Citadel Securities has agreed to pay a $7 million penalty to settle allegations from the Securities and Exchange Commission (SEC) that it violated short sale regulations by incorrectly marking millions of orders over a five-year period.
The private Miami-based firm has agreed to pay the penalty without admitting or denying the SEC’s findings.
The SEC alleges that Citadel Securities inaccurately denoted if short sales were long sales and vice versa due to a coding error in its trading system and, as a result, provided inaccurate data to regulators including the SEC.
“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” Mark Cave, associate director of the SEC’s Division of Enforcement, said in a statement.
“This action against Citadel Securities demonstrates that a broker-dealer’s failure to comply with the requirements of Reg SHO can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the commission of important information about the markets it regulates.”
A Citadel Securities spokesperson told Proactive that this matter had no impact on the quality of its client execution.
“While updating our systems to accommodate certain client requests, we made a coding change that inadvertently affected a de minimis percentage of our order markings. We detected the issue and promptly fixed it more than three years ago,” the spokesperson said.
- Updated with Citadel Securities spokesperson's statement -
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