SEC Adopts Rules to Protect Investors that Have Brokerage Firm-Held Assets

In a 3-2 vote, the SEC adopted rules to provide substantially more protections to investors who have assets held by registered broker-dealers. SEC Chairman Mary Jo White issued a statement saying she was confident the rules would give customers’ assets key “additional safeguards,” including the strengthening of audit requirements and enhanced oversight.

Under the new rules, broker-dealers would have to file reports with the Commission that are supposed to lead to greater compliance with financial responsibility rules. Brokerages have to start filing new quarterly reports with the regulator and yearly reports with the Securities Investor Protection Corporation by year’s end. Effective June 1, 2014, they will have to file yearly reports with the SEC.

These latest rules amend the Securities and Exchange Act of 1934’s Rule 17a-11 and Rule 17a-5. Per the rule amendments, a broker-dealer with custody of customers’ assets will have to file a compliance report with the Commission and work with an independent public accountant that is PCAOB-registered to put together a report based on a study of statements in the compliance report. Brokerage firms without custody of these assets need to submit an exemption report with the regulator noting its exemption from the requirements. Also, whether/not a broker-dealer has custody of clients’ assets, a firm has to let SRO or SEC staff look at the independent public accountant’s work papers if this information is needed to examine the brokerage firm and the accountant is allowed to talk about its findings with examiners.

Our securities lawyers work with investors that have sustained losses from stockbroker fraud. We have helped thousands of clients recoup their losses sustained due to the negligence or errors of their financial representatives.

SEC Adopts Rules to Increase Protections for Investors With Assets Being Held By Broker-Dealers, SEC, July 31, 2013
Securities and Exchange Act of 1934, Cornell.law.edu

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