NexPoint Securities Settles FINRA Charges of Net Capital Deficiencies

NexPoint Securities, Inc. recently resolved Financial Industry Regulatory Authority (FINRA) charges relating to its failure to maintain the minimum required net capital while conducting a securities business. According to a Norton Rose Fulbright news article, the regulatory action focused on 44 instances in which the firm operated below the mandated threshold.

The Acceptance, Waiver, and Consent decree (Department of Enforcement Financial Industry Regulatory Authority RE: NexPoint Securities, Inc.) states that the deficiencies arose from misclassifications of assets, including deferred tax assets, federal tax prepayments, and commissions receivable from affiliated mutual fund sales.

The errors led to overstated net capital figures and inaccurate financial reporting, affecting both internal records and formal submissions to regulators.

Specifically, FINRA’s investigation determined that the misclassifications resulted in inaccurate general ledgers, net capital computations, and monthly FOCUS reports. The firm overstated net capital by up to $814,337 and failed to submit required notifications to FINRA and the SEC for multiple days when capital fell below regulatory requirements.

The regulator also identified deficiencies in NexPoint’s internal guidance and oversight, citing weak supervisory processes and inadequate verification of financial notifications. These lapses prevented the firm from properly identifying and reporting all net capital deficiencies.

FINRA concluded that the firm’s supervisory system was ineffective and failed to meet established standards for accuracy and oversight.

As a consequence, FINRA cited violations of several Exchange Act Sections and FINRA Rules. The regulatory findings emphasized both operational and supervisory shortcomings in capital compliance.

The settlement requires NexPoint to accept a censure, pay a $50,000 fine, and provide a written certification confirming remediation from senior management within 60 days.

The firm must implement an effective supervisory system, including documented procedures for net capital compliance, to prevent recurrence of similar deficiencies.

Financial industry lawyers who read the decree will be reminded that the role of accurate asset classification, rigorous reporting, and robust oversight cannot be overstated in maintaining regulatory compliance.