Series 28: Requirement To Secure Possession Or Control

Requirement to Secure Possession or Control

A broker-dealer must determine every day the quantity of fully paid and excess margin securities in its possession and control at the close of business on the previous day. If a portion of its securities are not in its physical possession or control, it must take one of the following actions by the next business day:

• • For securities subject to a lien securing money the broker-dealer borrowed, issue instructions to release those securities within two business days
• • For securities on loan to another broker-dealer, issue instructions to return those securities within five business days
• • For “failed to receive” securities lasting longer than 30 calendar days, take prompt steps to obtain them through a buy-in procedure
• • For securities receivable as a dividend or stock split longer than 45 calendar days, obtain them through a buy-in procedure
• • For securities that allocate to a short position for more than 30 calendar days, take prompt steps to obtain them (except for certain sell orders)

With a buy-in procedure, the broker-dealer provides a written notice to the original seller that it will close out the contract by purchasing the undelivered securities and billing the original seller for the cost, including any potential losses. The notice will specify a date of execution for the buy