SEC Adopts Rule Amendments to the Broker-Dealer Customer Protection Rule

The Securities and Exchange Commission today adopted amendments to Rule 15c3-3 (the customer protection rule) to require certain broker-dealers to increase the frequency with which they perform computations of the net cash they owe to customers and other broker-dealers (known as PAB account holders) from weekly to daily. The Commission also adopted amendments to Rule 15c3-3 and Rule 15c3-1 (the broker-dealer net capital rule) to permit certain broker-dealers that perform a daily customer reserve computation to decrease the required 3 percent “buffer” in the customer reserve bank account by reducing the customer-related receivables, or “aggregate debit items,” charge from 3 percent to 2 percent in the computation.

"Our markets have dramatically evolved since the 1972 adoption of Rule 15c3-3, otherwise known as the Customer Protection Rule," said SEC Chair Gary Gensler. "I’m pleased to support this adoption because it helps protect customers and the Securities Investor Protection Corporation Fund, while promoting greater trust in the markets."

Broker-dealers may have large deposit requirements that indicate that there may be times when the net amount of cash owed to customers and PAB account holders is substantially greater than the amounts on deposit in the special reserve bank accounts. The amendments will require broker-dealers with average total credits (the amount of cash they owe customers and PAB account holders) equal to or greater than $500 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. By reducing the timeframe between computations, the amendments will 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 amendments will also more quickly apply the protective measures of the Rule 15c3-3 reserve requirements to cash of customers and PAB account holders that is newly deposited into the broker-dealer. This will reduce the risk that, if the broker-dealer fails financially, it may be unable to promptly return cash and securities to customers and PAB account holders through an orderly self-liquidation.

Today’s amendments also recognize that the enhancements to the customer protection measures of Rule 15c3-3 through a daily reserve computation warrant a corresponding reduction of the 3 percent “buffer” that certain broker-dealers must include as part of their customer reserve computation to 2 percent.

The amendments will become effective 60 days after the date of publication of the adopting release in the Federal Register. Broker-dealers that exceed the $500 million threshold using each of the 12 filed month-end FOCUS Reports from July 31, 2024, through June 30, 2025, must perform the customer and PAB reserve computations daily beginning no later than December 31, 2025 (i.e., six months after June 30, 2025). When the amendments are effective, a carrying broker-dealer may voluntarily perform a daily customer reserve computation and apply the 2 percent aggregate debit items reduction, provided it notifies its designated examining authority in writing at least 30 calendar days prior.