Regulatory Outlook | 10.27.20
SEC Democrats Object to No-Action Letter on Brokers Borrowing Securities
Democratic members of the SEC have objected to agency staff providing leeway to broker-dealers that have not properly established customer protections when borrowing securities from them. In a no-action letter to FINRA, Elizabeth Baird, deputy director of the SEC Division of Trading and Markets, said some brokers are violating the customer protection rule, which requires them to deliver collateral to customers from whom they are borrowing fully paid and excess margin securities. The no-action letter gives the brokerages who are violating the rule until April 22 to come into compliance. Democratic SEC members Allison Herren Lee and Caroline Crenshaw said the no-action letter was misguided because it provided cover to continue inappropriate behavior for another six months.
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