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Regulatory Obligations and Related Considerations

Regulatory Obligations

FINRA Rule 5210 (Publication of Transactions and Quotations) prohibits member firms from publishing or circulating, or causing to be published or circulated, any communication which purports to report any transaction as a purchase or sale of any security unless such member believes that such transaction was a bona fide purchase or sale of such security. Firms may, on a discretionary basis, communicate or advertise their trading activity to the market through one or more service providers that disseminate that information to subscribers and the market. Firms that do so must ensure that such information is truthful, accurate and not misleading, consistent with the requirements of Rule 5210. 

Related Considerations

• Do your firm’s supervisory procedures provide for a method to verify and assess the accuracy of the firm’s published trading volume, including when such trading volume is disseminated through one or more third-party service providers?

Findings and Effective Practices

Findings

• Inflating Trading Volume: Overstating, or inflating, the firm’s trading volume due to technological or procedural failures or errors.
• Unreasonable Supervision: Failing to establish and maintain supervisory systems that are reasonably designed to achieve compliance with Rule 5210, including with respect to trading information disseminated by third-party service providers.

Effective Practices

• Monitoring and Reviewing Reported Trade Data: Monitoring internal systems and responsible personnel to ensure that trade information transmitted to third-party service providers for dissemination is consistently complete, accurate and not misleading.
• Monitoring and Reviewing Disseminated Trade Volume Data: Monitoring trade volume information for the firm that is disseminated by service providers to subscribers and the market to ensure that the disseminated data accurately reflects trade data reported by the firm.

Additional Resource

• Notice to Members 06-50 (NASD Reminds Members of Their Obligation to Provide Accurate Information to Services that Disseminate Trading Volume and Trading Interest)