FINRA fines StratCap Securities for failure to maintain its minimum required net capital
StratCap Securities, LLC has agreed to a fine of $15,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Between October 13 and October 28, 2021, StratCap conducted a securities business on 12 consecutive business days while it failed to maintain its minimum required net capital. As a result, StratCap violated Section 15(c) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 15c3-1 promulgated thereunder, and FINRA Rules 4110(b) and 2010.
During the period from September 30, 2021 through October 28, 2021, the firm had a minimum net capital requirement of $250,000. On September 30 and October 20, 2021, the firm received capital contributions from its parent company totaling $530,000. On October 22, 2021, StratCap transferred $500,000 back to its parent company and the parent company returned the $500,000 to the firm on October 27, 2021.
The firm’s transfer of $500,000 on October 22, 2021 caused the firm to have insufficient funds to maintain its minimum net capital and constituted a withdrawal of equity capital within one year of its contribution, rendering that amount of the two capital contributions from its parent company not allowable.
Accordingly, the firm’s net capital fell below its minimum required net capital on 12 consecutive business days between October 13, 2021 through October 28, 2021, in amounts ranging from approximately $58,000 to approximately $700,000. During this period of net capital deficiency, the firm continued to operate a securities business by acting as a wholesale distributor of private placement offerings.
Therefore, Respondent violated Exchange Act § 15(c), Exchange Act Rule 15c3-1 and FINRA Rules 4110(b) and 2010.
In addition to the fine, the firm has agreed to a censure.