requires that they maintain a minimum level of net capital, which the SEC has said must include highly liquid assets.
Gravitas: SEC Rule 15c3-1 require a securities firm to cease doing business if it is not in compliance
Granularity: SEC Rule 15c3-1 defines the "haircut" or percentage deduction to be applied to each category of assets in the computation of net capital.
Further, on September 13, 2012, NASDAQ halted trading of the Common Stock following the Company's announcement on September 12, 2012, that the Company's broker-dealer subsidiary, Rodman & Renshaw, LLC, had advised the Financial Industry Regulatory Authority ("FINRA") that it was no longer in compliance with the SEC's Net Capital Rule 15c3-1
, and, accordingly, that such subsidiary would cease conducting its securities business, other than liquidating transactions, unless and until it can achieve compliance with the rule.
SEC Rule 15c3-1
imposes a cap of no more than a 15-1 ratio.
Since the securities industry is heavily regulated, the guide provides an overview of numerous regulatory considerations, primarily those of the SEC, including net capital requirements under Rule 15c3-1, customer protection rules under Rule 15c3-3, and reporting requirements under Rule 17a-5.
The new guide incorporates many definitions and narrative explanations included in Rule 15c3-1 and includes an outline of the net capital calculation and the alternative method available under the rule.
In addition to the basic financial statements, broker-dealers must also include 1) a statement of changes in liabilities subordinated to claims of general creditors when liabilities are subordinated and treated as additions to net worth in the computation of net capital, 2) supplementary schedules of the computation of net capital under Rule 15c3-1, and where applicable, 3) the reserve requirement computation and information relating to position or control requirements under Rule 15c3-3.