SEC slaps Citadel Securities with $7 million fine to settle short selling charges
Citadel founder and CEO Kenneth Griffin.
Andrew Harrer | Bloomberg | Getty Images
WASHINGTON — The U.S. Securities and Exchange Commission fined Citadel Securities $7 million in a settlement of charges that the firm mismarked sales orders, the agency said Friday.
The SEC estimated that between September 2015 and September 2020 Citadel Securities marked millions of certain short sale orders as long sales, and vice versa.
The inaccuracies were the result of a coding error in Citadel’s automated trading system, the SEC found.
A Citadel spokesperson told CNBC that the matter “had no impact on the quality of our client execution.”
“While updating our systems to accommodate certain client requests, we made a coding change that inadvertently affected a de minimis percentage of our order markings,” the spokesperson added.
“We detected the issue and promptly fixed it more than three years ago.”
In a short sale, an investor borrows stock shares and sells them, with the hope of buying the same amount of shares back at a lower price and returning them to the lender, pocketing the price difference as profit.
Mark Cave, associate director of the SEC’s Division of Enforcement, said compliance with requirements that sales orders be properly marked “is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling.”
Failure to comply “can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the Commission of important information about the markets it regulates,” Cave added in a statement.
Also on Friday, the SEC fined Goldman Sachs $6 million for inaccurate “blue sheet” submissions containing identifying securities trading information.