Jefferies LLC Pays $650,000 To Settle SEC Case Over At Least 7,700 Flawed Trading-Data Submissions

The SEC settled administrative proceedings with Jefferies LLC, the broker-dealer subsidiary of Jefferies Financial Group, over at least 7,700 faulty submissions of trading records to SEC staff. The order, dated Friday, requires a $650,000 civil penalty and a censure; the parent company was not charged.

What the SEC found

The order covers July 2018 through July 2024. In that period, Jefferies LLC answered SEC staff requests with electronic blue sheets, the standard format brokers use to hand over trading records, that contained inaccurate information or omissions. The SEC found the errors came from at least nine types and led to misreported data on at least 1.2 million transactions.

According to the order, the errors came largely from manual mistakes, coding errors or programming problems in the reporting systems of Jefferies or its vendors. Examples include trades reported in foreign currency rather than US dollars, customers wrongly flagged as broker-dealers, large trader IDs in a non-conforming format, and an average price indicator wrongly applied to single-execution trades.

The SEC found the firm willfully violated Exchange Act Section 17(a)(1) and Rules 17a-4(j) and 17a-25. The order's footnote says "willfully" means only that the person charged with the duty knows what he is doing.

The penalty and the settlement terms

Jefferies LLC must pay the $650,000 civil penalty within ten days of the order's entry. It was also censured and ordered to cease and desist from further violations of those provisions.

The order says Jefferies LLC admits the facts in the findings and acknowledges that its conduct violated the federal securities laws. The charged party is the subsidiary, a Delaware limited liability company registered as a broker-dealer, which the order describes as wholly owned by Jefferies Financial Group. In Friday trading, Jefferies Financial Group shares were at $44.45, up 0.11% (market data).

Remedial steps and what is unfinished

The SEC said it weighed the firm's remedial acts and its cooperation with staff in accepting the settlement offer. Jefferies hired a consultant to assess its blue sheet program, put in a data validation system with daily automated checks, and set up a governance committee and a working group that meet periodically.

After regulatory inquiries began, Jefferies identified and self-reported seven of the nine error types. It has resubmitted a substantial portion of corrected data and is still resubmitting the rest.

The next dated marker is the payment deadline: ten days after entry of the order, with extra interest accruing if the $650,000 is late.

Sources

• SEC administrative order 34-106641 — Jefferies LLC — U.S. Securities and Exchange Commission