SEC Charges Owners of Broker-Dealer with Aiding and Abetting Violations of Net Capital Requirements

The Securities and Exchange Commission (SEC) has taken legal action against Ustocktrade LLC and its proprietor, Anthony Weeresinghe from Chestnut Hill, Massachusetts, charging them with aiding and abetting a registered broker-dealer’s repeated violations of the SEC’s net capital provisions. These provisions are in place to ensure broker-dealers possess sufficient liquid assets to meet their obligations to customers.

According to the SEC’s complaint, Weeresinghe, through Ustocktrade LLC, owned and exercised control over an SEC-registered broker-dealer named Ustocktrade Securities, Inc. This broker-dealer operated an alternative trading system that targeted college students and other retail investors, encouraging them to participate in day trading. The complaint alleges that Weeresinghe and Ustocktrade LLC were made aware of 11 distinct instances in 2021 when the broker-dealer’s net capital fell below the required minimum. It is claimed that during these periods, Ustocktrade LLC and Weeresinghe facilitated the broker-dealer’s net capital breaches by continuing to operate its customer trading platforms for unlawful securities transactions. Furthermore, the complaint states that in November 2021, during the broker-dealer’s final net capital deficiency, Weeresinghe directed the transfer of a significant portion of the remaining cash to Ustocktrade LLC, thereby exacerbating the financial position of an already deficient broker-dealer. Ultimately, in October 2022, the broker-dealer chose to withdraw and terminate its SEC registration.

The SEC’s complaint, officially lodged in the U.S. District Court for the Southern District of New York, charges Weeresinghe and Ustocktrade LLC with aiding and abetting the broker-dealer’s contraventions of the net capital provisions as stipulated in Section 15(c)(3) of the Exchange Act of 1934, alongside Rule 15c3-1. Although Weeresinghe and Ustocktrade LLC have not admitted or denied the allegations, they have agreed to reach a settlement with the SEC. Consequently, a final judgment will be issued that enforces permanent injunctions and penalties. Ustocktrade LLC is set to pay a penalty of $75,000, while Weeresinghe will pay a penalty of $10,000 as part of this resolution.