Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
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.
March 2010
Andrew Kevin O’Fee
OS/2008012052401/March 2010

On his member firm’s behalf, O’Fee verbally confirmed a sell order with another member firm for U.S. Treasury to be announced (TBA) securities, entered the trade into his firm’s trading systems via Bloomberg and cancelled the trade shortly thereafter, despite agreeing to the trade without properly entering the trade or honoring his commitment. O’Fee did this multiple times. O’Fee’s firm honored his trade, closing out his short position at a loss to the firm of $152,751.97.

Once O’Fee realized the trade he failed to enter had gone against him, he engaged in a series of additional trades to conceal his conduct and, in an attempt to make up losses in his trading book, he entered buy orders with another member firm into his firm’s trading system via Bloomberg, but his firm’s clearing firm attempted to send a wire to the firm notifying it that there was no comparison.

O’Fee sold the securities to another member firm without the other firm’s authorization to effect the sales; therefore, he was short on the sale to the second firm. O’Fee’s firm covered the short position, and these transactions caused his firm to lose an additional $130,000, less a fail float of $15,000. In addition, when O’Fee effected the trades and cancellations, he only entered them into the firm’s trading system via Bloomberg and did not create handwritten tickets as firm policy required, thus permitting O’Fee to avoid supervisory review or detection and causing his firm’s books and records to be inaccurate.

Andrew Kevin O’Fee : Fined $25,000; Suspended 18 months
Tags:  U.S. Treasuries     |    In: Cases of Note : FINRA
Bill Singer's Comment

On the surface, this looks like a fair and excellent resolution by FINRA.  However, as with ducks, on the surface everything looks smooth but underneath there is a flurry of movement.

I just don't get the fact pattern.  First FINRA seems to states that O"Fee verbally confirmed and then intentionally cancelled the trades at question -- or at least that's my inference.  However, FINRA then seems to state that "once O'Fee realized that the trade he failed to enter had gone against him . . ."  Frankly, that confuses me.  What does FIRNA mean that O'Fee "realized" that he "failed to enter" the trade?  My understanding is that he intentionally cancelled the trade -- he always knew the trade was cancelled and he didn't "fail" to enter the trade but, apparently, purposely cancelled it. 

Unfortunately, it doesn't make any sense either way.  If he knew that he had cancelled the sale, then it's not clear why he did that, much less why he would not have thought that a verbally confirmed trade existed at market risk.  On the other hand, if he inadvertently cancelled the trade, then that would more likely explain his flurry of activity to cover the open order and contain the loss. 

Enforcement Actions