Tastytrade settles with FINRA, agreeing to a $30,000 fine over supervisory failures related to employee securities accounts.
Tastytrade settles with FINRA, agreeing to a $30,000 fine over supervisory failures related to employee securities accounts.
Tastytrade settles with the Financial Industry Regulatory Authority (FINRA) and agreed to pay a $30,000 fine for deficiencies in its supervisory practices.
The settlement stems from the firm’s failure to establish and enforce an adequate system to monitor outside securities accounts held by its employees between July 2021 and July 2023. According to FINRA, Tastytrade did not maintain a supervisory framework that ensured proper review of outside accounts for potential violations of securities laws and FINRA regulations.
The firm required employees to disclose outside securities accounts, obtain compliance approval before trading, and submit quarterly account statements for review, but it needed to revise its written supervisory procedures (WSPs). The firm’s procedures did not specify how it would document reviews or track their completion. In particular, starting in the second half of 2021, Tastytrade failed to conduct timely reviews of transactions in employees’ outside brokerage accounts.
For instance, in the fourth quarter of 2021, the firm did not review trades in 25 employee accounts from the previous quarter. By the first quarter of 2022, the firm experienced significant delays in reviewing employees’ transactions, with problems continuing into 2023. Between July 2021 and June 2023, Tastytrade failed to review 84 accounts across 35 employees, including 14 accounts not reviewed until a FINRA examination in June 2023.
As part of the settlement, Tastytrade has also been censured by FINRA and has committed to enhancing its supervisory systems and updating its WSPs to better track and document reviews of outside securities accounts. After being notified of the deficiencies, the firm made these improvements in July 2023.
Tastytrade has been a member of FINRA since 2016. The firm offers self-directed trading services to retail investors through its website and mobile apps and currently employs 73 registered representatives. This settlement underscores the importance of robust supervisory systems and the timely review of employees’ securities transactions to maintain compliance with industry regulations.
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