WASHINGTON (CN) – The Securities and Exchange Commission wants stock brokers who carry customer accounts or clear transactions without a third-party clearance house to allow the agency to review the brokers’ independent audits, according to new rules proposed by the agency.
In addition, the SEC proposes to require the brokers to file new compliance reports detailing how they maintain custody of cash and securities in customer accounts.
Under existing regulations, broker-dealers who carry customer accounts must physically separate their customer’s assets from their corporate holdings into so-called “control locations” where they can be retrieved during regular business hours.
The new regulations would require the dealers to report their protocol for keeping customer assets from comingling with brokerage accounts and steps the broker takes to make sure that the assets set aside in control locations equal the assets listed for each customer in a broker’s books.
Brokers also would be required to have their independent public accountants file an Examination Report attesting to the validity of the broker’s compliance reports.