SEC “No-Action” letter to NYLIFE provides relief to Introducing Broker-Dealers
Welcome news for Introducing Broker-Dealers. The SEC issued a “no-action” letter to NYLIFE in which the SEC recognizes difficulties of “Introducing Brokers” in meeting the next-day-by-noon compliance requirement of Rule 15c3-3 (k).
NYLIFE reached out to the SEC asking for interpretation of Rule 15c3-3 which requires “Introducing Brokers” promptly transmit customer funds and securities to whom they are owed by noon the next business day. The “clock” starts when any associated person of a broker-dealers field office receives the funds or securities.
Many broker-dealers struggle to comply with the noon-by-next-day requirement. And, with an increasing host of other regulatory requirements, compliance with 15c3-3(k) has become nearly impossible. The SEC letter to NYLIFE indicates “no-action relief” for broker-dealers holding customers checks to complete principal suitability reviews of the sale and as long as they have;
- Established reasonable policies and procedures to ensure funds are safeguarded and that a registered member promptly prepares and forwards a complete and correct application package.
- A Registered principal performs a suitability review in accordance with FINRA 2111 and determines approval of each recommended subscription-way sale within 7 days after the OSJ member receives the application package.
- The check is transmitted no later than noon of the business day following the date the registered principal reviews and determines if the transaction is approved.
- The Broker-Dealer maintains a copy of each check and keeps a record of when the check was received and the date it was forwarded to the issuer, or returned if rejected.
- The Broker-Dealer discloses the process of handling checks payable to issuers of subscription-way securities to the customer in advance.
When is it effective: The SEC letter is dated March 12, 2015 and indicates the SEC would not recommend enforcement action by the SEC if “NYLIFE” or any other broker-dealer in similar circumstances holds customers checks payable to issuers, if the purpose for holding the checks is to complete principal suitability reviews.
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