FINRA censured and fined a financial services firm (the “Firm”) for failing to provide “complete and accurate trade data” in automated form when requested by the SEC and FINRA. Such trade data, commonly known as “blue sheets,” provide information about securities transactions, including the security, trade date, price, share quantity, customer name, and whether the transaction was a buy, sale, or short sale.
FINRA found that from January 2012 to September 2015, the Firm submitted to the SEC and FINRA inaccurate trade data as a result of problems with the Firm’s automated systems. According to FINRA, these problems were caused by technical deficiencies in the Firm’s blue sheet systems; errors in its blue sheet logic; and the fact that information was pulled from a front-end database that did not accurately reflect actions that sometimes occurred after a trade was executed.
FINRA also found that the Firm failed to have adequate audit systems in place for providing accountability of its blue sheet submissions.
In addition to the censure and fine, the Firm must also conduct a comprehensive review of its policies, systems and procedures related to blue sheet submissions, and to subsequently certify that it has established procedures reasonably designed to address and correct the violations.
Lofchie Comment: This is yet another very significant penalty for a firm providing the regulators with bad data. Accordingly, it behooves firms to devise methods of self-auditing the financial information that they provide, recognizing that this may not always be easy because there is no inherent feedback system to tell a firm when it has made a mistake for which it may be censured.