Understanding FINRA violations

Understanding FINRA violations

by | Mar 17, 2020 | Firm News

Within the investment community, financial professionals know that there is a wealth of regulations by which they must abide when conducting financial transactions. Many of these regulations may be put in place by the United States Securities and Exchange Commission. Others may be put in place by the not-for-profit organization that is supervised by the SEC, the Financial industry Regulatory Authority, also known as FINRA.

FINA works to provide oversight of the brokerage industry and maintain and preserve the integrity of the market. As part of its work, FINRA manages and implements disciplinary actions against organizations or individuals found to be in violation of its rules.

One firm based in New York, GFI Securities, has recently been fined $50,000 by FINRA for violations involving inaccurate risk management protocols. According to a report by Finance Magnate, the firm was said to have instituted a cap on daily trading for nearly three years from November of 2014 through August of 2017 with no clear details being provided as to how or why the cap was determined.

The firm was also said to conduct transactions in which customer orders were given directly to traders and then passed on directly to NASDAQ or ARCA. One of the SEC’s rules requires firms to institute risk management systems that include ongoing monitoring and real-time alerts as one means of reducing or limiting the financial risk and exposure. The report and allegations from FINRA indicate that GFI Securities failed to enact the right level of risk management controls, leading to the disciplinary actions, fines and noted violations.