# CETERA ADVISORS LLC X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: CETERA ADVISORS LLC - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0000356437-22-000002 - CIK: 356437 - File #: 8-26892 - Type: Broker-dealer - Material weakness: No - Auditor: Deloitte & Touche LLP - Auditor location: Los Angeles, CA - Contact: Keith Matz - Phone: 3206564316 - Email: tim.bowman@cetera.com - Website: cetera.com - Signed by: Timothy Bowman (Financial Principal) Original filing: https://www.sec.gov/Archives/edgar/data/356437/000035643722000002/capub.pdf --- {0}------------------------------------------------ CETERA ADVISORS LLC AND SUBSIDIARY (SEC I.D. No. 8-26892) CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021 AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Filed pursuant to Rule 17a-5(d) under the Securities Exchange Act of 1934 as a Public Document {1}------------------------------------------------ ## **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** # **ANNUAL REPORTS FORM X-17A-5 PART** Ill | 0MB APPROVAL | | | |--------------------------|----|--| | 0MB Number: 3235-0123 | | | | Expires: Oct. 31, 2023 | | | | Estimated average burden | | | | hours per response: | 12 | | # SEC FILE NUMBER 8-26892 **FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING **O 1/01/2021** MM/DD/VY AND ENDING **12f31 f2021** MM/DD/VY **A. REGISTRANT IDENTIFICATION** NAME oF FIRM: Cetera Advisors LLC TYPE OF REGISTRANT (check all applicable boxes): ~ Broker-dealer □ Security-based swap dealer D Check here if respondent is also an OTC derivatives dealer □ Major security-based swap participant ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) 5299 OTC Blvd #800 (No. and Street) Greenwood Village CO 80111 (City) (State) (Zip Code) PERSON TO CONTACT WITH REGARD TO THIS FILING Tim Bowman (619) 881-5262 Tim.Bowman@cetera.com (Name) (Area Code - Telephone Number) (Email Address) **B. ACCOUNTANT IDENTIFICATION** INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing\* Deloitte & Touche LLP (Name - if individual, state last, first, and middle name) 555 W. 5th Street, Floor 2700 Los Angeles CA 90013 (Address) (City) (State) (Zip Code) October 20, 2003 **34 rte of R,g;,trat;oo wUh PCAOB)(;f appbcable) FOR OFFICIAL USE ONLY )PCAOB R,g;,tcafoo Nombec, ;f appbcable)** I \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as t he basis of the exemption. See 17 CFR 240.17a-5(e)(l)(ii), if applicable. **Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid 0MB control number.** Public {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, Tim Bowman | | swear (or affirm) that, to the best of my knowledge and belief, the | | |--------------------------------------------------------------------------------|----|-----------------------------------------------------------------------------------|-------| | financial report pertaining to the firm of Cetera Advisors LLC (the "Company") | | | as of | | December 31 | 2~ | is true and correct. I further swear (or affirm) that neither the company nor any | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. Title: ~ea2e *See* A+:tq.chd Principal Financial Officer Notary Public # **This filing\*\* contains (check all applicable boxes}:** - ~ (a) Statement of financial condition. - ~ (b) Notes to consolidated 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 (d) Statement of cash flows. - D (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - □ (f) Statement of changes in liabilities subordinated to claims of creditors. - D (g) Notes to consolidated financial statements. - D (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-l, as applicable. - □ (i) Computation of tangible net worth under 17 CFR 240.18a-2. - □ (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - D (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.15c3-3. - □ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - □ (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.1Sc3-l, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - ~ (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - □ (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - ~ (t) Independent public accountant's report based on an examination of the statement of financial condition. - □ (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - D (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement t hat no material inadequacies exist, under 17 CFR 240.17a-12(k). D(z) Other:--- ------------------- - --------------- - - *\*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7{d)(2), as applicable.* {3}------------------------------------------------ #### **CALIFORNIA JURAT WITH AFFIANT STATEMENT GOVERNMENT CODE § 8202** See Attached Document (Notary to cross out lines 1-6 below) □ See Statement Below (Lines 1-6 to be completed only by document signer[s], not Notary) -,..,,,,.,,, \_\_\_\_\_ ~------------------------------------ ---------------- 2 3 4 5 6 ~----------------- - Signature of Document Signer No. 1 Signature of Document Signer No. 2 (if any) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California •••••••• TRAN MY LY **l** Notary Public - California San Die-so County ! Commission# 23421 85 **y** Comm. Expires Jan 18. 2025 Place Notary Seal and/or Stamp Above Subscribed and sworn to (or affirmed) before me on this *L-5* day of~~YLAC\.u 20-ZZ-., by Date Month Year (1) ~YD ~vY\9',V"\ (and (2) \_\_\_\_\_\_\_\_\_\_\_\_\_\_ ), Name(s) of Signer(s) proved to me on the basis of satisfactory evidence to be the person(s) who appeared before me. Signature -----~~---------- Signature of Notary Public **~----------------OPTIONAL------------------,** Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. **Description of Attached Document** Title or Type of Document: \_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_ \_ Document Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_ Number of Pages: \_\_\_\_\_\_\_ \_ Signer(s) Other Than Named Above: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_ **~00:QOlJ:QBO~ta RC a : J Of!O:J'.J:o E S 21 C D §:flO:B:rno:o:g:§ D 0( 6 §:[} BC 013=@ § 0 §0:§ § 0 S 00000** ©2019 National Notary Association {4}------------------------------------------------ # **Deloitte.** #### **Deloitte & Touche LLP** 555 W. 5th Street, Suite 2700 Los Angeles, CA 90013-1010 USA Tel : +1 213 688 0800 Fax : +1 213-688 0100 www .deloitte.com #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Member of Cetera Advisors LLC #### **Opinion on the Financial Statement** We have audited the accompanying consolidated statement of financial condition of Cetera Advisors LLC and its subsidiary (the "Company") as of December 31, 2021, and the related notes ( collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We are a public accounting finn registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial 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 fmancial 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 fmancial statement. 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 statement. We believe that our audit of the financial statement provides a reasonable basis for our opinion. February 25, 2022 We have served as the Company's auditor since 2016. {5}------------------------------------------------ # **CETERA ADVISORS LLC AND SUBSIDIARY** # **CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021** | ASSETS | | |-----------------------------------------------------------------|------------------| | Cash and cash equivalents | \$
17,720,055 | | Fees and commissions receivable | 21 ,161 ,368 | | Receivable from clearing broker | 937,031 | | Related party receivables | 11 ,779 | | Other receivables | 2,463,208 | | Deferred charges | 4,592,990 | | Intangible assets, net of accumulated amortization of \$344,809 | 2,541,191 | | Goodwill | 6,089,000 | | Other assets | 1,950,350 | | Total assets | \$
57,466,972 | | | | | LIABILITIES AND MEMBER'S EQUITY | | | LIABILITIES | | | Fees and commissions payable | \$
20,054,902 | | Related party payables | 225,024 | | Accrued expenses and accounts payable | 529,248 | | Accrued compensation | 1,182,365 | | Deferred revenue | 1,168,922 | | Deferred credit | 1,644,585 | | Regulatory and litigation reserves | 2,930,000 | | Other liabilities | 945,849 | | Total liabilities | 28,680,895 | | COMMITMENTS AND CONTINGENCIES (NOTE 10) | | | MEMBER'S EQUITY | 28,786,077 | | Total liabilities and member's equity | \$
57,466,972 | The accompanying notes are an integral part of this Consolidated Statement of Financial Condition. {6}------------------------------------------------ ## **CETERA ADVISORS LLC AND SUBSIDIARY** # **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021** #### **NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE COMPANY** Cetera Advisors LLC (the "Company") is an introducing broker-dealer registered under the Securities Exchange Act of 1934, a registered investment advisor, and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). The Company and its subsidiary, Cetera Advisors Insurance Services LLC, provide brokerage, investment advisory and planning, and insurance services to individuals nationally through independent financial advisors. The Company is a wholly owned subsidiary of Cetera Financial Group, Inc. ("Cetera Financial") which is a wholly owned subsidiary of Cetera Financial Holdings, Inc. ("Cetera Holdings"). Cetera Holdings is a wholly owned subsidiary of Aretec Group, Inc. ("Aretec"). Aretec is a direct wholly owned subsidiary of GC Two Intermediate Holdings, Inc. which is a wholly owned subsidiary of GC Two Holdings, Inc. #### **NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### **Basis of Presentation** The Consolidated Statement of Financial Condition was prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). #### **Use of Estimates** The preparation of the Consolidated Statement of Financial Condition in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the Consolidated Statement of Financial Condition. Accordingly, actual results could differ from those estimates, and these differences could be material. #### **Reportable Segment** The Company operates exclusively in the United States as one operating segment as it only reports financial information on an aggregate basis to its chief operating decision makers. #### **Cash and Cash Equivalents** Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and that are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. #### **Fees and Commissions Receivable and Payable** Fees and commissions receivable includes commissions from mutual funds, variable annuities, insurance product purchases transacted directly with the product sponsors, and mutual fund and annuity trailers. Fees and commissions payable related to these transactions are recorded based on estimated payout ratios for each product as commission revenue is accrued. #### **Receivable from Clearing Broker** Receivable from clearing broker represents commissions and fees earned and collected by the Company's clearing broker, but not yet remitted to the Company. {7}------------------------------------------------ #### **Other Receivables** Other receivables primarily consist of accrued receivables from the Company's clearing broker related to fees charged to client accounts. #### **Securities Owned and Securities Sold, Not Yet Purchased** Securities owned and securities sold, not yet purchased are recorded on a trade date basis and are stated at fair value. As of December 31, 2021, securities owned of \$136,708 are included in Other assets and securities sold, not yet purchased of \$4,144 included in Other liabilities in the Consolidated Statement of Financial Condition. See Note 3 - Fair Value Measurements for more information. #### **Deferred Charges** Deferred charges primarily consist of unamortized conversion and recruiting allowances provided to the Company's financial institution investment programs. The recruiting allowances are amortized over the advisor's estimated useful life of approximately 20 years while transition allowances are typically amortized over the estimated customer useful life of five years. As of December 31, 2021, the Company had unamortized deferred charges of \$4,592,990. As of December 31, 2021, the weighted average remaining useful life was 14.1 years. #### **Deferred Credits** Deferred credits primarily consist of rebates received on the signing of the Company's clearing services contract with Pershing LLC, which is accreted on a straight-line basis. The unaccreted deferred credits of\$ 1,644,585 is included in Deferred credit in the Consolidated Statement of Financial Condition and will be accreted over the remaining life of 3. 75 years. #### **Other Assets** Other assets include property and equipment is recorded to Other assets (see Note 5 - "Property and Equipment") and prepaid expenses. #### **Deferred Revenue** The Company records unearned income when cash payments are received or due in advance of its performance obligation, including amounts which are refundable. #### **Contract Acquisition Costs** The Company identifies all significant costs to obtain or fulfill a contract with a customer. These costs generally fall within referral costs, financial advisor related costs, and transfer costs incurred by underlying customers of the acquired financial advisor. Transfer costs related to customers are recognized as assets and are amortized over the estimated customer relationship life on a straight-line basis. Referral costs and other financial advisor related costs are recognized as assets and are amortized over the estimated financial advisor relationship life on a straight-line basis. These assets are presented as Deferred charges on the Company's Consolidated Statement of Financial Condition. To the extent that these costs are initially estimated and accrued for, adjustments are made based on actual costs incurred. #### **Recently Issued Accounting Pronouncements** There are no recently issued accounting pronouncements that would materially impact the Company's Consolidated Statement of Financial Condition and related disclosures. {8}------------------------------------------------ #### **NOTE 3 - ACQUISITION** On December 31, 2020, the Company and Magis Financial Partners, Inc. ("Magis") entered into a stock purchase agreement ("Agreement") under which the Company would acquire Magis' Registered Investment Advisory business. Mag is was already affiliated, as a region, with the Company and the purpose of the Agreement is for the Company to acquire interest in Magis' future earnings. The closing date of the agreement was March 1, 2021 . At the closing date, the Company recorded the initial purchase price of \$9.3 million, subject to customary purchase price adjustments, and allocated the purchase price to the assets acquired and liabilities assumed as follows: #### **Assets Acquired** | Fees and Commissions Receivable | \$
291,876 | |---------------------------------|-----------------| | Other Receivables | 30,500 | | Other Assets | 9,361 | | Intangible Assets | 2,886,000 | | Goodwill | 6,089,000 | | Net Assets Acquired | \$
9,306,737 | #### **NOTE 4 - FAIR VALUE MEASUREMENTS** The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP defines three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. Level 3 - Unobservable inputs that reflect the entity's own assumptions about the data inputs that market participants would use in the pricing of the asset or liability and are consequently not based on market activity. The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is the most significant to the fair value measurement in its entirety. A review of the fair value hierarchy classification is conducted on an annual basis. Changes in the type of inputs used in determining fair value may result in a reclassification for certain assets. The Company assumes all transfers occur at the beginning of the reporting period in which they occur. {9}------------------------------------------------ The Company's fair value hierarchy for those assets measured at fair value on a recurring basis by product category as of December 31, 2021 is as follows: | | Level1 | Level2 | Level3 | Total | |----------------------------------------------|--------------|--------|--------|--------------| | Assets: | | | | | | Cash equivalents - money market funds | \$
64,083 | \$ | \$ | \$
64,083 | | Securities owned - recorded in other assets: | | | | | | Equity securities | 136,708 | | | 136,708 | | Total | \$ 200,791 | \$ | \$ | \$ 200,791 | | | | | | | | | Level1 | Level2 | Level3 | Total | | Liabilities: | | | | | | Securities sold, not yet purchased - | | | | | | recorded in other liabilities: | | | | | | Equity securities | 4,144
\$ | \$ | \$ | 4,144
\$ | | Total | \$
4,144 | \$ | \$ | \$
4,144 | Cash equivalents include money market mutual fund instruments, which are short term in nature with readily determinable values derived from active markets. Equity securities with sufficient trading volume are fair valued by management using quoted prices for identical instruments in active markets. Accordingly, these securities are classified within Level 1. #### **Fair Value of Financial Instruments not Measured at Fair Value** The fair value of cash and cash equivalents was estimated to approximate the carrying value and are classified as Level 1 of the fair value hierarchy. The fair value of receivables from product sponsors, clearing organizations, and other receivables, accounts payable, accrued expenses, related party payable, and other payables was estimated to approximate the carrying value and are classified as Level 2 of the fair value hierarchy due to their short-term nature. #### **NOTE 5** - **PROPERTY AND EQUIPMENT** Property and equipment are recorded at cost, net of accumulated depreciation and amortization and recorded in Other assets on the Consolidated Statement of Financial Condition. Office furniture is depreciated using the straight-line method over their estimated useful lives of 3 years. Leasehold improvements are amortized over the lesser of their useful lives or the term of the lease. Property and equipment consisted of the following at December 31 , 2021 : | Leasehold improvements | \$
902,759 | |-----------------------------------|---------------| | Office furniture | 216,097 | | Total property and equipment | 1,118,856 | | Less: Accumulated depreciation | (229,811) | | Total property and equipment, net | \$
889,045 | {10}------------------------------------------------ #### **NOTE 6** - **GOODWILL AND OTHER INTANGIBLE ASSETS** A summary of the activity in goodwill is presented below: | Balance at December 31, 2020 | \$ | |------------------------------|-----------------| | Goodwill Acquired | 6,089,000 | | Balance at December 31, 2021 | \$
6,089,000 | The following tables present the components of intangible assets with definite lives subject to amortization at December 31, 2021 : | As of December 31, 2021 | Gross
Carrying
Amount | Accumulated
amortization | Net
Carrying
Amount | Weighted
Average
Remaining
Useful Life
(lears} | |--------------------------------|-----------------------------|-----------------------------|---------------------------|------------------------------------------------------------| | Financial advisor relationship | \$
2,860,000 | \$
(340,476) | \$
2,519,524 | 6.2 | | Trade names | 26,000 | {4,333} | 21,667 | 4.2 | | Total | \$
2,886,000 | \$
{344,809~ | \$
2,541,191 | | The Company amortizes intangible assets with definite lives on a straight-line basis over their useful lives. Note of the intangible assets with definite lives is anticipated to have a residual value. #### **NOTE 7** - **EMPLOYEE BENEFIT PLANS** The employees of the Company are covered by an Internal Revenue Code Section 401 (k) defined contribution plan and a health and welfare plan that are administered by Cetera Financial. Subject to eligibility requirements, all employees are eligible to participate. The 401 (k) plan features an employer-matching program. The health and welfare plan is a self-insured plan sponsored by Cetera Financial. Costs of the plans are allocated to the Company based on rates determined by Cetera Financial. The Company had no separate employee benefit plan in 2021 and relied on Cetera Financial to cover all eligible employees. All benefits that were paid by Cetera Financial were charged back to the Company for reimbursement. # **NOTE 8- RELATED PARTY TRANSACTIONS** Cetera Financial allocates a portion of its general administrative expenses to the Company based upon factors including assets under management, sales volume, number of personnel, and producing advisors. Because these transactions and agreements are with affiliates, they may not be the same as those recorded if the Company was not a wholly owned subsidiary of Cetera Financial. As of December 31, 2021, outstanding payables to Cetera Financial of \$152,356 were included in Related party payable. In addition, the Company had \$72,668 related party payable with other affiliates. Cetera Financial may fund note receivables as part of the recruitment effort to the Company's advisors. Those notes typically require the payback of principal and interest to Cetera Financial over periods of three to four years. The issuance of these notes by Cetera Financial is typically accompanied by the execution of a bonus agreement, between the financial advisor and the Company, providing for the payment based on the attainment of certain production targets. Cetera Investment Services LLC ("CIS"), an affiliate, provides custodial services for certain customer retirement accounts of the Company. As of December 31, 2021, outstanding receivable from CIS of \$6,568 was included in Related party receivables. In addition, the Company had \$5,211 of related party receivables with other affiliates. Given the credit agreements Aretec has with its lenders, in the event of a default the Company's assets could be used to satisfy Aretec's obligations. {11}------------------------------------------------ #### **NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET CREDIT RISK** Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposit and other accounts, the balances of which, at times, may exceed federally insured limits. Exposure to credit risk is reduced by maintaining the Company's banking relationships with high credit quality financial institutions. #### **NOTE 10 - COMMITMENTS AND CONTINGENCIES** **Legal and regulatory proceedings related to business operations** - The Company is involved in legal proceedings from time to time arising out of business operations, including arbitrations and lawsuits involving private claimants, subpoenas, investigations and other actions by government authorities and self-regulatory organizations. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases in which claimants seek indeterminate damages, the Company cannot estimate what the possible loss or range of loss related to such matters will be. The Company recognizes a loss with regard to a legal proceeding when it believes it is probable a loss has occurred and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. At December 31,2021, the Company had litigation reserve of \$1.2 million. The Company maintains insurance coverage, including general liability, directors and officers, errors and omissions, excess entity errors and omissions and fidelity bond insurance. The Company is a registered broker-dealer and, as such, is subject to the continual scrutiny of those who regulate its industry, including FINRA, the United States Securities and Exchange Commission ("SEC"), and the various securities commissions of the states and jurisdictions in which it operates. As part of the regulatory process, the Company is subject to routine examinations, the purpose of which is to determine the Company's compliance with rules and regulations promulgated by the examining regulatory authority. It is not uncommon for the regulators to assert, upon completion of an examination, that the Company has violated certain of these rules and regulations. Where possible, the Company endeavors to correct such asserted violations. In certain circumstances, and depending on the nature and extent of the violations, the Company may be subject to disciplinary action, including fines. The Company is being investigated by the SEC regarding whether the Company breached its fiduciary duties or other obligations by receiving SEC Rule 12b-1 fees from mutual funds and other fees in investment advisory accounts, including but not limited to revenue sharing payments and "markups" on expenses from its clearing firm. During the year ended December 31, 2019, the Company recognized a liability as it believes it is probable a liability has occurred and disgorgement costs related to remediating the claims asserted have been estimated to be \$1.7 million, inclusive of any applicable interest or civil penalties. Defense costs related to legal and regulatory proceedings are expensed as incurred. When there is indemnification or insurance, the Company may engage in defense or settlement and subsequently seek reimbursement for such matters. **Clearing broker-** Under the clearing arrangement with the clearing broker, the Company is required to maintain certain minimum levels of net capital and other financial ratio requirements. As of December 31, 2021 the Company complied with such requirement. #### **NOTE 11 - NET CAPITAL REQUIREMENTS** The Company is subject to the SEC Uniform Net Capital Rule 15c3-1. The Company computes its net capital pursuant to the alternative method provided for in the Rule 15c3-1, which requires the maintenance of minimum net capital of the greater of \$250,000 or 2% of aggregate debit items. At December 31, 2021, the Company had net capital of \$4,819,706 which was \$4,569,706 in excess of required net capital of \$250,000. {12}------------------------------------------------ #### **NOTE 12 - RESERVE REQUIREMENTS AND INFORMATION RELATING TO THE POSSESSION OR CONTROL REQUIREMENTS FOR BROKERS AND DEALERS** The Company claims an exemption from the provisions of Rule 15c3-3 of the Securities Exchange Act of 1934, pursuant to paragraph k(2)(ii) for all other transactions cleared on a fully disclosed basis with a clearing broker and that our other business activities met the requirements specified in Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 ("Footnote 74"). The Company carries no customers' accounts, promptly transmits customer funds and customer securities to the issuer or the clearing broker and does not otherwise hold funds or securities of customers. Because the Company claims an exemption, the Company is not required to prepare a determination of reserve requirements for brokers and dealers or provide information relating to possession or control requirements for brokers and dealers. # **NOTE 13-CONSOLIDATED SUBSIDIARY** The following is a summary of certain consolidating financial information of the Company's consolidated subsidiary, Cetera Advisors Insurance Services LLC, including eliminations, as of December 31 , 2021 . | Total assets | \$
28,563 | |-------------------|--------------| | Total liabilities | | | Member's equity | \$
28,563 | # **NOTE14-SUBSEQUENTEVENTS** The Company has evaluated activity through the date the Consolidated Statement of Financial Condition was issued and concluded that no subsequent events have occurred that would require recognition or disclosure in the financial statements. \*\*\*\*\*\* Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.