15 U.S.C. § 78c–5 — Segregation of assets held as collateral in security-based swap transactions

(a) Registration requirement No one can accept money, securities, or property — or give credit instead — from a security-based swaps customer to margin, guarantee, or secure a cleared security-based swap, unless they're registered with the Commission under this chapter as a broker, dealer, or security-based swap dealer, and that registration is still active, not expired, suspended, or revoked. (b) Cleared security-based swaps A broker, dealer, or security-based swap dealer must treat any money, securities, or property it gets from a customer to margin, guarantee, or secure a cleared swap — including anything the swap earns the customer — as belonging to that customer. This customer property must be tracked separately. It can't be mixed with the firm's own money, and it can't be used to margin, secure, or guarantee trades belonging to anyone else. (c) Exceptions Even so, customer funds can be pooled together, for convenience, in one or more accounts at a bank, trust company, or clearing agency. Whatever share of that pooled money is normally needed to margin, guarantee, secure, transfer, adjust, or settle a cleared swap can be withdrawn and used for that purpose — including paying commissions, brokerage costs, interest, taxes, storage, and other related charges. The Commission can also, by rule, regulation, or order, let customer funds be pooled with other money the firm is required to keep separately and treat as belonging to that customer. (d) Permitted investments The segregated customer money can be invested in U.S. government obligations, general obligations of a state or local government, obligations fully backed by the U.S. government, or anything else the Commission allows by rule — following whatever conditions the Commission sets. (e) Prohibition No one — including a clearing agency or a depository institution — that holds money, securities, or property in one of these segregated accounts can treat it as belonging to the broker, dealer, or swap dealer that deposited it, or to anyone other than the actual customer. (f) Segregation requirements for uncleared security-based swaps For swaps that aren't cleared, a security-based swap dealer or major security-based swap participant must tell its counterparty, at the start of the deal, that the counterparty has the right to ask for its margin funds or property to be segregated. If the counterparty does ask, the dealer or major participant must set that money or property aside for the counterparty's benefit and keep it in a separate account, apart from its own assets, following rules the Commission sets. This segregation rule applies only to swaps between a counterparty and a dealer or major participant that aren't sent to a clearing agency. It doesn't apply to variation margin payments. And it doesn't stop the counterparty and dealer from agreeing commercially on how the segregated funds get invested — as long as it's in investments the Commission allows — or on how any resulting gains or losses get divided. The segregated account has to be held by an independent third-party custodian and clearly designated as being for the counterparty. And if the counterparty doesn't ask for segregation, the dealer or major participant has to report to it every quarter that its back-office procedures for handling margin and collateral match what the counterparties agreed to. (g) Bankruptcy For bankruptcy purposes, a security-based swap, as defined in section 78c(a)(68), counts as a "security" under section 101(53A)(B) of title 11, and an account holding one — other than a portfolio margining account under section 78o(c)(3)(C) — counts as a "securities account" under section 741 of title 11. The definitions of "purchase" and "sale" from section 78c(a)(13) and (14) carry over to those same words as used in section 741. And the term "customer," as defined in section 741 of title 11, leaves out anyone whose claim comes from an open repurchase agreement, an open reverse repurchase agreement, a stock borrowed agreement, an uncleared option, or an uncleared security-based swap — except to the extent they delivered margin covered by a customer-protection requirement under section 78o(c)(3) or by a segregation requirement.