Broker-Dealer Settles Charges for Failing to Maintain Accurate Customer Account Records

An introducing broker-dealer settled FINRA charges for failing to maintain accurate records as to customers' securities holdings and cash balances and providing inaccurate information to customers.

In a Letter of Acceptance, Waiver, and Consent, FINRA found that the broker-dealer showed customers having short positions in certain ETFs when, in fact, the customers had negative cash balances in their accounts. Additionally, FINRA found that the broker-dealer (i) failed to maintain accurate books and records, and (ii) failed to maintain a supervisory system reasonably designed to prevent inaccurate customer communications and internal cash and securities reports, as well as a system designed to review reports and identify such errors.

As a result, FINRA determined that the broker-dealer violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 2210 ("Communications with the Public"), Rule 3110 ("Supervision") and Rule 4511 ("Books and Records Requirements - General Requirements").

To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $200,000 civil monetary penalty and (iii) undertakings to revise its supervisory systems.