- Subject
- According to FINRA, UBS Securities LLC was censured and fined for improperly including securities positions of a foreign affiliate when calculating net positions of independent trading units, resulting in inaccurate long and short sale determinations. The violations centered on UBS's organization of trading accounts into aggregation units (AGUs) based on trading strategy. The firm automatically netted securities positions across all accounts in each AGU, including accounts owned by a foreign affiliate not subject to SEC examination. Under Regulation SHO Rule 200(f), such foreign affiliate positions should not have been included in the firm's net position calculations. This improper aggregation affected four AGUs and prevented the firm from accurately assessing whether sale orders should be marked long or short - a critical compliance requirement designed to prevent abusive short selling practices. What makes this case particularly concerning is that UBS was aware of the issue from prior FINRA disciplinary actions involving similar problems. Despite knowing it needed to remove foreign affiliate accounts from its AGUs, the firm failed to implement changes in a timely manner. In fact, during its remediation efforts, UBS improperly added another foreign affiliate account to its AGUs. Only after FINRA directly raised the issue did the firm begin removing the accounts, a process that took eight months to complete. The firm's supervisory system and written procedures were found to be not reasonably designed to ensure compliance with Regulation SHO requirements. For market participants, this case underscores the technical complexity of modern trading operations and the importance of robust compliance systems. Investors should be reassured that FINRA actively monitors firm compliance with regulations designed to maintain fair and orderly markets, particularly rules preventing manipulative short selling practices.
- CRD number
- 2022-10-03
- State
- 520000
- Violation
- UBS Securities LLC