8.4.1.1.1. Net Capital Rule (Rule 15c3-1)
The net capital rule is designed to protect securities customers, counterparties, and creditors by requiring that broker-dealers have sufficient liquid resources on hand at all times to satisfy claims promptly.
The SEC requires broker-dealers to carry a minimum amount of capital to meet their ongoing financial obligations. Its net capital rule imposes net capital requirements in order to measure a firm’s financial viability and to protect customers and other creditors from insolvent firms. Firms must calculate their net capital daily to make sure they can meet these minimum requirements. Specifically, they must maintain a fixed minimum dollar amount (listed in the table following), and their aggregate indebtedness must not exceed 15 times their current net capital (8 times if the broker-dealer has been in business for less than 12 months). The minimum net capital requirements differ depending on the type of firm.
Introducing firms are brokerages that keep customer accounts but do not hold customer funds or securities. Instead, they arrange to transfer custody of these liabilities to a clearing firm. Clearing firms are brokerages that both handle customer accounts and keep custody of their customers’ funds and securities. Introducing firms that carry customer accounts must keep $100,000 in net capital. Clearing firms must maintain at