It’s not just broker/dealers’ clients who are experiencing lower net worth. The companies themselves have seen a decline in net worth of $884 million, or 1.9%, between year-end 2001 and year-end 2002, according to a report from Weiss Ratings.

Weiss evaluated the financial statements of 354 brokerage firms and found that, while net worth declined during that period, net capital increased, in part because of an increase in subordinated liabilities. "Essentially, firms replaced solid equity, earned from operating profits, with debt and then shifted to more liquid assets, which has the effect of improving net capital," said Melissa Gannon, VP at Weiss.

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