According to FINRA, SogoTrade, Inc. was censured, fined $75,000, and required to comply with undertakings for failing to establish, document, and maintain adequate risk management controls and supervisory procedures for its market access business.

The firm's market access controls were not reasonably designed to prevent customers from entering erroneous orders that exceeded appropriate price or size parameters. Specifically, SogoTrade's single-order quantity and single-order notional value controls were inadequate, and the firm failed to document its rationale for the thresholds it used. The firm also did not maintain a reasonable pre-trade price deviation control designed to reject orders priced more than a certain percentage away from a reference price.

The firm's single-order price deviation control was particularly deficient. Most of SogoTrade's price deviation limits were set at or above industry-wide execution guidelines under FINRA and applicable exchange rules. Setting controls at these extreme levels rendered them ineffective at preventing erroneous orders, as they would only trigger for orders that already violated industry-wide rules.

The firm's written supervisory procedures relating to market access were also inadequate. The procedures failed to describe the firm's market access controls, the thresholds applied by those controls, or the methodology and rationale for how the firm determined the thresholds. Without clear documentation, it becomes difficult to assess whether controls are appropriate or to maintain consistency in their application.

Market access rules require broker-dealers that provide customers direct market access to have risk management controls designed to prevent erroneous orders and other regulatory violations. These controls help prevent "fat finger" errors and other mistakes that could disrupt markets or cause significant losses. Notable market disruptions have resulted from inadequate market access controls, including the 2010 Flash Crash and the 2012 Knight Capital trading error that caused $440 million in losses.

Beyond the deficient controls, SogoTrade failed to conduct required annual reviews of its market access controls and supervisory procedures. The firm did not review the overall effectiveness of its risk management controls as designed, including the reasonableness of thresholds used. The firm's CEO certifications also failed to comply with applicable rules because they did not include required statements that controls complied with regulatory requirements or that the firm conducted reviews of market access business activity.

The firm conducted a review in December 2024 and obtained a proper certification from its CEO for 2024.