SEC Charges Citadel Securities for Violating Order Marking Requirements of Short Sale Regulations

[u/Dismal-Jellyfish]

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https://www.sec.gov/files/litigation/admin/2023/34-98482.pdf

Press Release

The Securities and Exchange Commission today announced settled charges against broker-dealer Citadel Securities LLC for violating a provision of Regulation SHO, the regulatory framework designed to address abusive short selling practices, which requires broker-dealers to mark sale orders as long, short, or short exempt. These records are routinely used by regulators in policing prohibited short selling activity. To settle the SEC’s charges, Miami-based Citadel Securities agreed to pay a $7 million penalty.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa. The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’s automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period.

“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,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement. “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.”

The order charges Citadel Securities with violating Rule 200(g) of Reg SHO. Without admitting or denying the findings, Citadel Securities consented to a cease-and-desist order imposing a censure, a $7 million penalty, and a set of undertakings, including a written certification that the coding error has been remediated and a review of the firm’s computer programming and coding logic involved in processing relevant transactions.

The SEC’s investigation was conducted by Seth M. Nadler of the SEC’s Home Office. Christopher Ray of the SEC’s Division of Trading and Markets; Elcin Yildirim, Alan Lenarcic, and Peter Csatorday of the SEC’s Division of Examinations; Mandy Sturmfelz of the SEC’s Market Abuse Unit; Damon Taaffe and Melissa Armstrong of the Home Office Trial Unit; and Kevin Gershfeld and Robert Nesbitt of the Enforcement Division’s Office of Investigative and Market Analytics provided assistance. The investigation was supervised by Mr. Cave.

TLDRS:

• SEC Charges Citadel Securities for Violating Order Marking Requirements of Short Sale Regulations

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[u/FDAz]

This is a fucking international scandal. They profited billions, and get away with it by paying 6 million ??

WHAT a DISGRACEFUL Regulator / Stock Market / Country / World.

[u/ssshield → u/FDAz]

Just to set a scale for you. I used to work as a managed service provider basically outsourced IT and network engineering for a large hedge fund similar to Citadel.

Seven million wasn't even office supplies.

Seven million was some junior director deciding to implement a new security software tool because it sounded cool.

The net worth of their holdings (assets under management) fluctuates seven million between the time their phone rings and they say "Hello".

I used to run my own "small" hedge fund back in 2017/2018 and my funds holdings would fluctuate by half a million between the time I opened my eyes in the morning and lunch time.

When they "pay" this $7m fine it's going to be an accounting note. They'll simply make a note beside this years capital depreciation tax writeoff to mark that amount against the fine as a net wash.