Trading companies are supposed to have effective risk policy (i.e., they are supposed to think about what happens if things do wrong and formulate rules to amel

Trading companies are supposed to have effective risk policy (i.e., they are supposed to think about what happens if things do wrong and formulate rules to ameliorate risks) and compliance controls (i.e., bureaucratic controls that ensure that policy actually is followed). The SEC charge does not paint a pretty picture on these counts, but the key point seems to be this one: -- Relied on financial risk controls that were not capable of preventing the entry of orders that exceeded pre-set capital thresholds for the firm in the aggregate. https://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539879795 https://www.sec.gov/News/PressRelease/Detail/PressRelease/13... (The charge also states that Knight violated rules on covering shorts, but I guess this is not so important). The SEC is quite right to fine firms that have lost money with poor risk controls: the point is that bad risk management can hurt the whole sector. It is like fining a factory owner who lets their plant break pollution regulations.