FINRA Fines TradeStation Securities for AML Program Failures
TradeStation Securities, Inc., a long-standing FINRA member, finds itself in the regulatory spotlight once again as the Financial Industry Regulatory Authority (FINRA) issues a Letter of Acceptance, Waiver, and Consent (AWC) detailing alleged rule violations. TradeStation Securities, headquartered in Plantation, Florida, with four branch offices and approximately 150 registered representatives, is known for providing online trading platforms to self-directed retail and institutional customers.
TradeStation Securities has accepted and consented to the findings outlined by FINRA without admitting or denying them. This AWC is submitted with the understanding that, if accepted, FINRA will refrain from pursuing future actions against TradeStation Securities based on the same factual findings.
The recent scrutiny follows a prior case from December 1, 2011 (AWC No. 2010023934201), where FINRA found TradeStation Securities failed to implement a reasonably designed system for reviewing suspicious activity in customer accounts, independent testing of its Anti-Money Laundering (AML) program, and adequate AML training for employees. The firm was censured and fined $200,000 as a result.
From January 2016 to March 2022, TradeStation Securities allegedly failed to establish and implement an AML program reasonably designed to report suspicious trading by its customers. The firm's AML program lacked procedures for escalating potentially suspicious trading for AML review, and it failed to escalate certain trading to assess the necessity of filing a suspicious activity report (SAR). These actions purportedly violated FINRA Rules 3310(a) and 2010.
In addition, TradeStation Securities is accused of not having reasonable written supervisory procedures (WSPs) concerning the acceptance and resale of low-priced securities to achieve compliance with Section 5 of the Securities Act of 1933. This failure to establish appropriate WSPs led to violations of FINRA Rules 3110 and 2010.
As a consequence of these alleged violations, TradeStation Securities faces potential penalties and fines. The firm is urged to rectify its compliance shortcomings and implement necessary measures to prevent future breaches.
This case serves as a reminder for financial institutions to regularly review and enhance their AML programs. Establishing robust procedures for escalating and reviewing suspicious activity is crucial in maintaining compliance with regulatory standards. Furthermore, the necessity for comprehensive written supervisory procedures cannot be overstated, particularly in areas such as the acceptance and resale of low-priced securities. Financial institutions should take proactive steps to prevent AML program deficiencies and uphold the highest standards of compliance to avoid regulatory repercussions.
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