A Broker's Guide to SEC Rules 17a-13(b)(3) and 17a-4: Verifying Positions You Don't Hold

Updated October 2026, to cover Rule 17a-13(b)(3) itself. First published October 2024.

An earlier version of this page described the SEC's quarterly statement rule for private fund advisers. That rule applied only to investment advisers, and the Fifth Circuit vacated it on June 5, 2024. The quarterly statement a broker-dealer actually sends is a different thing: the confirmation SEC Rule 17a-13(b)(3) requires for securities the firm controls but doesn't hold. This guide covers what to verify, who to ask, what to do with a difference, and which records Rule 17a-4 says to keep.

What (b)(3) Covers

Rule 17a-13 runs in five steps at least once each calendar quarter. You count the securities you hold, account for the ones you control but don't hold, verify some of those, compare the results with your records, and record whatever doesn't match. Paragraph (b)(3) is the verify step. It reaches securities in transfer, in transit, pledged, loaned, borrowed, deposited, failed to receive, failed to deliver, or subject to a repurchase or reverse repurchase agreement, but only "where such securities have been in said status for longer than thirty days."

So the population is every position on your stock record that sits outside your possession and has held the same status for more than 30 days. Short-dated items drop out. Aged fails, term stock loans, and transfers stuck at an agent stay in. Repo sorts the same way, and our post on repo positions under Rules 17a-3, 17a-4, and 17a-13 walks through a repo book.

The rule doesn't say when the 30 days start. One FINRA interpretation assumes the clock runs from settlement date: interpretation 17a-13(b)/02 lets a firm that gives written notice to its designated examining authority use a foreign market's customary settlement cycle as the settlement date for foreign issued and settled securities. For loans, borrows, and repos, the contract start date is the obvious choice. Whatever you pick, write it into your procedures so the population comes out the same way every quarter.

Who You Verify With

Paragraph (b)(3) says "verify" and stops there. It names no method and no counterparty. The reading that holds up is to ask whoever has the securities, or owes them to you, to confirm the position in writing.

FINRA's interpretations set a floor on what counts as an answer. Under 17a-13(b)/03, statements furnished through the LOANET service don't satisfy (b)(3) for borrowed or loaned securities unless the counterparty verifies and signs them. A report your own system produced, or a feed that repeats your numbers back to you, doesn't come from the counterparty, so it can't confirm the position.

Ask for a positive confirmation. Name the CUSIP, the quantity, the status, and the as-of date, and ask the counterparty to agree or give its own figure. A reply you can compare line by line is worth more than a counterparty's whole position file, which someone then has to search. Our post on the fails-and-loans reconciliation problem covers what happens when a contra firm answers a short request with its entire book.

Securities at a clearing corporation or custodian get their own, more frequent check. FINRA Rule 4522(b)(1) requires a carrying or clearing firm to receive position statements from them at least monthly and reconcile those statements to its books.

When the Answer Doesn't Match, or Doesn't Come

Paragraph (b)(4) has you compare the count and the confirmations with your records. Paragraph (b)(5) then requires you to record every unresolved difference in a security count difference account "no later than 7 business days after" the count. Each entry names the security and the date of comparison. Rule 17a-3(a)(4)(vi) describes that ledger: all long and short securities record differences from the count, by date, with the number of long or short differences for each security.

A confirmation that never comes back is a difference too. In a 1987 letter collected in FINRA's Rule 15c3-3 interpretations, SEC staff said that for securities in transfer, failure to obtain the (b)(3) confirmation "requires that the item be treated as a short security difference." The net capital rule points the same way. Its deduction for short securities differences includes positions "not susceptible to either count or confirmation." Send a second request well before the 7-business-day deadline, and keep both requests. What an unresolved short difference costs in net capital, the reserve formula, and buy-ins is its own post.

Paragraph (d) adds a staffing rule. The count, verification, and comparison have to be made or supervised by people whose regular duties don't give them direct responsibility for the securities or for the records being checked. The team that keeps the stock loan records shouldn't be the one confirming the loans.

Two timing rules round it out. No count may fall within 2 months of, or more than 4 months after, the prior one. Paragraph (c) lets you count on a cycle instead of one date, as long as the cycle covers the whole list within a calendar quarter and each security keeps the 2-to-4-month spacing.

What Rule 17a-4 Says to Keep

Rule 17a-4 never mentions Rule 17a-13. The count's records fall under its general categories instead, and they don't all carry the same retention period.

We'd keep the whole quarterly package for six years: the population list, the requests, the replies, the comparison, and the difference entries. It costs little beyond the three-year minimum, and an examiner who pulls a stock record entry from year five can then see the count behind it.

If you keep these records electronically, Rule 17a-4(f)(2) gives you two options. The system either keeps a complete time-stamped audit trail for the whole retention period, or it stores the records in a non-rewriteable, non-erasable format.

What Changed in 2026

Two 2026 actions deal with alternative investments that report value as a dollar capital balance and send position statements late. On January 6, 2026, SEC staff issued a no-action letter to one broker-dealer about "capital balance funds." Staff won't recommend enforcement if the firm misses the 7-business-day recording window for those funds, as long as it meets five conditions. Among them, it has to keep a record of each issuer's reporting schedule, reconcile each issuer statement within five business days of receiving it, and show customers the last reported value and its date.

On August 25, 2026, FINRA filed SR-FINRA-2026-019. It would exempt uncertificated investments in unregistered investment funds from Rule 4522(b)(1)'s monthly position statement requirement and reconcile them at least quarterly instead. FINRA's filing says the change doesn't affect the quarterly count and verification under Rule 17a-13. The SEC published the proposal for comment in September 2026.

Where QBS Fits

Quarterly Broker Statement (QBS) pulls the borrows, loans, repos, reverse repos, fails to deliver, and fails to receive from your stock record. It generates the (b)(3) confirmations for positions open more than 30 days, tracks the replies, and flags non-responses for alternative verification. Each difference is tracked against the 7-business-day deadline. QBS keeps every confirmation, response, and difference record for eight years, three of them in the application, or for less if your firm keeps its own copies and asks. Your firm's own Rule 17a-4 obligations stay with your firm.

This post is for informational purposes only and does not constitute legal advice. For guidance on specific regulatory obligations, consult your counsel or compliance advisor.