Series 26: Compliance And Exemption Reports

Compliance and Exemption Reports

Under Rule 17a-5 as amended, broker-dealers also must file either of the following two reports with the SEC, verifying their adherence to the financial responsibility rules. Carrying broker-dealers, who maintain custody of their customers’ assets, must file a compliance report. Introducing broker-dealers, who 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 requir