On September 30, 2020, the U.S. Securities and Exchange Commission (“SEC”) issued a settlement order imposing a $5 million civil monetary penalty in connection with violations of Rule 200(g) under Regulation SHO, which requires a broker-dealer to mark sales of securities as “long” only if it is deemed to own the security being sold, among other requirements. The SEC’s findings were predicated upon the failure to maintain independence between two trading units in connection with the firm’s synthetic prime brokerage swaps business. Because these trading units could not be considered independent, their net securities positions would be required to be aggregated, leading to the order marking failures at issue in the SEC order.
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