SEC Makes it Easier for Broker-Dealers to Offer Cash Sweep Programs
The staff of the SEC’s Division of Trading and Markets will allow broker-dealers to operate cash sweep programs without an unnecessary hit to net capital. In most cash sweep programs, where clients may have free credit balances swept to an FDIC bank, the BD may experience a one day lag to receive the funds from the bank. This lag creates a receivable that counts against net capital, thereby serving as an unnecessary regulatory drag on cash sweep programs. The no-action relief allows the BD to count the bank receivable as an allowable asset under Rule 15c3-1 to avoid the deduction from net capital.
This change may seem very technical but it has hampered the implementation of cash sweep programs to the detriment of retail customers. It has taken years for the SEC and FINRA to get comfortable that the benefits of cash sweep programs far outweigh the theoretical customer protection risks.