SEC adopts new financial responsibility and reporting requirements for US-registered broker-dealers

Abstract

Purpose

The purpose of this paper is to summarize the SEC's recent approval of amendments to its net capital, customer protection, books and records, notification and reporting requirements for broker-dealers, in an effort to enhance financial responsibility and investor asset safekeeping obligations.

Design/methodology/approach

The paper summarizes new requirements for broker-dealers relating to custody, reporting, and Rules 15c3-3 (customer protection rule), 15c3-1 (net capital rule), 17a-3 and 17a-4 (books and records rules) and 17a-11 (notification rule) under the Securities Exchange Act of 1934; explains that several of the amendments approved codify long-standing SEC staff interpretations of the rules and accounting standards that govern these requirements; clarifies whether the requirements apply to broker-dealers that carry customer accounts on their books (commonly referred to as “carrying brokers”) and/or to limited-purpose broker-dealers that do not carry customer accounts on their books.

Findings

Although certain of the amendments codify long-standing SEC staff interpretations of the rules and accounting standards, broker-dealers will be subject to additional legal and regulatory requirements resulting from the amendments commencing in October 2013.

Practical implications

Broker-dealers should begin to consider whether changes to operations, policies and procedures, and reporting obligations will be required as a result of the amendments.

Originality/value

The paper provides practical explanation by experienced financial services lawyers.

Citation

Curzon, E. and Wingler, J. (2013), "SEC adopts new financial responsibility and reporting requirements for US-registered broker-dealers", Journal of Investment Compliance, Vol. 14 No. 4, pp. 38-43. https://doi.org/10.1108/JOIC-10-2013-0032