SEC

SEC No-Action letter provides relief to Introducing Broker-Dealers

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). SEC

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;

 

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Read the SEC Letter

 

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