FINRA Censures, Fines Redbridge Securities $475K for AML Non-Compliance

The Financial Industry Regulatory Authority announced that it has censured and fined Redbridge Securities LLC – an introducing broker-dealer that offers customers self-directed trading via an online portal – $475,000 for failing to establish and implement an anti-money laundering, or AML, compliance program.

FINRA reported that, from September 2019 through October 2023, Redbridge failed to establish an AML program that could reasonably be expected to detect and cause the reporting of suspicious activity in light of the firm’s business model and customer base. FINRA also said that the majority of the firm’s customers were retail customers located in high-risk money laundering jurisdictions, including China, and that many of those customers regularly bought and sold shares of low-priced securities. Some customers were introduced to the firm by issuers or otherwise had financial connections to the issuers of the securities they purchased.

FINRA found that Redbridge’s AML program was not reasonably designed to detect or investigate red flags of suspicious activity, including potentially manipulative trading. Also, the firm’s written procedures did not reasonably address how the firm would detect or investigate red flags. They also failed to identify the specific alerts and reports used by the firm to identify potentially suspicious transactions, and they did not describe how such alerts or reports should be utilized by the firm’s AML analysts.

According to FINRA, although the firm used alerts to identify high-volume trading and certain kinds of wash trades, it did not have any automated method to identify other types of suspicious activity that could suggest market manipulation, including cross trading, layering, spoofing, or other types of coordinated trading until September 2022. Moreover, until September 2022, the firm conducted no order-level surveillance and did not supervise for canceled trades.

As a result, Redbridge failed to detect or suitably investigate certain red flags. For example, between March and October 2021, several customers who shared the same mailing address or opened accounts on the same day deposited low-priced shares of a digital asset mining company. These customers also used a common IP address and entered orders that appeared to artificially inflate the share price of the mining company’s securities and, overall, engaged in trading that did not appear to make rational economic sense. Despite these red flags, the firm closed the alerts with observations such as “client was selling now appears to be buying” without conducting a reasonable review of the trading activity.

In another case, a customer reported his liquid net worth as $200,000, yet later deposited shares worth $2.7 million into his Redbridge account. The customer later sent five outgoing wires totaling $2.5 million.

Due to these oversights, Redbridge violated Rule 3310 which requires each member firm to develop and implement a written AML program reasonably designed to achieve and monitor the firm’s compliance with the requirements of the Bank Secrecy Act.

In addition to the censure and fine, Redbridge has agreed to retain a third-party consultant to conduct a comprehensive review of the adequacy of its AML compliance program and to recommend procedural and systemic changes. The firm has also agreed to cooperate fully with the consultant and to adopt and implement the consultant’s recommendations.

Redbridge Securities, LLC is headquartered in Plano, Texas, and has approximately 10 registered representatives and one branch office.

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