A Rye financial services firm has been fined $100,000 and censured for repeatedly bypassing procedures meant to ensure that investors get the best prices on securities trades.
Puma Capital LLC consented to sanctions by the Financial Industry Regulatory Authority for failure to detect and correct 920 trade-through violations, despite warnings that it was not in compliance with federal securities laws and FINRA rules.
A trade-through is an order that bypasses, or trade-throughs, the securities exchange that offers the best price. Broker-dealers such as Puma are required to establish procedures that prevent trade-throughs, conduct regular surveillance to assure compliance, and fix problems promptly.
“Trade-though protection prevents unfairness to investors and facilitates best execution of customer orders,” according to Puma’s consent agreement with FINRA.
Puma was founded in 2008 and is led by Joshua Aaron Greenstein.
It describes itself as a market-maker for other broker-dealers, banks and hedge funds. It handles listed securities and over-the-counter securities, according to its website, such as preferred stock, distressed debt, and call options.
Puma was censured and fined in 2016 for violating trade-through rules, but still failed to establish preventative procedures.
In March 2018, for instance, it routed orders through another broker-dealer but omitted the code for the securities exchange to use. As a result, the consent agreement states, orders were executed in a so-called “dark pool,” a private exchange that lacks transparency and is not accessible to the investing public.
The coding error caused about 615 trade-throughs. A customer alerted Puma and the glitch was fixed in September 2019.
Puma still did not implement a process for making sure orders were executed correctly.
In September 2020, coding problems recurred, this time for orders meant to be executed by three exchanges. The glitch caused about 240 trade-throughs, until the problem was fixed in December 2020.
Puma still did not implement written procedures or test whether orders were received and executed on the intended exchanges, FINRA says.
From September to October 2021, about 65 more trade-throughs occurred.
Puma consented to censure and a $100,000 fine on the condition that FINRA would not bring any further actions for violations based on the same facts.
A FINRA official and Greenstein, Puma’s president, signed the deal this past November, and the agreement was disclosed in FINRA’s January monthly report.
