Limited-service broker-dealers affiliated with life insurers will not have to maintain inspection reports relating to the safeguarding of customer funds.[@@]
The U.S. Securities and Exchange Commission gave that guidance in an amended rule relating to supervisory control procedures that was first disclosed in the Daily Insurance Reporter. The SEC was responding to comments filed by the American Council of Life Insurers, Washington, stating that broker-dealers should not have to create and implement new inspection and supervisory procedures if they do not engage in activities involving control of customer assets.
The issue involves a rule developed by NASD, Washington, aimed at combating fraud involving full-service broker-dealers. In particular, NASD targeted one case of fraud in which a full-service broker-dealer misappropriated more than $115 million from customers over a 15-year period. NASD says that these activities occurred due to a lack of supervisory controls.