The Financial Industry Regulatory Authority (FINRA) has fined Pershing $3m for failing to protect customer’s funds and for related supervisory failures.
FINRA said Pershing violated the Securities and Exchange Commission’s Customer Protection Rule, which requires firms to protect customers’ funds and securities from broker-dealer misuse and maintain certain asset levels in the event of the broker-dealer insolvency.
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From November 2010 to August 2011, Pershing, a unit of Bank of New York Mellon Corp failed to set aside adequate reserves to meet its reserve deposit requirements ranging from approximately $4m to $220m.
In addition, Pershing also violated the rule between July 2010 and September 2011 and failed to promptly obtain and later maintain physical possession of certain customers’ fully paid and excess margin securities thereby exposing customer funds and securities to risk.
FINRA also found that Pershing’s supervisory procedures were inadequate and the firm failed to implement a system to review and approve procedural changes.
Pershing neither admitted nor denied FINRA’s findings.
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By GlobalDataFINRA’s executive vice president and chief of enforcement Brad Bennett said: "Clearing firms have a fundamental responsibility to protect customer assets and must ensure that their supervisory systems are compliant with the Customer Protection Rule.
"Customers’ assets were at risk because Pershing failed to establish systems to vet procedural changes with material impact to the reserve and possession and control positions," he added.
