According to FINRA, Instinet, LLC was censured and fined $165,000 for publishing inaccurate monthly reports of order executions.

The firm excluded from its Rule 605 of Regulation National Market System reports potentially reportable orders submitted to its alternative trading system by certain business units and systems. The firm had erroneously determined that all orders received through these particular business units and systems were subject to special handling and excluded from the definition of a covered order. As a result, the firm underreported by approximately five percent its total covered orders. After FINRA identified this issue during a firm exam, the firm began evaluating each order individually to determine whether it should be included in the firm's Rule 605 report.

Additionally, due to logic errors in the Rule 605 report-generating software used by the firm, the firm inaccurately classified midpoint peg immediate-or-cancel orders by order type. The firm classified such orders as marketable limit orders rather than inside-the-quote limit orders. The software logic error was subsequently corrected. In total, the firm published 54 inaccurate monthly Rule 605 reports.

The firm's supervisory system, including its Written Supervisory Procedures, was not reasonably designed to achieve compliance with Rule 605 of Regulation NMS. The firm had no procedure to review or test that it was correctly excluding orders or to check that orders included in its reports were properly classified by order type.

This case demonstrates the importance of accurate reporting in market transparency. Rule 605 reports provide investors with critical information about how broker-dealers execute orders. Investors rely on these reports to make informed decisions about order routing. Firms must implement proper controls and testing procedures to ensure the accuracy of their regulatory reports.