Rule G-16
Interpretive Notices

Background

Rule G-16 relates to the scope and frequency of periodic compliance examinations of municipal securities brokers and municipal securities dealers. The rule requires that each municipal securities broker and municipal securities dealer be examined at least once each 24 months to determine, at a minimum, whether it and its associated persons are in compliance with all applicable rules of the Board, as well as the Securities Exchange Act of 1934, as amended (the "Act"), and applicable rules and regulations of the Commission.

Section 15B(c)(7)(A) of the Act provides that periodic compliance examinations of municipal securities brokers and municipal securities dealers are to be conducted by the National Association of Securities Dealers, Inc. with respect to securities firms and by the appropriate federal bank regulatory agencies with respect to bank dealers. Rule G-16 permits examinations to determine compliance with Board rules to be combined with other periodic examinations of securities firms and bank dealers, in order to avoid unnecessary regulatory duplication and undue regulatory burdens for such firms and bank dealers.

Rule G-16 was drafted in consultation with the agencies required to conduct compliance examinations. The Board has been coordinating and will continue to coordinate with each such agency to assure that the Board’s rules are applied in a uniform manner to all municipal securities brokers and municipal securities dealers and in a manner consistent with the Board’s intent in promulgating them.

The rule was drafted in response to Congress’ direction to the Board to adopt rules to "specify the minimum scope and frequency of [periodic compliance] examinations" (section 15B(2)(E) of the Act) (emphasis added).

 

Table of contents | Back to Rule |   Home Page