UBS fined $3.75M by FINRA over inaccurate reporting violations

On Behalf of | Jan 16, 2023 | FINRA Compliance

The Financial Industry Regulatory Authority said UBS Securities has agreed to settle allegations involving inaccurate trade reporting, reports Financial Advisor.

FINRA said UBS did not adequately respond to three separate technology issues that resulted in over-the-counter options positions not being reported properly.

In a letter of acceptance, waiver and consent, UBS agreed to a $3.75 million fine and a censure. The case involves the firm’s deficiencies involving Large Options Position Report (LOPR), a system through which member firms are required to report large options positions so that FINRA can be on the alert for potentially manipulative behavior.

The AWC letter detailed the technology problems that led to LOPR reporting shortcomings by UBS. From 2010 through 2018, FINRA found that the firm failed to report to the LOPR positions in OTC options overlying foreign securities where it acted as an intermediary between U.S. based customers and its foreign affiliates. These intermediated positions were booked to its foreign affiliates’ system and were not fed to UBS’s LOPR reporting system. This resulted in a failure to report OTC options positions to the LOPR in about 436,000 cases.

The other issues involved inaccurate reporting to LOPR in 6.6 million instances of short-covered quantities of OTC options positions, and a coding glitch that caused errors in UBS’s LOPR reporting for some high net worth clients. According to FINRA, UBS had identified the reporting deficiencies in its system but “unreasonably failed to correct them for several years.” The firm was also accused of failing to reasonably investigate and take action on red flags of LOPR reporting issues.

Following the settlement, UBS said it was pleased to have resolved the matter, adding “These issues were fully remediated prior to the resolution of the matter.”

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