SEC Amends Custodian Rule for Broker-Dealers Withdrawing from Registration

The SEC approved a proposal to amend FINRA Rule 4570. The rule requires a broker-dealer that withdraws from SEC registration to designate a person to act as custodian of the firm's books and records. The amendments will become effective on August 19, 2019.

As previously covered, FINRA proposed to amend Rule 4570 to:

• give the withdrawing firm the option to designate another FINRA member broker-dealer (e.g., an introducing firm's clearing broker) to act as custodian of its books and records after the firm withdraws from registration; and

• clarify the responsibilities of the books and records custodian, including requiring the designated custodian to consent to the arrangement and to file a notice with FINRA acknowledging the custodian's responsibilities.