The Financial Regulatory Authority (FINRA) fined UBS Securities, the investment banking division of financial institution UBS, $3.75 million for numerous reporting and compliance failures in violation of FINRA reporting rules.
FINRA requires member firms to report over-the-counter (OTC) options to the Large Options Positions Reporting (LOPR) system, information that FINRA then uses “to surveil for potentially manipulative behavior, including attempts to corner the market in the underlying equity, leverage an option position to affect the price, or move the underlying equity to change the value of a large option position,” according to the Jan. 5 consent order.
From January 2010 through September 2021, UBS “failed to report OTC options positions to the LOPR in approximately 436,000 instances,” FINRA said. Furthermore, UBS “inaccurately reported certain required information for OTC options positions to the LOPR in more than 6.6 million instances.” These violations were caused by “three technology issues, each of which persisted for at least six years,” FINRA said.
Secondly, according to FINRA, UBS established OTC options positions that exceeded applicable position limits by “book[ing] positions in OTC options overlying foreign securities where it acted as an intermediary between U.S.-based customers and its foreign affiliates to its foreign affiliates’ systems that did not feed into its position limit monitoring systems.” This activity occurred from January 2010 through June 2018.
“For example, between May 2017 and June 2018, UBS established at least seven positions—six on behalf of customers and one on behalf of a firm account—in four OTC options that exceeded the applicable position limit of 25,000 contracts,” the consent order stated. “These positions were over the limit for periods ranging from two days to 208 days.”
Thirdly, UBS failed to “reasonably investigate and act upon red flags of LOPR reporting deficiencies,” the consent order stated. Even though UBS knew of the reporting issues, it “unreasonably failed to correct them for several years.”
UBS accepted and consented to FINRA’s findings without admitting or denying them. In addition to the $3.75 million fine, it has also agreed to a censure.
This is FINRA’s latest action against UBS. On Oct. 4, 2022, FINRA fined UBS $2.5 million for Regulation SHO violations and supervisory failures that spanned nine years. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.