Effective on February 24, 2026, the Securities and Exchange Commission (SEC) issued Release No. 34‑104881, an Amended and Restated Order under Section 17(h)(4) of the Securities Exchange Act of 1934. This order updates and expands the exemption criteria that allow certain broker‑dealers to avoid the more burdensome requirements of Rules 17h‑1T and 17h‑2T, which relate to the SEC’s broker‑dealer risk assessment program.
These rules were originally designed to ensure that the financial risks stemming from broker‑dealer affiliates could not compromise the financial stability of the broker‑dealer itself. The updated order reflects the SEC’s ongoing efforts to modernize regulatory thresholds in line with current market conditions.
What the Risk Assessment Rules Require
To understand why the exemption matters, it helps to know what the rules demand.
Rule 17h‑1T requires broker‑dealers to maintain and preserve:
- A full organizational chart including the broker‑dealer and all affiliates
- Written policies and procedures for monitoring and controlling risks posed by affiliates
- Descriptions of material pending legal or arbitration proceedings
- Consolidating and consolidated financial statements
Rule 17h‑2T requires:
Quarterly and Annual filing of Form 17‑H, which captures detailed information about affiliates and potential risk exposures.
Complying with these rules represent obligations that can be substantial, especially for smaller or non‑carrying broker‑dealers whose business models involve low systemic risk.
What Changed in Release 34‑104881
The 2026 order significantly expands the pool of broker‑dealers eligible for exemption from Rules 17h‑1T and 17h‑2T.
Key Updates:
1. Capital threshold increased
- The exemption now applies to firms with capital, as defined as including allowable subordinated liabilities for this purpose, of at least $20 million but less than $100 million. This raises the previous upper threshold from $50 million to $100 million.
2. Asset threshold unchanged
- Eligible broker‑dealers must still maintain total assets of less than $1 billion—reported on line item 940 of the FOCUS Report.
3. Applies to non‑carrying broker‑dealers
A broker-dealer is eligible for the exemption if:
- It does not carry customer accounts,
- Does not hold or owe customer funds or securities, or
- Otherwise qualifies for exemption under Rule 15c3‑3(k)(2).
4. Replaces the 2020 order
The new order supersedes the SEC’s June 29, 2020 exemptive order, which covered broker‑dealers with capital (plus subordinated liabilities) between $20 million and $50 million.
Why This Matters for Broker‑Dealers
This expanded exemption reflects the SEC’s recognition that smaller and mid‑sized broker‑dealers—particularly non‑carrying firms—pose relatively limited systemic risk. By raising the capital threshold to $100 million, the SEC allows a larger number of firms to avoid the administrative burden of quarterly Form 17‑H filings and extensive affiliate‑risk documentation.
Practical Implications:
- Reduced compliance workload for qualifying firms
- Less frequent regulatory reporting, allowing firms to focus on core business operations
- Greater regulatory clarity for non‑carrying firms with moderate capital levels
- Broader alignment with current market structures and capital profiles
Firms just above the old $50 million cap will now benefit from additional breathing room before becoming subject to the risk‑assessment requirements.
Final Thoughts
SEC Release 34‑104881 marks a meaningful shift in how the Commission calibrates regulatory obligations for broker‑dealers. By extending exemptions to firms with up to $100 million in capital—without compromising investor protection—the SEC appears to be taking a pragmatic approach to modernizing outdated thresholds.
For broker‑dealers evaluating their compliance posture, this release offers both relief and an opportunity to reassess whether they fall within the expanded exemption criteria.
If you’d like help interpreting how this applies to your specific firm or filing situation, the consultants at Integrated Solutions can walk you through the details.
