FINANCIAL RESPONSIBILITY RULES FOR BROKER-DEALERS
SEC Financial Responsibility Rules
The SEC staff communicates and issues oral and written interpretations to the financial responsibility and operational rules, which FINRA publishes on the Interpretations of Financial and Operational Rules page on the FINRA website. FINRA has published a number of Regulatory Notices announcing updates to the interpretations to reflect the addition, revision or rescission of specified interpretations, including among other things updates to reflect the effectiveness of the new rule amendments.
• FINRA Regulatory Notice 18-03 (January 10, 2018): FINRA Announces Updates of the Interpretations of Financial and Operational Rules
Liquidity Risk Management Practices
Effective liquidity management is a critical control function at broker-dealers and across firms in the financial sector. Failure to manage liquidity has contributed to both individual firm failures and, when widespread, systemic crises. From an investor protection perspective, sound liquidity risk management practices enhance investor protection because they make it more likely that a firm’s customers continue to have prompt access to their assets, even in times of stress.
FINRA is providing guidance on effective practices that senior management and risk managers at firms should consider and implement. Regulatory Notice 15-33 is directed to firms that hold inventory positions or clear and carry customer transactions. Other types of broker-dealers may also find the Notice is of value to them when assessing their own liquidity risks.
• FINRA Regulatory Notice 15-33 (September 2015): Guidance on Liquidity Risk Management Practices