ViewTrade Securities has agreed to pay a $250,000 fine as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From July 2017 through at least February 2020, ViewTrade failed to establish and implement a written anti-money laundering (AML) program reasonably expected to detect and cause the reporting of suspicious transactions, in violation of FINRA Rules 33 l0(a) and 2010.

In addition, from July 2017 through at least February 2020, ViewTrade failed to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks presented by its provision of market access to customers.

ViewTrade is a broker-dealer that offers its customers self-directed trading of stocks and options primarily through a web-based trading platform. The firm accepts accounts from customers located in foreign jurisdictions. During the relevant period, the firm had accounts for retail and institutional customers, including FFis. The institutional customers accounted for approximately 90% of the firm’s revenue.

During the relevant period, the firm also conducted an underwriting business for companies conducting initial public offerings (IP Os), including serving as book running manager. During the relevant period the firm conducted IPOs in China, but no longer engages in this business.

From July 2017 through at least February 2020, ViewTrade did not reasonably tailor its AML program to reasonably monitor for and report suspicious activity in light of the firm’s business model and customer base. The firm’s written AML procedures assigned the responsibility for surveillance of potentially suspicious transactions to a designated principal and referenced the use of a daily transaction report.

Although the firm did generate and review a daily transaction report, it had no written procedures regarding the use of the daily transaction report-no defined parameters, guidance for who would review the report, or the frequency of such review. The firm also did not have written procedures designating who was responsible for conducting the reviews ofits surveillance system and reports generated from the system, their respective duties, what reports they would review, the factors they would consider when reviewing surveillance reports, how to document such reviews, when and how reviewing personnel would escalate an issue, or when and how the compliance and operations departments should share information from their reviews.

In addition, many of the firm’s surveillance reports were not reasonably designed to detect suspicious or potentially manipulative transactions. For example, the firm’s volume report, which the firm used to identify customer trading activity that surpassed a certain percentage of a security’s average daily volume, was limited to trading activity in low-priced securities. This was not reasonable because manipulative trading is not limited to low-priced securities.

And, in some instances, when ViewTrade’s surveillance reports flagged potential spoofing and layering or wash trades, the firm did not reasonably review these red flags.

From July 2017 through at least February 2020, ViewTrade also lacked reasonable written AML procedures to detect and monitor for related customer accounts.

In late 2017 and early 2018, ViewTrade failed to detect multiple related red flags in three IPOs in which ViewTrade served as underwriter. The bulk of the IPO investors were foreign investors who came to ViewTrade as customers through its online platform and independent of the firm’s efforts to attract investors. Many of these purportedly unrelated investors opened accounts shortly before the IPO offering and, at or near the same time as each other, submitted unsolicited indications of interest using emails with identical language except for the amount of interest.

The firm conducted no review to compare customer trading activity or indications of interest to financial information on customer account forms. In all three IPOs, multiple investors who purchased in the initial offering later engaged in extensive trading in the security in the days and weeks following the IPO. Trading by these customers presented red flags of potential coordinated trading.

Customers purchased shares in the IPO, sold shares quickly, and then repurchased shares at higher-than-IPO prices. The customers’ trading in the days and weeks following the IPOs also included successive bids at increasing prices, followed by multiple cancelled orders, which can be indicative of bid support and attempts at manipulating market prices.

On multiple days, trading by ViewTrade’s customers accounted for more than twenty percent of the daily volume. Additionally, in one instance, a customer submitted authorization for another customer to trade in her account and the two accounts then traded opposite of each other on several days. ViewTrade failed to detect or perform any AML investigation of these transactions.

Also, in several instances, ViewTrade failed to detect, investigate, and respond to suspicious movements of money for customers.

On top of the fine, ViewTrade Securities has agreed to continue to retain, at its own expense, the Third-Party Consultant to conclude a review of the adequacy ofViewTrade’s (1) policies, procedures, and internal controls relating to AML surveillance, investigations, and reporting; (2) IPO process; and (3) risk management controls and supervisory procedures related to its market access business.