Broker-dealers are subject to various ongoing compliance obligations, including:
Minimum net capital
Broker-dealers must maintain minimum amounts of liquid assets, or net capital. The required minimum net capital level is based upon the type of securities activities conduct by the broker-dealer and certain financial ratios. Broker-dealers that do not clear and carry customer accounts can operate with lower levels of net capital.
Customer protection rule
Rule 15c3-3 under the 1934 Act is designed to protect customer funds and securities held by broker-dealers. The rule requires a broker-dealer to have possession or control of all fully-paid or excess margin securities held for the account of customers. The broker-dealer must periodically determine how much money it is holding that is either customer money or obtained from the use of customer securities. If this amount exceeds the amount that it is owed by customers or by other broker-dealers relating to customer transactions, the broker-dealer must deposit the excess into a special reserve bank account for the exclusive benefit of customers.
Broker-dealers must make and keep current books and records detailing, among other things, securities transactions, money balances, and securities positions. They also must keep records for required periods and furnish copies of those records to the SEC on request. These records include e-mail.
Broker-dealers must file quarterly and annual financial statements with the SEC. Broker-dealers must also notify the SEC regarding net capital, recordkeeping, and other operational problems.
Broker-dealers are generally prohibited from providing personal information about a customer to a third party unless they provide the customer with an initial and annual “privacy notice” giving him or her the opportunity to withhold consent to the sharing of the information.