Apex Clearing to Pay $3.2 Million in FINRA Settlement Over Securities Lending Violations

Posted on March 14th, 2025 at 2:11 PM
Apex Clearing to Pay $3.2 Million in FINRA Settlement Over Securities Lending Violations

From the desk of Jim Eccleston at Eccleston Law

Apex Clearing, the clearing arm of Apex Fintech Solutions, has agreed to pay $3.2 million to settle FINRA allegations that it failed to ensure customers received compensation for lending their securities. As reported by Financial Planning, FINRA’s investigation found that from January 2019 to June 2023, Apex misled clients about its "paid securities lending program," violating Rule 4330.

According to FINRA, Apex Clearing allowed broker-dealer clients to enroll investors in a securities lending program, under which Apex borrowed securities and lent them out for a fee. While Apex, its broker-dealers, and customers were supposed to share in the revenue, FINRA determined that Apex never ensured investors actually received those payments.

FINRA also found that Apex had no reasonable basis to believe the program was appropriate for participating clients.

Investors faced additional risks, including losing Securities Investor Protection Corporation (SIPC) guarantees and receiving cash payments instead of dividends, which are often taxed at a higher rate.

Bill St. Louis, FINRA’s head of enforcement told Financial Planning that, “It is unreasonable to expect a customer to take on risks and the potential financial consequences of securities lending with no financial upside.” Apex agreed to the settlement without admitting or denying FINRA’s findings in an Acceptance, Waiver and Consent (“AWC”).

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

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