July 21, 1992
TO: SEC RULES MEMBERS NO. 31-92
UNIT INVESTMENT TRUST MEMBERS NO. 43-92
COMPLIANCE COMMITTEE NO. 9-92
RE: SEC ADOPTS TEMPORARY BROKER-DEALER RISK ASSESSMENT RULES
__________________________________________________________
The Securities and Exchange Commission has adopted
temporary rules to implement the broker-dealer risk assessment
provisions of the Market Reform Act of 1990. Rule 17h-1T
requires broker-dealers to maintain and preserve certain
information regarding the financial and securities activities of
associated persons that are reasonably likely to have a material
impact on the financial or operational condition of the broker-
dealer. Rule 17h-2T requires the filing of quarterly reports
with the Commission summarizing the information required to be
maintained pursuant to Rule 17h-1T.
Consistent with an Institute recommendation to the Division
of Market Regulation at the time the Market Reform Act was
enacted, certain limited purpose mutual fund and unit investment
trust broker-dealers are exempted from the rules. Specifically,
as adopted the rules contain an exemption for broker-dealers that
are exempt from the "customer protection rule" (Rule 15c3-3 under
the Securities Exchange Act of 1934), pursuant to paragraph
(k)(1) or (k)(2) thereof. (Paragraph (k)(1) exempts, among other
things, broker-dealers whose activities are limited to the
purchase, sale and redemption of redeemable securities of
registered investment companies.) The rules further exempt
broker-dealers that do not carry customer accounts and that
maintain capital of less than $20 million, and broker-dealers
that maintain capital of less than $250,000, regardless of
whether they carry customer accounts. Excerpts from the adopting
release concerning exemptions from the rules are attached.
The rules will become effective in stages beginning on
September 30, 1992 with certain information gathering
requirements. Reports on this information must be filed with the
Commission by October 31, 1992 and the rules will be fully
effective on December 31, 1992.
Frances M. Stadler
Assistant Counsel
Attachment