FINRA Fines Velocity Clearing $1 Million for Lapses in Manipulative-Trading Surveillance
The Financial Industry Regulatory Authority announced that it has censured and fined Velocity Clearing, a New Jersey-based brokerage, $1,000,000 for failing to establish and enforce a supervisory system capable of detecting potentially manipulative trading activity by its customers.
According to FINRA, from December 2019 through June 2023, Velocity Clearing’s automated surveillance system generated nearly 150,000 alerts for suspicious trading, including spoofing, layering, wash trades, cross trades, and prearranged trades. The firm closed more than 147,000 of those alerts without conducting any investigation into the trading or customers’ patterns over time. FINRA said that approximately one-third of the alerts were closed on the same day they were opened.
In one example, the firm received inquiries from other broker-dealers about potential prearranged trading by more than 40 customers, but had not enabled its surveillance system’s prearranged-trading alert until December 2022. Even then, Velocity never reviewed the more than 10,000 alerts generated by this surveillance between December 2022 and February 2023.
FINRA said Velocity delegated responsibility for reviewing alerts to its compliance department but dedicated “insufficient resources” to the task. At one point, a single employee, who also had other responsibilities, was responsible for reviewing alerts. Even after hiring five additional compliance staff, the firm lacked staffing, training, and written guidance to conduct reasonable reviews or escalate alerts for secondary review.
FINRA continued by stating that, in July 2023, Velocity replaced its surveillance system with a new automated surveillance system, and, as of early 2025, this new system had generated roughly 15.2 million alerts identifying potentially manipulative trading, with more than 5.2 million remaining unreviewed.
As a result, the firm was found to have violated Rule 3110, which requires that firms maintain and enforce written procedures, along with Rule 2010, which requires high standards of commercial conduct.
In addition to the $1,000,000 fine and censure, Velocity must also retain an independent consultant at its own expense to conduct a comprehensive review of its policies, systems, and procedures related to detecting and preventing manipulative trading activity. The consultant must submit an initial report within 90 days and a follow-up report within a year. Velocity must implement all recommendations or propose acceptable alternatives.
Velocity Clearing, LLC provides retail brokerage, lending, and market-making services and engages in proprietary trading. The firm is headquartered in Hazlet, New Jersey, and employs approximately 120 registered persons across five branches.
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