CapFi Financial Partners LLC has been issued with a fine by the Financial Industry Regulatory Authority (FINRA) after the firm’s CEO used the corporate credit card to pay for plane tickets and lodging accommodations for family members and the firm failed to classify these properly.
From February 2016 to February 2018, MK – CapFi’s owner, CEO, and CCO – used the firm’s credit card and bank account to pay for approximately $265,000 of his personal expenses. MK’s personal expenses included plane tickets and lodging accommodations for family members, as well as purchases for goods or services with no connection to business.
CapFi subsequently misclassified MK’’s personal expenses as business expenses of the firm, rather than as compensation to MK, on the firm’s general ledger, causing the firm’s books and records and its FOCUS reports to be inaccurate.
For instance, for the fourth quarter of 2016, CapFi reported business expenses of approximately $100,000 on its general ledger and in its quarterly FOCUS report, of which approximately $75,000 were personal expenses of MK. As a result, CapFi’s books and records, as well as its FOCUS report, understated the amount of compensation paid to MK and overstated the firm’s expenses.
By virtue of the foregoing, CapFi violated Section 17(a) of the Exchange Act and Exchange Act Rules 17a-3 and 17a-5 thereunder, and FINRA Rules 4511 and 2010.
As a part of the settlement with FINRA, CapFi consents to the imposition of a censure and a fine in the amount of $15,000.