SEC No-Action Letter: Classification of Certain Persons as Owners of Broker-Dealers (with Lofchie Comment)

The SEC Division of Trading and Markets issued a no-action letter regarding the classification of certain persons as owners of broker-dealers for purposes of Exchange Act Rules 15c3-1 and 15c3-3. Owners of a broker-dealer are not “customers” for purposes of the customer protection provisions of Exchange Act Rule 15c3-3. The letter sets forth facts and conditions sufficient to allow a person to be classified as an owner for purposes of Rule 15c3-3 and for that person’s capital contribution to be treated as a capital contribution under Exchange Act Rule 15c3-1 (the net capital rule).

Lofchie Comment: This letter is primarily relevant to day trading firms that have numerous individual traders who make capital contributions to the firm, but each of whose individual profit or pay will largely depend on the individual's trading performance.

View letter in full here (links externally to SEC website).