FINRA Fines Introducing Broker SageTrader $775,000 for Supervisory Failures

Introducing broker SageTrader has been fined $775,000 and censured by the Financial Industry Regulatory Authority (FINRA) for failing to supervise potentially manipulative trading between 2013 and 2019.

SageTrader operates by referring customer orders to other broker-dealers for execution. In 2013, the company changed its business model and began offering routing and execution services to domestic and foreign customers.

Until 2015, the trading platform did not applied any supervisory system to detect potentially manipulative trading, such as spoofing, wash trades, or marking the close, FINRA stated.

SageTrader implemented its automated manipulative trading surveillance system in 2015, but it failed to capture 70 traders of a client for five months.

FINRA explained that 70% of of the internal alerts on SageTrader's surveillance were triggered by foreign day trader customers of only four firms, two of which has been classiified as 'high-risk' customers by SageTrader.

FINRA commented that SageTrader's review of surveillance alerts was 'unreasonable'. The company had only eight registered staff, but it has "limited staff and other resources to sufficiently review and resolve alerts for potentially manipulative trading, which, by 2018, totaled more than 500,000 alerts per year."

FINRA has ordered SageTrader to review and modify its supervisory system.