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Broker-Dealer Settles Supervisory Violations on Protection of Issuer Buyback Information

A firm settled NYSE Arca charges for supervisory system violations for "failing to maintain and enforce written policies and procedures reasonably designed to prevent the potential misuse of customer order information and to supervise and enforce reasonable information barriers in connection with their stock buyback trading activity."

NYSE Arca stated that, while the broker-dealer had supervisory processes in place for SEA Rule 10b-18 ("Purchases of Certain Equity Securities by the Issuer and Others") safe harbor provisions, the broker-dealer did not (i) evaluate whether customer buyback order information was material nonpublic information or (ii) establish information barriers to prevent front-running (trading in stocks or assets based on insider knowledge).

As a result, NYSE Arca determined that the broker-dealer violated Section 15(g) ("Prevention of Misuse of Material, Nonpublic Information") of the Exchange Act and NYSE Arca Rule 11.18 ("Supervision").

To settle the charges, the broker-dealer agreed to a censure and a $200,000 fine.

  1. NYSE Arca AWC: Cantor Fitzgerald & Co.
© Copyright 2022 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume XI, Number 312
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