• Service: Advisory, Risk Consulting, Financial Risk Management
  • Industry: Banking & Capital Markets
  • Date: 10/17/2013

Regulatory Practice Letter #13-18 

The Securities and Exchange Commission (SEC) has issued its long awaited revisions to the Financial Responsibility Rules for Broker-Dealers under the Securities Exchange Act of 1934 (SEA).
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The most significant aspects of the revisions pertain to the customer protection rules (SEA Rule 15c3-3).  The revisions center primarily on four aspects, the most significant of which is the codification of provisions in the SEC’s 1998 no action letter for Proprietary Assets of Introducing Brokers (PAIB).  The codification of the no-action letter guidance will basically require all carrying brokers who clear transactions of broker-dealers to establish a Special Reserve Bank Account for Brokers and Dealers and perform a separate reserve calculation for these accounts on a weekly basis.  Excess debits in the Customer Reserve Calculation can be used to reduce the PAB requirement, but excess PAB debits cannot reduce the Customer Reserve requirement.