Both the SEC and the PCAOB have proposed standards that would amend Exchange Act Rule 17a-5, to require broker-dealers and their auditors to include various schedules and financial reports with their annual audits.
The new requirements would require broker-dealers annual reports to include a financial report, a compliance report or an exemption report exam reviewed by an auditor. The PCAOB also proposed auditor testing standards for broker-dealers, who do not hold customer funds or securities, provided they meet the conditions for an exemption under Exchange Act Rule 15c3-3.
According to both the SEC and the PCAOB, such standards are needed to provide a level of assurance to regulators. There standards also would –it is believed–avoid any unnecessary expenses or complexity for smaller firms. Both regulators saw the need to improve this oversight given their historical perspective of broker-dealer examinations as well as audit reports derived from examinations of broker-dealers.
In sum, this trend of financial oversight of broker-dealers will invariably continue over time.