Settlement with Broker-Dealer for Charged Customer Protection and Net Capital Rule Violations

The SEC found that respondent broker-dealer, an IRS-authorized IRA custodian, ran afoul of the Customer Protection and Net Capital Rules from April 1, 2001 through August 15, 2001, due to its deposit of customer funds held for IRA customers into two escrow accounts at Matrix Capital Bank during that time period. Failures to properly account for the funds on deposit at Matrix resulted in reserve account deficiencies and an aggregate indebtedness to net capital ratio that reached a high of 87 to 1 (vs. a limit of 15 to 1). The same problem also caused failures to maintain accurate books and records and to comply with broker-dealer reporting provisions.