SEC Finalizes Rule Changes for Settlement Cycles
SEC Releases
Brief Synopsis
On February 15th, the SEC formally adopted rule changes to reduce the settlement cycle for most Broker Dealer transactions.
Their goal is to reduce risk, promote investor protection, and increase operational and capital efficiency.
The rules will become effective sixty days following the date of publication, and the compliance date for each of the final rules is May 28th, 2024.
Requirements for RIAs
- Transactions subject to Rule 15c6-2(a) should have well-kept records of each confirmation received, and of any allocation and each affirmation sent or received, with a date and time stamp.
Requirements for Broker Dealers
- Broker Dealers should not enter into contracts for the purchase or sale of a non-exempt security that indicate payment and delivery of securities that are later than T+1, unless parties expressly agree to a different date at the time of transaction.
- Broker Dealers should not enter into contracts for firm commitment offerings prices after 4:30pm ET that provide for payment of funds and delivery of securities T+2, unless parties expressly agree to a different date at the time of transaction.
- For new Rule 15c6-2(a), transactions requiring completion of the allocation, confirmation, or affirmation process either:
- Enter into written agreements with relevant parties to ensure completion as soon as technologically practicable, and no later than the end of the day on trade date.
- Create and enforce written policies and procedures designed to ensure completion as soon as technologically practicable, and no later than the end of the day on trade date.
- Written policies and procedures pursuant to Rule 15c6-2(a) should:
- Identify and describe the technology involved to coordinate with other parties and ensure timely completion of transactions.
- Set target time frames on trade date for completion of relevant transactions.
- Describe procedures for:
- Communicating trade information promptly
- Investigating discrepancies in trade information
- Adjusting trade information to ensure that transactions are completed by target time frames on trade date
- Describe how the Broker Dealer will identify and address delays if another party is not promptly completing the transactions, or if the Broker Dealer experiences delays.
- Measure, monitor, and document the rates of transactions completed.
Vigilant’s Final Conclusion
Broker Dealers and RIAs should evaluate their processes, and ensure that their compliance policies and procedures are evaluated, updated, and implemented to address the finalized rules.
Changing policies “on the fly”, without ensuring that policies are actually implemented and monitored, could bring significant regulatory burden to your firm.
Reach out to Vigilant to discuss how we can help your firm remain compliant.