How is Rehypothecation legal?
To “rehypothecate” an asset is to take it and sell it outright without depriving its owner of legal title to the asset. When this right is exercised, there is a material change in the legal relationship between the parties.
What is stock Rehypothecation?
Rehypothecation happens if a customer leaves a number of securities with a broker as a deposit, most often in a margin account, and the broker then uses the securities as a pledge for the margin on his own margin account or as backing for a loan.
What are non allowable assets?
Non-Allowable Asset – An asset that is not readily convertible into cash. For net capital purposes, it reduces the firm’s net worth. Such assets could be accounts receivable that are not collected within 30 day period.
What is Rehypothecation & discuss the Rehypothecation in repo agreements?
Rehypothecation is an alternative name for re-pledging. The pledge is extinguished and the collateral-giver loses his title to the collateral, which is transferred to the third party to whom the collateral has been rehypothecated.
What is SEC Rule 15c3-3 and how does it affect you?
Securities and Exchange Commission (SEC) Rule 15c3-3 requires brokerage firms to maintain secure accounts. Also known as the Customer Protection Rule, SEC Rule 15c3-3 is part of the Code of Federal Regulations.
What is customer protection under sea Rule 15c3-3?
CUSTOMER PROTECTION – RESERVES AND CUSTODY OF SECURITIES SEA Rule 15c3-3. (a) DEFINITIONS. For the purpose of this section: (1) The term “ customer” shall mean any person from whom or on whose behalf a broker or dealer has received or acquired or holds funds or securities for the account of that person.
What is Rule 15c3-3 adopting release?
Rule 15c3-3 Adopting Release, Exch. Rel. No. 9775, 1972 WL 125434, at *1 (Sept. 14, 1972). For customer cash, Rule 15c3-3 (e) requires a broker-dealer to maintain a reserve of funds or qualified securities in an account at a bank that is at least equal in value to the net cash owed to customers.
What is physical possession of securities under Rule 15c3?
Physical possession or control generally means that the broker-dealer must hold these securities in one of several locations specified in the Rule and that they be held free of liens or any other interest that could be exercised by a third-party to secure an obligation of the broker-dealer. Rule 15c3-3 (c).