The SEC recently published its 2022 Examination Priorities Letter on the heels of FINRA issuing its 2022 Examination and Risk Monitoring Program Report. One of many areas of common focus is financial management, and more specifically, net capital requirements and safekeeping of funds and securities. The SEC, for example, reminded broker-dealers that hold cash and securities of their responsibility to safeguard those assets in accordance with the Exchange Act Customer Protection Rule (15c3-3) and Net Capital Rule (15c3-1). For its part, FINRA laid out various related regulatory obligations and considerations as well as effective practices (both “dos” and “don’ts”) extracted from exam findings.
Compliance with these rules will remain an area of focus during examinations of broker-dealers, including sufficiency of internal processes, procedures, and controls. Firms should review the SEC priorities letter and FINRA exam report to ensure that they are well-positioned to weather exams and other inquiries later this year.