U.S. regulators sanctioned online discount brokerage firm Webull Financial LLC for failures in its complaint handling systems and customer due diligence procedures.
The U.S. Financial Industry Regulatory Authority Inc. (FINRA) fined the firm US$3 million for several violations, including not maintaining an adequate system to identify and address client complaints, failing to report certain complaints to FINRA, and not exercising due diligence in approving clients to trade options.
The firm agreed to settle the allegations without admitting or denying the SRO’s findings.
Among other things, FINRA found that Webull’s supervisory system created to identify and respond to customer complaints was “not reasonably designed” in that it “failed to commit the staff and other resources necessary to keep pace with the hundreds of thousands of customer communications it received, which included complaints.”
The SRO also said the firm didn’t report certain complaints, such as those involving alleged theft or misappropriation, to FINRA as required.
Separately, it found that failings in Webull’s automated system for approving options trading by clients mistakenly greenlit 9,000 accounts for options trading by customers who had no investment experience, and approved other potentially inappropriate accounts.
“The obligations on all FINRA member firms are clear, regardless of their size, rapid growth or business model,” said Christopher Kelly, senior vice-president and acting head of FINRA’s enforcement department.
“Before they approve customers for options trading, firms must establish systems and procedures that identify essential facts about their customers’ trading knowledge and experience,” he said. “Firms must also commit the resources necessary to address customer complaints and report those complaints to FINRA when required.”