US Corporate Law News: FINRA issues fines company for regulation SHO violations and supervisory failures


On August 20, 2018, the Financial Industry Regulation Authority (FINRA) announced that it was fining Interactive Brokers LLC (Interactive) for violations of Regulation SHO and other supervisory failures from July 2012 through July 2015. Following the completion of a short sale transaction, Regulation SHO requires firms to deliver shares on the settlement date or take actions to close out any failure to deliver by purchasing or borrowing securities. If a firm does not close out in this manner, it may not accept additional short sale orders in the security without first doing so. FINRA found that during a three year period, the supervisory system of Interactive was not set up to comply with Regulation SHO. Further, Interactive ignored internal warnings regarding issues and risks regarding compliance. FINRA ultimately found that the supervisory systems and procedures of Interactive were unreasonable and has now issued a $5.5 million fine as penalty. For more information see http://www.finra.org/node/86129.