Summary: The Securities and Exchange Commission (SEC), New York Stock Exchange, and National Association of Securities Dealers have written procedures--called examination guidelines--for reviewing broker-dealer compliance with the possession or control requirements specified by Rule 15c3-3, known as the customer protection rule. These guidelines address all the requirements of the rule needed to determine broker-dealer compliance or noncompliance with the possession or control requirements of the Rule. The Exchange and the Association said that they examine annually all of their broker-dealers who are required to comply with Rule 15c3-3. SEC officials said that they examine about six percent of the broker-dealers that the Exchange and the Association have previously examined to ensure broker-dealer compliance with securities laws and to evaluate and provide feedback to both organizations on the quality of their examination programs. Between 1988 and 1990, SEC found possession or control violations in 57 examinations of broker-dealers in which the Exchange and the Association had not discovered the violations during their previous examinations. GAO found that for the 17 examinations in 1990, SEC had encouraged both organizations to correct the violations, and the Exchange had acted to remedy the deficiencies identified.
