Rule 15c3-3 under the Securities Exchange Act of 1934 (Exchange Act), known as the Customer Protection Rule, requires broker-dealers to take specific steps to safeguard customer cash and securities. Rule 15c2-1(a)(1) under the Exchange Act prohibits, without customer consent, hypothecation of customer securities that would result in the customer’s securities being commingled with another customer’s securities. A broker-dealer recently settled SEC charges that it had violated both rules, as well as the reporting requirements under the Exchange Act, by permitting cash customers’ fully paid securities to be improperly commingled in omnibus margin accounts at a clearing broker and to be hypothecated without their consent. The broker allegedly used those securities to finance its own operations and margin obligations. The settlement serves as a reminder that private fund advisers should pay close attention to how their brokers are protecting fund assets and whether those brokers are using fund assets to finance their operations. This article details the SEC’s allegations and the terms of the settlement. See “Morgan Stanley Settles SEC Charges Stemming From the Use of Customer Cash to Finance a Broker’s Hedge Positions” (Jan. 19, 2017); and “Merrill Lynch Settlement Reminds Hedge Fund Managers to Be Aware of How Brokers Are Handling Their Assets” (Jul. 7, 2016).