Electronic Transaction Clearing Inc. is settling charges that it put more than $25 million of its customers' securities at risk numerous times in 2015 to fund its own operations.
The SEC said Electronic Transaction Clearing improperly transferred almost $8 million of fully paid securities belonging to cash customers to an account at another clearing firm to meet margin requirements on borrowed funds. It also alleged that the company used $17 million of two customers' securities to borrow funds without consent.
The SEC order also stated that the broker/dealer improperly commingled customers' securities and allowed a customer's excess margin securities to be loaned out by another clearing firm.
Without admitting or denying the SEC's findings, the company agreed to the order, to pay an $80,000 penalty, to cease and desist from committing or causing any similar violations in the future and to be censured. Electronic Transaction Clearing cooperated with the SEC's investigation and has taken remedial steps to prevent future violations, the regulator said in a statement.