According to FINRA, Alterna Securities, Inc. (formerly known as Actinver Securities, Inc.) was fined $32,500 for maintaining a supervisory system that was not reasonably designed to surveil for potentially manipulative pre-arranged trades.

The firm did not have exception reports, trade alerts, or other supervisory mechanisms to identify pre-arranged transactions. Instead, the firm relied on supervisors to identify such transactions as part of their daily review of a fixed income trade blotter. However, the blotter was organized by customer account and did not show execution times, making it an unreasonable mechanism to identify potential pre-arranged trading.

Moreover, the firm's written procedures provided no information or guidance to supervisors on how to review for pre-arranged trading, what information to identify or evaluate, or what steps were required to address indications of pre-arranged transactions. While the procedures designated a firm principal as responsible for supervising fixed income transactions, they did not designate a supervisor for that principal's own trading activity.

As a result, a designated principal effected 35 pairs of pre-arranged transactions in corporate bonds, selling bonds from the firm's inventory or on behalf of a customer to another broker-dealer and then buying the same bonds back (usually within five minutes) from the same broker-dealer on behalf of other customers. Because the firm had no surveillance system to detect pre-arranged transactions and no supervisor for the principal's trading, none of these transactions were flagged for review.

Pre-arranged trading can be manipulative because it may create a false appearance of market activity or be used to transfer profits between accounts. Firms must have adequate surveillance systems to detect such activity and protect investors from potential manipulation. This case demonstrates the importance of firms implementing comprehensive surveillance systems with clear procedures for all types of potentially problematic trading patterns.