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- Net_capital_rule abstract "The uniform net capital rule is a rule created by the U.S. Securities and Exchange Commission ("SEC") in 1975 to regulate directly the ability of broker-dealers to meet their financial obligations to customers and other creditors. Broker-dealers are companies that trade securities for customers (i.e., brokers) and for their own accounts (i.e., dealers).The rule requires those firms to value their securities at market prices and to apply to those values a haircut (i.e., a discount) based on each security's risk characteristics. The haircut values of securities are used to compute the liquidation value of a broker-dealer's assets to determine whether the broker-dealer holds enough liquid assets to pay all its non-subordinated liabilities and to still retain a "cushion" of required liquid assets (i.e., the "net capital" requirement) to ensure payment of all obligations owed to customers if there is a delay in liquidating the assets.On April 28, 2004, the SEC voted unanimously to permit the largest broker-dealers (i.e., those with "tentative net capital" of more than $5 billion) to apply for exemptions from this established "haircut" method. Upon receiving SEC approval, those firms were permitted to use mathematical models to compute the haircuts on their securities based on international standards used by commercial banks.Since 2008, many commentators on the financial crisis of 2007-2009 have identified the 2004 rule change as an important cause of the crisis on the basis it permitted certain large investment banks (i.e., Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley) to increase dramatically their leverage (i.e., the ratio of their debt or assets to their equity). Financial reports filed by those companies show an increase in their leverage ratios from 2004 through 2007 (and into 2008), but financial reports filed by the same companies before 2004 show higher reported leverage ratios for four of the five firms in years before 2004.The 2004 rule change remains in effect. The companies that received SEC approval to use its haircut computation method continue to use that method, subject to modifications that became effective January 1, 2010.".
- Net_capital_rule wikiPageExternalLink v12n3article1.pdf.
- Net_capital_rule wikiPageExternalLink key_rules.pdf.
- Net_capital_rule wikiPageExternalLink bdaltnetcap.htm.
- Net_capital_rule wikiPageExternalLink bdnetcapital.htm.
- Net_capital_rule wikiPageID "19609792".
- Net_capital_rule wikiPageRevisionID "590923467".
- Net_capital_rule hasPhotoCollection Net_capital_rule.
- Net_capital_rule subject Category:United_States_housing_bubble.
- Net_capital_rule subject Category:United_States_securities_law.
- Net_capital_rule type AdministrativeDistrict108491826.
- Net_capital_rule type Country108544813.
- Net_capital_rule type District108552138.
- Net_capital_rule type Location100027167.
- Net_capital_rule type Object100002684.
- Net_capital_rule type PhysicalEntity100001930.
- Net_capital_rule type Region108630985.
- Net_capital_rule type UnitedStatesHousingBubble.
- Net_capital_rule type YagoGeoEntity.
- Net_capital_rule type YagoLegalActorGeo.
- Net_capital_rule type YagoPermanentlyLocatedEntity.
- Net_capital_rule comment "The uniform net capital rule is a rule created by the U.S. Securities and Exchange Commission ("SEC") in 1975 to regulate directly the ability of broker-dealers to meet their financial obligations to customers and other creditors.".
- Net_capital_rule label "Net capital rule".
- Net_capital_rule sameAs m.04mwxxt.
- Net_capital_rule sameAs Q6998435.
- Net_capital_rule sameAs Q6998435.
- Net_capital_rule sameAs Net_capital_rule.
- Net_capital_rule wasDerivedFrom Net_capital_rule?oldid=590923467.
- Net_capital_rule isPrimaryTopicOf Net_capital_rule.