FINRA Fines TradeUP Securities and Dalmore Group for Multiple Regulatory Violations

The Financial Industry Regulatory Authority (FINRA) has taken action against two broker-dealers, TradeUP Securities, Inc. and Dalmore Group LLC, for various regulatory violations. Both firms have agreed to significant fines and censures without admitting or denying the findings.

TradeUP Securities, Inc., a New York-based discount securities broker, has been fined $300,000 by FINRA for failing to report short interest positions and lacking proper supervisory systems. The firm, a FINRA member since November 1986, failed to report 18,702 short interest positions totaling 36,452,154 shares between August 2021 and May 2023.

The violation occurred shortly after TradeUP, previously known as Marsco Investment Corporation, began self-clearing customer short sales in July 2021. The firm reportedly believed that its third-party back-office vendor was handling the reporting on its behalf. However, TradeUP did not begin reporting its short interest to FINRA until May 2023, following a regulatory inquiry.

FINRA also found that TradeUP failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to ensure compliance with its short interest reporting obligations.

Dalmore Group Fined $375,000 for Multiple Violations

In a separate action, FINRA has fined Dalmore Group LLC $375,000 for a series of violations spanning from January 2019 to the present. Dalmore, a FINRA member since November 2005, is headquartered in Woodmere, New York, and primarily acts as a broker-dealer of record for private offerings.

The violations include:

1. Failure to establish and maintain a supervisory system for compliance with suitability and best interest obligations in private placements.
2. Inadequate supervisory system to prevent misuse of material non-public information.
3. Failure to fingerprint 45 non-registered associated persons.
4. Failure to report or timely report outside business activities of registered representatives.
5. Violations of FINRA's standards for communications with the public on websites and in video content.
6. Failure to properly handle a contingency offering, including not specifying a date for meeting the minimum raise and releasing investor funds prematurely.
7. Providing late, incomplete, and inaccurate responses to FINRA information requests.

Significance of the Violations

These cases underscore FINRA's ongoing efforts to ensure compliance with reporting requirements and supervisory obligations that are critical for market transparency and investor protection. The violations highlight the importance of:

1. Accurate and timely reporting of short interest data, which is crucial for regulatory purposes and investor decision-making.
2. Proper supervisory systems and written procedures for various aspects of broker-dealer operations.
3. Compliance with fingerprinting requirements for associated persons.
4. Accurate and timely reporting of outside business activities.
5. Adherence to FINRA's standards for communications with the public, especially in digital media.
6. Proper handling of contingency offerings to protect investor interests.
7. Prompt and accurate responses to regulatory inquiries.

Both firms have been censured in addition to the monetary fines. TradeUP Securities has implemented procedures to ensure accurate and timely submission of short interest reporting and amended its written supervisory procedures.

Dalmore Group, in addition to the fine, has agreed to an undertaking requiring a senior management member to certify within 90 days that the firm has remediated the identified issues and implemented a supervisory system designed to achieve compliance with relevant FINRA rules and Exchange Act regulations.

These actions by FINRA demonstrate the regulator's commitment to maintaining the integrity of the securities markets and protecting investors through robust enforcement of industry rules and regulations.

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