According to FINRA, Northern Trust Securities, Inc. has been censured and fined $150,000 for failing to report commissions to TRACE for certain transactions in TRACE-eligible securities, including Corporate Debt Securities, Agency Debt Securities, Securitized Products, and U.S. Treasury Securities.

The incomplete reporting was caused by delays associated with the firm's manual calculation of commissions. During periods of large transaction volume, the firm was unable to calculate all commissions within 15 minutes of execution. The firm erroneously determined that it was not required to report commissions for these transactions because it couldn't calculate them in time.

The firm also failed to establish and maintain a supervisory system reasonably designed to achieve compliance with FINRA Rule 6730. The firm failed to address known delays associated with its manual commission calculation process to ensure timely reporting during periods of heavy trading volume.

This issue was ultimately resolved when the firm automated the commission calculation process.

TRACE reporting is a critical component of fixed income market transparency. The Trade Reporting and Compliance Engine provides regulators and market participants with essential information about bond transactions, including pricing and commissions. When firms fail to report complete and accurate information, it undermines the transparency that protects investors.

This case illustrates how manual processes can create compliance risks, particularly during periods of high volume. Investors benefit when firms invest in automated systems that can maintain compliance regardless of market conditions. The firm's eventual automation of the process demonstrates the importance of technology in maintaining regulatory compliance.