SEC Financial Responsibility Rules
The National Law Review writes "SEC Issues FAQs on Financial Responsibility Rules". Written by Morgan Lewis, it says, "On March 6, the staff of the Securities and Exchange Commission (SEC) issued long-awaited guidance in the form of frequently asked questions (FAQs) on the financial responsibility rule amendments adopted on July 30, 2013. The FAQs provide guidance on (1) the effective dates of the Financial Responsibility Rules Amendments; (2) amendments to Rule 15c3-1 (the Net Capital Rule); (3) amendments to Rule 15c3-3 (the Customer Protection Rule), including (i) the allocation of customers' fully paid and excess margin securities to short positions, (ii) proprietary accounts of broker-dealers, (iii) the treatment of free credit balances outside a sweep program, (iv) certain sweep program questions, and (v) questions regarding the bulk transfer of customer accounts; and (4) amendments to Rule 17a-11.... Rule 15c3-3(j)(2)(ii) -- sweep programs -- establishes customer disclosure, notice, and affirmative consent requirements for programs where a customer's free credit balances in a securities account are "swept" into a money market mutual fund or an account at a bank whose deposits are insured by the Federal Deposit Insurance Corporation. The FAQs clarify the following: In the context of carrying agreements, where a carrying agreement is otherwise compliant with FINRA Rule 4311, the carrying firm may rely on a representation from the introducing broker that the customer has given the introducing broker the required "written" consent to include the customer's free credit balances in the carrying broker-dealer's sweep program under Rule 15c3-3(j)(2)(ii))(A). The requirement to provide notice to a customer, as part of the customer's quarterly statement of account, that the balance in the bank deposit account or shares of the money market mutual fund in which the customer has a beneficial interest can be liquidated on the customer's order and the proceeds returned to the securities account or remitted to the customer is not inconsistent with money market mutual fund documents that allow the fund a specified period of time to pay redemption proceeds or any applicable rules that would permit money market mutual funds to limit redemptions in certain circumstances."
