Customer Protection Rule

The Customer Protection Rule, also known as SEC Rule 15c3-3, is a regulation designed to safeguard the funds and securities of customers held by broker-dealers. This rule ensures that broker-dealers maintain a reserve of cash or qualified securities to protect customer assets and prevent their misuse in the event of financial difficulties or insolvency.

Under the rule, broker-dealers must follow two primary requirements: 

• First, they must maintain physical possession or control of fully paid and excess margin securities owned by customers.
  • ​Broker-dealers can satisfy this requirement by maintaining a separate, reserve bank account for customer funds. This ensures that customer securities are kept separate from the firm’s own assets and cannot be used to finance the broker-dealer’s activities.
• Second, broker-dealers must calculate their cash obligations to clients pursuant to Exhibit A of Rule 15c3-3a.

For more information, see: Segregation of Assets and Customer Protection.

[Written in December of 2024 by the Cornell Law School Securities Law Clinic]

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