FINRA fines Nomura Securities International for inaccurate calculation of its net capital
Nomura Securities International, Inc has agreed to pay a fine of $125,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA)
From June 2019 to March 2021, Nomura inaccurately calculated its net capital by misclassifying certain reverse repurchase agreements (reverse repos) with its corporate affiliate as allowable assets. Because the securities subject to the reverse repos were custodied in an account held by the affiliate, Nomura should not have classified the reverse repos as allowable assets for purposes of the firm’s net capital calculations.
The firm’s inaccurate calculations of its net capital resulted in material decreases to the firm’s excess net capital in amounts ranging from approximately $183,000 to approximately $1.95 billion. As a result, Nomura violated Section 15(c) of the Securities Exchange Act of 1934, Rule I5c3-l, thereunder, and FINRA Rule 2010.
The firm’s misclassification of reverse repos as allowable assets resulted in inflated tentative net capital calculations. This caused the firm to inaccurately calculate its Customer Reserve Formula by failing to take required concentration charges on three dates during the relevant period, in the amounts of $151,903,500, $458,218,957, and $460,589,242.
As a result, the firm violated Exchange Act §15(c), Exchange Act Rule 15c3-3, and FINRA Rule 2010.
The firm’s inaccurate calculations of its net capital caused the firm to violate Exchange Act§ l 7(a), Exchange Act Rule l 7a-5, and FINRA Rule 2010 by filing 21 FOCUS Reports during the relevant period that inaccurately reported the firm’s excess net capital.
The firm’s inaccurate net capital calculations also caused the firm to violate Exchange Act§ l7(a), Exchange Act Rule l7a-3, and FINRA Rules 4511 and 2010 by failing to maintain accurate books and records regarding its net capital calculations.
Additionally, during the relevant period, the firm violated FINRA Rules 3110 and 20I0 by failing to establish and maintain supervisory systems and procedures, including written supervisory procedures (WSPs), reasonably designed to ensure the accuracy of its net capital calculations.
On top of the fine, the firm has agreed to a censure.