TradeStation Securities of Plantation, FL, agreed to settle FINRA charges that it proceeded with new business operations prior to obtaining FINRA approval.  FINRA found that the firm appropriately filed an Application for Approval of Change of Business Operations to move its futures business operations from fully-disclosed clearing to omnibus clearing operations.  It requested expedited processing of its application. 

Apparently, FINRA did not move fast enough for TradeStation, which commenced omnibus clearing before getting approval from FINRA.  Additionally, FINRA notified the firm by letter that it had conducted an initial review of the application and requested additional information re: the firm and its proposed change in business operations.  The firm provided the requested information to FINRA by letter, and in that same letter notified FINRA that it made the required net capital increases and went live with its omnibus arrangement even though FINRA had neither concluded its review of the application nor granted the firm’s request for provisional approval to effect the change from fully disclosed to omnibus clearing operations.

Part of the concern for FINRA during its review was that, at the time the firm was undergoing the approval process for its
application, the firm also was contemplating a change in its business operations to prime brokerage.  The firm apparently informed FINRA that, prior to conducting any fullscale prime brokerage business, it intended to submit a separate Rule 1017 application.  However, prior to FINRA's review and approval of its Application for Approval of Change of Business Operations - i.e., requesting approval to conduct prime brokerage business - TradeStation had already started engaging in unapproved prime brokerage activity.   TradeStation Securities was fined $15,000.  This is FINRA Case #2010023770401.   [Disciplinary Actions for May 2011]