The institutional broker-dealer arm of Santander in the United States agreed to pay $100,000 to settle allegations by the Financial Industry Regulatory Authority (FINRA) regarding supervision failures related to misuse of material nonpublic information (MNPI).
Santander U.S. Capital Markets agreed to be censured in reaching settlement for failing to establish, maintain, and enforce a supervisory system and written procedures reasonably designed to achieve compliance with FINRA rules, the self-regulatory organization said in a disciplinary action published Friday.
The details: From April 2019 through December 2021, Santander U.S. did not have reasonably designed systems and procedures to monitor affiliate employees accessing MNPI, FINRA said. The firm’s procedures relied on a manual process requiring affiliate employees with access to be identified to firm personnel and their communications be documented to prevent trading in MNPI.
At least seven employees of the firm’s foreign affiliates had access to MNPI but were not monitored, and at least 45 affiliate employees who had access were not monitored until two to 18 days after being exposed to MNPI, FINRA alleged.
FINRA also claimed Santander U.S.’s system was not reasonably designed to review securities transactions in employee outside brokerage accounts that were maintained at a foreign broker-dealer. The firm allowed employees to maintain outside accounts at foreign brokerage firms if they manually uploaded account statements, but four employees failed to do so, preventing Santander U.S. from timely monitoring trading.
Compliance considerations: In March 2019, deficiencies in systems and procedures relating to preventing potential misuse of MNPI were identified by another regulator and communicated to the firm, which prompted remedial efforts, FINRA said.
After engaging an outside consultant, the firm implemented and improved its control room policies, implemented a new conflicts management system used for the maintenance of restricted and watch lists, and updated the way information was entered into that system.
Company response: “We take this matter very seriously,” a Santander U.S. spokesperson said in an emailed statement. ”We have taken necessary actions to address the findings and are pleased to have this matter resolved.”
The firm agreed to the settlement without admitting or denying FINRA’s findings.