Interpretations of Financial and Operational Rules

To assist firms in complying with SEC Rules regarding financial and operational matters, FINRA has published and will periodically update certain interpretations provided by the staff of the SEC's Division of Trading and Markets. 

To purchase a hard-copy, three-ring binder of Interpretations of Financial and Operational Rules for a one-time fee of $150, you may FAX a completed Printed Publications Order Form (PDF 32KB) to 240-386-4838, or call FINRA MediaSource at 240-386-4200.



Net Capital

Net Capital Requirements for Brokers or Dealers SEA Rule 15c3-1 PDF 887 KB
Options SEA Rule 15c3-1a Appendix A PDF 47 KB
Adjustments to Net Worth and Aggregate Indebtedness for Certain Commodities Transactions SEA Rule 15c3-1b Appendix B PDF 42 KB
Consolidated Computations of NET Capital and Aggregate Indebtedness for Certain Subsidiaries and Affiliates SEA Rule 15c3-1c Appendix C PDF 63 KB
Satisfactory Subordination Agreements SEA Rule 15c3-1d Appendix D PDF 81 KB
Deductions for Market Credit Risk for Certain Brokers or Dealers SEA Rule 15c3-1e Appendix E PDF 107 KB
Optional Market and Credit Risk Requirements for OTC Derivatives Dealers SEA Rule 15c3-1f Appendix F PDF 69 KB
Conditions for Ultimate Holding Companies of Certain Brokers or Dealers SEA Rule 15c3-1g Appendix G PDF 89 KB

Customer Protection

SEA Rule 15c3-2 (Reserved) SEA Rule 15c3-2 PDF 9 KB
Customer Protection – Reserves and Custody of Securities SEA Rule 15c3-3 PDF 949 KB

OTC Derivatives Dealers

Internal Risk Management Control Systems for OTC Derivatives Dealers SEA Rule 15c3-4 PDF 42 KB

Records to be Made and Preserved

Records to be Made by Certain Exchange Members, Brokers and Dealers SEA Rule 17a-3 PDF 108 KB
Records to be Preserved by Certain Exchange Members, Brokers and Dealers SEA Rule 17a-4 PDF 86 KB

Reports to be Made

Reports to be made by Certain Brokers and Dealers SEA Rule 17a-5 PDF 99 KB

Notification Provisions

Notification Provisions for Brokers and Dealers SEA Rule 17a-11 PDF 15 KB

Quarterly Security Counts

Quarterly Security Counts to be made by Certain Exchange Members, Brokers and Dealers SEA Rule 17a-13 PDF 49 KB

Interpretive Letters for Financial and Operational Rules

November 9, 2011—SEA Rule 15c3-1 Net Capital Treatment of Proprietary Assets Held with MF Global Inc.

On October 31, 2011, MF Global Inc. (MFGI) became subject to a liquidation proceeding under the Securities Investor Protection Act of 1970. As a result of the liquidation proceeding and reports of missing customer assets at MFGI, cash and securities assets held by MFGI on behalf of member firms may not be available for withdrawal for an extended period of time, rendering the assets illiquid and unavailable for normal broker-dealer business operations.

FINRA staff has discussed the net capital treatment of the assets with the staff of the SEC's Division of Trading and Markets and has been advised that effective immediately, member firms that have proprietary cash and/or securities held with MFGI pursuant to a proprietary account of an introducing broker-dealer (PAIB) agreement are required to apply a charge to their tentative net capital equal to 50 percent of the cash and securities. Dually registered broker-dealer/Futures Commission Merchant (FCM) members (BD/FCMs) must follow the regulatory guidance issued by the Joint Audit Committee via Regulatory Update #11-02 issued on November 4, 2011, for FCMs. As such, effective immediately, BD/FCMs must reflect customer segregated, secured 30.7 and commodities related proprietary trading balances held at MFGI at 60 percent of account balances (net liquidating value plus securities on deposit) for net capital purposes.

In addition, effective immediately, any other receivables from MFGI that are not included in the PAIB computation but that would ordinarily be an allowable asset for 30 days (e.g., commissions receivable) and any receivable from an affiliate of MFGI must be treated as a non-allowable asset.

Please note that the net capital treatment of proprietary assets held by MFGI, as discussed above, is subject to further change. Any questions regarding the foregoing should be directed to your firm's Regulatory Coordinator.


September 18, 2008—Additional, Temporary Relief from the Net Capital, Reserve Formula, Non-purpose Loan, and Maintenance Margin Requirements Applicable to Credit Extended on Auction Rate Securities to Broker-Dealers That Agree to Buy Back Auction Rate Securities

FINRA granted additional, temporary relief from the net capital, reserve formula, non-purpose loan, and maintenance margin requirements applicable to credit extended on auction rate securities to broker-dealers who have agreed to implement buyback programs for auction rate securities. See interpretive letter (PDF 50 KB) and Regulatory Notice 08-65.


April 11, 2008—Temporary Relief from the Requirements of FINRA and SEC Rules Regarding the Net Capital Charges Applicable to Credit Extended on Non-Marginable ARPS

FINRA released an interpretive letter (PDF 47 KB) on temporary relief from the requirements of FINRA and SEC Rules regarding the net capital charges applicable to credit extended on non-marginable Auction Rate Preferred Securities. The letter is in response to recent developments in the market for such securities.


April 24, 2008—Temporary Relief from the Requirements of FINRA and SEC Rules Regarding the Net Capital Charges Applicable to Credit Extended on Non-Marginable ARPS

Update to the April 11, 2008, Interpretive Letter: Auction Rate Preferred Securities (PDF 42 KB)

Update to the temporary relief from the requirements of FINRA and SEC Rules regarding the net capital charges applicable to credit extended on non-marginable ARPS. This update modifies the requirement to obtain secured bank loans for credit extended to customers collateralized by ARPS.