# ST. GERMAIN SECURITIES, INC. X-17A-5 (2020-03-02) — Broker-dealer annual report - Company: ST. GERMAIN SECURITIES, INC. - Form: X-17A-5 - Filed: 2020-03-02 - Period: 2019-12-31 - Accession: 0000200664-20-000001 - CIK: 200664 - File #: 8-04575 - Material weakness: No - Auditor: Wolf and Company, PC - Auditor location: Springfield, MA - Contact: Jason Schuck - Phone: 4137335111 - Website: stgermaininvestments.com - Signed by: Michael R Matty (President) Original filing: https://www.sec.gov/Archives/edgar/data/200664/000020066420000001/stgermainfull.pdf --- {0}------------------------------------------------ | | Accountant not resident in United States or any of its possessions.
FOR OFFICIAL USE ONLY | | | | |------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|--| | Public Accountant | | | | | | Certified Public Accountant | | | | | | CHECK ONE: | | | | | | (Address) | (City) | (State) | (Zip Code) | | | 99 High Street | Boston | MA | 02110 | | | Wolf and Company, P.C. | (Name - if individual, state last, first, middle name) | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | | (Area Code - Telephone Number) | | | Jason Schuck 413-733-5111 | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | | | (City) | (State) | (Zip Code) | | | | Springfield | (No. and Street)
MA | 01115 | | | | 1500 Main Street | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
FIRM I.D. NO. | | | | | | NAME OF BROKER-DEALER: St. Germain Securities. Inc. | | | OFFICIAL USE ONLY | | | | A. REGISTRANT IDENTIFICATION | | | | | | MM/DD/Y Y | | ------------------------------------ | | | REPORT FOR THE PERIOD BEGINNING 01/01/2019 | AND ENDING 12/31/2019 | | | | | | Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | | | | | | FACING PAGE
Information Required of Brokers and Dealers Pursuant to Section 17 of the | | | | | | PART III | | | | | | FORM X-17A-5 | | SEC FILE NUMBER | | | | ANNUAL AUDITED REPORT | | Estimated average burden
hours per response 12.00 | | | | SECURITIES ANDEXCHANGE COMMISSION
Washington, D.C. 20549 | Expires: | OMB Number:
3235-0123
August 31, 2020 | | Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays acurrently valld 10-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-11-SEC 1410 (11-05) {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | St. Germain Securities, Inc. | | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
------------------------------------------, | |-----------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | of December 31st | | as
2019 | | | | are true. an.d correct I. further sv.ear ( or affirm) th.at
neith~r the ·.co~p-~ny nor ~~}' P3rtner, proPrietOr, Principal officer Or dire~tOr h~s ~ny .pl'Oprietary interest in-any accourit | | | | classified.solely as.that.ofa-customer,.except-as-follows::-----·-------------------------; | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | President | | | | Title | | .~u~ | | | | | | | | Notary Publi"'7'
VJ,t_ | I: _ --~ | | | This report•• contains {check all applicable boxes): | | | | 0 (a) Facing Page. | | | | 0 (b) Statement of Financial Condition. | | | | | | 0 (c} Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement | | | of Comprehensive Income (as defined in §210.1-02 of Regulation S-X), | | | 17] (d) Statement of Changes in Financial Condition, | | 0 (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. | | | D (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | | | | | § (g) Computation ofNet Capital. | | (h) Computation for Determination of Reserve Requirements Pursuant to Rule !5c3-3. | | | | (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. | | | | 0 (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule !5c3-l and the | | | | | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 1503-3. | | | | | 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of | | consolidation. | | | | ✓ (!) An.Oath or Affirmation.
0 (m) A copy of the SIPC Supplemental Report. | | | | | | D (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous a.udit | | | | | | | | •• For eon,JJtions of corifj.854,216 | | Interest income | 10,432 | | Mutual fund distribution fees | 135,653 | | Realized and unrealized gain on investments, net | (4,279) | | Other income | 416,514 | | Total operating revenue | 1,412,536 | | Operating expenses: | | | Production costs | 321,221 | | Salary and benefits | 367,109 | | Other operating expenses | 523,489 | | Total operating expense | 1,211,819 | | Income before income taxes | 200,717 | | Income tax provision | 55,305 | | Net income | \$
145,412 | {8}------------------------------------------------ ## Statement of Changes in Shareholder's Equity ### Year Ended December 31, 2019 | | Shares | Common
Stock | Retained
Earnings | Total | |-------------------------------------------|--------|-----------------|----------------------|--------------| | Shareholder's equity at December 31, 2018 | 100 | \$790,897 | \$1,510,246 | \$ 2,301,143 | | Net income | | | 145,412 | 145,412 | | Shareholder's equity at December 31, 2019 | 100 | \$790,897 | \$1,655,658 | \$ 2,446,555 | {9}------------------------------------------------ ## Statement of Cash Flows #### Year Ended December 31, 2019 | Cash flows from operating activities: | | |------------------------------------------------|-----------------| | Net income | \$
145,412 | | Adjustments to reconcile net income to net | | | cash provided by operating activities: | | | PtEChase and sale of investments, net | 997,497 | | Realized and nnrealized gains, net | 4,279 | | Security deposit down payment | (25,000) | | Change in operating assets and liabilities: | | | Prepaid expenses | (2,910) | | Other assets | (15,041) | | Due from Parent | 17,092 | | Receivab Jes from Broker, net | (74,983) | | Accrued expenses and other liabilities | (48,995) | | Net cash provided by operating activities | 997,351 | | Net increase in cash and cash equivalents | 997,351 | | Cash and cash equivalents at beginning of year | 1,255,237 | | Cash and cash equivalents at end of year | \$
2,252,588 | {10}------------------------------------------------ Notes to Financial Statements December 31, 2019 ### **1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** ## *Nature of Business* The financial statements include the accounts of St. Germain Securities, Inc. (the "Company"), a wholly-owned subsidiary ofD.J. St. Germain Company, Inc. ("DJS" or "Parent"). The Company is registered as a broker-dealer with the Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority ("FlNRA") and is licensed as a broker-dealer in all 50 states. The Company claims exemption from the requirements of Rule 15c3-3 under Section (k)(2)(ii) of Rule 15c3-3. ## *Use of Estimates* The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ### *Revenue Recognition* Revenue from contracts with customers includes commission income, mutual fund distribution fees, and other fees. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgement is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transactions prices where multiple performance obligations are identified; when to recognize revenue on the appropriate measure of the Company's progress under the contract and whether constraints on variable consideration should be applied due to uncertain events. The Company buys and sells securities on behalf of its customers. Each time a customer enters into a buy or sell transaction, the Company charges a commission. Commissions and {11}------------------------------------------------ Notes to Financial Statements ### December 31, 2019 ### **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** related clearing expenses are recorded on the trade date (the date the Company fills the trade order by finding and contracting with a counterparty and confirms the trade with the customer). The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. The company receives remuneration on customer cash that is treated as an overnight sweep account into FDIC insured deposits. The Company received \$372,000 for the year ended December 31, 2019 which is recorded in the other income on the statement of operations. ### *Cash and Cash Equivalents* The Company considers all instruments with an original maturity of three months or less when purchased to be cash equivalents. #### *Receivables* Amounts receivable from broker-dealers and clearing organizations at December 31, 2019 was \$88,979. The company considered the need for an allowance for doubtful accounts as of December 31, 2019 and determined none was necessary. ### *Investments* Investments owned are recorded at fair value with changes in fair value recorded in earnings. Cost is determined on the specific identification method. Income from investments owned is recorded as earned on an accrual basis. Realized gains and losses are determined based on the specific identification of the securities sold, and any dividends are recorded on the payment date. There were no investments held as of December 31, 2019. #### *Fair Value* Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. GAAP establishes a hierarchal framework which prioritizes and ranks the level of market price observability used in measuring fair value. Observable inputs are those that market participants would use in pricing the asset or liability based on market {12}------------------------------------------------ #### Notes to Financial Statements #### December 31, 2019 #### **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that management has the ability to access at the measurement date. Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 - Inputs include unobservable inputs that reflect management's assumptions about the assumptions that market participants would use in pricing the asset or liability. Management develops these inputs based on the best information available, including management's own data. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. ### *Income Taxes* The Company is part of an affiliated group which files a consolidated tax return. Pursuant to a tax allocation agreement by and amongst the members of the affiliated group, the consolidated tax liability is allocated to the members of the group on the basis of the percentage of the total tax which the tax of such member, if computed on a separate return, would bear to the total amount of the taxes for all members of the group so computed ("separate return liability method"). The Company does not have any uncertain tax positions at December 31, 2019 which require accrual or disclosure. The Company records interest and penalties as part of income tax expense. No interest or penalties were recorded for the year ended {13}------------------------------------------------ Notes to Financial Statements December 31, 2019 ### **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (conclnded)** December 31, 2019. The consolidated DJS income tax returns are subject to review and examination by federal and state taxing authorities. These returns are currently open to audit under applicable statutes of limitations by the Internal Revenue Service generally back to and including 2016. ## *Concentration of Credit Risks* During the year ended December 31, 2019, the Company had amounts in excess of \$250,000 in a brokerage account. These balances fluctuate during the year. Amounts are insured by the Securities Investors Protection Corporation ("SIPC") up to \$500,000, of which no more than \$250,000 may be in cash. The Company's principal clearing firm carries additional protection on terms similar to SIPC for brokerage account balances in excess of \$500,000. Management monitors the clearing firm regularly, along with the Company's balances, and seeks to keep this potential risk to a minimum. ### **2. REGULATORY NET CAPITAL REQUIREMENTS** As a broker-dealer, the Company is subject to the Securities and Exchange Commission's regulations and operating guidelines, which require the Company to maintain a minimum amount of net capital, as defined, and a ratio of aggregate indebtedness to net capital, as defined, not to exceed 15 to 1. Net capital and the related ratio of aggregate indebtedness to net capital may fluctuate on a daily basis. At December 31, 2019, the Company had net capital of\$2,403,019 which is \$2,303,019 in excess of its required net capital of\$100,000. At December 31, 2019, the Company's ratio of aggregate indebtedness to net capital was 0.015 to 1. The Company is currently exempt from compliance with Rules 15c3-3 and 17a-13 under the Securities Exchange Act of 1934, because it does not hold any customer securities or customer cash. ### **3. RELATED PARTY TRANSACTIONS** Certain expenses incurred are allocated between DJS and the Company pursuant to an agreed-upon allocation percentage based on the nature of the expense. Amounts due to/from the Parent will fluctuate based on these expense allocations and are reflected on the statement of financial condition as a Due to Parent. Substantially all of the Company's revenue is commissions and fees resulting from transactions with an investment advisor related through common ownership. {14}------------------------------------------------ #### Notes to Financial Statements December 31, 2019 ### **4. COMMITMENTS** The Parent is obligated under lease agreements for office space expiring October 3 I, 2022, November 30, 2023, June 30, 2023 and December 31, 2024 in four locations throughout Massachusetts. The company's expected share of future rent commitments as part of the expense sharing agreement is as follows: Year ended December 31: | 2020 | 57,023 | |------|------------| | 2021 | 57,661 | | 2022 | 56,296 | | 2023 | 47,102 | | 2024 | 34,296 | | | \$ 253,378 | Total rent expense allocated to the Company for the year ended December 31, 2019 was \$21,843. {15}------------------------------------------------ ### Computation ofNet Capital Pursuant to Rule 15c 3-1 of the Securities and Exchange Commission December 31, 2019 #### **Computation of net capital:** | Total shareholder's equity qualified fur net capital | \$ 2,446,555 | |------------------------------------------------------|---------------| | Less: non-allowable assets: | | | Receivable from Broker and Due from Parent | 16,971
\$ | | Prepaid expenses | 13,400 | | Total non-allowable assets | 30,371 | | Less: 2% hair cut -
money market | 13,165 | | Net capital | \$ 2,403,019 | | | | | Computation of basic net capital requirement: | | | Net capital requirment of reporting broker-dealer | 100,000
\$ | | Excess net capital | \$ 2,303,019 | | Aggregate indebtedness | 36,516
\$ | | Percentage of aggregate indebtedness to net capital | 1.5% | There were no material difrerences between the above computation of net capital and the Company's computation as reported in the unaudited Part II ofForm-l 7A-5 as of December 31, 2019 See report of independent registered public accounting firm. {16}------------------------------------------------ ![](_page_16_Picture_0.jpeg) # Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholder of St. Germain Securities, Inc.: We have reviewed management's statements, included in the accompanying Exemption Report, in which (a) St. Germain Securities, Inc. (the "Company") claimed an exemption from 17 C.F.R. \$ 240.15c3-3 under the following provisions of 17 C.F.R. § 240.15c3-3 (k)(2)(ii) (the "exemption provisions") and (b) the Company stated that it met the identified exemption provisions in 17 C.F.R. § 240.15c3-3(k) throughout the most recent fiscal year without exception. The Company's management is responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, includes inquiries and other review procedures to obtain evidence about the Company's compliance with the exemption provisions. 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)(2)(ii) of Rule 15c3-3 under the Securities Exchange Act of 1934. Boston, Massachusetts February 28, 2020 {17}------------------------------------------------ ![](_page_17_Picture_0.jpeg) 1500 Main Street, Springfield, MA 01115 413 - 733-5111 100 Pearl Street, Hartford, CT 06103 860 - 727-9350 Toll Free: 800-443-7624 | St. Germain Securities, Inc. Exemption Report | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | St. Germain 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. §240.17a-5, "Reports to be
made by certain brokers and dealers"). This Exemption Report was prepared as required by 17
C.F.R. § 240.17a-5(d)(1) and (4). To the best of its knowledge and belief, the Company states the
following: | | The Company claimed an exemption from 17 C:F.R. § 240.15c3-3 under the following provisions
of 17 C.F.R. § 240.15c3-3:(k)(2)(ii). | | The Company met the identified exemption provisions in 17 C.F.R. § 240.15c3-3(k) throughout
the most recent fiscal year without exception. | | St. Germain Securities, Inc. | | 1, Michael R. Matty
_, swear (or affirm) that, to my best knowledge and
belief, this Exemption Report is true and correct.
Signature | | President
Title | | | | | | | | | | 14 | | www.stgermaininvestments.com
. | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.