On 12 October 2022, FINRA reported short position reporting, supervisory failures.
- FINRA issued letter of acceptance, waiver and consent (AWC) with Scotia Capital (USA) Inc. re short position reporting requirements and supervision violations.
- Between July 2012 and June 2019, Scotia erroneously included non-reportable short positions reflected in two omnibus accounts in the firm’s short interest reports.
- Positions in these accounts were not reportable because they did not result from short sales, were not transactions marked long due to firm’s or customer’s net long position.
- During a sample period of July 2017 through June 2019, Scotia inaccurately reported approximately 2,400 short interest positions totaling approximately 130 million shares.
- Should have reported approximately 100 short interest positions totaling 31mn shares.
- Supervisory system did not include process to determine whether its report included non-reportable short positions, did not have reasonable reconciliation process.
- Violated FINRA Rule 4560, FINRA Rule 3110, FINRA Rule 2010, and NASD Rule 3010.
- Without admitting or denying, Scotia consented to censure and to pay a $300,000 fine.