Justly Markets gets a $100k fine for failing to preserve records

The Financial Industry Regulatory Authority (FINRA) recently fined a private securities placement platform, Justly Markets. According to the regulator, the platform has violated certain rules, which earned it a $100,000 fine.

Justly Markets agreed to pay $100k for the violation

Justly markets, formerly known as DBOT ATS, was fined for failing to preserve records of more than 95 million orders that came from its broker-dealer customers. FINRA noted that the violation took place over the course lf two and a half years, between April 2017 and October 2019. Apart from the fine, the platform was also censored for violating multiple sections of the US Securities Exchange Act of 1934.

FINRA revealed all the details on Tuesday by publishing the Letter of Acceptance, Waiver, and Consent, which Justly Markets filed with the regulator. The letter specified that Justly Markets failed to establish a functional supervisory system between April 2017 and February 2020, such as written supervisory procedures. Such a system is necessary in order to comply with the recordkeeping requirements, which are a part of the law.

However, FINRA stated that Justly Markets agreed to pay the fine, but it did not admit or deny that it violated the law. FINRA’s filing further explained that the company started using the services of a third-party vendor on May 1st, 2018. It kept using the same vendor and its services for well over a year until October 31st, 2019. The goal was to preserve its order records with the help of a third-party firm.

How did Justly Markets violate the law?

The problem emerged when it changed vendors in 2019, and the original one deleted Justly Markets’ records of the orders, which involved over 95 million of them. Justly is at fault for not preserving the records in any other way, only relying on the third-party vendor, and also for not taking over the records when it decided to hire a different firm for preserving orders.

By doing this, it violated Section 17(a) of the Exchange Act, FINRA rules 4511 and 2010, and the Exchange Act Rule 17a-4(b)(1), according to the regulator. FINRA also criticized the company for lacking policies and procedures, not conducting supervisory reviews, and ensuring that the firm made and kept order records secure.

Justly Markets has been a member of FINRA for over a decade now, starting in November 2012. However, it wasn’t until 2017 that the company started operating as an ATS (Alternative Trading System). At that time, it started matching buying and selling orders automatically, offering OTC securities that came from broker-dealer customers. FINRA then ordered it to stop the ATS operations in February 2020, at least when it comes to the US. Since then, the firm has operated as a private placement platform.