Series 28: Customer Protection Rule

Taken from our Series 28 - Introducing Broker-Dealer Financial and Operations Principal Qualification Examination

Definition of the term Customer Protection Rule...

passed by the SEC in 1972 as a reaction to several broker-dealer firms liquidating and leaving their customers high and dry. The rule requires broker-dealers to (1) promptly obtain and maintain the physical possession or control of all fully paid and excess margin customer securities and (2) to segregate all customer cash and securities that a broker-dealer has not used to finance other customers' transactions from its own proprietary accounts.

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