Securities Differences
A securities difference is the difference between the amount of securities listed on a broker-dealer’s books and the securities actually in its possession. A long securities difference exists when the amount of securities in the broker-dealer’s possession or control exceeds the amount recorded on its books. A short securities difference occurs when a security is listed as an asset on the books, but neither the security nor a confirmation of its purchase can be found in its possession.
The market value of all short securities differences that remain unresolved after their discovery becomes a non-allowable asset in accordance with the following schedule:
|
Differences* |
Numbers of business days after discovery |
|
25% |
7 |
|
50% |
14 |
|
75% |
21 |
|
100% |
28 |
|
*Percentage of market value of short securities differences |
|
Long securities differences are allowable assets, unless the securities have been sold before the difference has been adequately resolved. Once sold, the unresolved long securities difference becomes a non-allowable asset, less any reserves established.
For example, a fail to receive is a long securities difference. This is an asset on a broker-dealer’s books because it owns the security, although it does not yet possess it. For purposes of net capital, it is an allowable asset. If the broker-dealer sells the fail before receiving it, the fail is still on the books, but it is no longer considered an allowable asset. The entire amount, less reserves, must be deducted from the broker-dealers’ net capital.
The designated examining authority for a broker or dealer may extend the periods for