# ROTHSCHILD INVESTMENT CORPORATION X-17A-5 (2021-02-26) — Broker-dealer annual report - Company: ROTHSCHILD INVESTMENT CORPORATION - Form: X-17A-5 - Filed: 2021-02-26 - Period: 2020-12-31 - Accession: 0000085338-21-000002 - CIK: 85338 - File #: 8-16429 - Material weakness: No - Auditor: Wipfli LLP - Auditor location: Chicago, IL - Contact: Bradley C. Drake - Phone: 312-983-8956 - Signed by: Bradley C. Drake (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/85338/000008533821000002/Public.pdf --- {0}------------------------------------------------ Statement of Financial Condition December 31, 2020 Filed as PUBLIC information pursuant to Rule 17a-5(d) under the Securities Exchange Act of 1934. {1}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-0123 Expires: October 31, 2023 Estimated average burden hours per response .. . . . . . 12.00 ## ANNUAL AUDITED REPORT FORM X-17A-5 PART III | SEC FILE NUMBER | |-----------------| | 8-16429 | FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING | 01/01/2020 | AND ENDING | 12/31/2020 | | |---------------------------------------------------------------------------------------------|--------------------------------------------------------|-------------------|--------------------------------|--| | | MM/DD/YY
A. REGISTRANT IDENTIFICATION | | MM/DD/YY | | | | | | | | | NAME OF BROKER-DEALER: Rothschild Investment Corporation | | OFFICIAL USE ONLY | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | | 311 South Wacker Drive, Suite 6500 | | | | | | | (No. and Street) | | | | | Chicago | Illinois | | 60606-6618 | | | (City) | (State) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Bradley C. Drake | | | 312-983-8956 | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIBICATION | | | | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
Wipfli LLP | | | | | | | (Name - if individual, state last, first, middle name) | | | | | 1 N. Wacker Drive | Chicago | | 60606 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE: | | | | | | Certified Public Accountant | | | | | | Public Accountant | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | | | | \*Claims 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 facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2) > Potential 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. {2}------------------------------------------------ ### OATH OR AFFIRMATION | Bradley C. Drake
, swear (or affirm) that, to the best of | | | |-----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|--| | Rothschild Investment Corporation | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
, as | | | of December 31 | . 20 20 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, principal officer or director has any proprietary interest in any account | | | DANIEL P HORD
Official Seal
Notary Public - State of Illinois
My Commission Expires Oct 6, 2023 | Signature | | | | Chief Financial Officer | | | Notary Public
26/202 | Title | | | This report ** contains (check all applicable boxes): | | | | (a) Facing Page. | | | | (b) Statement of Financial Condition. | | | | | (c) Statement of Income (Loss) or, if there is other comprehensive in the period(s) presented, a Statement | | | of Comprehensive Income (as defined in §210.1-02 of Regulation S-X). | | | | (d) Statement of Changes in Financial Condition. | | | | (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. | | | | (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
(g) Computation of Net Capital. | | | | (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. | | | | (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. | | | | | (i) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3-1 and the | | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | | consolidation. | (k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of | | | | | | - 7 (1) An Oath or Affirmation. - (m) A copy of the SIPC Supplemental Report. - (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. \*\* For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). {3}------------------------------------------------ ### Contents | Report of Independent Registered Public Accounting Firm | | |---------------------------------------------------------|-------| | Financial Statement | | | Statement of Financial Condition | 2 | | Notes to Statement of Financial Condition | 3 – 8 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ### **ZWKZdK&/EWEEdZ'/^dZWh>/KhEd/E'&/ZD** dŽƚŚĞ^ƚŽĐŬŚŽůĚĞƌƐĂŶĚŽĂƌĚŽĨŝƌĞĐƚŽƌƐŽĨZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶ ### **KƉŝŶŝŽŶŽŶƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ** tĞŚĂǀĞĂƵĚŝƚĞĚƚŚĞĂĐĐŽŵƉĂŶLJŝŶŐƐƚĂƚĞŵĞŶƚŽĨĨŝŶĂŶĐŝĂůĐŽŶĚŝƚŝŽŶŽĨZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶĂƐŽĨ ĞĐĞŵďĞƌϯϭ͕ϮϬϮϬ͕ĂŶĚƚŚĞƌĞůĂƚĞĚƐƚĂƚĞŵĞŶƚƐŽĨŽƉĞƌĂƚŝŽŶƐ͕ĐŚĂŶŐĞƐŝŶƐƚŽĐŬŚŽůĚĞƌƐΖĞƋƵŝƚLJĂŶĚĐĂƐŚĨůŽǁƐĨŽƌ ƚŚĞLJĞĂƌƚŚĞŶĞŶĚĞĚĂŶĚƚŚĞƌĞůĂƚĞĚŶŽƚĞƐƚŽƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ;ĐŽůůĞĐƚŝǀĞůLJƌĞĨĞƌƌĞĚƚŽĂƐΗĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐΗͿ͘/ŶŽƵƌŽƉŝŶŝŽŶ͕ƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƉƌĞƐĞŶƚĨĂŝƌůLJ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ƚŚĞĨŝŶĂŶĐŝĂů ƉŽƐŝƚŝŽŶŽĨZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶĂƐŽĨĞĐĞŵďĞƌϯϭ͕ϮϬϮϬ͕ĂŶĚƚŚĞƌĞƐƵůƚƐŽĨŝƚƐŽƉĞƌĂƚŝŽŶƐĂŶĚŝƚƐ ĐĂƐŚĨůŽǁƐĨŽƌƚŚĞLJĞĂƌƚŚĞŶĞŶĚĞĚŝŶĐŽŶĨŽƌŵŝƚLJǁŝƚŚĂĐĐŽƵŶƚŝŶŐƉƌŝŶĐŝƉůĞƐŐĞŶĞƌĂůůLJĂĐĐĞƉƚĞĚŝŶƚŚĞhŶŝƚĞĚ ^ƚĂƚĞƐŽĨŵĞƌŝĐĂ͘ ### **ĂƐŝƐĨŽƌYƵĂůŝĨŝĞĚKƉŝŶŝŽŶ** dŚĞƐĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƌĞƚŚĞƌĞƐƉŽŶƐŝďŝůŝƚLJŽĨZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶΖƐŵĂŶĂŐĞŵĞŶƚ͘KƵƌ ƌĞƐƉŽŶƐŝďŝůŝƚLJŝƐƚŽĞdžƉƌĞƐƐĂŶŽƉŝŶŝŽŶŽŶZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶΖƐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐďĂƐĞĚŽŶŽƵƌ ĂƵĚŝƚ͘tĞĂƌĞĂƉƵďůŝĐĂĐĐŽƵŶƚŝŶŐĨŝƌŵƌĞŐŝƐƚĞƌĞĚǁŝƚŚƚŚĞWƵďůŝĐŽŵƉĂŶLJĐĐŽƵŶƚŝŶŐKǀĞƌƐŝŐŚƚŽĂƌĚ;hŶŝƚĞĚ ^ƚĂƚĞƐͿ;WKͿĂŶĚĂƌĞƌĞƋƵŝƌĞĚƚŽďĞŝŶĚĞƉĞŶĚĞŶƚǁŝƚŚƌĞƐƉĞĐƚƚŽZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶŝŶ ĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞh͘^͘ĨĞĚĞƌĂůƐĞĐƵƌŝƚŝĞƐůĂǁƐĂŶĚƚŚĞĂƉƉůŝĐĂďůĞƌƵůĞƐĂŶĚƌĞŐƵůĂƚŝŽŶƐŽĨƚŚĞ^ĞĐƵƌŝƚŝĞƐĂŶĚ džĐŚĂŶŐĞŽŵŵŝƐƐŝŽŶĂŶĚƚŚĞWK͘ tĞĐŽŶĚƵĐƚĞĚŽƵƌĂƵĚŝƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞƐƚĂŶĚĂƌĚƐŽĨƚŚĞWK͘dŚŽƐĞƐƚĂŶĚĂƌĚƐƌĞƋƵŝƌĞƚŚĂƚǁĞƉůĂŶ ĂŶĚƉĞƌĨŽƌŵƚŚĞĂƵĚŝƚƚŽŽďƚĂŝŶƌĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞĂďŽƵƚǁŚĞƚŚĞƌƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƌĞĨƌĞĞŽĨ ŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚ͕ǁŚĞƚŚĞƌĚƵĞƚŽĨƌĂƵĚŽƌĞƌƌŽƌ͘KƵƌĂƵĚŝƚŝŶĐůƵĚĞĚƉĞƌĨŽƌŵŝŶŐƉƌŽĐĞĚƵƌĞƐƚŽĂƐƐĞƐƐƚŚĞ ƌŝƐŬƐŽĨŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ǁŚĞƚŚĞƌĚƵĞƚŽĨƌĂƵĚŽƌĞƌƌŽƌ͕ĂŶĚƉĞƌĨŽƌŵŝŶŐ ƉƌŽĐĞĚƵƌĞƐƚŚĂƚƌĞƐƉŽŶĚƚŽƚŚŽƐĞƌŝƐŬƐ͘^ƵĐŚƉƌŽĐĞĚƵƌĞƐŝŶĐůƵĚĞĚĞdžĂŵŝŶŝŶŐ͕ŽŶĂƚĞƐƚďĂƐŝƐ͕ĞǀŝĚĞŶĐĞƌĞŐĂƌĚŝŶŐ ƚŚĞĂŵŽƵŶƚƐĂŶĚĚŝƐĐůŽƐƵƌĞƐŝŶƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘KƵƌĂƵĚŝƚĂůƐŽŝŶĐůƵĚĞĚĞǀĂůƵĂƚŝŶŐƚŚĞĂĐĐŽƵŶƚŝŶŐ ƉƌŝŶĐŝƉůĞƐƵƐĞĚĂŶĚƐŝŐŶŝĨŝĐĂŶƚĞƐƚŝŵĂƚĞƐŵĂĚĞďLJŵĂŶĂŐĞŵĞŶƚ͕ĂƐǁĞůůĂƐĞǀĂůƵĂƚŝŶŐƚŚĞŽǀĞƌĂůůƉƌĞƐĞŶƚĂƚŝŽŶŽĨ ƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘tĞďĞůŝĞǀĞƚŚĂƚŽƵƌĂƵĚŝƚƉƌŽǀŝĚĞƐĂƌĞĂƐŽŶĂďůĞďĂƐŝƐĨŽƌŽƵƌŽƉŝŶŝŽŶ͘ ### **ƵĚŝƚŽƌΖƐZĞƉŽƌƚŽŶ^ƵƉƉůĞŵĞŶƚĂů/ŶĨŽƌŵĂƚŝŽŶ** dŚĞƐƵƉƉůĞŵĞŶƚĂƌLJŝŶĨŽƌŵĂƚŝŽŶĐŽŶƚĂŝŶĞĚŝŶ^ĐŚĞĚƵůĞ/ĂŶĚ//;ƚŚĞ^ƵƉƉůĞŵĞŶƚĂƌLJ/ŶĨŽƌŵĂƚŝŽŶͿŚĂƐďĞĞŶ ƐƵďũĞĐƚĞĚƚŽĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐƉĞƌĨŽƌŵĞĚŝŶĐŽŶũƵŶĐƚŝŽŶǁŝƚŚƚŚĞĂƵĚŝƚŽĨZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶΖƐ ĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘dŚĞ^ƵƉƉůĞŵĞŶƚĂů/ŶĨŽƌŵĂƚŝŽŶŝƐƚŚĞƌĞƐƉŽŶƐŝďŝůŝƚLJŽĨZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶΖƐ ŵĂŶĂŐĞŵĞŶƚ͘KƵƌĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐŝŶĐůƵĚĞĚĚĞƚĞƌŵŝŶŝŶŐǁŚĞƚŚĞƌƚŚĞƐƵƉƉůĞŵĞŶƚĂůŝŶĨŽƌŵĂƚŝŽŶƌĞĐŽŶĐŝůĞƐƚŽ ƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽƌƚŚĞƵŶĚĞƌůLJŝŶŐĂĐĐŽƵŶƚŝŶŐĂŶĚŽƚŚĞƌƌĞĐŽƌĚƐ͕ĂƐĂƉƉůŝĐĂďůĞ͕ĂŶĚƉĞƌĨŽƌŵŝŶŐ ƉƌŽĐĞĚƵƌĞƐƚŽƚĞƐƚƚŚĞĐŽŵƉůĞƚĞŶĞƐƐĂŶĚĂĐĐƵƌĂĐLJŽĨƚŚĞŝŶĨŽƌŵĂƚŝŽŶƉƌĞƐĞŶƚĞĚŝŶƚŚĞ^ƵƉƉůĞŵĞŶƚĂů /ŶĨŽƌŵĂƚŝŽŶ͘/ŶĨŽƌŵŝŶŐŽƵƌŽƉŝŶŝŽŶŽŶƚŚĞƐƵƉƉůĞŵĞŶƚĂůŝŶĨŽƌŵĂƚŝŽŶ͕ǁĞĞǀĂůƵĂƚĞĚǁŚĞƚŚĞƌƚŚĞ^ƵƉƉůĞŵĞŶƚĂů /ŶĨŽƌŵĂƚŝŽŶ͕ŝŶĐůƵĚŝŶŐŝƚƐĨŽƌŵĂŶĚĐŽŶƚĞŶƚ͕ŝƐƉƌĞƐĞŶƚĞĚŝŶĐŽŶĨŽƌŵŝƚLJǁŝƚŚϭϳ͘&͘Z͘ΑϮϰϬ͘ϭϳĂͲϱ͘/ŶŽƵƌŽƉŝŶŝŽŶ͕ ƚŚĞ^ĐŚĞĚƵůĞ/ĂŶĚ//ĂƌĞĨĂŝƌůLJƐƚĂƚĞĚ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ŝŶƌĞůĂƚŝŽŶƚŽƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƐĂǁŚŽůĞ͘ tĞŚĂǀĞƐĞƌǀĞĚĂƐZŽƚŚƐĐŚŝůĚ/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶΖƐĂƵĚŝƚŽƌƐŝŶĐĞϮϬϭϵ͘ &ĞďƌƵĂƌLJϮϲ͕ϮϬϮϭ ŚŝĐĂŐŽ͕/ůůŝŶŽŝƐ tĞ ŚĂǀĞ ƐĞƌǀĞĚ ĂƐ ZŽƚ {5}------------------------------------------------ Statement of Financial Condition December 31, 2020 | Assets | | | |---------------------------------------------------------------------------------|------|-----------| | Cash | | 415,074 | | Receivable from and deposit with clearing broker | | 534,318 | | Securities owned, at fair value | | 2,116,561 | | Furniture, equipment and leasehold improvements | | | | (net of accumulated depreciation and amortization of \$658,342) | | 45,962 | | Right-of-use asset - operating leases | | 350,995 | | Prepaid expenses | | 181,367 | | Other assets | | 382,212 | | Total assets | ക്ക | 4,026,489 | | Liabilities and Stockholders' Equity | | | | Liabilities | | | | Accounts payable and accrued expenses | ಲ್ಲಿ | 1,425,602 | | Securities sold short, not yet purchased | | 18,640 | | Lease liabilities - operating leases | | 505,963 | | Total liabilities | | 1,950,205 | | | | | | Stockholders' equity | | | | Common A, \$2.00 par value, 500,000 shares authorized and 266,501 shares issued | | 533,002 | | Common B, \$0.10 par value, 500,000 shares authorized and 269,942 shares issued | | 26,994 | | Additional paid in capital | | 459,334 | | Retained earnings | | 1,225,512 | | | | 2,244,843 | | Less: 80,160 shares of Common A stock in treasury, at cost | | (160,320) | | 82,382 shares of Common B stock in treasury, at cost | | (8,238) | | Total stockholders' equity | | 2,076,284 | | | | | | Total liabilities and stockholders' equity | ಲ್ಲಿ | 4,026,489 | See Notes to Financial Statements. {6}------------------------------------------------ ### Notes to Statement of Financial Condition ### Note 1. Nature of Organization and Significant Accounting Policies Nature of organization: Rothschild Investment Corporation (the Company) is a registered securities broker-dealer and a registered investment adviser. As a broker-dealer, the Company provides brokerage services to retail and institutional customers located primarily throughout the Midwestern United States, with customer transactions cleared through another broker-dealer on a fully disclosed basis. The Company's designated examining authority is the Financial Industry Requlatory Authority ("FINRA"). As an investment adviser, the Company provides investment services to individuals, trusts and retirement plans. The Company operates under the provisions of Paragraphs (k)(1) and (k)(2)(ii) of Rule 15c3-3 of the Securities Exchange Act of 1934 and, accordingly, is exempt from the remaining provisions of those Rules. The requirement of Paragraph (k)(1) provides that the Company promptly transmits all customer funds received in connection with transactions in securities such as mutual funds or insurance products that are executed with the Fund Company or Insurance Company. The requirement of Paragraph (k)(2)(ii) provides that the Company clear all transactions on behalf of customers on a fully disclosed basis with a clearing broker-dealer. The clearing broker-dealer carries all of the accounts of the customers and maintains and preserves all related books and records as are customarily kept by a clearing broker. Any customer checks or securities received are promptly transmitted to the clearing broker. The following is a summary of the Company's significant accounting policies: Accounting policies: The Company follows the Generally Accounting Principles (GAAP), as established by the Financial Accounting Standards Board (FASB), to ensure consistent reporting of financial condition, results of operations, and cash flows. Use of estimates: The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Furniture, equipment and leasehold improvements: Furniture, equipment and leasehold improvements are recorded at cost. Furniture and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the lesser of the term of the lease or the economic useful lives of the improvements. Revenue recognition: The Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), effective as of January 1, 2018. The revenue recognition policies are as follows: - · Asset Management: Investment advisory fees are based on contractual rates applied to assets managed and recognized as earned. The Company provides investment advisory services on a daily basis. The Company believes the performance obligation for providing advisory services is satisfied over time because the customer is receiving the benefits as they are provided. Fees are received quarterly and are recognized as revenue over time as they relate specifically to the services provided in that period, which are distinct from the services provided in other periods. - · Commissions and related clearing expenses are recorded on a trade-date basis. The Company buys and sells securities on behalf of its customers. The Company believes the performance obligation is satisfied on the trade date because that is when the underlying security is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. {7}------------------------------------------------ ### Notes to Statement of Financial Condition ### Note 1. Nature of Organization and Significant Accounting Policies (Continued) ### Revenue Recognition (Continued) - · Commission revenue also includes mutual fund revenues consisting primarily of sales charges earned on open-end funds and 12b-1 distribution and/or service fees from open-end funds and money market funds. The Company may receive fees paid by the funds up front (sales charges) or over time (distribution /service fees). The Company believes that its performance obligation is the sale of securities to investors and as such is fulfilled on trade date. Distribution/service fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods. Distribution service fees are accrued monthly as services are provided and amounts are determinable. - · Rebates consist of credits to customers. Rebates are recorded when quantifiable and are shown as reduction of commissions or advisory fees on the statement of operations. The following contract assets and liabilities are presented under the requirements of Topic 606: | | | 1/1/2020 | | 12/31/2020 | |------------------------------------------------------------------------------------------------------------------------|------|----------|-------|------------| | IA Fee Receivables | ಲ್ಲಿ | 355,765 | ಳ | 255,956 | | Deferred IA Fees | ಲ್ಲಿ | 235,640 | સ્ત્ર | 267,013 | | Revenue recognized in the period from:
Amounts included in the contract
liability at the beginning of the period | မာ | 235,640 | | | The incremental costs of obtaining a contract with a customer are incurred by the Company only when a new contract is obtained. The following are incremental costs that the Company incurs: Commissions and Investment Advisory fees paid to the Company's investment representatives as well as clearing expenses. The Company elected a practical expedient for recording the incremental costs of obtaining a contract with the customer, wherein the Company recognizes such costs as incurred. Income taxes: The Company has elected to be treated as a qualified subchapter "S" corporation under the Internal Revenue Code. As a result, the Company does not pay any federal corporate income taxes. Instead, stockholders are liable for individual federal income taxes on their respective shares of the Company's taxable income. FASB quidance requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained "when challenged" or "when examined" by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and liability in the current year. Through December 31, 2018 management has determined that there are no material uncertain tax positions. The Company is generally not subject to examination by the U.S. Federal and state tax authorities for tax years before 2018. Subsequent events: The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these financial statements were issued. {8}------------------------------------------------ ### Notes to Statement of Financial Condition ### Note 2. Receivable from and Deposit with Clearing Broker The Company clears customer transactions on a fully disclosed basis and proprietary transactions through the Company's clearing broker. Amounts receivable from and on deposit with the clearing broker at December 31, 2020, consist of the following: | Cash | લ્ત્વ | 81.732 | |--------------------|-------|---------| | Money market funds | | 343.086 | | Deposit | | 100,000 | | Fees receivable | | 9.500 | | | ಕೆ | 534.318 | The deposit is required to be maintained in accordance with the Company's agreement with the clearing broker. At December 31, 2020, cash on deposit with the Company's clearing broker may serve as collateral for amounts due to the clearing broker and securities sold short, not yet purchased, if any. #### Note 3. Fair Value Measurements 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. The Company utilizes valuation techniques to maximize the use of observable inputs and minimize the use of unobservable inputs. Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. Financial assets and liabilities recorded at fair value are categorized within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, and fair value is determined through the use of models or other valuation methodologies. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement. Level 3: Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial investment. {9}------------------------------------------------ ### Notes to Statement of Financial Condition ### Note 3. Fair Value Measurements (Continued) The following table presents the Company's financial assets and liabilities measured at fair value at December 31, 2020 using the fair value hierarchy: | Description | | Level 1 | | Total | | |----------------------------------------------------------------------------------------------------------------------------------|-----|----------------------|------|----------------------|--| | Assets
Receivable from and deposit with
clearing broker -
Money market funds
Securities owned -
Equity securities | ക | 343.086
2,116,561 | ക | 343.086
2,116,561 | | | | | 2,459,647 | | \$ 2,459,647 | | | Description | | Level 1 | | Total | | | Liabilities
Securities sold short,
not yet purchased | ക്ക | (18,640) | ಲ್ಲಿ | (18,640) | | Equity securities are traded on a national securities exchange and are stated at the last reported sales price on the day of valuation. Money market funds are valued based on the published net asset value per share on the day of valuation. These financial instruments are classified as Level 1 in the fair value hierarchy. As of December 31, 2020, the Company had no financial instruments categorized as Level 2 of the fair value hierarchy. The Company assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Company's accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. ### Note 4. Furniture, Equipment and Leasehold Improvements Furniture, equipment, and leasehold improvements at December 31, 2020 consisted of the following: | Furniture and equipment | ಕಾ | 277.192 | |------------------------------------------------|----|-----------| | Leasehold improvements | | 427,112 | | | | 704.304 | | Less accumulated depreciation and amortization | | (658.342) | | | | 45.962 | {10}------------------------------------------------ ### Notes to Statement of Financial Condition #### Note 5 l eases The Company leases office space under a noncancelable operating lease agreement and expires in March 2022. The future minimum annual rentals, exclusive of additional payments that may be required for certain increases in taxes and operating costs, are as follows: | For the year ending December 31, 2021 | ಕಿ | 416,867 | |--------------------------------------------------|----|----------| | For the year ending December 31, 2022 | | 104,839 | | Total lease payments | | 521,706 | | Less: imputed interest | | (15,743) | | Operating lease liabilities at December 31, 2020 | | 505,963 | #### Note 6. Profit Sharing Plan The Company has a discretionary profit-sharing plan that covers all eligible employees. Profit sharing amounts may be contributed at the option of the Company's Board of Directors. The Company earns commissions from executing trades for the profit-sharing plan. In addition, investment advisory fees for services rendered to the plan were absorbed by the Company. #### Note 7. Related Party The Company provides brokerage and investment services to certain shareholders and executive officers and their family members. Advisory fees are waived and commissions charged may be reduced. For 2020 only, the Company had an expense-sharing agreement with one of its officers whereby the officer is responsible for a portion of overhead expenses equaling \$90,000 and is located in other income on the statement of operations. #### Note 8. Indemnifications In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties that provide indemnifications under certain circumstances. The Company's maximum exposure under these agreements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications. Management of the Company expects the risk of loss to be remote. ### Note 9. Financial Instruments with Off-Balance-Sheet Risk Customers' transactions are introduced to and cleared through Pershing, LLC, the Company's clearing broker. Under the terms of its clearing agreement, the Company quarantees the performance of its customers in meeting contracted obligations. In conjunction with the clearing broker, the Company seeks to control the risks associated with its customer activities by requiring customers to maintain collateral in compliance with various regulatory and internal guidelines. Compliance with the various guidelines is monitored daily and, pursuant to such guidelines, the customers may be required to deposit additional collateral, or reduce positions where necessary. The Company is exposed to off-balance-sheet counterparty risk resulting from principal transactions in securities. Such risk arises in the event that counterparties fail to satisfy their obligations and the related collateral is insufficient. The Company monitors such risk on a daily basis. {11}------------------------------------------------ ### Notes to Statement of Financial Condition ### Note 9. Financial Instruments with Off-Balance-Sheet Risk (Continued) The receivable from and deposit with the clearing broker, and cash equivalents held by the clearing broker, resulting from the Company's trading and brokerage activities, represent a concentration of credit risk. The Company does not anticipate nonperformance by its customers or clearing broker. It is the Company's policy to review, as necessary, the credit standing of each counterparty. The Company maintains cash in its trading accounts at its clearing broker and in bank deposit accounts. The cash in bank deposit accounts may at times exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes the Company is not exposed to any significant credit risk on cash. #### Note 10. Net Capital Requirements The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. The rule also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31, 2020, the Company had net capital of \$879,745 which was \$629,745 in excess of its required net capital \$250,000. The Company's aggregate indebtedness to net capital ratio was 1.80 to 1. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.