Domestic Securities, Inc. (CRD #34721, Montvale, New Jersey) recently submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $142,500, ordered to pay $4,046.82, plus interest, in restitution to investors, and to revise its written supervisory procedures regarding market order protection, NASDAQ Rule 4755, trade reporting, riskless principal transactions, best execution, not held orders, riskless principal transactions, best execution, principal transactions, and disclosure of order execution information. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to execute customer limit orders in NASDAQ securities after it traded each subject security for its own market-making account at a price that would have satisfied each customer’s limit order, and failed to contemporaneously or partially execute customer limit orders in NASDAQ securities after it traded each subject security for its own market-making account at a price that would have satisfied each customer’s limit order. The findings stated that the firm accepted and held customer market orders, traded for its own account at prices that would have satisfied the customer market orders, and failed to immediately thereafter execute the customer market orders up to the size and at the same price at which it traded for its own account or a better price. The findings also included that the firm failed to fully and promptly execute orders.
FINRA found that in transactions for or with a customer, the firm failed to use reasonable diligence to ascertain the best inter-dealer market, and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. FINRA also found that the firm executed a short sale transaction and failed to report it to the FNTRF with a short sale modifier; the firm executed short sale transactions and failed to report them to the FNTRF with the correct symbol indicating whether the transactions were a buy, sell, sell short or cross for transactions in reportable securities. In addition, FINRA determined that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and/or FINRA rules addressing market order protection, NASDAQ Rule 4755, trade reporting, riskless principal transactions, best execution, not held orders, riskless principal transactions, best execution, principal transactions, and disclosure of order execution information. Moreover, FINRA found that the firm made available reports on the covered orders in national market system securities that it received for execution from any person that included incorrect information. Furthermore, FINRA found that the firm failed to document the terms and conditions of all orders received from one of its customers by failing to show the terms and conditions on numerous brokerage order memoranda from this customer for orders.
This information which is publicly available on FINRA’s website has been provided by The White Law Group, LLC.
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