# COLONIAL SECURITIES, INC. X-17A-5 (2019-03-01) — Broker-dealer annual report - Company: COLONIAL SECURITIES, INC. - Form: X-17A-5 - Filed: 2019-03-01 - Period: 2018-12-31 - Accession: 0000021879-19-000001 - CIK: 21879 - File #: 8-17631 - Material weakness: No - Auditor: We, Wei & Co., LLP - Auditor location: New York, NY - Contact: David Wong - Phone: 212-587-3970 - Signed by: David Wong (Vice President) Original filing: https://www.sec.gov/Archives/edgar/data/21879/000002187919000001/2018PublicRev.pdf --- {0}------------------------------------------------ *(SEC File No. 8-17631)* Financial Statements and Supplemental Schedule for the Year Ended December 31, 2018 and Independent Auditors' Report and Supplemental Report on Internal Control This report is deemed PUBLIC in accordance with Rule 17a-5(e)(3) under the Securities Exchange Act of 1934. {1}------------------------------------------------ **UNJTED A SECURITIESANDEXCHANGE OMMJ 10 Washinuton O.C. 20S49** # **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** | | | 0MB APPROVAL | |--------------------------|-----------------|---------------------------| | 0MB Number: | | 3235-0123 | | Expires: | August 31, 2020 | | | Estimated average burden | | | | | | hours per response 12.00 | | SEC FILE NUMBER | |-----------------| | 8-17631 | **FACI G P** GE Information Required of Brokers and Dealer Pur uant to Section 17 of the **ecuritie Exchange Act of 1934 aod Rule 17a-5 Thereunder** | REPORTFOR THE PERfODBEGINNING Q1/01/2018 | | | ---------
END! G 12/31/2018 | | |--------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|-----------------------|--------------------------------|--| | | MM/DD/YY | - | -
MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | AME OF BROK R-DEALER: COLONIAL SECURITIES, INC. | | | OFFICIAL USE ONLY | | | ADDRE
OF PRI CTPAL PLACE OF BUSINESS: (Do not use P.O. Box
o.) | | | FIRM I.D. NO. | | | 80 BOWERY ROOM 603 | | | | | | NEW YORK | ( o. and Street)
NY | | 10013 | | | (City) | (State) | | (Zip Code) | | | MBER OF PERSO
ME A D TELEPHO
DAVID WONG (212) 587-3970 | TO CO TACT I | REGARD TO THIS REPORT | | | | | | | (Area Code - Telephone umber) | | | | | | | | | | | | | | | INDEPENDE T PUBLIC ACCOU TA T whose opinion is contained in this Report*
,WEI & CO., LLP
WEl | | | | | | | (Name - if individual, state last, first, middle name) | | | | | 133-10 39TH AVENUE | FLUSHING | NY | 11354 | | | (Address) | (City) | (State) | (Zip Code) | | | CHE KO E: | | | | | | | | | | | | I certified Public Accountant | | | | | | ccountant
Public | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | *Claim for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant | | | | | *must be supported by a statement of/acts and circumstances relied on as the basi for the exemption. See Section 240. l7a-5(e)(2)* Potential persons who are to respond lo the collection of Information contained in this form are not required lo respond uni ess the form displays a currently valid OM B control number. SEC 1410 (06-02) {2}------------------------------------------------ ## **OATH OR A.FFIRMA TION** | COLONIAL SECURITIES. INC. | | my knowledge and belief the accompanying financial statemeot and supponing schedules pertaining to the firm of
-----------------------------~-------------- | |------------------------------------------------------------------------------------------------------------------------------------------------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------| | of DECEMBER 31 | 20 18 | '
a
are true and correct. I further swear (or affirm) that | | classified solely as that of a customer except as follows: | | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account | | CINOYWU
• lary Public, State of !~sw Yori(
No. 01WU;i040405
OualihGd in K, d.,,.n,. t, A
Coim\lssk-n Expire;; Mt rd-. I 3,, Zo 1 ~ | | VICE PRESIDENT
Tille | - 0 (a) Facing Page. - ✓ (b) Statement of Financial Condition. - (c) Statement oflncome (Loss). - (d) tatement of Change in Financial Condition. - (e) tatement of Changes in Stockholders' Equity or Parmers' or Sole Proprietors• Capital. - (f) tatement of Changes in Liabilities Subordinated to C laims of Creditors. - (g) Computation of et Capital. - (h) Computation for Detennination of Reserve Requirements Pursuant to Rule 15c3-3. - (i) information Relating to the Possession or Control Requirements Under Rule I 5c3-3 . - 0 G) A Reconciliation, including appropriate explanation of the Computation of et Cap ital Under Ru le l 5c3- l and the Computation for Determination of the Reserve Requirements Under Exhibit A of Rul e I 5c3-3. - 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. - 0 (I) An Oath or Affirmation. - 0 (m) A copy of the SIPC upplemental Rep ort. - D (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. - x (o)Exernption Report .. *For conditions of confidential treatment of certain portions of this filing, see section 240. I 7a-5(e)(3).* {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) Cnrnrn:n P@w: ,\cmlNl'.\:\Tu - MAIN OFFICE 133· 10 39TH AVENUE f l.USMING, NY 113.'>4 TEL (718) 445-6JOU FAX. (718) 445-67&0 - (AllfORNIA O FFICf 36 W BAY STATE 5TRffT AtKAMBRA, CA 91801 Tu. (626) 282-1630 FAX. (626) 282-9726 - BEIIINC OmcE 11/ F NORHI TOWER B UJINI; KtRRV CENTRE **1 CuANCiHUA RoAo CtUOYANC DISTRICT** Bw•~c ·100020, PRC Tn. (8610) 65997923 # **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Shareholders of Colonial Securities, Inc. ## **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Colonial Securities, Inc. as of December 31, 2018, and the related notes ( collectively referred to as the financial statement). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of Colonial Securities, Inc. as of December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibility of Colonial Securities, Inc. 's management. Our responsibility is to express an opinion on Colonial Securities, Inc.'s financial statement based on our audit. We are a public acc,ounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOD) and are required to be independent with respect to Colonial Securities, Inc. 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 statement is 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 statement, 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. We have served as Colonial Securities, Inc. 's auditor since 1998. Flushing, NY February 28, 2019 {4}------------------------------------------------ ## **STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2018** | ASSETS | | |---------------------------------------------------------|-----------| | Cash | \$114,457 | | Deposit with clearing organization | 50,367 | | Property and equipment, net of accumulated depreciation | | | and amortization of \$82,712 (Notes 2 and 3) | 25,251 | | Stockholder's Loan | 7,451 | | Other assets | 31,965 | | TOT AL ASSETS | \$229,491 | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | LIABILITIES: | | | Accounts payable and accrued expenses | \$38,232 | | | | | COMMITMENTS AND CONTINGENCJES (Notes 6 and 9) | | | STOCKHOLDERS' EQUITY: | | | Common stock, no par value, | | | Class A, voting; authorized 500 shares; issued and | | | outstanding 252 shares | 58,500 | | Class B, non-voting; authorized 500 shares; issued and | | | outstanding 120 shares | 26,460 | | Additional paid-in capital | 98,000 | | Retained earnings | 8,299 | | Total stockholders' equity | 191,259 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | \$229,491 | See accompanying notes to financia l statements. {5}------------------------------------------------ # **NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018** # **1. ORGANIZATION** Colonial Securities, Inc. (the "Company") was incorporated in the State of New Jersey on December 11, 1972. The Company is a registered broker-dealer under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority (FINRA). ## **2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** **Cash** The Company considers aH demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. #### **Property, equipment and depreciation and amortization** Property and equipment are stated at cost. The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are amortized over the lesser of the remaining term of the related lease or the estimated useful lives of the assets. Depreciation and amortization are computed on the straight-line method for both financial reporting and income tax purposes. The useful lives of property and equipment for purposes of computing depreciation and amortization are: Furniture and fixtures Office equipment Leasehold improvements 7 years 5 years The lesser of the remaining life of the lease or the remaining useful life of the asset {6}------------------------------------------------ ### **NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018** #### **2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** #### **Income taxes** The Company accounts for income taxes in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") 740, *Income Taxes,* which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established to reduce deferred tax assets to the amount expected to be realized. The Company follows the provisions of FASB ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns. FASB ASC 740-10-25 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. Interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as "interest expense, net" in the statement of income. Penalties would be recognized as a component of "general and administrative expenses." The Company does not have any accruals for uncertain tax positions as of December 31, 2017. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date. Currently, the 2015, 2016 and 2017 tax years are open and subject to examination by the taxing authorities. However, the Company is not currently under audit nor has the Company been contacted by any of the taxing authorities. #### **Use of estimates** The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. {7}------------------------------------------------ # **NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018** ### **2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** #### **Fair value** FASB ASC 820, *Fair Value Measurement,* defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by F ASB ASC 820, are used to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: - Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. - Level 2 Inputs other than the quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly. - Level 3 Unobservable inputs for the asset or liability. The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, the liquidity of markets, and other characteristics particular to the security. To the extent that the valuatfon is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety. {8}------------------------------------------------ #### **NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018** #### **2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** #### **Fair value {continued)** As of December 31 , 2018, none of the assets and liabilities were required to be reported at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, receivable from clearing organization, stockholder loans, other assets and accounts payable and accrued expenses, approximate fair values due to the short tenn nature of these financial instruments. There were no changes in methods or assumptions during the year ended December 31 , 2018. #### **Recent accounting pronouncements** The Financial Accounting Standards Board (the "FASB") has established the Accounting Standards Codification (Codification" or "ASC") as the authoritative source of generally accepted accounting principles ("GAAP"). The principles embodied in the Codification are to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP **in** the United States. New accounting pronouncement are incorporated into the ASC through the issuance of Accounting Standards Updates ("ASUs"). For the year ending December 31 , 2018, various ASUs issued by the FASB were either newly issued or had effective implementation dates that would require their provisions to be reflected in the financial statements for the year then ended. The Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible impact they may have on the Company's financial statements. In most cases, management has determined that the pronouncement has either limited or no application to the Company and, believes that implementation would not have a material impact on the financial statements taken as a whole. The Company will adopt FASB ASU 842 commencing January 1, 2019. This standard will require the Company to recognize a "right of use asset" and a corresponding liability based on the present value of the remaining lease payments. Based upon the Company's current lease, these amounts are anticipated to in the range approximately \$150,000 to \$200,000. {9}------------------------------------------------ # **NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018** ### **2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** #### **Recent accounting pronouncements (continued)** In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers." This standard, along with its related amendments, requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Financial Accounting Standards Board (FASB) allows two adoption methods under ASC 606. Companies are permitted to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company has adopted this standard in 2018. The adoption of this standard did not have a material effect on the Company's financial statements. # **3. PROPERTY AND EQUIPMENT** Property and ,equipment consists of the following: | Office equipment | \$ 76,093 | |--------------------------------|-----------| | Furniture and fixtures | 4,630 | | Leasehold improvements. | 27,240 | | Less: accumulated depreciation | (82,712) | | | \$ 25,251 | #### **4. STOCKHOLDER'S LOANS** The stockholder's loan is non-interest bearing and due on demand. {10}------------------------------------------------ #### **NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018** #### **5. NET CAPITAL REQUIREMENTS** As a registered broker-dealer, the Company is subject to the Uniform Net Capital Rule (Rule l 5c3-l) under the Securities Exchanges Act of 1934. The Company computes its net capital using the aggregate indebtedness standard method, which requires the maintenance of minimum net capital of \$50,000 and requires the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. At December 31, 2018, the Company had net capital of \$126,592, which was \$76,592 in excess of its required net capital. The Company's net capital ratio was 0.30 to 1. #### **6. FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK** The Company introduces aU customer transactions in securities traded on U.S. secunt1es markets to a clearing broker firm on a fully-disclosed basis. The agreement between the Company and its clearing broker provides that the Company is obligated to assume any exposure related to non-performance by customers or counter parties. The Company's exposure to credit risk associated with the non-performance of customers and counter parties in fulfilling their contractual obligations pursuant to these securities transactions can be directly impacted by volatile trading markets which may impair the customer's or counter party's ability to satisfy their obligations to the Company. In the event of non-performance, the Company may be required to purchase or selJ financial instruments at unfavorable market prices resulting in a loss to the Company. The Company does not anticipate non-performance by customers and counter parties in the above situations. The Company seeks to control the aforementioned risks by requiring customers or counter parties to maintain margin collateral in compliance with various regulatory requirements, the clearing broker's guidelines and indust1y standards. The Company monitors required margin levels daily and pursuant to such guidelines requires the customer to deposit additional collateral, or to reduce positions, when necessary. #### 7. **CREDIT RISK CONCENTRATION** Financial instruments which potentially subject the Company to concentrations of credit risk consist principaJiy of cash and cash equivalents. The Company maintains its cash with a financial institution. The Company monitors the credit quality of the financial institution and does not anticipate any exposure. The cash balance in each financial institution is insured by the FDIC up to \$250,000. At December 31, 2018, the Company did not have cash balances in excess of the FDIC insured limit. {11}------------------------------------------------ ### **NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018** #### **8. SUBSEQUE T EVENTS** The Company's management has performed subsequent events procedures through February 28, 2019, which is the date the financial statements were available to be issued. No subsequent events required adjustment to the financial statements or disclosures as stated herein. {12}------------------------------------------------ ![](_page_12_Picture_0.jpeg) • MA1N OmcE 133-10 39"' AVfNUf fLU>HING1 N V 1 I 354 Tll. (718) 445-6308 fax. (718) 445-6760 • CAuroRNIA OrncE 36 W BAY STATE Sum ALHMIBRA, CA 91801 T!t. (626) 2112- 1630 FAX. (626) 282-9726 • BEIJING 01F1CE 11 IF NORTII Towr.R BEIIING KERRY CCNT RI 1 G UANGHU• RuAI> (HAOYA~'C 01ST'RtC1 Bu 111