On July 8, the staffs of the Division of Trading and Markets (TM) of the US Securities and Exchange Commission and of the Office of General Counsel of the Financial Industry Regulatory Authority, Inc. issued a joint statement on broker-dealer custody of digital assets that are also securities (Joint Statement). As explained in, and for purposes of, the Joint Statement, a “digital asset” refers to an asset that is issued and transferred using distributed ledger or blockchain technology, including, but not limited to, so-called “virtual currencies,” “coins,” and “tokens.” While all digital assets are not securities under the federal securities laws, a digital asset that is a security is referred to as a “digital asset security” in the Joint Statement. While the Joint Statement provides some insight on the issues under consideration by regulators regarding custody, it does not identify specific circumstances under which a broker-dealer could custody digital asset securities in a manner consistent with the financial responsibility rule applicable to broker-dealers.
The staff of the Securities and Exchange Commission’s (SEC) Division of Trading and Markets (Staff) issued a no-action letter on October 29 to the Financial Industry Regulatory Authority (FINRA), which, in effect extends the effective date of recent changes to FOCUS reporting by registered broker-dealers. In August 2018, the SEC adopted amendments regarding, among other things, broker-dealer reporting with respect to reporting of extraordinary gains, the cumulative effect of changes in accounting principles, and comprehensive income reported on broker-dealer annual reports (i.e., Rule 17a-5). The amendments are scheduled to become effective for all filings made on and after November 5, 2018.
On October 11, 2018, the Securities and Exchange Commission (SEC) will have an open meeting to consider whether to reopen the comment period and request additional comments (including potential modifications to proposed rule language) regarding the following:
(1) Capital, margin, and segregation requirements for security-based swap (SBS) dealers and major SBS participants, and amendments to Rule 15c3-1 for broker-dealers that were proposed in October 2012 (Financial Responsibility Proposal)
(2) Amendments proposed in May 2013 that would establish the cross-border treatment of SBS capital, margin, and segregation requirements (Cross-Border Proposal)
(3) An amendment proposed in April 2014 that would establish an additional capital requirement for SBS dealers that do not have a prudential regulator (Prudential Regulator Proposal)