27 July 2016
Find out more

UBS comes up short; fined $12 million by Finra for 'systemic supervisory failure'

26 October 2011  |  5674 views  |  0 cash

The Financial Industry Regulatory Authority (Finra) has fined UBS Securities $12 million for failing to properly supervise short sales of securities.

The Swiss bank's US brokerage unit violated Regulation SHO, which requires a broker-dealer to have reasonable grounds to believe that the security could be borrowed and available for delivery before accepting or effecting a short sale order, says Finra.

The rules require firms to obtain and document this "locate" information before the short sale occurs to help cut the number of potential failures to deliver.

However, UBS' Reg SHO supervisory system for locating and the marking sale orders was "significantly flawed and resulted in a systemic supervisory failure that contributed to serious Reg SHO failures across its equities trading business".

The brokerage placed millions of short sale orders to the market without locates, including in securities that were known to be hard to borrow. The violations extended to "numerous trading systems, desks, accounts and strategies, and impacted UBS' technology, operations, and supervisory systems and procedures".

In addition, UBS mismarked millions of sale orders in its trading systems. Many of these were short sales that were tagged as "long". Finra also found "significant deficiencies" related to aggregation units.

Brad Bennett, chief of enforcement, Finra, says: "Firms must ensure their trading and supervisory systems are designed to prevent the release of short sale orders without valid locates, and properly mark sale orders, in order to prevent potentially abusive naked short selling. The duration, scope and volume of UBS' locate and order-marking violations created a potential for harm to the integrity of the market."

UBS has neither admitted nor denied the charges in consenting to Finra's findings.

After a tough summer in which it emerged that it had suffered a $2.3 billion loss through unauthorised trading, yesterday the bank admitted in a document to the SEC that internal controls were "not effective".

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

UBS admits to breakdown in risk control systems

UBS admits to breakdown in risk control systems

25 October 2011  |  7964 views  |  0 comments
UBS trading scandal investigation finds risk systems ignored

UBS trading scandal investigation finds risk systems ignored

06 October 2011  |  12248 views  |  3 comments
UBS trader charged with fraud

UBS trader charged with fraud

16 September 2011  |  6350 views  |  0 comments
Rogue trader costs UBS $2bn

Rogue trader costs UBS $2bn

15 September 2011  |  9383 views  |  2 comments
Finra fines Deutsche Bank and NFS over short sales violations

Finra fines Deutsche Bank and NFS over short sales violations

14 May 2010  |  6974 views  |  0 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
Visit www.abe-eba.euVisit VocaLink.comVisit capgemini.com

Top topics

Most viewed Most shared
satelliteContactless Bitcoin startup Plutus Tap &am...
9442 views comments | 9 tweets | 4 linkedin
MasterCard agrees £700m VocaLink acquisitionMasterCard agrees £700m VocaLink acqu...
9323 views 14 comments | 32 tweets | 38 linkedin
Apps crush internet for UK banking loginsApps crush internet for UK banking logins
8094 views comments | 19 tweets | 25 linkedin
Telefonica Germany launches Fidor-backed mobile banking serviceTelefonica Germany launches Fidor-backed m...
6030 views comments | 14 tweets | 19 linkedin
hands typing furiouslyHow machine learning can cut costs on tran...
6012 views 0 | 9 tweets | 3 linkedin

Featured job

Find your next job