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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 In a nutshell, the SEC no-action letter relating to prime brokerage of January 25, 1994 confirms that a cash trade executed by a customer with an executing broker for [[give-up]] to a [[prime broker]] does not violate the “free-rider” rule in [[Regulation T]].
-Thus, once you have your BAU operational framework set up, [[Regulation T]] is not really something that should trouble the [[legal eagle]]s, at least from a documentation perspective, prescribing as it does how the business should operate, not how it is documented.
+Thus, once you have your BAU operational framework set up, [[Regulation T]] is not really something that should trouble the [[legal eagle]]s, at least from a documentation perspective, prescribing as it does how the business should operate, not how it is documented, though there are some documentation requirements, especially as regards the [[executing broker]].
-In saying this, the no-action letter does have a rather succinct description of what prime brokerage, for the most part, is. Made somewhat succincter, the [[JC]] reads the gist as follows:
+In saying this, the no-action letter does have a rather succinct description of what basic equity [[prime brokerage]] is. Made somewhat succincter, the [[JC]] reads the gist as follows — and by way of disclaimer, the JC is not a New York lawyer, is not steeped in the same tea as our American friends, so as long as treat this as the musings of the feebleminded cretin it is, you won’t get yourself in too much of a pickle:
 {{quote|[[Prime brokerage]] is the process by which a registered broker-dealer clears and settles of securities trades for its customers. It involves three distinct parties: the [[prime broker]], the [[executing broker]], and the [[customer]].
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 The '''prime broker''' is a [[registered broker-dealer]] that [[Clearing|clears]] and [[Margin lending|finances]] the trades the customer has executed with an “executing broker” — another [[registered broker-dealer]] at the customer’s request.
-Each [[executing broker]] receives a letter from the [[prime broker]] agreeing to clear and carry each trade placed with it by the [[customer]], where the customer directs delivery of money or securities under the trade to be made to or by the prime broker, to an account the customer maintains with the prime broker.
+Each [[executing broker]] receives a letter from the [[prime broker]] agreeing to clear and carry each trade placed with it by the [[customer]], where the customer directs delivery of money or securities under the trade to be made to or by the prime broker, to an account the customer maintains with the [[prime broker]].
 Orders placed with the executing broker are effected through an account with the executing broker in the name of the prime broker for the benefit of the customer.