SpeedRoute LLC
The findings stated that the firm’s WSPs did not include a description of supervisory reviews for potentially manipulative trading activity. The WSPs included a list of real-time monitoring features and post-trade reports available to the firm, but it did not describe how it should use the reviews to identify potentially manipulative conduct. The firm relied, in part, on an individual’s manual reviews of trade blotters to detect potentially manipulative conduct which were unreasonable given the number of orders the firm routed.
The findings also stated that the firm’s market access controls and supervisory procedures with respect to establishing, monitoring and amending customer credit limits were unreasonable. The firm did not have market access supervisory procedures reasonably designed to systematically limit its financial exposure as a result of its market access business. The WSPs did not require firm personnel to conduct due diligence as to the customer’s business, financial condition or trading patterns and to document those decisions. While the firm had a list of credit limits for each client, because it did not establish WSPs to require sufficient information or documentation of its review of the areas described, it could not reasonably assess whether support existed for the listed limits.
Furthermore, other than a review of net capital information, the firm was unable to demonstrate that it conducted the reviews described in its WSPs. The firm’s chief compliance officer (CCO) and/or chief operating officer were to review limits on a quarterly basis by comparing the limit thresholds to clients’ actual daily credit utilization. However, the WSPs failed to provide reasonable guidance regarding how such review and analysis should be conducted, or the standards that would lead the firm to amend a customer credit limit following a quarterly review.
The firm also did not have a process for documenting amendments to an initial credit limit. The firm allowed intraday amendments to customer credit limits, but the process for seeking an intraday change to a credit limit, and the factors reviewed to determine whether such a change was appropriate, were not included in the WSPs.
The findings also included that the firm did not conduct a documented review required under Rule 15c3-5(e)(1) of the Securities Exchange Act of 1934, or maintain evidence of what was reviewed as part of the chief executive officer (CEO) certification process required under Rule 15c3-5(e)(2). Moreover, the firm’s WSPs did not set forth procedures for conducting such a review.
FINRA found that the firm transmitted inaccurate information to Order Audit Trail System (OATS™) by submitting reports with incorrect codes in certain fields. FINRA also found that the firm failed to enforce its written procedures to achieve compliance with FINRA Rule 7450 by failing to conduct the reviews of its OATS submissions described in its WSPs. As a result, the firm did not detect that it submitted reports to OATS with incorrect codes.
The full FINRA Letter of Acceptance, Waiver, and Consent can be found here.
