According to FINRA, Lampert Capital Markets Inc. was censured and fined $10,000 for conducting securities business while under its required minimum net capital by improperly including non-allowable assets in net capital computations.

The firm misclassified payment for order flow fees receivables, ranging between approximately $6,000 and $48,200, as allowable assets in its net capital calculations. This resulted in the firm overstating its net capital and excess net capital. At one point, the firm classified approximately $48,200 in non-allowable receivables as allowable assets and operated with actual net capital of approximately $88,500, creating a net capital deficiency of approximately $11,500.

The firm failed to maintain accurate books and records, overstating its allowable receivables, net capital, and excess net capital on six month-end FOCUS reports. Additionally, when the firm's net capital fell below its minimum requirement and below 120 percent of required minimum net capital, it failed to file required notices with FINRA or the SEC as mandated by regulations.

Net capital rules are designed to ensure broker-dealers maintain sufficient liquid assets to meet obligations to customers and counterparties. Payment for order flow receivables may not qualify as allowable assets because they may not be readily convertible to cash. Accurate classification of assets is critical for determining whether a firm meets net capital requirements. The failure to file required notices when net capital falls below thresholds prevents regulators from taking timely action to protect investors. Investors should understand that net capital violations indicate deficiencies in a firm's financial controls and management. FINRA BrokerCheck allows investors to review a firm's regulatory history, including net capital violations, helping them make informed decisions about broker-dealer selection. Strong financial controls and compliance with net capital rules are fundamental indicators of a firm's ability to safely handle customer assets.