Vision Brokerage Services, LLC, Vision Financial Markets LLC
The firms did not establish and implement policies and procedures tailored to their business, which could be reasonably expected to detect and cause the reporting of suspicious activity arising from transactions and money movements in domestic and foreign-based retail accounts. The firms’ written AML procedures were not reasonably designed for the surveillance of potentially suspicious trading and money movements in customer accounts.
Although the firms’ written procedures identified exception reports for them to use to assist with identifying suspicious activity, the procedures did not describe how supervisors should use these reports, or what activity should trigger further action by supervisors or the firms.
The firms’ procedures also did not identify certain red flags for manipulative trading that were relevant to their business, such as a customer placing frequent orders on one side of the market and then executing orders on the opposite side of the market in the same security, which can be indicative of spoofing and layering.
Likewise, although the firms’ procedures required the firms to create, and review a watch list of high-risk clients, the procedures did not describe what information the watch list should contain or state how often the firms should monitor the list for accuracy or completeness.
Further, the firms relied almost exclusively on a manual review of the daily trade blotter and money movement reports to identify suspicious trading. This was unreasonable given the volume and complexity of trading by the firms’ customers and because the blotter did not reflect patterns of trading across accounts or across multiple days. Indeed, even for the accounts that the firms identified as high-risk and placed on the watch list, the firms primarily relied on a manual review of a portion of the trade blotter that reflected trades in only some of the accounts placed on the watch list.
Moreover, even after the firms implemented an automated surveillance system from a third-party vendor, they did not reasonably monitor order data, and continued to fail to timely detect and investigate certain potentially suspicious activity.
The findings also stated that the firms failed to timely or reasonably detect, investigate, and respond to numerous potentially suspicious activities by retail customers.
The findings also included that the firms failed to reasonably supervise for potentially manipulative trading. The review of those alerts for potentially suspicious trading in customer accounts was unreasonable.
The firms failed to dedicate sufficient resources to the review of the alerts, did not investigate the activity that generated certain categories of alerts because the firms unreasonably concluded that these types of alerts did not indicate potentially manipulative activity and relied on a manual review of data to detect whether alerts regarding potentially manipulative trading reflected a broader pattern of manipulation by certain traders.
FINRA found that Vision Financial failed to establish reasonable market access controls and procedures. Vision Financial did not implement any erroneous order controls that took into account the individual characteristics of a security, such as an average daily trading volume control. In addition, Vision Financial did not review the reasonableness of its erroneous order controls on a regular basis. As a result, Vision Financial violated Section 15(c)(3) of the Exchange Act and Rule 15c3-5(b) and (c) thereunder.
