Charles Schwab Fined $2 Million by Finra
August 24 2015 - 12:06PM
Dow Jones News
Charles Schwab & Co. has been fined $2 million for capital
deficiencies and related supervisory failures, the Financial
Industry Regulatory Authority said Monday.
Finra found that on three occasions between May 15 and July 1
last year, Schwab was net capital deficient by up to $775 million
because the company had cash inflows that exceeded the amounts it
could invest with existing facilities. As a result, Schwab
transferred $1 billion to its parent company for overnight
investment, which the company's Treasury group approved as an
unsecured loan under a revolving loan agreement, according to
Finra.
Schwab didn't have procedures in place requiring its Treasury
group to consult with its regulatory reporting group, nor were
Schwab's supervisory systems reasonably designed to prevent the
Treasury group from entering into unsecured transfers with
affiliates that could result in a net capital deficiency, the
regulator said.
"Communication between risk functions within a firm is
essential" and "Schwab failed to coordinate across its various
business units which ultimately led to the firm's net capital
deficiencies," said Finra enforcement official Brad Bennett.
"Maintaining adequate net capital is critical to the protection of
customer assets," Mr. Bennett added.
Schwab neither admitted nor denied the charges.
"We regret that our procedures didn't flag the overnight cash
transfers in 2014," a representative for Schwab said, adding that
the company self-identified the matter, reported it immediately,
and has "put in place revised procedures and processes to assure it
will not happen again."
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 24, 2015 11:51 ET (15:51 GMT)
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