FINRA Hits Webull with $3M Fine for Permitting Unqualified Options Traders
- FINRA also faulted Webull's supervisory system.
- The regulator has fined SageTrader, UBS Securities and others since the start of the year.
The Financial Industry Regulatory Authority (FINRA) has slammed a $3 million fine on the security broker, Webull for onboarding unqualified options traders between December 2019 and July 2021. The membership-based regulator, which is overseen by the United States Securities and Exchange Commission, announced the fine on Thursday.
FINRA in a statement noted that Webull, which is the US-based subsidiary of Chinese-owned Webull Corporation, did not exercise “reasonable due diligence” before accepting options traders and failed to maintain a “reasonably designed” supervisory system to note and respond to customer complaints. In addition, the online broker, which was launched in 2017, failed to forward to FINRA certain written customer complaints as required by the regulatory body.
Webull's Automated Systems Fails to Detect Unqualified Options Trader
According to FINRA, Webull first started offering options trading to its customers in December 2019. However, between that time and July 2021, the brokerage firm’s automated system for reviewing customer applications for options trading failed to check new applications with previously provided information.
As a result of this failure, the brokerage regulator noted, Webull sanctioned unqualified customers for options trading. This included 9,000 traders that stated that they had no prior investment experience and should have been disqualified.
“For example, the firm approved more than 2,500 customers under the age of 21 to trade options spreads, even though the firm’s eligibility criteria required customers to have at least three years of options trading experience before being approved for that trading level,” FINRA further explained.
FINRA Faults Webull Supervisory System
Furthermore, FINRA in its investigations into Webull’s supervisory system found that the broker’s mechanism for identifying and responding to customer complaints was not “reasonably designed.” Moreover, the regulator faulted Webull for not dedicating enough staff and resources needed to keep up with the backlog of customer communications, including the complaints that it received.
“The firm also did not report certain written customer complaints to FINRA, as required, including complaints that involved allegations of theft or misappropriation,” the regulator added.
Meanwhile, since the start of the year, FINRA has fined a number of other security brokerage firms. These include SageTrader, UBS Securities, BGC Financial and Nomura Securities.
The Financial Industry Regulatory Authority (FINRA) has slammed a $3 million fine on the security broker, Webull for onboarding unqualified options traders between December 2019 and July 2021. The membership-based regulator, which is overseen by the United States Securities and Exchange Commission, announced the fine on Thursday.
FINRA in a statement noted that Webull, which is the US-based subsidiary of Chinese-owned Webull Corporation, did not exercise “reasonable due diligence” before accepting options traders and failed to maintain a “reasonably designed” supervisory system to note and respond to customer complaints. In addition, the online broker, which was launched in 2017, failed to forward to FINRA certain written customer complaints as required by the regulatory body.
Webull's Automated Systems Fails to Detect Unqualified Options Trader
According to FINRA, Webull first started offering options trading to its customers in December 2019. However, between that time and July 2021, the brokerage firm’s automated system for reviewing customer applications for options trading failed to check new applications with previously provided information.
As a result of this failure, the brokerage regulator noted, Webull sanctioned unqualified customers for options trading. This included 9,000 traders that stated that they had no prior investment experience and should have been disqualified.
“For example, the firm approved more than 2,500 customers under the age of 21 to trade options spreads, even though the firm’s eligibility criteria required customers to have at least three years of options trading experience before being approved for that trading level,” FINRA further explained.
FINRA Faults Webull Supervisory System
Furthermore, FINRA in its investigations into Webull’s supervisory system found that the broker’s mechanism for identifying and responding to customer complaints was not “reasonably designed.” Moreover, the regulator faulted Webull for not dedicating enough staff and resources needed to keep up with the backlog of customer communications, including the complaints that it received.
“The firm also did not report certain written customer complaints to FINRA, as required, including complaints that involved allegations of theft or misappropriation,” the regulator added.
Meanwhile, since the start of the year, FINRA has fined a number of other security brokerage firms. These include SageTrader, UBS Securities, BGC Financial and Nomura Securities.