FINRA joined with the New York Stock Exchange ("NYSE"), NASDAQ and several other exchanges in censuring and fining Newedge USA, LLC $9.5 million for failure to supervise client trading activity via Newedge's order routing platform and the internet.
FINRA and the exchanges also accused Newedge of violating regulations and SEC orders concerning short sales, further charging Newedge with failing to obtain and retain accurate books and records. Newedge also failed to retain certain e-mails and text messages.
According to FINRA's release, Newedge lacked sufficient procedures for surveillance and supervision of direct market access ("DMA") and sponsored access ("SA") trading. The findings state that although "red flags" were raised, Newedge failed to take adequate steps to address the problem.
Specifically, FINRA found that Newedge's supervisory deficiencies prevented the firm from being able to monitor trades for compliance with FINRA, SEC, NASDAQ, NYSE and other regulations and rules.
For instance, FINRA believed the deficiencies prevented Newedge from detecting potentially manipulative trading schemes, such as wash trading—an illegal practice that occurs when shares are bought and sold simultaneously in order to artificially increase trading volume and price. Newedge also allegedly failed to adhere to multiple SEC orders resulting in several short sales in securities prohibited by the Commission.
In addition to FINRA, NYSE and NASDAQ, the BATS Exchange, Inc.and NYSE Arca, Inc. jointly administered the penalty.
Pursuant to the terms of the settlement, in which Newedge neither admitted nor denied the charges, the exchanges will split the $9.5 million total in the following fashion:
> FINRA will receive the largest sum, a $4 million fine.
> NASDAQ Stock Market LLC will receive $1.75 million.
> BATS Exchange, Inc. will receive $1.75 million.
> The New York Stock Exchange LLC will receive $1.125 million.
> NYSE Arca, Inc. will receive $875,000.
If you have invested with Newedge USA, LLC or with any firm whose failure to supervise or otherwise adhere to FINRA, SEC or any other rules or regulations has proven harmful to your investments or financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.