SEC Releases Extensive Changes to Broker-Dealer Reporting and Financial Responsibility Rules

On July 30, 2013, the Securities and Exchange Commission (the “Commission”) amended certain annual reporting, audit and notification requirements applicable to broker-dealers. Concurrently, the Commission also released amendments to its financial responsibility rules (primarily the Customer Protection Rule (15c3-3), and the Net Capital Rule (15c3-1)). The following chart presents the more significant changes enacted and their respective effective dates for implementation:




October 21, 2013  

Comply with the amended Financial Responsibility Rules which comprise:

  • Customer Protection Rule (Rule 15c3-3)
  • Net Capital Rule (Rule 15c3-1)
  • Books and Records Rules (Rules 17a-3 and 17a-4)
  • Notification Rule (Rule 17a-11).

See our detailed discussion here:
SEC Amends Financial Responsibility Rules For Broker-Dealers 

December 10, 2013 or 30 calendar days after registration as a broker-dealer 

All broker-dealers subject to Rule 17a-5 must inform the Commission and their designated examining authority (DEA) that it has designated an independent public accountant registered with the Public Company Accounting Oversight Board (PCAOB) through the filing of a new “statement regarding the independent public accountant under Rule17a-5(f)(2)."

A broker-dealer that clears transactions or carries customer accounts will need to include in this statement certain language to allow the Commission and DEA examination staff to review the audit documentation associated with its annual audit reports required under Rule 17a-5 and to allow its independent public accountant to discuss findings relating to the audit reports with Commission and DEA examination staff upon written request.

December 31, 2013 

File Form Custody quarterly with its DEA within 17 business days of the end of the period.

The form is designed to elicit information concerning whether a broker-dealer maintains custody of customer and non-customer assets, and if so, how such assets are maintained.

December 31, 2013 

Annual reports will be required to be filed with SIPC.


Fiscal years ending on or after June 1, 2014  

File annual reports consisting of a financial report and one of two new reports with the Commission: either a compliance report or an exemption report. These reports are required to be audited under PCAOB standards.

See our detailed discussion here:
Compliance and Exemption Reports Under the SEC’s Amended Broker-Dealer Rules

June 1, 2014 

Notification of non-compliance or material weaknesses:

  1. The independent public accountant must notify the broker-dealer’s CFO of the nature of any non-compliance with or material weaknesses in internal controls related to the financial responsibility rules.
  2. Broker-dealer must in turn file a notification with the Commission and DEA within 24 hours if the notice concerns an instance of non-compliance that would trigger notification under those rules. In addition, the broker-dealer must transmit a report within 48 hours stating what is being done to correct the situation.

Rule 17a-11 has been amended to include conforming language.  The notification requirements remain substantially unchanged.

June 1, 2014 

Satisfy obtaining an internal control report relating to the custody of client securities and funds pursuant to Rule 206(4)-2 with independent public accountant’s report based on an examination of the compliance report.

Broker-dealers that are also registered as investment advisors may, acting in their capacity as broker-dealers, maintain client securities and funds as qualified custodians in connection with advisory services provided to clients. Pursuant to Rule 206(4)-2 (the “IA Custody Rule”), these broker-dealers are required to obtain an internal control report relating to the custody of those assets from a PCAOB registered independent public accountant. As a result of the amendments to Rule 17a-5, the Commission has determined that the independent public accountant’s report based on an examination of the compliance report will satisfy the internal control report requirement of the IA Custody Rule.


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