The SEC charged a broker-dealer's former part owner and one of its employees for inaccurate reporting and misleading statements that put the firm at risk of operating without the required net capital as required by SEA Rule 15c3-1 ("Net capital requirements for brokers or dealers").

According to the Complaint filed in the U.S. District Court for the Southern District of New York, the defendants misled the broker-dealer's third-party financial operations professional ("FINOP"), FINRA and the SEC about its net capital position. Specifically, the SEC alleged that the defendants knew the firm was at risk of operating without the required net capital and attempted to hide this fact. According to the SEC:

  • the former employee removed a six-figure liability for back rent from the broker-dealer's ledger and falsely reported to the FINOP that the liability was satisfied;

  • the former employee gave the FINOP a forged account statement, saying that the broker-dealer had more funds on deposit with its clearing firm than it actually had; and

  • the former part owner falsely stated to the FINOP and the SEC that a $1 million deposit represented a capital infusion when it was actually a loan.

The SEC is seeking permanent injunctions and civil monetary penalties.