New bill could provide regulatory relief to small brokerage firms
Small brokerage firms could soon see relief from longstanding regulatory burdens.
Alabama Democratic Sen. Doug Jones and Arkansas Republican Sen. Tom Cotton recently introduced to the Senate Banking Committee an amendment to the Sarbanes-Oxley Act of 2002. Rep. French Hill, R-AR, and Rep. Vicente Gonzalez, D-TX, introduced the amendment to the House of Representatives Financial Services Committee.
HR 6021: Small Business Audit Correction Act of 2018 would exempt privately held, small, non-custody brokers and dealers that are in good standing from the requirement to hire a Public Company Accounting Oversight Board-registered audit firm to meet their annual reporting obligation and would reinstate the previous regulatory audit requirements.
"This legislation will provide much-needed regulatory relief to small broker-dealers," said Dale Brown, president and CEO of the Financial Services Institute, a national organization that advocates on behalf of independent financial advisers and independent financial services firms.
The PCAOB, established by Congress in 2002 to oversee the audits of public companies in order to protect investors, was expanded by the Dodd-Frank Act in 2010 to include annual audits of all brokers and dealers – regardless of size – registered with the Securities and Exchange Commission.
Currently, a three-person firm is held to the same standards as publicly traded firms. This has taken a financial toll on small firms in the investment and accounting industries around the U.S.
"Ten years ago, there were approximately 1,000 more of these small businesses in our industry than there are today, but the crush of regulatory burdens, including the PCAOB-registered audit firm requirement, has led to their demise," Brown said. "The remaining small firms are feeling this impact especially hard as fees rise due to the smaller pool of audit firms. The impact is felt throughout the country as these Main Street businesses struggle to remain viable."