Series 27: Other Types Of Brokers

Taken from our Series 27 Online Guide

Other Types of Brokers

If a broker-dealer does not receive or hold funds or securities for customers, owe funds or securities to customers, or carry accounts for customers, it must maintain net capital of $5,000 at a minimum. This category includes direct participation programs (DPPs) and broker-dealers that engage exclusively in mergers and acquisitions.

Broker-dealers that engage in riskless principal transactions and do not meet the definition of a dealer also need only maintain a minimum of $5,000 in net capital. A riskless principal transaction occurs when a broker fills an order from a customer by buying the security from a dealer but, instead of immediately delivering the security to the client, puts it into a riskless principal account. The broker then sells the security from this account to the customer at a markup. This type of transaction is called a principal transaction because the broker-dealer has traded from its own account and added a markup. It is riskless because the firm can immediately sell the security.

SEC Rule 15c3-1(a)(2)(vi)

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Minimum Net Capital Requirement

Type of Broker

Minimum Net Capital Requirement

Carrying firms that carry accounts and hold custody of client assets

$250,000

Firms that carry accounts but do not hold custody of client assets

$100,000

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