New SEC Risk Alert Warns of T+1 Transition
Examiners will review whether and how RIAs have evaluated the impact of the settlement cycle change on their businesses.
The Securities and Exchange Commission released Wednesday a risk alert about the upcoming transition on May 28 to T+1, the shortening of the securities transaction settlement cycle for most broker-dealers from two business days after the trade date to one.
May 28 is also the compliance date for new rules related to the processing of institutional trades by broker-dealers and certain clearing agencies, as well as certain recordkeeping amendments applicable to RIAs.
The risk alert warns that it’s “critical that registrants and other market participants prepare for the shortened settlement cycle and understand the impacts of T+1″ to successfully manage the transition.
Shortening the standard settlement cycle will affect market participants, such as broker-dealers, clearing agencies, including those that are central matching services providers, and RIAs, by requiring changes to their business practices, computer systems, and technology solutions, the alert explains.
T+1 could also affect how registrants and other market participants comply with other existing regulatory obligations.
The agency’s Division of Examinations said it will continue to review whether and how registrants have evaluated the potential impact of the final rules on their:
- business activities;
- operations and risk assessments;
- services; and
- customers, clients, and/or other relevant parties.