FINRA hits Electronic Transaction Clearing Inc. with a $100k Fine
Overview of Electronic Transaction Clearing Inc.
Electronic Transaction Clearing Inc. (ETC) is a brokerage firm based in Los Angeles, California. They operate under the supervision of the SEC’s Investment Adviser Public Disclosure website and offer a trio of services: clearing, settlement, and custodial services for institutional clients.
ETC takes pride in its distinctive business model, acting like it’s on a mission to revolutionize financial services. The company seems to believe it’s a trailblazer in a world filled with traditional financial institutions, boasting about its efforts to provide a unique and pioneering service.
ETC became a registered broker-dealer with the Commission in June 2008 and holds membership with the Financial Industry Regulatory Authority, Inc. It is a privately owned entity and functions as a wholly-owned subsidiary of ETC Global Holdings, Inc.
Allegations
Electronic Transaction Clearing Inc. (ETC) has faced disciplinary measures and financial penalties from the Financial Industry Regulatory Authority (FINRA) due to various violations. The company agreed to sanctions concerning its supervision systems, risk management controls, and market access operations, all of which were deemed insufficient in effectively handling risks.
In 2023, ETC consented to a $100,000 fine for breaching FINRA’s registration requirements. Moreover, in November 2023, FINRA imposed disciplinary actions that highlighted ETC’s deficiencies in risk controls and compliance obligations.
These regulatory interventions and fines underscore the heightened scrutiny and consequences ETC has encountered for its actions.
Details of the Case
On October 23, 2023, an AWC (Acceptance, Waiver, and Consent) was issued, censuring and imposing a total fine of $100,000 on a firm, with $5,000 payable to FINRA. The firm, without admitting or denying the findings, agreed to the sanctions. The findings indicated that the firm allowed individuals to operate in roles for which they were either unqualified or not properly registered.
It was revealed that the firm failed to establish, maintain, and enforce a supervisory system, including Written Supervisory Procedures (WSPs), that was reasonably designed to ensure compliance with FINRA’s registration and qualification requirements. The firm’s ongoing supervisory process relied on annual reviews that were inadequate in identifying changes in individuals’ job functions and registration statuses throughout the year.
Furthermore, the firm’s WSPs lacked reasonable guidance on how the annual reviews should be conducted. This included details on what qualification and registration information should be reviewed, how to verify such information, and the steps to be taken if missing qualifications or registrations were identified. Subsequently, the firm has revised its supervisory system, including its WSPs, about the registration and qualification of its associated persons.
Conclusion
In conclusion, Electronic Transaction Clearing Inc. (ETC) is a Los Angeles-based brokerage firm specializing in clearing, settlement, and custodial services for institutional clients. Operating under the SEC’s oversight, ETC presents itself as a trailblazer in the financial services sector.
However, recent disciplinary actions and financial penalties from FINRA have shed light on deficiencies in ETC’s risk management controls and compliance obligations. The firm faced a $100,000 fine in 2023 for breaching FINRA’s registration requirements and inadequacies in its supervisory system.
The case revealed lapses in ETC’s processes, including inadequate annual reviews and a lack of Written Supervisory Procedures, prompting the firm to revise its systems. These regulatory interventions underscore the challenges and consequences ETC has faced in maintaining compliance within the dynamic financial landscape.
