Series 26: Physical Possession Or Control

Physical Possession or Control

Rule 15c3-3 requires broker-dealers to promptly obtain and maintain in their possession or control all of their customers’ fully paid and excess margin securities. This number must be determined daily. Possession means that the securities are physically located at the broker-dealer’s. Control means securities are located at an approved location, such as a clearing firm or bank. Should the broker-dealer find itself in a deficit position, it must initiate action to eliminate that deficit.

This requirement to have possession or control does not apply to temporary lags in obtaining possession of securities that occur solely as the result of normal business operations.

Nor does it apply to securities that a broker-dealer may borrow from a customer’s margin account. We will describe how this may happen in a moment. For now, we will relate t