SEC – Granted No-Action Relief Regarding Certain Bank Sweep Receivables under Rule 15c3-1

May 15, 2020 – SEC granted relief for Broker Dealers (B/D) to treat unsecured receivables from bank sweep accounts (as in Exchange Act Rule 15c3-3) as allowable assets not deducted from net worth. Usually B/D must deduct unsecured receivables from net worth to calculate net capital.

In sweep programs, B/Ds offer clients the option to automatically transfer free credit balances in a securities account to FDIC insured bank accounts on pass-through basis. Bank sweep accounts may be held at an affiliate bank of the B/D or a third party bank. B/D instructs bank to transfer the funds to the B/D who then deposits them into the customer’s securities account; process may have operational lag, take several days. To allow immediate use of funds, B/Ds credit customer account prior to bank transfer. The pre-funding creates an unsecured receivable owed to B/D that must be deducted from its net worth in order to calculate net capital, as per Exchange Act Rule 15c3-1.

Relief Granted
B/D may treat receivables from sweep accounts as allowable assets not deducted from net worth for net capital purposes for one business day from date receivable created. Provided receivable is created through pre-funding of a customer’s brokerage account as part of an FDIC insured bank sweep program transaction; receivable arises from a receivable from FDIC insured bank for which a sweep deposit account was established. In addition, the B/D has legal right to demand, receive the payment from that bank. Also, customer unable to access sweep account directly or without going through B/D.

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