NASAA Touts Multistate Agreement to Settle Online Trading Platform Failures
The North American Securities Administrators Association ("NASAA") highlighted a multistate agreement among state regulators leading to the settlement of state charges against an online trading platform for its 2020 operational and technical failures during a period of meme-stock volatility.
In a joint investigation, the state regulators found that the broker-dealer caused harm to Main Street investors by failing to:
- exercise customer due diligence when gathering financial information;
- oversee its trading technology which resulted in "significant platform outages" and in particular, an outage in March of 2020;
- maintain adequate (i) customer response systems during platform outages and (ii) supervisory systems for its technology; and
- report "tens of thousands" of customer complaints it received to FINRA.
NASAA stated that the broker-dealer will pay a collective amount of $10.2 million in penalties for violating state securities regulations. Additionally, in the Consent Orders with the state regulators, (see e.g., Texas Consent Order, and California Consent Order,) the broker-dealer agreed to (i) provide access to a FINRA-ordered compliance implementation report and (ii) attest one year out from its settlement date that it is fully compliant with the "FINRA-ordered independent compliance consultant's recommendations."