Aggregate Indebtedness
A firm’s net capital may actually need to be higher than the minimum, depending on the firm’s aggregate indebtedness.
Aggregate indebtedness is made up of liabilities that are not secured by any of the firm’s assets. This is an amount of money that a firm must pay its unsecured creditors if it were to liquidate. Aggregate indebtedness includes:
- • Loans that are backed by customer securities
- • Customer credit balances
- • Accounts payable
Aggregate indebtedness does not include loans that are backed by the firm’s own securities. First-year firms and established firms will have different net capital requirements based on their aggregate indebtedness.
First-year firms must ensure that their aggregate indebtedness is not more than eight times the amount of their net capital.