[Federal Register Volume 68, Number 153 (Friday, August 8, 2003)]
[Notices]
[Pages 47375-47376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20221]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48281]


Broker-Dealer Financial Statement Requirements Under Section 17 
of the Exchange Act

August 4, 2003.
    Section 17(e)(1)(A) of the Securities Exchange Act of 1934 
(``Exchange Act'') requires that every registered broker-dealer 
annually file with the Commission a certified balance sheet and income 
statement, and section 17(e)(1)(B) requires that the broker-dealer 
annually send to its customers its ``certified balance sheet.'' \1\ The 
Sarbanes-Oxley Act of 2002 (``Act'') \2\ established the Public Company 
Accounting Oversight Board (``Board'') \3\ and amended section 17(e) to 
replace the words ``an independent public accountant'' with ``a 
registered public accounting firm.'' \4\
---------------------------------------------------------------------------

    \1\ Exchange Act Rule 17a-5 requires registered broker-dealers 
to provide to the Commission and to customers of the broker-dealer 
other specified financial information.
    \2\ Public Law 107-204.
    \3\ Section 101 of the Act.
    \4\ Section 205(c)(2) of the Act.
---------------------------------------------------------------------------

    The Act establishes a deadline for registration with the Board of 
auditors of financial statements of ``issuers,'' as that term is 
defined in the Act.\5\ The Act does not provide a deadline for 
registration of auditors of broker-dealers that are not issuers (``non-
public broker-dealers''). Application of registration requirements and 
procedures to auditors of non-public broker-dealers is still being 
considered.
---------------------------------------------------------------------------

    \5\ Section 2 of the Act defines ``issuer.'' Section 102 of the 
Act establishes a specific deadline by which auditors of issuers 
must register with the Board. Based on the statutory deadline of 180 
days after the Commission determined the Board was ready to carry 
out the requirements of the Act, that date is October 22, 2003. See 
Exchange Act Release No. 48180 (July 16, 2003).
---------------------------------------------------------------------------

    Accordingly, we believe that it is consistent with the public 
interest and the protection of investors that non-public broker-dealers 
file with the Commission and send to their customers the documents and 
information required by section 17(e) certified by an independent 
public accountant instead of a registered public accounting firm until 
January 1, 2005, unless rules are in place regarding Board registration 
of auditors of non-public broker-dealers that set an earlier date.\6\
---------------------------------------------------------------------------

    \6\ We note the continued applicability of Exchange Act Rule 
17a-5. We wish to highlight Exchange Act Rule 17a-5(g), which 
requires, among other things, that audits of broker-dealers be made 
in accordance with generally accepted auditing standards (GAAS). 
GAAS requires, for example, that audits be conducted with due 
professional care by independent persons with adequate technical 
training and proficiency as an auditor.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to section 17(e) of the Exchange 
Act, that non-public broker-dealers may file with the Commission a 
balance sheet and income statement and may send to their customers a 
balance sheet certified by an independent public accountant instead of 
certified by a registered public accounting firm until January 1, 2005, 
unless rules are in place regarding Board registration of auditors of 
non-public broker-dealers that set an earlier date.


[[Page 47376]]


    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-20221 Filed 8-7-03; 8:45 am]
BILLING CODE 8010-01-P