The Financial Industry Regulatory Authority (FINRA) fined Apex Clearing Corporation USD 3.2 million for violations tied to its fully paid securities lending program, marking FINRA’s first case charging violations of FINRA Rule 4330 on permissible use of customers’ securities. The action focuses on Apex’s borrowing of introduced customers’ fully paid or excess margin securities in a program where participating retail customers were exposed to securities lending risks but did not receive any lending fee. From January 2019 through June 2023, Apex entered into securities loans without reasonable grounds to believe the loans were appropriate for customers who received no loan fee. FINRA also found Apex distributed documents to introducing broker-dealers that were sent to more than 5 million retail investors and misrepresented that customers would receive compensation, and failed to deliver required written disclosures to many enrolled customers from March 2021 through April 2023. The order also cites violations of FINRA Rules 2210, 3110 and 2010, including failures to establish and enforce a supervisory system and written supervisory procedures reasonably designed to achieve compliance with Rule 4330. Apex settled without admitting or denying the findings and agreed to certify that it has remediated the issues identified by FINRA.
Financial Industry Regulatory Authority 2025-02-04
Financial Industry Regulatory Authority fines Apex Clearing USD 3.2 million in first enforcement action under Rule 4330 for fully paid securities lending violations
FINRA fined Apex Clearing USD 3.2 million for violations in its fully paid securities lending program, marking the first enforcement of Rule 4330. Apex misrepresented compensation to retail investors and failed to deliver required disclosures, violating several rules. Apex settled without admitting or denying the findings and agreed to certify remediation.