SEC requirement that all broker/dealers maintain a ratio of no more than 15:1 between indebtedness and liquid assets. Indebtedness includes money owed to the firm, margin loans, and commitments to purchase securities. Liquid assets include cash and assets which are easily converted to cash. The purpose of this rule is to make sure that the broker/dealer will be able to maintain its operations and not adversely affect the capital markets even if it suffers a large amount of bad debt. called net capital rule.
Related information about net capital ratio:
- What is net capital ratio? definition and meaning
Definition of net capital ratio: SEC requirement that all broker/dealers maintain a ratio of no more than 15:1 between indebtedness and liquid assets.
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- net capital ratio
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- Net Capital Requirement (aka Net Capital Rule, Net Capital Ratio)
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