The Financial Industry Regulatory Authority (FINRA) has slammed a $3
million fine on security broker Webull for onboarding unqualified
options traders between December 2019 and July 2021. The membership-based
regulator, which is overseen by the United States Securities and Exchange
Commission, announced the fine on Thursday.
FINRA in a statement noted that Webull, which is the US-based subsidiary
of Chinese-owned Webull Corporation, did not exercise “reasonable due
diligence” before accepting options traders and failed to maintain a
“reasonably designed” supervisory system to note and respond to customer
complaints. In addition, the online broker, which was launched in 2017, failed
to forward to FINRA certain written customer complaints as required by the
regulatory body.
Webull’s Automated Systems Fails to Detect Unqualified Options Trader
According to FINRA, Webull first started offering options trading to its
customers in December 2019. However, between that time and July 2021, the brokerage
firm’s automated system for reviewing customer applications for options trading
failed to check new applications with previously provided
information.
As a result of this failure, the brokerage regulator noted, Webull
sanctioned unqualified customers for options trading. This included 9,000
traders that stated that they had no prior investment experience and should have been
disqualified.
“For example, the firm approved more than 2,500 customers under the age
of 21 to trade options spreads, even though the firm’s eligibility criteria
required customers to have at least three years of options trading experience
before being approved for that trading level,” FINRA further explained.
FINRA Faults Webull Supervisory System
Furthermore, FINRA in its investigations into Webull’s supervisory
system found that the broker’s mechanism for identifying and responding
to customer complaints was not “reasonably designed.” The regulator also
faulted Webull for not dedicating enough staff and resources needed to keep up
with the backlog of customer communications, including complaints, that it received.
“The firm also did not report certain written customer complaints to
FINRA, as required, including complaints that involved allegations of theft or
misappropriation,” the regulator added.
Meanwhile, since the start of the year, FINRA has fined a number of other security brokerage firms. These include SageTrader, UBS Securities, BGC Financial and Nomura Securities.
The Financial Industry Regulatory Authority (FINRA) has slammed a $3
million fine on security broker Webull for onboarding unqualified
options traders between December 2019 and July 2021. The membership-based
regulator, which is overseen by the United States Securities and Exchange
Commission, announced the fine on Thursday.
FINRA in a statement noted that Webull, which is the US-based subsidiary
of Chinese-owned Webull Corporation, did not exercise “reasonable due
diligence” before accepting options traders and failed to maintain a
“reasonably designed” supervisory system to note and respond to customer
complaints. In addition, the online broker, which was launched in 2017, failed
to forward to FINRA certain written customer complaints as required by the
regulatory body.
Webull’s Automated Systems Fails to Detect Unqualified Options Trader
According to FINRA, Webull first started offering options trading to its
customers in December 2019. However, between that time and July 2021, the brokerage
firm’s automated system for reviewing customer applications for options trading
failed to check new applications with previously provided
information.
As a result of this failure, the brokerage regulator noted, Webull
sanctioned unqualified customers for options trading. This included 9,000
traders that stated that they had no prior investment experience and should have been
disqualified.
“For example, the firm approved more than 2,500 customers under the age
of 21 to trade options spreads, even though the firm’s eligibility criteria
required customers to have at least three years of options trading experience
before being approved for that trading level,” FINRA further explained.
FINRA Faults Webull Supervisory System
Furthermore, FINRA in its investigations into Webull’s supervisory
system found that the broker’s mechanism for identifying and responding
to customer complaints was not “reasonably designed.” The regulator also
faulted Webull for not dedicating enough staff and resources needed to keep up
with the backlog of customer communications, including complaints, that it received.
“The firm also did not report certain written customer complaints to
FINRA, as required, including complaints that involved allegations of theft or
misappropriation,” the regulator added.
Meanwhile, since the start of the year, FINRA has fined a number of other security brokerage firms. These include SageTrader, UBS Securities, BGC Financial and Nomura Securities.
Read More
The Financial Industry Regulatory Authority (FINRA) recently announced a fine of $3 million for Webull Financial LLC, for their failure to enforce rules that prevented unqualified options traders from engaging in transactions.
FINRA’s investigation found that from January 2018 to April 2020, Webull Financial failed to put and enforce policies that required customers to pass qualifying examinations in order to trade options. This lack of enforcement allowed individuals to place options trades who were not qualified to do so. FINRA also found that Webull was not properly supervising the activities of its options customers to ensure they were aware of the requirements to trade options.
Webull Financial also failed to detect and prevent manipulative and disruptive trading activity in options, including the improper use of flash orders, marking orders at non-marketable prices, and engaging in wash trading. FINRA’s investigation also revealed that Webull disregarded the risks associated with trading in low-priced securities options and had inadequate systems to detect or prevent those activities.
In addition to the fine, Webull agreed to pay restitution to customers who were impacted by their lack of oversight and to enhance its options trading, surveillance and supervision systems.
The fine underscores FINRA’s commitment to holding brokerage firms accountable for ensuring that professional and retail customers are able to conduct their investments in a safe and secure environment. FINRA President Thomas Gira emphasized that, “firms must remain vigilant and take all necessary steps to ensure that their customers properly qualify to trade and that their systems, procedures and supervision are adequate to detect and prevent manipulative and disruptive trading activities.”
