tastytrade, Inc. has agreed to pay a fine of $30,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA)
From July 2021 through July 2023, tastytrade failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to ensure that all outside securities accounts disclosed by associated persons were monitored and reviewed for potential violations of the securities laws and FINRA rules.
The firm required employees to disclose outside securities accounts, obtain compliance approval to trade in those accounts, and, if approved, make arrangements for these account statements to be provided to tastytrade for review on at least a quarterly basis. The firm’s WSPs, however, failed to specify how the firm would document its review of statements of outside securities accounts or track that those reviews had been completed.
Beginning in the second half of 2021, tastytrade failed to review securities transactions in accounts disclosed by its associated persons in a reasonable manner.
For example, in the fourth quarter of 2021, trades from the preceding quarter in 25 employees’ brokerage accounts were not reviewed.
By the first quarter of 2022, the firm was delayed in nearly all of its reviews of employees’ transactions in outside brokerage accounts. Delays in reviewing employees’ outside brokerage accounts persisted until June 2023.
In total, from July 2021 through June 2023, tastytrade failed to review, on a quarterly basis, approximately 84 outside securities accounts belonging to 35 employees. This included 14 accounts that the firm failed to review at all until June 2023, during FINRA’s cycle examination of the firm.
In July 2023, tastytrade updated its WSPs and made enhancements to its system for supervision of employees’ outside security accounts.
Therefore, tastytrade violated FINRA Rules 3110 and 2010.
On top of the $30,000 fine, the firm has agreed to a censure.
Tastytrade, Inc. has been a FINRA member firm since 2016. The firm, which is headquartered in Chicago, Illinois, has 73 registered representatives and offers self-directed trading to retail investors through its website and mobile applications.
