Learn how Series 28 tests minimum net capital, aggregate indebtedness, allowable versus non-allowable assets, net worth adjustments, other deductions, haircuts, and final net capital judgment for introducing firms.
Net capital is the largest Series 28 function and the main technical pressure point. The exam is not only testing whether you can do arithmetic. It is testing whether you can classify balances correctly, understand what changes minimum capital requirements, distinguish allowable from non-allowable assets, recognize when deductions or haircuts apply, and know when withdrawals or business changes create restrictions or escalation.
The strongest answers usually classify first, compute second, and escalate third if the result creates a capital or withdrawal problem.
| Item | What matters here |
|---|---|
| Weight | 33% |
| Main skill | identify the correct classification and capital effect before doing any computation |
| Typical trap | doing fast math on the wrong base because the asset, liability, or deduction was misclassified |
| Strongest first instinct | ask what requirement applies, what the item is, whether it is allowable, and what deduction or haircut follows |
| Section | Main exam angle |
|---|---|
| Minimum net capital requirement, introducing status, and basic vs alternative method | threshold determination |
| Product activity, clearing relationships, and changes that affect minimum capital | business-model effect |
| Aggregate indebtedness, cash liabilities, deferrals, and exclusions | liability treatment |
| Allowable assets, non-allowable assets, receivable aging, and collateralization | asset quality |
| Net worth adjustments: deferred taxes, discretionary liabilities, guarantees, and subordinations | equity and adjustment logic |
| Other deductions: unsecured balances, securities differences, financing charges, and fidelity bond impact | additional deduction triggers |
| Haircuts, ready market, undue concentration, restricted or control securities, and open commitments | market-risk deductions |
| Final net capital computation, withdrawals, consolidations, and business curtailment | final judgment and restrictions |
Series 28 is testing whether you can think like a limited-scope FINOP when capital gets tight or classification gets messy. Strong answers know that the hard part is usually not the arithmetic itself. It is recognizing what belongs in the calculation and what supervisory consequence follows from the result.
The first question is often which threshold or method applies. If you miss the introducing-firm status or the relevant method, the rest of the computation can be clean and still be wrong.
Changes in activity or clearing structure can change the capital answer. The FINOP should ask whether the firm’s current business model still matches the assumptions behind its capital treatment.
These questions test liability classification and whether something truly belongs in aggregate indebtedness. Series 28 rewards careful treatment rather than quick memorization.
Asset-quality questions are central because many wrong answers come from carrying something as valuable for capital purposes when it should not be. Aging and collateral facts matter because they can change the classification.
This section tests how equity-related adjustments and support arrangements affect final capital. The better answer usually asks what can really be relied on and what still weakens the capital picture.
This section is about cleanup discipline. A candidate may know the main formula but still miss the exam because the smaller deductions are ignored.
Haircuts are where market risk enters the capital answer. The key is not only the percentage logic but whether the security or position qualifies for the treatment the candidate wants to use.
The exam often finishes by asking what happens after the number is known. That is where weak candidates keep answering as if the result were merely informational. A capital result can change what the firm may withdraw, continue, or curtail.
| If the vignette shows… | Stronger implication |
|---|---|
| uncertainty about firm status or method | threshold determination comes first |
| asset that feels valuable but lacks capital quality | allowable vs non-allowable issue |
| liability or deferral described loosely | aggregate-indebtedness classification issue |
| proprietary position or concentration exposure | haircut and market-risk deduction issue |
| weak result followed by proposed withdrawal | restriction and escalation issue |
A FINOP includes an aged receivable as an allowable asset in a net capital computation because the customer is expected to pay soon, and the inclusion prevents a projected capital shortfall. What is the strongest conclusion?
Answer: B
Series 28 net-capital questions usually punish optimistic classification. A receivable does not become allowable just because management expects payment.