Accounting Guide

Chapter 3 Regulatory Considerations¹

3.01 Pursuant to the Securities Exchange Act of 1934 (the 1934 Act), the SEC developed a comprehensive system to regulate broker-dealers and the securities industry in general. As a result, all broker-dealers are subject to regulation by the SEC.

3.02 The audit and reporting requirements for securities broker-dealers are regulated by SEC Rule 17a-5 under the 1934 Act. Such requirements for broker-dealers that are also commodities brokers, known as CFTC-registered futures commission merchants (FCMs) or CFTC-registered introducing brokers (IBs) are regulated by Regulation 1.16 of the Commodity Exchange Act, whereas the requirements for registered broker-dealers in U.S. government securities are regulated by Section 405.2 of the regulations pursuant to Section 15C of the 1934 Act. Those rules are listed in the “Commodities Brokers” section of this chapter.

3.03 The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), signed into law by the president on July 21, 2010, called for a number of regulatory changes related to the securities industry.

3.04 In February 2017, the president signed an executive order that sets in motion scaling back some of the provisions of the Dodd-Frank Act. Readers should be alert for further developments. One of the provisions of this act amended the Sarbanes-Oxley Act of 2002 (SOX) to give the PCAOB full oversight authority over audits of all broker-dealers, including nonissuer broker-dealers. ...