← Broker database 2023-04-04
SpeedRoute Fined $45,000 for Improperly Accepting Market Orders in New Issues
According to FINRA, SpeedRoute LLC was fined $45,000 for improperly accepting market orders for purchases of shares of new issues before secondary market trading commenced. The firm also failed to establish adequate supervisory procedures to ensure compliance with FINRA Rule 5131(d)(4).
The firm's written procedures improperly placed the responsibility of compliance on its broker-dealer clients, stating that those customers should reject improper market orders. However, the firm failed to implement any process to surveil for instances where it accepted market orders for new issue purchases prior to secondary market trading. This supervisory gap allowed the rule violations to occur.
To address these issues, SpeedRoute implemented a system to automatically reject market orders in new issues prior to secondary market trading and updated its written supervisory procedures. The firm also added an exception report designed to detect instances where it received and rejected improper market orders. Subsequently, the firm enhanced its procedures by implementing a monthly manual review to ensure the automatic blocks were functioning properly.
This case illustrates the importance of firms having active surveillance systems rather than relying solely on their clients to maintain compliance. Market orders in new issues prior to secondary trading can contribute to excessive volatility and unfair pricing. Investors should understand that proper controls around new issue trading help ensure orderly markets and fair pricing for all participants.