FINRA Suspends FinOP for Inaccurate Financial Reporting

FINRA suspended a Financial and Operations Principal ("FinOP") for causing his firm to file inaccurate financial reports and operate below its required net capital levels.

According to the AWC, the FinOP was responsible for calculating the firm’s net capital and filing its FOCUS reports. FINRA found that the FinOP was aware that several corporate resolutions approving capital contributions through debt forgiveness had been backdated. Despite this, the FinOP used the backdated dates when approving the firm’s net capital computations, resulting in inaccurate calculations. FINRA added that the FinOP prepared and filed FOCUS reports that misstated the firm’s net capital for multiple reporting periods.

FINRA found that the FinOP knew the firm was below its minimum required net capital on numerous occasions by amounts reaching approximately $2 million. FINRA determined that the FinOP allowed the firm to continue conducting a securities business during these periods of deficiency and failed to file timely notifications with FINRA and the SEC, submitting reports more than 50 days late.

FINRA also stated that the FinOP was responsible for performing the firm’s weekly customer reserve calculations. FINRA found that the FinOP either failed to conduct the required calculations or performed them incorrectly by misclassifying certain customer deposits. FINRA determined that these errors caused the firm to maintain insufficient funds in its Reserve Account, resulting in multiple deficiencies totaling up to approximately $220,000. FINRA further stated that the FinOP caused the firm to misstate its customer reserves on its books and records and to file inaccurate FOCUS reports.

FINRA determined that the broker violated FINRA Rules 2010 ("Standard of Commercial Honor and Principles of Trade"), 4110 ("Capital Compliance"), and 4511 ("General Requirements").

The individual consented to (i) a three-month suspension from associating with any FINRA member as a FinOP, (ii) a requirement to requalify as a FinOP by passing the requisite examination prior to acting in that capacity, and (iii) a $10,000 fine.