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The Customer Protection Rule as part of SEC Rule 15C3-3 requires that a broker dealer to protect customer assets and to keep customer assets segregated from the assets of the firm.
It is important for professionals who are taking a principal level exam to have a good mastery of the requirements of the customer protection rule. The focus of the rule, to put it simply, is to ensure that the assets of the customers do not get used to meet the liabilities of the broker dealer. Stating that another way, the rule is designed to ensure that if the broker dealer gets into financial difficulty, neither the broker dealer nor its creditors may use those funds to meet the broker dealer’s financial demands. The customer protection rule requires the broker dealer to establish a segregated customer account at a bank. The bank must acknowledge in writing that the bank may not access those assets even if the broker dealer owes the bank money. The customer protection rule requires the broker dealer to make deposits into the special reserve account by 10 AM two business days after it calculates its customer assets. Small broker dealers will less than $1,000,000 in customer credit items may compute the required deposit monthly. If the broker dealer calculates monthly, the required deposit is equal to 105% of the net customer credit items. Most broker dealers calculate weekly and are required to deposit 100 % of customer credit items. Weekly calculations will be done on Friday, with the required deposit being due on Tuesday by 10 AM. Be sure you are ready to ace your exam with our exam prep software, videos and textbooks.
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The Securities Institute of America, Inc.