On August 6, 2024, the U.S. Securities and Exchange Commission (SEC) announced that it will begin detailed examinations of banks to assess T+1 compliance. Banks are expected to be ready to provide information on their policies, procedures and record keeping processes to validate compliance to the newly established SEC regulatory rules.
In May 2024, the SEC transitioned to a shortened US trade settlement lifecycle, squeezing trade settlement from two days (T+2) to one day (T+1). The transition aims to improve industry liquidity management, reduce counterparty risk, and create opportunities for industry participants to modernize financial infrastructure and increase efficiency.
To support this transition, the SEC updated the regulatory rules of Exchange Act Rule 15c6-1, 15c6-2 and Advisers Act Rule 204-2 requiring the establishing of written documentation to address the new settlement cycle timings. As a result, it is imperative for firms to evaluate all documentation related to trade settlement activities for compliance with the new regulatory rules.
Capco has extensive T+1 subject matter expertise after supporting multiple financial institutions in preparation for the transition, from identifying and implementing technical changes, adjusting timing of operational processes, and updating policies and procedures. We can help ensure you are prepared for these upcoming SEC audits through our experience in evaluating firm documentation for T+1 compliance.
PROVEN T+1 COMPLIANCE EXPERTISE
In previous engagements, Capco drove efforts to evaluate firm documentation for T+1 compliance across four key areas:
Working closely with client teams to collate a full inventory of documents, our Capco team leveraged a mix of queries and manual reviews to complete an in-depth analysis of documentation related to trade settlement processes and identify gaps where changes are required to meet T+1 compliance. With support from business, operations, legal, and compliance teams, we then proposed suggested language to remediate the gaps and facilitated required approval protocol to implement changes and publish updated documents accordingly.
In parallel, our Capco team proactively gathered and organized evidence that may be leveraged for future audits to demonstrate the degree of socialization and approvals that all policy, procedure, and other document changes underwent before publication.
In massive, collaborative efforts, hundreds of documents were reviewed and, those in scope, were updated and published to official firm document inventories.
We take a thorough and collaborative approach in reviewing documents across the four key evaluation areas. Coordination across multiple teams is essential to identify a full inventory of documents across the various lines of business involved in trade settlement and ensure comprehensive review.
Capco will coordinate cross-team efforts, including business, operations, technology, legal, risk, and compliance, to complete inventory efforts and analysis of documents. We can also propose suggested language to update documents for T+1 compliance and facilitate any activities to enable formal publication of updated documents.
If you are interested in learning more about how your firm can ensure readiness for the upcoming SEC T+1 Compliance exams, reach out to us using the form below.
