The U.S. Securities and Exchange Commission (SEC) proposed amendments that will impact broker-dealers and how often they customers are paid out.
Specifically, the amendment require certain broker-dealers to increase the frequency with which they perform computations of the cash they owe to customers and other broker-dealers, known as PAB account holders, from weekly to daily. Further, the net cash owed to customers and PAB account holders must be held in a special reserve bank account.
“I am pleased to support this proposal because, if adopted, it would help protect customers in the event that a broker-dealer fails,” SEC Chair Gary Gensler said. “A key tenet of our securities laws is the segregation of customers’ cash and securities from a broker-dealer’s own account. Given the speed, scale, and volume of today’s market activity, I believe customers would benefit if broker-dealers carrying large credit balances made daily reserve account calculations and deposits. This frequency would better align with the inflows, swings, and balances that broker-dealers experience in today’s markets.”
The proposal 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 daily, as of the close of the previous business day. By reducing the time between computations, the proposal would assist broker-dealers in matching the cash owed to customers and PAB account holders with the amount on deposit in their reserve bank accounts. The daily computations would safeguard customers by reducing the potential for large mismatches and increasing the likelihood that they are made whole even if a broker-dealer fails.
The SEC will take public comments for 60 days following publication of the proposing release on the SEC website or 30 days following publication in the Federal Register.