BD Fined after Self-Reporting Net Capital Miscalculation
The SEC fined and censured a broker-dealer who misrepresented its net capital by failing to account for SBA loans taken with its parent company as co-borrowers. The net capital miscalculation was discovered by a new auditor and reported by the firm in amended FOCUS filings. The SEC cites violations of Rule 15c3-1 (net capital rule) for operating with a net capital deficiency.
OUR TAKE: This is the type of technical enforcement action that compliance officers dread: no client harm, technical violation, self-reported. Yet, the SEC still brings an enforcement case that highlights a breakdown. The SEC does not give credit for good intent, only for compliance programs that prevent any and all violations.