Two obligations. Possession and control: fully paid and excess margin securities must be held free of any lien and not lent or pledged. And the reserve formula: a computation of what the firm owes customers versus what customers owe it, with the excess deposited in a special reserve bank account.
It is the structural reason a broker's failure should not cost customers their fully paid holdings, with sipc-protection as the backstop when it does.
Example: a firm computes customer credits of $2.1 billion against debits of $1.4 billion and must hold $700 million in a special reserve account for customers exclusively. That cash may not fund proprietary positions, even overnight.
Related: sipc-protection, rehypothecation, street-name, broker-dealer