Clearing Firm Settles FINRA Charges for Capital, Custody and Recordkeeping Violations

A clearing firm settled charges for violating a number of capital, custody and recordkeeping requirements. According to FINRA, the clearing firm violated:

  • SEA Rule 15c3-3 ("Customer Protection-Reserves and Custody of Securities") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), by neglecting to make correct customer and PAB reserve amount calculations;

  • FINRA Rules 4110 ("Capital Compliance") and 2010, by failing to receive written permission by FINRA prior to making unsecured advances in excess of 10 percent of its net capital to its parent company, totaling over $1 million;

  • SEA Exchange Act Rule 17a-3 ("Records to Be Made by Certain Exchange Members, Brokers and Dealers") and FINRA Rules 4511 ("General Requirements") and 2010, by failing to create and maintain required business records; and

  • FINRA Rules 3110(a) ("Supervision") and 2010, by failing to (i) address deficiencies in its electronic systems, (ii) ensure that its backup manual processes complied with regulatory requirements and (ii) supervise the operation of its electronic storage systems.

To settle the charges, the clearing firm agreed to a (i) censure, (ii) $450,000 fine and (iii) submission of certification within 60 days by the clearing firm that it has implemented certain supervisory procedures.

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