Tastytrade, a Chicago-based retail trading platform and U.S. subsidiary of IG Group (LSE: IGG), has been fined $30,000 by the Financial Industry Regulatory Authority (FINRA). The penalty stems from a failure to properly supervise employees’ outside securities accounts over a two-year period, between July 2021 and June 2023.
Compliance Issues Identified
According to FINRA, tastytrade failed to establish and enforce an effective supervisory system, including written supervisory procedures (WSPs), to monitor outside trading accounts disclosed by its employees. Approximately 84 accounts belonging to 35 employees were affected. The investigation uncovered significant delays and lapses in reviewing these accounts, with some going unchecked for months or even years.
By the fourth quarter of 2021, account reviews for 25 employees were already behind schedule, and the situation worsened in 2022. FINRA found that 14 accounts were not reviewed at all until June 2023, when the regulator conducted a routine examination of the firm. The supervisory procedures also lacked clear guidelines for documenting and tracking mandatory reviews, contributing to the oversight failures.
Response from Tastytrade
Without admitting or denying FINRA’s findings, tastytrade agreed to the fine and accepted a censure. The firm updated its supervisory procedures and implemented system enhancements in July 2023 to address the identified shortcomings.
Tastytrade, a FINRA member since 2016, operates with 73 registered representatives from its Chicago headquarters. Despite the regulatory penalty, the parent company IG Group’s stock price remained unaffected, rising 0.4% to 951 pence on the day of the announcement.
Financial and Industry Context
Tastytrade generated nearly $71 million in revenue during the three months ending August 31, contributing to one-quarter of IG Group’s total revenue of $279 million for the period. The regulatory action highlights FINRA’s ongoing focus on ensuring proper supervision in the retail trading sector, a rapidly growing area of financial services.
This fine follows similar enforcement actions in recent months. In October, FINRA penalized Interactive Brokers (Nasdaq: IBKR) $475,000 for compliance failures in its share lending program. Earlier, in June, TradeZero America was fined $250,000 for regulatory violations spanning from 2020 to 2022.
Tastytrade’s case underscores the importance of robust supervisory systems for trading platforms to maintain regulatory compliance and protect market integrity.
