Jefferies has been fined $1 million by the Financial Industry Regulatory Authority (FINRA) after the watchdog found the Wall Street firm had repeatedly failed to maintain adequate balances in customer and broker-dealer reserve accounts over more than a decade.
Jefferies Fined $1m by FINRA Over Reserve Account Violations
According to FINRA, between September 2009 and July 2022 Jefferies inaccurately calculated its customer and proprietary accounts of broker-dealers (PAB) reserve formula.
The errors are said to have led to 136 customer reserve deficiencies and three PAB reserve deficiencies, at times amounting to shortfalls of more than $500 million.
FINRA said the failures resulted in the firm maintaining inaccurate books and records and filing incorrect regulatory reports.
The regulator added that the breaches violated the U.S. Securities Exchange Act, associated rules, and FINRA’s own standards of supervision and record-keeping.
Jefferies, which has been a FINRA member since 1963 and employs around 2,400 registered representatives, was also censured for not establishing and enforcing a supervisory system capable of preventing such errors.
The regulator said the firm’s procedures failed to ensure borrowed securities collateralised by non-qualified assets were properly accounted for.
The New York-based firm self-reported the issue and has since overhauled its supervisory systems.
FINRA credited Jefferies with “extraordinary cooperation,” noting it engaged an independent consultant to review historic breaches, corrected deficiencies in a timely manner and provided substantial assistance to investigators.
Despite this, FINRA said the firm’s long-running failures warranted a financial penalty and public censure to underline the importance of protecting client assets.
Jefferies accepted and consented to the findings by FINRA without admitting or denying them.
