July 25, 2023

Broker-Dealer Fined for Misreporting Expenses

An introducing broker-dealer settled FINRA charges for misclassifying its owner's personal expenses as business expenses and failing to register and supervise an unregistered individual serving as a principal of the firm.

In a Letter of Acceptance, Waiver, and Consent ("AWC"), FINRA stated that the majority-owner of the broker-dealer firm misclassified $28,428 in personal expenses as business expenses in the broker-dealer's ledger. As a result, FINRA stated that the broker-dealer's financial reports were inaccurate.

FINRA also found that the broker-dealer failed to register an individual who acted in a principal capacity. FINRA found that the broker-dealer failed to supervise the individual’s (i) firm-related email communications and (ii) use of an outside email account to engage in securities-related business of the firm.

FINRA determined that the broker-dealer violated Exchange Act Section 17(a) ("Records and Reports"), Exchange Act Rules 17a-3 ("Records to be made by certain exchange members, brokers and dealers"), 17a-4 ("Records to be Preserved by Certain Exchange Members, Brokers and Dealers") and 17a-5 ("Reports to be made by certain brokers and dealers"), FINRA Rules 4511 ("General Requirements"), 2010 ("Standards of Commercial Honor and Principles of Trade"), 1210 ("Registration Requirements"), 1220 ("Registration Categories"), 3110 ("Supervision") and NASD Rule 1020.

To settle the charges, the broker-dealer agreed to (i) a censure, (ii) pay of a $75,000 fine and (iii) comply with the undertakings set forth in the AWC.