UBS Securities, the investment bank division of Swiss banking giant UBS, agreed to pay $3.75 million to settle allegations brought by the Financial Industry Regulatory Authority (FINRA) that its failure to adequately supervise compliance staff led to millions of violations of options trading reporting requirements.
UBS Securities was obligated under FINRA rules to reasonably investigate possible rule violations and address them, the self-regulatory organization said in a consent order Thursday.
UBS’s failure to adequately investigate red flags led to 7.1 million violations of FINRA options reporting rules between January 2010 and September 2021, according to the order. The alleged lapses included large options position report (LOPR) alerts not being investigated or addressed.
UBS was obligated to create a system, including written procedures, for supervising every staff member responsible for ensuring compliance with securities laws and regulations and for maintaining and enforcing those procedures. It failed to do so from November 2013 through November 2022, according to FINRA.
The bank’s written procedures “failed to provide for any supervisory review to determine whether the short-covered quantity of information reported to the LOPR was accurate,” FINRA said.
UBS did identify three reporting issues but failed to correct them in a timely manner, according to the order. In one case, it waited five years between identifying the issue in 2013, self-reporting it to FINRA in 2017, and finally correcting it in 2018.
In another alleged case, UBS identified a short-covered quantity problem in 2015, hired a consultant regarding it in 2018, but didn’t fully remediate the issue until 2020.
In the third case, UBS discovered a problem related to an account name and address in mid-2018 but did not fix it until September 2021, despite FINRA raising the issue with the bank in January 2021, the order stated.
In addition to paying the fine, UBS agreed to be censured.
UBS did not respond to a request for comment.
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