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Velox Clearing LLC has been fined $1.3 million by the Financial Industry Regulatory Authority (FINRA) as part of a settlement for several violations.
The firm, which provides clearing services to foreign financial institutions transacting in thinly traded, low-priced securities through omnibus accounts, was found to have:
* Failed to establish and implement an adequate Anti-Money Laundering (AML) program from January 2019 onwards, in violation of FINRA Rules 3310 and 2010. This failure led to the firm not detecting or investigating red flags of manipulative trading practices such as spoofing, layering, bid support, and marking the close.
* FINRA Rule 3310 requires firms to develop and implement a written AML program reasonably designed to achieve and monitor compliance with the Bank Secrecy Act and detect and report suspicious transactions.
* FINRA Rule 2010 is a broad rule that requires firms and associated persons to “observe high standards of commercial honor and just and equitable principles of trade” in the conduct of their business.
* Failed to retain and review business communications on non-firm communications platforms, violating Exchange Act Section 17(a), Exchange Act Rule 17a-4, and FINRA Rules 3110, 4511, and 2010.
* Exchange Act Section 17(a) generally deals with record-keeping requirements for broker-dealers.
* Exchange Act Rule 17a-4 specifies the retention periods and accessibility requirements for records.
* FINRA Rule 3110 requires firms to establish and maintain a system to supervise the activities of their associated persons.
* FINRA Rule 4511 outlines general requirements for firms to make and preserve books and records as required by FINRA rules, the Exchange Act, and applicable Exchange Act rules.
* Failed to reasonably supervise outside brokerage accounts between January 2019 and February 2024, in violation of FINRA Rule 3110(d). This rule specifically addresses the supervision of associated persons’ outside brokerage accounts.
In addition to the $1.3 million fine, Velox Clearing has been censured and has agreed to retain an independent consultant to review its compliance programs.

Video courtesy of CSOB

Video courtesy of CSOB