SEC and FINRA Shine a Light on Net Capital Requirements and Financial Management Practices – Financial Services

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The SEC recently released its 2022 Review Priorities Letter on the heels of FINRA’s release of its 2022 Risk Review and Oversight Program Report. One of the many areas of common interest is financial management, particularly net capital requirements and custody of funds and securities. The SEC, for example, reminded broker-dealers who hold cash and securities of their responsibility to protect those assets in accordance with the Exchange Act’s Client Protection Rule (15c3-3) and Net Capital Rule (15c3 -1). For its part, FINRA has identified various related regulatory obligations and considerations as well as effective practices (both “do’s” and “don’ts”) drawn from the examination results.

Compliance with these rules will remain an area of ​​focus during broker reviews, including the sufficiency of internal processes, procedures and controls. Companies should review the SEC’s priority letter and FINRA’s review report to ensure they are well placed for weather reviews and other demands later this year.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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