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ARTICLE · 05 JULY 2021

Internet Broker Settles FINRA Charges For Systemic Failures

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FINRA stated that this action represents the largest financial penalty ever ordered, and emphasized that the penalty amount reflects "the scope and seriousness of the violations."

United StatesFinance and Banking
Hogan Lovells Cadwalader
Hogan Lovells Cadwalader
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An internet-based broker-dealer that provides retail customers with commission-free trading through its website and mobile applications settled FINRA charges for significant systemic failures that led to (i) customers receiving false or misleading information, (ii) system-wide outages and (iii) customers being inappropriately approved to trade options.

In a Letter of Acceptance, Waiver and Consent ("AWC"), FINRA made the following determinations:

  • In violation of FINRA Rules 2010("Standards of Commercial Honor and Principles of Trade"), 2210 ("Communications with the Public"), 2220 ("Options Communications") and 3110 ("Supervision"), the broker-dealer distributed false and misleading information to customers, including:
    • telling certain customers that they needed to upgrade their accounts in order to trade on margin, when such customers were actually allowed to place options trades that would have triggered the use of margin;

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