According to FINRA, Regal Securities, Inc was fined a total of $100,000 for failing to establish and maintain adequate supervisory systems for surveilling potentially manipulative trading. The firm improperly delegated supervisory responsibilities and failed to reasonably review surveillance alerts.

The case involved a customer whose account opening was initially recommended against by the compliance department due to previous issues with margin calls and trading activity. Despite these red flags, a branch manager escalated the matter and the firm opened the account. The firm then delegated responsibility for supervising this customer's trading to the branch manager and another registered representative, both registered as General Securities Principals, without adequate oversight.

The customer's trading activity generated approximately 1,600 surveillance alerts indicating potential marking the close activity and approximately 40 alerts indicating potential wash trading. While the firm forwarded these alerts to the designated representatives, its written procedures did not describe how alerts should be reviewed or documented. The firm did not evidence that reviews were conducted to determine whether the activity was manipulative, except in a small number of instances. Neither representative escalated concerns to the compliance department, and the compliance department did not follow up after forwarding alerts.

This case highlights critical failures in supervisory systems. Marking the close and wash trading are serious forms of market manipulation that can create artificial pricing and mislead other investors. Firms must maintain active oversight of surveillance alerts rather than simply forwarding them to interested parties without proper follow-up or documentation requirements.