SEC Passes New Broker-Dealer Rules for Compliance Reporting Requirements

On July 31, 2013, the world of broker-dealers (BDs) was taken on by the Securities and Exchange Commission (SEC) with the passage of a new rule and a set of new amendments affecting this financial sphere. While each of these matters deals with separate issues within the Securities Exchange Act of 1934, both the new rule and the new amendments seek to provide further safeguards for investors and their assets as they work with their broker-dealers. This week’s blog will focus on the newly adopted rule related to compliance reporting requirements.

The new rules adopted on July 31st “require broker-dealers to file new reports with the Commission that should result in higher levels of compliance with the SEC’s financial responsibility rules.” These requirements, listed as amendments to Section 17 of the Exchange Act, mandate that a broker-dealer must file a “compliance report” or an “exemption report,” dependent on whether a BD does or does not possess custody of a particular investor’s assets. In either of these cases, the BD is also obligated to employ a PCAOB-registered independent public accountant to review and prepare an independent report assessing the BD’s particular report. In addition to this regulated review process, a broker-dealer must file a quarterly “Form Custody” report, which “contains information about whether and how it maintains custody of its customers’ securities and cash.”

These changes are particularly important to investors and consumers, as they provide greater transparency in broker-dealer examinations by the SEC and pertinent Self-Regulatory Organizations (SROs). The new quarterly reports for the SEC, and an annual report with the Securities Investor Protection Corporation (SIPC), must be filed by the end of 2013, while the filing of SEC annual reports required for broker-dealers effectively begins on June 1, 2014.

For more information or assistance on other compliance topics, please contact us at (619) 278-0020 to schedule a consultation.

Leave a Reply

Your email address will not be published. Required fields are marked *