The Financial Industry Regulatory Authority (FINRA) has slapped BofA Securities with a hefty fine of $24 million. According to FINRA, BofA Securities was involved in over 700 cases of spoofing and related supervisory failures in the United States Treasury secondary markets spanning more than 6 years.
Spoofing, which involves placing deceptive orders to create a false impression of market activity, was allegedly carried out by the company’s two former traders in the United States Treasury secondary markets from October 2014 to February 2021. They reportedly engaged in 717 instances of spoofing.
According to Expense St. Louis, the Executive Vice President and Head of Enforcement at FINRA, “Spoofing undermines the transparency and integrity of the markets by distorting the true nature of supply and demand. This action sends a strong message that FINRA will aggressively pursue companies that engage in spoofing, including cross-product spoofing.”
FINRA Highlights Supervisory Failures
During this period, BofA Securities failed to establish and maintain an effective supervisory system capable of detecting spoofing activities in the United States Treasury markets. The system, implemented in November 2015, was found to be inadequate until mid-2019, as it was designed to detect algorithmic spoofing but not manual manipulation by traders.
BofA Securities has agreed to FINRA’s findings without admitting or denying the charges. In addition to this recent fine, FINRA had previously fined the company $325,000 in 2015 for issuing inaccurate monthly reports for order execution.
It was revealed that between January 2014 and February 2022, BofA Securities inaccurately reported order execution data for its two market centers, MLCO and MLIX. The company allegedly violated the requirement to report separate statistical information under Rule 605, resulting in the publication of combined reports for both.
Increased Regulatory Scrutiny in Brokerage Practices
In June, Credit Suisse came under scrutiny after FINRA imposed a fine of $900,000 on its US subsidiary for regulatory reporting lapses, including late trades and inaccurate Trade Reporting and Compliance Engine reports from November 2015 to March 2023.
Earlier this year, FINRA fined Webull $3 million for its oversight in onboarding options traders and an absence of proper supervisory systems to identify and address customer complaints. This oversight led to the approval of approximately 9,000 unqualified traders, including over 2,500 customers under the age of 21 who did not have the necessary options trading experience.