Lime Brokerage LLC recently reached a settlement with the US Financial Industry Regulatory Authority (FINRA). The firm agreed to pay a fine of $100,000 for overstating its trading volumes.
Between February 2015 and August 2015, Lime advertised fraudulent trading volumes at least 4,280 times. They overstated the firm’s trading volumes by 186,818,546 shares. The settlement comes for violating the rules between February 9, 2015 and September 30, 2015. The firm overstated its executed trade volumes, which were advertised on Bloomberg, LP. This misrepresentation violated FINRA Rules 5210 and 2010.
During this period, the firm also failed to create and maintain a supervisory system. It also failed to create, enforce, and maintain written procedures designed reasonably to achieve compliance with the regulatory requirements put under Rule 5210. The rule governs the accuracy of the trading volumes advertised by a firm. In addition, it violated Rules 3110 and 2010 by not maintaining compliance related to advertising guidelines.
How did the overstatement occur?
Lime planned to determine its executed trading volume on Bloomberg in early 2015 and brought a registered representative (RR) on board to handle this task. The RR collected data for the firm and submitted it to Bloomberg for advertising the executed trade volume on Lime’s platform. However, in February and August 2015, the representative collected and submitted data that could not be attributed to Lime.
This means that the data submitted to Bloomberg for advertising including “Access Only” order flow as well, which were to be attributed to other broker-dealers. These forms used Lime as a technology vendor, not a broker-dealer. Lime never routed their order flow or executed their orders. Therefore, their volumes cannot be counted as standard executed trade volumes.
During this period, Lime also submitted duplicate trading volumes to Bloomberg for one symbol. After September 30, 2015, the platform stopped advertising its executed trade volumes. The platform has consented to censure in addition to the fine.