The Financial Industry Regulatory Authority (FINRA) has fined Credit Suisse Securities (USA) $1.75m for violating Regulation SHO (Reg SHO) and failing to properly supervise short sales of securities and marking of sale orders.
FINRA said that Credit Suisse entered millions of short sale orders without reasonable grounds and mismarked thousands of sales orders.
The regulator found that from June 2006 through December 2010, Credit Suisse’s Reg SHO supervisory system regarding locates and the marking of sale orders was flawed and resulted in a systemic supervisory failure that contributed to significant Reg SHO failures across its equities trading business.
According to FINRA, many of Credit Suisse’s violations were not detected or corrected by the firm until after its investigation caused Credit Suisse to conduct a substantive review of its systems and monitoring procedures for Reg SHO compliance.
FINRA executive vice president and chief of enforcement Brad Bennett said that Credit Suisse’s Reg SHO supervisory and compliance monitoring system was seriously flawed.
"Millions of short sale orders were being entered in its systems without locates for over four years because the firm did not have adequate Reg SHO technology and procedures in place," added Bennett.
Credit Suisse neither admitted nor denied the charges in the settlement.