FINRA Hits SageTrader with New $100k Fine for AML Failure

Wednesday, 08/02/2023 | 20:31 GMT by Solomon Oladipupo
  • The violation allegedly occurred between April 2016 and December 2019.
  • FINRA fined SageTrader $775K for supervisory failures in July last year.
Fined, nfa
Finance Magnates

The Financial Industry Regulatory Authority (FINRA) has hit California-based securities broker, SageTrader, with a censure order and fine of $100,000 for failing to establish and implement anti-money laundering (AML ) policies and procedures “reasonably expected to detect and cause the reporting of suspicious activity.”

According to the American private securities regulator, SageTrader’s AML failure, which violates FINRA Rules 3310(a) and 2010, happened between April 2016 and December 2019. The details are contained in a Letter of Acceptance, Waiver and Consent filed by SageTrader and accepted by FINRA on Tuesday.

The new pecuniary penalty comes six months after FINRA fined SageTrader $775,000 for failing to supervise potentially manipulative trading conducted on its systems between 2013 and 2019. The securities regulator said SageTrader has agreed to pay the new fine without admitting or denying its findings.

Watch the recent FMLS22 session on what will define financial regulation in 2023.

FINRA Faults SageTrader’s ‘Three-Strike’ Policy

FINRA fine SageTrader

According to FINRA, SageTrader between April 2016 and June 2018 operated a "three-strike" policy where it [SageTrader] only considered filing a suspicious activity report (SAR) against a single trader only after it had undergone three phases: first, issued a warning, second, suspended the trader for a day and, third, denied them access to its platform on the third warning.

Furthermore, the regulator noted that although SageTrader during the stated period removed certain traders from its platforms based on a notice from external regulators or executing brokers, it again did not consider filing an SAR.

In addition, FINRA said between June 2018 and December 2019, SageTrader replaced its “three-strike policy” with a “one-strike” policy under which it terminated a suspected trader’s access to its platform only after a single warning. However, despite this change in procedure, the securities broker still did not consider filing an SAR.

FINRA explained that this meant SageTrader’s AML policy and procedures were insufficient to detect and report SARs. Moreover, the regulator faulted SageTrader for committing the duty of reviewing all of its suspicious activity alerts to a single compliance officer without any AML supervisory experience or training.

“From April 2016 through December 2019, SageTrader did not tailor its AML program to reasonably monitor for and report suspicious activity in light of the firm’s business model and customer base. SageTrader’s system for detecting and causing the reporting of suspicious activity was predicated on its review of alerts generated by its automated third-party surveillance system,” FINRA added.

The Financial Industry Regulatory Authority (FINRA) has hit California-based securities broker, SageTrader, with a censure order and fine of $100,000 for failing to establish and implement anti-money laundering (AML ) policies and procedures “reasonably expected to detect and cause the reporting of suspicious activity.”

According to the American private securities regulator, SageTrader’s AML failure, which violates FINRA Rules 3310(a) and 2010, happened between April 2016 and December 2019. The details are contained in a Letter of Acceptance, Waiver and Consent filed by SageTrader and accepted by FINRA on Tuesday.

The new pecuniary penalty comes six months after FINRA fined SageTrader $775,000 for failing to supervise potentially manipulative trading conducted on its systems between 2013 and 2019. The securities regulator said SageTrader has agreed to pay the new fine without admitting or denying its findings.

Watch the recent FMLS22 session on what will define financial regulation in 2023.

FINRA Faults SageTrader’s ‘Three-Strike’ Policy

FINRA fine SageTrader

According to FINRA, SageTrader between April 2016 and June 2018 operated a "three-strike" policy where it [SageTrader] only considered filing a suspicious activity report (SAR) against a single trader only after it had undergone three phases: first, issued a warning, second, suspended the trader for a day and, third, denied them access to its platform on the third warning.

Furthermore, the regulator noted that although SageTrader during the stated period removed certain traders from its platforms based on a notice from external regulators or executing brokers, it again did not consider filing an SAR.

In addition, FINRA said between June 2018 and December 2019, SageTrader replaced its “three-strike policy” with a “one-strike” policy under which it terminated a suspected trader’s access to its platform only after a single warning. However, despite this change in procedure, the securities broker still did not consider filing an SAR.

FINRA explained that this meant SageTrader’s AML policy and procedures were insufficient to detect and report SARs. Moreover, the regulator faulted SageTrader for committing the duty of reviewing all of its suspicious activity alerts to a single compliance officer without any AML supervisory experience or training.

“From April 2016 through December 2019, SageTrader did not tailor its AML program to reasonably monitor for and report suspicious activity in light of the firm’s business model and customer base. SageTrader’s system for detecting and causing the reporting of suspicious activity was predicated on its review of alerts generated by its automated third-party surveillance system,” FINRA added.

About the Author: Solomon Oladipupo
Solomon Oladipupo
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About the Author: Solomon Oladipupo
Solomon Oladipupo is a journalist and editor from Nigeria that covers the tech, FX, fintech and cryptocurrency industries. He is a former assistant editor at AgroNigeria Magazine where he covered the agribusiness industry. Solomon holds a first-class degree in Journalism & Mass Communication from the University of Lagos where he graduated top of his class.
  • 1050 Articles
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