Small Business Audit Correction Act of 2018

“(5) In good standing—The term in good standing means, with respect to a broker or dealer (as those terms are defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))), that, as of the last day of the most recently completed fiscal year of the broker or dealer, as applicable, the broker or dealer—

“(A) was registered with the Commission;

“(B) was a member of a registered securities association (as defined under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3));

“(C) was compliant with the minimum dollar net capital requirements under section 240.15c3–1 of title 17, Code of Federal Regulations, or any successor regulation;

“(D) had not, during the 10-year period preceding that date, been convicted of a felony under Federal or State law;

“(E) does not have an associated person (as that term is defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))) who, during the 10-year period preceding that date, was convicted of a felony under Federal or State laws for fraudulent conduct; and

“(F) was not, as provided by section 3(a)(39) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))—

“(i) expelled or suspended from membership or participation in any self-regulatory organization (as provided in section 3(a)(26) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(26))) or a registered futures association (as provided in section 17 of the Commodity Exchange Act (7 U.S.C. 21));

“(ii) subject to an order of the Commission, or other appropriate regulatory agency, denying, suspending, or revoking its registration as any regulated entity; or

“(iii) subject to an order of the Commodity Futures Trading Commission, or other appropriate regulatory agency, denying, suspending, or revoking its registration under the Commodity Exchange Act (7 U.S.C. 1 et seq.) or its authority to engage in any transactions.

“(6) Non-custody broker or dealer—The term non-custody broker or dealer means a broker or dealer (as those terms are defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))), as applicable, that—

“(A) as of the last day of the most recently completed fiscal year of the broker or dealer had not less than 1 and not more than 150 associated persons (as that term is defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))) registered with a self-regulatory organization (as provided in section 3(a)(26) of the Securities Exchange Act (15 U.S.C. 78c(a)(26))) of which the broker or dealer is a member; and

“(B) throughout the most recently completed fiscal year of the broker or dealer—

“(i) did not, as a matter of ordinary business practice in connection with the activities of the broker or dealer, receive customer checks, drafts, or other evidence of indebtedness made payable to the broker or dealer;

“(ii) promptly forwarded customer securities and customer checks, drafts, or other evidence of indebtedness payable to a third party, including a clearing broker or dealer, in compliance with section 240.15c3-3 of title 17, Code of Federal Regulations, or any successor regulation;

“(iii) did not otherwise hold customer securities or cash;

“(iv) if required under section 3(a)(2) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78ccc(a)(2)), was a member of the Securities Investor Protection Corporation; and

“(v) either—

“(I) claimed exemption from section 240.15c3–3 of title 17, Code of Federal Regulations, or any successor regulation; or

“(II) claimed no exemption from such section 240.15c3–3, or any successor regulation, or was not otherwise subject to such, because the broker or dealer did not maintain custody over any customer securities or cash.

“(7) Privately held—The term privately held means, with respect to a broker or dealer (as those terms are defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))), that the broker or dealer, as applicable, is not an issuer.”