On July 12th, the SEC announced proposed rules that would amend and enhance Rule 15c3-3 (the rule that protects a customer’s cash and securities held at a carrying broker-dealer). The rules would require certain broker-dealers to increase the frequency with which they perform customer and broker-dealer reserve computations of the net cash they owe to customers and other broker-dealers (referred to as PAB account holders) from weekly to daily. Performing these computations with increased frequency would better correspond with the inflows, swings, and balances that broker-dealers currently are experiencing in the markets. Under Rule 15c3-3, carrying broker-dealers are required to have a special reserve bank account at a bank that must hold cash or qualified securities in an amount determined by a computation of the net cash owed to the carrying broker-dealer’s customers and PAB account holders.
Should the proposed rule amendments be adopted, they would:
- require broker-dealers with average total credits (the amount of cash they owe customers and PAB account holders) equal to or greater than $250 million to make the computations necessary to determine the amounts required to be deposited in the customer and PAB reserve bank accounts daily, as of the close of the previous business day
- assist broker-dealers in more accurately matching the net amount of cash owed to customers and PAB account holders with the amount on deposit in the broker-dealer’s customer and PAB reserve bank accounts by reducing the timeframe between computations
- protect customers and PAB account holders by mitigating the potential for large mismatches to build over time and increasing the likelihood that customers are made whole even if a broker-dealer fails
The SEC also is requesting comments on whether similar daily reserve computation requirements should apply to broker-dealers and security-based swap dealers with respect to their security-based swap customers. Interested parties may submit feedback during the public comment period, which will remain open for 60 days following publication on the SEC website or 30 days following publication in the Federal Register, whichever period is longer. For more information, including instruction on how to submit comments, refer to the Daily Computation of Customer and Broker-Dealer Reserve Requirements under the Broker-Dealer Customer Protection Rule proposed rule on sec.gov.
Source:
SEC Proposes Rule Amendments to the Broker-Dealer Customer Protection Rule (sec.gov)
