Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword or section
Like this
0Activity
0 of .
Results for:
No results containing your search query
P. 1
2013-18734

2013-18734

Ratings: (0)|Views: 42|Likes:
Published by MarketsWiki

More info:

Published by: MarketsWiki on Aug 27, 2013
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

08/27/2013

pdf

text

original

 
Vol. 78 Wednesday,No. 162 August 21, 2013Part II
Securities and Exchange Commission
17 CFR Part 240Financial Responsibility Rules for Broker-Dealers; Final Rule
VerDate Mar<15>2010 17:54 Aug 20, 2013Jkt 229001PO 00000Frm 00001Fmt 4717Sfmt 4717E:\FR\FM\21AUR2.SGM21AUR2
  e  m  c   d  o  n  a   l   d  o  n   D   S   K   6   7   Q   T   V   N   1   P   R   O   D  w   i   t   h   R   U   L   E   S   2
 
51824
Federal Register
/Vol. 78, No. 162/Wednesday, August 21, 2013/Rules and Regulations
SECURITIES AND EXCHANGECOMMISSION17 CFR Part 240
[Release No. 34–70072; File No. S7–08–07]RIN 3235–AJ85
Financial Responsibility Rules forBroker-Dealers
AGENCY
:
Securities and ExchangeCommission.
ACTION
:
Final rule.
SUMMARY
:
The Securities and ExchangeCommission (‘‘Commission’’) isadopting amendments to the net capital,customer protection, books and records,and notification rules for broker-dealerspromulgated under the SecuritiesExchange Act of 1934 (‘‘Exchange Act’’).These amendments are designed toaddress several areas of concernregarding the financial responsibilityrequirements for broker-dealers. Theamendments also update certainfinancial responsibility requirementsand make certain technicalamendments.
DATES
:
Effective Date: 
October 21, 2013.
FOR FURTHER INFORMATION CONTACT
:
Michael A. Macchiaroli, AssociateDirector, at (202) 551–5525; Thomas K.McGowan, Deputy Associate Director, at(202) 551–5521; Randall Roy, AssistantDirector, at (202) 551–5522; RaymondLombardo, Branch Chief, at (202) 551–5755; Sheila Dombal Swartz, SpecialCounsel, (202) 551–5545; Carrie A.O’Brien, Special Counsel, (202) 551–5640; or Kimberly N. Chehardy,Attorney Advisor, (202) 551–5791;Division of Trading and Markets,Securities and Exchange Commission,100 F Street NE., Washington, DC20549–7010.
SUPPLEMENTARY INFORMATION
:
Table of Contents
I. BackgroundII. AmendmentsA. Amendments to the CustomerProtection Rule1. Background2. Proprietary Accounts of Broker-Dealersi. Definition of ‘‘PAB Account’’ under Rule15c3–3(a)(16)ii. Written Permission To Use PABAccount Securitiesiii. PAB Reserve Bank Accountsiv. Other PAB Issues Raised byCommentersv. Amendment to Rule 15c3–1(c)(2)(iv)(E)Related to PAB Accounts3. Banks Where Special Reserve DepositsMay Be Held4. Allocation of Customers’ Fully Paid andExcess Margin Securities to ShortPositions5. Importation of Rule 15c3–2Requirements Into Rule 15c3–3 andTreatment of Free Credit Balancesi. Importation of Rule 15c3–2ii. Treatment of Free Credit Balancesa. Treatment of Free Credit BalancesOutside of a Sweep Program b. Treatment of Free Credit Balances in aSweep Program6. ‘‘Proprietary Accounts’’ Under theCommodity Exchange Act7. Expansion of the Definition of ‘‘Qualified Securities’’ To IncludeCertain Money Market FundsB. Holding Futures Positions in aSecurities Portfolio Margin AccountC. Amendments With Respect to SecuritiesLending and Borrowing and Repurchase/Reverse Repurchase TransactionsD. Documentation of Risk ManagementProceduresE. Amendments to the Net Capital Rule1. Requirement To Deduct From Net WorthCertain Liabilities or Expenses Assumed by Third Parties2. Requirement To Subtract From NetWorth Certain Non-Permanent CapitalContributions3. Requirement To Deduct the Amount byWhich a Fidelity Bond DeductibleExceeds SRO Limits4. Broker-Dealer Solvency Requirement5. Amendment to Rule Governing OrdersRestricting Withdrawal of Capital From aBroker-Dealer6. Adjusted Net Capital Requirementsi. Amendment to Appendix A of Rule15c3–1ii. Money Market Fundsa. Clarification b. Proposed Haircut Reduction From 2% to1%c. Aggregate Debit Items ChargeF. Technical AmendmentsIII. Responses to Specific Requests forCommentIV. Paperwork Reduction ActA. Summary of the Collection of Information RequirementsB. Use of InformationC. RespondentsD. Total Annual Reporting andRecordkeeping Burden1. Securities Lending Agreements andDisclosures2. DEA Permission To Withdraw CapitalWithin One Year of Contribution3. Written Subordination AgreementsUnder Rule 15c3–34. PAB Reserve Bank AccountRecordkeeping Requirements5. Adequate Procedures Required UnderParagraph (j)(1) of Rule 15c3–36. Treatment of Free Credit Balances7. Documentation of Risk ManagementProcedures8. Notice RequirementsE. Collection of Information Is MandatoryF. ConfidentialityG. Record Retention PeriodV. Economic AnalysisA. IntroductionB. Economic BaselineC. Discussion of General CommentsReceivedD. Economic Analysis of the Amendmentsand Alternatives1. Amendments to the Customer ProtectionRulei. Economic Analysisa. Proprietary Accounts of Broker-Dealers(I). Summary of Amendments(II). Baseline and Incremental EconomicEffects(III). Alternatives(IV). Compliance Cost Estimates b. Banks Where Special Reserve DepositsMay Be Held(I). Summary of Amendments(II). Baseline and Incremental EconomicEffects(III). Alternatives(IV). Compliance Cost Estimatesc. Allocation of Customers’ Fully Paid andExcess Margin Securities to ShortPositionsd. Importation of Rule 15c3–2Requirements Into Rule 15c3–3e. Treatment of Free Credit Balances(I). Summary of Amendments(II). Baseline and Incremental EconomicEffects(III). Alternatives(IV). Compliance Cost Estimatesf. ‘‘Proprietary Accounts’’ Under theCommodity Exchange Actii. Consideration of Burden onCompetition, and Promotion of Efficiency, Competition, and CapitalFormation2. Holding Futures Positions in a SecuritiesPortfolio Margining Accounti. Economic Analysisii. Consideration of Burden onCompetition, and Promotion of Efficiency, Competition, and CapitalFormation3. Amendments With Respect to SecuritiesLending and Borrowing and Repurchase/Reverse Repurchase Transactionsi. Economic Analysisii. Consideration of Burden onCompetition, and Promotion of Efficiency, Competition, and CapitalFormation4. Documentation of Risk ManagementProceduresi. Economic Analysisii. Consideration of Burden onCompetition, and Promotion of Efficiency, Competition, and CapitalFormation5. Amendments to the Net Capital Rulei. Economic Analysisa. Requirement To Deduct From Net WorthCertain Liabilities or Expenses AssumedBy Third Parties(I). Summary of Amendments(II). Baseline and Incremental EconomicEffects(III). Alternatives b. Requirement To Subtract From NetWorth Certain Non-Permanent CapitalContributions(I). Summary of Amendments(II). Baseline and Incremental EconomicEffects(III). Alternativesc. Requirement To Deduct the Amount byWhich a Fidelity Bond Exceeds SROLimitsd. Broker-Dealer Solvency Requiremente. Amendment to Rule GoverningRestrictions of Withdrawals of Capital
VerDate Mar<15>2010 17:54 Aug 20, 2013Jkt 229001PO 00000Frm 00002Fmt 4701Sfmt 4700E:\FR\FM\21AUR2.SGM21AUR2
  e  m  c   d  o  n  a   l   d  o  n   D   S   K   6   7   Q   T   V   N   1   P   R   O   D  w   i   t   h   R   U   L   E   S   2
 
51825
Federal Register
/Vol. 78, No. 162/Wednesday, August 21, 2013/Rules and Regulations
1
17 CFR 240.15c3–1.
2
17 CFR 240.15c3–3.
3
17 CFR 240.17a–3; 17 CFR 240.17a–4; and 17CFR 240.17a–11.
4
See Amendments to Financial Responsibility Rules for Broker-Dealers,
Exchange Act Release No.55431 (Mar. 9, 2007), 72 FR 12862 (Mar. 19, 2007)(‘‘
Amendments to Financial Responsibility Rules’’ 
).As part of this release, the Commission alsorequested comment on three additional matters:reducing the Rule 17a–11 (17 CFR 240.17a–11)early warning level for broker-dealers that carryover $10 billion in debits; harmonization of the netcapital deductions required by paragraph(c)(2)(iv)(B) of Rule 15c3–1 for securities lendingand borrowing transactions with the deductionsrequired under paragraph (c)(2)(iv)(F) for securitiesrepurchase and reverse repurchase agreementtransactions (17 CFR 240 240.15c3–1(c)(2)(iv)(B)and (c)(2)(iv)(F), respectively); and accounting forthird-party liens on customer securities held at a broker-dealer. As discussed below in section III. of this release, the Commission received comments inresponse to these requests but has determined todefer consideration of actions with respect to thesespecific matters at this time.
5
Amendments to Financial Responsibility Rules for Broker-Dealers,
Exchange Act Release No. 66910(May 3, 2012), 77 FR 27150 (May 9, 2012).
6
Comments on the amendments are
letter dated April 22, 2007from Peter G. Crane, President, Crane Data LLC(‘‘
Crane Data Letter 
’’); letter dated April 22, 2007from David Michael Bishop (‘‘
Bishop Letter 
’’); letterdated April 27, 2007 from Ted Beer, Broker/DealerPrincipal (‘‘
Beer Letter 
’’); letter dated April 28, 2007from Ted Beer, Broker/Dealer Principal (‘‘
Beer 2Letter 
’’); letter dated April 29, 2007 from R.A.Lowenstein, FinOps Compliance Consultant(‘‘
Lowenstein Letter 
’’); letter dated April 29, 2007from G. Kirk Ellis (‘‘
Ellis Letter 
’’); letter dated May1, 2007 from Stuart J. Kaswell and David J. Harris,Dechert LLP on behalf of Federated Investors(‘‘
Federated Letter 
’’); letter dated May 2, 2007 fromDaniel R. Levene, President, small NASD broker-dealer (‘‘
Levene Letter 
’’); letter dated May 4, 2007from Gerard J. Quinn, Vice President and AssociateGeneral Counsel, SIFMA (‘‘
SIFMA Letter 
’’); letterdated May 7, 2007 from Michael Bell, President andCEO, Curian Clearing, LLC (‘‘
Curian Clearing Letter 
’’); letter dated May 10, 2007 from Richard B.Franz II, Senior Vice-President, Treasurer and Chief Financial Officer, Raymond James & Associates(‘‘
Raymond James Letter 
’’); letter dated May 16,2007 from Steven R. Gerbel, Chicago CapitalManagement LP (‘‘
Chicago Capital Letter 
’’); letterdated May 17, 2007 from Jeffrey L. Kiss, Principal,PackerKiss Securities, Inc. (‘‘
PackerKiss Letter 
’’);letter dated May 17, 2007 from Josephine Wang,General Counsel, SIPC (‘‘
SIPC Letter 
’’); letter datedMay 18, 2007 from Kimberly Taylor, ManagingDirector and Clearing House President, ChicagoMercantile Exchange Inc. (‘‘
CME Letter 
’’); letterdated May 18, 2007 from Diane V. Esheleman,Executive Vice President, JP Morgan Chase Bank,N.A. (‘‘
 JP Morgan Letter 
’’); letter dated May 21, 2007from Faith Colish, Carter Ledyard Milburn LLP(‘‘
Colish Letter 
’’); letter dated May 23, 2007 fromCharles R. Manzoni, Jr., General Counsel, FAFAdvisors, Inc. (‘‘
FAF Advisors Letter 
’’); letter datedMay 27, 2007 from Joyce Glenn (‘‘
Glenn Letter 
’’);letter dated May 28, 2007 from William Bare (‘‘
BareLetter 
’’); letter dated May 29, 2007 from RobertKeenan, CEO, St. Bernard Financial Services, Inc.(‘‘
St. Bernard Financial Services Letter 
’’); letterdated May 31, 2007 from John C. Melton, Sr.,Executive Vice President, Coastal Securities(‘‘
Coastal Letter 
’’); letter dated June 3, 2007 fromAnonymous (‘‘
Anonymous Letter 
’’); letter dated June 5, 2007 from Kelly S. McEntire, Executor,Retired State Administrator/Executor of JanusCapital Investments (‘‘
McEntire Letter 
’’); letter dated June 13, 2007 from Bruce Bent, Chairman, TheReserve (‘‘
Reserve Letter 
’’); letter dated June 14,2007 from Amal El Said, Accounting andRegulatory, Abbey National (‘‘
Abbey National Letter 
’’); letter dated June 14, 2007 from Frank A.Perrone, Senior Vice President, Brown BrothersHarriman & Co. (‘‘
Brown Brothers HarrimanLetter 
’’); letter dated June 15, 2007 from James J.Angel, Ph.D., CFA, Associate Professor of Finance,McDonough School of Business, GeorgetownUniversity (‘‘
Angel Letter 
’’); letter dated June 15,2007 from Matthew M. Hughey, Chief FinancialOfficer, First Clearing, LLC (‘‘
First Clearing Letter 
’’);letter dated June 15, 2007 from Marshall J.Levinson, Senior Managing Director, Bear, Stearns& Co. Inc., Chair, SIFMA Capital Committee(‘‘
SIFMA 2 Letter 
’’); letter dated June 15, 2007 fromChristopher Williams, Director and Senior Counsel,and Barbara Brooks, Principal Financial Officer,Dresdner Kleinwort (‘‘
Dresdner Kleinwort Letter 
’’);letter dated June 18, 2007 from Michael Dworkin(‘‘
Dworkin Letter 
’’); letter dated June 18, 2007 fromKeith Weller, Executive Director and SeniorAssociate General Counsel, UBS Global AssetManagement (Americas) Inc. (‘‘
UBS Letter 
’’); letterdated June 18, 2007 from Marcelo Riffaud,Managing Director, Legal Department, DeutscheBank Securities Inc. (‘‘
Deutsche Bank SecuritiesLetter 
’’); letter dated June 18, 2007 from Jill Grossand Rahat Sarmast, Pace Investor Rights Project(‘‘
Pace Letter 
’’); letter dated June 18, 2007 fromRobert E. Putney, III, Director and Senior Counsel,BlackRock, Inc. (‘‘
BlackRock Letter 
’’); letter dated June 18, 2007 from James S. Keller, Chief Regulatory, the PNC Financial Services Group, Inc.(‘‘
PNC Letter 
’’); letter dated June 18, 2007 fromSarah A. Miller, General Counsel, American ABASecurities Association (‘‘
ABASA Letter 
’’); letterdated June 18, 2007 from David Hirschmann,Executive Vice President, National ChamberFoundation of U.S. Chamber of Commerce(‘‘
National Chamber Foundation Letter 
’’); letterdated June 18, 2007 from Michael W. Fields, Chief Fixed Income Officers, American Beacon Advisors(‘‘
American Beacon Letter 
’’); letter dated June 18,2007 from David Lonergan, Head of U.S. CashManagement, Barclays Global Investors (‘‘
BarclaysLetter 
’’); letter dated June 18, 2007 from HowardSpindel, Senior Managing Directors, IntegratedManagement Solutions (‘‘
Integrated Management Letter 
’’); letter dated June 18, 2007 from Jane G.Heinrichs, Associate Counsel, Investment CompanyInstitute (‘‘
ICI Letter 
’’); letter dated June 18, 2007from Jeffrey P. Neubert, CEO, ClearinghouseAssociation L.L.C. (‘‘
Clearing House Letter 
’’); letterdated June 19, 2007 from James T. McHale,Associate General Counsel, E*Trade BrokerageHoldings, Inc. (‘‘
E*Trade Letter 
’’); letter dated June25, 2007 from Cliff Verron, Managing Director,Deputy Chief Financial Officers and John Ramsay,Managing Director, Deputy General Counsel,Citigroup Global Markets Inc. (‘‘
Citigroup Letter 
’’);letter dated June 25, 2007 from AMEX, CBOE, ISE,OCC, and NYSE/ARCA (‘‘
AMEX Letter 
’’); letterdated July 3, 2007 from Keith F. Higgins, Chair,Committee on Federal Regulation of Securities,American Bar Association (‘‘
American Bar Association Letter 
’’); letter dated July 23, 2007 fromCharles S. Morrison, Senior Vice President andMoney Market Group Leader, Fidelity Management& Research Company, and John Valenti, VicePresident, National Financial Securities LLC(‘‘
Fidelity/NFS Letter 
’’); letter dated August 6, 2007from Stuart Kaswell, Dechert LLP, on behalf of Federated Investors, Inc. (‘‘
Federated 2 Letter 
’’);letter dated October 9, 2007 from Stuart Kaswell,Dechert LLP on behalf of Federated Investors, Inc.(‘‘
Federated 3 Letter 
’’); letter dated November 16,2007 from Marshall J. Levinson, Chair, CapitalCommittee, SIFMA (‘‘
SIFMA 3 Letter 
’’); letter dated January 7, 2008 from Stuart J. Kaswell, Dechert LLP,on behalf of Federated Investors, Inc. (‘‘
Federated 4 Letter 
’’); letter dated August 7, 2008 from Stuart J. Kaswell, Bryan Cave LLP, on behalf of FederatedInvestors, Inc. (‘‘
Federated 5 Letter 
’’); letter datedNovember 10, 2008 from Lee A. Pickard, Pickard &Djinis LLP on behalf of Federated Investors(‘‘
Federated 6 Letter 
’’); letter dated November 25,2008 from Lee A. Pickard, Pickard & Djinis LLP on behalf of Federated Investors (‘‘
Federated 7 Letter 
’’);
Continued
f. Amendment to Rule 15c3–1 Appendix Aii. Consideration of Burden onCompetition, and Promotion of Efficiency, Competition, and CapitalFormationVI. Final Regulatory Flexibility AnalysisA. General Issues Raised by PublicCommentsB. Amendments to the Customer ProtectionRule1. Need for and Objectives of the RuleAmendments2. Significant Issues Raised by PublicComment3. Small Entities Subject to the Rules4. Reporting, Recordkeeping, and OtherCompliance Requirements5. Agency Action To Minimize Effect onSmall EntitiesD. Securities Lending and Borrowing andRepurchase/Reverse RepurchaseTransactions1. Need for and Objectives of theAmendments2. Significant Issues Raised by the PublicComments3. Small Entities Subject to the Rule4. Reporting, Recordkeeping, and OtherCompliance Requirements5. Agency Action To Minimize Effect onSmall EntitiesE. Documentation of Risk ManagementProcedures1. Need for and Objectives of theAmendments2. Significant Issues Raised by PublicComments3. Small Entities Subject to the Rule4. Reporting, Recordkeeping, and OtherCompliance Requirements5. Agency Action To Minimize Effect onSmall EntitiesF. Amendments to the Net Capital Rule1. Need for and Objectives of theAmendments2. Significant Issues Raised by PublicComments3. Small Entities Subject to the Rule4. Reporting, Recordkeeping, and OtherCompliance Requirements5. Agency Action to Minimize Effect onSmall EntitiesVII. Statutory Authority
I. Background
The Commission is adoptingamendments to the broker-dealer netcapital rule (Rule 15c3–1),
1
customerprotection rule (Rule 15c3–3),
2
 booksand records rules (Rules 17a–3 and 17a–4), and notification rule (Rule 17a–11).
3
 The Commission proposed these rulechanges on March 9, 2007.
4
TheCommission re-opened the publiccomment period on May 3, 2012.
5
TheCommission received a total of 97comment letters on the proposedamendments.
6
Sixty comment letters
VerDate Mar<15>2010 17:54 Aug 20, 2013Jkt 229001PO 00000Frm 00003Fmt 4701Sfmt 4700E:\FR\FM\21AUR2.SGM21AUR2
  e  m  c   d  o  n  a   l   d  o  n   D   S   K   6   7   Q   T   V   N   1   P   R   O   D  w   i   t   h   R   U   L   E   S   2

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->