FINRA Hits Major Firms with Multi-Million Dollar Fines Over Trading Data Errors

In a series of year-end enforcement actions, FINRA has ordered three prominent financial firms to pay significant fines for submitting inaccurate trading data, highlighting the industry's ongoing struggles with regulatory reporting accuracy.

Wells Fargo, LPL Financial, and Virtu Americas LLC were censured and fined a combined $2.55 million for submitting flawed "blue sheet" data - crucial trading information that helps regulators investigate potential market manipulation and insider trading.

The most extensive reporting failures came from Wells Fargo, which submitted approximately 22,000 inaccurate blue sheets affecting roughly 5.5 million transactions over a 12-year period. The firm agreed to pay a $900,000 fine after self-reporting multiple software coding errors that led to misreported trade execution locations and incorrect identification of registered representatives, among other issues.

LPL Financial faced similar sanctions, including a $900,000 fine, for submitting about 5,800 inaccurate blue sheets affecting 205,000 transactions between February 2010 and July 2021. The firm's errors ranged from omitting required transactions to incorrectly reporting customer information and trade execution times.

Meanwhile, Virtu Americas was fined $750,000 for overstating its advertised trade volume by approximately 17.1 billion shares across 110,500 instances on Bloomberg and Thomson Reuters platforms. The overstatements, occurring between May 2017 and February 2022, stemmed from messaging format issues and transaction coding errors.

In a parallel move, Wells Fargo and LPL Financial have agreed to pay an additional $900,000 each to settle charges with the U.S. Securities and Exchange Commission (SEC). The charges stem from the firms' failure to provide complete and accurate securities trading data, known as blue sheet data, to the SEC, a key component of the agency’s market surveillance.

What sets these cases apart is how the firms responded once the issues came to light. Wells Fargo, for instance, hired an outside consultant to conduct a comprehensive seven-year review of its reporting systems and implemented new controls. LPL Financial deployed new blue sheet reporting software and hired dedicated personnel, while Virtu enhanced its daily monitoring systems.

None of the firms admitted or denied the findings in settling these matters, but all have agreed to the censures and fines. The cases underscore the growing importance of data accuracy in today's highly automated trading environment, where regulators rely heavily on blue sheet data to maintain market integrity.

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