FINRA fines CoreCap Investments for expanding its business beyond membership agreement
CoreCap Investments, LLC has agreed to pay a fine of $60,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Between April 26, 2021, and November 3, 2021, CoreCap operated more offices than permitted in its membership agreement without filing a continuing membership application for a material change in business operations and without obtaining approval from FINRA, in violation of FINRA Rules 1017(a) and 2010.
In 2019, FINRA advised CoreCap that it had exceeded the number of offices in its membership agreement in violation of NASD Rule 1017.3 In response, CoreCap filed a continuing membership application with FINRA requesting approval for a business expansion from 20 offices to 100 offices.
CoreCap thereafter amended its application to request approval for a business expansion to 55 offices. On May 8, 2020, CoreCap executed a membership agreement permitting it to “operate 55 [offices] (registered and unregistered), which includes the Main Office.” CoreCap subsequently executed another membership agreement on July 29, 2020, that also permitted it to operate 55 offices.
Despite the firm’s representation in its membership agreement, CoreCap operated 82 offices by April 26, 2021, and had thereby expanded its permitted business operations by 27 offices. Through this expansion, the firm also exceeded the safe harbor by 11 offices.
Although CoreCap recognized that it had expanded its business beyond its membership agreement and the safe harbor, it failed to reduce its number of offices to the permitted number of offices until a year after it discovered the violation and approximately five months after FINRA advised the firm that it had exceeded the number of offices allowed by its membership agreement and the safe harbor.
Therefore, the firm violated FINRA Rules 1017 and 2010.
In addition to the fine, the firm has agreed to a censure.