CF Secured has agreed to pay a USD125,000 fine as part of an agreement with the US Financial Industry Regulatory Authority (FINRA). CF Secured provides financing to prime brokerage clients. According to FINRA, between April 2018 and January 2019, CF Secured failed to calculate exactly its required customer reserve in three separate cases, leading to a shortfall of about USD126 million. The company’s failure to accurately calculate its customer reserve obligations has led the company to maintain inaccurate books and records and to make two regulatory filings inaccurately reporting its customer reserve.
In general, the reserve formula requires the company to calculate all the amounts it owes customers, (loans), and to compare the loans with the amounts customers owe it, (debits). If loans exceed debits, the company must deposit the difference in the reserve account. A shortfall occurs when the company finds that it previously has not made a sufficient deposit in its reserve account.