New York-based broker dealer OTC Link LLC was penalized for repeated compliance failures related to Regulation Systems Compliance and Integrity (SCI).
The Securities and Exchange Commission determined that between August 2016 and March 2025, OTC Link LLC failed to establish, maintain, and enforce certain written policies and procedures required by Regulation SCI for OTC Link ATS, an alternative trading system for over-the-counter securities that it operates. The violations included including policies and procedures pertaining to system security, access control, and application vulnerability management, testing, and remediation.
Staff in the SEC’s Division of Examinations examined OTC Link ATS several times during the relevant period and each time flagged certain required policies and procedures that the firm had not established or kept in draft form and failed to finalize or enforce. But the SEC’s order found that OTC Link LLC repeatedly failed to promptly remediate these deficiencies.
OTC Link LLC did not admit the findings, but agreed to a censure, a cease-and-desist order and a $575,000 civil penalty due to the longstanding violations.
“OTC Link’s continual failure to remediate deficiencies even after they were repeatedly flagged by Division of Examinations staff reflects a disregard for their findings and the overall examinations process and justifies a meaningful penalty,” said Laura D’Allaird, Chief of the Division of Enforcement’s Cyber and Emerging Technologies Unit. “All SCI entities are expected to take their regulatory responsibilities seriously and promptly fix issues when they’re identified.”
The SEC found that OTC Link LLC lacked written policies and procedures that were reasonably designed to ensure that OTC Link ATS’s SCI systems and, for purposes of security standards, indirect SCI systems, had levels of capacity, integrity, resiliency, availability, and security adequate to maintain OTC Link ATS’s operational capability and promote the maintenance of fair and orderly markets in violation of Rule 1001(a)(1) of Regulation SCI.
By failing to have the required policies and procedures, to periodically review the effectiveness of its policies and procedures, and to take prompt action to remedy its deficiencies, OTC Link LLC was found to have violated Rules 1001(a)(2) and 1001(a)(3).
The attorneys at Hyman Cotter PC include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 833-665-0784 or through our online contact form.
