← Broker database 2023-05-01
Webull Financial Fined $3 Million for Options Approval and Complaint Reporting Violations
According to FINRA, Webull Financial LLC was fined $3 million for not exercising reasonable due diligence before approving customers for options trading, not maintaining a supervisory system reasonably designed to identify and respond to customer complaints, and not reporting certain written customer complaints to FINRA as required.
Between December 2019 and July 2021, the firm did not exercise reasonable due diligence before approving customers for options trading. The firm employed an automated system to review customer applications for options trading, but the system failed to compare new applications with information previously provided by customers. This led to Webull approving customers for options trading who did not satisfy the firm's eligibility criteria or whose accounts contained red flags that options trading was potentially inappropriate.
For example, the firm approved more than 2,500 customers under age 21 to trade options spreads, even though the firm's eligibility criteria required customers to have at least three years of options trading experience before approval for that trading level. Due to program errors in automated systems, the firm mistakenly approved 9,000 accounts for options trading even though those customers stated they did not have any investment experience, which should have made them ineligible under the firm's criteria.
Separately, from May 2018 through December 2021, Webull's supervisory system to identify and respond to customer complaints was not reasonably designed. The firm failed to commit sufficient staff and resources to keep pace with hundreds of thousands of customer communications it received, including complaints. The firm also did not report certain written customer complaints to FINRA as required, including complaints involving allegations of theft or misappropriation. Investors should understand that options trading involves significant risks and requires appropriate knowledge and experience.