FACT SHEET

Proposed 

Enhancements to the 

Broker-Dealer Customer 

Protection Rule

U.S. SECURITIES AND EXCHANGE COMMISSION PAGE 1 OF 2

Why This Matters

Rule 15c3-3, known as the Customer Protection Rule, requires broker-dealers that maintain

custody of customer securities and cash (“carrying broker-dealers”) to have a special reserve 

account at a bank that must hold cash and/or qualified securities in an amount determined 

by a computation of the net cash owed to the carrying broker-dealer’s customers. Generally, 

carrying broker-dealers are required to perform the customer reserve computation and make 

any required deposits into the customer reserve bank account weekly. Carrying brokerdealers also perform a similar computation and make the required deposit, generally on a 

weekly basis, for the net cash a carrying broker-dealer owes to other broker-dealers whose 

accounts the broker-dealer carries, known as PAB account holders (i.e., proprietary 

securities account of a broker-dealer).

Carrying broker-dealers may receive large cash inflows that are not deployed for or on behalf 

of their customers or PAB account holders for the purpose of investing in securities prior to 

the next required customer and PAB reserve computations and the associated deposits into 

the customer and PAB reserve bank accounts. When this occurs, the value of the cash 

and/or qualified securities in the customer and PAB reserve bank accounts may not equal 

the net cash owed to customers and PAB account holders for a period of time. This mismatch 

poses a risk to the carrying broker-dealer’s customers and PAB account holders that, if the 

carrying broker-dealer fails financially, it may not be able to return all of the securities and 

cash owed to the customers and PAB account holders. The proposal is intended to address 

this potential mismatch risk by shortening the time between required computations and 

deposits.

How This Rule Would Apply

The proposal would require carrying broker-dealers with large total credits (generally the 

amount of cash owed to customers and PAB account holders) to increase the frequency of 

their customer and PAB reserve computations from weekly to daily. Specifically, the proposal

would require carrying broker-dealers with average total credits equal to or greater than $250 

million to make the relevant computations daily, as of the close of the previous business day. 

The Securities and Exchange Commission proposed enhancements to Rule 15c3-3—the rule 

that protects a customer’s cash and securities held at a broker-dealer—to require certain 

broker-dealers to increase the frequency of the computations of the net cash they owe to 

customers and other broker-dealers from weekly to daily.
FACT SHEET | Proposed Enhancements to the Broker-Dealer Customer Protection Rule 

U.S. SECURITIES AND EXCHANGE COMMISSION Page 2 of 2

Those carrying broker-dealers would be required to make deposits no later than one hour 

after the opening of banking business on the following business day. For example, a carrying 

broker-dealer performing a computation on Tuesday as of the close of business on Monday 

would be required to make the deposit on Wednesday, assuming all three days are business 

days.

The proposal would define average total credits as the arithmetic mean of the sum of total 

credits reported in a carrying broker-dealer’s customer and PAB reserve computations in its

12 most recently filed month-end financial and operational reports (known as FOCUS 

Reports). This means the average total credits would be a 12-month rolling average, as the 

carrying broker-dealer would add up the sum of the total credits reported in the customer 

and PAB reserve computations in each of the 12 most recently filed month-end FOCUS 

Reports and divide that amount by 12 to calculate the arithmetic mean of the total credits.

The proposal would also require that a carrying broker-dealer comply with the daily 

computation requirement for the customer and PAB reserve bank accounts no later than six 

months after having exceeded the $250 million threshold. This is intended to provide time 

for a carrying broker-dealer to make the systems and staffing changes necessary to perform 

a daily computation after it exceeds the $250 million threshold.

In the event that a carrying broker-dealer’s average total credits subsequently fall below the 

$250 million threshold, the proposed amendments would require it to continue performing 

daily computations and provide written notification to its designated examining authority of 

its election to perform weekly computations. The carrying broker-dealer would be required 

to provide such notification 60 days prior to reverting to weekly computations.

Additional Information:

The public comment period will remain open for 60 days following publication of the proposing release on the 

SEC website or 30 days following publication of the proposing release in the Federal Register, whichever period 

is longer.