Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 17a-11 -- Notification Provisions for Brokers and Dealers

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1. This section shall apply to every broker or dealer registered with the Commission pursuant to Section 15 of the Act.
   
   
2. 1. Every broker or dealer whose net capital declines below the minimum amount required pursuant to Rule 15c3-1 shall give notice of such deficiency that same day in accordance with paragraph (g) of this section. The notice shall specify the broker or dealer's net capital requirement and its current amount of net capital. If a broker or dealer is informed by its designated examining authority or the Commission that it is, or has been, in violation of Rule 15c3-1 and the broker or dealer has not given notice of the capital deficiency under this Rule 17a-11, the broker or dealer, even if it does not agree that it is, or has been, in violation of Rule 15c3-1, shall give notice of the claimed deficiency, which notice may specify the broker's or dealer's reasons for its disagreement.
      
      
   2. In addition to the requirements of paragraph (b)(1) of this section, an OTC derivatives dealer or broker or dealer permitted to compute net capital pursuant to the alternative method of Rule 15c3-1e shall also provide notice if its tentative net capital falls below the minimum amount required pursuant to Rule 15c3-1. The notice shall specify the tentative net capital requirements, and current amount of net capital and tentative net capital, of the OTC derivatives dealer or the broker or dealer permitted to compute net capital pursuant to the alternative method of Rule 15c3-1e.
      
      
3. Every broker or dealer shall send notice promptly (but within 24 hours) after the occurrence of the events specified in paragraphs (c)(1), (c)(2), (c)(3) or (c)(4) of this section in accordance with paragraph (g) of this section:
   
   
   1. If a computation made by a broker or dealer subject to the aggregate indebtedness standard of Rule 15c3-1 shows that its aggregate indebtedness is in excess of 1,200 percent of its net capital; or
      
      
   2. If a computation made by a broker or dealer, which has elected the alternative standard of Rule 15c3-1, shows that its net capital is less than 5 percent of aggregate debit items computed in accordance with Rule 15c3-3a Exhibit A: Formula for Determination Reserve Requirement of Brokers and Dealers under Rule 15c3-3; or
      
      
   3. If a computation made by a broker or dealer pursuant to Rule 15c3-1 shows that its total net capital is less than 120 percent of the broker's or dealer's required minimum net capital, or if a computation made by an OTC derivatives dealer pursuant to Rule 15c3-1 shows that its total tentative net capital is less than 120 percent of the dealer's required minimum tentative net capital.
      
      
   4. The occurrence of the fourth and each subsequent backtesting exception under Rule 15c3-1f(e)(1)(iv) during any 250 business day measurement period.
      
      
4. Every broker or dealer who fails to make and keep current the books and records required by Rule 17a-3, shall give notice of this fact that same day in accordance with paragraph (g) of this section, specifying the books and records which have not been made or which are not current. The broker or dealer shall also transmit a report in accordance with paragraph (g) of this section within 48 hours of the notice stating what the broker or dealer has done or is doing to correct the situation.
   
   
5. Whenever any broker or dealer discovers, or is notified by an independent public accountant, pursuant to Rule 17a-5(h)(2) or Rule 17a-12(f)(2) [Editor's note: It appears that the last reference should be to Rule 17a-12(g)(2)] of the existence of any material inadequacy as defined in Rule 17a-5(g) or Rule 17a-12(e)(2), the broker or dealer shall:
   
   
   1. Give notice, in accordance with paragraph (g) of this section, of the material inadequacy within 24 hours of such discovery or notification; and
      
      
   2. Transmit a report in accordance with paragraph (g) of this section within 48 hours of the notice stating what the broker or dealer has done or is doing to correct the situation.
      
      
6. Every national securities exchange or national securities association that learns that a member broker or dealer has failed to send notice or transmit a report as required by paragraphs (b), (c), (d), or (e) of this section, even after being advised by the securities exchange or the national securities association to send notice or transmit a report, shall immediately give notice of such failure in accordance with paragraph (g) of this section.
   
   
7. Every notice or report required to be given or transmitted by this section shall be given or transmitted to the principal office of the Commission in Washington, D.C., the regional office of the Commission for the region in which the broker or dealer has its principal place of business, the designated examining authority of which such broker or dealer is a member, and the Commodity Futures Trading Commission if the broker or dealer is registered as a futures commission merchant with such Commission. For the purposes of this section, "notice" shall be given or transmitted by telegraphic notice or facsimile transmission. The report required by paragraphs (d) or (e)(2) of this section may be transmitted by overnight delivery.
   
   
8. (h) Other notice provisions relating to the Commission's financial responsibility or reporting rules are contained in Rule 15c3-1(a)(6)(iv)(B), Rule 15c3-1(a)(6)(v), Rule 15c3-1(a)(7)(ii), Rule 15c3-1(a)(7)(iv), Rule 15c3-1(c)(2)(x)(B)(1), Rule 15c3-1(c)(2)(x)(F)(3), Rule 15c3-1(e), Rule 15c3-1d(c)(2), Rule 15c3-3(i), Rule 17a-5(h)(2) and Rule 17a-12(f)(2).
   
   
9. The provisions of this section shall not apply to a broker or dealer registered pursuant to section 15(b)(11)(A) of the Act that is not a member of either a national securities exchange pursuant to section 6(a) of the Act or a national securities association registered pursuant to section 15A(a) of the Act.
   
   

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