← Broker database 2022-09-16
Vision Brokerage and Vision Financial Markets Fined $850,000 for AML and Supervision Failures
According to FINRA, Vision Brokerage Services, LLC and Vision Financial Markets LLC were fined $850,000 jointly and severally and required to retain an independent consultant for failing to develop and implement an AML program reasonably designed to detect and report suspicious activity.
The findings revealed that the firms did not establish policies and procedures tailored to their business that could reasonably be expected to detect suspicious activity arising from transactions and money movements in domestic and foreign-based retail accounts. The written AML procedures were inadequate for surveillance of potentially suspicious trading and money movements. Although the procedures identified exception reports to assist with identifying suspicious activity, they did not describe how supervisors should use these reports or what activity should trigger further action.
The firms' procedures also failed to identify certain red flags for manipulative trading relevant to their business, such as customers placing frequent orders on one side of the market and then executing orders on the opposite side in the same security, which can indicate spoofing and layering. The procedures required creating and reviewing a watch list of high-risk clients but did not describe what information the list should contain or how often the firms should monitor it for accuracy or completeness.
The firms relied almost exclusively on manual review of the daily trade blotter and money movement reports to identify suspicious trading, which was unreasonable given the volume and complexity of customer trading. The blotter did not reflect patterns of trading across accounts or multiple days. Even for accounts identified as high-risk and placed on the watch list, the firms primarily relied on manual review of only a portion of the trade blotter reflecting trades in some watch-listed accounts. Even after implementing an automated surveillance system from a third-party vendor, the firms did not reasonably monitor order data and continued to fail to timely detect and investigate certain potentially suspicious activity.
The firms also failed to timely or reasonably detect, investigate, and respond to numerous potentially suspicious activities by retail customers, and failed to reasonably supervise for potentially manipulative trading. The review of alerts for potentially suspicious trading was unreasonable. The firms failed to dedicate sufficient resources to review alerts, did not investigate activity that generated certain categories of alerts because they unreasonably concluded these types of alerts did not indicate potentially manipulative activity, and relied on manual review of data to detect whether alerts regarding potentially manipulative trading reflected broader patterns of manipulation.
Additionally, Vision Financial failed to establish reasonable market access controls and procedures. It did not implement erroneous order controls that took into account individual characteristics of securities, such as average daily trading volume controls, and did not review the reasonableness of its erroneous order controls on a regular basis, violating federal securities regulations.
This case demonstrates the serious risks when firms providing direct market access fail to maintain adequate AML and supervisory systems. The substantial fine and requirement for an independent consultant reflect the breadth and severity of the violations. Investors should understand that firms providing market access have heightened obligations to prevent their services from being used for market manipulation or money laundering, as failures in these areas can facilitate schemes that harm market integrity and innocent investors.