WASHINGTON, D.C.—Director of Securities Policy Benjamin Schiffrin issued the following statement in connection with the adoption by the Securities and Exchange Commission of rule amendments designed to better protect customers from broker-dealer failures:

“Today, the SEC required that large broker-dealers calculate the net cash owed to their customers daily. The purpose of the required calculation is to prevent a mismatch between the amount of funds broker-dealers have available and the amount of funds they owe customers. The change from a weekly calculation requirement, which the SEC first adopted in 1972, to a daily requirement reduces the risk that if these broker-dealers fail financially they will have insufficient funds to reimburse their customers with the cash they are owed. Retail investors should not risk losing their funds, or even delays in receiving their funds, because of the failures of an institution.

“The requirement that broker-dealers calculate the amount of funds they owe every day, and make deposits into a special reserve account if the daily calculations reveal a shortfall, thus provides crucial protection to the customers of broker-dealers. A daily calculation requirement also helps to ensure that the customers of a failing broker-dealer are made whole through the broker-dealer’s own assets, rather than through the fund established by the Securities Investor Protection Corporation to satisfy the claims of customers of a failing broker-dealer (‘SIPC Fund’). So long as the assets in the failing broker-dealer’s special reserve account are sufficient to return to customers their net cash owed, recourse to the SIPC Fund is unnecessary, which prevents the fund from being unnecessarily depleted.

“We applaud the Commission for updating a rule in place since 1972 and taking steps to better protect customers from the risk that their broker-dealer will fail financially.”

Our comment letter is available here.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.