FINRA Fines Pruco Securities LLC for Pricing Errors and Inadequate Supervisory Procedures
The Financial Industry Regulatory Authority (“FINRA”) announced that is has fined Pruco Securities LLC (“Pruco”) $550,000 and ordered it to pay $10.7 million in restitution for pricing errors and having inadequate supervisory procedures. The allegations relate to the pricing of mutual funds by one of Pruco’s retail brokerage units, COMMAND.
According to FINRA, between 2003 and 2011, COMMAND priced more than 850,000 paper mutual fund orders (received via facsimile or postal mail) one or two days after it had received a complete paper order. The Investment Company Act of 1940 requires that mutual fund orders received before 4:00 p.m. be priced the same day they are received. According to Pruco, COMMAND personnel mistakenly believed they could use “best efforts” (up to two business days) to process paper mutual fund orders and that paper orders could be priced on the day processed rather than the day received – even if the complete order was received prior to 4:00 p.m.
FINRA also found that Pruco did not have an adequate supervisory system in place to detect and prevent the mispricing of paper mutual fund orders and did not train its employees about paper mutual fund pricing requirements.
According to FINRA, Pruco self-reported the pricing issue to FINRA after an inquiry was made to a COMMAND employee regarding the next day execution of a fax order. As a result of FINRA’s findings, Pruco will pay approximately $10.7 million in restitution, plus interest, to roughly 34,000 customers.