Fintech firms
Department of Enforcement vs. Stanley
Date: Aug. 28, 2025
Issue: Whether former Synapse Brokerage LLC executives Jeffrey Stanley and Mark Paveman violated Financial Industry Regulatory Authority (FINRA) rules by failing to properly supervise the subsidiary’s cash management program.
Case Summary: FINRA charged two former Synapse Brokerage executives over failures tied to the firm’s cash management program before Synapse collapsed.
“Banking-as-a-service” is a business model that allows financial technology (fintech) firms to provide online banking services to members of the public, “end-users.” Fintech firms partner with licensed banks, which in turn hold end-user funds.
Synapse Financial Technology Inc. (Synapse Fi) operated a technology platform that connected fintech firms and their end users to two banking partners, DDA Bank 1 and DDA Bank 2, which held end-user funds in omnibus demand deposit accounts. By September 2023, millions of end users relied on the platform, and the DDA Banks held more than $2 billion. At that time, Synapse Fi failed to reconcile its ledger with DDA Bank 1’s records. DDA Bank 1 reported a nearly $90 million shortfall compared to Synapse Fi’s reports to end users. Each party claimed the other’s ledger was inaccurate.
After a dispute with DDA Bank 1, Synapse Fi began using its subsidiary, Synapse Brokerage LLC, to open cash management accounts and hold end-user funds through a cash sweep program, while retaining control of key functions, including the ledger. As the dispute continued, Synapse Fi collapsed and filed for bankruptcy in 2024. In May 2024, with the ledger dispute unresolved, DDA Bank 1 stopped processing Synapse Brokerage transactions and DDA Bank 2 froze customer funds. FINRA noted that Synapse Fi remains in bankruptcy, the ledgering dispute persists, and many customers still cannot access their money.
FINRA charged Synapse Brokerage’s former president, Jeffrey Stanley, and former chief compliance officer, Mark Paverman, with violating FINRA rules. First, FINRA alleged Stanley failed to reasonably supervise the firm’s cash management program, violating Rules 3110 and 2010, which require adequate supervisory systems and high standards of commercial honor. Specifically, Stanley allegedly approved end-user cash management accounts without proper authorization, approved or permitted customer fund transfers without adequate approval, and allowed Synapse Fi, a non-FINRA member, to conduct significant brokerage functions.
Second, FINRA alleged that Paverman violated FINRA Rule 4511 by failing to maintain required books and records. Rule 4511 obligates member firms to make and preserve books and records under FINRA rules, the Exchange Act, and its related regulations. According to FINRA, Paverman failed to preserve: email communications for three of the eight persons associated with Synapse Brokerage; instant messages for all Synapse Brokerage personnel; and electronic communications of Synapse Fi personnel who carried out brokerage functions.
FINRA also charged former compliance officer Mark Paverman with violating Rule 2010 by misrepresenting Synapse Brokerage’s access to its books and records and failing to comply with an undertaking. Paverman allegedly claimed the firm had a direct vendor contract and independent access to its records when it did not. He further committed to promptly provide FINRA with the requested information on the firm’s behalf, but failed to do so, which FINRA claimed impeded its investigation.
Bottom Line: FINRA asked FINRA’s Office of Hearing Officers to find that Stanley and Paverman committed the alleged violations, impose sanctions under FINRA Rule 8310(a), including monetary penalties, and require them to pay the costs of the proceedings under FINRA Rule 8330. The executive did not admit to or deny FINRA’s allegations.
Document: Complaint
