Unit 7-Other Relevant Regulations Flashcards
SEC Rule 17f-1
Established Securities Information Center (SIC)
-This is the central database for reporting lost, stolen, counterfeit, or missing securities
Reporting Rules (missing securities)
- If no criminal activity is suspected, the BD has 2 business days to find securities. On 3rd business day, loss must be reported to SIC as well as transfer agent
- If criminal activity is suspected, BD has 1 business day to notify SIC, transfer agent, and FBI
- If securities are later found, all parties previously notified must be contacted within one business day
Securities Inquiries
All BDs receiving new securities must reach out to the SIC to inquire about their status unless security is:
- Received directly from issuer
- Received from another member firm
- Part of transaction valued at less than $10K
- Received from an existing customer of firm that:
- Is registered in customer name
- Was previously sold to customer and can be verified by member records
Fidelity Bonding (G-6)
Required MSRB members to secure fidelity bonding to protect against theft, embezzlement, etc by its own employees
-Minimum bond is 120% of net cap requirement (must be at least 100K no matter how small net cap)
-Fidelity bond level must be reviewed annually
NOTE: Bank dealers are exempt as they already have insurance under current banking laws
Lifetime Records
- Articles of Incorporation/Partnership Agreements
- Minutes of Board Meetings
- Records of stock certs
Six Year Records
-Blotters (original entry and trade)
-Cash receipts and disbursement records
-General Ledger
-Customer Ledger (statements)
-Securities Records
-Customer Account Records (6 yrs after account closed)
-Syndicate Settlement Records
-Customer Complaints
-Principal Designation Records
-Political Contributions
-Gifts and Gratuities
-Consultant Agreements
NOTE: All records must be readily available for 2 years
NOTE 2: Bank Dealers do not need to keep records of customer credits/debits. These are only applicable to securities accounts.
NOTE 3: Securities receives and delivered out same day do not need to be recorded
Records not explicitly mentioned as lifetime or 6-year
Default for 4 years:
-Trial balances
-CE records
-Correspondence and written communication
-Put options and repurchase agreements
-Customer Confirms
NOTE: Records can be kept on a trade date or settlement date basis. Whichever process is chosen must be applied consistently
Digging into an APs U4
- Hiring firm must look into at least 3 years before date of application to verify info
- A BD that receives an inquiry from another member regarding a former employee must respond within 10 business days
- U4s are kept for 3 years after separation (6 for principals)