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 licensed by, and registered with, the Financial Industry Regulatory Authority or a national securities exchange that is registered with the Commission under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f);

“(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; and

“(E) was not barred from registering, or had not been expelled from registration, with the Commission, the Financial Industry Regulatory Authority, the Commodity Futures Trading Commission, or any State regulatory agency, without regard to whether the broker or dealer had, as of that date, filed an appeal challenging such a bar or expulsion, as applicable.

“(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—

“(i) had not less than 1 and not more than 150 registered persons holding a securities license registered with the broker or dealer;

“(ii) cleared each eligible transaction with and for a consumer on a fully disclosed basis with a clearing broker or dealer or a member of a national securities exchange that is registered with the Commission under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f);

“(iii) did not, as a matter of ordinary business practice in connection with the activities of the broker or dealer, elect to receive customer checks, drafts, or other evidence of indebtedness made payable to the broker or dealer or a person other than the requisite registered broker or dealer carrying the account of a customer, escrow agent, issuer, underwriter, sponsor, or other distributor of securities;

“(iv) did not otherwise hold funds or securities for customers; and

“(v) 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

“(B) during the most recently completed fiscal year of the broker or dealer, claimed exemption from section 240.15c3–3 of title 17, Code of Federal Regulations, or any successor regulation.

“(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.”