SEC settles with L.A.-based firm over customer protection violations
Electronic Transaction Clearing censured and will pay $80,000 penalty.
Electronic Transaction Clearing, a Los Angeles-based broker-dealer, has agreed to settle charges by the Securities and Exchange Commission that the firm violated the Customer Protection Rule and illegally placed more than $25 million of customers’ securities at risk in order to fund its own operations. The firm will pay an $80,000 penalty and be censured, the SEC said in a release.
According to the SEC’s order, in 2015 ETC improperly transferred almost $8 million of fully paid securities belonging to cash customers to an account at another clearing firm to meet margin requirements on borrowed funds.
The agency also charged that ETC used more than $17 million of securities belonging to two customers to borrow funds without consent, commingled customers’ securities and allowed a customer’s excess margin securities to be loaned out by the other clearing firm.
“As this case shows, no broker-dealer is allowed to use its customers’ securities to fund its own operations,” said Michele W. Layne, director of the SEC’s Los Angeles regional office.
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