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<\/a><\/a>\nSpecifically, FINRA fined Pictet Overseas Inc. $610,000<\/a> for these violations concerning low-priced securities transactions, the majority of which occurred through an omnibus account held by the firm\u2019s affiliate, along with other violations.<\/p> \nThis action comes on the heels of FINRA\u2019s $550,000 fine against Blue Ocean ATS<\/a> for similar violations. Blue Ocean handled 95% of all overnight trading volume since its inception, including a substantial volume of low-priced securities. FINRA ordered Blue Ocean to certify that it remediated the deficiencies with its AML compliance program.<\/p> \nBoth firms failed to develop and implement AML compliance programs reasonably designed to detect and cause the reporting of suspicious transactions in low-priced securities. The thin trading volumes, price volatility and limited public information of low-priced securities make them attractive targets for manipulative schemes and fraudulent activity. Effective AML programs are essential for firms that handle low-priced securities transactions to help detect suspicious patterns and prevent illegal activity.<\/p> \n\u201cFirms that engage in high-risk business activity must implement AML programs that are appropriately designed for their specific risk profile,\u201d said Bill St. Louis, Executive Vice President and Head of Enforcement at FINRA<\/a>. \u201cBlue Ocean\u2019s and Pictet\u2019s monitoring systems were inadequate given their customers\u2019 low-priced securities trading. These firms failed to implement the robust surveillance necessary to detect suspicious activity in an area where such risks are well-established.\u201d<\/p> \nPictet executed approximately $300 million of low-priced securities transactions involving more than 150 million shares from February 2022 to March 2023, including nearly $30 million of over-the-counter securities. More than 70% of these transactions occurred through an omnibus account held by the firm\u2019s foreign financial institution (FFI) affiliate. In June 2021, another regulator alerted Pictet to certain deficiencies in its AML program. Despite this warning and its customers\u2019 low-priced securities transactions, Pictet failed to take timely corrective action. The firm did not implement an AML compliance program reasonably designed to detect and cause the reporting of suspicious transactions in low-priced securities from September 2021 to February 2025.<\/p> \nPictet also failed to commit adequate resources to its AML program and, until February 2023, relied on manually compiled daily reports that could not effectively identify patterns of suspicious activity. As a result, Pictet did not detect or reasonably investigate red flags of suspicious activity involving low-priced securities. This included instances where customers\u2019 trading represented significant portions of daily market volume\u2014in some cases, more than 20% on individual days. Pictet also did not implement a reasonably designed due diligence program for FFI correspondent accounts, including by failing to conduct periodic reviews of FFI account activity. Pictet\u2019s supervisory system and procedures also were not reasonably designed to achieve compliance with Section 5 of the Securities Act of 1933 in connection with low-priced securities.<\/p> \nAdditionally, Pictet inaccurately reported transactions to the Trade Reporting and Compliance Engine, issued deficient trade confirmations, and did not reasonably supervise the firm\u2019s compliance with those reporting and disclosure obligations.<\/p> \nDespite the rapid growth in Blue Ocean\u2019s overnight trading business and the known risks associated with low-priced securities trading, the firm failed to develop and implement\u2014since at least January 2023\u2014an AML compliance program reasonably tailored to the risks of its business and reasonably designed to detect potentially manipulative trading.<\/p> \nBlue Ocean\u2019s monitoring consisted primarily of manual reviews by a single employee of a wash sale report and a low-priced securities report, which were insufficient to identify patterns of potential manipulative activity. In practice, the firm conducted no surveillance for spoofing, layering and other manipulative order entry patterns. As a result of its deficient supervision, Blue Ocean failed to detect and investigate red flags of potentially suspicious order schemes.<\/p> \nIn settling these matters, Pictet and Blue Ocean consented to the entry of FINRA\u2019s findings, without admitting or denying the charges.<\/p> \nFINRA Regulatory Notice 19-18<\/a> provides guidance to member firms regarding suspicious activity monitoring and reporting obligations under FINRA Rule 3310<\/a> (Anti-Money Laundering Compliance Program). In addition, FINRA provides updated guidance<\/a> and compliance training<\/a> to member firms about their AML compliance obligations. The 2026 FINRA Annual Regulatory Oversight Report<\/a> contains information about FINRA\u2019s areas of concern related to AML.<\/p> \nFINRA makes available disciplinary actions and other information on its Disciplinary Actions Online<\/a> database. In addition, FINRA publishes on its Monthly Disciplinary Actions<\/a> page a summary of disciplinary actions against firms and individuals for violations of FINRA rules; federal securities laws, rules and regulations; and the rules of the Municipal Securities Rulemaking Board. FINRA\u2019s use of fine monies is limited to specific purposes set forth in its public Financial Guiding Principles<\/a>, which are approved by its Board of Governors. FINRA publicly itemizes and discloses<\/a> how it uses fine monies each year.<\/p> \nAbout FINRA<\/b><\/p> \nFINRA is a not-for-profit organization dedicated to investor protection and market integrity. FINRA regulates one critical part of the securities industry\u2014member brokerage firms doing business in the U.S. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org<\/a>.<\/p>