.
“We routinely use blue sheet data to detect wrongdoing and protect Main Street investors through our enforcement efforts,” said Kelly Gibson, Associate Regional Director of the SEC’s Philadelphia Regional Office. “Firms must be diligent and take seriously their obligations to provide accurate and complete data in response to our requests.”
The orders further found that each of the firms has engaged in remedial efforts to address the causes for its deficient submissions, including the retention of an outside consultant and the adoption of new policies and procedures for processing blue sheet requests.
The SEC’s orders also found that Citadel, Natixis, and MUFG willfully violated the broker-dealer books and records and reporting provisions. The firms admitted the findings in the SEC’s cease and desist orders and agreed to be censured and to pay penalties of $3.5 million for Citadel, $1.25 million for Natixis, and $1.4 million for MUFG.
The SEC’s investigations of Citadel and Natixis were conducted by Lawrence D. Parrish, Paulina L. Jerez, and Kingdon Kase of the Philadelphia Regional Office and Daniel L. Koster of the Complex Financial Instruments Unit. The SEC’s investigation of MUFG was conducted by Han Nguyen, Rachael Clarke, and Scott A. Thompson of the Market Abuse Unit. The investigations were supervised by Kelly L. Gibson and Joseph G. Sansone. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.