# AMERICAN FIDELITY SECURITIES, INC. X-17A-5 (2024-02-27) — Broker-dealer annual report - Company: AMERICAN FIDELITY SECURITIES, INC. - Form: X-17A-5 - Filed: 2024-02-27 - Period: 2023-12-31 - Accession: 0000005006-24-000004 - CIK: 5006 - File #: 8-15123 - Type: Broker-dealer - Material weakness: No - Auditor: Deloitte & Touche LLP - Auditor location: Oklahoma City, OK - Contact: Taryn Colon - Phone: 405-608-6063 - Email: taryn.colon@amerianfidelity.com - Website: amerianfidelity.com - Signed by: Taryn Colon (CFO) Original filing: https://www.sec.gov/Archives/edgar/data/5006/000000500624000004/afs2023secfiling.pdf --- {0}------------------------------------------------ ### **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** OMB APPROVAL OMB Number: ϯϮϯϱͲϬϭϮϯ Expires: EŽǀ͘ϯϬ͕ϮϬϮϲ Estimated average burden hours per response: # **ANNUAL REPORTS FORM X-17A-5 PART III** SEC FILE NUMBER **FACING PAGE** **Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AND ENDING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 01/01/2023 12/31/2023 MM/DD/YY MM/DD/YY **A. REGISTRANT IDENTIFICATION** #### NAME OF FIRM: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ American Fidelity Securities, Inc. TYPE OF REGISTRANT (check all applicable boxes): ܆ Broker-dealer ܆ Security-based swap dealer ܆ Major security-based swap participant ܆ Check here if respondent is also an OTC derivatives dealer ■ ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) #### \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 9000 Cameron Parkway | | OK | | 73102 | |--------------|------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | (State) | | (Zip Code) | | | | | | | 405-608-6063 | | Taryn.Colon@amerianfidelity.com | | | | | (Email Address) | | | | | | | | | | | | | 2340 | City | OK | 73102 | | (City) | | (State) | (Zip Code) | | | 34 | | | | | (PCAOB Registration Number, if applicable) | | | | | | | | | | | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING
LLP
Suite
(Date of Registration with PCAOB)(if applicable) | (No. and Street)
(Area Code – Telephone Number)
B. ACCOUNTANT IDENTIFICATION
Oklahoma
FOR OFFICIAL USE ONLY | _____________________________________________________________________________________
_____________________________________________________________________________________
INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
_____________________________________________________________________________________
(Name – if individual, state last, first, and middle name)
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_____________________________________________________________________________________ | \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. **Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.** {1}------------------------------------------------ | 1. | Taryn Colon | |----|-------------| ![](_page_1_Picture_4.jpeg) - - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ Financial Statements and Schedules December 31, 2023 (With Report of Independent Registered Public Accounting Firm Thereon) {3}------------------------------------------------ #### **Table of Contents** **Page** | Report of Independent Registered Public Accounting Firm | 1 | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----| | Statement of Financial Condition – December 31, 2023 | 3 | | Statement of Operations – Year ended December 31, 2023 | 4 | | Statement of Changes in Stockholder's Equity – Year ended December 31, 2023 | 5 | | Statement of Cash Flows – Year ended December 31, 2023 | 6 | | Notes to Financial Statements | 7 | | Schedules | | | Schedule I: Computation of Net Capital Pursuant to Rule 15c3-1 of the Securities and Exchange
Commission | 10 | | Schedule II: Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3,
and Information Relating to Possession or Control Requirements Pursuant to Rule
15c3-3 | 11 | {4}------------------------------------------------ ## REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of American Fidelity Securities, Inc. ## Opinion on the Financial Statements We have audited the accompanying statement of financial condition of American Fidelity Securities Inc. (the "Company") (a wholly-owned subsidiary of American Fidelity Assurance Company) as of December 31, 2023, and the related statements of operations, changes in stockholder's equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. ## Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. ## Emphasis of Matter The Company engages in various related-party transactions with affiliates under common control as discussed in Note 2 to the financial statements. The accompanying financial statements are not necessarily indicative of the conditions that would exist or the results of operations that would prevail if the Company were operated as an unaffiliated entity. ## Report on Supplemental Schedules The accompanying supplemental schedules, Schedule I and Schedule II (collectively "the supplemental schedules"), listed in the accompanying table of contents have been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. The supplemental schedules are the responsibility of the Company's management. Our audit procedures included determining whether the supplemental schedules reconcile to the financial statements or the {5}------------------------------------------------ underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion on the supplemental schedules, we evaluated whether the supplemental schedules, including their form and content, are presented in compliance with Rule 17a-5 under the Securities Exchange Act of 1934. In our opinion, such schedules are fairly stated, in all material respects, in relation to the financial statements as a whole. /s/ Deloitte & Touche LLP Oklahoma City, Oklahoma February 13, 2024 We have served as the Company's auditor since 2020. {6}------------------------------------------------ Statement of Financial Condition December 31, 2023 #### **Assets** | Cash
Accrued fees receivable | \$
54,714
24,016 | |-----------------------------------------------------------------------------|------------------------| | Accrued interest receivable | 286 | | Total assets | \$
79,016 | | Liabilities and Stockholder's Equity | | | Liabilities: | | | Accrued expense payable-parent | 18,857 | | Accrued expense payable-affiliated | 5,159 | | Total liabilities | 24,016 | | Stockholder's equity: | | | Common stock, par value \$10 per share. Authorized 5,000 shares; issued and | | | outstanding 1,000 shares | 10,000 | | Additional paid-in capital | 45,000 | | Total stockholder's equity | 55,000 | | Total liabilities and stockholder's equity | \$
79,016 | | | | {7}------------------------------------------------ #### Statement of Operations #### Year ended December 31, 2023 | Revenues: | | |-----------------------------------------------|-----------------| | Fees for variable annuity insurance contracts | \$
2,277,562 | | Interest | 2,121 | | | 2,279,683 | | Expenses: | | | Fees to affiliated service providers | 1,940,483 | | Regulatory fees and expenses | 339,200 | | | 2,279,683 | | Net income | \$
— | {8}------------------------------------------------ #### Statement of Changes in Stockholder's Equity Year ended December 31, 2023 | | Common
stock | Additional
paid-in
capital | Total
stockholder's
equity | |----------------------------|-----------------|----------------------------------|----------------------------------| | Balance, December 31, 2022 | \$
10,000 | 45,000 | 55,000 | | Net income | — | — | — | | Balance, December 31, 2023 | \$
10,000 | 45,000 | 55,000 | {9}------------------------------------------------ #### Statement of Cash Flows #### Year ended December 31, 2023 | Cash flows from operating activities: | | |------------------------------------------------------------------------------|--------------| | Net income | \$
— | | Adjustment to reconcile net income to net cash used in operating activities: | | | Increase in accrued interest receivable | (286) | | Increase in accrued fees receivable | (382) | | Decrease in accounts payable - general | (2,042) | | Increase in accrued expenses - parent | 2,476 | | Decrease in accrued expenses - affiliated | (53) | | Net cash used in operating activities | (287) | | Net decrease in cash | (287) | | Cash, beginning of year | 55,001 | | Cash, end of year | \$
54,714 | {10}------------------------------------------------ #### Notes to Financial Statements December 31, 2023 #### **(1) Organization and Significant Accounting Policies** American Fidelity Securities, Inc. (the Company) is a wholly owned subsidiary of American Fidelity Assurance Company (AFA), a life insurance company. The Company is a limited purpose broker-dealer registered with the Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA). The Company's primary function is to act as a broker-dealer in the business of effecting transactions for the American Fidelity Separate Account A, American Fidelity Separate Account B, and American Fidelity Separate Account C (the Funds), separate accounts of AFA. The Company also acts as the broker-dealer for other variable annuity products for American Fidelity General Agency. #### *(a) Basis of Presentation* The financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The Company is a registered broker-dealer and applies the specialized accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 940 - Financial Services – Brokers and Dealers. #### *(b) Use of Estimates* The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. #### *(c) Cash and Cash Equivalents* Cash and cash equivalents consist of cash on hand and in banks including money market and demand deposits. #### *(d) Revenue Recognition* Revenues from fees for variable annuity insurance contracts consist of underwriting income, which is comprised of sales, distribution, withdrawal and policy maintenance charges, as well as revenue sharing and concessions. Revenues from policy maintenance charges are recognized over time when the performance obligation is satisfied which equated to \$615,193 with payments settled monthly. All other revenues, recorded on a trade-date basis, are recognized at a point in time when control of the promised services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services and equated to \$1,662,369 with payments settled at the end of each calendar month. Accrued fees receivable is derived from revenue sharing and concessions earned on 2023 business activity. During the year ended December 31, 2023, fees from the Funds and affiliates were \$2,073,509 and fees from other non-affiliated entities were \$204,053. #### *(e) Income Taxes* No provision for income taxes was recognized because the Company's revenues equals the expenses incurred, and because the tax basis of its assets and liabilities equal the book basis. The Company is {11}------------------------------------------------ #### Notes to Financial Statements December 31, 2023 included in the American Fidelity Corporation and Subsidiaries consolidated federal income tax return. The Company recognizes and measures unrecognized tax positions in accordance with FASB ASC 740 – Income Taxes. The Company has no unrecognized tax positions at December 31, 2023. As of December 31, 2023, the Company has no accrued interest and penalties related to unrecognized tax positions. The Company would recognize interest accrued related to unrecognized tax positions in interest expense and penalties accrued in operating expense, should they occur. The tax years 2017, 2018, and 2020 through 2023 remain open to examination by the U.S. federal jurisdiction and various states to which the Company is subject. The Company is not currently under examination by any taxing authority and does not expect any material changes to its unrecognized tax positions within the next twelve months. ### **(2) Related Party Transactions** The Company receives underwriting income from AFA based on the variable annuity insurance contracts issued by AFA to participants in the Funds. The Company has an Expense Management Service Agreement (Agreement) with its parent, AFA. Under the Agreement, AFA provides general administrative resources and services to the Company including employees, professional services support, facilities and related expenses and income taxes. This represents fees to affiliated service providers in the Statement of Operations. Additionally, under the Agreement, AFA agrees to pay expenses in connection with the Company acting as, and being registered as, a broker dealer. These fees include regulatory and professional fees billed directly to the Company for which the Company is directly liable. In return, the Company will pay to AFA its net revenues on hand to assist with expenses borne by AFA related to the variable annuity business. During 2023, the Company received underwriting income of \$2,011,397 and incurred expenses of \$1,940,483 for services AFA provided under the Agreement. The company received income of \$62,112 from an affiliated entity for other variable annuity products. As of December 31, 2023, there was an accrued payable of \$18,857 due to AFA and \$5,159 due to an affiliate of the Company. #### **(3) Net Capital Requirements** The Company, as a registered broker-dealer of securities, is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1). Broker-dealers that transact business only in investment company shares and variable annuities and that do not receive customer moneys or securities must maintain net capital of the greater of \$5,000 or 6 2/3% of aggregated indebtedness. The Company has net capital of \$55,000 as of December 31, 2023. #### **(4) Subordinated Liabilities** The Company incurred no liabilities subordinated to claims of general creditors as of and for the year ended December 31, 2023. {12}------------------------------------------------ #### Notes to Financial Statements December 31, 2023 ### **(5) Commitments and Contingencies** The Company is a party to various legal actions arising in the normal course of business. Management is not aware of any such actions which are probable and estimable of loss as of and for the year ended December 31, 2023. Any legal costs or judgments against the Company that exceed its required minimum capital would be funded by the management agreement between the Company and AFA. #### **(6) Subsequent Events** There were no material events that occurred subsequent to December 31, 2023. Subsequent events have been considered through February 13, 2024, the date the financial statements were issued. {13}------------------------------------------------ #### **Schedule I** #### **AMERICAN FIDELITY SECURITIES, INC.** #### Computation of Net Capital Pursuant to Rule 15c3-1 #### of the Securities Exchange Act of 1934 #### December 31, 2023 | Computation of net capital: | | |-------------------------------------------------------------------------------------------------------|--------------| | Total stockholder's equity | \$
55,000 | | Total stockholder's equity qualified for net capital | 55,000 | | Total capital | 55,000 | | Deductions: | | | Nonallowable receivables | — | | Net capital before haircuts | 55,000 | | Haircuts on securities | — | | Net capital | 55,000 | | Computation of net capital requirement: | | | Minimum dollar net capital requirement (6.67% of total indebtedness or \$5,000, whichever is greater) | 5,000 | | Excess net capital | \$
50,000 | | Excess net capital at 1000% (net capital less the greater of 10% of aggregate | | | indebtedness or 120% of the minimum net capital) | \$
49,000 | | Computation of aggregate indebtedness: | | | Total liabilities (from Statement of Financial Condition) | \$
24,016 | | Percentage of aggregate indebtedness to net capital | 44% | There were no differences between the Computation of Net Capital Pursuant to Rule 15c3-1 included in this report and the computations included in the Company's corresponding unaudited Form X-17a-5, Part IIA filing as of December 31, 2023. {14}------------------------------------------------ ### **Schedule II** ## **AMERICAN FIDELITY SECURITIES, INC.** Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3, and Information Relating to Possession or Control Requirements Pursuant to Rule 15c3-3 December 31, 2023 The Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934, in that the Company's activities are limited to those set forth in the conditions for exemption appearing in Paragraph (k)(1) of the Rule. {15}------------------------------------------------ ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Stockholder of American Fidelity Securities, Inc. We have reviewed management's statements, included in the accompanying American Fidelity Securities, Inc. Exemption Report, in which (1) American Fidelity Securities, Inc. (the "Company") identified the following provision of 17 C.F.R. § 240.15c3-3(k) under which the Company claimed an exemption from 17 C.F.R. § 240.15c3-3: paragraph (k)(1) (the "exemption provision) and (2) the Company stated that the Company met the identified exemption provision throughout the year ended December 31, 2023, without exception. The Company's management is responsible for compliance with the exemption provision and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about the Company's compliance with the exemption provision. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(1) of Rule 15c3-3 under the Securities Exchange Act of 1934. /s/ Deloitte & Touche LLP Oklahoma City, Oklahoma February 13, 2024 {16}------------------------------------------------ February 13, 2024 ## AMERICAN FIDELITY SECURITIES, INC. EXEMPTION REPORT American Fidelity Securities, Inc. (the "Company") is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. Section 240.17a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. Section 240.17a-5(d)(1) and (4). To the best of its knowledge and belief, the Company states the following: - (1) The Company claimed an exemption from 17 C.F.R. Section 240.15c3-3 under the following provisions of 17 C.F.R. Section 240.15c3-3(k)(1). The Company met the identified exemption provisions in 17 C.F.R. Section 240.15c3-3(k) throughout the most recent fiscal year ended December 31,2023, with three exceptions. In these instances, occurring June 22, June 26, and November 6, 2023, the Company did not promptly remit all funds received from customers in accordance with the identified exemption provisions. - (2) The Company met the identified exemption provisions in 17 C.F.R. Section 240.15c3-3(k) throughout the most recent fiscal year. American Fidelity Securities, Inc. I, Taryn Colon, swear (or affirm) that, to my best knowledge and belief, this Exemption Report is true and correct. By: Taryn Colon Treasurer Principal Financial Officer Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.