Recently, FINRA accepted a Letter of Acceptance, Waiver, and Consent (AWC) issued by a large New York-based member firm with a general securities business. The AWC addressed allegations that the firm failed to collect initial and maintenance margin on over-the-counter equity option contracts with two affiliated entities between October 2012 through March 2021.

The firm accepted and consented that, in violation of various sections of the Exchange Act, Exchange Act Rules, Federal Reserve Regulations, and FINRA Rules, it: (i) failed to collect requisite margins; (ii) extended credit in cash accounts; (iii) reported net capital inaccurately; (iv) filed inaccurate FOCUS Reports; and (v) maintained inaccurate schedules to the firm’s general ledger. The firm self-reported the issue to FINRA, initiated remediation, and implemented an automated process to calculate margin requirements. The AWC emphasized the firm’s commitment to compliance and the steps taken to address the violations, including conducting an internal investigation and sharing the results with FINRA.

As part of the proposed settlement, the firm consented to a censure and a $1.4 million fine without admitting or denying the findings. The firm submitted the AWC on the condition that, if accepted, FINRA will not bring any future actions against the respondent under the same allegations.