SEC Proposes Amendments to Rule 15c3-3 to Increase Frequency of Net Cash Calculations for Broker Dealers

The Securities and Exchange Commission (SEC) has proposed changes to Rule 15c3-3 (the Customer Protection Rule) that would require certain broker-dealers to increase the frequency of computing net cash they owe to customers and other broker-dealers (known as PAB account holders). At present, these computations are done weekly, but the proposal calls for them to be done daily. These computations must be done to ensure that customer and PAB accounts are held in a special reserve bank account in order to safeguard customers. The proposal will mainly affect broker-dealers with average total credits of equal or greater than $250 million. Making the computations on a daily basis would dynamicly match the net amount of cash owed to customers and PAB account holders with the amount on deposit in the broker-dealer's accounts, decreasing the potential for large mismatches over time. This would help better protect customers in the event that the broker-dealer fails by increasing the chance that customers will be “made whole”. The proposed rule change has been welcomed by SEC Chairman Gary Gensler who is supportive of its adoption so customers can benefit from better protections.