The SEC gives Citadel a $8 million fine to settle charges of short selling.
The U.S. Securities and Exchange Commission announced Friday that Citadel Securities, an investment management company, had to pay a $7 million fine to settle charges that it did not follow order marking rules.
According to the SEC, between September 2015 and September 2020, the company marked millions of short sale orders as long sales, and vice versa.
The SEC found that the errors were caused by a mistake in the code of Citadel’s automated trade system during this time.
A spokesperson for Citadel told CNBC that the situation “did not affect the quality of our client execution.”
“While updating our systems to meet some client requests, we made a coding change that affected a small number of order markings by accident,” the spokesperson said. “We found the problem over three years ago and fixed it immediately.”
Bankrate says short sales are made by borrowing stock from a seller and selling it on the market. The stock is then repurchased at a lower price, and the borrowed stock is returned to make money on the price difference.
Mark Cave, assistant director of the SEC’s Division of Enforcement, said that making sure orders are marked is a crucial part of the government’s efforts to stop abusive market practices like “naked” short selling.
Cave said that if a firm follows the rules, it could help the accuracy of its electronic records, including its electronic blue sheet reports, which would keep the Commission from getting vital information about the markets it oversees.
Friday, the SEC also fined Goldman Sachs for sending in the wrong “blue sheets” with information about dealing securities.