According to FINRA, Evercore Group L.L.C. was censured and fined $100,000 for multiple failures related to its market access controls and procedures.

The firm failed to establish, document, and maintain reasonably designed credit threshold controls for customers to whom it provided market access. Evercore generally assigned customers to pre-defined, tiered credit limits based solely on each customer's largest notional value trading day over a two-year period, without sufficiently considering the customer's business, financial condition, trading patterns, or other relevant information. This approach frequently resulted in credit limits that were too high to be effective risk management tools.

The firm's erroneous order controls were also inadequate. Single order quantity controls were set too high to prevent erroneous orders in certain securities, including maximum share quantity and maximum order value controls. The firm used uniform thresholds for all securities without considering individual security characteristics, and procedures did not adequately explain the rationale for control settings. Some customers were assigned thresholds that exceeded their aggregate credit threshold, creating additional risk.

The supervisory system for market access controls was also deficient. The firm had no written procedures for reviewing orders that triggered soft blocks, did not contemporaneously document soft block reviews, and did not describe how the firm supervised soft block alert reviews. The firm also modified control parameters without documented procedures or rationale for when modifications were appropriate.

This case illustrates the complex regulatory requirements surrounding market access and the importance of robust controls to prevent erroneous trades and manage risk. For market participants, these controls are essential safeguards that protect market integrity and prevent potentially catastrophic trading errors.