While conducting a securities business, the Firm failed to maintain the required minimum net capital. The firm’s financial books and records, including the firm’s trial balances and net capital calculations, were inaccurate; the firm improperly netted payroll advances against its monthly payroll accrual, improperly included amounts held in a brokerage account as an allowable asset even though the firm did not have a Proprietary Accounts of Introducing Broker/Dealer (PAIB) agreement, failed to accrue some expenses and took a larger deduction for a fidelity bond deductible than it was permitted.
The Firm failed to report to FINRA statistical and summary information for complaints. NASD Rule 3070 reporting was inaccurate in that firm reports for these complaints included erroneous complaint dates, incorrect product codes, inaccurate problem codes and/or identified the wrong registered representative. In connection with some of its registered employees, the firm failed to amend or ensure the amendment of Uniform Applications for Securities Industry Registration or Transfer (Forms U4) to disclose customer complaints and the resolution of those complaints, and the firm also filed late Forms U4 amendments.
The Firm failed to have an adequate system to preserve instant messages (IM) sent or received by registered representatives of the firm; the firm did not archive IMs in a non-erasable, non-rewritable format.
The Firm failed to preserve for a period of not less than three years, the first two in an accessible place, copies of instant messages sent and received between several of the firm’s traders and an external party on certain days within a total of approximately 10 weeks, and the new account form and clearing agreement for one of the firm’s accounts at another broker-dealer. The firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning retention and review of electronic communications.
In response to an NASD Rule 8210 request, a firm principal orally asked the associated person originally responsible for the firm’s reviews of such electronic communications to gather and deliver the evidence of such reviews but the associated person realized he had misplaced the file and was directed by his supervisor to duplicate past reviews. Instead of duplicating such reviews using the same parameters as were in effect during the review period, the associated person re-conducted such reviews using changed and expanded parameters, signed and hand-wrote in dates of when he estimated the reviews took place, and delivered them to the secretary of the firm principal who was responding to the inquiry on the firm’s behalf. Without conducting any review of the newly created reports, the firm’s principal submitted them to FINRA as evidence of the past reviews and the firm failed to take reasonable steps to confirm that the subject reports represented authentic and contemporaneous evidence of supervisory reviews that were actually conducted during the review period.
The Firm failed to
record the identity of the person who accepted each customer order because it failed to update its order ticket form to reflect the identity of the person who accepted the order; and
to review Bloomberg emails and some firm employees’ instant messages
The Firm distributed a document, Characteristics and Risks of Standardized Options, that was not current, and the firm lacked procedures for advising customers with respect to changes to the document and failed to document the date on which it was sent to certain customers who had recently opened options accounts. Also, the firm’s compliance registered options principal did not document weekly reviews of trading in discretionary options accounts.