Capital Requirements

9 Months Ended

Sep. 30, 2019

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

Capital Requirements

3. Capital Requirements

MSCO is subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1 or “Uniform Net Capital Rule”), which requires the maintenance of minimum net capital. MSCO has elected to use the alternative method, permitted by the Uniform Net Capital Rule, which requires that MSCO maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions, as defined. The Uniform Net Capital Rule also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital would be less than 5% of aggregate debits. As of September 30, 2019, MSCO had net capital of approximately $5.7 million, which was approximately $5.4 million in excess of required net capital of $250,000. As of December 31, 2018, MSCO had net capital of approximately $8.9 million, which was approximately $8.7 million in excess of required net capital of $250,000.

MSCO claims exemption from the reserve requirements under the SEC’s Rule 15c-3-3 pursuant to paragraph (k)(2)(ii) as it clears its customer transactions through one unaffiliated and one affiliated clearing firm on a fully disclosed basis.

The Company’s cash and cash equivalents are unrestricted and are used to fund working capital needs. The Company’s total assets as of September 30, 2019 were approximately $24.0 million, of which $4.2 million, or approximately 18%, is highly liquid. The Company’s total assets as of December 31, 2018 were approximately $18.2 million, of which $7.2 million, or approximately 40%, is highly liquid.