FINRA Censures, Fines Texas-Based Broker-Dealer $25K for Net Capital Violations

The Financial Industry Regulatory Authority has censured and fined SWBC Investment Services LLC $25,000 for operating below its required minimum net capital for 16 business days and filing inaccurate financial reports with the regulator, according to a letter of acceptance, waiver, and consent.

The San Antonio-based broker-dealer’s net capital deficiency fluctuated between approximately $76,000 and $2 million during a span in February and March 2024, FINRA said.

SWBC was unaware of the deficiency at the time, according to the AWC, because it had misclassified unsecured receivables held in its parent company’s general operating account as “allowable” assets. Under Securities Exchange Act Rule 15c3-1, broker-dealers must deduct non-allowable assets –  those not readily convertible to cash – when computing net capital. Because the funds were not segregated or subject to legal restrictions limiting the parent’s use, they did not qualify as allowable, according to FINRA.

Between December 2023 and March 2024, the firm also maintained inaccurate net capital computations and, as a result, filed inaccurate Financial and Operational Combined Uniform Single, or FOCUS, reports with FINRA for December 2023 through February 2024.

Exchange Act Rule 17a-11 requires broker-dealers to notify regulators on the same day their net capital falls below the required minimum. SWBC did not file its net capital deficiency notice with the SEC and FINRA until seven days after the deficiency period had ended.

SWBC, a FINRA member since 2005, consented to the sanctions without admitting or denying the findings.

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