Lowenstein Sandler Secures SEC No-Action Letter Relief for Zero Cash Balance Brokerage Accounts, Representing a Major Victory for Its FinTech, Crypto, Trading & Markets Clients and Their Customers

In a significant victory for its clients eToro USA Securities Inc. (eToro) and Alpaca Securities LLC (Alpaca), Lowenstein Sandler secured two SEC no-action letters that provide significant relief and regulatory clarity for broker-dealers and their affiliated fintech platforms.

• Two separate no-action letters issued by SEC staff provide relief to fintech brokerage platforms operating in conjunction with affiliated and third-party money services businesses.
• Zero cash balance brokerage accounts allow innovative fintech platforms to better serve retail brokerage customers, facilitate U.S. market access to foreign customers, reduce traditional foreign exchange conversion constraints, and better support multi-asset and multiproduct financial services offerings.
• Each of the no-action letters issued today provides necessary regulatory clarity for SEC-registered broker-dealers operating in this space with respect to their net capital, customer disclosure, and flow of funds mechanisms.
  
  

The “Zero Cash Balance” SEC no-action letters (eToro; Alpaca) allow broker-dealers and clearing firms to offer brokerage accounts where purchases of stocks are funded on an as-needed basis by drawing funds from customer bank accounts, crypto accounts, or remittance payment accounts held with affiliated or third-party money transmitter or financial institutions. Similarly, clearing firms can automatically transfer proceeds from customer brokerage accounts into associated accounts when customers sell their stocks rather than maintaining idle cash balances in customer brokerage accounts.