Key Insights
- Tastytrade was fined $30,000 and censured by FINRA for failing to establish and maintain proper supervisory procedures for employee outside securities accounts from July 2021 to July 2023.
- The firm did not review approximately 84 outside securities accounts belonging to 35 employees, with 14 accounts never being reviewed until FINRA’s cycle examination in June 2023.
CHICAGO (MarketsXplora) – Tastytrade, Inc. has agreed to pay a $30,000 fine and accept a censure from the Financial Industry Regulatory Authority (FINRA) for significant lapses in monitoring employee securities accounts between July 2021 and July 2023.
The regulatory settlement reveals that the Chicago-based trading firm failed to establish and maintain an adequate supervisory system for reviewing outside securities accounts of its associated persons. Despite requiring employees to disclose and obtain compliance approval for outside trading accounts, tastytrade’s written supervisory procedures (WSPs) lacked specific documentation protocols for account statement reviews.
According to the FINRA investigation, the firm’s oversight failures were extensive. In the fourth quarter of 2021, trades from 25 employees’ brokerage accounts went unreviewed. By the first quarter of 2022, the company was significantly delayed in reviewing employee transactions, a pattern that continued until June 2023.
Over the two-year period, tastytrade failed to conduct quarterly reviews for approximately 84 outside securities accounts belonging to 35 employees. Notably, 14 accounts received no review until FINRA’s cycle examination in June 2023.
In response to the findings, tastytrade updated its written supervisory procedures and enhanced its employee account supervision system in July 2023. The firm, which has been a FINRA member since 2016 and operates with 73 registered representatives, offers self-directed trading to retail investors through its website and mobile applications.
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