ACS Execution Services LLC agreed to pay a $250,000 fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA).
ACS provides execution services to broker-dealers and executes agency, net trade or risk-free capital orders based on the instructions it receives. When the firm receives a short sale order from a client trading on a net basis, the firm executes a primary short sale order (or orders) in the same security on an exchange or other execution venue and then satisfies the order by purchasing the security as primary on different price.
When trading in this manner, two short sales occur: ACS accepts a short sale order from its broker-dealer client, and ACS executes a short sale order for its own account.
From June 2017 to the present, ACS mistakenly believed that it could rely on the identification of a broker-dealer client when conducting a short sale for its own account to facilitate net transactions. As a result, ACS executed at least 10 million short sales for its own account to facilitate short orders on a net basis without borrowing the securities, entering into a good faith agreement to borrow the securities, or having reasonable grounds to believe that the securities could be borrowed so that they can be delivered on the delivery due date.
Therefore, Respondent violated SHO Rule 203(b)(l) and FINRA Rule 2010.
During the same period, ACS also violated FINRA Rules 3110 and 2010 by failing to establish and maintain a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the detection requirements of Rule 203.
In addition to the fine, the company agreed to a reprimand.