4.1.1.2. Ratio Requirement
Typically, the ratio requirement is based on a 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 ratio requirements for first-year firms and established firms. Broker-dealers that have operated for one year or less must ensure that their aggregate indebtedness is not more than eight times the amou