Folio Investments, Inc has agreed to pay a fine of $1.3 million as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From at least January 2017 to the present, Folio failed to conduct reasonable regular and rigorous reviews of execution quality.

During this period, Folio routed its customer orders to two market centers that paid the firm for that order flow.

In 2022, Folio began routing a substantial portion of its orders to another market center, which was a firm affiliate. The firm failed to compare the quality of executions it obtained from its order routing and execution arrangements to the quality of executions it could have obtained from competing markets.

Additionally, in reviewing the execution quality provided by its existing routing venues, the firm reviewed price improvement, but did not consider other relevant execution quality factors. The firm’s price improvement review was also unreasonable because it did not reasonably consider differences in order types or sizes.

As a result, Folio violated FINRA Rules 5310(a), 5310 Supplementary Material .09 (Rule 5310.09), and 2010.

During this same period, Folio also violated FINRA Rules 3110 and 2010 by failing to establish and maintain a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with its best execution obligations.

For these violations, Folio is censured, fined $1.3 million, and required to certify that it has implemented a supervisory system reasonably designed to remediate the issues.

Folio became a FINRA member in December 1999. Based in McLean, Virginia, the firm has six branch offices and approximately 50 registered representatives. The firm offers brokerage and custodial services. In September 2020, the firm was acquired by Goldman Sachs Group, Inc. Following the acquisition, Folio has continued to maintain and operate under its own broker-dealer registration.