Series 26: Compliance And Exemption Reports

Compliance and Exemption Reports

In order to verify their adherence to the financial responsibility rules, broker-dealers must also file either of the following two reports with the SEC. Carrying broker-dealers, which are firms that maintain custody of their customers’ assets, must file a compliance report. Introducing broker-dealers, which are firms that do not have custody of their customers’ assets, must file an exemption report. Exemption reports must cite the member firm’s exemption from the stricter requirements that apply to carrying broker-dealers. Both reports must be filed annually. The purpose of these two reports is to help independent public accountants identify the custody practices of broker-dealers and to safeguard investors’ assets.

The compliance report requires broker-dealers to affirm that they have established and implemented intern