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SEC no-action letter relating to prime brokerage: Difference between revisions
SEC no-action letter relating to prime brokerage (view source)
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===Terms=== | ===Terms=== | ||
The SEC Enfrocement Division will not recommend that the Commission take enforcement action if, under such a prime broker arrangement, the executing broker and prime broker treat the customer account as if it were a broker-dealer credit account under [[Regulation T]] and: | The SEC Enfrocement Division will not recommend that the Commission take enforcement action if, under such a prime broker arrangement, the executing broker and prime broker treat the customer account as if it were a broker-dealer credit account under [[Regulation T]] and: | ||
*[.. | *[...][''Various matters relating to the regulatory status and set up of the prime broker itself] | ||
*The customer must keep a [[minimum net equity]] with the prime broker of at least $500,000 in cash or liquid securities (those with “a ready market”)<ref>See the definition in 15-c3 of [https://www.law.cornell.edu/cfr/text/17/240.15c3-1. ready market], which amounts to a liquid public market: “... a recognized established securities market in which there exists independent bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined for a particular security almost instantaneously ...”.</ref> and the customer is obliged to cure any [[passive breach]]es of that USD500,000 limit within a rather leisurely 5 business days, on pain of the [[PB]] publicly disowning its customer and [[DK]]ing<ref>Until the year of our Lord 2021, the [[JC]] laboured under the gentle misapprehension that “DK” stood for “drop-kick”. To an American, not being wise in the ways of rugby union, it turns out [[DK]] means she “does not know” — that is, rejects — the trade allegation. Strange but true.</ref> all subsequent trades. | |||
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{{sa}} | {{sa}} | ||
*[https://www.sec.gov/divisions/marketreg/mr-noaction/pbroker012594-out.pdf The famous SEC no-action letter] | *[https://www.sec.gov/divisions/marketreg/mr-noaction/pbroker012594-out.pdf The famous SEC no-action letter] | ||
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