Securities and Exchange Commission Department of Market Regulation No-Action Letter on Recording Certain Broker/Dealer Expenses and Liabilities



July 24, 2003

 

The Division of Market Regulation of the U.S. Securities and Exchange Commission has provided guidance concerning the application of the financial responsibility rules when a parent, holding company, affiliate of a broker/dealer or another third-party agrees to assume responsibility for payment of the broker/dealer's expenses.

 

In its July 11 letter (PDF 223 KB), the SEC states that broker/dealers are required to prepare certain financial statements in accordance with generally accepted accounting principles (GAAP). A broker/dealer is also required to make and keep current certain books and records relating to its business, including records "reflecting all assets and liabilities, income and expense and capital accounts." A broker/dealer must also retain copies of all written agreements entered into by the broker/dealer relating to its business.

 

This letter clearly sets forth broker/dealers' responsibilities with regard to any such expense sharing arrangements and all broker/dealers are advised to read this statement.