Recently, the SEC announced the adoption of new rules to protect clients with cash or securities at brokerage firms by requiring more disclosure and safeguards from securities brokers.
The new measures, which were approved in a split 3-2 vote by the commission, are part of regulators’ ongoing efforts to strengthen custody rules and prevent future fraud in the wake of Bernard Madoff’s long-running Ponzi scheme.
By the end of 2013, brokerages will be required to file new quarterly reports with the SEC about the securities they hold on behalf of their customers. These reports will allow regulators to better monitor and understand how firms maintain custody over their customers’ assets.
“These rules will provide important additional safeguards for customer assets,” SEC Chairman Mary Jo White said in a statement. “These rules will strengthen the audit requirements for broker-dealers and enhance our oversight of the way they maintain custody.”
In addition to the new quarterly reports, firms holding customer cash or securities are required to file a compliance report with the SEC to show that they are protecting customer assets, meeting capital requirements, and sending genuine account statements to customers.
The SEC also unanimously approved amendments to previous rules regarding brokerage firms. These rule changes are meant to better protect client money by revising how capital is calculated along with new documentation and notification requirements for firms.
“Investors need to feel confident that their money is safe when it’s being held by their broker-dealers,” said Mary Jo White. “These measures will significantly bolster the protections that our rules already offer.”
Click here to read the full description of the SEC’s new brokerage rules and amendments.