NASD Regulation Fines Banc One Capital Markets, Inc. $1.8 Million For Net Capital, Customer Reserve and Recordkeeping Violations

Apr 05, 2001, 01:00 ET from NASD Regulation, Inc.

    WASHINGTON, April 5 /PRNewswire/ -- NASD Regulation, Inc., today announced
 it has censured and fined Banc One Capital Markets, Inc., $1.8 million for
 inadequate net capital, insufficient customer reserves and inaccurate books
 and records.  Banc One, a broker/dealer subsidiary of Bank One Corporation, a
 bank holding company, entered into a settlement with NASD Regulation in which
 the firm neither admitted nor denied the allegations.
     NASD Regulation found that Banc One operated from February 1999 through
 August 1999 without a reliable accounting system.  The violations occurred
 after a conversion of Banc One's computerized securities processing and
 accounting software in early 1999.  The conversion caused numerous accounting
 entries to post incorrectly.  As a result, account balances in the firm's
 general ledger did not match the underlying transaction data balances.  Banc
 One was unable to reconcile these differences promptly, and by March 1999 the
 dollar amount of the differences exceeded $1 billion.  The total number of
 unreconciled items increased from 1,000 in April 1999 to over 4,000 by July
 1999.
     Banc One failed to treat the accounting differences properly when it
 prepared and reported its net capital and customer reserve computations.
 Instead of treating each difference on a gross basis, as is required, Banc One
 calculated its net capital and customer reserve using the aggregate net of all
 differences.  The firm's improper accounting treatment of these differences
 caused Banc One to operate from February 1999 through August 1999 with net
 capital deficiencies ranging from $520 million to $1.27 billion, and customer
 reserve account deficiencies ranging from $380 million to $1.05 billion.
     Although required to do so by federal securities laws, Banc One failed to
 promptly notify regulators that its books and records were unreliable.  The
 firm also failed to give proper notice that it was conducting a securities
 business with inadequate net capital, and that its customer reserve account
 was deficient.  Maintaining reliable records, adequate net capital and
 customer reserves are critical to investor confidence, protection and overall
 market integrity.
     In resolving this matter, and imposing these sanctions, NASD Regulation
 took into consideration Banc One's cooperation during the investigation, that
 the firm's reconciliation process showed customer accounts were not impacted,
 and the steps the firm took to restructure its operations.  This case resulted
 from an investigation conducted by NASD Regulation's Chicago District Office.
     Investors can obtain more information about NASD Regulation as well as the
 disciplinary record of any NASD-registered broker or brokerage firm by calling
 800-289-9999, or by sending an e-mail through NASD Regulation's Web Site,
 http://www.nasdr.com .  The National Association of Securities Dealers, Inc.,
 is the largest securities-industry, self-regulatory organization in the United
 States.  It is the parent organization of NASD Regulation, Inc.; the American
 Stock Exchange, LLC; and NASD Dispute Resolution, Inc.  For more information
 about the NASD and its subsidiaries, please visit the following Web sites:
 www.nasd.com; www.nasdr.com; www.amex.com; and www.nasdadr.com.
 
 

SOURCE NASD Regulation, Inc.
    WASHINGTON, April 5 /PRNewswire/ -- NASD Regulation, Inc., today announced
 it has censured and fined Banc One Capital Markets, Inc., $1.8 million for
 inadequate net capital, insufficient customer reserves and inaccurate books
 and records.  Banc One, a broker/dealer subsidiary of Bank One Corporation, a
 bank holding company, entered into a settlement with NASD Regulation in which
 the firm neither admitted nor denied the allegations.
     NASD Regulation found that Banc One operated from February 1999 through
 August 1999 without a reliable accounting system.  The violations occurred
 after a conversion of Banc One's computerized securities processing and
 accounting software in early 1999.  The conversion caused numerous accounting
 entries to post incorrectly.  As a result, account balances in the firm's
 general ledger did not match the underlying transaction data balances.  Banc
 One was unable to reconcile these differences promptly, and by March 1999 the
 dollar amount of the differences exceeded $1 billion.  The total number of
 unreconciled items increased from 1,000 in April 1999 to over 4,000 by July
 1999.
     Banc One failed to treat the accounting differences properly when it
 prepared and reported its net capital and customer reserve computations.
 Instead of treating each difference on a gross basis, as is required, Banc One
 calculated its net capital and customer reserve using the aggregate net of all
 differences.  The firm's improper accounting treatment of these differences
 caused Banc One to operate from February 1999 through August 1999 with net
 capital deficiencies ranging from $520 million to $1.27 billion, and customer
 reserve account deficiencies ranging from $380 million to $1.05 billion.
     Although required to do so by federal securities laws, Banc One failed to
 promptly notify regulators that its books and records were unreliable.  The
 firm also failed to give proper notice that it was conducting a securities
 business with inadequate net capital, and that its customer reserve account
 was deficient.  Maintaining reliable records, adequate net capital and
 customer reserves are critical to investor confidence, protection and overall
 market integrity.
     In resolving this matter, and imposing these sanctions, NASD Regulation
 took into consideration Banc One's cooperation during the investigation, that
 the firm's reconciliation process showed customer accounts were not impacted,
 and the steps the firm took to restructure its operations.  This case resulted
 from an investigation conducted by NASD Regulation's Chicago District Office.
     Investors can obtain more information about NASD Regulation as well as the
 disciplinary record of any NASD-registered broker or brokerage firm by calling
 800-289-9999, or by sending an e-mail through NASD Regulation's Web Site,
 http://www.nasdr.com .  The National Association of Securities Dealers, Inc.,
 is the largest securities-industry, self-regulatory organization in the United
 States.  It is the parent organization of NASD Regulation, Inc.; the American
 Stock Exchange, LLC; and NASD Dispute Resolution, Inc.  For more information
 about the NASD and its subsidiaries, please visit the following Web sites:
 www.nasd.com; www.nasdr.com; www.amex.com; and www.nasdadr.com.
 
 SOURCE  NASD Regulation, Inc.