FINRA FINES CREDIT SUISSE SECURITIES $1.75 MILLION FOR REGULATORY VIOLATIONS AND SUPERVISORY FAILURES RELATING TO SHORT SALE TRANSACTIONS
The Financial Industry Regulatory Authority (FINRA) has fined Credit Suisse Securities $1.75 Million for violation of Regulation SHO and its failure to adequately supervise its brokers regarding short sale transactions.
A short sale involves the sale of a security the seller does not presently own. When delivery of the security is required, the seller then purchases the security and makes the delivery. Reg. SHO requires a brokerage firm to have a reasonable basis to believe the security will be available for purchase by the seller before the firm accepts a short sale order. Requiring firms to document this “locate” information prior to entry of the short sale reduces the chance that delivery of the security will fail. Reg. SHO also requires that all equity securities sales be marked as long or short.
FINRA found significant violations of Reg. SHO by Credit Suisse. According to FINRA, from June 2006 to December 2010, Credit Suisse placed millions of short sale orders without documenting the locate information, including in securities that were known to be difficult to obtain. In addition, Credit Suisse mismarked tens of thousands of short sale order tickets as “long.”
Credit Suisse consented to the entry of FINRA’s findings without admitting or denying the charges.