Online Broker Fails to Catch Pump and Dump Schemes, FINRA Finds

by Damian Chmiel
  • It concerns anti-money laundering violations over a period of 6 years.
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The Financial Industry Regulatory Authority (FINRA) has fined the online brokerage firm TradeStation Securities $700,000 for anti-money laundering (AML) failures from 2016 to 2022. This is the second penalty the company has received from U.S. regulators in the last week.

TradeStation Securities Fined $700K by FINRA for AML Failures

According to the FINRA documents, TradeStation failed to reasonably escalate potentially suspicious customer trading activity for further AML review to determine if suspicious activity reports should be filed.

Specifically, TradeStation did not have adequate procedures for analysts reviewing automated trade surveillance alerts to escalate suspicious trading to the AML department consistently. As a result, certain potentially suspicious activity was not reviewed or reported.

"The firm's AML program did not include reasonable procedures concerning the escalation of potentially suspicious customer trading to determine whether the activity should be reported to FinCEN, including the factors to consider or the process that should be followed," FINRA commented.

Examples cited include a customer involved in potential pump-and-dump schemes, an institutional customer with significant alerts for wash trades and layering, and a retail customer with alerts for wash trading and marking the close.

In addition to the $700,000 fine, TradeStation must certify in writing that it has remediated the AML issues within 60 days.

TradeStation Securities, founded in 1982 and based in Plantation, Florida, is an online brokerage firm providing trading platforms for self-directed investors. In 2011, TradeStation was previously fined $200,000 by FINRA for AML deficiencies.

Another Week, Another Fine for TradeStation

TradeStation has faced more than one penalty in the USA within the last week. As reported by Finance Magnates, the company's cryptocurrency division was fined $1.5 million by the Securities and Exchange Commission (SEC ). The company consented to pay this fine to resolve allegations related to its crypto asset account interest-earning feature.

The SEC's announcement detailed that TradeStation Crypto had marketed and sold a crypto lending product as a security without proper registration. Despite voluntarily discontinuing the product on June 2022, TradeStation still incurred fines.

The North American Securities Administrators Association also disclosed a $1.5 million settlement with TradeStation Crypto, Inc. over its crypto interest-earning program. The company was accused of not adhering to state registration requirements and failing to provide investors with essential information and risk disclosures.

In more positive developments, the company recently joined its forces with the technology solutions provider for traders and brokers, CQG. The integration is set to offer investors a new trading toolkit.

The Financial Industry Regulatory Authority (FINRA) has fined the online brokerage firm TradeStation Securities $700,000 for anti-money laundering (AML) failures from 2016 to 2022. This is the second penalty the company has received from U.S. regulators in the last week.

TradeStation Securities Fined $700K by FINRA for AML Failures

According to the FINRA documents, TradeStation failed to reasonably escalate potentially suspicious customer trading activity for further AML review to determine if suspicious activity reports should be filed.

Specifically, TradeStation did not have adequate procedures for analysts reviewing automated trade surveillance alerts to escalate suspicious trading to the AML department consistently. As a result, certain potentially suspicious activity was not reviewed or reported.

"The firm's AML program did not include reasonable procedures concerning the escalation of potentially suspicious customer trading to determine whether the activity should be reported to FinCEN, including the factors to consider or the process that should be followed," FINRA commented.

Examples cited include a customer involved in potential pump-and-dump schemes, an institutional customer with significant alerts for wash trades and layering, and a retail customer with alerts for wash trading and marking the close.

In addition to the $700,000 fine, TradeStation must certify in writing that it has remediated the AML issues within 60 days.

TradeStation Securities, founded in 1982 and based in Plantation, Florida, is an online brokerage firm providing trading platforms for self-directed investors. In 2011, TradeStation was previously fined $200,000 by FINRA for AML deficiencies.

Another Week, Another Fine for TradeStation

TradeStation has faced more than one penalty in the USA within the last week. As reported by Finance Magnates, the company's cryptocurrency division was fined $1.5 million by the Securities and Exchange Commission (SEC ). The company consented to pay this fine to resolve allegations related to its crypto asset account interest-earning feature.

The SEC's announcement detailed that TradeStation Crypto had marketed and sold a crypto lending product as a security without proper registration. Despite voluntarily discontinuing the product on June 2022, TradeStation still incurred fines.

The North American Securities Administrators Association also disclosed a $1.5 million settlement with TradeStation Crypto, Inc. over its crypto interest-earning program. The company was accused of not adhering to state registration requirements and failing to provide investors with essential information and risk disclosures.

In more positive developments, the company recently joined its forces with the technology solutions provider for traders and brokers, CQG. The integration is set to offer investors a new trading toolkit.

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