August 24, 2022

Broker-Dealer Settles FINRA Charges for AML Supervisory and Market Access Failures

A broker-dealer settled FINRA charges for failing to maintain written AML policies reasonably designed to detect suspicious transactions, as well as related supervisory failures.

In a Letter of Acceptance, Waiver and Consent, FINRA found that the broker-dealer failed to reasonably tailor its AML program to its business model and customer base to monitor for suspicious activity. FINRA asserted that the broker-dealer's supervisory procedures provided no guidance for documenting its investigations of suspicious activity nor did it document any findings. Accordingly, FINRA determined that the broker-dealer failed to timely investigate red flags raised by suspicious trading on its platform, including transactions in IPOs where the broker-dealer served as the underwriter.

Additionally, FINRA found that the broker-dealer failed to maintain supervisory procedures reasonably designed to manage the risks of its market access business.

As a result, FINRA determined that the broker-dealer violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 3110 ("Supervision") and Rule 3310 ("Anti-Money Laundering Compliance Program"). FINRA also determined that the broker-dealer violated SEA Section 15(c)(3) ("Registration and regulation of brokers and dealers") and SEA Rule 15c3-5 ("Risk management controls for brokers or dealers with market access").

To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $250,000 civil monetary penalty and (iii) undertakings to retain a third-party consultant to ensure compliance with federal AML and securities laws, which it cannot terminate without FINRA's permission.