According to FINRA, Nomura Securities International, Inc. was censured and fined $125,000 for failing to accurately calculate its net capital by misclassifying certain reverse repurchase agreements with its corporate affiliate as allowable assets.

Since the securities subject to the reverse repurchase agreements were under the corporate affiliate's custody and control, the firm should have classified the reverse repurchase agreements as non-allowable assets in its net capital calculations. As a result, in its daily net capital calculations, the firm overstated its net capital and excess net capital in amounts ranging from approximately $183,000 to approximately $1.95 billion.

The firm's miscalculation of its net capital resulted in inflated tentative net capital calculations that caused the firm to fail to account for certain instances when the value of a customer's margin account exceeded 25 percent of the firm's tentative net capital. As a result, the firm improperly omitted an undue concentration charge for its customer reserve formula in amounts ranging from $152 million to $461 million.

Due to the misclassification of the reverse repurchase agreements and resultant inaccurate net capital calculations, the firm filed inaccurate Financial and Operational Combined Uniform Single (FOCUS) reports. The firm failed to report the value of the reverse repurchase agreements and non-allowable assets and inaccurately reported its excess net capital.

The firm failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with net capital and customer reserve rules. The firm lacked supervisory systems and procedures reasonably designed to detect custodial arrangements in which securities subject to reverse repurchase agreements were held in the custody or control of a counterparty. The firm relied on an automated third-party system that was unable to detect whether securities subject to reverse repurchase agreements were within the custody or control of a counterparty.

This case underscores the critical importance of accurate net capital calculations, which are fundamental to a broker-dealer's financial integrity and customer protection.