FINRA has fined two member firms a total of more than $1.1 million for anti-money laundering (AML) and supervisory violations related to low-priced securities transactions.
Specifically, FINRA fined Pictet Overseas Inc. $610,000 for these violations concerning low-priced securities transactions, the majority of which occurred through an omnibus account held by the firm’s affiliate, along with other violations.
This action comes on the heels of FINRA’s $550,000 fine against Blue Ocean ATS 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.
Both 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.
“Firms that engage in high-risk business activity must implement AML programs that are appropriately designed for their specific risk profile,” said Bill St. Louis, Executive Vice President and Head of Enforcement at FINRA. “Blue Ocean’s and Pictet’s monitoring systems were inadequate given their customers’ 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.”
Pictet 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’s 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’ 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.
Pictet 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’ trading represented significant portions of daily market volume—in 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’s 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.
Additionally, Pictet inaccurately reported transactions to the Trade Reporting and Compliance Engine, issued deficient trade confirmations, and did not reasonably supervise the firm’s compliance with those reporting and disclosure obligations.
Despite the rapid growth in Blue Ocean’s overnight trading business and the known risks associated with low-priced securities trading, the firm failed to develop and implement—since at least January 2023—an AML compliance program reasonably tailored to the risks of its business and reasonably designed to detect potentially manipulative trading.
Blue Ocean’s 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.
In settling these matters, Pictet and Blue Ocean consented to the entry of FINRA’s findings, without admitting or denying the charges.
FINRA Regulatory Notice 19-18 provides guidance to member firms regarding suspicious activity monitoring and reporting obligations under FINRA Rule 3310 (Anti-Money Laundering Compliance Program). In addition, FINRA provides updated guidance and compliance training to member firms about their AML compliance obligations. The 2026 FINRA Annual Regulatory Oversight Report contains information about FINRA’s areas of concern related to AML.
FINRA makes available disciplinary actions and other information on its Disciplinary Actions Online database. In addition, FINRA publishes on its Monthly Disciplinary Actions 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’s use of fine monies is limited to specific purposes set forth in its public Financial Guiding Principles, which are approved by its Board of Governors. FINRA publicly itemizes and discloses how it uses fine monies each year.
