FINRA Fines Cantor Fitzgerald $100,000 for Best Execution Violations

Cantor Fitzgerald & Co., a prominent Wall Street firm, has agreed to pay a $100,000 fine and over $51,000 in restitution to settle allegations of best execution violations in over-the-counter (OTC) securities trades, according to a recent Financial Industry Regulatory Authority (FINRA) action.

The settlement, detailed in a Letter of Acceptance, Waiver, and Consent (AWC), covers conduct from July 2017 through May 2019. During this period, FINRA found that Cantor Fitzgerald failed to provide best execution for 2,395 customer orders in OTC securities received from other broker-dealers.

The regulator stated that the firm did not use "reasonable diligence to ascertain the best market for the subject securities" and failed to execute trades at the most favorable prices possible under prevailing market conditions. This conduct violated FINRA Rules 5310 and 2010.

At the heart of the issue was Cantor Fitzgerald's handling of OTC Link messages, an electronic messaging service used by market makers to indicate interest in buying or selling specific securities. The firm's market-making desk received these messages but did not integrate them into its order management system, resulting in a manual process that sometimes led to customers receiving inferior prices.

FINRA also cited supervisory failures, noting that Cantor Fitzgerald's system for monitoring best execution in OTC securities was not reasonably designed to achieve compliance with its obligations. The firm's review process initially failed to account for price opportunities available through OTC Link messages and later implemented an overly narrow review with technical issues.

As part of the settlement, Cantor Fitzgerald agreed to pay $51,214.16 in restitution to affected customers, plus interest. The firm neither admitted nor denied the findings but consented to the entry of FINRA's findings.

This action underscores FINRA's ongoing focus on best execution practices in the OTC markets and highlights the importance of robust systems and supervision in ensuring fair pricing for customers.

Cantor Fitzgerald, a FINRA member since 1945, sold its OTC securities business that gave rise to this matter in May 2019.

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