SEC Proposes Rule Amendments to the Broker-Dealer Customer Protection Rule

The U.S. Securities and Exchange Commission, SEC, has published a press release to announce an upcoming consultation on proposed changes to 17 CFR Part 240, § 240.15c3-3, also known as the „Broker-Dealer Customer Protection Rule“ to enhance customer protection in case of the failure of a broker-dealer and to better align customer fund custody requirements with today’s modern and fast cash flow options.
Specifically, the proposed amendments would require broker-dealers with average total credits (average total cash owed to customers – including those funds owed to or held on behalf of other broker-dealers (PAB accounts)) equal to or greater than $250 million to increase the frequency of their computations of such cash owed from weekly to daily and to daily adjust the account deposits accordingly. This reduction in the timeframe between computations would help broker-dealers better match the net cash owed to customers with the amounts held in the respective „reserve“ bank accounts. According to the SEC, the goal is to minimize potential mismatches over time, thereby increasing the likelihood of customers and PAB account holders being fully compensated even if a broker-dealer faces financial difficulties.
Furthermore, the Commission seeks feedback on an equivalent custody requirement for broker-dealers and security-based swap dealers in relation to their security-based swap customers. Here, too, the current rule requires the net amount of cash owed to security-based swap customers to be computed weekly and deposited in a separate bank account.
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The comment period will remain open for 30 days following the publication of the draft in the Federal Register or for 60 days following the publication on the SEC website – whichever is longer.