FINRA Broker-Dealer Settles Net Capital and Recordkeeping Violations

The broker-dealer settled FINRA charges for failing to maintain required minimum net capital levels and failing to maintain accurate books and records.

According to the AWC, between November 2021 and January 2023, the firm conducted a securities business while net capital deficient for five separate periods totaling approximately 90 days. FINRA found that two of these deficiencies resulted from the firm failing to use the accrual method of accounting for commissions earned from insurance contracts and private placements. Instead of recording receivables and payables on the transaction closing dates, the firm improperly recorded them on other dates. FINRA said the remaining deficiencies stemmed from the firm failing to provide its Financial and Operations Principal with timely and accurate financial information.

The firm also failed to file a required same-day notification for a net capital deficiency identified in November 2021. Regulators remained unaware of the deficiency until a FINRA examination team discovered it in December 2022. 

FINRA found the firm violated Exchange Act Sections 15(c) ("Registration and regulation of brokers and dealers") and 17(a) ("Records and Reports"), Exchange Act Rules 15c3-1 ("Net capital requirements for brokers or dealers"), 17a-3 ("Records to be made by certain exchange members, brokers and dealers"), and 17a-11 ("Notification provisions for brokers and dealers"), and FINRA Rules 4110 ("Capital Compliance"), 4511 ("General Requirements"), 2010 ("Standards of Commercial Honor and Principles of Trade"), and 3110 ("Supervision") regarding net capital, books and records, notification, and supervision.

To settle the matter, the firm consented to a censure and a $40,000 fine.