Series 27: Exemption For Certain Liens On Securities Of Noncustomers

Exemption for Certain Liens on Securities of Noncustomers

While broker-dealers generally may not commingle hypothecated customer securities with their own securities under a lien for a loan, there is one exception to this rule. Where a margin deficiency is created on an existing loan that has been secured by hypothecated customer securities, broker-dealers may add their own securities as additional collateral. This exemption also applies to day loans.

When customers remove securities that are being used as collateral for a broker-dealer’s loans, however, these securities can only be replaced with other customer securities. They cannot be replaced with a broker-dealer’s own securities.

SEC Rules 8c-1(e) and 15c2-1(e)