SEC Changes Broker-Dealer Oversight Rules
WASHINGTON (CN) - The Securities and Exchange Commission has changed its reporting rules to require audits on broker-dealers to be performed consistent with the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In response to cases of fraudulent activities by broker-dealers and investment advisors in 2009, the SEC began reviewing rules governing the safekeeping of investor assets.
In 2011, the SEC proposed rule amendments meant to provide better safeguards for broker-dealers' custody of customers' money, designed to give the SEC better oversight on broker-dealers' use of their customers' securities.
The SEC has issued a new regulation adopting changes to its reporting, audit, and notification rules. The regulation requires broker-dealers to file annual financial reports and either a compliance or exemption report, among other things.
The regulation also requires broker-dealers to file certain reports prepared by a certified public accountant.
Among other things, the financial reports must include income and cash flow statements.
If an accountant finds that a broker-dealer is not complying with financial responsibility rules, it is required to inform the broker-dealer, who is in turn required to notify the SEC and its designated examining authority.
Under the new regulation, audits of broker-dealers must comply with the standards of the Public Company Accounting Oversight Board, as provided by the Dodd-Frank Act.