Large Broker/Custodian Fined $2 Million for Overnight Net Capital Violations
FINRA fined a large broker/custodian $2 Million for violating its net capital requirements when it transferred overnight cash balances to its parent company. According to FINRA, the firm transferred $1 Billion for overnight investment and recorded the transaction as an unsecured loan. The transfer resulted in significant net capital deficiencies. According to FINRA, the firm’s Treasury function failed to consult the Regulatory Reporting group. FINRA faults the firm for weak supervisory controls. Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement, said, “Communication between risk functions within a firm is essential.”
OUR TAKE: Lack of communication between separate functions affects many large firms. Without adequate executive oversight, firms can trip over regulatory wires.