Amendments to the Customer Protection Rule would require certain broker-dealers to increase the number of times broker-dealers compute the net cash they owe, officials with the Securities and Exchange Commission said Monday.
The amendments would require certain broker-dealers to calculate how much they owe customers and other broker-dealers, or PAB account holders. The SEC also adopted amendments to Rule 15c3-3 and Rule 15c3-1 that would allow certain broker-dealers to perform daily customer reserve computations to decrease the require 3 percent “buffer” in the customer reserve bank account by reducing the customer-related receivable, or the “aggregate debit items” charge from 3 percent to 2 percent.
“Our markets have dramatically evolved since the 1972 adoption of Rule 15c3-3, otherwise known as the Customer Protection Rule,” SEC Chair Gary Gensler said. “I’m pleased to support this adoption because it helps protect customers and the Securities Investor Protection Corporation Fund, while promoting greater trust in the markets.”
Officials said broker-dealers may have large deposit requirements show that there may be times with the net amount of cash owed to customers and PAB account holder is greater than the amounts on deposit in the special reserve bank account. The newly passed amendments will require broker-dealers with $500 million or more in cash they owe customers and PAB account holders to make computations daily to determine the amounts that should be deposited in the customer and PAB accounts as of the close of the previous business day.
By reducing the timeframe between computations, the commission said, broker-dealers will be able to more dynamically match the net amount of cash owed with the amount on deposit in accounts. The amendments will also apply protective measure quicker and will reduce the risk that, if the broker-dealer fails financially, it will be unable to return cash and securities to customers and PAB account holders through self-liquidation.
The amendments will become effective 60 days after they are published in the Federal Register, and broker-dealers that exceed the $500 million threshold will be required to make the daily computations starting on Dec. 31, 2025.