If the fear-mongering business media has taught us anything in the past few months, it's that hackers are everywhere and thirsty to steal your precious personal information.
Everyone from big banks to Facebook have made big shows of acknowledging that they want to keep that data safer. Well almost everyone...
The Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined E*Trade Securities LLC $900,000 for failing to conduct an adequate review of the quality of execution of its customers’ orders and for supervisory deficiencies concerning the protection of customer order information.
What you did, E*Trade?
Firms routing customer orders are required to assess the quality of competing markets to which it directs order flow. Accordingly, the firms are required to periodically conduct “regular and rigorous reviews” of the quality of the executions of its customers’ orders to determine whether any material differences in execution quality exist among the markets trading the security. In an effort to satisfy this obligation, E*Trade established a Best Execution Committee to review execution quality it received on its customers’ orders.
Ah, so they arbitrarily told a handful of middle managers that they were now part of some new regulatory committee and then gave it a fancy name. Isn't that what we call "Compliance" these days?
FINRA found that, E*Trade’s Best Execution Committee lacked sufficiently accurate information to reasonably assess the execution quality it provided its customers. E*Trade’s Best Execution Committee also failed to take into account internalized order flow sent to its affiliated broker-dealer market maker G1 Execution Services (G1X) and failed to adequately consider the actual execution quality provided by the market centers to which it routed orders. In addition, E*Trade regularly accepted requests from G1X to change prioritization in E*Trade’s order routing system and to redirect certain order flow, without determining whether these changes would improve the quality of execution received by its customers.
FINRA also found that E*Trade did not have adequate systems and controls in place to ensure that there was no misuse of confidential customer order information by individuals dually registered with E*Trade and G1X.
C'mon, “E*Trade Best Execution Committee,” you gotta at least pretend to do something or these overweening regulators will just keep chipping away at your hard-won revenue. You need to light your torches and sharpen your pitchforks to fight these Dodd-Frankensteins or they'll accuse you of all kinds of stuff that you didn't do.
And after all, we're sure E*Trade has a reasonable explanation for all this confusion...
In concluding this settlement, E*Trade neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
At least a metaphorical shrug is the perfect response to being accused of lazy compliance.