The Financial Industry Regulatory Authority has fined BNY's Pershing $1.4 million for distributing more than one million account statements and trade confirmations that listed inaccurate interest rate information for certain variable rate securities.
According to FINRA's order, Pershing also "provided inaccurate interest rate information about those securities through the online access portals the firm provided for customers and registered representatives of the introducing firms that used Pershing's clearing services."
The order states that from January 2010 through December 2022, Pershing's "security master system, which contains information the firm relies on when generating transaction confirmations and customer account statements, contained incorrect information for certain categories of securities with variable interest rate features" for two reasons.
First, Pershing relies on a third-party vendor to provide interest rate information for variable rate securities issued by foreign issuers.
Between January 2016 and September 2022, the firm's third-party vendor "failed to provide any updated interest rate information for at least 13,000 foreign variable rate securities," the order states. "As a result, for each such security, Pershing's security master system continued to reflect the initial interest rate, even after the security's interest rate had changed."
Second, from 2010 through 2022, Pershing's security master system "contained coding that, in many instances, prevented it from listing zero percent as the interest rate for certain variable rate domestic bonds," the order said.
