FINRA Fines Folio Investments in Execution-Quality Case

FINRA fines Folio Investments $1.3 million after finding years of inadequate execution-quality reviews and weak supervisory systems.

Folio Investments, Inc. has agreed to pay a $1.3 million fine after the Financial Industry Regulatory Authority found that the firm failed for years to conduct reasonable, regular, and rigorous reviews of order-execution quality.

According to FINRA, from January 2017 to the present, Folio routed customer orders to two market centers that paid the firm for order flow but did not evaluate whether those venues provided the best available execution. In 2022, the firm began directing a substantial portion of its orders to an affiliated market center, yet again failed to compare the execution quality it received with what it might have obtained from competing venues.

FINRA Fines Folio Investments in Execution-Quality Case

FINRA said Folio reviewed price improvement but ignored other relevant execution-quality factors and did not adequately account for differences in order types or sizes—rendering its analysis unreasonable. As a result, the regulator found violations of FINRA Rules 5310(a), 5310.09, and 2010.

FINRA also determined that the firm violated Rules 3110 and 2010 by failing to establish and maintain a supervisory system—including written supervisory procedures—reasonably designed to ensure compliance with best-execution obligations.

Under the settlement, regulators censured Folio, fined it $1.3 million, and required it to certify that it has implemented a supervisory system that addresses the identified deficiencies.

Folio, headquartered in McLean, became a FINRA member in 1999. The firm operates six branch offices, employs about 50 registered representatives, and provides brokerage and custodial services. In September 2020, it was acquired by Goldman Sachs Group, Inc., though it continues to operate under its own broker-dealer registration.

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