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.

OFG Financial Services, Inc.
AWC/2008011625301

The Firm failed to maintain and preserve all of its business-related electronic communications for some of its registered representatives. The Firm’s registered representatives at some of its offices had non-firm email addresses to conduct non-securities business, and upon receiving emails from securities customers at their non-firm email addresses, several of the representatives, in certain instances, would reply using that same email address. The Firm’s email system did not capture the emails from the non-firm email addresses, and a registered representative erroneously believed that his non-firm emails were going to the firm’s server for retention, which did not occur.

 

OFG Financial Services, Inc. : Censured; Fined $20,000

Tags: Electronic Communications  Email  

Anna Maria Somoza
AWC/2008015103701

After deciding to resign from her member firm to join another FINRA member firm, Somoza used her broker workstation to change certain of her customers’ telephone numbers to incorrect numbers and deleted several email addresses in her firm’s electronic database, causing the firm to create and maintain inaccurate books and records. Somoza made these changes without the customers’ knowledge or authorization, and she was aware that the firm’s policies prohibited firm employees from making false and misleading entries in its books and records. Somoza admitted to the firm that she made the changes because she did not want anyone at the firm calling her clients after she left the firm. The firm immediately terminated Somoza’s employment.

Anna Maria Somoza : Fined $5,000; Suspended 30 days

Tags: Altered Customer Phone Records  

Credit Suisse Securities (USA) LLC
SFC/09-NYSE-24

Credit Suisse failed to adhere to the principles of good business practice in that on Nov. 14, 2007, beginning at approximately 3:40 p.m., a Credit Suisse proprietary algorithm routed hundreds of thousands of cancel/replace requests to the New York Stock Exchange for orders that had been previously generated by the algorithm, but, due to an unforeseen programming issue, were never sent by the algorithm. The unusually large amount of cancel/replace messages contributed to the over-queuing of message traffic in all of the securities, approximately 975 in total, traded at five posts on the NYSE Trading Floor. Messages, including new orders, modifications of orders, and cancellation requests were frozen in queue and could not be immediately processed. These five posts could not be closed on time, ultimately closing between 4:10 p.m. and 4:27 p.m.

Credit Suisse violated NYSE Rule 342 by failing to properly supervise the development and implementation of the firm’s proprietary algorithm, particularly with respect to certain revisions to the algorithm that contributed to the Nov. 14 incident. The firm also failed to properly monitor the operation of the algorithm, as evidenced by the fact that the firm was unaware that hundreds of thousands of messages sent by the algorithm were being rejected by NYSE systems until being notified of the issue by NYSE Regulation the following day. These failures by the firm also constituted a bad business practice in violation of NYSE Rule 401.

Credit Suisse Securities (USA) LLC: Censure; Fined $150,000

Tags: Algorithmic Trading  

Cutler Group L.P.
OS/09-ARCA-12

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