According to FINRA, CIBC World Markets Corp. was censured and fined $425,000 for failing to accurately report over-the-counter (OTC) options positions to the Large Options Positions Reporting (LOPR) system.

The firm's reporting failures stemmed from multiple technical and procedural issues. First, the firm applied LOPR logic that overrode open position reports when reporting new options contracts identical to existing positions executed on prior trading days. This meant that when the firm reported a new contract identical to a previously reported position, only the quantity of the most recent trade was reflected, rather than the correct total aggregate quantity.

Second, the firm failed to enter Tax ID numbers when onboarding certain accounts. The firm's system prevented submission of LOPR records without all required fields, including Tax ID numbers. Reportable trades for accounts missing Tax ID numbers were quarantined in an internal queue for review, but due to human error, these quarantined trades were not reviewed or reported for almost two years.

Third, when the firm made certain amendments to its risk system, it inadvertently applied LOPR logic that caused certain reportable positions not to be reported.

The firm's supervisory system was also deficient. CIBC had no supervisory process for ensuring the accuracy and completeness of its LOPR reporting, and no process to ensure its internal queue of quarantined trades was reviewed. These deficiencies went undetected for more than six years.

The firm has since updated its written supervisory procedures to require daily oversight of quarantined trades, hired an employee to manage LOPR reporting processes, and implemented daily reconciliation of LOPR submissions with trading records.

Large options position reporting helps regulators monitor for potential market manipulation and systemic risk. Accurate reporting is essential to market integrity.