FINRA fines Electronic Transaction Clearing for violating registration requirements
Electronic Transaction Clearing, Inc. has agreed to pay a fine of $100,000 for violations of FINRA registration requirements.
Between May 2017 and December 2021, the firm permitted eight individuals to operate in capacities for which they were not qualified or not properly registered pursuant to NASD Rules 1021, 1022, 1031, and 1032, or to FINRA Rules 1210 and 1220.
Specifically, at varying times throughout the period, ETC:
- failed to qualify and register one individual as a General Securities Principal, a Securities Trader Principal and a Securities Trader;
- failed to qualify and register one individual as a General Securities Principal, a General Securities Representative and a Securities Trader;
- failed to qualify and register two individuals as General Securities Principals and General Securities Representatives;
- failed to qualify and register one individual as a General Securities Principal;
- failed to qualify and register one individual as a General Securities Representative;
- failed to register one individual as a Financial and Operations Principal, a General Securities Representative and General Securities Principal; and
- failed to register one individual as a General Securities Representative.
Therefore, ETC violated NASD Rules 1021, 1022, 1031, and 1032, and FINRA Rules 1210, 1220 and 2010.
From at least December 2020 to December 2021, ETC failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the registration and qualification requirements of the FINRA Rules. ETC’s supervisory system was unreasonable in multiple respects.
First, ETC’s ongoing supervisory process relied on annual reviews that were not reasonably designed to identify changes in individuals’ job functions and registration statuses that occurred throughout the year.
Additionally, the firm’s WSPs did not provide reasonable guidance regarding how the annual reviews should be conducted, such as what qualification and registration information would be reviewed, how such information would be verified, or what steps would be taken if a missing qualification or registration were identified.
ETC revised its supervisory system, including its WSPs, relating to the registration and qualification of its associated persons in or around January 2022.
Therefore, ETC violated FINRA Rules 3110 and 2010.
On top of the fine, the firm has agreed to a censure.