FINRA fines securities firm for failing to use an escrow agent

Securities FINRA Securities Exchange Act

Recently, FINRA released its letter of acceptance, waiver, and consent (AWC) against a securities firm for allegedly failing to use an escrow agent to custody customer funds. Among other things, the firm deposited investor funds for both offerings into accounts that its registered representative established and controlled, rather than with a bank. According to FINRA, these actions, discovered during a firm examination, violated the Exchange Act § 15(c)(2), Rule 15c2-4 thereunder, and FINRA Rule 2010. The firm further failed to both “promptly return customer funds” when the contingency was not met and changed material terms in its 2020 offering; violating Exchange Act §10(b), Rule 10b-9 thereunder, and FINRA Rule 2010. The firm consented to receiving a censure and a $20,000 fine.