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Finra Fine For Broker's Failure To Prepare General Ledger and Trial Balance Upheld - Original Records Not Sufficient

North Woodward Financial Corp., Douglas A. Troszak, Exchange Act Rel. 60505, August 14, 2009

Time since appeal filed - 7 months 9 days
Time since last brief filed - 4 months 6 days


North Woodward, a registered broker-dealer and its principal owner Troszak were found by Finra to have failed to prepare and maintain a proper general ledger and trial balance for two months in 2005. They were fined $2,500 jointly and severally. The Commission upheld the findings and sanctions.

Troszak gave Finra examiners various financial records of the firm during an exam, but refused to produce a general ledger and trial balance. He claimed that he had given the examiners all raw data that would otherwise be included in a general ledger. He claimed that the firm's bank account statements and his handwritten notes were the equivalent of a trial balance. The examiners concluded that Woodward understated the firm's net capital by $6,900 and had thereby submitted an inaccurate FOCUS report to Finra.

The Commission rejected the claim that the underlying records satisfied the substantive requirement of Finra and Exchange Act rule 17a-3. Finra has specifically defined the requirements of a broker-dealer's ledger and trial balance since at least 1996. Among other reasons, this is because broker-dealers are required to use accrual accounting and source documents are not prepared using accrual accounting methods.

In upholding the fines, the Commission noted that they were at the lower end of the Finra penalty guidelines.


Appeal of a $2,500 fine? Not surprising that the appeal was pro se. At least the Commission didn't labor for too long on this one.