<p>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 <a href=”https://www.financemagnates.com/terms/a/anti-money-laundering-aml/” class=”terms__main-term” id=”4df0a4d4-58b9-4b86-ad6b-67a720641803″ target=”_blank”>anti-money laundering (AML</a>) policies and procedures
“reasonably expected to detect and cause the reporting of suspicious activity.”</p><p>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 <a href=”https://www.finra.org/sites/default/files/fda_documents/2022073705601%20SageTrader%2C%20LLC.%20CRD%20137862%20AWC%20lp.pdf” target=”_blank” rel=”follow”>filed by SageTrader</a> and accepted by
FINRA on Tuesday.</p><p>The new pecuniary
penalty comes six months after FINRA <a href=”https://www.financemagnates.com/forex/brokers/introducing-broker-sagetrader-fined-775k-for-supervisory-failures/” target=”_blank” rel=”follow”>fined SageTrader $775,000</a> 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.</p><p>Watch the recent FMLS22 session on what will define financial regulation in 2023.</p><p>FINRA Faults SageTrader’s
‘Three-Strike’ Policy </p><p>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. </p><p>Furthermore, the
regulator noted that although SageTrader during the stated period removed certain traders from its platforms based on notice from external regulators or
executing brokers, it again did not consider filing a SAR. </p><p>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 a SAR.</p><p>The foregoing, FINRA
explained, meant that 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
<a href=”https://www.financemagnates.com/terms/c/compliance/” class=”terms__secondary-term” id=”569f58ee-534c-44f0-a7cd-f55b0f9a2b2a” target=”_blank”>compliance</a> officer without any AML supervisory experience or training.</p><p>“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 explained.</p>
This article was written by Solomon Oladipupo at www.financemagnates.com.
