The following additions were made to the FINRA interpretations related to Rule 15c3-1:
- Paragraph (c)(1)(i)/02 – “When a broker-dealer has a proprietary trading account carried by another broker-dealer, indebtedness in such account is considered ‘adequately collateralized’ if the broker-dealer’s equity in such account is at least equal to the haircut requirements specified in SEA Rules 15c3-1(c)(2)(vi) and (vii) on the positions in such account. If the proprietary trading account is not adequately collateralized (i.e., the equity in the account is less than the haircuts required on the positions), the excess of the haircut amount over the equity in the account, up to the amount of the indebtedness, shall be included as aggregate indebtedness. The remainder of the indebtedness may be considered adequately collateralized and may be excluded from aggregate indebtedness.” Additionally, the interpretations provide an example scenario illustrating the application of the new interpretation. Effectively, the interpretation will result in broker-dealers with a proprietary trading account with indebtedness in such account, carried by another broker-dealer, to recognize aggregate indebtedness for the portion of the account that is not adequately collateralized subject to the limit of the total indebtedness amount.
- Paragraph (c)(2)(i)(G)/01 – The interpretation clarifies that a payment (including any reduction or forgiveness of a receivable from the broker-dealer’s parent or affiliate) in connection with a services arrangement with the parent or affiliate of the broker-dealer would not be considered a capital withdrawal for purposes of SEA Rules 15c3-1(c)(2)(i)(G) and 15c3-1(e) if all of the following conditions are met:
- "at the time the service(s) were provided to the broker-dealer, the services arrangement was in writing and specified such service(s) with a reasonable and consistent basis for determining the cost of each service (e.g., utilizing a percentage of the broker-dealer’s net income to determine the cost to be charged by a parent or affiliate for technology services provided by a parent or affiliate, for example, may not be deemed “a reasonable basis” because the cost of obtaining such services generally does not fluctuate based on the level of a broker-dealer’s net income);
- the service(s) provided were related to the broker-dealer’s business;
- the parent or affiliate had the ability to provide such service(s); and
- the parent or affiliate provided the service(s).”
- Paragraph (c)(2)(iv)(B)/16 – “Deficits or unsecured balances in securities transactions with a Federal Reserve Bank need not be deducted in computing net capital under SEA Rule 15c3-1(c)(2)(iv)(B).”
- Paragraph (c)(2)(iv)(C)/095 – The interpretation clarifies that certain unsecured receivables may be the result of revenue accrued in connection with the sale of products or for services where at the same time expenses (and a corresponding payable) have been accrued as a result of selling such products or providing such services. In such situations, the unsecured receivable associated with such revenues does not need to be deducted from net worth under SEA Rule 15c3-1(c)(2)(iv)(C) limited to the amount of the payable balance associated with the expenses incurred in connection with such revenue given the following conditions have been met:
1. “A written contract exists between the broker-dealer and the payee, in which:
a. The broker-dealer’s liability for the amount payable is limited solely to the proceeds of the receivable; and
b. The payee waives payment of the amount payable until the broker-dealer has received payment of the related amount receivable; and
2. If the broker-dealer is subject to the Aggregate Indebtedness Standard of paragraph (a)(1)(i) of SEA Rule 15c3-1,
a. The portion of the payable due within twelve months is included in aggregate indebtedness; and
b. The broker-dealer’s net capital requirement shall be increased by an amount equal to one percent of the portion of the payable that was not included in aggregate indebtedness.”
- Paragraph (c)(2)(viii)(C)/033 – Generally, contractual securities commitments are subject to the haircut provisions of SEA Rule 15c3-1. The additional interpretation refines the generality to make clear that underwriting commitments in an unregistered offering may be reduced by binding contracts for sale, including bona fide presales. The interpretation defines a bona fide presale and provides an example of what evidence may support a bona fide presale.
- Paragraph (e)/01 – The interpretation is a reiteration of the interpretation noted above for paragraph (c)(2)(i)(G)/01.
The following table summarizes the interpretations related to Rule 15c3-1 that have been revised, demonstrating the former and new interpretations (with emphasis on the revisions in bold font):