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93-70 SEC Amends Rule 17a-5 Giving Additional Responsibilities to Designated Examining Authorities

SUGGESTED ROUTING

Senior Management
Internal Audit
Legal & Compliance
Operations

Executive Summary

The Securities and Exchange Commission (SEC) has approved changes to Rule 17a-5. This rule authorizes the designated examining authority (DEA) to grant or deny requests from broker/dealers for extensions of time to file their FOCUS and audited annual financial reports. Also, these amendments permit the DEA to approve a member's request for a change in a date as of which it files the audited annual financial report. Members must now submit these requests to their DEA, not the SEC.

Background

Rule 17a-5 requires broker/dealers to file with the SEC monthly and quarterly reports concerning their financial and operational status. However, the rule allows broker/dealers to file these reports with their DEA, instead of the SEC, if the DEA has a plan on file with the SEC that conforms to paragraph (a)(4) of the rule. Currently, all self-regulatory organizations that are DEAs have approved plans on file.

Under these plans, broker/dealers have filed FOCUS reports with their DEA, and the DEA has provided copies of applicable parts of the reports periodically to the SEC. Also, pursuant to the rule, broker/ dealers have filed their annual audits with their DEA and the SEC.

Until now, authority to grant filing extensions for these reports, however, has rested with the SEC; likewise, the SEC approves changes in the "as of" date for filing annual audits. Last March, the SEC proposed delegating this responsibility to the DEA.

The proposal noted that, because the DEA is most familiar with the current financial and operational conditions of the member firms, it is in a better position to respond to their requests. The NASD agreed and supported the proposed rule changes in a comment letter.

Approved Amendments

On August 25, the SEC approved the following amendments to Rule 17a-5. The effective date of these changes is October 1, 1993.

  • The authority to grant or deny requests for extensions of time for the filing of FOCUS reports is given primarily to a broker/dealer's DEA.

  • The DEA has the primary responsibility to grant or deny broker/ dealers' requests for extensions of time to file audited annual financial reports.

  • The DEA has the authority to approve changes in the "as of" date of the audited annual financial reports.

Because the authority to approve these requests has been given to the DEA, the SEC also is amending the rule to delete references that give this authority to SEC regional administrators.

Submitting Requests to NASD

Members designated to the NASD must submit, in writing, their requests for extensions of time for filing FOCUS reports or annual audits to the appropriate NASD district office. Members also should contact the district office regarding changes in the firm's audit date.

Questions concerning this Notice should be directed to Samuel Luque, Associate Director, Compliance, at (202) 728-8472.


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