| 02 April 2010

Scottrade was fined $200,000 by FINRA yesterday for violating margin rules for day-traders. The violations occured from February 2006 through October 2007.

The FINRA investigation found that Scottrade continued to let customers trade even when their accounts fell below the minimum margin balance of $25,000.

"The day trader margin rules were devised to limit the risk to which day traders expose clearing firms and the market while their positions are open during the course of the day," said James S. Shorris, FINRA Executive Vice President and Executive Director of Enforcement. "Scottrade's systems allowed day-trading customers to continue risky, leveraged day trading without meeting the $25,000 minimum equity requirement."

FINRA also found that Scottrade extended credit to certain customers and failed to obtain timely cash payments.

In settling the ruling Scottrade neither admitted nor denied the allegations. A spokesperson for Scottrade said in the St. Louis Business Journal, "We're glad to have put this matter behind us."

The National Association of Securities Dealers, or NASD -- the predecessor organization to FINRA -- also fined Scottrade in 2005 for similar violations that occurred in 2001 wherein the firm improperly extended credit to cash customers.

FINRA, itself, has been the subject of a rising number of complaints lately. We recently wrote about the self-regulatory agency paying its own executives excessive amounts while the firm lost money on reckless investments.