FINRA recently fined the NYC-based financial services firm Cantor Fitzgerald & Co. $2 million for failing to comply with the industry rule relating to “naked” short selling (the sale of securities that an investor does not own).
The Securities and Exchange Commission adopted Regulation SHO in 2005 to curb abuses in naked short selling practice. It established standards by which all broker dealers had to abide - the "locate" requirement and the "close-out" requirement. You can read more about the details of Regulation SHO on the SEC’s website.
In this action against Cantor Fitzgerald, FINRA reported that between January 2013 and December 2017, Cantor Fitzgerald’s written supervisory procedures and supervision system was not reasonably designed to achieve compliance with Regulation SHO. Cantor Fitzgerald’s alleged misconduct persisted over a 5-year period, and its failures to timely address red flags, rectify persistent supervisory deficiencies, and improves its systems had major consequences for investors. For example, according to FINRA, Cantor Fitzgerald:
- Failed to timely close-out nearly 5,000 failures-to-deliver; and
- Routed and / or executed thousands of short sale orders without first borrowing / arranging to borrow securities or issuing notice to pre-borrow to broker-dealers for whom it settled and cleared trades.
Brokerage firms have a duty to supervise, ensure their supervisory systems are reasonably designed to achieve compliance with industry rules, and address problems they discover in a timely manner. If you are an investor who has lost money while working with Cantor Fitzgerald, you can learn more about your rights and options for an investor fraud or misconduct claim from Meyer Wilson.
Our attorneys serve wronged investors nationwide. Call (800) 738-1960 or contact us online to speak with a lawyer.