Customer Protection and Custody of Assets

What this video covers

• The two pillars of the Customer Protection Rule (Rule 15c3-3): physical possession or control of fully paid and excess margin securities, plus the untouchable special reserve bank account for customer net cash
• The 140% threshold that separates margin securities the firm can pledge from excess margin securities that must be locked down in customer possession or control
• How the Net Capital Rule creates a second layer of defense by requiring broker-dealers to maintain minimum liquid capital and immediately halt business if they fall below it
• Why commingling customer and firm assets is always prohibited, and why written customer authorization is the only narrow exception for using customer assets for firm benefit
• SIPC coverage limits: $500,000 total per separate customer capacity with a $250,000 sub-limit for cash claims, and how the suitcase analogy makes the math click under pressure
• What SIPC covers (missing registered securities and cash held for securities purchases when a firm fails) versus what it explicitly excludes (market losses, commodity futures, forex, fixed annuities, bad advice)
• How to spot the most common exam traps: borrowing from the special reserve account, mixing assets, and confusing firm failure protection with investment loss protection