FINRA Hits Velox Clearing with Penalty after AML & Surveillance Breakdowns

Key Takeaways

• $1.3 Million Fine and Censure: Velox Clearing LLC agreed to pay a $1.3 million fine and was censured by FINRA for significant failures in its AML program, supervision of outside accounts, and recordkeeping practices.
• Failure to Detect Suspicious Trading: Velox lacked effective trade surveillance tools and failed to detect or investigate red flags of spoofing, layering, and manipulative trading involving low-priced securities—often through omnibus accounts tied to foreign financial institutions.
• Off-Channel Communication Violations: The firm did not preserve or supervise over 10,000 business-related communications conducted over unauthorized platforms like WeChat and text, despite management knowing about the usage.
• Supervisory System Deficiencies: Velox failed to monitor employee outside brokerage accounts and lacked adequate written supervisory procedures, staff resources, and oversight mechanisms for several years.
• Independent Consultant Mandate: As part of the settlement, Velox must continue working with a third-party consultant to remediate its AML and supervisory systems, certify compliance, and submit detailed implementation reports to FINRA.

Deep Dive

Velox Clearing, a Miami-based clearing broker with just two-dozen registered representatives, has learned the hard way that a skeleton compliance crew and patchwork surveillance don’t cut it when you’re moving thinly traded penny stocks for foreign clients.

In a newly released Letter of Acceptance, Waiver, and Consent, the firm agreed to surrender $1.3 million, accept a formal censure, and bring in an independent consultant to rebuild its anti-money-laundering (AML) and supervisory programs from the ground up. The settlement closes FINRA’s latest cycle exam but leaves a long to-do list for Velox’s leadership.

Since 2019 Velox has served a small roster of foreign financial institutions, one of them under common ownership with the firm, using omnibus accounts to trade low-priced, thinly capitalized stocks, many tied to recent China-based IPOs. That mix of cross-border customers, penny-stock volatility, and omnibus opacity is a recipe regulators have been warning about for years. Yet Velox’s AML playbook wasn’t much more than an empty binder:

• No meaningful trade-surveillance tools until mid-2023, and even then only a basic wash-trade report.
• Eight different AML officers cycled through the role in six years, none with dedicated staff.
• Zero guidance on red-flag reviews for spoofing, layering, or ramp-and-dump schemes.

The result was predictable. FINRA examiners spotted patterns of layered buy orders, last-minute price spikes, and suspicious round-trip trades (classic signs of manipulation) sailing through Velox’s systems without detection or follow-up. Even when operations staff and the chief compliance officer flagged suspect trades, management let the warnings die on the vine.

Compounding the surveillance gaps, Velox personnel (up to and including the CEO) ran much of their day-to-day business over WeChat and text messages. Those off-channel conversations covered everything from wire instructions to order tickets, yet the firm captured none of it. FINRA estimates more than 10,000 business-related messages vanished from the record, putting Velox squarely in violation of federal record-keeping rules.

Missing Eyes on Employees’ Own Trading

Velox also skipped a basic blocking-and-tackling duty i.e., watching its employees’ personal brokerage accounts. Before February 2024 the firm had no system to collect duplicate confirms or review outside trades, leaving regulators blind to potential insider-trading or front-running risks.

Under the settlement, Velox must:

• Hire an independent consultant, already on board from a related Nasdaq action, to overhaul its AML program.
• Submit a senior-level certification within 120 days proving that record-keeping and supervisory fixes are fully in place.
• Keep the consultant in place and cooperate fully until FINRA signs off on the remediation.

The agreement bars Velox from claiming it can’t pay the fine and leaves the door open for additional evidence requests from FINRA.

For firms clearing high-risk securities, if your compliance infrastructure doesn’t match the complexity and speed of your business, regulators will eventually do the math for you, and the bill can easily hit seven figures.

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