Extension of Compliance Date for Required Daily Computation of Customer and Broker-Dealer Reserve Requirements Under the Broker-Dealer Customer Protection Rule

<RULE> SECURITIES AND EXCHANGE COMMISSION <CFR>17 CFR Part 240</CFR> <DEPDOC>[Release No. 34-103320; File No. S7-11-23]</DEPDOC> <RIN>RIN 3235-AN28</RIN> <SUBJECT>Extension of Compliance Date for Required Daily Computation of Customer and Broker-Dealer Reserve Requirements Under the Broker-Dealer Customer Protection Rule</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Securities and Exchange Commission. <HD SOURCE="HED">ACTION:</HD> Final rule; extension of compliance date. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Securities and Exchange Commission (“Commission”) is extending the compliance date for the recently adopted amendments that require certain broker-dealers to perform daily reserve computations and make required deposits into their reserve bank accounts daily rather than weekly by six months from December 31, 2025, to June 30, 2026. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> As of July 1, 2025, the compliance date for Rule 15c3-3(e)(3)(i)(B)( <E T="03">1</E> ), published January 13, 2025, at 90 FR 2837, is extended from December 31, 2025, to June 30, 2026. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Michael A. Macchiaroli, Associate Director; Raymond Lombardo, Assistant Director; Sheila Dombal Swartz, Senior Special Counsel; or Abraham Jacob, Special Counsel, Office of Broker-Dealer Finances, at (202) 551-5500, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-7010. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> The Commission is extending the compliance date for the requirement to perform a reserve computation for accounts of customers (“customer reserve computation”) and accounts of other broker-dealers (“PAB reserve computation”) daily rather than weekly under paragraph (e)(3)(i)(B)( <E T="03">1</E> ) of Rule 15c3-3 under the Securities Exchange Act of 1934 (“Exchange Act”) from December 31, 2025, to June 30, 2026. <SU>1</SU> <FTREF/> This daily reserve computation requirement applies to broker-dealers with average total credits equal to or greater than $500 million (“$500 Million Threshold”). The Commission is not extending the compliance dates with respect to the amendments to paragraph (e)(3)(v) of Rule 15c3-3 and the conforming amendments to the Financial and Operational Combined Uniform Single Report (“FOCUS Report”). <FTNT> <SU>1</SU>  17 CFR 240.15c3-3(e)(3)(i)(B)( <E T="03">1</E> ) (“Rule 15c3-3(e)(3)(i)(B)( <E T="03">1</E> )”). </FTNT> <HD SOURCE="HD1">I. Discussion</HD> On December 20, 2024, the Commission adopted amendments to Rule 15c3-3 (the “broker-dealer customer protection rule”) to require broker-dealers that hold customer cash and securities (“carrying broker-dealers”) and that exceed the $500 Million Threshold to perform their customer and PAB reserve computations and make any required deposits into their reserve bank accounts daily rather than weekly. <SU>2</SU> <FTREF/> The daily reserve computation requirement is designed to address the risks associated with situations where a carrying broker-dealer receives large cash inflows on behalf of customers and PAB account holders during the week and days prior to the next required weekly reserve computations and associated deposits into the reserve bank accounts. Such occurrences can lead to circumstances where the net amount of cash owed to customers and PAB account holders  <SU>3</SU> <FTREF/> is substantially greater than the amounts held in the carrying broker-dealer's customer and PAB reserve bank accounts. <SU>4</SU> <FTREF/> By requiring daily rather than weekly reserve computations and deposits, the protections provided by the reserve requirements of Rule 15c3-3 will be applied more quickly to newly deposited cash of customers and PAB account holders and reduce the risk that if a carrying 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. <SU>5</SU> <FTREF/> <FTNT> <SU>2</SU>   <E T="03">See Daily Computation of Customer and Broker-Dealer Reserve Requirements Under the Broker-Dealer Customer Protection Rule,</E> Exchange Act Release No. 102022 (Dec. 20, 2024) [90 FR 2790 (Jan. 13, 2025)] (“Adopting Release”). The term “average total credits” is defined as the arithmetic mean of the sum of total credits in the customer reserve computation and the PAB reserve computation reported in the carrying broker-dealer's 12 most recently filed month-end FOCUS Reports. <E T="03">See</E> Adopting Release, 90 FR at 2793 and paragraph (e)(3)(i)(B)( <E T="03">1</E> ) of Rule 15c3-3. </FTNT> <FTNT> <SU>3</SU>  The term PAB account means a proprietary securities account of a broker-dealer (which includes a foreign broker-dealer, or a foreign bank acting as a broker-dealer) other than a delivery-versus-payment account or a receipt-versus-payment account. The term does not include an account that has been subordinated to the claims of creditors of the carrying broker-dealer. <E T="03">See</E> paragraph (a)(16) of Rule 15c3-3 and Adopting Release, 90 FR at 2791, n.9. </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> Adopting Release, 90 FR at 2791-92. </FTNT> <FTNT> <SU>5</SU>   <E T="03">See id.</E> at 2792. </FTNT> In the Adopting Release, the Commission also amended Rule 15c3-1, <SU>6</SU> <FTREF/> the broker-dealer net capital rule, to permit carrying broker-dealers that use the alternative method to compute their minimum net capital  <SU>7</SU> <FTREF/> and that perform a required daily customer reserve computation to reduce their aggregate debit items by 2% rather than 3% (“2% debit reduction”) when performing a customer reserve computation under Rule 15c3-3. <SU>8</SU> <FTREF/> Further, carrying broker-dealers that use the alternative method and are below the $500 Million Threshold may voluntarily perform a daily customer reserve computation under Rule 15c3-3 and, in so doing, apply the 2% debit reduction in lieu of the 3% debit reduction if they notify their designated examining authority (“DEA”) at least 30 days prior to beginning the daily customer reserve computation. <SU>9</SU> <FTREF/> Finally, the Commission adopted technical amendments to the FOCUS Report to conform it to the amendments with respect to the lowering of the debit reduction from 3% to 2%. <SU>10</SU> <FTREF/> <FTNT> <SU>6</SU>  17 CFR 240.15c3-1 (“Rule 15c3-1”). </FTNT> <FTNT> <SU>7</SU>  The minimum net capital requirement for broker-dealers is the greater of a fixed-dollar amount specified in Rule 15c3-1 and an amount determined by applying one of two financial ratios: the 15-to-1 aggregate indebtedness to net capital ratio (“basic method”) or the 2% of aggregate debit items ratio (“alternative method”). A carrying broker-dealer using the alternative method must reduce aggregate debit items ( <E T="03">i.e.,</E> customer-related receivables) by 3% when performing its customer reserve computation under Rule 15c3-3. <E T="03">See</E> Adopting Release, 90 FR at 2793. </FTNT> <FTNT> <SU>8</SU>   <E T="03">See id.</E> at 2793; <E T="03">see also</E> paragraph (a)(1)(ii)(A) of Rule 15c3-1. </FTNT> <FTNT> <SU>9</SU>   <E T="03">See</E> paragraph (e)(3)(v) of paragraph 15c3-3. </FTNT> <FTNT> <SU>10</SU>   <E T="03">See</E> Adopting Release, 90 FR at 2806. </FTNT> The Commission addressed the compliance dates of the amendments in the Adopting Release. <SU>11</SU> <FTREF/> The Commission stated that carrying 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 customer and PAB reserve computations daily beginning no later than December 31, 2025 ( <E T="03">i.e.,</E> six months after June 30, 2025). <SU>12</SU> <FTREF/> The Commission also stated that on or after the effective date of the final amendments, <SU>13</SU> <FTREF/> a carrying broker-dealer may voluntarily perform a daily customer reserve computation and apply the 2% debit reduction, provided it notifies its DEA in writing at least 30 calendar days prior to beginning the daily customer reserve computation that applies the 2% debit reduction. <SU>14</SU> <FTREF/> Finally, the Commission stated in the Adopting Release that the compliance date for the amendments to the Form X-17A-5, Part II ( <E T="03">i.e.,</E> Part II of the FOCUS Report) is March 1, 2026. <SU>15</SU> <FTREF/> <FTNT> <SU>11</SU>   <E T="03">See</E> Adopting Release, 90 FR at 2811-12. </FTNT> <FTNT> <SU>12</SU>   <E T="03">See id.</E> </FTNT> <FTNT> <SU>13</SU>  The effective date of the amendments was March 14, 2025. <E T="03">See</E> Adopting Release, 90 FR at 2790. </FTNT> <FTNT> <SU>14</SU>   <E T="03">See</E> Adopting Release, 90 FR at 2811-12. </FTNT> <FTNT> <SU>15</SU>   <E T="03">See id.</E> The Commission is not extending the compliance dates with respect to the amendment to paragraph (e)(3)(v) of Rule 15c3-3 that permits a carrying broker-dealer that does not exceed the $500 Million Threshold but that elects to voluntarily perform a daily customer reserve computation to apply the 2% debit reduction, and the conforming amendments to Part II of the FOCUS Report. </FTNT> Since the Commission adopted the daily customer and PAB reserve computation requirement, industry representatives and carrying broker-dealers have indicated through telephonic meetings with Commission staff and letters that, as carrying broker-dealers work to meet the December 31, 2025, compliance date, some of them believe that additional time to implement the capability to perform a required daily customer and PAB reserve computation is needed. For example, the Securities Industry ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 25k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━