US stock market daily report (January 29, 2014, Wednesday)
January 30, 2014, Thursday, 04:41 GMT | 00:41 EST | 10:11 IST | 12:41 SGT
Scottrade, broker-dealer, founded by Rodger Riney and headquartered in St. Louis, Missouri was charged Wednesday by the Securities and Exchange Commission with failing to provide the agency with complete and accurate information about trades done by the firm and its customers, commonly referred to as “blue sheet” data. Scottrade agreed to settle the charges by paying a $2.5 million penalty and admitting it violated the recordkeeping provisions of the federal securities laws.
Andrew J. Ceresney, director of the SEC’s Division of Enforcement said, “Blue sheet information is the lifeblood of many SEC investigations and examinations. When firms fail to provide us with accurate or complete trade data, it risks compromising our ability to detect and investigate securities law violations.”
According to the SEC’s order, in December 2011, SEC staff sent electronic blue sheet requests to Scottrade in connection with an investigation the agency was conducting suspicious trades made in a Scottrade online brokerage account that was the apparent victim of account intrusion.
Daniel M. Hawke, director of the SEC’s Philadelphia Regional Office and chief of the Enforcement Division’s Market Abuse Unit said, “Scottrade’s failure over six years to provide accurate and complete blue sheet trading data was egregious and violated its obligations under the securities laws. Firms need to ensure that that they comply with their blue sheet production obligations or, as in Scottrade’s case, they will pay a heavy price if they fail to do so.”
SEC staff discovered that Scottrade’s blue sheet submission was incomplete as it failed to include data from a number of trades that resulted from unauthorized account intrusions. The SEC staff contacted Scottrade questioning the data and was informed by the broker-dealer that a computer coding error had resulted in the inadvertent omission of the trades.
From March 2006 to April 2012 per the SEC’s order, Scottrade failed to provide the required blue sheet information on 1,231 occasions as the computer coding error resulted in the omission of trades. Scottrade has corrected the deficient code responsible for its inaccurate and incomplete blue sheet responses.
The term “blue sheet” stems from the color of the forms originally mailed to broker-dealers to complete and return to the SEC. The process shifted to an electronic format in the 1980. Broker-dealers are required to electronically provide the SEC with blue sheet data, upon request, so the agency can use it to identify and analyze trades in the course of investigations and other work. Blue sheets contain the details of each equity or options trade that is routed through clearing broker-dealers.
Scottrade admits the facts underlying the charges made in the SEC’s order, which requires Scottrade to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Exchange Act of 1934 and Rules 17a-4(j), 17a-25, and 17a-4(f)(3)(v). In addition to the $2.5 million penalty, Scottrade has agreed to undertake such remedial measures as retaining an independent consultant to review its supervisory, compliance, as well as other policies and procedures designed to detect and prevent securities laws violations related to blue sheet submissions.
Strategic Rare Earth Metals
Rare surge for an OTC stock but, Strategic Rare Earth Metals, Inc. (OTC Markets:SREH) announced Wednesday that they are actively pursuing a joint venture with a Medical Marijuana Company, causing shares of the OTC to soar by a double digit percentage during early morning trading. President of Strategic Rare Earth Metals, Inc. Bill Schaefer stated, 'I am very pleased and excited about the opportunities that lay ahead for the company.' Strategic Rare Earth Metals was formerly known as China Granite Corporation.