Tag Archive for: SEC

SEC Grants Additional 30 Days for Certain Broker-Dealers to File Annual Reports

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Certain broker-dealers received much-needed relief this month when the Securities and Exchange Commission agreed to extend the annual audit filing deadline by 30 calendar days, cementing 90 days as the new regulatory obligation.

The extension, issued in a February 12th order, allows broker-dealers who meet certain criteria to file the reports within 90 calendar days after the end of their fiscal year. Previously, the reports were due within 60 calendar days.

The SEC extended the deadline in response to a request from the Financial Industry Regulatory Authority, accepting FINRA’s position that the extra 30 calendar days would reduce the burdens that certain smaller broker-dealers face in obtaining audit services. The extension also provides needed time for their PCAOB registered independent public accountants to perform the audit work necessary to comply.

Full details of the SEC order are included here, but in general the deadline for filing the annual reports is extended 30 calendar days for broker-dealers who:

1) Are in compliance with Rule 15c3-1;

2) Have total capital and allowable subordinated liabilities of less than $50 million, as reported in box 3530 of Part II or Part IIA of its FOCUS Report;

3) Are permitted to file an exemption report as part of their most recent fiscal year-end annual reports;

4) Submit written notification to their designated examining authority of their intent to rely on this order on an ongoing basis for as long as they meets the conditions of the order;

5) File the annual report electronically with the Commission using an appropriate process.

Jay Gettenberg, ACI Managing Partner, has been advocating for this change since being elected to the FINRA Small Firm Advisory Committee (SFAC) effective January 1, 2020.  He has stressed the need for the 30-day extension to senior FINRA staff, citing increasing audit costs, availability of PCAOB registered auditors, and logistical challenges of completing an audit within only one month of the regulatory Focus filing deadline. 

Mr. Gettenberg said, “We believe this rule change will ease the time pressures broker-dealers face, while simultaneously ensuring higher-quality audits and providing the readers of the financial statements with both greater transparency and an increased likelihood of accuracy in the representations being made by senior management.”

Gettenberg, as a member of SFAC, assisted in laying the groundwork for FINRA’s request.  His efforts to ensure a successful implementation will continue, and will include having other regulatory organizations, most notably SIPC, NFA/CFTC and the various states, accept similar 90-day filing deadlines.

ACI will continue to provide updates on our Resources page as more information becomes available.

ACI Participates in Effort to Overturn PCAOB Inspection over Non-Custodial Broker Dealer Audits

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ACI’s Managing Partner, Jay Gettenberg, was in Washington D.C. this week for the 2018 FINRA Annual Conference. His recent involvement in the FINRA District 10 Committee, which commenced on January 1, 2018, offered Mr. Gettenberg the opportunity to assist Paige Pierce, chair of the FINRA Small Firm Advisory Board, and Robert Hackel, Chief Operating Officer of R.F. Lafferty & Co., Inc., in an effort to reduce regulation and potentially clear the path for the removal of the PCAOB’s oversight of certain qualifying broker dealer audits.   On Wednesday, May 23, 2018, Ms. Pierce, Mr. Hackel and Mr. Gettenberg were able to secure a meeting at Congress to push forward this agenda.

The proposed bill, which hopes to make it to the Congressional floor in early June, would still require broker dealers to obtain annual independent certified audits, but the PCAOB oversight and scrutiny would no longer apply for non-custodial/carrying broker dealers, provided they employ less than 150 registered representatives. This would qualify them under FINRA’s guidelines as a “small firm.”

Over the past few years, the broker dealer community has seen a significant increase in audit costs, which primarily correlates with enhanced peer review requirements, auditor fear of PCAOB inspection and sanctions, and the overall reduction in PCAOB certified audit firms, who were unable to keep current with evolving and increasingly complex standards.

Efforts made over the past few months by a small group of industry experts has resulted in the SEC and PCAOB verbally committing to remaining neutral on any proposal submitted for ratification. While they are not supporting the passing of legislation that would mitigate the requirement, they are also not opposing it, leaving the decision to the House of Representatives and the Senate to decide the fate of the bill.  At this time, the Senate has obtained both a Republican and Democratic co-sponsor and the House has obtained a Republican sponsor.  The recent efforts of Ms. Paige, Mr. Hackel, Mr. Gettenberg, and a few other leading industry professionals, has propelled the likelihood of obtaining a Democratic co-sponsor in the House, which would allow the bill to be eligible for vote, potentially leading to approval and implementation over the upcoming months.

It is currently estimated that the removal of PCAOB inspection over small broker dealer audits would result in over $60 million in annual savings for the approximately 3,000 member-firms that would qualify. The goal is to provide imminent relief to the small broker dealer community, which has significantly decreased in size over the past half-decade.