SEC Seeks Changes to Protect Customers against Broker-Dealers’ Failure

<p>The US
securities regulator today (Wednesday) proposed an amendment to rules that
require broker-dealers to segregate customer funds and securities from their
own assets. Specifically, the <a href="https://www.financemagnates.com/terms/s/securities-and-exchange-commission-sec/">Securities and Exchange Commission (SEC</a>)
wants securities trading firms to calculate the net cash owed to customers and
other broker-dealers daily instead of weekly. For both parties, this cash is required to be held in special reserve bank
accounts.</p><blockquote><p lang="en" dir="ltr">Today we proposed enhancements to the rule that protects a customer’s cash and securities held at a broker-dealer, increasing from weekly to daily the frequency of the computations of the net cash a broker-dealer owes to customers and other broker-dealers.<a href="https://t.co/HECd0F2eeB">https://t.co/HECd0F2eeB</a> <a href="https://t.co/ZYvY0xBDt9">pic.twitter.com/ZYvY0xBDt9</a></p>— U.S. Securities and Exchange Commission (@SECGov) <a href="https://twitter.com/SECGov/status/1679185162796695555?ref_src=twsrc%5Etfw">July 12, 2023</a></blockquote><p>SEC Eyes Change
in Reserve Deposit</p><p>The SEC
explained that the purpose of the proposed change is to help broker-dealers
match the amount of cash they owe their customers and external broker-dealers, with the amount they deposit in reserve bank accounts meant for them. </p><p>As a
result, the regulator is proposing that broker-dealers with net cash equal to
or more than $250 million must calculate the amount daily and deposit the cash into the reserve by the end of the following business day. The regulator noted that this
will make it less likely that ‘large mismatches' will build up over time, predisposing customers to greater losses should a broker-dealer fail. </p><p>“Given the
speed, scale, and volume of today’s market activity, I believe customers would
benefit if broker-dealers carrying large credit balances made daily reserve
account calculations and deposits,” the Chair of the SEC, Gary Gensler noted. “This
frequency would better align with the inflows, swings, and balances that
broker-dealers experience in today’s markets.”</p><p>The SEC is
currently collating public comments on the proposal. It mentioned that it will
gather public opinions for 30 days after the proposal is published in the
Federal Register.</p><p>The proposed amendment comes amid the SEC's crackdown on cryptocurrency exchanges whose offerings it believes are unregistered securities. In its recent <a href="https://www.financemagnates.com/cryptocurrency/sec-charges-binance-ceo-over-illegal-exchanges-commingling-of-client-fund/" target="_blank" rel="follow">lawsuit against Binance</a>, the regulator raised concerns about the crypto exchange mixing clients' funds with its assets.</p><p>Recent Amendments by the SEC</p><p>Meanwhile, the SEC in recent months proposed other amendments to the rules binding the securities trading industry. In March, the financial market supervisor <a href="https://www.financemagnates.com/institutional-forex/us-regulator-shortens-securities-settlement-cycle-to-single-day/" target="_blank" rel="follow">finalized a change to its policy</a> that requires broker-dealer securities transactions to be settled within one business day (T+1). </p><p>On top of that, the regulator recently <a href="https://www.financemagnates.com/institutional-forex/us-wants-financial-services-to-get-rid-of-paper/" target="_blank" rel="follow">proposed amendments</a> to its information collection procedures. The SEC said it wants broker-dealers, clearing agencies and security-based swap dealers, among others, to submit 'a number of filings' electronically, <a href="https://www.financemagnates.com/" target="_blank" rel="follow">Finance Magnates</a> reported.</p><p>eToro's CFDs fees; hirings at Exinity, Scope Markets; <a href="https://www.financemagnates.com/forex/news-nuggets-12-july-etoros-cfds-fees-hirings-at-exinity-scope-markets/" target="_blank" rel="follow">read today's news nuggets</a>.</p>

This article was written by Solomon Oladipupo at www.financemagnates.com.