The Financial Industry Regulatory Authority (FINRA) has fined U.S.-based brokerage Velocity Clearing $1 million and issued a censure after finding the firm failed to maintain adequate supervisory systems to detect potentially manipulative trading activity.
FINRA Fines Velocity Clearing $1m Over Supervisory Failures
According to a Letter of Acceptance, Waiver, and Consent published by FINRA, the failings spanned from December 2019 to the present and involved breaches of FINRA Rules 3110 and 2010.
The regulator explained Velocity’s written supervisory procedures did not provide sufficient guidance on how to assess alerts for spoofing, layering, wash trades, cross trades and prearranged trading, nor did they outline when to escalate concerns.
FINRA noted that Velocity’s automated surveillance system generated nearly 150,000 alerts between December 2019 and June 2023, but the firm closed most without reasonable review.
In one case, more than 10,000 alerts for prearranged trading were generated over a two-month period in 2022–23 but were never reviewed.
FINRA added that the compliance department, which at times relied on a single employee, often closed hundreds or even thousands of alerts in a single day without further investigation.
Since mid-2023, the firm’s new surveillance system has generated around 15.2 million alerts, the vast majority of which were also closed without investigation, with over 5.2 million still unreviewed by early 2025.
As part of the settlement, Velocity must appoint an independent consultant to conduct a comprehensive review of its supervisory policies and systems, and implement recommendations to strengthen oversight. Furthermore, FINRA stated that $81,056 of the fine will be paid to them, with the remainder allocated to various exchanges.
Velocity neither admitted nor denied the findings but accepted the sanctions.
