Spartan Capital Securities, LLC has agreed to pay a fine of $115,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Between June 2021 and August 2023, Spartan failed to timely respond to three requests made pursuant to FINRA Rule 8210. Spartan did not fully comply with these three requests until after FINRA issued four follow-up FINRA Rule 8210 requests and pursued three expedited proceedings to compel its compliance. Therefore, Spartan violated FINRA Rules 8210 and 2010.
In 2022, FINRA was examining Spartan’s calculation of its net capital, including its treatment of non-allowable assets such as non-cash compensation. For the purpose of that examination, on February 2, 2022, FINRA asked Spartan pursuant to FINRA Rule 8210 for information and documents relating to FINRA’s examination. The request contained six items, and Spartan’s response was due, after FINRA granted an extension of the deadline, by March 2, 2022.
Spartan failed to respond by the extended deadline.
On March 3, 2022, FINRA requested the information and documents for the second time, again pursuant to FINRA Rule 8210. Spartan’s response to the March 3 request was due, after FINRA granted another extension, by March 17, 2022.
Spartan again failed to respond by the extended deadline.
Subsequently, Spartan requested and FINRA granted a third extension of time to respond, until April 14, 2022.
Spartan failed to respond by that new extended deadline.
Due to Spartan’s failures to respond, FINRA initiated an expedited proceeding under FINRA Rule 9552 to suspend Spartan’s membership until it responded. One day before the suspension was set to take effect, Spartan provided a partial but incomplete response, leaving outstanding two items—records of the firm’s payment of non-cash compensation and documentation for a transaction affecting the firm’s net capital—that FINRA needed for its examination. Spartan also requested a hearing, which stayed the suspension.
Shortly before the hearing, on August 8, 2022, Spartan completed its response.
From June 2021 through August 2023, Spartan also has failed to reasonably supervise the firm’s compliance with FINRA Rule 8210. Among other things, Spartan did not have a reasonable system to track deadlines for Rule 8210 requests and the firm did not adequately staff its compliance department or train its existing staff to respond to Rule 8210 requests. Spartan failed to take reasonable measures to improve its supervision system despite facing three expedited proceedings for failures to respond to Rule 8210 requests in less than two years.
As a result, Spartan violated FINRA Rules 3110(a) and 2010.
On top of the fine, the firm has agreed to a censure and an undertaking to retain an independent consultant.
