Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2010
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
January 2010
Cutler Group L.P.
OS/09-ARCA-12/January 2010

Cutler Group L.P., an NYSE Arca Options trading permit holder, failed to

  • preserve certain electronic communications in the required format;
  • maintain a complete and accurate list of accounts in which its employees had a direct or indirect financial interest;
  • obtain, maintain and review monthly account statements for accounts in which its employees had a direct or indirect financial interest;
  • file a complete and accurate annual acknowledgment attestation with the exchange;
  • appropriately conduct background checks of its associated persons; and
  • establish, maintain, and/or enforce appropriate written policies and procedures for supervision and control, including a separate system of follow-up and review, with respect to certain of the foregoing areas.

The NYSE found the following violations:

  • Section 17(a)(1) of Exchange Act, and Rules 17a-4(b)(4) and 17a-4(f) thereunder, and NYSE Arca Options Rule 11.16(a) by failing to preserve business-related e-mail and instant messages in non-rewriteable, non-erasable format, and by failing to preserve business-related fax communications
  • NYSE Arca Options Rule 11.3—Commentary .03 by failing to maintain complete and accurate list of accounts in which employees had direct or indirect financial interest, and by failing to obtain, maintain and review monthly account statements for accounts in which employees had direct or indirect financial interest;
  • NYSE Arca Options Rule 11.3(a) by failing to establish, maintain, or enforce adequate written policies and procedures reasonably designed to prevent misuse of material, non-public information by employees;
  • Section 17(a)(1) of Exchange Act, and Rule 17a-3(a)(12) thereunder, and NYSE Arca Options Rule 11.16(a), by failing to appropriately conduct and document background checks of employees prior to employment, and by failing to properly retain and preserve manually signed Forms U-4;
  • NYSE Arca Options Rule 11.18 by failing to establish, maintain, and/or enforce appropriate written policies and procedures for supervision and control, including separate system of follow-up and review, in following areas:
    • (a) conducting and documenting background checks of employees prior to employment, including maintaining complete and accurate signed Forms U-4;
    • (b) retention in proper format and review of business-related e-mails, instant messages and faxes sent or received by employees; and
    • (c) prevention of misuse of material, non-public information by employees .
Cutler Group L.P.: Censure; $20,000 Fine
Tags:  Electronic Communications    Outside Accounts    Email    Background     |    In: U4, U5, RE-3, Rule 3070
Bill Singer's Comment

To read the full decision, visit http://www.nyse.com/pdfs/09-ARCA-12.pdf

Enforcement Actions
Tags