The Massachusetts Securities Division has fined Constancy Brokerage Providers $750,000 for “rubber-stamping” choices buying and selling purposes.
The consent order, filed by Secretary of State William Galvin, alleged that Constancy’s utility evaluate system “allowed prospects to submit a number of purposes, every time with the data altered till the shoppers met the necessities to be accredited,” his workplace mentioned.
On Jan. 26, 2022, Galvin’s division filed a grievance towards Constancy alleging that the agency “did not correctly vet prospects who utilized to be accredited for choices and margin buying and selling,” his workplace mentioned.
Constancy has taken steps since then to enhance its utility evaluate programs and on-line purposes, in accordance with Galvin’s workplace.
Choices buying and selling is dangerous because of choices’ complexity, lack of liquidity and “the truth that simply breaking even requires one to precisely predict short-term worth fluctuations within the underlying asset,” Galvin mentioned, saying Constancy confirmed a “half-hearted and lackadaisical perspective” towards safeguarding retail buyers.
Brokers decide an investor’s suitability for various ranges of choices buying and selling primarily based on their earnings, web price, buying and selling expertise and basic information of investing.