Pershing Penalized $1.4 Million by FINRA for Reporting Errors

FINRA fined Pershing LLC $1.4 million for distributing inaccurate interest rate information on variable rate securities from 2010 to 2022, prompting corrective actions and censure.

August 05, 2024

Pershing LLC, a subsidiary of The Bank of New York Mellon, has agreed to pay a $1.4 million fine to settle charges by the Financial Industry Regulatory Authority (FINRA) for distributing inaccurate interest rate information on variable rate securities.

Between January 2010 and December 2022, Pershing issued over a million account statements and trade confirmations containing incorrect interest rate details. These inaccuracies were also present on the online portals used by customers and registered representatives.

The errors arose from two main issues. Firstly, Pershing relied on a third-party vendor for interest rate data on foreign-issued variable rate securities. This vendor failed to update rates for at least 13,000 securities from January 2016 to September 2022, causing Pershing to use outdated information. Additionally, Pershing's system often failed to display a zero percent interest rate for certain domestic variable rate bonds, ignoring zero percent rates provided by the vendor.

Due to these issues, customers received approximately one million account statements with incorrect interest rates, impacting current interest rate, accrued interest, estimated annual income, and yield figures. Over 200,000 trade confirmations also showed inaccurate rates. Despite numerous customer complaints, Pershing did not thoroughly investigate or address the problem until prompted by FINRA’s investigation.

Although the inaccuracies did not affect the actual yields paid to customers, they violated FINRA Rule 2010, which requires firms to uphold high standards of commercial honor, and Rule 3110, which mandates effective supervisory systems. In addition to the fine, Pershing was censured and has implemented corrective actions, including system updates, improved data verification processes, and enhanced supervisory protocols.

Based in Jersey City, N.J., Pershing employs over 1,100 registered individuals across 15 branches and provides clearing, prime brokerage, and trading services. As of March 31, 2024, Pershing managed over $2.5 trillion in global client assets.