U.S. – FINRA Fines for Short Selling Violations

U.S. – FINRA Fines for Short Selling Violations

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.

AWC Provisions

  • Gar Wood Securities consented to censure; additionally agreed to pay $100k fine.