National Financial Services' $175K FINRA Fine: Reg NMS

Updated October 2026. First published January 2025. The first version described this as a short-interest reporting case under FINRA Rule 4560. FINRA's order is about Rule 605 and Rule 606 reports under Regulation NMS.

In November 2024, FINRA censured National Financial Services LLC (NFS) and fined it $175,000 over two sets of public reports that Regulation NMS requires (AWC No. 2023077003601). NFS neither admitted nor denied the findings. It's a carrying broker-dealer in Boston that provides clearing and custody services, with about 70 branches and 2,000 registered representatives. The case came out of FINRA's 2023 cycle exam.

FINRA made two findings:

From January 2020 to July 2024, each of NFS's 19 quarterly Rule 606(a) order routing reports misreported routing data or left out required information about its relationships with execution venues.
From September 2022 to April 2023, NFS's monthly Rule 605 execution quality reports left out immediate-or-cancel mid-point peg orders. That came to about one billion transactions.

Both rules turn order data into public statistics. In both, the trouble was in how the data was mapped into the report.

Four Problems in the 606 Reports

Rule 606(a) requires a broker-dealer to publish a quarterly report on how it routes non-directed orders in NMS securities. For each venue that gets them, the report shows the share of all non-directed orders and the share of market orders, limit orders (split by marketability), and other orders. It also has to describe the material aspects of the firm's relationship with each venue, including payment for order flow, profit sharing, and the amounts per share or per order the firm pays or receives.

FINRA found four problems:

From January 2020 to April 2024, when NFS sent a customer's market or limit order to an alternative trading system as a mid-point peg order, the report counted it as an "other" order. The report described the order NFS routed, not the order the customer placed.
From January 2020 to July 2024, for venues with tiered pricing, NFS linked to each venue's current price list. The rule requires a description of all the tiers, the pricing for each, and the tier that applied to NFS. SEC staff said in a November 2022 risk alert that a link to a venue's current pricing doesn't meet that requirement.
From January 2020 to January 2024, for some venues, the report said only that NFS paid fees and received rebates under the exchanges' rules. A reader couldn't work out the amounts from it.
From April 2022 to April 2023, the report listed a venue under its old name after another broker-dealer acquired it.

NFS fixed all four before it published its October 2024 report.

The 605 Problem FINRA Had Already Flagged

Rule 605 requires a market center to publish monthly statistics on execution quality for covered orders. Under the rule as it stood during the period, covered orders were market orders and limit orders, including immediate-or-cancel orders, minus orders where the customer asked for special handling. NFS ran an execution venue that received covered orders, so its reports had to include them.

In September 2022, FINRA told NFS that its 605 reports were leaving out immediate-or-cancel mid-point peg orders. The reports kept leaving them out through April 2023, and NFS fixed the logic in May 2023. That's about eight months from the regulator's notice to the fix. Of everything in the order, it's the part a firm can most easily avoid.

What the Process Got Wrong

Each of the four 606 problems is a mapping or maintenance problem. The customer's order type, the tier a venue charged, and a venue's new owner are facts a firm already has. What failed was the step between the source data and the published report. Three habits would have caught most of it:

Classify each order by what the customer sent, and record routing instructions separately. A pegged order sent to an ATS still started as a market or limit order.
Rebuild the venue disclosures from data each quarter instead of carrying the text forward. A venue can change its tiers or its owner in any quarter.
Log every regulator comment as an issue with an owner and a due date, and confirm the fix shows up in the next report.

It's the same kind of failure as a system default that nobody reviews. In another October 2024 case, CICC US Securities' order system marked every trade "unsolicited" from February 2019 to February 2020 because no one changed the setting.

What to Check in Your Own Reports

Pull a sample of customer market and limit orders that went to an ATS as pegged orders, and find them in your 606 report. They belong in the market or limit columns.
For each venue with tiered pricing, check that the report states the tier and the rate that applied to you that quarter.
Read the material-aspects section for any sentence that points to a fee schedule instead of giving the amount. Replace it with the amount.
Compare the venue names in the report with each venue's current ownership every quarter.
If you're a market center, run an order-type count against your 605 file each month: every order type your venue accepted, and whether each one made it into the report.

Amended Rule 605 Covers More Firms

The SEC amended Rule 605 in March 2024. The amendments brought larger broker-dealers and single-dealer platforms into the monthly reporting requirement, changed how covered orders are categorized and which ones count, and added a summary report. The compliance date was December 14, 2025. On September 30, 2025, the SEC moved it to August 1, 2026 (Release No. 34-104147; see also the SEC's April 2026 exemptive order).

If your firm started producing 605 reports this year, NFS's 605 mistake is the one to look for first: an order type your venue accepts that never makes it into the file. The monthly order-type count above is the cheapest way to find it.

This post is for informational purposes only and does not constitute legal advice. For guidance on specific regulatory obligations, consult your counsel or compliance advisor.