BIG RETURNS MIGHT HAVE BEEN A SECURITIES FRAUD TARGETING SENIORS

The following case is an excerpt from the SEC web site:

“Litigation Release No. 21959 /May 5, 2011
Securities and Exchange Commission v. Robert C. Butler, United States District Court for the Central District of California, Case No. 11-03792 MMM (FFMx) (filed May 3, 2011)
SEC HALTS FRAUDULENT DAY TRADING SCHEME TARGETING SENIOR CITIZENS
The Securities and Exchange Commission obtained an emergency asset freeze and court order to halt an ongoing securities fraud being orchestrated by Robert C. Butler of Bermuda Dunes, Calif.
The SEC alleges that from January 2009 to March 2011, Butler raised approximately $3.3 million from at least 17 investors who were mostly senior citizens living in or around Indio, Calif. He operated out of his home and dazzled investors with his multiple computer screens and a purported proprietary trading program that he claimed to use in his day trading business. Butler promised exorbitant returns to investors through investments in his hedge fund, but instead stole $1.6 million and lost the other half of investor funds in his securities trading.
The SEC’s complaint alleges that Butler sent falsified account statements to investors in order to conceal his fraud, and grossly inflated the hedge fund balances. According to one statement, the fund balance was $8.9 million compared to the true balance of merely $22. The SEC further alleges that Butler lied that he was a graduate of MIT and he concealed from investors his Chapter 7 bankruptcy filing in 1998. Despite investor requests, Butler has failed to return their money and instead continues to solicit new funds and lull existing investors into believing that repayments are forthcoming.
The Honorable Margaret Morrow, United States District Judge, granted the SEC’s application for emergency relief and froze the defendants’ assets. On May 11, 2011, the court will hold a hearing on the SEC’s motion for a preliminary injunction.
The SEC’s complaint charges Butler with violating the antifraud provisions, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, of the federal securities laws. In addition to the emergency relief, the complaint seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties.
The SEC’s investigation was conducted by Janet Weissman and Katharine Nolan in the Los Angeles Regional Office, and David Van Havermaat will lead the SEC’s litigation.”

SEC ANNOUNCES PROPOSED AMENDMENTS TO THE BROKER DEALER REPORTING RULE

The following is from the SEC website:

“Washington, D.C., June 15, 2011 — The Securities and Exchange Commission today unanimously proposed amendments to the broker-dealer financial reporting rule in order to strengthen the audits of broker-dealers as well as the SEC’s oversight of the way broker-dealers handle their customers’ securities and cash.
The SEC’s proposal builds upon rules adopted in December 2009 that strengthened the protections provided to investors who turn their assets over to investment advisers.

“When investors hand their assets over to a broker-dealer, they trust that their broker-dealer will hold and invest the assets as directed,” said SEC Chairman Mary L. Schapiro. “To protect investors and help maintain confidence in the market, we must take strong steps to help safeguard the assets held by broker-dealers.”
The SEC’s proposal is intended to strengthen the annual audits of broker-dealers by requiring an increased focus on the custody activities of broker-dealers. While current rules require broker-dealers to protect and account for customer assets, the proposed rule amendments would mandate an audit of the controls that the broker-dealer has put in place.
Additionally, the proposal would strengthen oversight of broker-dealer custody practices by requiring broker-dealers that maintain custody of customer assets or self-clear transactions to allow SEC staff and the relevant designated examining authority to review work papers of the public accounting firm that audits the broker-dealer and discuss any findings with the accounting firm. The proposed amendments also would require all broker-dealers to quarterly file a proposed new form that would elicit information about the custody practices of the broker-dealer to be used as a starting point for examinations by regulators.
Public comments on the SEC’s proposal should be received within 60 days of its publication in the Federal Register.
# # #
FACT SHEET
Proposal to Amend Broker-Dealer Financial Reporting Rule
(Rule 17a-5)
Background
What are broker-dealers? Broker-dealers are entities that engage in the business of effecting securities transactions — either for someone else’s account or for their own account. Under the U.S. securities laws, most entities engaged in these activities (with the notable exception of certain commercial banks) must register with the SEC as broker-dealers. Currently, there are approximately 5,000 broker-dealers registered with the SEC. Of those, about 300 maintain custody of their customers’ securities and cash. Broker-dealers also must be members of at least one self-regulatory organization (SRO) such as FINRA or a national securities exchange.
How are customer assets at broker-dealers protected? Broker-dealers that maintain custody of a customer’s securities and cash are subject to strict requirements under the Securities Exchange Act of 1934 that are designed to protect and account for these assets. These requirements include:
The Net Capital Rule (Rule 15c3-1). This SEC rule requires a broker-dealer to maintain more than a dollar of highly liquid assets for each dollar of liabilities. If the broker-dealer fails, this rule helps to ensure that there are sufficient liquid assets to pay all liabilities to customers.
The Customer Protection Rule (Rule 15c3-3). This SEC rule requires a broker-dealer to segregate customer securities and cash from the firm’s proprietary business activities. If the broker-dealer fails, these customer assets should be readily available to be returned to customers.
The Quarterly Security Count Rule (Rule 17a-13). This SEC rule requires a broker-dealer on a quarterly basis to count, examine, and verify the securities it actually holds for customers and for itself — and compare that with the amounts of such securities it should be holding as indicated by its records. This process includes verifying the actual amount of securities located at sub-custodians such as the Depository Trust and Clearing Corporation, or DTCC. If there are differences between the actual amounts held and the amounts that should be held, the broker-dealer must take capital charges until the differences are resolved.
The Account Statement Rule. This SRO rule requires a broker-dealer to send a statement — at least quarterly — to each customer reflecting the customer’s securities and cash positions held at the broker-dealer, as well as the activity in the account.
These requirements are designed to protect customer assets held at broker-dealer. However, if a broker-dealer violates these requirements by, for example, misappropriating these assets, the securities and cash may not be available to be returned to customers. In this situation, the Securities Investor Protection Corporation will initiate a liquidation proceeding to protect customers, including making up for shortfalls in customer accounts up to $500,000 per customer (of which $250,000 can be used to make up a cash shortfall.)
Proposed Rule Amendments
What would the amendments to Rule 17a-5 do?
The proposed amendments would:
Strengthen Audit Requirements — Currently, Section 17 of the Exchange Act and Rule 17a-5 together require a broker-dealer to, among other things, file an annual report with the SEC and the broker-dealer’s designated examining authority. The report must contain audited financial statements and certain supporting schedules and supplemental reports, as applicable. An independent public accountant registered with the Public Company Accounting Oversight Board (PCAOB) must conduct the audit.
Under the proposal, a broker-dealer that maintains custody of customer securities and cash would be required to undergo an examination — by a registered public accounting firm — of:
Whether it is in compliance with the four rules described above.
Its controls for complying with these rules.
In addition, a broker-dealer that does not maintain custody of customer securities and cash would be required to undergo a review by an independent public accountant of its assertion that it is not subject to segregation requirements because it does not maintain custody of customer securities and cash.
Strengthen Oversight of Broker-Dealer Custody Practices — Section 17(b) of the Exchange Act subjects broker-dealers to routine inspections and examinations by staff of the Commission and the relevant SRO.
The proposed amendments would enhance these broker-dealer examinations in two ways:
First, the proposed amendments would require a broker-dealer that maintains custody of customer securities and cash or clears transactions to allow Commission and SRO examiners to:
Access the work papers of the registered public accounting firm that audits the broker-dealer.
Discuss any findings with the personnel of the registered public accounting firm.
The examiners could use this information to better focus their examinations.
Second, the proposed amendments would require a broker-dealer to file a report on a quarterly basis that contains information about whether and, if so how, it maintains custody of its customers’ securities and cash. The report would establish a custody profile for the broker-dealer that examiners could use as a starting point to focus their custody examinations.
How do the amendments relate to the audits that Investment Advisers must undergo?
In 2009, the SEC adopted rules requiring investment advisers — depending on their custody arrangements — to engage an independent public accountant to conduct an annual “surprise exam” to verify that client assets exist. Depending on the custody arrangement, the rules also require some broker-dealers to obtain — from the entity that maintains the assets of the investment adviser’s client — a written internal control report prepared by a PCAOB registered public accounting firm. The internal control report must describe the controls in place at the custodian of the assets, test the operating effectiveness of the controls, and provide the results of the tests.
The proposed amendments recognize that some broker-dealers that serve as the custodian for the assets of investment adviser clients must provide the internal control report. Those broker-dealers would be able to rely on the examination outlined in the proposed amendments and, therefore, not also have to obtain the internal control report. “

POOR CITY OF CHICAGO

The following is from the SEC website:
Former Executive of Illinois Refuse Container Repair Company Sentenced to Serve 16 Months in Prison for Conspiring to Defraud the City of Chicago
WASHINGTON — A former vice president of an Illinois refuse disposal container repair company was sentenced today to serve 16 months in prison and to pay a $40,000 criminal fine for his role in a conspiracy to commit mail and wire fraud in connection with bids on a contract with the city of Chicago, the Department of Justice announced.
Steven Fenzl, a California resident, was also sentenced by U.S. District Court Judge Ruben Castillo to pay $35,302 in restitution for his participation in a conspiracy to defraud the city of Chicago on a contract for the repair of refuse carts from as early as November 2004 to as late as September 2008. Fenzl, along with his business partner Douglas E. Ritter, was charged in an indictment filed on April 21, 2009, in U.S. District Court in Chicago. Fenzl was found guilty by a jury on Sept. 28, 2010, of one count of conspiracy to commit mail and wire fraud, two counts of mail fraud and one count of wire fraud. Ritter, an Illinois resident, pleaded guilty to the conspiracy on June 3, 2010, and was sentenced on May 10, 2011, to serve 16 months in prison and to pay $35,303 in restitution.
According to the indictment, Fenzl, Ritter and their co-conspirator conspired to deceive city of Chicago officials about the number of legitimate, competitive bids submitted for the contract. Specifically, Fenzl and his co-conspirators fraudulently induced other companies to submit bids for the contract at prices determined by Fenzl and his co-conspirators and greater than the price for which Fenzl’s company had submitted a bid. The department said that included in these bids were fraudulent documents indicating that, if awarded the contract, the bidder would enter into subcontracts to purchase goods or services for a specified percentage of the contract from a minority-owned business and a women-owned business, as required by the city of Chicago. According to the indictment, Fenzl and his co-conspirators also fraudulently certified to the city on Fenzl’s company’s bid that it had not entered an agreement with any other bidder relating to the price named in any other bid submitted to the city for the contract.
Today’s sentencing resulted from an investigation of the refuse cart repair industry being conducted by the Antitrust Division’s Chicago Field Office and the city of Chicago’s Office of Inspector General.”

CFTC ON EXEMPTIVE RELIEF

The following is from the CFTC website:

Oral Statement on Proposed Order for Exemptive Relief
General Counsel Dan Berkovitz
June 14, 2011
Good morning Mr. Chairman and Commissioners.
First, I would like to thank the members of the OGC team that have worked very hard on this order: Harold Hardman, Terry Arbit, Carlene Kim, Neal Kumar, Sue McDonough, and Mark Higgins. I also would like to thank the Divisions for their helpful comments and support on this project.
The proposed order before you today clarifies how the Commodity Exchange Act will apply to swaps as of July 16, 2011, the general effective date of the Title VII of the Dodd-Frank Act.
Section 754 of Dodd-Frank provides that, unless otherwise provided, provisions of the Act that require a rulemaking are effective no sooner than the earlier of 60 days after the rulemaking is completed, or 360 days after enactment, which is July 16, 2011. Many provisions fall into this category. Examples of such provisions include the registration of swap dealers and major swap participants, margin and capital requirements, and external business conduct standards for swap dealers and MSPs. Although the Commission has issued proposed rules to implement these provisions, these rulemakings will not be completed by July 16. Because these provisions will not become effective until after the rulemakings have been completed and implementing dates established, the proposed Order does not include relief from these provisions as of July 16.
We have provided the Commission with a list of the provisions that require a rulemaking.
Provisions that do not require a rulemaking are effective on the general effective date. Thus, certain provisions of the Dodd-Frank Act will become effective immediately on July 16, while others will be phased-in over a period of time. The proposed Order before the Commission would provide clarity to market participants and the public regarding which provisions of the CEA as amended by the Dodd-Frank Act will apply during this transition, and those which will not.
The draft proposed Order proposed to grant exemptive relief in two parts.
Part one of the draft order proposes to address provisions that would go into effect on July 16, but that reference terms such as “swap,” “swap dealer,” “major swap participant,” or “eligible contract participant” that the Dodd-Frank Act requires the Commission and the Securities and Exchange Commission to “further define.” These definitional rulemakings will not be in place by July 16. Accordingly, the draft order proposes to temporarily exempt persons or entities from complying with these provisions until the earlier of the effective date of the definitional rulemaking for such terms or December 31, 2011. The exemption would apply only to the extent the provision specifically relates to entities or instruments such as swaps, swap dealers, major swap participants, and eligible contract participants.
Part two of the draft order proposes to address provisions of the Commodity Exchange Act that will apply to certain transactions in exempt or excluded commodities (primarily financial and energy commodities) as a result of the repeal of various CEA exemptions and exclusions as of July 16, 2011, specifically Commodity Exchange Act sections 2(d), 2(e), 2(g), 2(h) and 5d as well. The Commission is proposing to temporarily exempt such transactions until the repeal or replacement of certain of the Commission’s regulations or December 31, 2011, whichever is earlier.
The proposed exemptive order would be issued under section 712(f) of the Dodd-Frank Act, which specifically authorizes the Commission to issue exemptive orders in preparation for the effective date of the Dodd-Frank Act, and section 4(c) of the CEA, which provides the Commission with exemptive authority for many provisions of the CEA. As required by section 4(c), if approved by the Commission, the proposed Order would be subject to a period of notice and comment. In light of the impending July 16 effective date, the proposed Order would provide for a 14-day public comment period. This would provide the Commission and staff sufficient time to analyze the public comments and issue a final Order, as appropriate, prior to the July 16 effective date.
The proposed Order does not provide relief from all of the provisions of the CEA that will become effective on July 16. The staff has also provided a list of those provisions for which relief is not being provided. Examples of such provisions include the core principles for designated contract markets, the core principles for derivatives clearing organizations, and the prohibition on disruptive trading practices.
There are a few provisions in the CEA that will apply as of the effective date and for which the Commission does not have authority to issue exemptive relief under section 4(c). The staff is considering whether to issue no action relief from these provisions.
Before concluding, I would like to also highlight several limitations on the scope of the proposed temporary relief in both parts.
First, the draft order does not provide relief from the Commission’s anti-fraud and anti-manipulation authorities.
Second, the draft order does not affect any Dodd-Frank Act implementing regulations that the Commission promulgates, including any implementation dates therein.
Third, neither part of the proposed Order would affect the Commission’s authority with respect to futures contracts, options on futures, or transactions by retail customers in foreign currency or other commodities.
Fourth, the proposed Order would not apply to any provision of Title VII of the Dodd-Frank Act that has already become effective.
Fifth, the draft order states that the proposed relief would not limit the Commission’s authority under section 712(f), which provides the Commission with wide-latitude to engage in exemptions, rulemakings and other actions necessary to prepare for the effective dates of the provisions of Title VII.
In addition, the draft proposed Order also would not affect the Commission’s ability to provide further exemptive relief, as appropriate, either prior to or after the expiration date.
I am happy to take any questions you might have.
Last Updated: June 15, 2011



Oral Statement on Proposed Order for Exemptive Relief
General Counsel Dan Berkovitz
June 14, 2011
Good morning Mr. Chairman and Commissioners.
First, I would like to thank the members of the OGC team that have worked very hard on this order: Harold Hardman, Terry Arbit, Carlene Kim, Neal Kumar, Sue McDonough, and Mark Higgins. I also would like to thank the Divisions for their helpful comments and support on this project.
The proposed order before you today clarifies how the Commodity Exchange Act will apply to swaps as of July 16, 2011, the general effective date of the Title VII of the Dodd-Frank Act.
Section 754 of Dodd-Frank provides that, unless otherwise provided, provisions of the Act that require a rulemaking are effective no sooner than the earlier of 60 days after the rulemaking is completed, or 360 days after enactment, which is July 16, 2011. Many provisions fall into this category. Examples of such provisions include the registration of swap dealers and major swap participants, margin and capital requirements, and external business conduct standards for swap dealers and MSPs. Although the Commission has issued proposed rules to implement these provisions, these rulemakings will not be completed by July 16. Because these provisions will not become effective until after the rulemakings have been completed and implementing dates established, the proposed Order does not include relief from these provisions as of July 16.
We have provided the Commission with a list of the provisions that require a rulemaking.
Provisions that do not require a rulemaking are effective on the general effective date. Thus, certain provisions of the Dodd-Frank Act will become effective immediately on July 16, while others will be phased-in over a period of time. The proposed Order before the Commission would provide clarity to market participants and the public regarding which provisions of the CEA as amended by the Dodd-Frank Act will apply during this transition, and those which will not.
The draft proposed Order proposed to grant exemptive relief in two parts.
Part one of the draft order proposes to address provisions that would go into effect on July 16, but that reference terms such as “swap,” “swap dealer,” “major swap participant,” or “eligible contract participant” that the Dodd-Frank Act requires the Commission and the Securities and Exchange Commission to “further define.” These definitional rulemakings will not be in place by July 16. Accordingly, the draft order proposes to temporarily exempt persons or entities from complying with these provisions until the earlier of the effective date of the definitional rulemaking for such terms or December 31, 2011. The exemption would apply only to the extent the provision specifically relates to entities or instruments such as swaps, swap dealers, major swap participants, and eligible contract participants.
Part two of the draft order proposes to address provisions of the Commodity Exchange Act that will apply to certain transactions in exempt or excluded commodities (primarily financial and energy commodities) as a result of the repeal of various CEA exemptions and exclusions as of July 16, 2011, specifically Commodity Exchange Act sections 2(d), 2(e), 2(g), 2(h) and 5d as well. The Commission is proposing to temporarily exempt such transactions until the repeal or replacement of certain of the Commission’s regulations or December 31, 2011, whichever is earlier.
The proposed exemptive order would be issued under section 712(f) of the Dodd-Frank Act, which specifically authorizes the Commission to issue exemptive orders in preparation for the effective date of the Dodd-Frank Act, and section 4(c) of the CEA, which provides the Commission with exemptive authority for many provisions of the CEA. As required by section 4(c), if approved by the Commission, the proposed Order would be subject to a period of notice and comment. In light of the impending July 16 effective date, the proposed Order would provide for a 14-day public comment period. This would provide the Commission and staff sufficient time to analyze the public comments and issue a final Order, as appropriate, prior to the July 16 effective date.
The proposed Order does not provide relief from all of the provisions of the CEA that will become effective on July 16. The staff has also provided a list of those provisions for which relief is not being provided. Examples of such provisions include the core principles for designated contract markets, the core principles for derivatives clearing organizations, and the prohibition on disruptive trading practices.
There are a few provisions in the CEA that will apply as of the effective date and for which the Commission does not have authority to issue exemptive relief under section 4(c). The staff is considering whether to issue no action relief from these provisions.
Before concluding, I would like to also highlight several limitations on the scope of the proposed temporary relief in both parts.
First, the draft order does not provide relief from the Commission’s anti-fraud and anti-manipulation authorities.
Second, the draft order does not affect any Dodd-Frank Act implementing regulations that the Commission promulgates, including any implementation dates therein.
Third, neither part of the proposed Order would affect the Commission’s authority with respect to futures contracts, options on futures, or transactions by retail customers in foreign currency or other commodities.
Fourth, the proposed Order would not apply to any provision of Title VII of the Dodd-Frank Act that has already become effective.
Fifth, the draft order states that the proposed relief would not limit the Commission’s authority under section 712(f), which provides the Commission with wide-latitude to engage in exemptions, rulemakings and other actions necessary to prepare for the effective dates of the provisions of Title VII.
In addition, the draft proposed Order also would not affect the Commission’s ability to provide further exemptive relief, as appropriate, either prior to or after the expiration date.
I am happy to take any questions you might have.
Last Updated: June 15, 2011

SOME STANFORD GROUP COMPANY MAY GET SIPA PROTECTION

The following is from the Sec Website:

If you invest in securities many times you are covered by SIPA which insures that if you invest your money with a crooked broker then you will be held harmless should that broker default on it's accounts. In the following case the SEC believes that some defrauded investors in the Stanford Group Company might be able to receive some recovery.

"Washington, D.C., June 15, 2011 – The Securities and Exchange Commission today concluded that certain individuals who invested money through the Stanford Group Company – a U.S. broker-dealer owned and used by Allen Stanford to perpetrate a massive Ponzi scheme – are entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA).
In exercising its discretionary authority under SIPA and based on the totality of the facts and circumstances of the case, the Commission asked the Securities Investor Protection Corporation (SIPC) to initiate a court proceeding under SIPA to liquidate the broker-dealer.
According to its 2009 complaint, the SEC alleged that Allen Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC). SGC is a SIPC Member.
In an analysis provided to SIPC, the SEC explains that, on the specific facts of this case, investors with brokerage accounts at SGC who purchased the CDs through the broker-dealer qualify for protected “customer” status under SIPA.
In reaching its determination, the SEC cited the conclusions in the report of the court appointed-receiver for SGC, who noted that the many companies controlled and directly or indirectly owned by Stanford “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.
Among other things, the receiver also noted that “[c]orporate separateness was not respected within the Stanford empire. ... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefitted Allen Stanford personally.”
The Commission further determined that, in light of all of the facts and circumstances in this case, the customers’ claims should be based on their net investment in the fraudulent CDs used to carry out the Ponzi scheme.
A SIPA liquidation proceeding would allow investors with accounts at SGC to file claims with a trustee selected by SIPC. The trustee would decide whether the investors have “customer” claims that are protected by the statute. An investor who disagreed with the trustee’s determination could seek court review.
The Commission has authorized its staff to file an action in federal district court under SIPA to compel SIPC to initiate a liquidation proceeding in the event SIPC does not do so.”

OPENING STATEMENT BY MARY SCHAPIRO AT SEC OPEN MEETING

The following is from the SEC website:

Speech by SEC Chairman:
Opening Statement at SEC Open Meeting: Proposals to Amend Rule 17a-5
by
Chairman Mary Schapiro
U.S. Securities and Exchange Commission
Washington, D.C.
June 15, 2011
Good morning. This is an open meeting of the United States Securities and Exchange Commission on June 15, 2011.
Today, we will consider a proposal that is designed to strengthen the audits that broker-dealers must undergo, and enhance the ability of regulators to oversee the ways in which broker-dealers maintain custody of their customers’ assets.
This proposal builds upon the rules we adopted two years ago that strengthened the protections provided to investors who turn their assets over to investment advisers.
As with the investment adviser rules, the proposal under consideration today grew out of the Madoff Ponzi scheme and other frauds in which investor assets were misappropriated.
The fact is that when investors hand their assets over to a broker-dealer, they trust that their broker-dealer will hold and invest the assets as directed. But when a broker-dealer violates that trust and misuses the assets, that broker not only harms the investor but also erodes confidence broadly in the financial system. This in turn undermines the ability of legitimate businesses to raise capital.
To protect investors and help maintain confidence in the market, I believe we must take strong steps to help safeguard the assets held by broker-dealers.
Strengthening Broker-Dealer Audits
The proposals under consideration would strengthen the annual audits of broker-dealers by requiring those audits to have increased focus on the custody activities of broker-dealers. While current rules require broker-dealers to protect and account for customer assets, today’s proposal would mandate an audit of the controls that the broker-dealer has put in place to ensure compliance with those rules.
While not directly mandated by the Dodd-Frank Act, today’s proposals would facilitate the PCAOB’s new responsibility established by that Act to oversee the registered public accounting firms that audit broker-dealers.
Strengthening Oversight of Broker-Dealer Custody
Additionally, the proposals would strengthen oversight of broker-dealer custody practices. First, the proposals would require broker-dealers that maintain custody of customer assets – or that self-clear transactions – to allow staff of the Commission and the relevant designated examining authority (DEA) to review work papers of the public accounting firm that audits the broker-dealer and to discuss any findings with the accounting firm. The goal would be to enhance the Commission’s or DEA’s examination of the broker-dealer by building on the work performed by the accounting firm, particularly in the area of verifying the custody of customer assets.
Second, the proposed amendments would require all broker-dealers to file, on a quarterly basis, a proposed new form that would elicit information about the custody practices of the broker-dealer. This would create a profile of the broker-dealer’s custody practices to be used as a starting point for examinations by regulators.
I strongly encourage public comment on the proposals to assist the Commission in formulating sound rules and regulations. I look forward to reviewing the public comment.
Before I turn to Robert Cook and John Ramsay, I would like to thank them and other Commission staff including Mike Macchiaroli, Tom McGowan, Nathaniel Stankard, Randall Roy, Rose Wells, and Mark Attar from the Division of Trading and Markets for the long hours and hard work they have devoted to preparing the recommendations before us.
Additionally, I would like to thank Brian Croteau, Jeffrey Minton, and John Offenbacher from the Office of the Chief Accountant and Norm Champ, Julius Leiman-Carbia, and Robert Sollazo from the Office of Compliance Inspections and Examinations for their valuable assistance in developing these proposals.
I also appreciate the contributions from Meredith Mitchell, David Blass, Paula Jenson, Cynthia Ginsberg, Janice Mitnick, and Lynn Taylor from the Office of the General Counsel; Jennifer Marietta-Westberg, Tiago Requeijo, and Chuck Dale from the Division of Risk, Strategy, and Financial Innovation; and Dan Kahl, Jaime Eichen, and Brian Johnson from the Division of Investment Management.
I’d also like to thank my fellow Commissioners and their staff for their work on this proposal.
Now I will ask Robert and John to provide us with additional details about the Division’s recommendations.”