Industry analysis, product news, and thought leadership from Loffa Interactive Group's team of settlement technology and compliance experts.
An undocumented prime brokerage relationship was generating more than 100 Letters of Free Funds a day. The 1994 SEC letter explains why, plus what else the executing broker takes on when the F1SA is missing: confirmations, customer protection, and disaffirmed trades.
A mail merge and a spreadsheet automate one task: sending the request. Delivery assurance, response tracking, exception handling, security, and the audit trail still happen in IT, operations, compliance, and legal—where nobody prices them. A worked example puts that hidden cost near $32,400 a year.
An SEC Rule 17a-13 quarterly securities count runs on a calendar: plan, count, reconcile, chase the 30-day items, assemble the record, retain it. This covers what each phase requires, the evidence an examiner asks for, and where QBS fits.
A FINRA document request for carrying agreements asks for more than the current contract. It wants the version in effect on a specific date, amendment history with approvals, an SIA-150/SIA-151/F1SA set that fits together, and evidence of supervisory review. Here is what a complete file contains.
It is late Friday and the queue is full of free credit balance requests. SEC Rule 15c3-3 stops being a paragraph in the manual and becomes a question of records — and Friday is dangerous because it compresses the time you have to answer it.
SEC Rule 17a-13 is not satisfied by having a written procedure. It is satisfied by a supervisory trail that proves the count, the verification, and the unresolved differences actually happened — and holds up when the examiner asks.
Under FINRA Rule 4311, the question is rarely whether a firm has prime brokerage agreements. It is whether the firm can show the current version, the signatures, the amendments, and the supervisory trail without rebuilding the file from scratch.
SEC Rule 15c3-3 is not just about whether a firm asked the free credit balance question. It is about whether the firm can prove the verification happened, the response was captured, and the supervisory trail is intact.
Positions open longer than thirty days are where SEC Rule 17a-13 gets difficult. The hard part is not sending confirmation letters. It is proving the right letters went out, the right responses came back, and the right exceptions were handled on time.
The SEC's move to rescind the so-called "gag rule" is more than a policy shift. It is a signal. Regulatory narratives evolve, but beneath the movement, one reality stays constant: operational failures are what ultimately expose firms.
The SEC softened its settlement language. Examiners did not soften the document request. Here is what an evidence-ready supervisory record actually looks like for LOFFs, prime broker agreements, and 17a-13(b)(3) confirmations.
The SEC's decision to eliminate its long-standing "gag rule" has drawn attention across the securities industry. After more than 55 years, firms that settle enforcement matters may now publicly deny wrongdoing without being barred from doing so by the terms of the settlement itself.
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