SEC Charges BNP Paribas with Violations of Regulation Sho
June 29, 2020
File No. 3-19839
June 29, 2020 - The Securities and Exchange Commission today announced settled charges against BNP Paribas Securities Corp. (f/k/a BNP Paribas Prime Brokerage Inc.), a New York-based broker-dealer, for loaning securities to a customer to settle purported "long" sales in violation of Regulation SHO.
According to the SEC's order, on at least 35 occasions over a four-month period in 2016, BNPP's customer submitted sale orders marked as "long" to another broker for execution, which were subsequently submitted to BNPP for clearing. For each of those "long" sales, the customer did not have sufficient shares in its prime brokerage account at BNPP on the morning of the settlement date to cover the sale order. When the customer failed to deliver the shares by the settlement date, BNPP loaned the customer shares to cover the sale. The order finds that BNPP loaned its customer a total of more than eight million shares in the securities of three different issuers to settle purported "long" sales that had been submitted to BNPP for clearing.
According to the SEC's order, it was not reasonable for BNPP to rely on its customer's assurances that the orders were properly marked "long" and that the customer would deliver the securities to its BNPP account prior to the settlement date because BNPP was on notice of the customer's repeated failures to deliver the securities by the settlement date.
The SEC's order finds that BNPP willfully violated Rule 203(a)(1) of Regulation SHO of the Securities Exchange Act of 1934. Without admitting or denying the findings, BNPP agreed to be censured, to cease-and-desist from violating Rule 203(a)(1) of Regulation SHO, and to pay a penalty of $250,000.
The SEC's investigation, which is continuing, is led by Matt Reilly, Emily Shea, and Michael Brennan, with assistance by Sarah Heaton Concannon, and is supervised by Kevin Guerrero.