SEC to toughen custody rules for broke-dealers

By @ibtimes on

The top securities regulator said on Monday that she plans to hold broker-dealers more accountable for their customers' assets after Bernard Madoff duped his clients out of billions of dollars.

We are considering enhancing oversight of broker-dealer custody by providing new information and tools to regulatory examiners, Schapiro said at an accounting conference.

Months after Madoff was arrested in 2008 for operating his epic Ponzi scheme, the SEC beefed up its oversight of investment advisers.

Madoff's investment advisory business was registered with the SEC. He was also registered as a broker-dealer and supervised by the SEC and industry-funded watchdog the Financial Industry Regulatory Authority .

The SEC's rule subjects some 1,600 investment advisers who physically hold their customers' assets to a surprise audit to ensure that the assets are really there.

Now the SEC is mulling ways to improve auditors' oversight of broker-dealers.

Currently, law requires auditors to provide assurances that the broker-dealers' numbers are accurate, and that their controls are in place. But that rule is nearly 30 years old.

We are considering strengthening compliance and controls, Schapiro said at the conference in Washington of the American Institute of Certified Public Accountants.

Separately, Schapiro said the SEC would decide in 2011 whether to forgo domestic accounting rules for international standards -- now used in more than 100 countries.

If the SEC decides to allow U.S. companies to use the International Financial Reporting Standards, or IFRS, Schapiro said there would be a four-year implementation period.

(Reporting by Rachelle Younglai; Editing by Derek Caney)

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