Compliance Corner: SEC, Broker-Dealer Industry

Editorial Staff

2 July 2020

SEC
The Securities and Exchange Commission has updated a rule that exempts certain smaller broker-dealers from specific reporting requirements.

The SEC said earlier this week that it had issued an order to update the filing threshold for broker-dealers’ Form 17-H filings. The threshold hasn’t been updated in nearly 30 years. The SEC will continue to obtain data about the financial condition of covered broker-dealers and their affiliates.

The exemption applies to broker-dealers with capital of between $20 million to $50 million so long as the firm maintains less than $1 billion in total assets. Firms maintaining $50 million or more in capital, including subordinated debt, currently account for approximately 98 per cent of the total capital of the broker-dealers subject to the 17h Rules; these firms will continue to remain subject to the rules, the SEC said.

The order follows the recommendation of the SEC’s Office of Inspector General, published earlier this year, that raising the reporting threshold would, among other things, make filing more efficient and cut burdens on smaller firms.

“This Commission order will reduce the regulatory burden for certain smaller broker-dealers in a targeted, measured manner that preserves reporting by firms representing approximately 98 per cent of the total capital of firms currently subject to our 17h Rules,” Brett Redfearn, director of the SEC’s Division of Trading and Markets, said.

The SEC initially adopted the rules in 1992.