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SEC adopts final rules to increase financial responsibility of broker-dealers and protect investors

  • SEC (US Securities and Exchange Commission) Image

Jul 30, 2013

The SEC adopted a final rule to amend certain broker-dealer annual reporting, audit, and notification requirements.

The amendments include a requirement that broker-dealer audits be conducted in accordance with standards of the Public Company Accounting Oversight Board (PCAOB) in light of explicit oversight authority provided by the Dodd-Frank Act. The amendments further require a broker-dealer that clears transactions or carries customer accounts to agree to allow representatives of the SEC or the broker-dealer’s designated examining authority (DEA) to review the documentation associated with certain reports of the broker-dealer’s independent public accountant and to allow the accountant to discuss the findings in connection with a regulatory examination of the broker-dealer. Finally, the amendments require a broker-dealer to file a new form with its DEA that elicits information about the broker-dealer’s practices with respect to the custody of securities and funds of customers and noncustomers.

The SEC also adopted another final rule to amend the net capital, customer protection, books and records, and notification rules for broker-dealers. These amendments are designed to address concerns regarding the financial responsibility requirements for broker-dealers.

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