Thursday, November 10, 2011
The SEC charged UBS Securities LLC for inaccurate recording practices when providing and recording “locates” to customers seeking to execute short sales. The practices go back at least to 2007. UBS settled the enforcement action by agreeing to pay an $8 million penalty and retain an independent consultant.
Broker-dealers are routinely asked by customers to locate stock for short selling, and a “locate” represents a determination by a broker-dealer that it has borrowed, arranged to borrow, or reasonably believes it could borrow the security to settle the short sale. Broker-dealers are required under Regulation SHO to accurately record the basis upon which it has given out locates.