• FINRA accepted the offer of a Letter of Acceptance, Waiver, and Consent (AWC) from M1 Finance for millions of violations of Regulation SHO by marking trades long.
• Failed to establish and maintain a supervisory system designed to achieve compliance with Reg SHO's locate and order marketing requirements and application records rules.

Allegations & Violations

• Since Mar. 2016, M1 Finance violated Regulation SHO Rule 203(b)(1) (17 CFR 242.203(b)(1)) and Reg SHO Rule 200(g) (17 CFR 242.200(g)) and FINRA Rule 2010.
• M1 violated these Reg SHO rule by failing to locate securities available for borrowing and by inaccurately marking those same millions of short orders as long orders.
• By inaccurately recording short selling, and another 3.5mn principal buy orders, as executed in an agent capacity, M1 maintained inaccurate books and records.
• These inaccurate books, records violated the Exchange act s. 17(a) (15 USC 78q), SEA Rule 17a-3, (17 CFR 240.17a-3) and FINRA Rule 4511 and FINRA Rule 2010.
• Finally, from Mar. 2016 to present, M1 Finance violated FINRA Rule 3110 and FINRA Rule 2010 by failing to maintain supervisory system including written procedures.
• System should have been reasonably designed to achieve compliance with Reg SHO.

AWC Terms

• Under the terms of the AWC, respondent consented to a censure and to a $400k fine.
• Firm to undertake to certify to remediation within 180 days of the issuance of AWC.
• Certification must contain specified content and be signed by a principal of the firm.