Customer Protection: Reserves and Custody of Securities

What this video covers

• Why the customer protection rule protects specific customer assets while net capital protects the firm, and the two continuous pillars every carrying firm must satisfy
• How to calculate excess margin securities using 140% of the customer's debit balance, not total market value, and why the firm must segregate anything above that threshold
• The four acceptable control locations for possession or control and the required prompt action when a security is not in good control
• How the customer reserve formula balances credits the firm owes customers against debits customers owe the firm, and why a credit excess requires a deposit of cash or qualified securities
• The default weekly computation schedule, the specific Tuesday deposit deadline, and the exam trap of "next business day"
• Why $500 million in average total credits triggers daily reserve computation by June 30, 2026, and how many firms actually cross this threshold
• Why proprietary accounts of broker-dealers use the same reserve formula but must remain entirely separate from retail customer reserves with no netting permitted