Barclays Capital, Goldman Sachs and Merrill Lynch Fined $1 Million by FINRA for Submitting Inaccurate Blue Sheets

by Michael Lorigas

On June 4, 2014, FINRA announced that it had censured and fined Barclays Capital, Inc., Goldman, Sachs & Co. and Merrill Lynch, Pierce Fenner & Smith, Inc. $1,000,000 each for their failure to provide complete and accurate electronic blue sheets to FINRA, the SEC, and other regulators.

Blue sheets are questionnaires requested by a regulatory authority that contain detailed information about trades performed by a firm and its clients. Some of the information includes the security’s name, the date traded, price, transaction size and the parties involved. They came to be known as blue sheets because they were originally filled out on blue paper. Due to the high volume of trades, the information is now submitted through electronic blue sheet systems (“EBS”).

This is not the first time each company has been in trouble for this violation. In January 2006, Merrill Lynch and Goldman Sachs each received a censure and fine for failure to submit accurate trading information on electronic blue sheets. Barclays was censured and fined for the same offense in October 2007.

Electronic blue sheets are important to investors because they allow the SEC and FINRA to monitor securities and transactions to determine if there has been any federal securities violations, especially insider trading and market manipulation. EBS also allows the regulatory agencies to examine why a specific security may have experienced a large level of volatility, which then allows the agency to conduct market reconstructions.

Accurate blue sheets are necessary for the agencies to enforce regulatory mandates. The information contained in electronic blue sheets allows the SEC and FINRA to ensure that the market is operating effectively and protects the integrity of investments and their investors.