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 the amount 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 firm securities
There are different requirements for first year firms and established firms.
First-year firms must ensure that their aggregate indebtedness is not more than eight times the amount of their net capital. If a firm’