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Day: March 22, 2018

Broker-Dealer Unlawfully Commingled and Pledged Client Assets

The SEC fined and censured a broker-dealer for violations of the customer protection rule arising from transactions with its clearing broker.  The SEC alleges the firm failed to properly segregate customer funds and securities held at its omnibus account at the clearing firm, which held unlawful liens against the assets.  The respondent failed to obtain the proper consent from clients to move assets.  The result of the violative transactions allowed the broker-dealer to borrow money from the clearing firm using client assets as collateral.  The transactions violated the customer protection rules.

OUR TAKE:  Hire a competent Financial Operations Principal.  Without expert help, a broker-dealer can easily and unwittingly violate the complicated and esoteric customer protection rules.