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Rule 436 Interest on Credit Balance

This rule interpretation is no longer applicable effective November 11, 2008.

/01 Reinvestment

Interest may be paid on "free" credit balances left with a member organization for the purpose of reinvestment or temporarily being held awaiting investment. Member organizations should, however, devise a method for determining whether the credit balance is left for investment or reinvestment purposes to ensure that such funds are fully protected by SIPC (e.g. not being deposited solely to earn interest) and that its activities do not violate applicable banking laws. (Also see definition of "customer" in the Securities Investor Protection Act, Section 16(3).)
/02 Solicitation of Credit Balances

Member organizations and their associated persons may not solicit the deposit or retention of free credit balances from customers for the purpose of paying interest thereon, unless the member organization is registered under and subject to the banking laws. Special compensation paid to associated persons in this regard may be deemed evidence of solicitation.

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