On 18 August 2022, FINRA fined Gar Wood Securities for short selling violations.
- FINRA accepted AWC from Gar Wood Securities to settle allegations that firm accepted short sale orders without obtaining locates, maintain supervisory system for reporting.
- Gar Wood violated FINRA Rule 2010 and SEA Reg SHO Rule 203 ((17 CFR 242.203).
- Violated FINRA Rule 7230A, trade reporting input; FINRA Rule 3110, supervision.
- Gar Wood inadvertently configured its delivery versus-payment (DVP) client accounts.
- To allow short sale orders entered in systems to be executed without obtaining locates.
- Gar Wood thus failed to obtain locates, for approximately 2,000 short sale orders.
- One of the firm's order management system (OMS) was incorrectly coded to send a principal capacity symbol for client agency orders to the reporting party.
- Reported 867k transactions to FINRA TRF with incorrect capacity (70% of executions).
- Gar Wood failed to reasonably supervise for compliance with locate, trade reporting rules; firm’s supervisory system required that a review for locate data be performed.
- Firm's system failed to include a locate review for short sale orders in DVP accounts.
- Further, Gar Wood conducted locates supervisory review for custodial accounts, but it incorrectly excluded short sales orders accepted for execution but did not execute.
- In 2018, Gar Wood switched all agency order routing to OMS that was correctly coded to report the proper capacity symbol; in 2019 updated WSPs to address deficiencies.
- Gar Wood Securities consented to censure; additionally agreed to pay $100k fine.