Prompt Transmission of Funds No Action Letter

Our member firms will be happy to know that there has been a significant positive development in the “prompt transmission” of funds.

Financial services firms have long struggled with the “prompt transmission” rule because of the inflexibility of the standard and the challenge of sending checks so quickly, particularly in remote branch offices. In a no-action letter, the SEC has now said they will not recommend enforcement action if a firm fails to transmit funds by noon of the next business day if the purpose for holding the check is to complete the firm’s account opening process in compliance with FINRA rules.

In addition, firms need to do the following:

  1. Establish relevant policies and procedures;
  2. Ensure the advisor promptly sends the check and documents to the OSJ;
  3. Review by a Registered Principal to confirm the accounting opening documents are complete and correct and the documents include a check made payable to the broker-dealer;
  4. The check arrives at the broker-dealer before noon the day after the documents are reviewed and approved;
  5. The firm keeps adequate books and records;
  6. And the firm discloses to customers its process to customers.

This is a positive development for our members as it solves an issue many firms have struggled with for quite some time. We applaud the SEC for their willingness to dialogue about these challenges and allowing for a common-sense approach.


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