Rule 17a-13 requires a dealer dealer to physically account for, verify and account for securities held physically or otherwise under its control or instructions. At present, the rule does not contain a specific reference to securities subject to reverse retirement and retirement operations. The amendment seeks to clarify that a dealer broker will be held liable for repo securities, since they are other securities subject to his holding or control. Commentators have generally supported the amendment and the Commission adopts it in the proposed form8 7 A custody hold-in operation is a repo transaction in which the dealer broker holds the counterparty`s securities. According to the CDAs, the C.A.C. and the lawyers interviewed for this article, most brokerage firms know the rules and have no problem following them. Roy Liljebeck, chief financial officer of Airborne Freight Corp., Seattle, reports a strong performance from its brokers. The company, which recently made a buyback of 2 million shares and has the board`s approval to buy an additional 2 million shares, trades on the New York Stock Exchange and collaborates with several brokers, giving each a little business on the substance. Under the amendments, the dealer broker is required to increase its net capital requirement by 10% of the excess market value of U.S. Treasury bonds that are subject to reverse-rest arrangements with a counterparty greater than 105% of the funds paid under these agreements.
Commentators have indicated that this change would inhibit the dealer broker`s credit function, as it would require capital if the dealer broker protected itself against credit risks. Things are starting to get difficult at this point due to the extent of the company`s share buyback rules. The safest procedure for CSOs or others making a redemption is to follow the guidelines of Rule 10b-18 of the 1934 Act – Purchases of Certain Equity Securities by the Issuer and Others. Technically, Rule 10b-18 provides a safe haven only for the repurchase of common shares. In practice, it is often used as a guideline for buybacks of other securities. While most brokers adequately protect themselves against credit risks related to reverse rest by receiving securities valued beyond the funds they have granted under the agreement, some dealer dealers create leverage by obtaining the use of funds through coordinated retirement operations. These dealer dealers enter into reverse retirement transactions, receive securities whose value is significantly higher than the pre-paid amount, and then sell the securities according to repo transactions for a cash amount greater than the pre-paid amount in reverse retirement transactions. The net funds received are then used in the dealer`s activities. In the June press release, the Commission proposed further amendments to Rule 15c3-3 as regards the treatment of rest detention for commentary. One version was the same as the temporary dominance of the Ministry of Finance. The other version differed from the Treasury rule only with respect to holding below $1 million….