The Securities and Exchange Commission (SEC) today announced settled charges against California-based registered broker-dealer Velox Clearing LLC for violating federal securities laws governing the submission of suspicious activity reports (SARs).

As part of the settlement, Velox agreed to pay a civil penalty of $500,000.

According to the SEC’s order, from at least July 2019 through December 2022, Velox did not reasonably design or adequately implement its anti-money laundering policies and procedures to address the risks associated with its business. The order further finds that due to these deficiencies, and Velox’s failure to sufficiently investigate red flags, Velox failed to file SARs for numerous suspicious transactions.

Specifically, according to the order, Velox’s policies and procedures did not include red flags identified in public regulatory guidance relevant to the firm’s business, such as transactions by omnibus accounts held at foreign financial institutions, deposits that represent a large percentage of the float of a security, trading activity by a customer that represents a significant proportion of the daily trading volume of a security, and trading by a customer when a stock’s price and volume dramatically increase absent relevant news.

The order further finds that Velox failed to identify or investigate red flags of potentially suspicious conduct listed that did appear in its policies and procedures, including matched trading activity.

The SEC’s order finds that Velox willfully violated Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder.

Without admitting or denying the SEC’s findings, Velox consented to a cease-and-desist order and a censure and agreed to pay a civil money penalty of $500,000.