Banc One Capital Markets has been censured and fined $1.8 million by NASD Regulation for inadequate net capital, insufficient customer reserves and inaccurate books and records. Banc One, a broker/dealer subsidiary of $265 billion Bank One, entered into a settlement with NASD Regulation in which the firm neither admitted nor denied the allegations.
According to NASD Regulation, Banc One operated from Feb. 1999 through Aug. 1999 without a reliable accounting system. The violations occurred after a conversion of Banc One's computerized securities processing and accounting software in early 1999. The conversion caused numerous accounting entries to post incorrectly.
As a result, account balances in the firm's general ledger did not match the underlying transaction data balances. Banc One was unable to reconcile these differences promptly, and by March 1999 the dollar amount of the differences exceeded $1 billion. The total number of unreconciled items increased from 1,000 in April 1999 to over 4,000 by July 1999.
In a statement, Banc One said, "The settlement with the NASD allows Bank One to put the matter in the past and to look forward to the continued growth and expansion of its capital markets business." Banc One said that the accounting problems were purely internal, and had no impact on Banc One's customers.
Banc One said it willingly took action beginning in 1999 to correct the problems and to initiate enhancements in its personnel and procedures. These measures included strengthening the level of supervision and accountability within Banc One, and implementing substantial enhancements to internal controls and procedures based upon recommendations from independent consultants.