Series 52: 8.4.1.1.2. Customer Protection Rule (Rule 15c3-3)

8.4.1.1.2.  Customer Protection Rule (Rule 15c3-3)

The customer protection rule prohibits broker-dealers from using customer securities and cash to finance their own businesses without customers’ written consent. It requires that customer property (securities and funds) in the custody of broker-dealers be kept separate from the firm’s capital and safe from risks associated with its business operations.

Rule 15c3-3 has two parts. The first part requires broker-dealers to promptly obtain and maintain the physical possession or control of all fully paid and excess margin customer securities. Possession means that the securities are physically located at the broker-dealer’s. Control means securities are located at an approved location, such as a clearing firm or bank. Broker-dealers must determine daily the number of customer securities in their possession or control and ensure that their firm is not in a deficit position.

The second part of the customer protection rule restricts the use of customer securities. The firm cannot use customer property for its own operations w