FINRA Fines Goldman Sachs-Owned Folio Investments $1.3 Million Over Best Execution Failures

Key Takeaways

• FINRA Enforcement Action: FINRA fined Folio Investments $1.3 million and issued a censure after finding the firm failed to properly review the quality of customer trade executions.
• Best Execution Reviews Fell Short: Between 2017 and 2025, the firm did not adequately compare the execution quality of its order routing arrangements with competing markets.
• Narrow Focus in Execution Analysis: Internal reviews primarily focused on price improvement and failed to reasonably consider other required execution quality factors such as speed, fill likelihood, and transaction costs.
• Payment for Order Flow Arrangements: Folio routed most orders to market makers that paid the firm for order flow, including an affiliated market maker beginning in 2022.
• Supervisory System Deficiencies: FINRA found the firm’s supervisory system and written supervisory procedures were not reasonably designed to ensure compliance with best execution obligations.

Deep Dive

A brokerage firm owned by Goldman Sachs has agreed to pay a $1.3 million fine after regulators found the firm failed to properly review whether its customers were receiving the best available trade executions.

In a settlement with the Financial Industry Regulatory Authority, Folio Investments, Inc. was censured and fined after the regulator concluded the firm did not conduct sufficiently rigorous reviews of execution quality for customer orders for several years. The firm must also certify that it has strengthened its supervisory systems and procedures related to best execution.

Folio, a McLean, Virginia-based broker-dealer that provides brokerage and custodial services primarily to registered investment advisers, has been a FINRA member since 1999. The firm was acquired by Goldman Sachs in 2020 but continues to operate under its own broker-dealer registration.

Best Execution Reviews Fell Short

At the center of the case is the long-standing regulatory expectation that broker-dealers seek the most favorable terms reasonably available when executing customer trades.

According to FINRA, Folio routed most of its customer orders to a small number of market makers, including venues that paid the firm for order flow. While such arrangements are common in equity markets, regulators expect firms to regularly test whether their routing decisions are delivering competitive execution quality.

FINRA said Folio’s internal reviews did not meet that standard. The firm’s best execution committee met quarterly, but its analysis largely focused on trades routed through the firm’s existing venues and did not meaningfully compare those results with execution quality available at competing markets.

Without those comparisons, regulators said the firm could not determine whether its routing practices were delivering the best reasonably available outcomes for customers.

Narrow Reviews and Limited Analysis

FINRA also found the firm’s execution reviews were overly narrow.

The committee primarily examined price improvement data when evaluating execution quality. But best execution reviews are expected to consider a wider range of factors, including execution speed, the likelihood that orders will be filled, transaction costs, and how different order sizes or order types perform across venues.

By focusing largely on price improvement and not breaking down results by order type or size, the firm’s reviews were not sufficient to identify potential differences in execution quality across trading venues, the regulator said.

The firm handled a significant volume of trades during the period examined. Between 2017 and 2025, Folio routed roughly 440 million equity shares annually.

Supervisory Weaknesses

FINRA also said the firm’s supervisory framework did not adequately address its best execution obligations.

Until 2021, the firm’s written supervisory procedures did not describe how its best execution committee should conduct reviews. Even after the firm adopted a committee charter, its procedures still lacked clear guidance on how execution quality factors should be evaluated or how the firm should assess competing markets.

Because the firm relied on those reviews as its primary supervisory control, FINRA concluded the overall supervisory system was not reasonably designed to ensure compliance with best execution rules.

To resolve the matter, Folio agreed to a censure and a $1.3 million fine. The firm must also provide a certification within 120 days confirming that it has implemented supervisory systems and written procedures designed to address the deficiencies identified by FINRA.

The certification must come from a senior management principal and include documentation demonstrating the firm’s remediation efforts.

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