Securities and Exchange Commission, Office of Inspector General – SECs Oversight of Bear Stearns and Related Entities: Broker-Dealer Risk Assessment Program, September 25, 2008, Report No. 446-B
SEC’s Division of Trading and Markets (TM)…”is not fulfilling its obligations in accordance with the underlying purpose of the Broker-Dealer Risk Assessment program in several respects. First, TM has failed to update and finalize the rules governing the program, which would ensure that broker-dealers file pertinent information with the Commission in a timely manner. Second, TM has failed to enforce the temporary rules document retention and filing requirements that are incumbent upon broker dealers. As a result, nearly one-third of the firms failed to file 17(h) documents as required by the rules. Third, even after the collapse of Bear Stearns, in March 2008, two related broker-dealers still exist, one of which carries a significant number of customer accounts. However, TM has not yet determined whether these broker-dealers are obligated to file Form 17-H. Fourth, although TM tracks the filing status of 146 broker-dealers that file quarterly and annual reports with the Commission, TM only conducts an in-depth review of the filings for six of the 146 firms that TM determined are most significant. TM generally does not review the filings for the remaining 140 firms, yet they are required to file under the Broker-Dealer Risk Assessment program. Fifth, TM does not timely process and review the filings from the six firms upon which its staff focus their review. Sixth and finally, TM does not maintain documentation to identify all of the broker dealers that are exempt from the filing process…”
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