Broward County Brokerage Firm Fined $125,000 Inadequate Supervisory System

Recently, the Financial Industry Regulatory Authority (FINRA) issued a $125,000 fine against TradeStation Securities, Inc. (CRD #39473), a brokerage firm headquartered in Plantation, Florida. This broker-dealer has been in business since 1995 and is licensed to operate in 51 American states and U.S. territories.

According to FINRA investigators, TradeStation Securities executed extended hours trades without following the proper protocols. FINRA believes that the brokerage firm failed to put an adequate supervisory system in place. As a result, customers were not assured that they were getting fair prices on certain trades.

Without admitting or denying any of the alleged misconduct, the Broward County-based broker-dealer consented to the penalties. Here, our experienced Miami investment fraud attorneys discuss the case. For complete details regarding this disciplinary proceeding, please refer to the case number: 2014039942904.

FINRA Findings: TradeStation Securities  

The Violative Conduct  

Upon review of the brokerage firm’s conduct, FINRA officials determined that the firm did not provide the proper disclosure forms to a customer before accepting and executing transactions outside of normal market hours. According to FINRA, this occurred on at least 14 different occasions. As a result, transactions were conducted at ‘average prices’. Yet, the customer was never informed of this material fact. Under FINRA Rule 2265, registered brokerage firms are prohibited from engaging in and facilitating after-hours transactions, unless the firm has provided specific disclosure forms to any customers engaging in those types of transactions. This rule exists because extended hours trading comes with some important and unique risks. These risks include:

• Lower liquidity;
• Higher volatility;
• Risk of sudden price changes;
• Risk of wider spreads; and
• Risk of late news announcement.

TradeStation Securities failed to live up to its obligations in these circumstances. In addition, FINRA investigators determined that the broker-dealer lacked the proper supervisory system to ensure that this type of rule violation would be prevented in the future. There are several different FINRA rules and SEC regulations that are implicated.

The Penalties  

Though the firm did not admit to or deny the violations, TradeStation Securities consented to the penalties proposed by FINRA. The firm was fined $125,000, of which $32,500 was marked to be paid to FINRA, while the remainder was to be paid to other securities industry regulators. In addition to the financial penalties, TradeStation Securities agreed to update its Written Supervisory Procedures (WSPs) in order to ensure compliance in the future. All brokerage firms must have effective WSPs in place. These procedures help to make sure that brokers are complying with industry rules and looking out for the best interests of their customers.

Contact Our Florida Investment Fraud Attorneys Today

At Carlson & Associates, P.A., our dedicated FINRA arbitration lawyers are committed to protecting the rights and interests of investors. If you or a family member lost money due to a brokerage firm’s failure to establish a proper supervisory system, we can help. For a fully confidential review of your legal claim, please call our Miami office now at 1-(305)-372-9700.

Resources:

brokercheck.finra.org/firm/summary/39473

finra.org/sites/default/files/fda_documents/2014039942904%20TradeStation%20Securities%20Inc%20CRD%2039473%20AWC%20Redacted%20sl.pdf

finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=8257