SEC Wants BDs to Assess Cash Reserves Daily

What You Need to Know

SEC Chairman Gary Gensler said the proposal would protect customers if a broker-dealer fails.
The SEC also said the proposal would assist broker-dealers in more dynamically matching the net amount of cash owed to customers and PAB account holders.
The proposal would affect broker-dealers with average total credits equal to or greater than $250 million.

The Securities and Exchange Commission on Wednesday proposed amendments to Rule 15c3-3, the customer protection rule, to require certain broker-dealers to increase the frequency with which they calculate the net cash they owe to customers and other broker-dealers, known as PAB account holders, from weekly to daily.

SEC Chairman Gary Gensler said in a statement that he was “pleased to support this proposal because, if adopted, it would help protect customers in the event that a broker-dealer fails.”

Net cash owed to customers and PAB account holders must be held in a special reserve bank account, according to the SEC.

“A key tenet of our securities laws is the segregation of customers’ cash and securities from a broker-dealer’s own account,” Gensler said. “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.”

Broker-dealers occasionally may have substantial deposit requirements as a result of customer and PAB reserve computations, the SEC said.

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 necessary to determine the amounts required to be deposited in the customer and PAB reserve bank accounts daily, as of the close of the previous business day,” the SEC says.

“By reducing the timeframe between computations, the proposal would assist broker-dealers in more dynamically matching the net amount of cash owed to customers and PAB account holders with the amount on deposit in the broker-dealer’s customer and PAB reserve bank accounts,” the SEC added.