SEA Rule 15c3-3a Exhibit A and Related Interpretations

15c3-3a(Note E)(4)/01 Determination of the Includible Amount of an Affiliated Account’s Debit Balance in the Reserve Formula

A broker-dealer may utilize its reserve formula allocation to determine the includible amount of an affiliated account’s debit balance that is related to a credit item in the reserve formula.

The broker-dealer’s allocation system must be able to determine any long security position underlying an affiliated account’s debit balance that allocates to a short security position underlying the related credit item in the reserve formula.

Credit items that have been included in the reserve formula, which may be considered as relating to an affiliated account’s debit balance, are limited to those related to bank loan, securities loan, fail to receive, customer short, proprietary short, PAB short and non-customer short.

Each credit item identified as relating to an affiliated account’s debit balance must have a related credit balance which is included in the reserve formula, in order for the affiliated account’s debit balance to be includible in the reserve formula.

For purposes of this interpretation, the term “affiliated account” refers to cash and margin accounts of household members and other persons related to principals of a broker-dealer, as well as cash and margin accounts of affiliated persons of a broker-dealer.

(SEC Staff to NYSE) (NYSE Interpretation Memo 07-4, April 2007)
(SEC Staff to FINRA) (FINRA Regulatory Notice 15-25)

15c3-3a(Note E)(5)/01 Determination of the Includible Amount of a Customer’s Concentrated Margin Debit Balance in the Reserve Formula

A broker-dealer may utilize its reserve formula allocation to determine the includible amount of a customer’s concentrated margin debit balance that is related to a credit item in the reserve formula.

The broker-dealer’s allocation system must be able to determine any long security position underlying a customer’s concentrated margin debit balance that allocates to a short security position underlying the related credit item in the reserve formula.

Credit items that have been included in the reserve formula, which may be considered as relating to a customer’s concentrated margin debit balance, are limited to those related to bank loan, securities loan, fail to receive, customer short, proprietary short, PAB short and non-customer short.

Each credit item identified as relating to a customer’s concentrated margin debit balance must have a related credit balance which is included in the reserve formula, in order for the customer’s concentrated margin debit balance to be includible in the reserve formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 07-4, April 2007)
(SEC Staff to FINRA) (FINRA Regulatory Notice 15-25)

15c3-3a(Note E)(5)/02 Exclusion of Omnibus Accounts from the Requirements of Note E(5)

The term “omnibus account” in Note E(5) refers to an omnibus credit account maintained in compliance with the requirements of section 7(f) of Regulation T (12 CFR 220.7(f)). Omnibus credit under section 7(f) may only be extended to a broker-dealer registered under section 15 of the Exchange Act.

The exclusion of omnibus account from the requirements of Note E(5), therefore, is not available for accounts established for non-U.S. registered broker-dealers, nor for an account that is classified as a customer account under paragraph (a)(1) of Rule 15c3-3, because it contains assets of customers of a non-U.S. registered broker-dealer (sometimes referred to as a “single consolidated margin account”).

(SEC Staff to FINRA) (FINRA Regulatory Notice 21-27)

15c3-3a(Note E)(6)/01 Netting of Same Customer’s Balances – (Rescinded)

(NYSE Interpretation Memo 04-3, June 2004)

15c3-3a(Note E)(6)/011 Netting of Same Customer’s Balances

A short sale credit balance, other than a balance resulting from an open short versus the box position, may not be used for netting purposes with a debit balance with the same customer in arriving at the excludable debit balance portion from the reserve formula pursuant to Notes E(4), E(5), and E(6).

(SEC Staff to NYSE) (NYSE Interpretation Memo 04-3, June 2004)

15c3-3a(Note E)(6)/02 Determination of the Includible Amount of a Non-Customer’s Debit Balance Portion in a Joint Account with a Customer in the Reserve Formula

A broker-dealer may utilize its reserve formula allocation to determine the includible amount of a non-customer’s debit balance portion in a joint account with a customer that is related to a credit item in the reserve formula.

The broker-dealer’s allocation system must be able to determine any long security position underlying a non-customer’s debit balance portion in a joint account with a customer that allocates to a short security position underlying the related credit item in the reserve formula. Credit items that have been included in the reserve formula, which may be considered as relating to a non-customer’s debit balance portion in a joint account with a customer, are limited to those related to bank loan, securities loan, fail to receive, customer short, proprietary short, PAB short and non-customer short.

Each credit item identified as relating to a non-customer’s debit balance portion in a joint account with a customer must have a related credit balance which is included in the reserve formula, in order for the non-customer’s debit balance portion in a joint account with a customer to be includible in the reserve formula.

For purposes of this interpretation, the term “joint account” refers to joint accounts, custodian accounts, participation in hedge funds or limited partnerships or similar type accounts or arrangements between a “non-customer” and a “customer”, as defined under SEA Rule 15c3-3(a)(1).

(SEC Staff to NYSE) (NYSE Interpretation Memo 07-4, April 2007)
(SEC Staff to FINRA) (FINRA Regulatory Notice 15-25)

15c3-3a(Note G)(a)/01 Customer Security Accounts Holding Security Futures Products

The provisions of Note G are only applicable to security futures products written, purchased or sold in customer security accounts.

(SEC Staff to NYSE) (NYSE Interpretation Memo 05-2, January 2005)

15c3-3a(General)/01 Weekly Computations

Broker-dealers that make a weekly determination under the Reserve Formula are permitted to net free credit and other credit balances in customers’ security accounts (Reserve Formula, Item 1), with the debit balances in customers’ cash and margin accounts, excluding unsecured debits and accounts doubtful of collection (Reserve Formula, Item 10), for the computations other than that as of the month-end.

The month-end computation must reflect customers’ credit and debit balances separately, permitting, however, the combining of the balances in the several accounts of any one customer. Where customers’ credit and debit balances are developed separately on a monthly basis, the amount of customers’ unsecured debits and accounts doubtful of collection computed at that time may be used in the weekly computation until the next monthly determination.

If customer balances are netted in weekly computations of the formula, to comply with the 1% reduction in debits requirement outlined in Note E(3) of the Reserve Formula, the weekly computations should use the amount of reduction to such debits which was applied at the previous month-end. In the event the netting of customers’ balances on a weekly basis results in a credit, the credit should be increased by the amount of the 1% reduction computed as of the previous month-end.

Note: This does not apply for firms using the alternative net capital computation method.

(SEC Release 34-9922, January 2, 1973)

15c3-3a(General)/011 Netting of Customer Balances

In the event that a negative credit results on line Item #1 when the firm allocates customer shorts versus firm longs or customer shorts versus non-customer long, the customer negative credit must be added to the customer debits on line Item #12 which results in an increase in customer debits.

(SEC Staff to NYSE) (NYSE Interpretation Memo 01-3, March 2001)

15c3-3a(General)/012 Netting a Customer’s Account Balances when Preparing the Reserve Formula Computation under the Alternative Standard

A broker-dealer that elects to be subject to the Alternative Standard of SEA Rule 15c3-1(a)(1)(ii) may use a customer’s net account balance (i.e., net of cash account, margin account and bona fide short account), when preparing the weekly and month-end reserve formula computations under SEA Rule 15c3-3a (Exhibit A).

When a customer’s net account balance is used for the reserve formula computation, the broker-dealer must consider other requirements under SEA Rule 15c3-3a (Exhibit A) where adjustments are required to be made in the reserve formula computation (e.g., interpretations 15c3-3a(General)/011 (Exhibit A) and 15c3-3a(Note E)(6)/011) (Exhibit A).

Note: See interpretation 15c3-3a(General)/01 (Exhibit A) (Weekly Computation) for netting of customer account balances when preparing the reserve formula computation, for a broker-dealer that elects to be subject to the Aggregate Indebtedness Standard of SEA Rule 15c3-1(a)(1)(i).

(SEC Staff to FINRA) (FINRA Regulatory Notice 21-27)

15c3-3a(General)/02 Annual Audit

Where the audit date may not fall on a date for which a computation would be required, the broker-dealer shall make a computation as of the audit date and shall make any required deposit within the time specified in the rule. For firms who compute weekly, this audit date computation will be in lieu of the normal computation required for that period. For firms who compute monthly, the audit date computation will be in lieu of any computation required for the calendar month within which the audit falls; provided, that when the audit date is not a month end date the subsequent computation must not be more than 40 calendar days from the date of the audit.

(SEC Letter to NASD, April 28, 1975)

15c3-3a(General)/03 Allocation

Responses to certain of the items contained in the computation may require the determination of an amount that relates to customer accounts, transactions, or activity undertaken to consummate customer transactions based on an allocation method. If it is impractical or unduly burdensome to determine which fail to receive contracts and fail to deliver contracts relate to customer accounts and which securities loaned and securities borrowed are for customer accounts, an appropriate allocation may be made on a conservative basis to accomplish maximum protection for customers. If an allocation is used with regard to the foregoing items, the broker or dealer should be able to demonstrate that the results so obtained regarding designations of customer versus proprietary or non-customer positions would be comparable to those which would be obtained if the respective positions had been developed without the use of an allocation.

(SEC Letter to NYSE, May 3, 1985)

15c3-3a(General)/031 Allocation on Stock Borrow/Stock Loan – (Rescinded)

(NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(General)/032 Allocation on Stock Borrow/Stock Loan

If a market value allocation is used, the general ledger balances (contract value) of stock borrows and stock loans need to be reduced by the excess contract value over market value for only those items excluded from the reserve formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(General)/04 Making and Retaining a Record of Allocation

When an allocation is required to determine balances, positions or accounts allocable to customers, the broker-dealer shall make and maintain a record of each such allocation and preserve it in accordance with SEA Rule 17a-4.

(SEC Staff to NYSE)

15c3-3a(General)/05 Repurchase, Reverse Repurchase and Matched Repurchase Agreement Transactions are Proprietary

These transactions shall be treated as proprietary transactions in the formula and allocated as such.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(General)/06 Subjecting Customers’ Securities to Cross Liens Prohibited

Where a broker pledges customers’ securities as well as his own securities or those of non-customers (partners, other broker-dealers, etc.) with a single pledgee to secure several loans, one or more of which are made against the broker’s own securities, or those of non-customers, it is necessary that the pledgee does not have a lien upon customers collateral for any loan except other loans also made against securities carried for the account of customers of the same broker. In other words customers’ securities and other property should not be available as collateral for proprietary or non-customer loans or obligations.

Such cross lien restrictions would also include but are not limited to obligations arising from:

• Clearing arrangements
• Unsecured loans
• Drafts payable to lender
• Overdrawn bank accounts
• Letters of Credit

Customer loans would include “Agreements to Pledge” loan arrangements. See interpretation 15c3-3a(Item 2)/10 (Exhibit A) for amounts includible in the Reserve Formula.

Such arrangements which could subject customers’ securities or property to “cross liens” may be in violation of SEA Rules 8c-1 and 15c2-1.

(SEC Letter to NYSE, May 3, 1985)

15c3-3a(General)/07 “Remote Checking”

The SEC expressed concern about the practice of the issuance to customers of checks drawn on distant banks for the purpose of prolonging a broker-dealer’s use of customer funds. It said this unfairly deprives customers of their immediate use of funds, is inconsistent with an obligation to deal fairly with its customers, is inconsistent with just and equitable principles of trade, and may violate the antifraud provisions of the Federal securities laws.

(NYSE Information Circular NYSE Interpretation Memo 79-11 and SEC Release 34-15194)
(NYSE Interpretation Memo 80-3, February 1980)

15c3-3a(General)/08 Customer Reserve Formula Allocation Chart

This customer reserve formula allocation chart shows the relationship between the various allocable items and may be used in conjunction with the interpretations when an allocation is required to determine the debit and credit values includible in the customer reserve formula computation.

Note: For purposes of the customer reserve formula allocation chart, references to “non-customer” include “PAB accounts” as defined under SEA Rule 15c3-3(a)(16). For purposes of the customer reserve formula computation under SEA Rule 15c3-3a (Exhibit A) and the interpretations thereunder, references to “non-customer” will continue to include accounts which are defined as PAB accounts.

(SEC Staff to FINRA) (FINRA Regulatory Notice 15-25)

* As allocated above.
** See interpretations /011, /071, and /09 to Item 12.
*** Credit must be included for unconfirmed items over 40 days.

NOTES REGARDING THE CUSTOMER RESERVE FORMULA ALLOCATION CHART

15c3-3a(General)/09 PAB Reserve Formula Allocation Chart

This PAB reserve formula allocation chart shows the relationship between the various allocable items and may be used in conjunction with the interpretations when an allocation is required to determine the debit and credit values includible in the PAB reserve formula computation.

* As allocated above.
 

NOTES REGARDING THE PAB RESERVE FORMULA ALLOCATION CHART

(SEC Staff to NYSE) (NYSE Interpretation Memo 07-4, April 2007)

15c3-3a(Item 1)/01 Customer Credit Balances

Report free credit balances and other credit balances contained in customers’ security accounts. Also include:

• Outstanding drafts payable to customers (SEA Rule 15c3-3a(Note A) (Exhibit A)).
• Checks drawn in excess of bank balances (interpretation 15c3-3a(Item 1)/20 (Exhibit A)).
• Checks drawn on a credit line account (interpretation 15c3-3a(Item 1)/22 (Exhibit A)).
• Overdrafts in bank account not otherwise excluded by interpretation.

When net capital is computed under the basic method and customers’ debit and credit balances are netted for the weekly formula computation (other than at month-end, see interpretation 15c3-3a(General)/01 (Exhibit A)) and that netting results in a credit, see interpretation 15c3-3a(Item 10)/06 (Exhibit A).

15c3-3a(Item 1)/02 Non-Regulated Commodity Accounts

Include the net balance due to customers in non-regulated commodity accounts, reduced by any deposits of cash or securities with any clearing organization or clearing broker in connection with the open contracts in such accounts.

(SEC Release 34-9922, January 2, 1973)

15c3-3a(Item 1)/021 Netting Customers’ Non-Regulated and Regulated Commodity Accounts

The net balances determined in accordance with interpretation 15c3-3a(Item1)/02 (Exhibit A) may be further reduced by the deficit contained in a customer’s regulated commodity account to the extent of the equity contained in the same customer’s non-regulated commodity account.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 1)/022 Customer Balances Related to Foreign Futures and Options Transactions

Any customer balances comprehended in the computation required by CFTC Regulation 30.7 need not be included in the formula.

(NYSE Information Memo 88-10, April 20, 1988)

15c3-3a(Item 1)/03 Partly Secured Accounts

See Item 10 /012 when a partly secured account has a credit balance.

When net capital is computed under the basic method and all customer balances are netted for the weekly formula computation, see Item 10 /06.

(SEC Letter to NYSE, December 9, 1975)

15c3-3a(Item 1)/04 Special Omnibus or Similar Accounts

When a special omnibus account maintained in compliance with the requirements of Section 10 of Regulation T or similar accounts carried on behalf of another broker-dealer is partly secured after applying current calls, i.e., outstanding not more than 5 business days, for margin, marks to the market or other required deposits, include the credit balance contained in such account, increased by the deficit after applying current calls. (See Note E(2).)

When net capital is computed under the basic method and all customers' balances are netted for the weekly formula computation, see Item 10 /06.

(SEC Release 34-13565, May 18, 1977) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 1)/05 TEFRA Accounts Payable

Taxes and interest withheld from customers' accounts which are payable to the government under the Tax Equity and Financial Responsibility Act are to be included in the formula until paid over to the Internal Revenue Service.

(SEC Staff to NYSE) (NYSE Interpretation Memo 86-8, August 1986)

15c3-3a(Item 1)/06 Customer Payments Prior to Settlement Date

Credit balances received from customers prior to settlement date of purchase must be included as a credit in the formula and this treatment is not negated by segregation of the securities.

(SEC Letter to Gibraltar Securities, Inc., March 5, 1986) (NYSE Interpretation Memo 92-10, July 1992)

15c3-3a(Item 1)/07 Accrued Interest Payable on Customers’ Credit Balance

Interest payable to customers is accrued on a daily basis and periodically credited to each customer's account. The total of such amounts, if not already credited to the customers' accounts, should be included in Item 1 of the reserve computation.

(SEC Staff to NYSE) (NYSE Interpretation Memo 91-5, June 1991)

15c3-3a(Item 1)/08 (Reserved)

15c3-3a(Item 1)/09 Retail Customer’s Purchasing Reverse Repurchase Agreements

If a broker-dealer enters into a hold in custody (HIC) repurchase agreement with a “retail” customer who had a pre-existing free credit balance with the broker-dealer, the liability of the broker-dealer will ordinarily be considered to be a free credit balance for purposes of SEA Rule 15c3-3. Customers that conduct their business with the broker-dealer on a delivery versus payment basis or customers with transactions that exceed $1 million contract value would not be considered “retail” customers for purposes of this interpretation. Include as a credit the contract value of hold in custody repurchase agreement(s) with “retail” customers who had pre-existing credit balances of less than $1 million prior to purchase. Open repurchase transactions with same customer, may be aggregated in determining the $1 million limit.

(SEC Staff to NYSE) (NYSE Information Memo 87-38, October 28, 1987)

15c3-3a(Item 1)/10 Hold-In Custody Reverse Repos Purchased By Customers Lacking Proper Documentation

The original contract value plus any marks to market is to be included in customer credit balances when there is no written agreement between the parties or when a written agreement exists but lacks notice to the customer that the provisions of The Securities Investor Protection Act of 1970 do not protect the counterparty to the repurchase agreement.

(SEC Release 34-24778) (NYSE Interpretation Memo 92-1, January 1992)

15c3-3a(Item 1)/11 Customers Purchasing Commercial Paper

Notes payable to customers in connection with the issuance of the broker-dealer’s own commercial paper may be excluded as credits in the reserve formula provided that adequate written disclosure is stated in the offering circular and on the confirmation as to the identity of the issuer and that these transactions are not covered by SIPC.

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-1, January 1992)

15c3-3a(Item 1)/12 Principal Transactions with Customers

When a broker-dealer purchases securities as principal from its customer and the securities have not been resold, the credit balance due to the customer arising from his sale of securities to the broker-dealer may be excluded from the formula until the securities sold have been delivered by the customer.

When a broker dealer receives non negotiable securities purchased on a principal basis from its customer and the securities have not been resold, the credit balance in the customer account shall be excluded from the formula until the earlier of 30 calendar days after settlement date or the date appropriate papers are received that makes the securities negotiable.

(SEC Release 34-11497, June 26, 1975) (NYSE Interpretation Memo 92-10, July 1992)
(SEC Letter to Emanuel & Company, February 28, 1986) (NYSE Interpretation Memo 92-10, July 1992)

15c3-3a(Item 1)/13 Short Credits in Customers’ Accounts

Credit balances due to customers' arising from sales of securities which are offset by debit balances arising from purchases in non-customers' accounts can be excluded from the formula.

(SEC Staff to NYSE)

15c3-3a(Item 1)/14 Loans Payable

Amounts representing unsecured or secured loans payable, which are not related to securities transactions of the lender and which are evidenced by written agreements are excluded from the formula.

(SEC Letter to Midwest Stock Exchange, Inc., July 28, 1976) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 1)/15 Unsecured Payables to Subsidiaries

Unsecured payables to subsidiaries representing loans to the broker-dealer are excluded from the formula when they are not related to securities transactions.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May, 1978)

15c3-3a(Item 1)/16 Unearned Prepaid Investment Advisory Fees

Unearned prepaid investment advisory fees that are taken into income when earned, with the unearned balance being deferred and subject to refund, are excluded from the formula.

(SEC Letter to A. R. Schmeidler & Co. Inc., Dec. 4, 1976) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 1)/17 Unearned Prepaid Customers’ Commissions

Unearned prepaid customers’ commissions that are refundable are excluded from the formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 1)/18 Requirements for Including the Receipt of Customer Checks

Customer checks received by a broker-dealer for the account of the customer must be included in the firm's computation of reserve requirements on the day that they are received by the broker-dealer, its branch office or its agent (e.g. registered representative). Customer checks, though not yet deposited, are customer funds.

(SEC Letter to Marketing One Securities, Inc., December 9, 1992)
(NYSE Interpretation Memo 94-5, May 1994)

15c3-3a(Item 1)/19 (Reserved)

15c3-3a(Item 1)/20 Checks Drawn In Excess of Bank Balances

Checks drawn in excess of a bank balance per the records of the broker/dealer must be included in the formula; whether or not the amount is used for customer payments. However, certain exceptions, described herein may apply.

15c3-3a(Item 1)/21 Two Or More Accounts Carried By The Same Bank - (Rescinded)

(NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 1)/211 Two Or More Accounts Carried By The Same Bank

Where two or more accounts, carried by a bank, are in reality one account which are separated for purposes that are immaterial to SEA Rule 15c3-3 under the Act, the amount of checks drawn in one account to the extent offset by positive balances in the other accounts need not be taken as a credit to the reserve formula provided the broker-dealer has an agreement with the bank acknowledging that:

1. except for bookkeeping and statement purposes, all such accounts are considered as one; and
2. the bank is authorized and agrees to treat all such accounts as a single account and apply the balances in one or more such account to any other debits in any other such account without further advice or instruction.

In addition, an opinion needs to be rendered by outside counsel that the bank agreement is legally binding under banking and other relevant federal and state laws and the opinion should include the effect of bankruptcy law or other equitable distribution principles on the agreement.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 1)/22 Checks Drawn On A Credit Line Account

The proceeds derived from writing checks to customers on credit line accounts (zero balance accounts) are included as a credit in the formula. However, unsecured firm borrowings from banks are not included in the formula provided they actually represent and are recognized by the banks as unsecured borrowings.

(SEC Letter to Shearson H.S. Inc., June 13, 1977) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 1)/23 Zero Balance or Overdraft Bank Accounts For Checks Issued to Vendors

Where a separate zero balance or overdraft checking account is maintained for payment of vendors’ invoices for proprietary purchases, employee payroll checks and checks paid to suppliers, the overdraft may be excluded from the formula provided:

1. The checks are drawn on a separate and distinct bank account which is clearly unrelated to any account from which customers’ checks are drawn;
2. Issuance of checks drawn on the account do not act to reduce a credit balance which would otherwise be included in the formula;
3. It is clearly demonstrated and the bank acknowledges in writing that the bank does not have the right to offset with any other account or customers’ assets or collateral it may be holding for the broker-dealer; and
4. The overdraft is included as Aggregate Indebtedness if the broker-dealer is computing net capital requirements under the AI method.

These accounts are not to be netted with other bank accounts and credit balances must be included in the Reserve Formula if any of the checks or drafts drawn on the account could be:

1. Payable to customers or broker-dealers;
2. Paid in connection with a securities transaction; or
3. Deposited in another account unless only certified checks or wired funds are paid out of the receiving account.

(SEC Staff to NYSE) (NYSE Interpretation Memo 91-7, July 1991)

15c3-3a(Item 1)/24 Zero Balance or Overdraft Accounts Used in Connection With “Seg-Offset” Accounts

Overdrafts incurred in connection with “Seg-Offset” activities need not be included as credit items in the reserve formula computation under SEA Rule 15c3-3a (Exhibit A) provided:

1. No checks or drafts drawn on these accounts are payable to customers or broker-dealers;
2. No checks or drafts drawn on these accounts are paid in connection with securities transactions;
3. No checks or drafts drawn on these accounts could be deposited in another bank account (the receiving account) unless only wired funds are paid out of such receiving account;
4. Written assurance has been obtained from the bank, by the broker-dealer, that there are no cross liens to customer-related assets or collateral or any other accounts with the bank; and
5. The overdrafts are carried on the books of the broker-dealer and otherwise treated as ordinary liabilities.

(NYSE Letter to SEC Staff, March 29, 1990) (NYSE Interpretation Memo 91-7, July 1991)

15c3-3a(Item 1)/25 Funds Wired From “Seg-Offset” Accounts

A “Seg-Offset” account is understood to be an account which is used as a cash management technique to obtain federal funds for a fee which is lower than prevailing interest rates, in amounts equivalent to amounts in customers’ segregated funds accounts with a bank. For example, through this technique, a broker-dealer leaves funds on deposit in a segregated account or Special Reserve Bank Account with a bank that permits the broker-dealer to withdraw federal funds from another account at the bank (the “Seg-Offset” account) in an amount equal to the segregated account or the Special Reserve Account deposits.

Further, the bank has no cross lien against the segregated account or the Special Reserve account for any overdraft in the “Seg-Offset” account. The broker-dealer covers the federal funds withdrawal with a clearing house check drawn on a zero-balance account at another bank.

Federal funds paid out of a “Seg-Offset” account by federal wire need not be included in the reserve formula computation under SEA Rule 15c3-3a (Exhibit A) as credit items provided:

1. It is clearly demonstrated and the bank acknowledges in writing that the bank does not have the right to offset with any other account or customers' assets or collateral it may be holding for the broker-dealer; and
2. The Special Reserve Bank Account must be free of lien and subject to all the requirements of SEA Rules 15c3-3 (e) and (g). No withdrawal entry may appear on the bank statement unless supported by a reserve computation.

(NYSE Letter to SEC Staff, March 29, 1990) (NYSE Interpretation Memo 91-7, July 1991)

15c3-3a(Item 1)/26 The Term “Any Other Accounts” Defined

Where it is required that broker-dealers obtain written assurances from the bank that there are no cross liens to customer-related assets or collateral or any other accounts with the bank, the term “any other accounts” refers to accounts that are used to pay down credits which would normally be included in the reserve computation, such as customer credits, customer-related fails etc. Under these circumstances “any other accounts” would include operating bank accounts and require appropriate “cross lien” documentation. Accounts used to write checks to customers that reduce customer credits are included in “any other accounts.” Firm bank loan collateral at the same bank is not considered a customer-related asset.

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-1, January 1992)

15c3-3a(Item 1)/27 Customer Credit Balances Related to Deposits in a Special Trust or Agency Account

Customer credit balances related to deposits in a special trust or agency account utilized pursuant to SEA Rule 15c2-4(b)(1) are excluded from the Reserve Formula.

(SEC Staff of DMR to NASD, September 1983)

15c3-3a(Item 1)/28 Postdated Customer Checks

A broker-dealer that receives postdated checks from customers for trades that have not settled must book said payments to the customer accounts, and, if a credit balance results, include said credits in Item 1 of the Reserve Formula.

(SEC Staff of DMR to NASD, September 1983)

15c3-3a(Item 1)/29 Credit Balances Arising from Limited Partnership Unit Sale

A broker-dealer selling secondary limited partnership units where the transactions create customer credit balances is not required to include such credits in the Reserve Formula, provided:

1. The broker-dealer, acting as agent or trustee for the persons who have the beneficial interest in the partnership unit, promptly deposits upon receipt the total purchase price of the transaction and the appropriate instruments of assignment in escrow, without interest, with a qualified bank escrow agent pending receipt of the comment of the general partner to the assignment.
2. Should consent not be forthcoming within 45 days after confirmation of the transaction, promptly return the escrow deposits to the depositor.
3. The qualified bank escrow agent holding the deposit must agree in writing to hold the escrow deposits for the persons having beneficial interest therein, and to transmit or return the deposits directly to persons entitled thereto when the appropriate event or contingency has occurred.

(SEC Staff of DMR to NASD, July 1986)

15c3-3a(Item 2)/01 Customer Bank Loans

Report monies borrowed from banks collateralized by securities carried for the account of customers.

15c3-3a(Item 2)/02 Letters of Credit Secured by Customers’ Securities, OCC Margin

Include, as required by Note B, the amount of Letters of Credit obtained by a member of Options Clearing Corporation which are collateralized by customers’ securities, to the extent of the member’s margin requirement at Options Clearing Corporation which is covered by such Letters of Credit.

(SEC Release 34-13565, May 18, 1977) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 2)/021 Letters of Credit Secured by Customer and Non-Customer Securities

When a letter of credit collateralized by both customer and non-customer securities is deposited with OCC as margin, the combined customer and non-customer margin requirement, up to the amount of the letter of credit must be included as a credit.

However, only the margin required for customers’ margin is included as a debit at Item 13.

(SEC Staff to NYSE) (NYSE Interpretation Memo 90-11, December 1990)

15c3-3a(Item 2)/03 OCC Margin Requirement Met by Customers Securities

When customer available collateral is deposited with OCC to satisfy margin requirements the actual amount of margin required is included in the Formula as both a debit and a credit. Such deposit of securities is not considered a good control location.

(SEC Staff to NYSE) (NYSE Interpretation Memo 83-2, April 1983)

15c3-3a(Item 2)/031 Commingled Collateral As Options Clearing Corp Margin Deposit - (Rescinded)

(NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 2)/032 Commingled Collateral As Options Clearing Corp Margin Deposit

When customer, non-customer and qualified proprietary securities are commingled as margin on deposit with OCC the lesser of the customer margin requirement or the market value of the customers’ securities pledged as collateral should be included as a credit in the reserve formula. In addition, the lesser of the customers’ margin requirement or the total market value of the customers’ and qualified proprietary securities pledged as collateral should be included as a debit in the reserve formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 2)/033 OCC Margin Required for a Broker-Dealer Introducing Options on an Omnibus Basis

A broker-dealer that introduces its customers’ option transactions on an omnibus basis should include a debit and an offsetting credit in its reserve formula when customers’ securities are deposited as collateral with the carrying/clearing broker-dealer to satisfy the margin requirement from the carrying/clearing broker-dealer. The amount to be included as a debit and a credit in the reserve formula is the lesser of the customers’ margin requirement or the market value of the customers’ securities deposited as collateral with the carrying/clearing broker-dealer.

The introducing omnibus broker-dealer should include a debit in its reserve formula (without an offsetting credit) when cash and/or qualified proprietary securities are deposited as collateral with the carrying/clearing broker-dealer to satisfy the margin requirement from the carrying/clearing broker-dealer. The amount to be included as a debit in the reserve formula is the lesser of the customers’ margin requirement or the cash and/or the market value of qualified proprietary securities deposited as collateral with the carrying/clearing broker-dealer.

(SEC Staff to NYSE) (NYSE Interpretation Memo 05-8, April 2005)

15c3-3a(Item 2)/04 Letters of Credit Secured by Customers’ Securities, Collateralizing Securities Borrowed

Include as a credit item the market value of securities borrowed from any person when such securities borrowed are collateralized by letters of credit which are secured by customer margin securities.

(SEC Release 34-18737, May 13, 1982)

15c3-3a(Item 2)/05 Firm Bank Loans Secured by Non-Proprietary Securities

The market value of securities lodged in firm bank loan shall be included in the formula when the broker or dealer does not have a corresponding proprietary long position, or they do not allocate to the account of a general partner, a director or principal officer of the broker or dealer who is not a customer under SEA Rule 15c3-3(a)(1).

(SEC Letter to NYSE, May 5, 1981) (NYSE Interpretation Memo 81-3, July 1981)

15c3-3a(Item 2)/051 Amount to be Included

When non-proprietary securities are lodged in a firm bank loan, the amount to be included in the formula is the lesser of the market value of customers’ securities or the total amount of firm bank loans at the particular bank.

(SEC Staff to NYSE) (NYSE Interpretation Memo 86-8, August 1986)

15c3-3a(Item 2)/06 Offset Debit for Customers’ Uncleared Checks Not Permitted

Uncleared customers’ checks may not be included as a debit item in the formula as a debit offset to bank loans which cannot be reduced (to obtain customers’ securities collateralizing firm bank loans) until the customers’ checks clear.

Such uncleared checks may, however, be deposited in a reserve bank account to satisfy a reserve deposit requirement. After clearance and a subsequent computation of the formula they may be withdrawn (if no longer required) and used to reduce the bank loan.

(SEC Letter to First Monmouth Securities Corp., June 13, 1984) (NYSE Interpretation Memo 92-10, July 1992)

15c3-3a(Item 2)/07 Customer Bank Loans Secured by Non-Customers’ Securities

When non-customers’ securities are included as collateral to a customer bank loan the total bank loan shall be included as a credit in the formula.

The related non-customer debit shall be excluded. In order to avoid a possible deposit requirement due to this situation a separate non-customer bank loan should be established in which event the non-customer bank loan and the non-customer debit would both be excluded from the formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 2)/08 Principal Sales to DVP Customers

Where securities which have been sold as principal to deliver versus payment customers are lodged in a firm bank loan, the short market value is included in the formula rather than the loan value.

If the securities are placed in a customer bank loan, then the bank loan amount shall be included in the formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 2)/09 Non-Purpose Loans

Include the amount of bank loans collateralized by securities carried long as margin for non-purpose loan accounts when a separate bank loan collateralized exclusively by non-purpose loan account securities has not been established.

Non-purpose loan receivables are not to be included as debit items in the formula.

(SEC Letter to NYSE, April 20, 1983) (NYSE Interpretation Memo 84-9, September 1984)

15c3-3a(Item 2)/10 Customers’ Securities Not To Be Subjected To Cross Liens

When a broker-dealer pledges customer securities to a customer loan and also has proprietary and/or non-customer loans with the same pledgee, it must assure itself that the pledgee does not have a lien upon customers collateral for any loan other than for customers.

If a cross lien exists and could place customers’ securities at risk, there shall be included in the formula the amount of the customer loan, plus the lower of the value of customer collateral in excess of the amount of the loan or the amount of the loans for other than customers.

The full market value of all customers’ collateral (including agreement to pledge collateral) within the possession and control of the lender shall be included if any of the loans or liabilities are for unspecified amounts or unlimited liabilities (as in the case of contingencies or guarantees).

The mere inclusion of additional credits in the formula computation will not serve to relieve any violation of the hypothecation Rules 8c-1 or 15c2-1. See interpretation 15c3-3(a)(1)/04.

(SEC Letter to NYSE, May 3, 1985)

15c3-3a(Item 2)/11 Customer Bank Loan Allocating to Stock Borrow

See interpretation 15c3-3a(Item 11)/031 (Exhibit A).

15c3-3a(Item 2)/12 Margin Related to Security Futures Products Deposited with a Clearing Agency or a Derivative Clearing Organization

The provisions of the interpretations under SEA Rule 15c3-3a(Item 2) (Exhibit A) related to the margin required and on deposit with the OCC for all option contracts written or purchased in customer accounts can be applied to the margin required and on deposit with a clearing agency or a derivatives clearing organization for all security futures products written, purchased or sold in customer security accounts under the provisions of SEA Rule 15c3-3a(Note G) (Exhibit A) for purposes of the reserve formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 05-8, April 2005)

15c3-3a(Item 3)/01 Customer Security Loans

Include monies received as collateral against the loan of securities including any deficits required by Note C (i.e., the amount by which the market value exceeds the value of collateral received), which are directly attributable to securities held long for customers.

See Item 3 /02 and /03 when an allocation method is required to determine which securities loans relate to customers.

15c3-3a(Item 3)/011 Stock Loan Deficits - Broker by Broker Basis

Stock loan deficits shall be determined on a broker-by-broker basis.

(SEC Release 34-13565, May 8, 1977) (SEC Staff to NYSE)
(NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 3)/012 Stock Loan Deficits Promptly Collected

Stock loan deficits may be excluded if the broker-dealer issues a mark to market call by 11:00 a.m. the business day following the computation and receives payment that day.

(SEC Letter to Bear, Stearns & Co., September 16, 1980)
(NYSE Interpretation Memo 81-9, December 1981)

15c3-3a(Item 3)/02 Securities Loaned Allocation Method

When it is impractical or unduly burdensome to determine which securities loans relate to securities held long for customers an appropriate allocation may be made on a conservative basis to accomplish maximum protection for customers.

Sample Allocation:

• A determination shall be made of the total contract value of all securities loaned and any deficits on securities loaned;
• Such amount shall be reduced by the contract value and deficits on securities loans which are not allocable to securities held long for customers (see Item 3 /03); and
• The remaining amount shall be included in the formula. See Item 3 /012 for the treatment of stock loan deficits that are promptly collected.

(SEC Release 34-9922, January 2, 1973)

15c3-3a(Item 3)/03 Securities Loans Not Allocable to Customers

Securities loans and deficits on securities loans allocable to the accounts shown below are not allocable to customers and shall not be included in the formula. All other allocations are deemed to be customers.

• S/L vs. Non-Customer Accounts
• S/L vs. Proprietary Accounts
• S/L vs. Securities Borrowed

15c3-3a(Item 4)/01 Customer Fails to Receive

Include the contract value of all securities failed to receive, and deficits on securities failed to receive outstanding more than 30 calendar days as required by Note D and /01, which are directly attributable to customers’ accounts or transactions.

See interpretation SEA Rule 15c3-3a(General) /03 (Exhibit A) and /06 when an allocation method is required to determine which fail to receive contracts relate to customers.

15c3-3a(Item 4)/011 Liquidating Deficits on Customer Fails to Receive

Deficits in customer fail to receive contracts over 30 calendar days old shall be determined on a contract by contract basis.

(SEC Release 34-13565, May 18, 1977)
(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 4)/02 Prepaid Fails to Receive

The market value of short securities positions resulting from prepaid fails to receive shall be included in the formula unless the prepaid short is located in a valid control location as determined by the SEC on appropriate application, in which event it shall not be included in the formula.

See interpretation 15c3-3(c)(7)/02 regarding Accommodation Transfers.

(SEC Letter to NASD, July 16, 1974)

15c3-3a(Item 4)/03 Possession or Control Requirement vs. Non-Customer Short Treated as Fail to Receive – (Rescinded)

(FINRA Regulatory Notice 15-25)

15c3-3a(Item 4)/04 Continuous Net Settlement Balances (CNS) – Fails to Receive

When computing the reserve formula calculations, broker-dealers must adjust any net credit balance payable to CNS to reflect the gross credit amounts representing the short market value of fails to receive and the gross debit amounts representing the long market value of fails to deliver.

The gross market value of fails to receive shall be included as a credit item in the reserve formula computation in accordance with the requirements of Rule 15c3-3a(Item 4) (Exhibit A). The gross market value of fails to deliver shall be included as a debit item in the reserve formula computation in accordance with the requirements of Rule 15c3-3a(Item 12) (Exhibit A).

(SEC Letter to Dupont, Glore Forgan, Inc., Feb. 27, 1973)
(SEC Staff to FINRA) (FINRA Regulatory Notice 13-44)

15c3-3a(Item 4)/05 Fail to Receive of Government Securities, Commercial Paper, Bankers Acceptances and Certificates of Deposit

Broker-dealers computing net capital under the alternative method shall exclude amounts payable for government securities, commercial paper, bankers acceptances and certificates of deposit not yet received from the issuer or its agent and any related debit items for three business days, as specified at subparagraph (f)(5)(iii) of SEA Rule 15c3-1.

(SEC Staff to NYSE)

15c3-3a(Item 4)/06 Fail to Receive Allocation Method

When it is impractical or unduly burdensome to determine which fails to receive relate to customers' accounts or transactions an appropriate allocation may be made on a conservative basis to accomplish maximum protection for customers.

Sample Allocation:

• A determination shall be made of the total contract value of all fails to receive and liquidating deficits on fails to receive outstanding more than 30 calendar days;
• Such amount shall be reduced by the contract value of fails to receive not allocable to customers, including the liquidating deficits on fails to receive outstanding more than 30 calendar days not allocable to customers (see Item 4 /07); and
• The remaining amount shall be included in the formula.

(SEC Release 34-9922, January 2, 1973)

15c3-3a(Item 4)/07 Fail to Receive Not Allocable to Customers

Fails to receive and liquidating deficits on fails to receive outstanding more than 30 calendar days allocable to the accounts shown below are not allocable to customers and shall not be included in the formula. All other accounts are deemed customers.

• F/R vs. Non-Customer Accounts
• F/R vs. Proprietary Accounts
• F/R vs. Fail to Deliver or Securities Borrowed of the same quantity and issue when net capital is computed under the alternative method provided debits for fail to deliver and securities borrowed are also excluded from the formula and 1% of such debit values are deducted in the alternative net capital computation. Otherwise the fail to receive value shall be included in the formula.

15c3-3a(Item 4)/08 Reduction of Money Market Funds Payables by Amounts Receivable from Money Market Funds

Money Market fund payables resulting from customer purchases are includable in the Reserve Formula; however, the payables can be reduced by certain receivables from the same or different funds. See interpretation 15c3-3a(Item 10)/08 (Exhibit A).

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-13, December 1992)

15c3-3a(Item 4)/081 Netting of Money Market Fund Payables by Amounts Receivable from Money Market Funds

Money market fund payables resulting from customer purchases can be reduced by certain receivables from the same or different money market funds. A broker-dealer can net receivables and payables between the same family of money market funds, but cannot net receivables and payables between unrelated families of money market funds.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 5)/01 Credit in Firm Accounts - Amount to be Included

Include in the formula the market value of uncovered or partially covered short sales which are attributable to principal sales to customers.

(SEC Letter to NASD, July 16, 1974)

15c3-3a(Item 5)/02 Proprietary vs. Customer Allocation

When a broker-dealer uses an allocation method to determine proprietary vs. customer securities, include in the formula the short market value of proprietary securities which allocate to customer longs.

(SIA Transcript SEA Rule 15c3-3)

15c3-3a(Item 5)/03 Possession or Control Requirement vs. Non-Customer Short

When customers’ fully-paid or excess margin securities are attributable or allocable to short positions in non-customer accounts, such short market value shall be included in the customer reserve formula computation under SEA Rule 15c3-3a(Item 5) (Exhibit A).

Note: See SEA Rule 15c3-3(d)(4) for possession or control requirements.

(SEC Staff to FINRA) (FINRA Regulatory Notice 15-25)

15c3-3a(Item 6)/01 Short Stock Dividends and Distributions

Include in the formula the short market value of stock dividends, stock splits and similar distributions outstanding over 30 calendar days.

(SEC Staff to NYSE)

15c3-3a(Item 7)/01 Short Security Differences

Include in the formula the market value of short security count differences:

• Over 30 calendar days old when net capital is computed under the basic method; or
• Over 7 business days old when net capital is computed under the alternative method as required by SEA Rule 15c3-1(f)(5)(ii).

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 8)/01 Suspense Accounts

Include in the formula the market value of short securities and credits (not to be offset by longs or by debits) contained in all suspense, difference, DK and similar accounts used to record “suspense” items:

• Over 30 calendar days old when net capital is computed under the basic method; or
• Over 7 business days old when net capital is computed under the alternative method, as required by SEA Rule 15c3-1(f)(5)(ii).

The phrase “credits ... Contained in all suspense, difference, DK and similar accounts used to record suspense items” includes all suspense credits and unclaimed dividend credits regardless of whether they have been identified as non-customer credits.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)
(SEC Letter to Checkers Simon & Rosner, November 8, 1988) (NYSE Interpretation Memo 92-10, July 1992)

15c3-3a(Item 8)/02 Short Securities With Related Credit Balances

When there exists a short security suspense position and a related credit balance, include in the formula (in accordance with the timeframes stated at Item 8 /01) the greater of the market value of the short security or the related credit balance.

(SEC Staff to NYSE)

15c3-3a(Item 8)/03 Unclaimed Dividends and Interest Payable

Unclaimed cash dividends and interest payable shall be considered as suspense items and shall be included in the formula if over 30 calendar days old under the basic capital method or if over 7 business days old under the alternative capital method.

(SEC Staff to NYSE) (NYSE Interpretation Memo 84-4, July 1984)

15c3-3a(Item 9)/01 Unconfirmed Transfers

Include in the formula the market value of securities in transfer for more than 40 calendar days when the broker-dealer has not received from the issuer or transfer agent within such 40 day period:

• A written acknowledgement that the securities are in the possession of the issuer or agent; or
• A revalidation of the window ticket from the transfer agent.

(SEC Staff to NYSE)

15c3-3a(Item 9)/02 Confirmed Transfer

When an item of transfer is confirmed in writing within the 40 calendar day period following transmittal to the transfer agent or issuer, thereafter it shall not be included in the formula.

Note however, that SEA Rule 17a-13(b)(3) requires the verification of all securities in transfer over 30 days at least once each calendar quarter. Failure to obtain such confirmation requires that the item be treated as a short security difference. (See Item 7 /01.)

(SEC Letter to Stifel, Nicolaus & Co., Inc., April 27, 1987)

15c3-3a(Item 10)/01 Customer Debit Balances

Determine the total of the net debit balances contained in customer’s cash accounts and margin accounts which are fully secured by salable securities, i.e., a ready market exists as stipulated by SEA Rule 15c3-1(c)(11) and there are no statutory, regulatory or contractual arrangements or other restrictions inhibiting the public offer or sale of the securities.

When net capital is computed under the basic method and customers’ debit and credit balances are netted for the weekly formula computation, see Item 10 /06.

15c3-3a(Item 10)/011 Drafts Receivable on Customer Debits

Include the debit in a related draft receivable account when immediate credit has not been received on draft shipments of securities purchased by customers when the debit in the customer's account for the purchase of the securities so drafted has been eliminated.

(SEC Release 34-9922, January 2, 1973)

15c3-3a(Item 10)/012 Partly Secured Accounts

For a margin account which is partly secured after applying current margin calls outstanding and in the case of a margin account where a margin call is outstanding more than 5 business days, the amount which should be included in the Reserve Formula should be the debit balance in such account reduced (or if a credit balance, increased) by:

1. The deficit in such account after the application of current margin calls outstanding; and
2. The amount which results from applying the appropriate haircut, set forth in SEA Rule 15c3-1(c)(2)(vi) or (f), to the market value of the securities in the account.

With respect to a partly secured cash account, which has a transaction liquidating to a deficit and which is not current within the meaning of Regulation T of the Board of Governors of the Federal Reserve System or which has more than one extension thereunder, the amount included in the Reserve Formula should be the debit balance in the partly secured cash account reduced (or if a credit balance, increased) by:

1. The deficit related to the transactions which are causing such deficit; and
2. The amount which results from applying the appropriate haircut, set forth in SEA Rule 15c3-1(c)(2)(vi) or (f), to the market value of the securities transactions which are causing the deficit.

When net capital is computed under the basic method and all customers’ balances are netted for the weekly formula computation, see Item 10 /06.

(SEC Letter to NYSE, December 9, 1975) (SEC Staff to NYSE)

15c3-3a(Item 10)/0120 Customers’ Unsecured/Partly Secured Deficit Offset by Correspondent’s Deposits

A carrying broker-dealer does not have to reduce customers’ debits from the customer reserve formula computation arising from an introducing broker-dealer’s customers’ unsecured or partly secured deficits provided sufficient deposits were received from the introducing broker-dealer which can legally be applied to cover (fully secure) the applicable deficits. However, the amount of the introducing broker-dealer’s deposits maintained at the carrying broker-dealer must be included in the PAB reserve formula computation of the carrying broker-dealer.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-3, February 2002)
(SEC Staff to FINRA) (FINRA Regulatory Notice 15-25)

15c3-3a(Item 10)/013 Special Omnibus or Similar Accounts

When a special omnibus account maintained in compliance with the requirements of Section 10 of Regulation T or similar accounts carried on behalf of another broker-dealer is partly secured after applying current calls, i.e., outstanding not more than 5 business days, for margin, marks to the market or other required deposits, include the debit balance contained in such account, reduced by the deficit after applying current calls. (See Note E(2).)

When net capital is computed under the basic method and customers’ debit and credit balances are netted for the weekly formula computation. (See Item 10 /06).

(SEC Release 34-13565, May 18, 1977) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 10)/014 Accrued Interest Receivable

Include as a debit accrued interest receivable on customers’ fully secured margin account debit balances.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 10)/015 Dividends and Interest Receivable from DTC

Include in Item 10, debit balances due from DTC representing dividends and interest receivable not outstanding for more than 5 business days which are allocable to credits in the formula, resulting from the firm’s crediting its customer account for the same dividends and interest.

(SEC Letter to NYSE, March 19, 1984) (NYSE Interpretation Memo 84-3, April 1984)

15c3-3a(Item 10)/016 Household Members, Relatives and Affiliated Persons of the B/D

Debit balances contained in the cash and margin accounts of household members and other persons related to principals of the broker-dealer, or contained in the accounts of affiliated persons of the broker-dealer shall be excluded, unless the broker-dealer can demonstrate that such debit balances are directly related to credit items in the formula. (See Note E(4) and Note E(5).)

When net capital is computed under the basic method and customers’ debit and credit balances are netted for the weekly formula computation, see Item 10 /06.

15c3-3a(Item 10)/017 Debit Balances in Excess of $50,000

In accordance with Note E(5) include in Item 10 the first $50,000 of the debit balance in a margin account that has a debit in excess of $50,000 of a single customer (other than in an omnibus account); in related accounts under common control of a single customer; or subject to cross guarantees, in which case the debit balances shall be aggregated.

The portion of the debit balance remaining shall also be included, provided the total amount included is not in excess of 25% of the broker-dealer's tentative net capital, i.e., the net capital computed in accordance with SEA Rule 15c3-1 prior to the application of securities haircuts; and

If any portion of the debit balance remains, i.e., the portion in excess of 25% of tentative net capital, it shall be excluded, unless the broker-dealer can demonstrate that the debit balance is directly related to credit items contained in the formula. (See Note E(5).)

(SEC Staff to NYSE)

15c3-3a(Item 10)/018 Customer and Non-Customer Interest in a Single Account

When both a “customer” and a “non-customer” have a participation interest in a single account with a debit balance, in accordance with Note E(6) include the percentage of the debit balance as follows:

* If the broker-dealer can demonstrate that the debit balance is directly related to credit items in the formula, the entire debit shall be included. (See Note E(5))

When net capital is computed under the basic method and customers’ debit and credit balances are netted for the weekly formula computation, see Item 10 /06.

15c3-3a(Item 10)/019 Partial Identification of Debits With Credits in The Formula

Debit balances in excess of 25% of the broker-dealer’s tentative net capital which are shown to be directly related to credits included in the formula computation may be considered as a reduction of the non-allowable debit amount. Where this application reduces the remaining debit below 25% of tentative net capital, the balance of the debit may also be included in the computation.

“Debit balances in excess of 25% of tentative net capital, (TNC)” refers to the total debit balance in a single customer's account and not the portion of the debit in excess of 25% of the broker-dealer’s TNC.

(SEC Staff to NYSE)
(SEC Staff to NYSE) (NYSE Interpretation Memo 91-5, April 1991)

15c3-3a(Item 10)/02 Estate Account Debit Balances

Debit balances in Estate accounts are to be included or excluded in accordance with Note E(6).

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-10, July 1992)

15c3-3a(Item 10)/03 Accrued Trade Date Commissions

Commissions receivable accrued on a trade date basis by broker-dealers using settlement date accounting shall not be included in Item 10 in the Reserve Formula.

(SEC Staff to NYSE)

15c3-3a(Item 10)/031 Debit Balances In Customers’ Spot Commodity Accounts

Debit balances in fully secured spot commodity accounts of customers shall not be included in Item 10.

However, such debits may be used to reduce a credit balance of the same customer reportable at Item 1. (See Item 1 /02, /021 and /022.)

(SEC Letter to E.F. Hutton & Company, Inc., August 25, 1980) (NYSE Interpretation Memo 84-3, April 1984)

15c3-3a(Item 10)/032 Non-Purpose Loans

Non-purpose loan receivables shall not be included.

When a separate bank loan is collateralized by securities held as margin for a non-purpose loan, the bank loan credit is not reportable at Item 2. (See Item 2 /05.)

(SEC Letter to NYSE, April 20, 1983) (NYSE Interpretation Memo 84-9, September 1984)

15c3-3a(Item 10)/033 Unsecured Customer Short Positions

For firm longs allocable to unsecured customer shorts, both sides are excluded from the formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 10)/034 Accrued Custodial Fees Receivable - IRA Accounts

Accrued custodial fees receivable for IRA custody accounts may be included under Item 10 provided the individual fees are secured by and chargeable to each related IRA custody account.

(SEC Staff to NYSE) (NYSE Interpretation Memo 90-11, December 1990)

15c3-3a(Item 10)/04 Debit Balances in Margin Accounts - Sample Computation

Debit balances in margin accounts shall be reduced by the amount by which a specific security (other than an exempted security) which is collateral for margin accounts exceeds in aggregate value 15 percent of all securities which collateralize all margin accounts receivable; provided, however, the required reduction shall not be in excess of the amounts of the debit balance required to be excluded because of this concentration rule. A specific security is deemed to be collateral for a margin account only to the extent it represents in value not more than 140 percent of the customer debit balance in a margin account.

Example

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 10)/05 (Reserved)

15c3-3a(Item 10)/06 Weekly Computation - Netting of Customers’ Debit and Credit Balances

When net capital is computed under the basic method and customers’ debit and credit balances are netted for the weekly formula computations (other than at month-end, see interpretation 15c3-3a(General)/01 (Exhibit A)), a net debit balance shall be reduced (and a net credit balance at Item 1 of this formula computation shall be increased) by the amount determined at the prior month-end that reflected customers’ credit and debit balances separately, for the following:

• The reduction required for customers’ unsecured debits, accounts doubtful of collection [see interpretation SEA Rule 15c3-3a(General)/01) (Exhibit A)] and partly secured accounts (see Item 10 /012);
• The reduction required because deficits exist in special omnibus accounts or similar accounts [see Item 10 /013 and SEA Rule 15c3-3a(Note E)(2) (Exhibit A)];
• The reduction required because an account with a debit balance includes a participation interest of a “non-customer” [see SEA Rule 15c3-3a(Note E)(6) (Exhibit A)];
• The reduction required for household members and other persons related to principals or affiliated persons of the broker-dealer [see SEA Rule 15c3-3a(Note E)(4) (Exhibit A)];
• The reduction required because a single customer’s debit balance exceeds 25% of the broker-dealer's tentative net capital [see SEA Rule 15c3-3a(Note E)(5) (Exhibit A)];
• The reduction required because of concentrated collateral for margin debits [see SEA Rule 15c3-3a(Note E)(1) (Exhibit A)]; and
• The 1% required reduction of aggregate debits [see SEA Rule 15c3-3a(Note E)(3) (Exhibit A)];

(SEC Staff to NYSE)

15c3-3a(Item 10)/07 Debit Balances in Customers’ Accounts Collateralized by Control or Restricted Securities

Debit balances in customers’ accounts collateralized by control or restricted securities may only be included in the Reserve Formula computation to the extent they are secured by securities that can be publicly sold. Broker-dealers will bear the burden of proof in demonstrating that the control or restricted securities can be publicly sold. FINRA may require a legal opinion where the value of such securities is a material amount.

If an account is partially secured after the application of this interpretation, interpretation 15c3-3a(Item 10)/012 (Exhibit A) (Partly Secured Accounts) should be applied to determine the includable amount of the debit balance in the Reserve Formula computation.

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-1, January 1992)
(SEC Staff to FINRA) (FINRA Regulatory Notice 21-27)

15c3-3a(Item 10)/08 Customer Redemptions of Money Market Funds

Debit balances in customers’ accounts arising from prepayments made by a broker-dealer on behalf of customers which are expected to be covered the next day upon settlement of such customers' redemptions, are treated as receivable from the fund and is not to be included as a debit in the Reserve Formula. This applies even if the broker-dealer maintains the money market fund position long in the customer's account, and the customer’s account is credited for the redemption on settlement date. However, the debit may serve to reduce certain credit balances. (See interpretation 15c3-3a(Item 4)/08 (Exhibit A).)

The term “prepayments” would include the actual payment of funds to or on behalf of customers in the form of a check or wire (e.g., credit card charges or checks written by customers), which are covered by customers' instructions to redeem their money market fund position.

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-13, December 1992)

15c3-3a(Item 10)/081 Netting of Money Market Fund Payables by Amounts Receivable from Money Market Funds

Money market fund payables resulting from customer purchases can be reduced by certain receivables from the same or different money market funds. A broker-dealer can net receivables and payables between the same family of money market funds, but cannot net receivables and payables between unrelated families of money market funds.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 10)/09 Credit Extended Upon Exercise of Employee Stock Option

When a broker-dealer exercises an employee stock option for a customer, it must have acknowledgement from the issuer that a freely transferable, readily salable and marketable security in negotiable form will be promptly delivered to the broker-dealer within 15 business days after exercise notice is given to the issuer (when acknowledgment is given by telephone, the condition should be restated in the transmittal to the issuer). The exercise shall be subject to the following:

1. When the security to be received from the exercise has been sold and is not received from the issuer within 15 business days after notice of exercise has been given, the position shall be subject to a cash margin deficiency charge computed without allowing any value for the security not received and is subject to the buy-in provisions under SEA Rule 15c3-3(m) unless an extension of time is requested and approved under SEA Rule 15c3-3 (n);
2. When the security to be received from the exercise has not been sold and is not received within 15 business days after notice of exercise has been given, any related debit balance shall be treated as an unsecured debit.

(SEC Staff to NYSE) (NYSE Interpretation Memo 96-3, April 1996)

15c3-3a(Item 10)/10 Term Debits in Customers’ Accounts Collateralized by Securities Subject to Restrictions on Use

A margin debit balance in a customer account that is not payable on demand (a “term debit”) may only be included in the Reserve Formula computation to the extent it is secured by securities that the broker-dealer carrying the account may use without restriction to obtain cash or funding while the term debit is outstanding.

If a term debit in an account is partially secured after the application of this interpretation, interpretation 15c3-3a (Item 10)/012 (Exhibit A) (Partly Secured Accounts) should be applied to determine the includable amount of the term debit in the Reserve Formula computation.

(SEC Staff to FINRA) (FINRA Regulatory Notice 21-27)

15c3-3a(Item 11)/01 Securities Borrowed for Customer Transactions

Include in the formula the contract value of securities borrowed from any person to effectuate short sales by customers and to make delivery on customers' securities failed to deliver, or securities borrowed that allocate to customers accounts. Borrowed securities must be fully secured by cash, “qualified securities” or a secured letter of credit to be includible in the Reserve Formula. SEA Rule 15c3-1 (c)(2)(iv)(G) requires a net capital deductions equal to 1% of the securities borrowed collateralized by an irrevocable letter of credit under both the basic and alternative methods of net capital computations.

If securities borrowed are collateralized by a letter of credit that is secured:

1. By proprietary securities, such securities shall be “qualified securities”; or
2. By customer margin securities, the value of the borrowed securities shall also be included in the formula as a credit at Item 2.

Securities borrowed from customers that do not comply with the requirements of subparagraph (b)(3) of SEA Rule 15c3-3 shall not be included in the formula and any securities borrowed from institutions or other customers shall be held in possession or control until returned to the lender.

(SEC Release 34-18737, May 13, 1982) (SEC Staff to NYSE)

15c3-3a(Item 11)/02 Securities Borrowed Allocation Method

When it is impractical or unduly burdensome to determine which securities borrowed relate to customers transactions an appropriate allocation may be made on a conservative basis to accomplish maximum protection for customers.

Sample Allocation:

• A determination shall be made of the total contract value of all securities borrowed which are fully secured by deposits of collateral as stated at Item 11 /01;
• Such amount shall be reduced by the contract value of securities borrowed which are not allocable to customers (see Item 11 /03); and
• The remaining amount shall be included in the reserve formula.

(SEC Release 34-9922, January 2, 1973)

15c3-3a(Item 11)/03 Securities Borrowed Not Allocable to Customers

Securities borrowed allocable to the locations shown below are not allocable to customers and shall not be included in the formula. SEA Rule 15c3-1(c)(2)(iv)(G) requires a net capital deductions equal to 1% of the securities borrowed collateralized by an irrevocable letter of credit under both the basic and alternative methods of net capital computations.

• S/B vs. Non-Customer Accounts
• S/B vs. Proprietary Accounts
• S/B vs. Fail to Receive of the same quantity and issue when net capital is computed under the alternative method provided credits for fails to receive of the same quantity and issue “matched” against fails to deliver and securities borrowed are also excluded from the formula and 1% of the securities borrowed and fail to deliver debit values are deducted in the alternative net capital computation. Otherwise the securities borrowed value shall be included in the formula.
• S/B vs. Stock Dividends Receivable
• S/B vs. Securities Loaned
• S/B vs. Transfer unless the transfer item had previously allocated to a customer fail to deliver in which event the market value of the securities borrowed shall be included in the formula. (Note that the market value of unconfirmed transfer items over 40 calendar days old must be included as a credit in the reserve formula at Item 9.)
• S/B vs. All Other Physical Control Locations unless it can be demonstrated that the securities were borrowed:
  1. To complete a delivery arising from a customer related fail to receive or a customer's short position;
  2. The borrowed securities were received too late in the day to be used or returned;
  3. The borrowed securities were actually used for the purpose for which they were borrowed and returned to the lending broker-dealer the business day following receipt;
  4. Once the treatment is elected it is consistently applied and documented proof is retained for at least three years.

In which event such securities borrowed may be treated as allocable to customers and included in the formula at contract value.

(SEC Staff to NYSE) (NYSE Interpretation Memo 85-5, May 1985)

15c3-3a(Item 11)/030 Returning Securities Borrowed Focusing Around Bank Holidays

In determining the includable debit items in the reserve formula related to securities borrowed which allocate versus physical control locations, a broker-dealer can return borrowed securities on Tuesday in lieu of Monday if it is unable to process the return because securities exchanges are open on Monday but it is also a domestic or foreign bank holiday.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 11)/031 Securities Borrowed versus Bank Loan

The market value of securities borrowed that allocate to bank loan should be included both as a debit and a credit in the reserve formula. Further, if the stock borrow allocates to a customer bank loan, the market value to be included as a credit is in addition to the amount of the customer bank loan balance.

(SEC Staff to NYSE) (NYSE Interpretation Memo 96-4, November 1996)

15c3-3a(Item 11)/04 Banks and Institutions are Customers

Banks and financial institutions, other than broker-dealers, are defined as customers for purposes of SEA Rule 15c3-3. However if securities are borrowed from them and the appropriate securities borrowed agreements are on file which includes the language contained in SEA Rule 15c3-3(b)(3)(i), (ii), (iii) and (iv), then the securities positions should be allocated as securities borrowed. If the appropriate securities borrowed agreements are not on file or the agreements lack the needed language the securities should be allocated as customers' fully paid securities with no debit included in the formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 11)/041 Federal Reserve Bank as a Non-Customer - (Rescinded)

(FINRA Regulatory Notice 21-27)

15c3-3a(Item 12)/01 Fail to Deliver of Customer Securities

Include the contract value of securities failed to deliver not more than 30 calendar days old which are directly attributable to customers’ accounts or transactions.

See interpretation SEA Rule 15c3-3a(General)/03 (Exhibit A) and interpretation SEA Rule 15c3-3a(Item 12)/07 (Exhibit A) when an allocation method is required to determine which fail to deliver contracts relate to customers.

15c3-3a(Item 12)/011 Fail to Deliver of Customer Securities - Aged Items

Include the contract value of specific fail to deliver securities shown below not more than 120 calendar days old (reduced by the applicable haircut percentage, adjusted for mark to market, computed in accordance with subparagraph (c)(2)(ix) of SEA Rule 15c3-1, the net capital rule) which are directly attributable to fail to receive contract values includible at Item 4 of the formula relative to the following securities:

• Municipal securities or securities issued or guaranteed by the United States or any of its agencies; or
• A “so-called” zero or stripped bond relating to one of those securities.

See interpretation SEA Rule 15c3-3a(General)/03 (Exhibit A) and interpretation SEA Rule 15c3-3a(Item 12)/071 (Exhibit A) when an allocation method is required to determine which fail to deliver contracts relate to customers.

(SEC Letter to NYSE, August 12, 1988) (NYSE Interpretation Memo 88-18, October 1988)

15c3-3a(Item 12)/012 Repriced Contracts Under NSCC’s RECAPS Program

Broker-dealers participating in the National Securities Clearing Corporation’s Reconfirmation and Pricing Service (RECAPS) Program may treat the RECAPS’s settlement date as the date of the fail for aging purposes and treat the RECAPS’s price of the contract as the reportable contract value rather than the original price of the trade.

(SEC Letter to NSCC, December 22, 1987)

15c3-3a(Item 12)/02 Drafts Receivable on Fails to Deliver

Report as Fail to Deliver the debit balance contained in a related draft receivable account when the fail to deliver has been eliminated, and immediate credit has not been received on shipments with draft attached to other broker-dealers.

15c3-3a(Item 12)/03 Continuous Net Settlement Balances (CNS) – Fails to Deliver

When computing the reserve formula calculations, broker-dealers must adjust any net debit balance receivable from CNS to reflect the gross debit amounts representing the long market value of fails to deliver and the gross credit amounts representing the short market value of fails to receive.

The gross market value of fails to deliver shall be included as a debit item in the reserve formula computation in accordance with the requirements of Rule 15c3-3a(Item 12) (Exhibit A). The gross market value of fails to receive shall be included as a credit item in the reserve formula computation in accordance with the requirements of Rule 15c3-3a(Item 4) (Exhibit A).

(SEC letter to Dupont, Glore Forgan, Inc., February 27, 1973)
(SEC Staff to FINRA) (FINRA Regulatory Notice 13-44)

15c3-3a(Item 12)/04 Fail to Deliver Securities in Transfer

When a fail to deliver exists due to securities not in good deliverable form being sent to transfer after the sales proceeds is paid to the customer, it may be included in the formula, provided:

• It is not more than 30 calendar days old; and
• The appropriate and necessary papers have been obtained and attached to such securities in transfer.

(SEC to Midwest Stock Exchange Inc., May 25, 1977) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 12)/05 Free Shipments of Mutual Funds

Free shipments of mutual funds which give rise to an unsecured receivable may be included in the formula as fail to deliver for not more than seven business days from the date of shipment.

(SEC Staff to NYSE)

15c3-3a(Item 12)/06 Free Shipments to Broker-Dealers

Free shipments to broker-dealers to satisfy a customer related fail which gives rise to an unsecured receivable shall not be included in the formula as a debit item.

(SEC Letter to NASD, July 16, 1974)

15c3-3a(Item 12)/07 Fail to Deliver Allocation Method

When it is impractical or unduly burdensome to determine which fails to deliver not more than 30 calendar days old relate to customers transactions an appropriate allocation may be made on a conservative basis to accomplish maximum protection for customers.

Sample Allocation:

• A determination shall be made of the total contract value of all fails to deliver not more than 30 calendar days old;
• Such amount shall be reduced by the contract value of fails to deliver not more than 30 calendar days which are not allocable to customers (see Item 12 /08); and
• The remaining amount shall be included in the reserve formula.

(SEC Release 34-9922, January 2, 1973)

15c3-3a(Item 12)/071 Fail to Deliver Allocation Method - Aged Items

When it is impractical or unduly burdensome to determine which aged fail to deliver securities not more than 120 calendar days old relate to securities includible as fail to receive at Item 4 of the reserve formula (see specifics at Item 12 /011):

• A determination shall be made of the total contract value of all fails to deliver between 31 and 120 calendar days old of municipal securities, securities issued or guaranteed by the United States or any of its agencies and “so-called” zero or stripped bonds which, based on an appropriate allocation made on a conservative basis to accomplish maximum protection for customers, are allocable to fails to receive includible at Item 4 of the reserve formula;
• Such amount shall be reduced by the applicable haircut percentage, adjusted for mark to market, computed in accordance with subparagraph (c)(2)(ix) of Rule 15c3-1, the net capital rule; and
• The remaining amount shall be included in the reserve formula.

(SEC Letter to NYSE, August 12, 1988)

15c3-3a(Item 12)/08 Fail to Deliver Not Allocable to Customers

Fails to deliver not more than 30 calendar days old allocable to the locations shown below are not allocable to customers and shall not be included in the reserve formula.

• F/D vs. Non-Customer Accounts
• F/D vs. Proprietary Accounts
• F/D vs. Fail to Receive of the same quantity and issue when net capital is computed under the alternative method provided credits for fails to receive of the same quantity and issue “matched” against fails to deliver and securities borrowed are also excluded from the reserve formula and 1% of the securities borrowed and fail to deliver debit values are deducted in the alternative net capital computation. Otherwise the fail to deliver shall be included in the reserve formula.
• F/D vs. Stock Dividends Receivable
• F/D vs. Transfer over 30 calendar days old
• F/D vs. Short Security Count, Confirmation and Suspense Differences
• F/D vs. Physical Control Locations unless negotiable securities are in the broker-dealers physical possession and are in excess of possession or control requirements for not more than three business days, in which event the fail to deliver may be included in the reserve formula.

15c3-3a(Item 12)/081 Fail to Deliver vs. All Other Physical Control Locations

When fails to deliver to a broker-dealer or clearing corporation allocate to a box location, the broker-dealer may elect to include the contract value of the failed to deliver in the reserve formula provided:

1. It can be demonstrated that the failed to deliver arose from a customer sale transaction. As an alternative, a broker-dealer may elect to include a percentage of fails to deliver that allocate to the box that is equal to the ratio of customer fails to deliver, includable in the reserve formula, to total fails to deliver. A new ratio is to be determined whenever another reserve formula calculation is implemented;
2. The security is negotiable and is excess of possession or control requirements for not more than three (3) business days; and
3. Documented proof of the above procedures is retained for at least three years.

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-10, July 1992)
(SEC Staff to NYSE) (NYSE Interpretation Memo 95-3, May 1995)

15c3-3a(Item 12)/09 Foreign Issued and Settled Securities Fail to Deliver

Broker-dealers may, on the filing of a written notice with its designated examining authority of its intention and maintenance in its records of a schedule of the current settlement cycle of each country in which it trades, use the foreign settlement date of foreign issued and settled securities as the customary settlement cycle in the particular country. In those instances where the settlement cycle is on a “seller’s option basis”, the settlement date must be a date no more than thirty (30) days from the trade date.

In addition, broker-dealers may include as a debit foreign issued and settled failed to deliver securities contracts outstanding more than 30 days past the customary settlement date that allocate to either failed to receive contracts or other includible credits provided:

1. The aged failed to deliver security is a foreign issued and settled equity security traded on an exchange, or
2. A foreign issued and settled debt security in Australia, Austria, Belgium, Canada, Denmark, the Federal Republic of Germany, Finland, France, Hong Kong, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, and the United Kingdom;
3. The aged failed to deliver is reduced on a mark-to-market basis thirty (30) days after the customary settlement date by an amount computed in accordance with paragraph (c)(2)(ix) of Rule 15c3-1, the net capital rule. For purposes of this calculation, broker-dealers are not required to apply paragraph (c)(2)(vii) of Rule 15c3-1; and
4. The fail to deliver security contract is not outstanding more than sixty (60) calendar days past the customary settlement cycle in the foreign country or, if the settlement cycle is on a “seller’s option basis”, more than ninety (90) days from the trade date.

The SEC will monitor this program to assure that the procedures outlined function in a manner consistent with the objectives of SEA Rules 15c3-3 and 17a-13 which requires the quarterly count of securities.

(SEC Letter to Securities Industry Association, August 9, 1990)
(NYSE Interpretation Memo 90-7, September 1990)

15c3-3a(Item 12)/10 Receivable from Money Market Funds Due to Customer Redemptions

When broker-dealer records a receivable from money market funds on the day before settlement date of customer redemptions, the resulting debit is not includable in the Reserve Formula. However, the debit may serve to reduce certain credit balances.

See interpretation 15c3-3a(Item 4)/08 (Exhibit A).

(SEC Staff to NYSE) (NYSE Interpretation Memo 92-13, December 1992)

15c3-3a(Item 13)/01 Margin Required by Options Clearing Corporation

Include in the formula the amount of margin required and on deposit with the Options Clearing Corporation for all option contracts written or purchased in customer accounts. Note F stipulates that such margin shall be represented by cash, proprietary qualified securities and letters of credit collateralized by customers’ securities.

Unsecured letters of credit and proprietary securities not qualified under paragraph (a)(6) of SEA Rule 15c3-3 shall not be included in the reserve formula.

(SEC Release 34-13565, May 18, 1977) (NYSE Interpretation Memo 78-1, May 1978)

15c3-3a(Item 13)/011 OCC Margin Requirement Met by Customers Securities

When customer available collateral is deposited with OCC to satisfy margin requirements the actual amount of margin required is included in the Formula as both a debit and a credit. Such deposit of securities is not considered a good control location.

(SEC Staff to NYSE) (NYSE Interpretation Memo 83-2, April 1983)

15c3-3a(Item 13)/012 Commingled Collateral As Options Clearing Corp Margin Deposit - (Rescinded)

(NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 13)/013 Commingled Collateral As Options Clearing Corp Margin Deposit

When customer, non-customer and qualified proprietary securities are commingled as margin on deposit with OCC the lesser of the customer margin requirement or the market value of the customers’ securities pledged as collateral should be included as a credit in the reserve formula. In addition, the lesser of the customers’ margin requirement or the total market value of the customers’ and qualified proprietary securities pledged as collateral should be included as a debit in the reserve formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 02-7, August 2002)

15c3-3a(Item 13)/02 Restricted Letters of Credit Collateralized by Proprietary Securities

Include in the formula restricted letters of credit secured by proprietary “qualified” securities (under SEA Rule 15c3-3(a)(6)) limited, however, to the extent of:

• The net margin required for all options contracts in customers’ accounts; and
• The net margin requirement not met by other qualified margin.

(SEC Letter to CBOE, March 14, 1975)

15c3-3a(Item 13)/03 Letters of Credit Secured by Customer’ Securities

Include in the formula the amount of letters of credit obtained by a member of Options Clearing Corporation which are collateralized by customers’ securities not required to be in possession or control, to the extent of the member’s customers margin requirement. The collateral securities are not in the possession or control of the broker-dealer.

(SEC Staff to NYSE) (NYSE Interpretation Memo 83-2, April 1983)

15c3-3a(Item 13)/031 Letters of Credit Secured by Customer and Non-Customer Securities

When a letter of credit collateralized by both customer and non-customer securities is deposited with OCC as margin, only the amount required for customers’ margin is included as a debit.

The combined customer and non-customer margin requirement, up to the amount of the letter of credit, must be included as a credit at Item 2.

(SEC Staff to NYSE) (NYSE Interpretation Memo 90-11, December 1990)

15c3-3a(Item 13)/04 OCC Margin Required From Introducing Firms – (Rescinded)

(NYSE Interpretation Memo 05-8, April 2005)

15c3-3a(Item 13)/041 OCC Margin Required for a Broker-Dealer Introducing Options on an Omnibus Basis

A broker-dealer that introduces its customers’ option transactions on an omnibus basis should include a debit and an offsetting credit in its reserve formula when customers’ securities are deposited as collateral with the carrying/clearing broker-dealer to satisfy the margin requirement from the carrying/clearing broker-dealer. The amount to be included as a debit and a credit in the reserve formula is the lesser of the customers’ margin requirement or the market value of the customers’ securities deposited as collateral with the carrying/clearing broker-dealer.

The introducing omnibus broker-dealer should include a debit in its reserve formula (without an offsetting credit) when cash and/or qualified proprietary securities are deposited as collateral with the carrying/clearing broker-dealer to satisfy the margin requirement from the carrying/clearing broker-dealer. The amount to be included as a debit in the reserve formula is the lesser of the customers’ margin requirement or the cash and/or the market value of qualified proprietary securities deposited as collateral with the carrying/clearing broker-dealer.

(SEC Staff to NYSE) (NYSE Interpretation Memo 05-8, April 2005)

15c3-3a(Item 14)/01 Margin Related to Security Futures Products Deposited with a Clearing Agency or a Derivative Clearing Organization

The provisions of the interpretations under SEA Rule 15c3-3a(Item 13) (Exhibit A) related to the margin required and on deposit with the OCC for all option contracts written or purchased in customer accounts can be applied to the margin required and on deposit with a clearing agency or a derivatives clearing organization for all security futures products written, purchased or sold in customer security accounts under the provisions of SEA Rule 15c3-3a(Note G) (Exhibit A) for purposes of the reserve formula.

(SEC Staff to NYSE) (NYSE Interpretation Memo 05-8, April 2005)