Apex Clearing Corporation Faces $3.2 Million Fine in FINRA Settlement

In a settlement with FINRA, Apex Clearing Corporation, a Dallas-based firm that provides clearing services for introducing broker-dealers, is paying a $3.2 million fine after being found in violation of securities lending regulations. While financial penalties are common in the industry, this case tells a much bigger story about trust, transparency, and accountability—issues that are increasingly at the heart of how financial services firms do business.

From 2019 to 2023, Apex was involved in some problematic practices around its Fully Paid Securities Lending Program (FPLP). Essentially, this program allowed retail customers to lend out their fully paid or excess margin securities, typically in exchange for a fee. But for certain customers, those fees simply didn’t exist. They were taking on all the risks of lending their securities—like potential tax consequences or losing their voting rights—without the reward of any loan fees.

Now, it's important to note that this wasn’t a widespread problem across all customers, but it affected enough that it caught the attention of FINRA. In addition to that, customers were kept in the dark about some of the important risks involved in securities lending—risks that should have been disclosed under FINRA Rule 4330.

It wasn’t until FINRA conducted an examination that Apex realized its serious oversight. Between March 2021 and April 2023, millions of customers didn’t receive all of the required disclosures about the risks they were taking on.

Misleading Documents & Broken Promises

The story takes another turn when we look at the documents Apex sent to its introducing broker-dealers. These materials promised that customers would earn loan fees for lending out their shares under the FPLP. The problem? For some customers, this simply wasn’t true. Apex didn’t deliver on the loan fees it had promised, leading to accusations of misleading customers about how the program worked.

It gets even murkier with some versions of these documents stating that customers would receive compensation via management fee reductions, even though no such fees existed. This wasn’t just a small misstep—it was a significant failure to communicate clearly and accurately with retail investors, violating FINRA Rule 2210, which lays out rules for truthful communications with investors.

Lack of Supervision

And here’s where it gets a little technical, Apex failed to establish a proper supervisory system to oversee its FPLP. According to FINRA Rule 3110, firms are required to have systems in place that are designed to prevent these kinds of missteps and to ensure that customer participation is appropriate. But Apex didn’t have procedures to properly assess whether fully paid securities lending was a good fit for its retail clients. The firm relied too much on introducing broker-dealers, who didn’t always have the tools or oversight to make sure customers were well-informed and protected.

The settlement comes with a $3.2 million fine, a censure (essentially a formal slap on the wrist), and the promise that Apex will take steps to correct these issues. Apex has agreed to implement new supervisory procedures and fix the underlying issues that allowed these violations to happen. In fact, a senior member of Apex’s management will be required to certify within the next six months that the firm has addressed all the problems and put in place processes to make sure this doesn’t happen again.

These violations aren’t just about technical mistakes—they’re about how a firm treats its clients and communicates the risks they’re facing. In a world where financial firms handle increasingly complex services for everyday investors, the expectation is that they’ll be compliant, transparent, accountable, and most importantly, trustworthy.

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