SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50020]
July 14, 2004
Extension of Order Regarding Broker-Dealer Financial Statement Requirements under Section 17 of the Exchange Act
The Securities and Exchange Commission ("Commission") is extending its Order, originally issued on August 4, 2003 (the "2003 Order")1 under Section 17(e) of the Securities Exchange Act of 1934 ("Exchange Act"), regarding audits of financial statements of broker-dealers that are not issuers ("non-public broker-dealers"). The 2003 Order provided that non-public broker-dealers may file with the Commission and may send to their customers documents and information required by Section 17(e) certified by an independent public accountant, instead of 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.
Section 17(e)(1)(A) of the 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."2 The Sarbanes-Oxley Act of 2002 ("Act")3 established the Public Company Accounting Oversight Board ("Board")4 and amended Section 17(e) to replace the words "an independent public accountant" with "a registered public accounting firm."5
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.6 The Act does not provide a deadline for registration of auditors of non-public broker-dealers.
The 2003 Order expires January 1, 2005. Application of registration requirements and procedures to auditors of non-public broker-dealers is still being considered. The Commission has therefore determined that extending the Order is consistent with the public interest and the protection of investors.
IT IS 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 by a registered public accounting firm, for fiscal years ending before January 1, 2006, unless the Commission has approved rules regarding Board registration of auditors of non-public broker-dealers that set an earlier date.
By the Commission.
Margaret H. McFarland
1 Exchange Act Release No. 48281.
2 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.
3 Public Law 107-204.
4 Section 101 of the Act.
5 Section 205(c)(2) of the Act.
6 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 was October 22, 2003. See Exchange Act Release No. 48180 (July 16, 2003). The registration deadline for non-U.S. public accounting firms has been extended to July 19, 2004. See Exchange Act Release No. 49473 (March 25, 2004).