FINRA files complaint against Fusion Analytics Securities for records and net capital rules violation
The firm allegedly conducted a securities business on 26 days during which it failed to maintain the required minimum net capital.
The Department of Enforcement of the United States Financial Industry Regulatory Authority (FINRA) has filed a complaint against Fusion Analytics Securities LLC alleging that, between September 2014 and May 2018 (the “Relevant Period”), the firm failed to comply with critical books and records and net capital rules established by the Securities and Exchange Commission (SEC) and FINRA.
The complaint, filed on April 10, 2020, alleges that Fusion Analytics Securities conducted a securities business on 26 days during which it failed to maintain the required minimum net capital.
FINRA explains that the Net Capital Rule requires each broker-dealer to maintain, at all times, a certain minimum amount of net capital. The Net Capital Rule specifies required minimum net capital depending on the type of securities business conducted by a broker-dealer.
During the Relevant Period, the Net Capital Rule required Fusion Analytics Securities to maintain $5,000 in minimum net capital; however, the Firm was required to maintain $250,000 in minimum net capital on days in which it held customers’ securities or funds without promptly forwarding them.
On 24 days between September 2014 and October 2017, the firm conducted a securities business while it failed to maintain the $250,000 minimum net capital required on those days.
The Net Capital Rule also prohibits a broker or dealer from having its aggregate indebtedness exceed 1500% of its net capital. The Aggregate Indebtedness Standard requires a broker-dealer that commenced business more than one year ago to maintain net capital at least equal to six and two-thirds percent of the sum of its aggregate indebtedness. Fusion conducted a securities business on two dates when it failed to maintain the minimum net capital required pursuant to the Aggregate Indebtedness Standard.
This way, the firm violated Section 15(c) of the Exchange Act and Rule 15c3-1 (the “Net Capital Rule”), and violated FINRA Rules 4110(b) and 2010.
In addition, the firm failed to file with the SEC and FINRA a notice of financial deficiency disclosing that it did not maintain the minimum net capital required during the following periods: September 30, 2014 through and including February 3, 2017; on January 31,2018; and on April 30, 2018. Thereby, thee firm violated Section 17(a) of the Exchange Act and Rule 17a-11, and violated FINRA Rule 2010.
Furthermore, Fusion filed inaccurate quarterly FOCUS Reports. Therefore, it violated Section 17(a) of the Exchange Act and Rule 17a-5, and violated FINRA Rules 4511 and 2010.
Finally, the firm made and preserved inaccurate balance sheets, trial balances, general ledgers, and net capital computations. Thereby, it violated Section 17(a) of the Exchange Act and Rule 17a-3, and violated FINRA Rules 4511 and 2010.
The Department of Enforcement seeks, inter alia, that one or more of the sanctions provided under FINRA Rule 8310(a), including monetary sanctions, be imposed on Fusion Analytics Services.