Nomura Securities International, Inc. (NSI) has agreed to pay a fine of $625,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From at least January 2016 through April 2022, NSI included accounts of two affiliated foreign broker-dealers in calculations of an aggregation unit’s net positions. However, those affiliates lacked self-regulatory oversight, and were not subject to SEC examination.

By including those affiliates’ accounts in the aggregation unit’s net positions, NSI did not accurately calculate those net positions, did not accurately mark some of the aggregation unit’s sales as long or short, and did not locate securities for some short sales where required.

Therefore, NSI violated Regulation SHO Rule 200(f) and FINRA Rule 2010.

Further, from at least January 2016 through April 2022, NSI failed to establish and maintain a supervisory system and written supervisory procedures that were reasonably designed to achieve compliance with Rule 200(f). NSI’s supervisory system, including its written procedures, failed to require the exclusion of entities that lack self-regulatory oversight and are not subject to Commission examination from aggregation unit netting.

By at least 2016, NSI became aware that Rule 200(f) did not permit the inclusion of its two affiliated foreign broker-dealers in aggregation unit netting, but NSI failed to take reasonable steps to remedy that problem in a timely manner.

Although NSI began working to remove those affiliates’ accounts from the aggregation unit in 2016, the work stopped in 2017.

NSI did not restart that work until FINRA raised the issue with the firm in 2019, and NSI did not complete the work until April 2022.

By failing to establish and maintain a supervisory system and written supervisory procedures that were reasonably designed to achieve compliance with Rule 200(f), NSI violated FINRA Rule 3110 and 2010.

In addition to the $625,000 fine, Nomura Securities International has agreed to a censure and an undertaking that a member of its senior management who is a registered principal of the firm must certify in writing that the firm’s current aggregation unit structure complies with Rule 200(f).