Charles Schwab 2015 Annual Report Download - page 116

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THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
- 96 -
Net capital and net capital requirements for Schwab and optionsXpress, Inc. are as follows:

Net Capital
Minimu
m
2% of in Excess of
N
et Ca
p
ital A
gg
re
g
ate Re
q
uire
d
December 31, 2015
N
et Ca
p
ital Re
q
uire
d
Debit Balances
N
et Ca
p
ital
Schwab $ 1,746 $ 0.250
$ 358 $ 1,388
optionsXpress, Inc. 244 1 7 237
December 31, 2014
Schwab $ 1,550 $ 0.250
$ 324 $ 1,226
optionsXpress, Inc. 123 1 6 117
Schwab and optionsXpress, Inc. are also subject to Rule 15c3-3 under the Securities Exchange Act of 1934 and other
applicable regulations, which require them to maintain cash or qualified securities in a segregated reserve account for the
exclusive benefit of clients. In accordance with Rule 15c3-3, Schwab and optionsXpress, Inc. had portions of their cash and
investments segregated for the exclusive benefit of clients at December 31, 2015. Amounts included in cash and investments
segregated and on deposit for regulatory purposes represent actual balances on deposit, whereas cash and investments
required to be segregated and on deposit for regulatory purposes at December 31, 2015 for Schwab and optionsXpress, Inc.
totaled $20.5 billion. On January 5, 2016, Schwab and optionsXpress, Inc. deposited a net amount of $1.4 billion of cash into
their segregated reserve bank accounts. Cash and investments required to be segregated and on deposit for regulatory
purposes at December 31, 2014 for Schwab and optionsXpress, Inc. totaled $21.9 billion. On January 5, 2015, Schwab and
optionsXpress, Inc. deposited a net amount of $1.7 billion of cash into their segregated reserve bank accounts.
24. Segment Information
The Company’s two reportable segments are Investor Services and Advisor Services. The Company structures its operating
segments according to its clients and the services provided to those clients. The Investor Services segment provides retail
brokerage and banking services, retirement plan services, and other corporate brokerage services. The Advisor Services
segment provides custodial, trading, and support services as well as retirement business services. Revenues and expenses are
allocated to the Company’s two segments based on which segment services the client.
The accounting policies of the segments are the same as those described in “Notes – 2. Summary of Significant Accounting
Policies.” For the computation of its segment information, the Company utilizes an activity-based costing model to allocate
traditional income statement line item expenses (e.g., compensation and benefits, depreciation and amortization, and
professional services) to the business activities driving segment expenses (e.g., client service, opening new accounts, or
business development) and a funds transfer pricing methodology to allocate certain revenues.
The Company evaluates the performance of its segments on a pre-tax basis, excluding significant non-recurring items and
results of discontinued operations. Segment assets and liabilities are not used for evaluating segment performance or in
deciding how to allocate resources to segments. However, capital expenditures are used in resource allocation and are
therefore disclosed. There are no revenues from transactions between the segments. Capital expenditures are reported gross,
and are not net of proceeds from the sale of fixed assets.