Firms that carry customer accounts are required under the to maintain a "Special Reserve Bank Account for the Exclusive Benefit of Customers" and to deposit therein, on a weekly basis, the funds required by the reserve calculation.
This requirement is intended to ensure that, in the event a broker-dealer is liquidated by the Securities Investor Protection Corporation ("SIPC"), the broker-dealer will have sufficient assets on hand to satisfy its customer obligations. For this…
In this case, the borrowing firm entered into securities loans with customers of introducing brokers who cleared through the borrowing firm. FINRA found that the borrowing firm failed to comply with two provisions of ("Customer Protection — Permissible Use of Customers' Securities") and also caused inaccurate statements to be made to lending customers.
First, the AWC stated that the borrowing firm entered into securities loans with customers of introducing brokers without…
The initial issue raised by the AWC concerns the timeliness of reviews. In this regard, the AWC states that the firm in question revised its WSPs to require the responsible principal to review its Reg NMS ISO Orders Report "in real time to identify trade-throughs." Notwithstanding this language, the AWC states that the firm actually reviewed the relevant report "at month's end." As a result, system issues, such as the ones the firm experienced, where not identified promptly. Indeed, in the…
The AWC charges the firm with a violation of Exchange Act Rule 17f-2 due to the firm's failure to fingerprint "non-registered associated persons" employed by US and non-US firm affiliates. However, it is not clear how the firm's failure to fingerprint such persons could trigger a violation of Rule 17f-2, as such persons do not seem to fall within the scope of Rule 17f-2.
It was previously my understanding that FINRA read Rule 17f-2 broadly to reach any person, whether an employee of…
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Firms that carry customer accounts are required under the to maintain a "Special Reserve Bank Account for the Exclusive Benefit of Customers" and to deposit therein, on a weekly basis, the funds required by the reserve calculation.
This requirement is intended to ensure that, in the event a broker-dealer is liquidated by the Securities Investor Protection Corporation ("SIPC"), the broker-dealer will have sufficient assets on hand to satisfy its customer obligations. For this…
In this case, the borrowing firm entered into securities loans with customers of introducing brokers who cleared through the borrowing firm. FINRA found that the borrowing firm failed to comply with two provisions of ("Customer Protection — Permissible Use of Customers' Securities") and also caused inaccurate statements to be made to lending customers.
First, the AWC stated that the borrowing firm entered into securities loans with customers of introducing brokers without…
The initial issue raised by the AWC concerns the timeliness of reviews. In this regard, the AWC states that the firm in question revised its WSPs to require the responsible principal to review its Reg NMS ISO Orders Report "in real time to identify trade-throughs." Notwithstanding this language, the AWC states that the firm actually reviewed the relevant report "at month's end." As a result, system issues, such as the ones the firm experienced, where not identified promptly. Indeed, in the…
The AWC charges the firm with a violation of Exchange Act Rule 17f-2 due to the firm's failure to fingerprint "non-registered associated persons" employed by US and non-US firm affiliates. However, it is not clear how the firm's failure to fingerprint such persons could trigger a violation of Rule 17f-2, as such persons do not seem to fall within the scope of Rule 17f-2.
It was previously my understanding that FINRA read Rule 17f-2 broadly to reach any person, whether an employee of…