The U.S. Securities and Exchange Commission (SEC) is adopting changes to its rules for broker-dealers to ensure that their clients are protected from the threat of dealer insolvency.
The SEC announced Wednesday that it has adopted amendments to its rules regarding brokers’ capital requirements, asset segregation, and books and records, that aim to better protect dealers’ customers, and enhance the regulator’s ability to monitor and prevent unsound business practices.
The commission proposed a series of amendments to these rules back in 2007, and it re-opened the comment period in 2012. Now, the changes have received unanimous approval from the commission, and they are slated to take effect in 60 days.
“Investors need to feel confident that their money is safe when it’s being held by their broker-dealers,” said Mary Jo White, chair of the SEC. “These measures will significantly bolster the protections that our rules already offer.”
Separately, the SEC also said that it has also voted in favour of rules designed to substantially increase protections for investors who turn their assets over to broker-dealers. The new rules, which were approved by a three-to-two commission vote, require broker-dealers to file new reports with the commission that, it hopes, will result in higher levels of compliance with the financial responsibility rules.
“These rules will provide important additional safeguards for customer assets held by broker-dealers,” said White. “These rules will strengthen the audit requirements for broker-dealers and enhance our oversight of the way they maintain custody of their customers’ assets.”
Broker-dealers are required to begin filing new quarterly reports with the SEC, and annual reports with the Securities Investor Protection Corp. (SIPC) by the end of 2013. The requirement for broker-dealers to file annual reports with the SEC is effective June 1, 2014.