Redbridge Securities LLC
Redbridge Securities was fined $475,000 for failing to establish and implement an AML compliance program reasonably designed to detect and cause the reporting of suspicious transactions by the firm’s customers. The findings stated that the firm’s AML program was not reasonably designed to detect or investigate red flags of suspicious activity, including potentially manipulative trading.
The firm’s written procedures did not reasonably address how the firm would detect or investigate red flags. The firm’s written procedures also failed to identify the specific alerts and reports used by the firm to identify potentially suspicious transactions, and they did not describe how such alerts or reports should be utilized by the firm’s AML analysts. In addition, the firm did not have a reasonable system to investigate the red flags of suspicious activity that its surveillance identified. As a result, the firm failed to detect or reasonably investigate red flags in connection with customer deposits and trading activity in low-priced securities.
The findings also stated that the firm failed to establish and implement an AML program reasonably designed to achieve compliance with customer identification and risk profile requirements. The firm failed to reasonably assess the identity verification risks posed by opening accounts for customers domiciled in China, many of whom had known connections to the issuers. The firm’s CIP procedures did not describe how the firm should investigate red flags of identity theft during the account opening process. Furthermore, the firm’s customer due diligence procedures did not require the firm to create risk profiles for customers.
The firm also failed to identify or follow up on instances in which a customer’s account activity was inconsistent with their stated financial resources, including several instances where customers transferred money or acquired securities with a market value greater than their stated financial circumstances. The firm also failed to establish procedures to reasonably monitor for such inconsistencies in customer profile information.
FINRA found that the firm failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with federal securities laws and FINRA rules prohibiting market manipulation. The firm’s WSPs did not directly address market manipulation and the firm’s supervisory system was not reasonably designed to detect and address red flags of potentially manipulative trading. Moreover, even though the firm did use exception reports related to wash trading, the review and investigation of those alerts was insufficient to detect or reasonably address market manipulation.
