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SEC Asks for Help Understanding Digital Assets and Custody Rule, FINRA Issues FAQs on 529 Self-Reporting Request, New Testing for Swap Traders and 79 Firms Settle with SEC in Share Class Initiative

IA Watch Webinar on Real-Life Lessons on BCPs with Jill Grenda, Managing Director at Hardin Compliance Consulting:  Don’t miss IA Watch’s FREE webinar, Real-Life Lessons Learned from Peers Who’ve Had to Implement their BCPs on April 16  from 2:00 p.m. to 3:00 p.m. EDT.  This webinar features several CCOs sharing their real-life experiences, including Hardin Compliance Consulting Managing Director, Jill Grenda.  Other speakers include Maurice Tallini, CCO Domini Impact Investments; Deborah Lamb, CCO McKinley Capital Management; and Ken Hyman, CCO Partnervest Advisory Services.

Highlights include:

  • What the SEC expects of you when it comes to your BCP
  • Why even the best BCP may force you to improvise in an emergency
  • Advice on how best to test your BCP and train employees to react properly
  • Ideas to add to your BCP

Register for IA Watch‘s FREE webinar and earn 1 CLE/CPE/CFP credit.

For Investment Advisers: SEC Actions

Mr. Blue Skies:  A Primer on Form D and Blue Sky filings:  For hedge fund and private fund managers, Denise Alfieri provides an overview of the basics of Form D and blue sky filings.  Check out The Devil is in the Details:  A Primer on Form D and Blue Sky Filings for Private Fund Managers.  Contributed by Denise D. Alfieri, Managing Director

Speak Now or Forever Hold Your Peace — SEC Asks for Help on the Custody Rule:  Advisers:  Now is your chance to speak up! The SEC is re-evaluating certain aspects of the Custody Rule (Advisers Act Rule 206(4)-2) and wants public comment on trading practices, including trades that are not settled on a delivery versus payment (“Non-DVP”) basis and the application of the Rule to digital assets.  In the release, the SEC lists questions where it wants industry and public input.

DVP settlement is “cash on delivery,” where payment is made when the security is delivered to the client’s account, making it difficult for a custodian to misappropriate client funds. Assets that settle Non-DVP, such as peer-to-peer transactions that settle on a Blockchain, are potentially more vulnerable to misappropriation.  “The Staff expects to utilize what it learns in future recommendations to the Commission.” Comments can be provided to the SEC using the email address IMOCC@sec.gov with “Custody Rule and Non-DVP Trading” or “Custody Rule and Digital Assets” in the subject line.  Contributed by Heather D. Augustine, Senior Compliance Consultant.

For Broker-Dealers:  FINRA Actions 

Keeping up with  FINRA’s 529 Plan Share Class Initiative:  Recently, FINRA released another video segment, “A Few Minutes With FINRA,” and Frequently Asked Questions Regarding the 529 Plan Share Class Initiative, where it announced an extension to the deadline for self-reporting to April 30, 2019.  In turn, FINRA extended the confirmation of eligibility deadline to May 31, 2019.  Firms may now request extensions for both the self-reporting and confirmation of eligibility due dates, via email to 529initiative@finra.org.

Susan Schroeder, EVP of Enforcement, addressed several questions received by FINRA in response to its 529 Plan Initiative, all the while stressing that this is a voluntary initiative.  When deciding whether to self-report, firms are encouraged to conduct a quality assessment of their supervisory procedures rather than a quantitative analysis.  Firms should ask whether they have the information needed to supervise these transactions and whether their brokers are properly trained to make appropriate share class recommendations.  If a firm identifies deficiencies in its supervisory procedures related to 529 Plan share class recommendations, even if there has been no impact to clients, the firm is encouraged to self-report to FINRA the corrective measures being taken to strengthen supervision in this area.

Ms. Schroeder also stated that self-reporting may not always result in an enforcement action.  For example, in cases where a firm identifies supervisory deficiencies but determines there has been no impact on customers, the results may be cautionary or no-action.

To assist you with assessing the quality of your supervisory procedures, Hardin has created a checklist of factors to consider.  Contributed by Rochelle A. Truzzi, Senior Compliance Consultant

Registration Required If Your Firm Handles Orders in NMS Stocks, OTC Equity Securities, or Listed Options:  Rule 613 under the Securities Exchange Act of 1934 requires national securities exchanges to create a National Market System (“NMS”) plan to develop a consolidated audit trail (CAT) that allows regulators to track activity in U.S. equity and options markets.  CAT NMS, LLC was formed by FINRA and other market participants to develop a database for all equity and options trading on U.S. exchanges.  FINRA firms that handle orders in NMS stocks, OTC (over-the-counter) equity securities or listed options will have to register as CAT Reporters by June 27.  Under the CAT NMS Plan, firms may self-report, use a third-party vendor to report, or use a combination of the two reporting methods.   Registration is now open and is due by June 27, 2019.   All subject firms must register, regardless of their reporting methods.

Registration is easy and must be completed on-line through the CAT NMS Plan website. Information requested includes: a registered principal, the manner of data submission (self-reporting or via a vendor), preferred reporting method (SFTP or via the CAT Reporting Portal), and the size of the firm (whether it has a capitalization of $500,000 or less).  The form also requires a CAT Reporting Industry Member ID number.  For your reference, FINRA hosted an industry webinar on March 19th and established a web page regarding the consolidated audit trail.  Please bookmark the Consolidated Audit Trail website for information on future developments and the Plan timeline.   Contributed by Rochelle A. Truzzi, Senior Compliance Consultant

Attention FINOPs – How To Report Operating Leases on FOCUS Filings:  In February 2016, the Financial Accounting Standards Board (“FASB”) released amendments to the accounting standards for recognizing leases on the balance sheet of a lessee (Topic 842, “Lease Accounting Update”).  The amendments went into effect for some firms that have fiscal years beginning after December 15, 2018.  The Lease Accounting Update changed the treatment of operating leases by requiring that a lessee must include on its balance sheet an asset and liability arising from an operating lease.  In response, the SEC issued a second No-Action Letter to Securities Industry and Financial Markets Association (SIFMA) dated October 23, 2018 (SIFMA 2 No-Action Letter) which pointed out that under the net capital requirements for broker-dealers in Securities Exchange Act Rule 15c3-1, an operating lease asset would be a non-allowable asset for purposes of determining net worth.   Without relief, a broker-dealer lessee would need to deduct the operating lease asset from its net worth when computing net capital.  The SIFMA 2 No-Action Letter grants such relief when a firm, in calculating net capital, adds back to its net worth an operating lease asset to the extent of the associated liability (with certain restrictions).  On the other side of the T-account, a firm does not need to include in its aggregate indebtedness calculation an operating lease liability to the extent of the operating lease asset (with certain restrictions).  This no-action letter replaces a prior No-Action Letter to SIFMA dated November 8, 2016.

In Regulatory Notice 19-08, FINRA provides specific guidance for reporting lease assets and lease liabilities on FOCUS reports.  The Lease Accounting Update requires a lessee to include on its balance sheet an asset and liability arising from an operating lease.  The SIFMA 2 No-Action Letter states that the SEC will not recommend enforcement action under Rule 15c3-1 if a firm, when calculating net capital, adds back to its net worth an operating lease asset to the extent of the associated liability (with certain restrictions).  On the other side of the T-account, a firm does not need to include in its aggregate indebtedness calculation an operating lease liability to the extent of the operating lease asset (with certain restrictions).  Contributed by Rochelle A. Truzzi, Senior Compliance Consultant

Does Your Firm Publish Quotations in Unregistered Securities of Foreign Private Issuers?  If so, FINRA’s Regulatory Notice 19-09 is a must read!   As per Securities Exchange Act Rule 15c2-11, a firm is prohibited from publishing quotes on such securities unless it has obtained, reviewed and makes available upon request the current (since the beginning of its last fiscal year) information published (or required to be published) by the issuer, including:

  • information that has been made public according to the laws of the issuer’s country of incorporation;
  • information filed with the principal stock exchange in the issuer’s primary trading market; and
  • information distributed to security holders.

This information is required by Securities Exchange Act Rule 12g3-2(b)(1)(iii) and must be available in English.  Member firms can satisfy this requirement if they provide the requestor with instructions on how to access this information on the issuer’s website.  The firm needs to be sure that the issuer’s web site does not restrict U.S. residents from this information.  Contributed by Rochelle A. Truzzi, Senior Compliance Consultant

For Mutual Funds: SEC Actions

Modifications to Form N-PORT: In response to information security concerns, and given the large amount of sensitive fund data contained on Form N-PORT filings, the SEC has issued an interim final rule (the “Interim Rule”) modifying Form N-PORT reporting requirements.  Under the Interim Rule, large and small fund complexes will still be required to prepare Form N-PORT within 30 days after month end.  But they will only be required to file the prior three month’s reports within 60 days after the fund’s fiscal quarter end.  Only the final month in the quarter will be publicly available.  The table below outlines the updated effective and filing dates.  Form N-LIQUID has also been amended to include an optional explanatory note.  Contributed by Cari A. Hopfensperger, Senior Compliance Consultant

No Action Letter to the Independent Directors Council relaxes certain in-person voting requirements for fund boards:  In a commonsense move, the SEC lifted the in-person meeting requirement for certain mutual fund board actions.  The relief permits directors to meet via telephone or video conference to vote on the following board actions:

  • Approval of an investment advisory contract under Section 15(c) of the Investment Company Act;
  • Approval of the principal underwriting contract for the fund;
  • Selection of the Fund’s independent accountant; and
  • Renewal of the fund’s 12b-1 plan.

The relief granted is limited to situations where the renewal or approval does not include material changes.  Contributed by Cari A. Hopfensperger, Senior Compliance Consultant

 For Municipal Advisors: MSRB Actions

MSRB Announces Effective Date for Amended Advertising Rules: On February 26, the MSRB announced amendments to MSRB Rule G-21, on advertising by brokers, dealers, and municipal securities dealers, and new Rule G-40, on advertising by municipal advisors.  These changes become effective on August 23, 2019.  The MSRB also announced two related rule changes that will become effective on the same date.  The changes provide social media guidance under the advertising rules and exempt interactive content considered to be advertising from the principal pre-approval requirements.  Contributed by Doug MacKinnon, Senior Compliance Consultant.

For Hedge Fund Managers: CFTC Actions 

NFA to Require Swap Proficiency Testing:  Beginning in 2021, associated persons of registered Commodity Pool Operators (CPOs) and Commodity Trading Advisors (CTAs) that engage in swap activities must satisfy new Swaps Proficiency Requirements similar to those required of associated persons engaging in commodity futures or forex activities.  To acknowledge the different types of swap activities performed, NFA established two separate tracks – a Long Track and Short Track.  According to the release, the requirements will need to be completed online through various modules that contain training and testing components.  The NFA has outlined the proficiency requirements in greater detail on its website.  Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.

Lessons Learned from Recent SEC and FINRA Cases

Advisor Slammed for Charging Some Clients More for Same Services: Continuing its focus on retail investors, the SEC recently settled with Valley Forge Asset Management, LLC (“VF”) a dually-registered investment adviser and broker-dealer that was ultimately acquired by BB&T Securities.  VF mainly provided discretionary advisory services to retail and institutional clients to which it offered three brokerage choices. The first was an affiliated brokerage option (“the Affiliated Brokerage Option”) where clients were informed through VF’s Form ADV and investment management agreement that they would receive “full service” brokerage for a discount of 70% from the firm’s retail commission rate. The second option allowed clients to direct brokerage to a third-party broker selected by the client (the “Directed Brokerage Option”).  The majority of these clients selected a broker that participated in a referral program with VF where the broker provided these clients with certain additional services and benefits at no additional cost beyond commission.  The third option (“the Discretionary Brokerage Option”), permitted VF to trade through any broker, including away from the client’s custodian. Over half of VF’s clients selected the Affiliated Brokerage Option.

In reality, clients who selected the Affiliated Brokerage option paid commissions roughly 4.5 times the rates paid by Directed Brokerage clients, and even more than rates charged to clients who selected the Discretionary Brokerage Option.  This third group was largely comprised of  VF’s institutional clients.  The SEC found that VF’s Form ADV disclosure that it would “benefit monetarily” under the Affiliated Brokerage option was inadequate and misleading, considering the wide disparity among the rates charged clients.  Additionally, Affiliated Brokerage clients received no additional services as compared to other clients, despite VF’s positioning of Affiliated Brokerage as “full service.”  By not describing “full service,” the SEC found that clients did not have the information necessary to make an informed decision.

Ultimately, BB&T agreed to return over $5 million to harmed retail investors and pay a $500,000 penalty.  This settlement acknowledges BB&T’s cooperation and remedial actions that included ending the Affiliated Brokerage program, revamping its in-house brokerage pricing, and amending its ADV disclosures.  Dually registered firms should carefully review disclosures related to brokerage arrangements as the SEC highlighted failures in VF’s description of brokerage services and their pricing and related conflicts.

Finally, the SEC recognized that VF’s Discretionary Brokerage clients, largely institutional, received the most favorable commission rates.  Advisers with a mix of retail and institutional clients, even those that are not conflicted with affiliated brokerage, should pay attention to differing commission rates and brokerage service levels between these two bases when crafting disclosures and conducting best execution analyses.  Kelly L. Gibson, Associate Director of Enforcement in the SEC’s Philadelphia Regional Office, continued to sound the SEC’s alarm bell with another warning in the accompanying press release: “The SEC’s examination and enforcement programs will continue to identify these types of violations and return money to harmed retail investors as quickly as possible.”  Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.

SEC Share Class Initiative Returning More Than $125 Million to Investors:  The SEC continued to demonstrate its commitment to retail investors through its recent settlements with 79 advisers that self-reported 12b-1 fee conflict disclosure failures last summer during the Share Class Selection Disclosure Initiative (“SCSD Initiative”).  After several years of similar enforcement actions and a related Risk Alert in 2016, the SEC launched the SCSD Initiative in February 2018.  For advisers who received 12b-1 fees (directly or indirectly) from clients when lower cost share classes were available to those clients without providing adequate and accurate disclosures of the related conflicts, the SCSD Initiative offered a path forward.  Under the voluntary initiative, conditions for participation included self- reporting violations, compensating harmed investors and revising disclosures in exchange for the SEC “favorable terms” with the SEC.  Read more about the history of this topic here and here.  These settlements mark the first with self-reporting advisers, and the SEC noted in its press release that it is still reviewing others.

The language of the 79 SEC orders appears consistent.  The press release noted that all advisers were found to have failed “to include adequate disclosure regarding the receipt of 12b-1 fees; and/or adequately disclose additional compensation received for investing clients in a fund’s 12b-1 fee-paying share class when a lower-cost share class was available for the same fund.”  In a departure from prior enforcement actions, the SEC did not cite the advisers for best execution failures.  Unfortunately, the orders failed to offer any insight regarding the language the SEC found inadequate.  The settling firms were required to update their disclosures within 30 days, so there will soon be 79 new samples to analyze.  Interestingly, the average amount returned to investors per adviser was roughly $1.5 million; however, six firms accounted for more than 40% of the total.

As we’ve said in prior articles, advisers can protect themselves from this risk by identifying and then appropriately disclosing related conflicts, ensuring they have robust policies and procedures on initial and ongoing share class selection practices, establishing appropriate oversight, providing training to FAs on those policies and procedures, and then rigorously testing them regularly.  Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.

Stupid is as Stupid Does:  Denial and ignorance is not a defense especially if you are a Certified Financial Analyst (“CFA”) and a 40-year veteran of the securities industry.  The SEC issued a cease and desist to Ascension Asset Management LLC and its owner, Grenville Gooder, Jr. (“Gooder”), for multiple violations of the Investment Advisers Act of 1940 including custody violations, materially untrue statements on Form ADV, compliance program failures, and books and records inadequacies.  First, the SEC found that he submitted 10 years of inaccurate Forms ADV.  Despite being the managing member of a private fund and listing Ascension as the investment adviser on the ADV, the firm failed to comply with the requirements of the Advisers Act Custody Rule.  Ascension failed to acknowledge custody in Item 9 of the Form ADV Part 1A, and never engaged an independent public accountant to conduct an audit of the private fund.  Obviously, no audited financials were delivered to investors.  Gooder also acted in the capacity as sole trustee on a $5.2 million trust account and again did not claim custody on the Form ADV Part 1.

These lapses may have been attributable to the fact that Gooder’s first named CCO was not empowered to implement a compliance program.  Consequently, the firm did not adopt written policies and procedures until after the SEC submitted its document request list for a routine examination.  Not surprisingly, the SEC hit the firm with violations of Advisers Act Rule 206 (4)-7 for an inadequate compliance program.  To make matters even more interesting, the second named CCO was not informed that he was CCO for the firm until he was contacted by the SEC’s enforcement division.  Finally, the SEC cited Gooder and Ascension for not maintaining the required financial records for ten years (you read that right — 10!).  The SEC stated in the cease and desist order that “Gooder failed to take steps to educate himself about the Rules.”  The SEC found that Gooder never attended any compliance training, visited the SEC’s website, contacted the SEC for questions, or made any effort to educate himself.

As egregious as this case is, it’s amazing that the SEC continues to highlight Custody Rule violations regarding private funds.  Firms that manage private funds have to meet the Custody Rule requirements.  As this case demonstrates, there is no mercy for ignorance.  Use publicly available resources including the Hardin Blog, the SEC website, Google, and if you don’t have the time or energy, hire a consultant or employee who can help keep your firm compliant. Contributed by Heather D. Augustine, Senior Compliance Consultant.

Cantor Fitzgerald’s Trading Activity Outpaces its Supervisory Structure: FINRA recently announced that it fined Cantor Fitzgerald & Co. (“Cantor”) $2 million for Regulation SHO (Reg SHO) violations and supervisory failures between 2013 and 2017.  FINRA found that Cantor was using a predominantly manual system to supervise its compliance with Reg SHO.  The system had become ineffective for supervising the firm’s increased trading activity that went from 35 billion shares in 2013 to 79 billion shares in 2014. This case serves as a good reminder that  FINRA increases its scrutiny on broker-dealers that experience significant growth. Contributed by Doug MacKinnon, Senior Compliance Consultant.

Worth Reading  

A bit of Blatant Self Promotion  Hardin Compliance Consulting partner and managing director, Jaqueline Hummel, has been recognized by JD Supra as one of the top five authors writing on compliance issues in 2018.

SEC not finished with scrutiny of self-reporting firms  Jessica Matthews of Financial Planning warns firms that the SEC’s 12b-1 fee probe has expanded to other revenue-sharing arrangements.  Jaqueline Hummel from Hardin Compliance weighs in.

Financial Institutions Report Widespread Elder Abuse  The Consumer Fraud Protection Bureau (CFPB) conducted a study of elder financial exploitation by analyzing 180,000 Suspicious Activity Reports (SARs) between 2013 and 2017 and published this report to describe its findings.

Cybersecurity Is Not an Area for De-Regulation This editorial by Lori T. Vullo, former Superintendent of the New York State Department of Financial Services, addresses the role of regulation as a cybersecurity control.

International Women’s Day: Memoirs of a Cashier Girl — Journey to the Compliance World  Chloe Bloomfield, from Thomson Reuters Regulatory Intelligence and Compliance Learning, brings us this article in recognition of International Women’s Day.  Although written from a U.K. perspective, this resonates equally in the U.S.

NIST Outlines Privacy Framework, Taking a Page from Past Cybersecurity Efforts  One of the most widely used cybersecurity frameworks turns its focus to establishing a new privacy framework.

Filing Deadlines and To Do List for April 2019


  • Form ADV Part 2A:  Registered investment advisers are required to distribute to each client an updated Form ADV Part 2A or a summary of material changes with an offer and information on how to obtain the updated Form ADV Part 2A, within 120 days of fiscal year-end.  Due April 30, 2019.
  • Form 13H: Following an initial filing of Form 13H, all large traders must make an amended filing to correct inaccurate information promptly (within ten days) following the quarter-end in which the information became stale (unless they are on Inactive Status).  Recommended due date:  April 10, 2019.  (Note:  Neither the SEC nor its staff has provided guidance on the definition of “promptly” for Form 13H.)
  • Form ADV Part 2BRegistered investment advisers should review their Form ADV Part 2B Brochure Supplements to ensure continued accuracy.
  • ERISA Schedule C of Form 5500 Disclosure: An adviser may be required to report certain information to its ERISA plan clients and investors for their use in completing Department of Labor Form 5500, including information about compensation received with respect to ERISA plan assets that the adviser manages or that are invested in the adviser’s funds. If you have ERISA plan clients that follow a calendar year, they may request this information to file Form 5500 by July 31, (ERISA plan clients that do not follow a calendar year must file Form 5500 by the last day of the seventh month following the plan’s year-end.)


  • Form PF for Large Liquidity Fund Advisers:  Large Liquidity Fund Advisers must file Form PF with the SEC on the IARD system within 15 days of each fiscal quarter end. Due April 15, 2019.
  • Distribute Audited Financial Statements for Private Funds: Private fund investment advisers should have their funds audited by an independent, PCAOB-registered accountant and deliver the audited financial statements to the funds’ investors within 120 days of the end of the funds’ fiscal year (for funds with December 31, 2018 year-end, the date is April 30, 2019). The deadline for private funds that are fund of funds is 180 days of the funds’ fiscal year end. That’s June 29, 2019, for funds with December 31 year-end.
  • Form PF Annual Amendment: Form PF Annual Amendment is due within 120 days of fiscal year-end for all private fund advisers other than “large hedge fund advisers” and “large liquidity fund advisers.” The due date is April 30, 2019.
  • Form PF Quarterly Update:  Form PF quarterly update is due for “large hedge fund advisers” and “large liquidity fund advisers” who did not submit information relating to their other private funds with their fourth-quarter filing.  Due April 30, 2019.
  • Blue Sky Filings (Form D): Advisers to private funds should review fund blue sky filings and determine whether any amended or new filings are necessary.  Generally, most states require a notice filing (“blue sky filing”) within 15 days of the first sale of interests in a fund, but state laws vary. Did you know that Hardin Compliance Consulting offers a convenient and economical blue sky filing service to help firms manage this complicated monthly task?  Learn more here and give us a call to discuss your needs further.  Due date:  April 15, 2019.


  • CFTC Form CPO-PQR Schedule A must be filed by small CPOs (i.e., CPOs with less than $150 million in aggregated gross pool AUM as of the close of business on any business day during a calendar year), by April 1, 2019.
  • CFTC Form CPO-PQR Schedules A and B must be filed by mid-sized CPOs (at least $150 million to $1.5 billion in aggregated gross pool AUM as of the close of business on any business day during a calendar year) by April 1, 2019.
  • Annual Reports for 4.7 Exempt CPOs. Exempt CPOs must electronically file audited annual reports, including statements of financial condition, statements of operations and appropriate footnotes, for their pools with the NFA and distribute them to their investors by April 1, 2019.


  • FINRA Accounting Support Fee: Quarterly invoice to support the GASB budget.  Based on the municipal securities the firm reported to the MSRB.  De Minimis firms (that owe less than $25) will not receive an invoice.  Invoices are sent to the firm via WebCRD’s E-Bill.  Due date to be determined.   
  • Annual Audit Reports for the Fiscal Year-End January 31, 2019:  FINRA requires that member firms submit their annual audit reports in electronic form.  Firms must also file the report at the regional office of the SEC in which the firm has its principal place of business and the SEC’s principal office in Washington, DC. Firms registered in Arizona, Hawaii, Louisiana, or New Hampshire may have additional filing requirements.  Due Date April 1, 2019.
  • SIPC-7 Assessment: For firms with a Fiscal Year-End of January 31, 2019.  SIPC members are required to file the SIPC-7 General Assessment Reconciliation Form together with the assessment owed (less any assessment paid with the SIPC-6) within 60 days after the Fiscal Year-End.  Due Date April 1, 2019.
  • Customer Complaint Quarterly Statistical Summary: For complaints received during the 1stQuarter, 2019.  FINRA Rule 4530 requires Firms to submit statistical and summary information regarding complaints received during the quarter by the 15th day of the month following the calendar quarter.  Due date April 15, 2019.
  • Rule 17a-5 Quarterly FOCUS Part II/IIA Filings:  For Quarter ending March 31, 2019. FINRA requires that member firms file a FOCUS, (Financial and Operational Combined Uniform Single) Report Part II or IIA on a quarterly basis. Clearing firms and firms that carry customer accounts file Part II and introducing firms file Part IIA.  Due date April 23, 2019. 
  • Quarterly Form Custody:  SEC requires that member firms file Form Custody pursuant to Securities Exchange Act Rule 17a-5(a)(5) for the quarter ending March 31, 2019. Due date April 23, 2019. 
  • Supplemental Statement of Income (“SSOI”): For the quarter ending March 31, 2019.  FINRA requires firms to submit additional, detailed information regarding the categories of revenues and expenses reported on the Statement of Income (Loss) page of the FOCUS Report Part II/IIA.  Due date April 26. 2019.
  • Supplemental Inventory Schedule (“SIS”): For the month ending March 31, 2019. The SIS must be filed by a firm that is required to file FOCUS Report Part II, FOCUS Report Part IIA or FOGS Report Part I, with inventory positions as of the end of the FOCUS or FOGS reporting period, unless the firm has (1) a minimum dollar net capital or liquid capital requirement of less than $100,000; or (2) inventory positions consisting only of money market mutual funds.  A firm with inventory positions consisting only of money market mutual funds must affirmatively indicate through the eFOCUS system that no SIS filing is required for the reporting period.  Due date April 26. 2019.
  • Annual Audit Reports for Fiscal Year-End February 28, 2019. FINRA requires that member firms submit their annual audit reports in electronic form.  Firms must also file the report at the regional office of the SEC in which the firm has its principal place of business and the SEC’s principal office in Washington, DC. Firms registered in Arizona, Hawaii, Louisiana, or New Hampshire may have additional filing requirements.  Due date April 29, 2019. 
  • SIPC-7 Assessment: For firms with a Fiscal Year-End of February 28, 2019.  SIPC members are required to file the SIPC-7 General Assessment Reconciliation Form together with the assessment owed (less any assessment paid with the SIPC-6) within 60 days after the Fiscal Year-End. Due date April 29, 2019. 
  • Form OBS: For the Quarter ending March 31, 2019.  Unless subject to the de minimis exception, all clearing, self-clearing, and carrying firms and those firms that have a minimum dollar net capital requirement equal to or greater than $100,000 and at least $10 million in reportable derivatives and other off-balance sheet items must submit Form OBS as of the last day of a reporting period within 22 business days of the end of each calendar quarter via eFOCUS.  Firms that claim the de minimis exemption must affirmatively indicate through the eFOCUS system that no filing is required for the reporting period.  Due date April 30, 2019. 
  • SIPC-3 Certification of Exclusion from Membership: For firms with a Fiscal Year-End of March 31, 2019, AND claiming an exclusion from SIPC Membership under Section 78ccc(a)(2)(A) of the Securities Investor Protection Act of 1970.  This annual filing is due within 30 days of the beginning of each fiscal year. Due date April 30, 2019. 
  • SIPC-6 Assessment: For firms with a Fiscal Year-End of September 30, 2018.  SIPC members are required to file for the first half of the fiscal year a SIPC-6 General Assessment Payment Form together with the assessment owed within 30 days after the period covered. Due date April 30, 2019. 


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Have a compliance question or want an independent review of your compliance program?  Hardin Compliance can help!  Call us today at 1.724.935.6770, or visit our website at www.hardincompliance.com for more information.


Hardin Compliance Consulting provides links to other publicly-available legal and compliance websites for your convenience. These links have been selected because we believe they provide valuable information and guidance.  The information in this e-newsletter is for general guidance only.  It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting of any kind.


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