Memorial Day weekend typically brings us open swimming pools, trips to the beach and smells of charcoal (lump only, of course) as far as the nose takes us.
And this year, the shortening of the settlement cycle for most broker-dealer transactions from 2 days to 1, or T+1, on May 28. The Securities and Exchange Commission’s Division of Examinations (“EXAMS”) posted a recent Risk Alert that recounts the rule changes and identifies certain issues associated with them. While these changes mostly impact broker-dealers – particularly with respect to issuing confirmations under Exchange Act Rule 10b-10 and complying with locate and other requirements under Reg SHO – registered investment advisers should take note that these include amendments to Advisers Act Rule 204-2. RIAs must keep records of certain allocations, confirmations and affirmations subject to the revised Rule 15a.
Ominously, EXAMS also notes in the Risk Alert that:
[t]o assess Registrant preparedness associated with the shortening of the settlement cycle and the final rules, EXAMS intends to continue engaging with Registrants through examinations and outreach, as applicable to each Registrant type.
And to that end, EXAMS posted a sample list of requests for information in an appendix to the Risk Alert. The optimist in me views this as a guide to help registrants lock down operational readiness. The cynic in me views this as yet another opportunity to “engage” with EXAMS. However you view it – and I suppose both viewpoints can be true simultaneously – I encourage compliance officers to give it a read as their firms review their operational readiness in advance of the change.
Please contact me should you want to discuss.
Because broker-dealers, registered investment advisers and the associates want to spend their time serving their clients, not their regulators.
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