Changes to Annual Reporting and Audit Requirements for Brokers and Dealers and an Update on the PCAOB Interim Inspection Program related to Audits of Brokers and Dealers

On July 30, 2013, the SEC amended Rule 17a-5 to, among other things, increase focus by broker-dealers and their auditors on compliance with certain financial and custodial requirements. The SEC’s new rules eliminate the “material inadequacy” report and put in its place requirements for broker-dealers to file a new annual compliance or exemption report that has been subject to an examination or review, respectively, by an independent registered public accountant. Brian and Bob will walk us through the new requirements for both broker-dealers and their auditors that are effective for fiscal years ending on or after June 1, 2014.

The Dodd-Frank Act gave the PCAOB oversight authority with respect to audits of brokers and dealers. Following that, the PCAOB began an interim inspection program related to broker-dealer audits to assess compliance with applicable audit standards and SEC Rules as well as to help facilitate the development of a permanent inspection program. The PCAOB released in August the second report on the interim inspection program that describes observations noted during inspections it conducted during 2012. Bob will walk us through these observations and the actions needed, and provide an overview of the PCAOB’s next steps for the interim inspection program and the development of its permanent inspection program. Brian will add his perspective on potential implications of PCAOB inspection findings.