Mazars logo Mazars logo Mazars logo The Ledger

FINRA Addresses Net Capital Treatment of Covered Loans Under the CARES Act

April 6, 2020

FINRA has issued an FAQ to provide guidance in response to the Coronavirus pandemic.


On April 2, 2020, the FAQ was updated to provide guidance to member firms with respect to net capital treatment of covered loans under Section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act ( the CARES Act).

The FAQ provides that if a member firm has included a covered loan as a liability on its balance sheet,

  • The firm may add the forgivable expense amount back to net capital, to the extent the firm has recorded the associated costs. The add back is limited to the amount of the covered loan liability. The associated costs may include payroll costs as defined in the Cares Act, as well as any rent obligation, and utility payments.
  • The firm may exclude the covered loan amount from aggregate indebtedness during the 8-week covered period, which is the period subsequent to the commencement of the loan. After the covered period, the firm may exclude from aggregate indebtedness the forgivable portion of the covered loan that is allowed to be treated as an add back to net capital, described above.

The FAQ also provides relief in other areas including

  • An automatic 30 day extension for filing of annual audits
  • Addback for purposes of net capital for monies due on FINRA annual assessment and extension of payment for those liabilities
  • Possible extension of time in responding to regulatory filings and waiving of late fees
  • An automatic 10 business day extension for FOCUS reports periods ending through April 2020

A full copy of the FAQ can be found here.

Related posts

Restrictions within the US government's coronavirus aid Main Street Lending Program (MSLP) are staving off borrowers and lenders

In the wake of FINRA’s Annual Conference, and the New York State Society of Certified Public Accountants Stockbrokerage

On December 20, 2018, the Securities and Exchange Commission’s (‘SEC”) Office of Compliance Inspections and Examinations (“OCIE”) issued