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Day: May 1, 2017

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.