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What is a Blue Sheet?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 27 September 2016
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A blue sheet is a report sent by a clearing firm to provide information to the Securities and Exchange Commission (SEC) about its activities. These documents are sent by request from the SEC and they are also used by other regulatory agencies to monitor trading activities. Failure to send a blue sheet upon request can be grounds for legal penalties, as firms involved in the financial markets are expected to comply with regulatory rulings designed to facilitate monitoring, regulation, and investor safety.

Until the late 1980s, this documentation was sent on literal blue sheets, explaining the name. With the advent of electronic filing techniques, firms began transitioning to electronic blue sheets, and today, electronic filing is the preferred method. The SEC can receive electronic filings instantly, and the filings are compatible with its databases, allowing them to be quickly stored, as well as cross-referenced with previous filings and filings from other companies. This facilitates the rapid exchange of accurate information.

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On the blue sheet, the company provides information about the names of any securities handled by the firm, along with the dates of trades and the prices at which trades were executed. The size of each transaction must also be reported, along with the names of the parties involved. This information should be readily available to the clearing firm in its own records and if it is not, it suggests the firm is having difficulty with recordkeeping and transaction monitoring, an indicator of a problem with the firm's management and procedures.

The SEC can examine a blue sheet for signs of irregularities or transactions of concern. It can also be compared to other public filings to match up accounts of various transactions. If something about a transaction arouses the concerns of SEC regulators, they can initiate an investigation to learn more about the transaction and the parties involved. For example, a clearing firm's blue sheet may reveal evidence of insider trading or other fraudulent trading activities.

Regulatory agencies like the SEC are expected to monitor the financial markets to keep them safe for people involved in trading of securities and other financial products. In addition, their monitoring is designed to protect the economy as a whole, as problems with trades and other financial activities may create bigger economic problems. A crashing company, for example, can panic investors, leading to economic turmoil and subsequent problems for people who are not necessarily directly involved in the financial market.

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anon979403
Post 3

You're better off knowing that most of the systems are rigged to begin with. The insiders know way more than we ever will and they're in business for themselves primarily. So be careful, be very careful. This system was not set up to benefit you. Therefore to extract benefit requires great insight.

amysamp
Post 2

@speechie - I am not sure what irregularities that are looked for on the blue sheets, but I do know this much, that I believe at some point you have to put your trust in the agencies involved. Otherwise you would spend your entire life worrying!

I have read an article about the Securities and Exchange Commission stepping in on practices, which did not fall in the commission's guidelines, so I hope that helps your faith in them.

Speechie
Post 1

It always seemed to me that the more I learn about the stock market and securities and such that the more I feel it would be impossible to regulate it well.

This being said, I would still prefer some regulation to the financial markets being the wild wild west without any regulation.

What irregularities would the Securities and Exchange Commission look for on such documents? Which then begs the question - if they companies know what regulators are looking for, does that make it easier to falsify or fudge the information?

I am just trying to find a way to feel more secure about the correctness of trading activities!

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