Pershing has been hit with a $3 million fine from FINRA for supervisory failures and violating the SEC's Customer Protection Rule.
"Clearing firms have a fundamental responsibility to protect customer assets and must ensure that their supervisory systems are compliant with the Customer Protection Rule," Brad Bennett, FINRA's executive vice president and chief of enforcement said in a statement. "Customers' assets were at risk because Pershing failed to establish systems to vet procedural changes with material impact to the reserve and possession and control positions."
According to FINRA, the Jersey City-based custodian failed to maintain adequate reserves to meet its reserve deposit requirements with reserve deficiencies ranging from approximately $4 million to $220 million from November 2010 to August 2011.
Pershing also failed to promptly obtain and later maintain physical possession or control of certain customers' fully paid and excess margin securities, FINRA stated. As a result, those failures "exposed customer funds and securities to risk," the self-regulatory authority said.
In addition, Pershing's supervisory systems and procedures for its internal reports between July 30, 2010 and Aug. 31, 2011 were "inadequate," according to FINRA, and the firm then "failed to implement a system to review and approve procedural changes."
Pershing neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
"We are pleased to have amicably resolved this matter," a Pershing spokesman said. "The company has enhanced its controls in this important area."
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