SEC Permits Electronic Filing of Broker-Dealer Annual Reports
Commentary by Steven Lofchie
The SEC Division of Trading and Markets permitted broker-dealers, and over-the-counter derivatives dealers, to file annual and supplemental reports electronically under Securities Exchange Act Rules 17a-5 ("Report to Be Made by Certain Brokers and Dealers") or 17a-12 ("Reports to Be Made by Certain OTC Derivatives Dealers") through the SEC's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system.
In a letter to FINRA, SEC staff stated that by filing electronically through EDGAR, "broker-dealers will avoid the uncertainties, delay, possible processing errors, and expense related to the physical delivery of multiple paper copies of the annual reports and, upon filing, will receive an instantaneous confirmation that the filings were received by the [SEC]." Accordingly, the staff stated, it will not recommend enforcement action under the rules if filings are done electronically rather than through paper submissions.
Commentary
The implicit message of the staff's letter is that the staff (not surprisingly) prefers electronic filings. One question that this raises (not actually directly related to this letter) is whether the SEC should as a rule allow electronic delivery by broker-dealers of all documents to customers (and not just to regulators). As this letter points out, electronic delivery is in fact faster and more certain. The existing regulatory preference for paper delivery of documents to customers (absent customer consent) is certainly an anachronism. While customers may elect to retain the option to receive paper documents, the general procedure should be that electronic delivery of documents is fine in the absence of a customer's request for paper.