Rule 402. Customer Protection—Reserves and Custody of Securities
This rule is no longer applicable. Incorporated NYSE Rule 402 has been superseded by FINRA Rules 4330 and 4340. Please consult the appropriate FINRA Rules.
(a) General Provisions
Each member organization shall obtain custody and control of securities and maintain reserves as prescribed by Rule 15c3-3 promulgated under the Securities Exchange Act of 1934. For the purpose of this Rule the definitions contained in such Rule 15c3-3 shall apply.
Each member organization shall obtain custody and control of securities and maintain reserves as prescribed by Rule 15c3-3 promulgated under the Securities Exchange Act of 1934. For the purpose of this Rule the definitions contained in such Rule 15c3-3 shall apply.
(b) Agreements for Use of Customers' Securities
No member organization shall lend, either to itself as a broker-dealer or to others, securities which are held on margin for a customer and which are eligible to be pledged or loaned, unless such member organization shall first have obtained a written authorization from such customer permitting the loan of such securities by the member organization.
No member organization shall lend, either to itself as a broker-dealer or to others, securities which are held on margin for a customer and which are eligible to be pledged or loaned, unless such member organization shall first have obtained a written authorization from such customer permitting the loan of such securities by the member organization.
• • • Supplementary Material: --------------
.30 Securities Callable in Part
Member organizations which have in their possession or under their control bonds or preferred stocks of issues which are callable in part, whether specifically set aside or otherwise, shall identify each such bond or preferred stock so that their records shall clearly show for whose account it is held, except in the case of:
Member organizations which have in their possession or under their control bonds or preferred stocks of issues which are callable in part, whether specifically set aside or otherwise, shall identify each such bond or preferred stock so that their records shall clearly show for whose account it is held, except in the case of:
(a) bonds, interest upon which has not been paid for at least two interest periods;
(b) Euro-Dollar bonds deposited in a central clearing facility for Euro-Dollar bonds, provided:
(1) customers are notified before deposit that their bonds may be deposited in the facility, and
(2) the member organization on behalf of its customers has the right to withdraw uncalled bonds from the facility at any time.
(c) bonds or preferred stocks, provided:
(1) the member organization has adopted an impartial lottery system in which the probability of a customer's bonds or preferred stocks being selected as called is proportional to the holdings of all customers of such securities held in bulk by or for the member organization;
(2) the member organization will withdraw such securities from any depository for the central handling of securities prior to the first date on which such securities may be called unless said depository has adopted an impartial lottery system which is applicable to all participants whereby the called amount of the securities deposited with the depository is allocated among said participants;
(3) the systems and the manner in which such securities are held as referred to in (c)(1) and (c)(2) and the right of customers under subparagraph (C)(4) are disclosed to all customers prior to the member organization's depositing in bulk or prior to the customer purchasing such securities, such disclosure to be made in writing prior to deposit or purchase except in the case of a new account, provided notice as herein described is sent to the customer prior to settlement date; and
(4) customers have the right to withdraw uncalled fully paid securities from the firm at any time prior to a partial call, and also to withdraw excess margin securities provided that the customers' accounts are not subject to restriction under Regulation T or such withdrawals will not cause a Rule 431 undermargined condition.
In the event there is any call of such securities referred to in (b) and (c) above which is favorable to the called parties, the member organization shall not allocate any such called securities to any account in which it or its general, limited, or special partners, officers, directors, approved persons or employees have an interest until all other customers' positions in such securities have been satisfied.
| Amendment. December 19, 1968; March 1, 1972. October 18, 1972; December 12, 1974; March 17, 1983. |