The FOCUS report translates a broker-dealer’s accounting records into a regulatory financial report. Errors often arise when the general ledger is accurate for financial-statement purposes but regulatory classifications, allowable-asset rules or supplemental schedules are not fully considered.
Classification and allowability
Receivables, deposits, prepaid expenses, related-party balances and other assets may require regulatory treatment different from their financial-statement presentation. Aging, collectability, documentation and the identity of the counterparty can matter.
Net-capital adjustments
Haircuts, undue-concentration charges, operational charges and other deductions should be tied to detailed supporting schedules. New products or unusual positions deserve review before the filing deadline.
Consistency across schedules
Amounts reported in the balance sheet, income statement, net-capital computation and supplemental schedules should reconcile. Changes from the prior period should be understood and supported.
Review before filing
A disciplined review considers both arithmetic accuracy and the business activity behind the numbers. Material changes in revenue, expenses, capital, receivables or securities positions may indicate a classification issue or a separate regulatory notification requirement.