(Dow Jones) Broker-dealers could face added regulatory scrutiny and possible fines as part of a "flash crash" crackdown by the Financial Industry Regulatory Authority.

Finra is conducting an investigation of broker-dealers who provided market access to high-frequency traders to determine whether they established appropriate risk-management controls before entering into those relationships, according to Finra Chairman and Chief Executive Richard Ketchum.

Ketchum, in an interview with the Financial Times, said the regulator is concerned about whether brokers understood what is being done with computerized trading programs--or algorithms--being used by such traders. Finra is also looking at whether high-frequency traders had fully contemplated how their programs would work in the context of big market changes, he said.

Ketchum made the remarks to the Financial Times on Sunday. A Finra spokeswoman confirmed his comments.

Finra may also scrutinize whether brokers adequately tried to verify the ownership of firms they allow to access markets, whether directly, or indirectly through sponsorship.

"The brokers should be satisfied they know who's really operating these systems," Ketchum said. The sub-custodian chain can bury identities of high-frequency traders in eastern Europe and other locations, for example, raising serious regulatory concerns, he said.

Ketchum predicted possible enforcement actions if Finra uncovered "serious cases" where brokers failed to try to check out high-frequency trading firms before allowing them market access.

Regulators are still trying to determine possible reasons for the flash crash that occurred on May 6, when the U.S. stock market fell nearly 1,000 points during several minutes. A report by the Securities and Exchange Commission and the Commodities Futures Trading Commission is expected in September.

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