B-Ds may pay more than $1M to foot bill for new audits

B-Ds may pay more than $1M to foot bill for new audits
The largest U.S. broker-dealers may be asked to pay more than $1 million a year to fund annual inspections required by the Dodd-Frank Act, according to a proposal by the panel that oversees public-company audits.
JUN 14, 2011
By  Mark Bruno
The largest U.S. broker-dealers may be asked to pay more than $1 million a year to fund annual inspections required by the Dodd-Frank Act, according to a proposal by the panel that oversees public-company audits. The Public Company Accounting Oversight Board, the industry-funded watchdog created by the Sarbanes-Oxley in 2002, was directed by Dodd-Frank to conduct inspections of all firms that audit broker-dealers. The plan being considered today at a PCAOB meeting in Washington would create a mechanism for raising the $15 million a year needed for those reviews. Dodd-Frank, the regulatory-overhaul law enacted in July, stipulated that the inspection fees be based on a firm's relative share of “tentative net capital,” Daniel L. Goelzer, the PCAOB's acting chairman, said in an interview. The burden will fall heavily on the larger firms because only about 14 percent of broker-dealers meet the minimum net-capital threshold for being subject to the fees, Goelzer said. Lawmakers included expanded oversight of broker-dealers in the wake of the financial crisis after it was revealed that Bernard Madoff, the New York money manager convicted for running a multibillion-dollar Ponzi scheme, had his firm's auditing done by a firm run from a 13-by-18-foot storefront in New City, New York. Dodd-Frank eliminated a system in which auditors had to register with the PCAOB but weren't overseen by the board. “You might view this expansion of our mandate as one of Bernie Madoff's legacies,” Goelzer said in a speech last week to the American Institute of Certified Public Accountants. Threshold The PCAOB is also weighing an increase in the market capitalization threshold of public companies that have to pay for the board's existing inspection program. The proposals would raise the cap from to $75 million from $25 million, meaning about 1,100 smaller firms would be exempted. It would also raise the investment-company threshold to $500 million from $250 million, removing about 1,480 companies. Approval of the proposal today would open a public-comment period that would run through Feb. 15. The rules won't go into effect until the board meets again to take a final vote. The new revenue from broker-dealer fees will represent about 7 percent of the PCAOB's funding, Goelzer said. --Bloomberg

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.