FINRA Imposes $24 Million Fine on BofA Securities for Spoofing and Supervisory Failures

The Financial Industry Regulatory Authority (FINRA) has levied a $24 million fine on BofA Securities, Inc. for over 700 instances of spoofing in U.S. Treasury secondary markets and associated supervisory lapses spanning over six years.

Spoofing, a fraudulent trading tactic, involves the use of non–bona fide orders to create a false appearance of market activity, deceiving other participants into executing against genuine orders entered on the opposite side of the market. This undermines market transparency and integrity, particularly in benchmark markets like U.S. Treasury securities.

Between October 2014 and February 2021, BofA Securities, under the actions of a former supervisor and junior trader, engaged in 717 instances of spoofing in U.S. Treasury securities. This was done to induce opposite-side executions in the same Treasury security or a correlated Treasury futures contract.

Additionally, BofA Securities failed to establish and maintain a supervisory system to detect spoofing in U.S. Treasury markets from at least October 2014 through September 2022. The bank's supervisory system, implemented in November 2015, was initially inadequate, designed to detect spoofing by trading algorithms, not manual spoofing by its traders, such as the instances addressed in the settlement.

Furthermore, the bank's surveillance failed to capture orders entered by its traders into certain external venue systems until at least December 2020. BofA Securities also neglected to supervise for potential cross-product spoofing in Treasuries through September 2022.

While settling the matter, BofA Securities neither admitted nor denied the charges, consenting to FINRA's findings. The fine serves as a stern reminder of regulatory commitment to maintaining market integrity and deterring fraudulent trading practices.

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