FINRA Sanctions Firm for Net Capital and Underwriting Violations

A firm settled FINRA charges after failing to maintain required net capital levels and engaging in unapproved underwriting activities. 

According to the AWC, the firm's "membership agreement prohibited the firm from participating in firm commitment offerings in any capacity and required the firm to maintain minimum net capital of $5,000." FINRA found that the firm engaged in commitment offerings despite these restrictions and without prior approval. FINRA determined that these activities triggered a $50,000 net capital requirement. FINRA stated that on nine occasions the Firm’s net capital fell below the required level, with deficiencies ranging from $1,000 to $33,000. FINRA found that after being notified, the firm corrected the shortfall and obtained authorization to participate in firm commitment underwritings.

FINRA determined that the firm violated Exchange Act section 15(c)(3) ("Government securities brokers and dealers") and rule 15c3-1 ("Net capital requirements for brokers or dealers"), as well as FINRA Rules 1017 ("Application for Approval of Change in Ownership, Control, or Business Operations"), 2010 ("Standard of Commercial Honor and Principles of Trade"), and 4110 ("Capital Compliance"). 

To resolve the matter, the firm consented to (i) a censure and (ii) a $20,000 fine.