Broker Dealer Regulation

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Dodd-Frank Timeline, Risk Management Controls for Brokers or Dealers with Market Access, SEC
Final Rule Issue Effective Date Compliance Date
November 15, 2010 June 30, 2011 November 30, 2011
Dodd-Frank Timeline, Broker-Dealer Reports, SEC
Proposal Date Final Rule Issue Effective Date, SIPC Reports Effective Date, SEC Reports
June 27, 2011 August 21, 2013 December 31, 2013 June 1, 2014
Timeline, Financial Responsibility Rules for Broker Dealers
Re-proposal Date Final Rule Issue Effective Date
May 9, 2012 August 21, 2013 October 21, 2013

Among the mandates of the Dodd-Frank Act are requirements that the Securities and Exchange Commission create and revise certain rulemakings related to registered broker-dealers.

SEC Final Rule: Risk Management Controls for Brokers or Dealers with Market Access

On November 3, 2010, the issued final rules regarding risk management controls for brokers or dealers with market access,specifically the implementation of risk management controls and supervisory procedures for those with direct trading access and prohibiting "unfiltered" or "naked" sponsored access to exchanges or alternative trading systems (ATSs).[1] Final rules were added to the Federal Register on November 15, 2010.

On June 27, 2011, the SEC extended the compliance date for regulation regarding risk management controls for brokers or dealers with market access under Dodd-Frank from July 14, 2011 to November 30, 2011.[2]

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Broker-Dealer Reports

On June 15, 2011, the SEC introduced a proposal to strengthen the audits of broker-dealers and monitor the way broker-dealers handle their customers’ securities and cash.[3] The proposed rule is designed to strengthen audits of broker-dealers who may or may not maintain custody of customers' securities and cash. The proposed rule would create new requirements for broker-dealers falling under both categories, including quarterly reports used by examiners to create custody profiles for these advisers.

The final rule was approved on July 31, 2013, and entered the Federal Register on August 21, 2013.

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Financial Responsibilities for Broker Dealers

On March 19, 2007, the commission proposed several changes to the Securities and Exchange Act that would enhance net capital, customer protection, books and records, and notification rules for broker-dealers. The original deadline for public comment was May 18, 2007. However, the commission did not finalize its rulemakings at the time. Subsequent to the financial crisis of 2008 and the passage of Dodd-Frank in 2010, the commission has decided that a re-proposal and request for additional comment is appropriate at this time.

On May 9, 2012, the SEC introduced into the Federal Register a proposed rule and comment request regarding amendments to its net capital, customer protection, books and records, and notification rules for broker-dealers under the Securities Exchange Act of 1934 (‘‘Exchange Act’’).[4] The proposed rule amendments are designed to update the financial responsibility rules for broker-dealers and make certain technical amendments.

The final rule was approved on July 31, 2013, and entered the Federal Register on August 21, 2013.

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White Papers Addressing Broker Dealer Regulation

In January 2011, the SEC staff released a study, mandated by Dodd-Frank, that addresses the effectiveness of existing regulatory standards for investment advice and recommendations to retail customers, and whether there regulatory gaps, shortcomings, or overlaps in these standards. The study outlined the SEC staff findings and made recommendations for potential new rulemaking and guidance for registered broker-dealers and investment advisers.

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References

  1. Press Release - SEC Adopts New Rule Preventing Unfiltered Market Access. SEC. Retrieved on November 3, 2010.
  2. Risk Management Controls for Brokers or Dealers with Market Access. SEC. Retrieved on June 27, 2011.
  3. SEC Proposes Ways to Strengthen Audits and Reporting of Broker-Dealers to Protect Customer Assets. SEC. Retrieved on June 15, 2011.
  4. SEC Reopens Comment Period for Proposed Amendments to Its Net Capital, Customer Protection, Books and Records, and Notification Rules for Broker-Dealers. SEC. Retrieved on May 14, 2012.

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