The following information was obtained on FINRA’s website under “Disciplinary and Other FINRA Actions, July, 2013,” by Soreide Law Group, a Securities Arbitration Law Firm, (888) 760-6552.
Citadel Securities LLC (CRD #116797, Chicago, Illinois)
was censured, fined $215,000, ordered to pay $239,582.12, plus interest, in restitution to customers, and required to revise its WSPs regarding the handling of customer orders during market-disrupting events. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that on a certain date, the American Stock Exchange (AMEX) opened for equity trading approximately 70 minutes later than its regular opening due to system problems; its transmission lines were shut down and all orders transmitted to AMEX were rejected. The findings stated that at the time, the firm did not have any WSPs to address how it would handle customer orders in the event a primary market failed to open for trading, or was unavailable for trading. With the exception of a few securities that the firm decided to begin trading on a manual basis, it followed its regular practice and handled all customer orders on a fully automated basis. Regular orders received prior to the opening of the AMEX were routed, on a riskless principal basis, to the AMEX to participate in the exchange’s opening process. The firm held the customer orders in-house on its book and sent identical representative orders to the AMEX floor for execution. Relying on this procedure, the firm continued to accept new customer orders and to send representative orders to the AMEX, after receiving notice that it was rejecting all orders.
Also, FINRA’s findings stated that the firm failed to establish, maintain and enforce a system of supervision and WSPs reasonably designed to address the handling of customer orders during market-disrupting events. The firm’s supervisory system did not include WSPs concerning the prompt and fair handling of customer orders in instances where a primary market fails to open for trading, or the market is unavailable for trading. The findings also included that the firm failed to preserve for a period of not less than three years, the first two in an accessible place, memoranda of the cancellation of numerous brokerage orders. FINRA also found that in transactions for or with a customer, the firm failed to use reasonable diligence to ascertain the best inter-dealer market, and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. (FINRA Case #2007010875201)
This ends the information obtained on FINRA’s website.
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