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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.

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.

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.

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.

The paper provides practical explanation by experienced financial services lawyers.

In the Spring 2003 issue of this Journal, I addressed the regulatory uncertainty surrounding the treatment of broker‐dealers’ expense‐sharing arrangements. As pointed out in that article, in 2002 the National Association of Securities Dealers, Inc. (NASD) conducted a comprehensive “sweep” examination of member‐firms’ financial reporting procedures, with special attention to the treatment of expenses and liabilities. The results of the sweep confirmed that many broker‐dealers, particularly small firms, relied on parents and affiliates to pay for part or all of their expenses. The results of this regulatory audit raised the NASD’s concern that many broker‐dealers failed to adhere to the financial responsibility rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In large part, this was due to an inherent conflict between the general accounting standards governing the recording of expenses and liabilities and the requirements imposed on broker‐dealers to accrue and book expenses and liabilities under the Exchange Act’s financial reporting rules. Following the sweep, the NASD wrote to certain member firms that did not appear to be following the financial responsibility rules. These letters asked the firms to explain their failure to report expenses that were paid, or subject to payment by, affiliated parties and to justify their procedures on expense and liability reporting. Some broker‐dealers responded that it was not possible to coordinate the accounting of expense‐sharing arrangements with the reporting requirements set forth under the Exchange Act’s rules.

An exhaustive analysis of the current state of play of both the old and new law and the regulations promulgated thereunder. A one‐stop analysis of the state of the requirements under the USA Patriot Act and particularly how it affects broker‐dealers.

To explain the Customer Protection Rule Initiative announced by the Securities and Exchange Commission (SEC) and offer practical guidance for complying with Rule 15c3-3 under the Securities Exchange Act of 1934.

This article discusses Rule 15c3-3 under the Securities Exchange Act of 1934, related interpretative guidance, and the Customer Protection Rule Initiative announced in June 2016 by the SEC.

This article concludes that broker-dealers should take advantage of the Customer Protection Rule Initiative’s self-reporting mechanism and use this time to review their current account arrangements with banks, existing internal policies and procedures, and account documentation.

This article contains valuable information about the SEC’s Customer Protection Rule Initiative and practical compliance guidance from experienced securities lawyers.

To provide an overview of the new uniform definition of “branch office” and to discuss how that definition will influence broker‐dealer supervisory programs.

Discusses the new definition of “branch office”, describes new NASD and New York Stock Exchange supervisory control system requirements and supervisory requirements for branch offices and other locations, and suggests guidelines for developing a branch office or remote office supervisory program.

In the current regulatory environment, no broker‐dealer should overlook regular and rigorous attention to supervision of branch offices and other remote locations. And in light of the new definition of a branch office, each broker‐dealer must include in its review and analysis a close evaluation of how the broker‐dealer supervises every location where broker‐dealer personnel engage in activities on behalf of the broker‐dealer and must document that evaluation.

Important reference for broker‐dealers’ branch office supervisory programs that underscores the need to pay proper attention to remote locations.

The author, Director of the Office of Compliance Inspections and Examinations at the SEC, talks about how the anti‐money laundering laws apply to securities firms while also discussing a new examinations initiative that the SEC, NYSE, and NASD are undertaking to focus the industry's attention on compliance programs that detect and prevent money laundering.

The blurring of the lines between banks, insurance companies and broker‐dealers continues. As we go to press, yet another merger has been announced. The application of the Anti‐Money Laundering Act of 1992 to the securities industry becomes more and more obvious. This article explores the act with particular attention to the safe harbor, which exists to encourage banks (financial institutions) to report suspicious activity while hopefully falling under the protection of the Act, so as not to be exposed to civil liability.

To educate on AML legal requirements and issues relative to foreign correspondent accounts, and give practical advice on relatively low-burdensome measures firms can take to help them achieve compliance in this challenging area.

Summarizes AML requirements relevant to foreign correspondent accounts, discusses two related FINRA settlements involving the alleged failure to obtain and verify beneficial ownership information, reviews ongoing regulatory and legislative initiatives (including a FinCEN initiative to require firms to identify beneficial owners and verify their identities), and suggests certain due diligence procedures firms can use to screen foreign correspondent accounts.

One of the fundamental risks that firms face when dealing with foreign correspondent accounts is not knowing their customers' customers. While the current regulatory framework does not, in most cases, explicitly require firms to obtain beneficial ownership information, the practical reality seems to be that obtaining and verifying such information, where possible, could pay substantial dividends in terms of risk assessment and avoidance.

In some cases, a variety of cost-effective screening measures can be sufficient for a firm to identify concrete risks so that it may take steps to reduce its own regulatory exposure. Firms should not discount the simple for the elaborate, and should take advantage of the several, cost-effective AML tools and resources that are readily available.

Practical guidance for AML officers and other compliance and legal professionals by an experienced financial institutions lawyer.

A topical examination of the risks undertaken by United States financial institutions who undertake to carry accounts for foreign officials; with some helpful direction on detecting red flags when carrying these accounts.

The purpose of this article is to inform the various securities market participants about new Exchange Act Rule 13h‐1, its specifics and the requirements it may impose.

The paper outlines the various requirements of the Rule and additional background information and some clarifications based on the SEC adopting release.

The Rule requires “large traders”, as defined in the Rule, to self‐identify to the SEC and to obtain from the SEC a large trader identification number (“LTID”) and provide the LTID to each US‐registered broker‐dealer through which it effects transactions in NMS securities. The Rule also requires US‐registered broker‐dealers to provide to the SEC, on request, data on large traders' transactions in NMS securities by the morning after the transactions are effected; and it requires US‐registered broker‐dealers to maintain books and records, and perform certain monitoring functions, with respect to these transactions. The SEC has also adopted Form 13H under Exchange Act Section 13(h). A large trader must submit to the SEC Form 13H as an “Initial Filing” to receive its LTID and file various periodic amendments thereafter.

The paper provides practical guidance from experienced securities lawyers. The authors hope the discussion in the paper will enable affected market participants, which include US‐ registered broker‐dealers as well as other persons within the Rule's definition of large trader, to be informed about and to prepare for compliance with the Rule.