Resources/ Updates - October 2014

The SDDco Client Update

The SDDco Client Update is an action oriented email prepared in-house, tailored to client needs, and sent as an adjunct to our online newsletter.  Verified newsletter subscribers receive our Client Update once each month.

The SDDco Client Update is intended to provide general information only. It is not intended as, and should not be taken as, financial, tax, accounting, legal, consulting or any other type of advice specific to you or your firm. Users of the SDDco Client Update should not act or refrain from acting on the basis of information provided on the website. Always check with your accountant and/or attorney.


New Broker-Dealer Supplemental Inventory Schedule ~ Due Jan. 30, 2015

On September 23, 2014, the SEC approved the adoption of a Supplemental Inventory Schedule (“SIS”), as proposed under FINRA Rule 4524, requiring additional info on the inventory positions held by certain broker-dealers.  The SIS must be filed by a broker-dealer that is required to file FOCUS Report Part II or Part IIA or FOGS Report Part

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SDDCO and Erado Hosts Panel Discussion ~ Outsourced Expertise

On Wednesday November 12, 2014, 6-8 p.m., Bryon Lyons, CEO of SDDCO Brokerage Advisors LLC will facilitate a panel discussion on financial services firm management at the Cornell Club in NYC: Compliance to Cyber-Security ~ Exploring Your Options Special guest: Steven Lofchie, Partner, Cadwalader, Wickersham & Taft LLP Co-panel contributors: Larry Goldfarb, Director of Sales, Erado Message Control Solutions and

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Risk Alert & FAQs ~ Customer Sales of Securities

On October 9, 2014, the Securities and Exchange Commission (“SEC”) issued a Risk Alert and supplementary FAQs regarding unregistered transactions.  The Risk Alert aims to remind broker-dealers of their responsibilities on behalf of their customers when facilitating sales of these transactions. This release comes in conjunction with an enforcement action by the SEC.  An SEC investigation

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Four Steps to Better Manage Your Taxes

The IRS advises taking steps to align the taxes you pay ahead to the taxes you’ll actually owe: Adjust Withholding  Employees who believe their  withholding is too low to cover what they will owe can increase their withholding to avoid a big tax bill. Present a new, completed Form W-4 Employee’s Withholding Allowance to your employer. Enter the

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SEC Rethinks Accredited Investor Definition

The Investor Advisory Committee (“IAC), formed by the SEC, recently recommended five alternative ways to redefine who should be considered an accredited investor.  The reason for this proposed revamp is twofold: it was mandated by the Dodd-Frank Wall Street Consumer Protection Act (“Dodd-Frank Act”) in 2010 and made more pressing last summer when the SEC

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Arbitrators May Refer to FINRA Before a Case Concludes

The SEC Approved Amendments to the Customer and Industry Codes to enable arbitrators to report serious fraud cases to FINRA, whether ongoing or imminent, in the midst of an arbitration case. The amendments become effective on October 27, 2014, for arbitration cases with remaining scheduled hearings. The referral protocol had been this: arbitrators were only

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FINRA’s New Supervisory Rules ~ What’s a BD to Do as of Dec 1st?

FINRA member broker-dealers must draft, implement, and enforce written supervisory procedures to supervise the activities of their associated persons* (“APs”) and business lines to prevent and detect violations and conflicts of interest.   FINRA’s new supervisory rulebook, which consolidated and codified existing supervisory guidance, becomes effective on December 1, 2014. FINRA’s new, supervisory rulebook (“New Rules”)

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Investor Bulletin: Private Placements Under Regulation D

The SEC’s Office of Investor Education and Advocacy issued the Investor Bulletin: Private Placements under Regulation D (“Private Placements Bulletin”) to educate investors about investing in unregistered securities offerings or private placements under Regulation D of the Securities Act. The Private Placements Bulletin expands further upon the following subtopics as they relate to investor protection.

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FINRA Updates Text & Interps of BD Rules ~ Removal of Credit Ratings Reliance

FINRA has updated imbedded text of Securities Exchange Act of 1934 (“SEA”) financial responsibility rules for broker-dealers in the Interpretations of Financial and Operational Rules. The updated text reflects as effective (July 2014) the Final Rule: Removal of Certain References to Credit Ratings Under the Securities Exchange Act of 1934 (“Final Rule”).  The Final Rule

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New FINRA E-File Statement Due ~ Public Accountant Independence

Every broker-dealer must file a statement with FINRA and copy the SEC to identify its independent accountant.   A new template will be available on FINRA Firm Gateway as of  November 24, 2014, for compliance with Securities Exchange Act (“SEA”) Rule 17a-5(f)(2) (Statement Regarding Independent Public Accountant). In 2013, the SEC amended SEA Rule 17a-5 (effective June 1, 2014)

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Municipal Advisor Compliance Seminar ~ Nov 3rd ~ by the SEC, MSRB & FINRA

The SEC has begun its examination initiative of newly regulated municipal advisors.  A free, municipal advisor compliance outreach program, set in Chicago on Monday, November 3, 2014, will provide municipal advisor professionals a forum for discussions with regulators about risk management, regulatory issues, and compliance practices.  Registration is now open. The SEC’s Office of Compliance Inspections and

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FINRA Lays Its CARDS on the Table

FINRA is seeking comments on their proposed rule to execute the Comprehensive Automated Risk Data System (CARDS), a data collection program designed to anticipate the latest compliance threats.  The initiative was originally released in January (Regulatory Notice 13-42) as a concept proposal. Overview CARDS is an initiative which would allow FINRA to safeguard investors by

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SEC Props Rule on Security-Based Swaps

In September, the SEC proposed a rule under the Securities Act of 1933 (“Securities Act”) to provide that certain communications involving security-based swap quotes would not constitute “offers of such security-based swaps or any guarantees of such security-based swaps that are securities” for purposes of the Securities Act, Section 5 registration requirements. Under the proposed

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NFA Wants FCM Reports Too ~ Risk Exposure & CCO

The National Futures Association (“NFA”) now requires member Futures Commission Merchants (“FCMs”) to also send copies of two Commodity Futres Trading Commission (“CFTC”) filings to the NFA: Quarterly, Commission Risk Exposure Report Annual, Chief Compliance Officer (CCO) Report Risk Exposure Reports Under CFTC Regulation 1.11, each FCM must uphold a system of risk management policies and procedures designed

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New Credit Risk Process for Securities BDs

The U.S. Securities and Exchange Commission (“SEC”) adopted amendments to remove references to credit ratings in rules covering broker-dealer financial responsibility and the confirmations of transactions.  Amendments to the liquid capital rule, specifically, removed   references to the ratings of nationally recognized statistical rating agencies or “NRSROs” and substituted a new standard of deciding creditworthiness. This

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Back to Fiduciary Basics ~ Best Ethical Practices

The Institute for the Fiduciary Standard (the “Institute”) released guidance focusing on the best, ethical principles for financial advisers.  If the principles seem familiar, they are.  The guidance put forth by the Institute’s president, Knut A. Rostad, channels the KISS principle (“Keep It Simple, Stupid”) by highlighting key ethical practices of the investment advisory profession that

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