# R.M. STARK & CO., INC. X-17A-5 (2020-12-10) — Broker-dealer annual report
- Company: R.M. STARK & CO., INC.
- Form: X-17A-5
- Filed: 2020-12-10
- Period: 2020-09-30
- Accession: 0000226001-20-000006
- CIK: 226001
- File #: 8-22543
- Material weakness: No
- Auditor: Assurance Dimensions
- Auditor location: Margate, FL
- Contact: Gary Stark
- Phone: 5612433815
- Signed by: Gary Stark (FINOP)
Original filing: https://www.sec.gov/Archives/edgar/data/226001/000022600120000006/rmstark2020_short.pdf
---
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**Financial Statements and Report of Independent Registered Public Accounting Firm Pursuant to Rule 17a-5**
**September 30, 2020**
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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
# ANNUAL AUDITED REPORT FORM X-17A-5 PART III
OMB APPROVAL OMB Number: 3235-0123 Expires: October 31, 2023 Estimated average burden hours per response .. . . . . . . . 12.00
| SEC FILE NUMBER | |
|-----------------|--|
| 8-22543 | |
#### 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 10/01/19 | | AND ENDING 09/30/20 | | |
|---------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|---------------------|--------------------------------|--|
| | MM/DD/YY | | MM/DD/YY | |
| | A. REGISTRANT IDENTIFICATION | | | |
| NAME OF BROKER-DEALER: R.M Stark & Co., Inc | | | OFFICIAL USE ONLY | |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | FIRM L.D. NO. | | |
| 730 South Federal Highway | | | | |
| | (No. and Street) | | | |
| Lake Worth | EL | | 33460 | |
| (City) | (State) | | (Zip Code) | |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Gary Stark, 561-243-3815 | | | | |
| | | | (Area Code - Telephone Number) | |
| | B. ACCOUNTANT IDENTIFICATION | | | |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
Assurance Dimensions | (Name - if individual, state last, first, middle name) | | | |
| | Margate | u | 33063 | |
| 2000 Banks Road, Suite 218
(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 amual report be covered by the opinion of an independent platfield. See Section 241 17-56 \*Claims for exemplion from the regularing the unitud report on or the basis for the exemption. See Section 240.17a-5(e)(2)
> Potential persons who are to respond to the collection of Potential persons who are to respond required to respond
> information contained in this form are not required to respond information contained in this form are not required to roopera
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SEC 1410 (11-05)
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### OATH OR AFFIRMATION
| T Gary Stark | swear (or affirm) that, to the best of | |
|----------------------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------|
| R.M Stark & Co., Inc | | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
as |
| | | |
| of September 30 | 20 ZU | , are true and correct. I further swear (or affirm) that |
of September 30 September 30 neither the company nor any partner, principal officer or director has any proprietary interest in any account
classified solely as that of a customer, except as follows:
| MARY JANE AUMAIS
Signature
AY COMMISSION # GG 094017
President
EXPIRES: July 27, 2021
Bonded Thru Notary Public Underwriters
Title |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Notary Public |
| 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 income 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. |
| (j) 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.
(k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of |
| consolidation. |
| (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). |
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Report of Independent Registered Public Accounting Firm
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# **R.M. STARK & CO., INC**
| STATEMENT OF FINANCIAL CONDITION |
|----------------------------------|
| |
SEPTEMBER 30, 2020
| ASSETS | |
|--------------------------------------------------------|-----------------------|
| Cash
and
Markets
Money | \$
368
475
, |
| Receivable
from
broker/dealers | \$
274
635
, |
| Securities
owned
fair
market
value
, at | \$
130 |
| Prepaid
expense and
other | \$
33
377
, |
| Right
of
Asset
Use
- Lease | \$
53
270
, |
| TOTAL
ASSETS | \$
729
887
, |
| LIABILITIES
AND
SHAREHOLDER'S
EQUITY | | | | | |
|--------------------------------------------------------------------------|----|-----------------|--|--|--|
| LIABILITIES | | | | | |
| Accounts
payable
, accrued
expenses and
other
liabilities | \$ | 91
947
, | | | |
| Commissions
payable | \$ | 151
005
, | | | |
| Liability
Lease | \$ | 53
575
, | | | |
| TOTAL
LIABILITES | \$ | 296
527
, | | | |
| SHAREHOLDER'S
EQUITY | | | | | |
| Stock
, no par value
, authorized
Common | | | | | |
| 2
000
000
875
shares
issued
,
,
, | \$ | 326
145
, | | | |
| Retained
Earnings | \$ | 107
215
, | | | |
| | | | | | |
| TOTAL
SHAREHOLDER'S
EQUITY | \$ | 433
360
, | | | |
| TOTAL
LIABILITES
AND
SHAREHOLDER'S
EQUITY | \$ | 729
887
, | | | |
See accompanying notes to financial statements
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# **NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES**
*Organization* – R.M. Stark & Co., Inc. (the "Company"), a wholly-owned subsidiary of RMST Holding Company, Inc. (the "Parent"), was incorporated in the state of Florida on September 29, 1988. The Company is registered with the Securities and Exchange Commission and is a member of the Financial Industry Regulatory Authority (FINRA). The Company's principal business activity is the sale of securities.
RMST Holding Company, Inc had a 100% change of ownership to an unrelated party where by member interest of parent company is now owned by Premium 72 Capital.
*Basis of Presentation* - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").
*Securities Transactions* - Securities transactions of the Company, including commission revenue and related expense, are recorded on a trade date basis, which is the same business day as the transaction date.
*Concentrations of Credit Risk* - The Company is engaged in various trading and brokerage activities in which the counterparties primarily include broker/dealers, banks, other financial institutions and the Company's own customers. In the event the counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counterparty.
In addition, most of the Company's cash is on deposit at one financial institution and the balance at times may exceed the federally insured limit. The Company's money market fund is covered by SIPC up to \$500,000. The Company believes it is not exposed to any significant credit risk to cash.
*Estimates* - The preparation of financial statements in conformity with 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
As of September 30th, 2020, the Company estimated \$33,377 of prepaid expenses which is composed of prepaid insurance for 10 months as well as a CRD deposit with FINRA for any appliable expenses.
*Cash and Cash Equivalents policy -* The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. The Company had cash equivalents of \$367,601 as of September 30, 2020.
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### **Note 1 Cont.**
*Receivables* - The Company reviews the receivables for collectability on a regular basis. The allowance for doubtful accounts reflects management's best estimate of probable losses determined principally on the basis of historical experience. The allowance for doubtful accounts was \$0 at September 30, 2020.
In 2019, the Company wrote off \$44,090 of Commissions Receivable. These monies were later collected and recorded as a credit to Bad Debt Expense in the accompanying statement of operations.
### *Revenue Recognition*
The Company adopted Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers on October 1, 2018, the date the guidance became effective for us. The Company adopted the guidance using the modified retrospective method (i.e. applied prospectively effective October 1, 2018), which had no impact on the Company's opening retained earnings. Further, the Company determined that there was no material impact to the Company's recognition of revenue upon adoption of Topic 606. All revenues are recorded in accordance with ASC 606, which is recognized when: (i) a contract with a client has been identified, (ii) the performance obligation(s) in the contract have been identified, (iii) the transaction price has been determined, (iv) the transaction price has been allocated to each performance obligation in the contract, and (v) the Company has satisfied the applicable performance obligation over time / point in time. We have completed the process of evaluating the effect of the adoption and determined there were no material changes required to our reported revenues as a result of the adoption.
The Company principally earns revenue (commissions) from brokerage activities, which are recognized on a trade date basis. Investment banking income includes fees earned for financial advisory and placement services. The company did not have any investment banking Revenue this fiscal year. Financial advisory fees revenues are earned throughout the term of the financial advisory agreement. Fees for placement services are recognized when the placement is completed, and the collection of the fee is reasonably determined. Margin interest is earned monthly based upon customer margin balances.
Proprietary securities transactions in trades are recorded on the trade date, as if they had settled. Profit and loss arising from all securities and commodities transactions entered into for the account and risk of the Company are recorded on the trade date basis. The net trading gain/loss is recorded under revenue in accordance with ASC Topic 940, "Financial Services-Brokers and Dealers" since it is not within scope of the new revenue recognition guidance ASC 606 "Revenue from Contracts with Customers".
Revenues are not concentrated in any region of the country or with any individual or group. The firm's commissions are primarily derived from a combination of a limited number of retail accounts and institutional execution services.
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### *Note 1 Cont.*
### *Recent Accounting Pronouncements*
The Company adopts all applicable, new accounting pronouncements as of the specified effective dates.
In February 2016, the FASB issued new guidance related to the accounting for leases (ASU 2016- 02). The new guidance requires the recognition of assets and liabilities on the balance sheet related to the rights and obligations created by lease agreements with terms greater than twelve months, regardless of whether they are classified as finance or operating leases. See note 6.
# **NOTE 2. FAIR VALUE MEASUREMENT**
FASB ASC 820 defines fair value, creates a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. 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 FASB 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 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities the Company has the ability to access.
• Level 2 inputs are inputs (other than quoted prices included within level 1) that are observable for the asset or liability, either directly or indirectly.
• Level 3 inputs are unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability.
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#### *Note 2 cont.*
| | Fair Value as of | | |
|------------------------|--------------------|---------|-----|
| Description | September 30, 2020 | Level 1 | |
| Equities | \$
130 | \$ | 130 |
| Total Securities owned | \$
130 | \$ | 130 |
All broker/dealer receivables, accounts payable and accrued expenses have been valued at net realizable value. No valuation techniques have been applied to all other assets and liabilities included in the statement of financial condition. Due to the nature of these items, all have been recorded at their historical values.
### **NOTE 3. INCOME TAXES**
Both the Company and its Parent have elected S Corporation status for federal income tax purposes. Income taxes are therefore the responsibility of the individual shareholders of the Parent. The Company accounts for any potential interest or penalties related to possible future liabilities for unrecognized income tax benefits as other expense. The Company is no longer subject to examination by tax authorities for federal, state or local income taxes for periods before 2017.
# **NOTE 4. OFF- BALANCE-SHEET RISK AND CLEARING AGREEMENT**
The Company enters into various transactions involving derivatives and other off-balance sheet financial instruments. These financial instruments include listed options. These derivative financial instruments are used to meet the needs of customers, conduct investment activities and manage risks and are, therefore, subject to varying degrees of market and credit risk. Derivative transactions are entered into for trading purposes or to economically hedge other positions or transactions. All investments are level 1 and most were liquidated as of September 30, 2020 with a minimal amount left.
As a writer (seller) of options, the Company and its customers receive a premium in exchange for giving the counterparty the right to buy or sell the security at a future date at a contracted price. The contractual or notional amount related to these financial instruments reflects the volume and activity and does not reflect the amount of risk.
The credit risk for options is limited to the unrealized market valuation gains recorded in the statement of financial condition. Market risk is substantially dependent upon the value of the underlying financial instruments and is affected by market forces such as volatility and changes in interest and foreign exchange rates.
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### *Note 4 Cont.*
In addition, the Company and its customers sell securities that they do not currently own and will therefore be obligated to purchase such securities at a future date. The Company records these obligations in the financial statements at market values of the related securities and will incur a loss if the market value of the securities increases subsequent to the financial statement date.
In order to facilitate the aforementioned transactions, as well as other transactions, the Company maintains an agreement with another broker/dealer (Clearing Broker/dealer) whereby the Company forwards (introduces) customer securities transactions to the Clearing Broker/dealer, fully disclosing the customer name and other information. The processing and, if applicable, any financing pertaining to the introduced securities transactions are performed by the Clearing Broker/dealer.
The customer account is therefore maintained and recorded in the books and records of the Clearing Broker/dealer on the Company's behalf. In consideration for introducing customers to the Clearing Broker/dealer, the Company receives commissions and other consideration, less the processing and other charges of the Clearing Broker/dealer. As part of the terms of the agreement between the Company and the Clearing Broker/dealer, the Company is held responsible for any losses arising when the customers introduced by the Company to the Clearing Broker/dealer fail to meet their contractual commitments pertaining to the purchase, sale and possible financing of securities transactions. The Company may therefore be exposed to off-balance-sheet risk in the event the customer is unable to fulfill its contracted obligations and it is necessary for the Clearing Broker/dealer to purchase or sell the securities at a loss. The Company's exposure to risk would consist of the amount of the loss realized and any additional expenses incurred pertaining to the transaction or other customer activity. The initial term of the aforementioned agreement was three years, which began in September 2003. Under terms of the agreement the Company is required to maintain \$100,000 deposit with Clearing Broker/dealer and is prohibited from using other Clearing Broker/dealers for securities transactions unless written consent is given by the Clearing Broker/dealer. Also included in the agreement are monthly minimum and termination charges.
### **NOTE 5. NET CAPITAL REQUIREMENTS**
As a registered broker/dealer and member of FINRA, the Company is subject to the Uniform Net Capital Rule, 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 1500%. At September 30, 2020, the Company's net capital and required net capital were \$390,671 and \$100,000 respectively. The ratio of aggregate indebtedness to net capital was 61.62%.
The Company originally filed its year-end FOCUS IIA showing an ending net capital of \$435,066.
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### **NOTE 6. Leases**
Effective October 1, 2019, the Company adopted the new lease accounting guidance in Accounting Standards Update No. 2016-02, Leases (Topic 842). The Company's current office space is leased on a 3 year basis for \$2,150 per month as of the fiscal year end. As a result of the adoption of the new lease accounting guidance, the Company recognized on October 1, 2019 (a) a lease liability of \$76,018, which represents the present value of the payments of \$78,397, discounted using the Company's incremental borrowing rate of 2%, and (b) a right of use asset of \$76,018
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of September 30, 2020:
| Year | Office Lease |
|---------------------------------|--------------|
| 2021 | \$
26,108 |
| 2022 | 28,640 |
| Total Lease payments | 54,748 |
| Less:
Interest | 1,173 |
| Present Value of lease payments | 53,575 |
### **NOTE 7. 401 (k) Plan**
The Company adopted a deferred compensation plan commonly referred to as a profit-sharing plan with provisions under IRS code section 401(k) whereby employees may contribute up to 75% of their compensation within specified legal limits. In addition, the Company will match 50% of employee contributions up to 6% of their compensation. The plan covers substantially all employees age 19 years or older. The Company changed the plan year to a calendar year end. Company contributions to the plan for the year ended September 30, 2020 were \$27,362.
### **NOTE 8. RELATED PARTIES**
Stark Financial Advisers, Inc. is an affiliate of R.M. Stark & Co., Inc. In some cases, the firms share common clients. Certain joint clients with assets custodian at Pershing enter into wrap-fee relationships where one fee covers both the execution costs that are paid to R.M. Stark and Co., and management fees that are paid to Stark Financial Advisers. Wrap-fees are typically charged against the assets held at Pershing and then credited to R.M. Stark. R.M. Stark then pays Stark Financial Advisers the portion of the fees deemed to be management fees. During the year ended September 30, 2020, the Company paid \$73,211 of their portion of the management fees.
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#### **NOTE 9. CONTINGENCIES**
The Company, from time to time, is involved in certain claims and arbitrations incidental to its business operations. The Company actively investigates these matters and takes the appropriate steps to defend itself against these claims. The Company has not accrued any amounts related to these claims at September 30, 2020.
Roberta O'Grady v. R.M. Stark & Co., Inc., Thomas J. Marino, Individually and Capstone Financial Group, LLC, et al. FINRA Case No. 19-00968. O'Grady alleges that she invested approximately \$300,000 with Marino and his personal company Capstone Financial while Marino was registered with R.M. Stark & Co., Inc. ("RMST"). The Company settled the case agreeing to pay \$245,000. The settlement was paid directly by the owner with no intent of being reimbursed by R.M. Stark & Co., Inc. This payment was treated as a capital contribution during the year ended September 30, 2020.
Nicholas A. Owoyemi v. Financial Industry Regulatory Authority, R.M. Stark & Co., Inc., Chase Investments Services Corporation and Merrimac Corporate Securities, Inc. New York Supreme Court Case 2019/2019. R.M. Stark filed individual motions to dismiss the state court action and compel FINRA arbitration. Owoyemi failed to oppose R.M. Stark's motion and thus the motion was granted by default. Owoyemi was ordered to proceed in arbitration. Owoyemi filed a motion to set aside the order granting R.M. Stark's motion to compel arbitration. Owoyemi's motion to set aside the default was denied. If Owoyemi proceeds, he will be forced to initiate FINRA arbitration and litigate issues there. The suit is totally without merit and the Company has an excellent case to recover legal fees and related costs.
Management has concluded that the COVID-19 outbreak in 2020 may have a significant impact on business in general, but the potential impact on the Company is not currently measurable. Due to the level of risk this virus may have on the global economy, it is at least reasonably possible that it could have an impact on the operations of the Company in the near term that could materially impact the Company's financials. Management has not been able to measure the potential financial impact on the Company but will review commercial and federal financing options should the need arise.
#### **NOTE 10. SUBSEQUENT EVENTS**
The Company has evaluated events and transactions that occurred subsequent to September 30, 2020, for possible disclosure or recognition in the financial statements. The Company has determined that there were no such events or transactions that warrant disclosure or recognition in the financial statements through the date these financial statements were available to be issued, December 10, 2020.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.