Title Details

Founded in 1887, the American Institute of Certified Public Accountants (AICPA) represents the CPA and accounting profession nationally and globally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups and other professional organizations. The AICPA develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the accounting profession's technical and ethical standards.
The AICPA's founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status and a commitment to serving the public interest.

Chapter 1 The Securities Industry 01-142

Broker-Dealers 04-25

Discount Brokers 08

Investment Bankers 09-14

Government Securities Dealers 15

Designated Market Maker 16

Clearing Brokers 17

Carrying Brokers 18

Prime Brokers 19

Swap Dealers 20-21

Introducing Brokers 22

Brokers’ Brokers 23

Bank-Owned Brokers (Section 4k4(e) and Section 20 Brokers) 24

Independent Broker-Dealers 25

The Financial Markets 26-46

Exchange Market 29-34

OTC Market 35-39

Third Market 40

Alternative Trading Venues 41-46

Clearing Organizations and Depositories 47-53

Transfer Agents 54-57

Regulatory Overview 58-61

Business Activities 62-142

Brokerage 62-70

Firm Trading 71-107

Investment Banking 108-115

Financing 116-128

Other Activities 129-142

Chapter 2 Broker-Dealer Functions, Books, and Records 01-176

Introduction 01-18

Overview 01-03

Original Entry Journals 04-06

General Ledger 07

Stock Record 08-12

Regulatory Recordkeeping Requirements 13-15

Trade Date and Settlement Date 16-18

Trade Execution 19-60

Customer Trades 19-48

Proprietary Trades 49-60

Clearance and Settlement 61-90

Overview 61-65

Comparison 66-70

Settlement 71-87

Bookkeeping 88-90

Specialized Clearance Activities 91-118

Mortgage-Backed Securities 91-95

Government Securities 96-98

Repos and Reverse Repos 99-100

Derivative Securities 101-103

Commodity Futures and Options on Futures 104-108

Forward Transactions 109

Municipal Securities 110-111

International Securities 112

Options on Securities 113-118

Reconciliation and Balancing 119-122

Custody 123-134

Possession or Control 124-128

Securities Transfer 129-134

Dividends, Interest, and Reorganization 135-148

Dividends and Interest 135-143

Reorganization 144-148

Collateralized Financing 149-163

Stock Loan and Stock Borrow 149-153

Bank Loan Financing 154-157

Reverse Repos and Repos 158-163

Regulatory Considerations 164-171

Tax Information Reporting for Certain Customer Transactions 172-175

Illustrative Stock Record Entries 176

Chapter 3 Regulatory Considerations 01-188

Applicable Rules 05-10

Interpretations of Rules 09-10

Explanation of Significant SEC Financial Responsibility Rules 11-125

SEC Rule 15c3-3, "Customer Protection—Reserves and Custody of Securities" 11-40

SEC Rule 15c3-1, "Net Capital Requirements for Brokers or Dealers" 41-60

SEC Rule 15c3-1(e), "Notice Provisions Relating to the Limitations on the Withdrawal of Equity Capital" 61-65

SEC Rule 17a-13, "Quarterly Security Counts to Be Made by Certain Exchange Members, Brokers, and Dealers" 66-70

SEC Rule 17a-3, "Records to Be Made by Certain Exchange Members, Brokers, and Dealers" 71

SEC Rule 17a-4, "Records to Be Preserved by Certain Exchange Members, Brokers, and Dealers" 72

Regulation T and Maintenance Margin 73-79

Account Statement Rule(s) 80-81

SEC Rules and CFTC Regulations Governing Customer Margin for Transactions in Security Futures 82

SEC Rules 17h-1T and 17h-2T 83-86

SEC Rule 17Ad-17, "Lost Securityholders and Unresponsive Payees" 87-92

SEC Rule 17Ad-22, "Clearing Agency Standards" 93-94

SEC Rule 17-248—Subpart C, "Regulation S-ID: Identity Theft Red Flags" 95

SEC Rule 506 of Regulation D and SEC Rule 144A 96-97

SEC Rule 15c3-5, "Risk Management Controls for Brokers or Dealers with Market Access" 98-101

SEC Rule 17a-5, "Reports to Be Made by Certain Brokers and Dealers" 102-122

Anti-money Laundering Regulations 123-125

Reporting Requirements 126-151

Consolidation of Subsidiaries 132-134

Form Custody 135

Other Periodic Reporting 136

The Annual Audited Financial Report 137-151

Filings Concurrent With the Annual Audited Financial Report 152-161

Compliance or Exemption Report Required by SEC Rule 17a-5 152-154

Report to State Regulatory Agencies 155

Financial Statements to Be Furnished to Customers of Securities Broker-Dealers 156-161

Other Reports 162-171

Reports on Securities Investor Protection Corporation Assessment 162-164

Reports on Agreed-Upon Procedures for Distributions 165

PCAOB Accounting Support Fee 166-171

Additional Requirements for Registered Investment Advisers 172-180

Rules Applicable to Broker-Dealers in Commodities and US Government Securities 181-183

Commodities Brokers 182

Government Securities Broker-Dealers 183

OTC Derivatives Dealers 184-185

Swap Dealers and Swaps Marketplace Participants 186

Annual Compliance Certification 187-188

Chapter 4 Internal Control 01-70

Introduction 01-06

The Control Environment 07-09

Risk Assessment for Financial Reporting Purposes 10-19

Control Activities 20-23

Information and Communication 24-30

Information and Communication Control Activities 27-30

Monitoring Activities 31-36

Broker-Dealer Control and Monitoring Activities 37-62

Sales and Compliance 41-44

Clearance 45-46

Securities Settlement 47-48

Custody 49-50

Dividends, Interest, and Reorganization 51-52

To-Be-Announced Securities 53

Principal Transactions 54-56

OTC Derivative Transactions 57

Commissions 58

Collateralized Financings 59-61

Period End Financial Reporting 62

SEC Requirements for Management’s Report on Internal Control Over Financial Reporting for Issuers 63-70

Annual Reporting Requirements for Issuers 67

Quarterly Reporting Requirements for Issuers 68-70

5 Accounting Standards 01-127

Accounting Model 02-40

Definition of Fair Value 06-08

Application of Fair Value Measurement to Liabilities and Instruments Classified in a Reporting Entity’s Shareholders’ Equity 09-11

Valuation Techniques 12-14

Inputs to Valuation Techniques 15-16

Application to Financial Assets and Financial Liabilities With Offsetting Positions in Market Risks or Counterparty Credit Risk 17-19

Inputs Based on Bid and Ask Prices 20

Present Value Techniques 21-24

The Fair Value Hierarchy 25-28

Fair Value Measurements of Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) 29-32

Fair Value Determination When the Volume or Level of Activity Has Significantly Decreased 33-37

Fair Value Option 38-40

Additional Fair Value Considerations 41-54

Financial Instruments Listed on a Recognized Exchange 41-45

Financial Instruments Not Listed on a Recognized Exchange but Having a Readily Available Market Price 46-48

Financial Instruments Not Having a Readily Available Market Price 49-54

Trade-Date Versus Settlement-Date Accounting 55-68

Proprietary and Principal Transactions 58-65

Agency Transactions 66-68

Statement of Financial Condition Considerations 69-112

Due From, and Due to, Other Broker-Dealers and Clearing Entities 69-70

Transfers of Financial Assets 71-85

Exchange Memberships Owned or Contributed 86

Suspense Accounts 87

Derivatives 88-97

Conditional Transactions 98

Leveraged Buyouts and Bridge Loans 99

Asset Securitizations 100-103

Variable Interest Entities 104

Soft-Dollar Arrangements 105-109

Mandatorily Redeemable Instruments 110-112

Statement of Income or Loss Considerations 113-124

Underwriting Revenues and Expenses 113-117

Distribution Costs 118-119

Interest, Dividends, and Rebates 120-123

Costs Associated With Exit or Disposal Activities 124

Revenue Recognition: Implementation of FASB ASC 606 125-127

Brokers, Dealers, and Futures Commission Merchants and the Definition of a Public Business Entity 125-127

6 Financial Statement Presentation and Classification 01-169

Introduction 01-12

Financial Statements 13-31

Statement of Financial Condition 13-15

Statement of Income or Operations 16-20

Statement of Cash Flows 21-22

Statement of Changes in Ownership Equity 23-24

Statement of Changes in Subordinated Borrowings 25

Consolidation of Subsidiaries 26-28

Going Concern 29-31

Supplementary Schedules 32-39

Computation of Net Capital Pursuant to SEC Rule 15c3-1 34

Computations for Determination of Reserve Requirements Pursuant to SEC Rule 15c3-3 35-36

Information Relating to Possession or Control Requirements Under SEC Rule 15c3-3 37-38

Schedules of Segregation Requirements and Funds in Segregation for Customers’ Trading Pursuant to the Commodity Exchange Act 39

Statement of Financial Condition Account Descriptions 40-97

Cash and Securities Segregated Under Federal and Other Regulations 41

Memberships in Exchanges 42-46

Securities Sold Under Agreements to Repurchase and Securities Purchased Under Agreements to Resell 47-53

Securities Borrowed and Securities Loaned 54-61

Securities Received as Collateral and Obligation to Return Securities Received as Collateral 62-64

Receivables From and Payables to Broker-Dealers, Clearing Organizations, and Others 65-73

Receivables From and Payables to Customers 74-77

Deferred Dealer Concessions 78

Securities Owned and Securities Sold, Not Yet Purchased 79-86

Other Borrowed Funds 87-89

Subordinated Borrowings 90-94

Commitments and Guarantees 95-96

Equity 97

Statement of Income or Operations Account Descriptions 98-126

Commission Income and Related Expense 99-103

Interest Income and Interest Expense 104-105

Dividend Income and Dividend Expense 106

Principal Transactions (Trading Gains and Losses) 107

Investment Banking Fees and Expenses 108-113

Asset Management and Investment Advisory Income 114-115

Distribution Fees 116-117

Floor Brokerage, Exchange Fee, and Clearance Expenses 118-120

Occupancy and Equipment Expenses 121

Employee Compensation and Benefits Expenses 122-124

Technology and Communications Expense 125

Management and Allocated Corporate Overhead Expense 126

Disclosures 127-165

Fair Value Disclosures 127-130

Disclosures Related to Transfers of Financial Assets Accounted for as Sales 131-132

Disclosures Related to Transfers of Financial Assets Accounted for as Secured Borrowings 133

Disclosures of Certain Significant Risks and Uncertainties and Contingencies 134-144

Derivative Instruments Disclosures 145-148

Guarantee Disclosures 149-150

Related Party Disclosures 151-156

Subsequent Events Disclosures 157-159

Balance Sheet Offsetting Disclosures 160-165

Financial Statements and Schedules 166-169

Appendix

A Information Sources

B Illustrative Example of Compliance Report Required by SEC Rule 17a-5

C Illustrative Example of Exemption Report Required by SEC Rule 17a-5

D Overview of Statements on Quality Control Standards

E The New Revenue Recognition Standard: FASB ASC 606

F The New Leases Standard: FASB ASC 842

G Accounting for Financial Instruments

H Schedule of Changes Made to the Text From the Previous Edition

Glossary

Index of Pronouncements and Other Technical Guidance

Subject Index