The violation allegedly occurred between April 2016 and December 2019.
FINRA fined SageTrader $775K for supervisory failures in July last year.
A $100,000 fine and a censure order have been issued by the Financial Industry Regulatory Authority (FINRA) to California-based securities broker SageTrader for failing to set up and implement anti-money laundering (AML) policies and procedures that were “reasonably expected to detect and cause the reporting of suspicious activity.”
The American private securities regulator claims that between April 2016 and December 2019, SageTrader’s AML failure, which contravenes FINRA Rules 3310(a) and 2010, occurred. The information is included in a Letter of Acceptance, Waiver and Consent that SageTrader submitted and that FINRA approved on Tuesday.
Six months ago, SageTrader was fined $775,000 by FINRA for failing to monitor possibly manipulative trading that took place on its systems between 2013 and 2019. The new monetary penalty follows that one. SageTrader has agreed to pay the additional fine, according to the securities regulator, without acknowledging or disputing its conclusions.
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SageTrader’s “Three-Strike” Policy is criticised by FINRA
According to FINRA, SageTrader operated a “three-strike” policy between April 2016 and June 2018 in which it [SageTrader] only considered filing a suspicious activity report (SAR) against a single trader after going through three phases: first, issuing a warning, second, suspending the trader for a day, and third, denying them access to its platform on the third warning.
The regulator also pointed out that even though SageTrader removed several traders from its platforms throughout the specified period in response to a notice from external authorities or executing brokers, it once more did not contemplate filing a SAR.
Additionally, according to FINRA, SageTrader changed its “three-strike policy” to a “one-strike” policy between June 2018 and December 2019, ending a suspected trader’s access to its platform just after issuing one warning. Although the protocol had changed, the securities broker had not yet thought about filing a SAR.
This means, according to FINRA, that SageTrader’s AML policy and processes weren’t adequate for identifying and disclosing SARs. The regulator also criticised SageTrader for giving a single compliance officer without any AML supervisory expertise or training the responsibility of analysing all of its suspicious activity notifications.
“From April 2016 through December 2019, SageTrader’s AML programme was not tailored to the firm’s business model and customer base in a way that made it reasonably monitor for and report suspicious conduct. The examination of alerts produced by SageTrader’s automated third-party surveillance system served as the foundation for its system for identifying and causing the reporting of suspicious conduct, according to FINRA.
