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by Howard Haykin

Three broker-dealers agreed to pay over $6 million in fines to settle SEC charges that they submitted incomplete and inaccurate securities trading information required for SEC production of “blue sheet data.”

Blue Sheets are requests for information sent out by the SEC to market makers, brokers and/or clearinghouses - related to specific securities or transactions and are often requested in order to determine if there has been any illegal activity or to determine why, for example, a certain security experienced a large level of volatility.

CITADEL SECURITIES FINED $3.5MN.    From November 2012 to August 2016, Citadel submitted 2,774 electronic blue sheets (“EBS’s”) to the SEC, all of which contained deficient information, resulting in incorrect reporting of trade execution time data for approximately 80 million trades.

MUFG SECURITIES AMERICAS FINED $1.4MN.    From May 2015 to March 2018, MUSA submitted 860 EBS’s to the SEC containing 687,176 transactions, nearly all of which contained missing or deficient data.

NATIXIS SECURITIES AMERICAS FINED $1.25MN.    From December 2012 to February 2017, Natixis submitted 1,237 EBS’s to the SEC, all of which contained inaccurate trade execution times, resulting in incorrect reporting of trade execution time data for approximately 148,763 trades.

As a result of this violative conduct, each broker-dealer violated the recordkeeping and reporting requirements of Section 17(a)(1) of the Exchange Act and Rules 17a-4(j) and 17a-25 thereunder.

Section 17 of the Exchange Act imposes on broker-dealers recordkeeping and reporting requirements that are essential to the Commission's ability to enforce the federal securities laws and to protect investors. To ensure the continued effectiveness of the Commission's enforcement and regulatory programs, broker-dealers must comply with, among other things: Rule 17a-25, requiring that broker-dealers submit electronically securities transaction information upon request by the Commission; and Rule 17a-4(j), requiring broker-dealers to furnish promptly legible, true, complete, and current copies of required records upon request by a representative of the Commission.

While the SEC’s orders found that Citadel, Natixis, and MUFG willfully violated the broker-dealer books and records and reporting provisions, the SEC noted that each 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. 

For further details, click on ...

SEC Order - Citadel Securities
SEC Order - MUFG Securities Americas
SEC Order - Natixis Securities Americas