Broker-Dealer Settles Charges for Violating Custody and Research Rules

A broker-dealer settled FINRA charges for violating the custody rule and for inadequate disclosures on research reports.

FINRA found that the broker-dealer violated Rule 15c3-3 ("Customer protection-reserves and custody of securities") of the Exchange Act by (i) failing to maintain possession or control of fully paid and excess securities, and (ii) failing to accurately calculate its required customer reserves. FINRA also found that, before 2017, the broker-dealer issued research reports that did not provide adequate disclosures as to conflicts of interest with investment banking on research reports.

To settle the charges, the broker-dealer agreed to (i) a $9 million fine and (ii) implement improved supervisory systems and procedures.