FINRA Fines Nomura $125,000 for Inaccurately Calculating Its Net Capital

The Financial Industry Regulatory Authority (FINRA) has fined Nomura Securities International, Inc. (Nomura) $125,000 for inaccurately calculating its net capital.

Nomura has been a FINRA member since 1969. The firm is a subsidiary of Nomura Holding America Inc., a U.S. corporation, which is owned by Nomura Holdings, Inc., a Japanese corporation. Nomura provides investment banking and brokerage services to institutional customers and engages in principal transactions for its proprietary accounts. The firm has approximately 1,060 registered representatives in seven branch offices.

From June 2019 to March 2021, Nomura inaccurately calculated its net capital by misclassifying certain reverse repurchase agreements (reverse repos) with its corporate affiliate as allowable assets. Because the securities subject to the reverse repos were custodied in an account held by the affiliate, Nomura should not have classified the reverse repos as allowable assets for purposes of the firm's net capital calculations.

The firm's inaccurate calculations of its net capital resulted in material decreases to the firm's excess net capital in amounts ranging from approximately $183,000 to approximately $1.95 billion.

The firm's misclassification of reverse repos as allowable assets resulted in inflated tentative net capital calculations. This caused the firm to inaccurately calculate its Customer Reserve Formula by failing to take required concentration charges on three dates during the relevant period, in the amounts of $151,903,500, $458,218,957, and $460,589,242.

The firm's inaccurate net capital calculations also caused the firm to fail to maintain accurate books and records regarding its net capital calculations.

Additionally, during the relevant period, the firm failed to establish and maintain supervisory systems and procedures, including written supervisory procedures (WSPs), reasonably designed to ensure the accuracy of its net capital calculations.