Usa Financial Securities Llc

Allegations: THE COMMISSION ALLEGED THAT USA FINANCIAL BREACHED ITS FIDUCIARY DUTY IN CONNECTION WITH ITS RECEIPT OF THIRD-PARTY COMPENSATION FROM CLIENT INVESTMENTS WITHOUT FULLY AND FAIRLY DISCLOSING ITS CONFLICTS OF INTEREST. Status: Final Sanction Detail: USA FINANCIAL AGREED TO DISGORGEMENT OF $162,918.49 AND PREJUDGMENT INTEREST OF $26,537.20, AS WELL AS A MONETARY PENALTY OF $60,000. Summary: BEGINNING IN 2019, THE SECURITIES AND EXCHANGE COMMISSION'S ("SEC") ENFORCEMENT DIVISION BEGAN A NATIONAL "SWEEP" INVESTIGATION WITH RESPECT TO VARIOUS TYPES OF REVENUE-SHARING ARRANGEMENTS IN THE SECURITIES INDUSTRY, INCLUDING COMMONLY USED "SWEEP" PROGRAMS FOR CLIENTS' SHORT-TERM CASH MANAGEMENT. USA FINANCIAL SECURITIES CORPORATION'S ("USA FINANCIAL") CLEARING/CARRYING FIRM, PERSHING, OFFERS THESE ARRANGEMENTS TO INVESTORS THROUGH OUR FIRM. TO FACILITATE TRANSFERS OR FUNDS AWAITING INVESTMENT, MANY CLIENTS ELECTED TO PARTICIPATE IN PERSHING'S "CHOICE PLUS" CASH SWEEP PROGRAM AND DESIGNATE A MONEY MARKET FUND. CONSEQUENTLY, WE WERE INCLUDED IN THE SEC'S "SWEEP - SWEEP". ON AUGUST 3, 2021, USA FINANCIAL AGREED TO A SETTLEMENT WITH THE COMMISSION IN ORDER TO RESOLVE THE COMMISSIONS INQUIRY INTO OUR PARTICIPATION IN PERSHING'S CASH SWEEP PROGRAM. DURING THE RELEVANT PERIOD OF THE SEC'S INVESTIGATION, 2015-2020, USA FINANCIAL PARTICIPATED IN PERSHING'S CHOICE PLUS PROGRAM. THE CHOICE PLUS MONEY MARKET FUNDS PROVIDED REVENUE SHARE TO FIRMS BASED ON AVERAGE FUND BALANCES. USA FINANCIAL'S OPTIONS, AT THE TIME SPELLED OUT IN PERSHING'S SCHEDULE OF AVAILABLE MONEY MARKET FUNDS, WERE TO PARTICIPATE IN CHOICE PLUS OR UTILIZE NON-CHOICE PLUS MONEY MARKET FUNDS. BY UTILIZING THE CHOICE PLUS PROGRAM, PARTICIPATING INVESTORS DID NOT INCUR BROKERAGE FEES OR TICKET CHARGES ON MONEY MARKET FUND SWEEP DEPOSITS OR LATER REDEMPTIONS - CRITICAL COST-SAVING FEATURES FOR SHORT-TERM CASH MANAGEMENT HOLDINGS. MOREOVER, WE COMPARED HISTORICAL PERFORMANCE AMONG THE AVAILABLE MMF OPTIONS, AND PERSHING INFORMED US THAT REVENUE SHARING DID NOT AFFECT THESE MMFS' INVESTMENT RETURNS TO CLIENTS. THUS, WE BELIEVED IT WAS MORE ADVANTAGEOUS TO CLIENTS TO PARTICIPATE. IN PREPARATION OF OUR RESPONSE TO THE SEC, USA FINANCIAL SPOKE WITH OUR DESIGNATED PERSHING REPRESENTATIVES ON MULTIPLE OCCASIONS. THROUGHOUT OUR EARLY 2020 COMMUNICATIONS WITH PERSHING WE WERE STILL NEVER ADVISED THAT THERE WAS, IN FACT, AN ALTERNATIVE MMF GROUP AVAILABLE WITH THE SAME CLIENT-FAVORED FEATURES BUT WITHOUT A REVENUE SHARING COMPONENT. FINALLY, ON OCTOBER 1, 2020, USA FINANCIAL WAS CONNECTED TO PERSHING'S LEGAL DEPARTMENT. IN THAT CONVERSATION, IT WAS REVEALED TO US THAT PERSHING NOW MAINTAINS AN ADDITIONAL MMF GROUP, SO-CALLED "GROUP 0", IN PERSHING'S CHOICE PLUS PROGRAM. AS WE NOW UNDERSTAND IT, THIS "GROUP 0" PROVIDES ALL OF THE CLIENT BENEFITS OF THE CHOICE PLUS MMFS-NO TICKET CHARGES, NO TRANSACTION CHARGES-BUT PERSHING DOES NOT PAY REVENUE SHARING ON "GROUP 0" FUNDS. PERSHING LISTED NO "GROUP 0" OPTION IN ITS 2012 OR 2016 CLEARING AGREEMENT SCHEDULES. INDEED, EVEN PERSHING'S NEW DESIGNATION-"GROUP 0"-EVIDENCES THAT THIS ALTERNATIVE WAS NOT THEN IN EXISTENCE. PERSHING DID NOT COMMUNICATE THE EXISTENCE OF ANY "GROUP 0" FUNDS TO USA FINANCIAL AT ANY TIME PRIOR TO OCTOBER 1, 2020. "GROUP 0" WAS NOT ANNOUNCED BY PERSHING NOR AVAILABLE TO USA FINANCIAL WHEN OUR CHOICE PLUS MMF SELECTIONS WERE MADE IN 2012 AND 2016. UNTIL PERSHING'S REVELATION, WE BELIEVED OUR "DEFAULT" MMF SELECTIONS WERE THE BEST AVAILABLE FOR CLIENTS SEEKING SHORT-TERM CASH MANAGEMENT SOLUTIONS AT THE LOWEST AVAILABLE COST-I.E., WITHOUT TRANSACTION COSTS OR TICKET CHARGES. USA FINANCIAL DID NOT INFORM OUR ADVISERS THAT CHOICE PLUS PROVIDED OUR FIRM WITH REVENUE SHARE NOR DID WE PROMOTE OR INCENTIVIZE FINANCIAL ADVISERS TO RECOMMEND THE CHOICE PLUS MMFS OVER PERSHING'S OTHER AVAILABLE MMFS. USA FINANCIAL RECEIVED, IN THE AGGREGATE, AN EXTRAORDINARILY SMALL AMOUNT OF REVENUE SHARING FROM PERSHING OVER THE ENTIRE FIVE-YEAR RELEVANT PERIOD, ILLUSTRATING THE LACK OF SIGNIFICANCE OUR FIRM PLACED ON PERSHING'S CHOICE PLUS PROGRAM. WHILE SOME INDUSTRY FIRMS RECEIVED 25% OF THEIR OVERALL REVENUE FROM CASH-SWEEP REVENUE, USA FINANCIAL'S REVENUE SHARE ACCOUNTED FOR ONLY 0.22% OF OUR FIRM'S OVERALL REVENUE.

Allegations: THE STATE OF FLORIDA ALLEGED THAT OUR FIRM FAILED TO PROPERLY REGISTER OUR BRANCH OFFICES PURSUANT TO CHAPTER 517, FLORIDA STATUTES, WHEN BRANCH OFFICE REGISTRATION BECAME AN ELECTRONIC PROCESS VIA THE WEBCRD SYSTEM. OUR FIRM TRIED TO PROPERLY REGISTER OUR BRANCH OFFICES ELECTRONICALLY BY CONTACTING WEBCRD FOR GUIDANCE. OUR FAILURE TO REGISTER OUR BRANCHES WAS NEITHER INTENTIONAL NOR INADVERTANT, BUT INSTEAD RESULTED FROM A TECHNICAL MISUNDERSTANDING OF THE ELECTRONIC REGISTRATION PROCESS. OUR FIRM WAS PROPERLY REGISTERED AS A BROKER-DEALER AND INVESTMENT ADVISER AT ALL TIMES, AND ALL OF OUR REPRESENTATIVES WERE ALSO PROPERLY REGISTERED IN THE STATE OF FLORIDA. Status: Final Sanction Detail: AS REFERENCED ABOVE, A FINE WAS LEVIED AGAINST OUR FIRM BECAUSE THE STATE OF FLORIDA ALLEGED THAT USA FINANCIAL SECURITIES FAILED TO PROPERLY REGISTER OUR BRANCH OFFICES PURSUANT TO CHAPTER 517, FLORIDA STATUTES, WHEN BRANCH OFFICE REGISTRATION BECAME AN ELECTRONIC PROCESS VIA THE WEBCRD SYSTEM. OUR FIRM TRIED TO PROPERLY REGISTER OUR BRANCH OFFICES ELECTRONICALLY BY CONTACTING WEBCRD FOR GUIDANCE. OUR FAILURE TO REGISTER OUR BRANCHES WAS NEITHER INTENTIONAL NOR INADVERTANT, BUT INSTEAD RESULTED FROM A TECHNICAL MISUNDERSTANDING OF THE ELECTRONIC REGISTRATION PROCESS. OUR FIRM WAS PROPERLY REGISTERED AS A BROKER-DEALER AND INVESTMENT ADVISER AT ALL TIMES, AND ALL OF OUR REPRESENTATIVES WERE ALSO PROPERLY REGISTERED IN THE STATE OF FLORIDA. THE TOTAL FINE LEVIED AGAINST OUR FIRM, USA FINANCIAL SECURITIES, WAS $10,000. THE AMOUNT WAS PAID ON MAY 6, 2008.