Velocity Clearing Hit With $1 Million Fine Over Supervisory Failures

Key Takeaways

• Supervisory Gaps: FINRA found Velocity failed to maintain effective systems and written supervisory procedures to detect manipulative trading.
• Alert Overload Ignored: Nearly 150,000 alerts between 2019–2023 and over 15 million alerts since 2023 were closed without meaningful review, with millions still unreviewed.
• Thin Compliance Resources: At times, just one employee was responsible for reviewing alerts, with little training or written guidance provided.
• Sanctions: Velocity agreed to a censure, a $1 million fine, and an undertaking to hire an independent consultant to overhaul its systems.
• Regulatory Signal: The case highlights FINRA’s push against firms treating surveillance as a box-ticking exercise rather than a safeguard against market abuse.

Deep Dive

Velocity Clearing, LLC has agreed to pay a $1 million penalty and bring in an independent consultant after FINRA uncovered sweeping failures in how the firm monitored for manipulative trading. The New Jersey-based broker-dealer, which has been a FINRA member since 2003, signed a settlement through a Letter of Acceptance, Waiver, and Consent (AWC), avoiding a formal disciplinary hearing.

The case stems from years of supervisory lapses. Between December 2019 and June 2023, Velocity’s automated surveillance systems churned out nearly 150,000 alerts tied to potential market abuses such as spoofing, layering, wash trades, and cross trades. Instead of investigating, compliance staff closed most alerts without meaningful review. At times, single employees closed hundreds or even thousands of alerts in a day.

When the firm upgraded its systems in July 2023, the problems only grew. The new platform generated more than 15 million alerts in under two years. Almost all were closed without investigation, and by early 2025 more than 5 million alerts were still sitting untouched.

Thin Resources, Thinner Oversight

The volume of warnings was compounded by a lack of resources. For part of the period, one compliance employee carried the responsibility for reviewing alerts while juggling other duties. Even after Velocity added staff, there was little training or written guidance on how to evaluate suspicious activity. Escalation procedures were missing, and reviews lacked consistency or depth.

FINRA noted that Velocity’s written supervisory procedures offered almost no practical direction on how to spot manipulative patterns or how to document and escalate concerns. The result was a surveillance framework that existed on paper but failed in practice.

Without admitting or denying the findings, Velocity agreed to:

• A censure;
• A $1 million fine, with $81,056 payable directly to FINRA and the remainder distributed across several U.S. exchanges, including NYSE, Nasdaq, and Cboe;
• An undertaking to hire an independent consultant, approved by FINRA, to overhaul its supervisory systems.

The case is another reminder of FINRA’s sharpened focus on firms that treat surveillance as a box-checking exercise rather than a serious defense against market abuse. For Velocity, the missed alerts add up to more than a compliance misstep, they illustrate the risks of letting supervision fall behind technology and trading volumes.

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