The US Securities and Exchange Commission (SEC) today announced a settlement with California-based broker-dealer Velox Clearing LLC for violations related to the submission of suspicious activity reports (SARs). The company has agreed to pay a $500,000 civil penalty as part of the settlement.

The SEC’s order found that from at least July 2019 to December 2022, Velox failed to properly design and implement anti-money laundering (AML) policies and procedures, leaving it unable to effectively address the risks tied to its business. This failure resulted in the firm’s inability to file SARs for numerous suspicious transactions, which is a key requirement under federal securities laws.

SEC Settles with Velox Clearing LLC for Failing to File 

According to the SEC, Velox’s policies did not account for critical red flags outlined in public regulatory guidance that could have identified suspicious trading activities. These included transactions involving omnibus accounts held by foreign financial institutions, deposits that significantly impacted the float of security, and customers engaged in large-scale trading when no relevant news justified the market movements. Additionally, the company failed to recognize and investigate patterns of matched trading activity, which was also a concern under its existing AML procedures.

The SEC further determined that these deficiencies resulted in the firm’s failure to act on several clear indicators of suspicious activity, including notable increases in stock price and trading volume without supporting news. As a result, Velox was found to have willfully violated Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8.

Without admitting or denying the SEC’s findings, Velox consented to a cease-and-desist order and a censure, agreeing to pay the $500,000 penalty. This settlement underscores the SEC’s commitment to enforcing compliance with anti-money laundering regulations to maintain the integrity of U.S. securities markets.

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