Gar Wood Securities, LLC

Gar Wood Securities was fined $100,000 for failing to comply with the locate requirement of Rule 203 of Regulation SHO of the Exchange Act whereby the firm inadvertently configured its delivery-versus-payment (DVP) client accounts to allow short sale orders entered into the firm’s order management systems (OMS) to route for execution without obtaining locates.

As a result, the firm failed to obtain locates for short sale orders. The findings also stated that the firm failed to accurately report the capacity symbol for trades.

One of the firm’s OMSs was incorrectly coded to send a principal capacity symbol for client agency orders to the reporting party. As a result, the firm caused transactions to be reported to the FINRA TRF with the incorrect capacity. Subsequently, the firm switched all agency order routing to an OMS that was correctly coded to report the proper capacity symbol.

The findings also included that the firm failed to reasonably supervise for compliance with locate and trade reporting requirements. The firm’s supervisory system, including its WSPs, was not reasonably designed to achieve compliance with Rule 203(b) of Regulation SHO. The firm’s supervisory system required that a review for locate information be performed but it inadvertently failed to include a locate review for short sale orders in the firm’s DVP accounts.

Further, the firm conducted a locates supervisory review for custodial accounts, but it incorrectly excluded short sales orders that were accepted for execution but did not execute. In addition, the firm lacked a review to confirm all required trade information, such as capacity, was accurately reported to the FINRA TRF.