Day Trading Firm SpeedTrader Faces Six-Figure Fine Due to Insufficient Controls

SpeedTrader Inc., an online brokerage firm based in Katonah, New York, will pay a $165,000 fine and accept a censure from FINRA. The firm failed to supervise potentially manipulative trading and lacked proper market access controls. Serving mainly day traders and institutional clients, SpeedTrader agreed to FINRA’s findings without admitting or denying the allegations. This settlement addresses issues from November 2017 to January 2020.

Supervisory Failures

FINRA found that SpeedTrader, which served about 570 customers including many day traders from China, did not set up a proper system to catch and stop potentially manipulative trading. The company used an automated surveillance system from a third party but did not adjust it for their specific business or customers. FINRA said SpeedTrader did not establish or maintain effective market access controls and procedures.

Inadequate Follow-Up

SpeedTrader was criticized for not properly following up on suspicious trading alerts and for using just one trader ID per customer account, even when multiple traders were allowed. This made it hard for the firm to track who was behind potentially problematic trades.

Market Access Rule Violations

FINRA found that SpeedTrader broke market access rules by not controlling customer credit limits directly. Instead, the firm wrongly depended on its clearing firms to set and monitor these limits.

Settlement Terms

SpeedTrader agreed to fix the issues FINRA found and improve its supervisory systems within 90 days. This isn’t SpeedTrader’s first regulatory trouble. In 2015, the firm was fined $595,000 for similar issues. The new fine will be shared among FINRA and several stock exchanges, with $13,200 going to FINRA. SpeedTrader has submitted a payment plan and given up its right to appeal.

Other Recent FINRA Actions

FINRA recently settled with SpeedTrader and took several other actions. TradeZero America, based in Brooklyn and a FINRA member since 2016, received a $250,000 fine for multiple breaches from July 2020 to October 2022. These breaches included misusing social media influencers and giving customers inaccurate privacy notices.

BofA Securities was fined $90,080 for late or incorrect notifications and failing to maintain a proper supervisory system. RBC Capital Markets also faced a $375,000 fine for not following trade confirmation rules and admitted to providing inaccurate and untimely trade confirmations.

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