Regulatory Alerts2023-12-22 | Regulatory Notice 23-21Added · Updated
FINRA Reminds Member Firms of Net Capital, Recordkeeping and Financial Reporting Requirements in Connection with Revenue Recognition Practices
FINRA warns member firms that recognizing revenue from non-refundable fees upon contract signing or receipt, without substantiating that performance obligations have been satisfied, violates ASC 606 and results in overstated revenues and net capital deficiencies. This non-compliance breaches SEA Rules 15c3-1, 17a-3, and 17a-5, leading to inaccurate FOCUS reports and annual filings. Member firms must implement documented policies to analyze contract performance obligations and ensure revenue recognition on FOCUS reports and Supplemental Statements of Income aligns with ASC 606 requirements.
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