Under the Securities Exchange Act of 1934, broker-dealers must maintain what to satisfy financial responsibility rules?

• A. Net capital requirements
• B. Cash reserve requirements
• C. Insurance requirements
• D. Credit rating requirements

Answer: (A)

Minimum net capital is the financial responsibility requirement for broker-dealers under the Securities Exchange Act of 1934. This rule requires firms to maintain a specified minimum level of net capital, which is essentially the firm’s liquid assets minus certain deductions, so it can meet customer claims and other obligations even under stress. Net capital provides a cushion that helps ensure ongoing solvency and protects customers and creditors. Cash on hand contributes to net capital, but the requirement is defined in terms of net capital itself, not separate cash reserves. Insurance requirements and credit ratings aren’t the basis of these financial responsibility rules for broker-dealers.