book

Accounting Guide

by AICPA

November 2019

Intermediate to advanced

464 pages

15h 24m

English

Wiley

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Broker-DealersDiscount BrokersInvestment BankersGovernment Securities DealersDesignated Market MakerClearing BrokersCarrying BrokersPrime BrokersSwap DealersIntroducing BrokersBrokers' BrokersBank-Owned Brokers (Section 4k4(e) and Section 20 Brokers)Independent Broker-DealersThe Financial MarketsExchange MarketOTC MarketThird MarketAlternative Trading VenuesClearing Organizations and DepositoriesTransfer AgentsRegulatory OverviewBusiness ActivitiesBrokerageFirm TradingInvestment BankingFinancingOther Activities
IntroductionOverviewOriginal Entry JournalsGeneral LedgerStock RecordRegulatory Recordkeeping RequirementsTrade Date and Settlement DateTrade ExecutionCustomer TradesProprietary TradesClearance and SettlementOverviewComparisonSettlementBookkeepingSpecialized Clearance ActivitiesMortgage-Backed SecuritiesGovernment SecuritiesRepos and Reverse ReposDerivative SecuritiesCommodity Futures and Options on FuturesForward TransactionsMunicipal SecuritiesInternational SecuritiesOptions on SecuritiesReconciliation and BalancingCustodyPossession or ControlSecurities TransferDividends, Interest, and ReorganizationDividends and InterestReorganizationCollateralized FinancingStock Loan and Stock BorrowBank Loan FinancingReverse Repos and ReposRegulatory ConsiderationsTax Information Reporting for Certain Customer TransactionsIllustrative Stock Record Entries
Applicable RulesInterpretations of RulesExplanation of Significant SEC Financial Responsibility RulesSEC Rule 15c3-3, “Customer Protection—Reserves and Custody of Securities”SEC Rule 15c3-1, “Net Capital Requirements for Brokers or Dealers”SEC Rule 15c3-1(e), “Notice Provisions Relating to the Limitations on the Withdrawal of Equity Capital”SEC Rule 17a-13, “Quarterly Security Counts to Be Made by Certain Exchange Members, Brokers, and Dealers”SEC Rule 17a-3, “Records to Be Made by Certain Exchange Members, Brokers, and Dealers”SEC Rule 17a-4, “Records to Be Preserved by Certain Exchange Members, Brokers, and Dealers”Regulation T and Maintenance MarginAccount Statement Rule(s)SEC Rules and CFTC Regulations Governing Customer Margin for Transactions in Security FuturesSEC Rules 17h-1T and 17h-2TSEC Rule 17Ad-17, "Lost Securityholders and Unresponsive Payees"SEC Rule 17Ad-22, “Clearing Agency Standards”SEC Rule 17-248—Subpart C, "Regulation S-ID: Identity Theft Red Flags"SEC Rule 506 of Regulation D and SEC Rule 144ASEC Rule 15c3-5, “Risk Management Controls for Brokers or Dealers with Market Access”SEC Rule 17a-5, “Reports to Be Made by Certain Brokers and Dealers”Anti-money Laundering RegulationsReporting RequirementsConsolidation of SubsidiariesForm CustodyOther Periodic ReportingThe Annual Audited Financial ReportFilings Concurrent With the Annual Audited Financial ReportCompliance or Exemption Report Required by SEC Rule 17a-5Report to State Regulatory AgenciesFinancial Statements to Be Furnished to Customers of Securities Broker-DealersOther ReportsReports on Securities Investor Protection Corporation AssessmentReports on Agreed-Upon Procedures for DistributionsPCAOB Accounting Support FeeAdditional Requirements for Registered Investment AdvisersRules Applicable to Broker-Dealers in Commodities and U.S. Government SecuritiesCommodities BrokersGovernment Securities Broker-DealersOTC Derivatives DealersSwap Dealers and Swaps Marketplace ParticipantsAnnual Compliance Certification
IntroductionThe Control EnvironmentRisk AssessmentControl ActivitiesInformation and CommunicationInformation and Communication Control ActivitiesMonitoring ActivitiesBroker-Dealer Control and Monitoring ActivitiesSales and ComplianceClearanceSecurities SettlementCustodyDividends, Interest, and ReorganizationTo-Be-Announced SecuritiesPrincipal TransactionsOTC Derivative TransactionsCommissionsCollateralized FinancingsPeriod End Financial ReportingSEC Requirements for Management’s Report on Internal Control Over Financial Reporting for IssuersAnnual Reporting Requirements for IssuersQuarterly Reporting Requirements for Issuers
Accounting ModelDefinition of Fair ValueApplication of Fair Value Measurement to Liabilities and Instruments Classified in a Reporting Entity’s Shareholders’ EquityValuation TechniquesInputs to Valuation TechniquesApplication to Financial Assets and Financial Liabilities With Offsetting Positions in Market Risks or Counterparty Credit RiskInputs Based on Bid and Ask PricesPresent Value TechniquesThe Fair Value HierarchyFair Value Measurements of Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)Fair Value Determination When the Volume or Level of Activity Has Significantly DecreasedFair Value OptionAdditional Fair Value ConsiderationsFinancial Instruments Listed on a Recognized ExchangeFinancial Instruments Not Listed on a Recognized Exchange but Having a Readily Available Market PriceFinancial Instruments Not Having a Readily Available Market PriceTrade-Date Versus Settlement-Date AccountingProprietary and Principal TransactionsAgency TransactionsStatement of Financial Condition ConsiderationsDue From, and Due to, Other Broker-Dealers and Clearing EntitiesTransfers of Financial AssetsExchange Memberships Owned or ContributedSuspense AccountsDerivativesConditional TransactionsLeveraged Buyouts and Bridge LoansAsset SecuritizationsVariable Interest EntitiesSoft-Dollar ArrangementsMandatorily Redeemable InstrumentsStatement of Income or Loss ConsiderationsUnderwriting Revenues and ExpensesDistribution CostsInterest, Dividends, and RebatesCosts Associated With Exit or Disposal ActivitiesRevenue Recognition: Application of FASB ASC 606Brokers, Dealers, and Futures Commission Merchants and the Definition of a Public Business Entity
IntroductionFinancial StatementsStatement of Financial ConditionStatement of Income, Comprehensive Income or OperationsStatement of Cash FlowsStatement of Changes in Ownership EquityStatement of Changes in Subordinated BorrowingsConsolidation of SubsidiariesGoing ConcernSupplementary SchedulesComputation of Net Capital Pursuant to SEC Rule 15c3-1Computations for Determination of Reserve Requirements Pursuant to SEC Rule 15c3-3Information Relating to Possession or Control Requirements Under SEC Rule 15c3-3Schedules of Segregation Requirements and Funds in Segregation for Customers’ Trading Pursuant to the Commodity Exchange ActStatement of Financial Condition Account DescriptionsCash and Securities Segregated Under Federal and Other RegulationsMemberships in ExchangesSecurities Sold Under Agreements to Repurchase and Securities Purchased Under Agreements to ResellSecurities Borrowed and Securities LoanedSecurities Received as Collateral and Obligation to Return Securities Received as CollateralReceivables From and Payables to Broker-Dealers, Clearing Organizations, and OthersReceivables From and Payables to CustomersDeferred Dealer ConcessionsSecurities Owned and Securities Sold, Not Yet PurchasedOther Borrowed FundsSubordinated BorrowingsCommitments and GuaranteesEquityStatement of Income or Operations Account DescriptionsCommission Income and Related ExpenseInterest Income and Interest ExpenseDividend Income and Dividend ExpensePrincipal Transactions (Trading Gains and Losses)Investment Banking Fees and ExpensesAsset Management and Investment Advisory IncomeDistribution FeesFloor Brokerage, Exchange Fee, and Clearance ExpensesOccupancy and Equipment ExpensesEmployee Compensation and Benefits ExpensesTechnology and Communications ExpenseManagement and Allocated Corporate Overhead ExpenseDisclosuresFair Value DisclosuresDisclosures Related to Transfers of Financial Assets Accounted for as SalesDisclosures Related to Transfers of Financial Assets Accounted for as Secured BorrowingsDisclosures of Certain Significant Risks and Uncertainties and ContingenciesDerivative Instruments DisclosuresGuarantee DisclosuresRelated Party DisclosuresSubsequent Events DisclosuresBalance Sheet Offsetting DisclosuresFinancial Statements and Schedules
A Information Sources

Overview

It is critical to understand the complexities of the specialized accounting and regulatory requirements needed for the broker-dealer industry. This comprehensive guide has been designed to be beneficial for a wide range of professionals within the broker-dealer industry. Updates to this edition are to conform the content to current accounting standards and regulatory requirements. The updates include:

SEC Release No. 34-86073, Amendment to Single Issuer Exemption for Broker-Dealers;
ASU No. 2018-09, Codification Improvements; and,
SEC Release Nos. 33-10532; 34-83875; IC-33203, Disclosure Update and Simplification.

In addition, this edition features a new example disclosure note for revenue from contracts with customers, which has been added to the guide's illustrative financial statements and footnote disclosures.