The second rule adopts amendments to the net capital, consumer protection, books and records, and for broker-dealers.
The staff for the SEC Division of Trading and Markets recently issued staff guidance (in the form of FAQs) in connection with these rules. To read FAQs about the amendments to Rule 17a-5 and Form Custody, click here. For FAQs concerning certain broker-dealer financial responsibility rules, click here. Other FAQs published by the staff of SEC Division of Trading and Markets are available here.
In October 2013, the PCAOB adopted two attestation standards pertaining to audits of brokers and dealers and an auditing standard, which is applicable when auditors are engaged to perform audit procedures and report on supplemental information that broker-dealers and others file with the SEC. These standards are effective for fiscal years ending on or after June 1, 2014.
In August 2011, the SEC approved a rule, adopting an interim inspection program related to audits of broker-dealers. Under the interim inspection program, the PCAOB inspects audit engagements of all types of broker-dealers. The “Third Report on the Progress of the Interim Inspection Program Related to Audits of Brokers and Dealers,” was released on August 18, 2014, and states that the PCAOB staff is currently working on a rule proposal for the Board to issue during 2016 to establish a permanent inspection program and its scope.
Audits of BDs are currently included in an interim inspection program by the PCAOB. Until such time that the PCAOB announces the scope of their permanent inspection program, audits of BDs will be subject to both PCAOB inspection and peer review. Peer reviewers are regularly identifying audits where the firm failed to comply with SEC independence rules by preparing the firm’s financial statements, which is consistent with the PCAOB interim inspection program findings. Read more on this topic and other peer review implications for broker dealer engagements.
The SEC Office of Compliance Inspections and Examinations announced its 2014 examination priorities for investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents.
Audits of Futures Commission Merchants (FCMs)
In November 2013, the CFTC approved a final rule on enhancing customer protections, which, in part, will require audits of futures commission merchants (FCMs) to be performed in accordance with PCAOB standards by a PCAOB-registered firm that “must have undergone a PCAOB inspection”. Find out more.
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