According to FINRA, NewEdge Securities, LLC (formerly known as Mid Atlantic Capital Corporation) was censured and fined $125,000 for failing to report over 19,000 interdealer transactions to TRACE and inaccurately reporting the capacity for over 2,000 additional transactions.

The reporting failures stemmed from the firm's misunderstanding of its reporting obligations. The firm erroneously believed that transactions effected using Delivery versus Payment (DVP) and Receive versus Payment (RVP) accounts created and controlled by a customer firm were not interdealer trades, so it failed to report those transactions to TRACE.

When the firm subsequently replaced the DVP/RVP accounts with a principal account belonging to another member firm, it failed to update its TRACE reporting process and continued to miss reporting these interdealer trades. Additionally, the firm inaccurately reported to TRACE that it had executed transactions with another member firm in an agency capacity when it actually executed those transactions in a principal capacity.

FINRA found that the firm failed to establish, maintain, and enforce a supervisory system and written supervisory procedures reasonably designed to achieve compliance with TRACE reporting rules. The firm had no system or procedures to identify potential failures to report transactions to TRACE. It also lacked any system for verifying that it conducted reviews regarding the accuracy of information reported to TRACE.

Accurate TRACE reporting is essential for transparency in the fixed income markets. When firms fail to report transactions or report them inaccurately, it undermines the integrity of market data that investors, regulators, and other market participants rely upon.

This case illustrates the importance of firms thoroughly understanding their reporting obligations and having systems in place to ensure compliance. Firms should not assume that certain transaction types are exempt from reporting without carefully verifying their obligations under applicable rules.