# CETERA FINANCIAL SPECIALISTS LLC X-17A-5 (2023-02-23) — Broker-dealer annual report
- Company: CETERA FINANCIAL SPECIALISTS LLC
- Form: X-17A-5
- Filed: 2023-02-23
- Period: 2022-12-31
- Accession: 0000700380-23-000004
- CIK: 700380
- File #: 8-27082
- Type: Broker-dealer
- Material weakness: No
- Auditor: Deloitte & Touche LLP
- Auditor location: Los Angeles, CA
- Contact: Tim Bowman
- Phone: 619-881-5262
- Email: bowman@cetera.com
- Website: cetera.com
- Signed by: Tim Bowman (Principal Financial Officer)
Original filing: https://www.sec.gov/Archives/edgar/data/700380/000070038023000004/cfspub.pdf
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CETERA FINANCIAL SPECIALISTS LLC (SEC I.D. No. 8-27082)
FINANCIAL STATEMENT CONDITION AS OF DECEMBER 31, 2022 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
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| | SECURITIES AND EXCHANGE COMMISSION | | | | | | |
| | | | | | | | |
| | | ANNUAL REPORTS | | SEC FILE NUMBER | | | |
| | | FORM X-17A-5 | | 8-27082 | | | |
| | | PART III | | | | | |
| Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | | FACING PAGE | | | | | |
| FILING FOR THE PERIOD BEGINNING 01/01/2022 AND ENDING 12/31/2022 | | | | | | | |
| | | MM/DD/YY | | MM/DD/YY | | | |
| | | A. REGISTRANT IDENTIFICATION | | | | | |
| NAME OF FIRM: Cetera Financial Specialists LLC | | | | | | | |
| TYPE OF REGISTRANT (check all applicable boxes):
@ Broker-dealer
L Check here if respondent is also an OTC derivatives dealer
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | | |
| 1450 American Lane, 6th Floor, Suite #650 | | | | | | | |
| | | (No. and Street) | | | | | |
| | Schaumburg | | | 60173 | | | |
| (City) | | (State) | | (Zip Code) | | | |
| PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | |
| Tim Bowman | Tim. Bowman@cetera.com | | | | | | |
| (Name) | | (619) 881-5262
(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 | | | | |
| (Date of Registration with PCAOB)(if applicable) | | FOR OFFICIAL USE ONLY | | (PCAOB Registration Number, if applicable) | | | |
| | | | | | | | |
| * Claims for exemption from the requirement that the annual reports of an independent public | | | | | | | |
Public
accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(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 OMB control number.
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#### OATH OR AFFIRMATION
J. Tim Bowman
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------financial report pertaining to the firm of Cetera Financial Specialists LLC (the "Company") as of December 31
, 2 022 \_ \_ 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.
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) Statement of cash flows.
- □ (e) Statement of changes in stockholders' or partners' or sole proprietor's equity.
- □ (f) Statement of changes in liabilities subordinated to claims of creditors.
- □ (g) Notes to consolidated financial statements.
- | (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, 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.
- | {{} 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.
- [ (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.
- □ (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 apropriate explanations, of the FOCUS Report with computation of net capible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-2, 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.
- | (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition.
- | | | 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.
- □ (s) Exemption report in accordance with 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 statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable.
- □ (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 240.17a-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 that no material inadequacies exist, under 17 CFR 240.17a-12(k).
- □ (z) Other:
- \*\* To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18c-7(d)(2), as applicable.
Signature:
Principal Financial Officer
Title:
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©2019 National Notary Association
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# 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 Financial Specialists LLC
#### Opinion on the Financial Statement
We have audited the accompanying statement of financial condition of Cetera Financial Specialists LLC (the "Company") as of December 31, 2022, 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, 2022, 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 firm 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 financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial 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 23, 2023 We have served as the Company's auditor since 2016.
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### CETERA FINANCIAL SPECIALISTS LLC
# STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2022
| ASSETS | | |
|---------------------------------------|-----|------------|
| Cash and cash equivalents | ക്ക | 10,708,787 |
| Commissions and fees receivable | | 7,151,019 |
| Receivable from clearing broker | | 1,726,022 |
| Related party receivable | | 108,328 |
| Other receivables | | 1,440,998 |
| Other assets | | 765,055 |
| Total assets | ತಿ | 21,900,209 |
| | | |
| LIABILITIES AND MEMBER'S EQUITY | | |
| LIABILITIES | | |
| Commissions payable | ಕಿ | 6,092,062 |
| Related party payables | | 821,490 |
| Deferred revenue | | 536,753 |
| Deferred credit | | 255,158 |
| Accrued expenses and accounts payable | | 78,809 |
| Other liabilities | | 308,964 |
| Total liabilities | | 8,093,236 |
| | | |
### COMMITMENTS AND CONTINGENCIES (NOTE 7)
| MEMBER'S EQUITY | 13.806.973 |
|---------------------------------------|------------|
| Total liabilities and member's equity | 21.900.209 |
The accompanying notes are an integral part of this Statement of Financial Condition.
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# CETERA FINANCIAL SPECIALISTS LLC
#### NOTES TO STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2022
#### NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE COMPANY
Cetera Financial Specialists LLC (the "Company") is an introducing broker-dealer registered under the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). The Company provides brokerage and insurance services to the public nationally through independent financial advisors.
The Company is a wholly owned subsidiary of Cetera Financial Specialists Services LLC ("Specialists Services") which 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 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 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 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 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 of changes in interest rates.
#### Commissions and Fees Receivable and Commissions Payable
Commissions and fees receivable includes commissions from mutual funds, variable annuities, insurance product purchases transacted directly with the product sponsors, and mutual fund and annuity trailers. 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.
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#### Other Receivables
Other receivables primarily consist of accrued receivables from the Company's clearing broker related to fees charged to client accounts, accrued receivables related to cash sweep programs, and accrued reimbursements.
#### Securities Owned
Securities owned are recorded on trade-date basis and are stated at fair value. As of December 31, 2022, securities owned of \$3,419 are included in Other assets. See Note 3- Fair Value Measurements for more information.
#### Other Assets
As of December 31, 2022, Other assets include prepaid expenses and advisor advances of \$214,527 net of an immaterial allowance for bad debt.
#### Deferred Credit
Deferred credit primarily consists of rebates received on the Company's clearing services contract with Pershing LLC which is accreted on a straight-line basis. The unaccreted deferred credit of \$255,158 is included in Deferred credit in the Statement of Financial Condition and will be accreted over the remaining life of 2.75 years.
#### Deferred Revenue
The Company records deferred revenue when cash payments are received or due in advance of its performance, including amounts which are refundable.
#### Recently Issued Accounting Pronouncements
There are no recently issued accounting pronouncements that would materially impact the Company's Statement of Financial Condition and related disclosures.
#### NOTE 3 - 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.
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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's fair value hierarchy for those assets measured at fair value on a recurring basis by product category as of December 31, 2022 , is as follows:
| | Level 1 | | Level 2 | | Level 3 | | Total | |
|------------------------------------------------------------------------------------------|---------|-----------|---------|---|---------|---|-------|-----------|
| Assets: | | | | | | | | |
| Cash equivalents - money market funds
Securities owned - recorded in Other
assets: | ಳಿ | 9,386,883 | ക | | ಳಿ | - | ക | 9,386,883 |
| Mutual funds | | 3,419 | | | | | | 3.419 |
| Total securities owned | | 3,419 | | - | | - | | 3,419 |
| Total | ક | 9,390,302 | ಕೆ | l | ಕೆ | - | ಕೆ | 9,390,302 |
Cash equivalents include money market mutual fund instruments, which are short term in nature with readily determinable values derived from active markets. Publicly traded equity securities with sufficient trading volume are fair valued by management using guoted 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 commissions and fees receivable from clearing broker, related party receivable, other receivables, commissions payable, related party payables, accrued expenses and accounts payable, and other liabilities were estimated to approximate carrying value and classified as Level 2 of the fair value hierarchy due to their short-term nature.
#### NOTE 4 - EMPLOYEE BENEFIT PLANS
The employees of the Company are covered by a 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 blan 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 2022 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. See Note 5 - Related Party Transactions for more information.
#### NOTE 5 - RELATED PARTY TRANSACTIONS
Specialists Services allocates a portion of its general administrative expenses to the Company based on number of registered financial advisors. Cetera Investment Services LLC ("CIS"), an affiliate, provides custodial services for certain customer retirement accounts of the Company.
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 Specialists Services and not an affiliate of CIS.
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A majority of the Company's advisors hold both securities and advisory licenses. The Company is not a Registered Investment Advisor (RIA), and as such, any advisory business generated by these advisors is recorded at Cetera Investment Advisors LLC ("CIA"), an affiliated RIA.
As of December 31, 2022, the Company had total outstanding Related party payables of \$821,490 reflected in the Statement of Financial Condition, including an outstanding liability of \$121,100 to Specialists Services. Further, Related party payables include \$644,167 outstanding liability to CIA and \$56,223 outstanding liabilities to other affiliates as of December 31, 2022.
The Company had an outstanding Related party receivable of \$108,328 from Cetera Financial primarily due to Strategic Partnership revenue received by Cetera Financial on behalf of the Company.
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 passage of time or attainment of certain production targets.
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.
#### NOTE 6 - 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 temporary cash investments 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 7 - COMMITMENTS AND CONTINGENCIES
Legal 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. 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 requlations promulqated by the examining requlatory 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 Company may be subject to disciplinary action, including fines.
When there is indemnification or insurance, the Company may engage in defense or settlement and subsequently seek reimbursement for such matters.
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Clearing broker - Under the clearing arrangement with the clearing broker, the Company is required to maintain certain minimum levels of net capital and comply with other financial ratio requirements. At December 31, 2022, the Company complied with all such requirements.
#### NOTE 8 - NET CAPITAL REQUIREMENTS
The Company is subject to the Securities and Exchange Commission 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, 2022, the Company had net capital of \$8,659,470, which was \$8,409,470 in excess of required net capital of \$250,000.
#### NOTE 9 - 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 paragraphs k(2)(i) for customer transactions processed directly with the issuer and k(2)(i) 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, promotly transmits customer funds and customer securities to 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 10 - SUBSEQUENT EVENTS
The Company has evaluated activity through the date the Statement of Financial Condition was issued and concluded that no subsequent events have occurred that would require recognition or disclosure in the Statement of Financial Condition, except as noted below.
The Company issued a dividend to Specialists Services on January 26, 2023, in the amount of \$3,000,000.
\*\*\*\*\*\*
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.