Authored by Samuel Gehebe
On June 29, 2020, the U.S. Securities and Exchange Commission (SEC) issued an order to update the filing threshold for broker-dealers’ Form 17-H filings made pursuant to Exchange Act Rules 17h-1T and Rule 17h-2T (SEC Release No. 2020-147) which is effective immediately. Form 17-H is the “Risk Assessment Report for Brokers and Dealers” and includes the following:
The filing threshold will exempt certain smaller broker-dealers, as defined below, from the reporting requirements of Exchange Act Rules 17h-1T and Rule 17h-2T while continuing to provide important information to the SEC on the financial condition of covered broker-dealers and their affiliates.
The purpose of the order to update the filing threshold is to increase the overall efficiency of Form 17-H filing intake and review process. In addition, the purpose is to reduce the reporting burden on smaller broker-dealer firms in a measured manner that preserves reporting by broker-dealer firms. The order was made based on the recommendation of the SEC’s Office of Inspector General.
Prior to the order to update the filing threshold, the SEC adopted the 17h Rules in 1992, which resulted in the following:
The order set in SEC Release No. 2020-147 updated the following:
The SEC’s decision to focus on the largest broker-dealers, which presumably carry proportionally more risk to the financial markets, appears in line with our belief that the costs and benefits of regulations over regulated entities should be continually explored and modified. Relief of requirements, which are concluded to not pose a material financial risk, are helpful in protecting the efficiency of capital markets.
In conclusion, the order issued by the SEC will ease some of the burden for certain smaller broker-dealers. The order will also modernize the application of the Exchange Act Rules 17h-1T and Rule 17h-2T, which will enhance the efficiency of the SEC’s oversight of the broker-dealers that continue to be subject to these rules. Information included above was sourced from the SEC website, in particular press release 2020-147 and the referenced content within. See the SEC website for additional details on the updates to the filing threshold to Rule 17h.
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