The Financial Industry Regulatory Authority has fined StoneX $60,000 over multiple failures related to rules that regulate quotations, trades, and reports for over-the-counter securities.
FINRA said StoneX, formerly known as INTL FCStone, consented in 2017 to findings that over a review period it experienced significant failures related to regulations requiring the firm to immediately display customer limit orders. The broker-dealer also didn’t establish written supervisory procedures (WSPs) to comply with FINRA Rules 6460 and 5320. At the time, StoneX agreed to pay a fine of $42,500 to resolve the reporting issues.
In addition to paying the penalty, the company agreed to be censured and cease and desist from further violations. However, a subsequent review found that in Q3 2017 and Q2 2018 StoneX failed to detect and prevent further breaches.
Specifically, the firm didn’t immediately display, route, execute, or cancel 27 out of 35 (77%) sampled exceptions of customer limit orders, 14 of which were cancel/replace orders. This demonstrated that StoneX had inadequate processes in place to validate the accuracy of handling its customer orders.
FINRA Rule 6460 requires OTC market makers to publish immediately a bid or offer for OTC equity securities in an inter-dealer quotation system. These requirements include customer limit orders, conditions exempt from the rule, and electronic communications networks. In addition, the rule outlines halting trade quotations for OTC equity securities when deemed necessary to protect investors.
StoneX neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
The FINRA has probed, fined several Wall Street banks and brokerage firms for similar lapses as it examines whether they have broken controls designed to prevent market abuse.
StoneX is a provider of financial-services execution, risk management, market intelligence, and post-trade services. The origins of the company date back to 1924, and currently serves institutional clients by providing them with access to blue chip international securities and ADRs.
In 2020, the US market maker rebranded to its current name to reflect the merger between International Assets Holding Corporation and FCStone Group, which took place in 2011. Operating under the same brand for over nine years, the company’s board desired to adopt a new corporate name as part of a global rebranding initiative.
Furthermore, StoneX Group has completed the $236 million acquisition of GAIN Capital Holdings, which in July reported its last financial results as an independent business.