Regulatory Requirements

6 Months Ended

Jun. 30, 2011

Regulatory Requirements

Regulatory Requirements

17. Regulatory Requirements

        As a registered broker-dealer, Cowen and Company is subject to the SEC's Uniform Net Capital Rule 15c3-1 (the "Rule"), which requires the maintenance of minimum net capital. Under the alternative method permitted by the Rule, Cowen and Company's minimum net capital requirement, as defined, is $1 million. Cowen and Company is not permitted to withdraw equity if certain minimum net capital requirements are not met. As of June 30, 2011, Cowen and Company had total net capital of approximately $42.9 million, which was approximately $41.9 million in excess of its minimum net capital requirement of $1 million.

        Cowen and Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 as their activities are limited to those set forth in the conditions for exemption appearing in paragraph (k)(2)(ii) of the Rule.

        Proprietary accounts of introducing brokers ("PAIB") held at the clearing broker are considered allowable assets for net capital purposes, pursuant to agreements between Cowen and Company and the clearing broker, which require, among other things, that the clearing broker performs computations for PAIB and segregates certain balances on behalf of Cowen and Company, if applicable.

        Ramius UK Ltd. ("Ramius UK") and Cowen International Limited ("CIL") are subject to the capital requirements of the Financial Services Authority ("FSA") of the UK. Financial Resources, as defined, must exceed the total Financial Resources requirement of the FSA. At June 30, 2011, Ramius UK's Financial Resources of $4.3 million exceeded its minimum requirement of $0.6 million by $3.7 million. At June 30, 2011, CIL's Financial Resources of $4.5 million exceeded its minimum requirement of $2.3 million by $2.2 million.

        CCAL (formerly known as Cowen Latitude Advisors Limited) is subject to the financial resources requirements of the Securities and Futures Commission ("SFC") of Hong Kong. Financial Resources, as defined, must exceed the Total Financial Resources requirement of the SFC. At June 30, 2011, CCAL's Financial Resources of $0.9 million exceeded the minimum requirement of $0.1 million by $0.8 million.

        As a registered broker-dealer and FINRA member firm, Cowen Capital LLC (formerly known as LaBranche Capital, LLC) is subject to SEC Rule 15c3-1, as adopted and administered by the SEC and FINRA. Cowen Capital LLC is required to maintain minimum net capital, as defined, equivalent to the greater of $1 million or 2% of aggregate indebtedness, as defined. As of June 30, 2011, Cowen Capital, LLC's net capital, as defined, was $33.3 million, which exceeded minimum requirements by $32.3 million. Cowen Capital LLC's aggregate indebtedness to net capital ratio was 0.16 to 1.

        As a registered broker dealer in the United Kingdom, Cowen International Trading Limited ("CITL") (formerly known as LaBranche Structured Products Europe Limited) is subject to the capital adequacy and capital resources as managed and monitored in accordance with the regulatory capital requirements of the FSA in the United Kingdom. In calculating regulatory capital, CITL's capital consists wholly of Tier 1 capital. Tier 1 capital is the core measure of a company's financial strength from a regulator's point of view. It consists of the type of financial capital considered the most reliable and liquid, primarily Shareholder's Equity. As of June 30, 2011, Tier 1 capital, as defined, was $51.2 million which exceeded the total variable capital requirement by $28 million. This Tier 1 capital included a loan to Cowen Structured Holdings Inc. (formerly known as LaBranche Structured Holdings, Inc.) by CITL as of February 2011, in the aggregate principal amount of $11.9 million.

        As a registered corporation under the Hong Kong Securities and Futures Ordinance, Cowen Structured Products Hong Kong Limited ("CSPH") (formerly known as LaBranche Structured Products Hong Kong Limited) is subject to the capital requirements of the Hong Kong Securities and Futures (Financial Resources) Rules ("FRR"). The minimum paid-up share capital requirement is HKD 5,000,000 ($0.6 million at June 30, 2011) and the minimum liquid capital requirement is the higher of HKD 3,000,000 ($0.4 million at June 30, 2011) and the variable required liquid capital as defined in the FRR. The Company monitors its compliance with the requirements of the FRR on a daily basis. As of June 30, 2011, CSPH's liquid capital, as defined was $2.7 million, which exceeded its minimum requirements by $2.3 million.