Credit Suisse Fined $1.75M for Short-Selling System Failures
Financial Planning, 28 December 2011
Credit Suisse Securities has been fined $1.75 million by the Financial Industry Regulatory Authority for failing to properly supervise short-selling activity.
From June 1, 2006 through December 2010, Credit Suisse Securities failed to comply with the locate and marking requirements of Regulation SHO as well as FINRA rules, NASD rules and federal securities laws, according to FINRA.
Specifically, FINRA fined Credit Suisse for Reg SHO violations and for failing to properly supervise short sales and the marking of sale orders. As a result, the financial services firm entered millions of short sales without reasonable grounds to believe that the securities could be borrowed and delivered and mismarked thousands of sales orders, FINRA charges.
The SEC enacted Regulation SHO in January 2005 to target abusive naked short selling by reducing failure to deliver securities, and by limiting the time in which a broker can permit failures to deliver.
“Credit Suisse’s REG SHO supervisory and compliance monitoring system was seriously flawed,” FINRA Executive Vice President and Chief of Enforcement Brad Bennett said. “Millions of short-sale orders were being entered in its systems for over four years because the firm did not have adequate Reg SHO technology in place.”
The FINRA fine was one of several leveled against the firm for Reg. SHO and related violations. In 2006, for instamce, Credit Suisse was fined $250,000 for Reg. SHO violations and another $150,000 for erroneously identifying short sales as long sales.
