CIBC World Markets Corp.
The findings stated that the firm applied LOPR logic that overrode open position reports when reporting new options contracts that were identical to an existing position executed on a prior trading day. Thus, when the firm reported a new options contract that was otherwise identical to a previously reported position, the LOPR only reflected the quantity of the most recent trade, rather than the total aggregate quantity. The firm ultimately revised its LOPR logic to issue records with the correct aggregate quantity for identical contracts.
In addition, the firm failed to enter Tax ID numbers when onboarding certain accounts. The firm applied LOPR logic that prevented it from submitting records without all "unique fields," including Tax ID numbers. LOPR-reportable trades for accounts without a Tax ID number were quarantined in an internal queue for further review and escalation. Due to human error, however, the quarantined trades were not reviewed or reported. The firm ultimately added Tax ID numbers to the affected accounts and all LOPR-reportable positions were submitted to the Options Clearing Corporation (OCC). Moreover, the firm inaccurately reported OTC options positions. When the firm made certain amendments in its risk system, it applied LOPR logic that caused certain reportable positions not to be reported. The firm ultimately updated its LOPR logic to remediate this issue.
The findings also stated that the firm failed to maintain and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with FINRA Rule 2360. The firm did not have a supervisory process for ensuring the accuracy and completeness of its LOPR reporting. Further, the firm had no supervisory process to ensure its internal queue of quarantined trades was reviewed to identify and report LOPR-reportable positions.
As a result, the firm failed to identify the above inaccuracies in its LOPR reporting for more than six years, and it failed to review and report quarantined transactions missing a Tax ID number for almost two years. The firm has since updated its WSPs to require daily oversight of its internal queue of quarantined trades. The firm also hired an employee to build and manage processes for secondary oversight of LOPR reporting. Furthermore, the firm implemented a new WSP governing daily reconciliation of its LOPR submissions with its trading records to ensure accuracy and completeness in LOPR reporting.
