Series 28: Haircuts

Taken from our Series 28 - Introducing Broker-Dealer Financial and Operations Principal Qualification Examination

Definition of the term Haircuts...

a discount that the SEC applies to the market value of securities held by a broker-dealer. Since the value of a security is constantly fluctuating, the SEC discounts its current market value to provide a cushion to account for a possible decrease in value at the time of a firm's liquidation.

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