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UPDATE 1-Scottrade to pay $2.5 mln over flawed trading data
January 29, 2014 / 6:00 PM / 4 years ago

UPDATE 1-Scottrade to pay $2.5 mln over flawed trading data

By Sarah N. Lynch and Aruna Viswanatha

WASHINGTON, Jan 29 (Reuters) - Brokerage Scottrade Inc admitted on Wednesday to breaking civil laws by providing incomplete trading data to federal regulators, and agreed to pay a $2.5 million fine to settle the case, officials said.

The settlement between St. Louis-based Scottrade and the U.S. Securities and Exchange Commission marks the fourth the agency has extracted an admission of wrongdoing from a defendant.

In this case, the SEC said Scottrade failed on 1,231 occasions over the course of six years to give the agency accurate trading data as a result of a coding error.

In a statement, Scottrade said the omissions in the trading data were inadvertent and the problem was fixed.

SEC Chair Mary Jo White unveiled a new settlement policy last June that would require defendants in some egregious cases to make admissions, rather than letting them settle without admitting or denying the charges.

"When the situation was discovered, Scottrade promptly conducted a thorough assessment, corrected the issue and supplied the missing information," a spokeswoman said.

The company is also retaining an independent consultant to review its record-keeping practices, the spokeswoman added.

Federal securities laws require broker-dealers to provide electronic "blue sheet" trading data upon request to the SEC.

The data is typically requested in connection with investigations into questionable trading patterns.

"Blue sheet information is the lifeblood of many SEC investigations and examinations," said Andrew Ceresney, the head of the SEC's Enforcement Division.

"When firms fail to provide us with accurate or complete trade data, it risks compromising our ability to detect and investigate securities law violations."

The SEC said it uncovered the six-year-old problem with Scottrade's blue sheet data, which dates back to 2006, during the course of a December 2011 investigation into possible account intrusion.

The SEC requested trading data to look into the suspicious trades. But after it received the data, SEC staff discovered it lacked crucial information, including missing trades that arose from the "unauthorized account intrusions."

The SEC went back to ask Scottrade about the data, and the brokerage discovered a coding error was to blame.

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