(Bloomberg) -- Scottrade Inc., the St. Louis-based discount brokerage, was fined $200,000 for letting traders who used borrowed money keep trading after the value of their holdings fell below regulatory minimums.
The Financial Industry Regulatory Authority faulted Scottrade for failing to curb day traders when equity in their margin accounts fell below $25,000 in 2006 and 2007. The firm instead sent first-time violators a notice telling them to boost their equity, Finra said in a statement today.
The rules “were devised to limit the risk to which day traders expose clearing firms and the market,” Finra enforcement director James Shorris said in the brokerage regulator’s statement. “Scottrade’s systems allowed day-trading customers to continue risky, leveraged day trading.”
The lapses let 11,708 customer margin accounts execute 171,910 day trades when equity fell short of the minimum, Finra said. Scottrade settled the complaint without admitting or denying the allegations.
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