# MML INVESTORS SERVICES, LLC X-17A-5 (2025-02-24) — Broker-dealer annual report - Company: MML INVESTORS SERVICES, LLC - Form: X-17A-5 - Filed: 2025-02-24 - Period: 2024-12-31 - Accession: 0000701059-25-000004 - CIK: 701059 - File #: 8-27250 - Type: Broker-dealer - Material weakness: No - Auditor: KPMG LLP - Auditor location: Boston, MA - Contact: Frank Rispoli - Phone: 413-744-5008 - Email: frispoli68@massmutual.com - Website: massmutual.com - Signed by: Frank Rispoli (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/701059/000070105925000004/mmlis2024public.pdf --- {0}------------------------------------------------ *Consolidated Statement of Financial Condition As of December 31, 2024 With Report of Independent Registered Public Accounting Firm Thereon* This report is filed as a Public document pursuant to Rule 17a-5(e)(3) under the Securities Exchange Act of 1934 {1}------------------------------------------------ | , D.C. 20549 | | |--------------|--| | REPORTS | | | | timated average burden | | | |--|------------------------|----|--| | | urs per response: | 12 | | | | | | | | | CCC CILC NIINIDED | | | | | | | | 1295 State Street | |--|--|--|--|-------------------| |--|--|--|--|-------------------| | | (No. and Street) | | |-------------|------------------|------------| | Springfield | MA | 01111-0001 | | (City) | (State) | (Zip Code) | | Frank Rispoli | 413-744-5008 | frispoli68@massmutual.com | | |---------------|--------------------------------|---------------------------|--| | (Name) | (Area Code - Telephone Number) | (Email Address) | | | (Name - if individual, state last, first, and middle name) | | | | | |------------------------------------------------------------|-----------------------|--------------------------------------------|------------|--| | 60 South Street | Boston | MA | 02111 | | | (Address) | (City) | (State) | (Zip Code) | | | 10-20-2003 | | 185 | | | | (Date of Registration with PCAOB)(if applicable) | | (PCAOB Registration Number, if applicable) | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | {2}------------------------------------------------ | Frank Rispoli | swear (or affirm) that, to the best of my knowledge and belief, the | | |------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|-------| | tinancial report pertaining to the firm of MML Investors Services, LLC | | as of | | 12/31 | 2 024 | | | | 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. | | | | | | | ![](_page_2_Figure_2.jpeg) - - - - - - - - - - - - - - - - - - - - - - - - - {3}------------------------------------------------ #### **Table of Contents** | | Page(s) | |---------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm | 1 | | Consolidated Statement of Financial Condition | 2 | | Notes to Consolidated Statement of Financial Condition | 3 - 16 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) KPMG LLP Two Financial Center 60 South Street Boston, MA 02111 ### **Report of Independent Registered Public Accounting Firm** To the Member and the Board of Directors MML Investors Services, LLC: #### *Opinion on the Consolidated Financial Statement* We have audited the accompanying consolidated statement of financial condition of MML Investors Services, LLC and Subsidiary(the Company) as of December 31, 2024, and the related notes (collectively, the consolidated financial statement). In our opinion, the consolidated financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2024, in conformity with U.S. generally accepted accounting principles. #### *Basis for Opinion* This consolidated financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2004. Boston, Massachusetts February 20, 2025 > KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. {5}------------------------------------------------ **Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* | Assets | | |-----------------------------------------------|---------------| | Cash and cash equivalents | \$
55,163 | | Segregated cash | 5,193 | | Commissions and other receivables | 57,619 | | Receivables from related parties | 5,913 | | Registered representative loans | 42,406 | | Secured demand notes | 75,000 | | Prepaid expenses and other assets | 38,914 | | Deferred tax assets, net | 1,711 | | Total assets | \$
281,919 | | Liabilities and Equity | | | Commissions and trail commissions payable | \$
74,487 | | Payables to related parties | 27,422 | | Accounts payable and accrued expenses | 6,622 | | Taxes payable | 11,763 | | Deferred revenue | 25,813 | | Subordinated liabilities under secured demand | | | note collateral agreements | 75,000 | | Total liabilities | 221,107 | | Member's equity | 28,590 | | Retained earnings | 32,222 | | Total equity | 60,812 | | Total liabilities and equity | \$
281,919 | {6}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* #### **(1) Organization** MML Investors Services, LLC ("MMLIS") is an indirect wholly-owned subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual" or "Parent"). MMLIS is the retail broker-dealer for MassMutual's career agency system and offers a wide variety of investment products and services through MassMutual agents and brokers, including open-end mutual funds, fee-based investment advisory programs, limited partnerships, variable insurance products, unit investment trusts, and general securities. MMLIS is registered as a broker-dealer and investment adviser with the Securities and Exchange Commission ("SEC"), is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"), and is licensed as a broker-dealer in all 50 states, Puerto Rico, the District of Columbia, and the Virgin Islands. MMLIS is the parent company of MML Insurance Agency, LLC ("MMLIA"). MMLIA enables MassMutual agents to sell non-MassMutual insurance products and conducts business in all 50 states, Puerto Rico, and the District of Columbia. MMLIS and MMLIA are organized as limited liability companies pursuant to the Massachusetts Limited Liability Act. The sole member of MMLIS is MassMutual Holding, LLC ("MMH"), whose sole member is MassMutual. For federal and most state tax purposes, MMLIS and MMLIA are treated as single member limited liability companies disregarded as separate entities from their sole owners. MMLIS and MMLIA are collectively referred to herein as the "Company." #### **(2) Summary of Significant Accounting Policies** The significant accounting policies are as follows: ### *Basis of Presentation and Principles of Consolidation* The consolidated financial statements include the accounts of MMLIS and MMLIA. MMLIS consolidates entities over which it exercises control and has a greater than 50% ownership interest. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). All material intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires the use of estimates. Accordingly, certain amounts in these financial statements contain estimates made by management. Actual amounts could differ from those estimates. {7}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* #### *Cash and Cash Equivalents* The Company maintains its operating cash in bank deposit accounts, which may exceed federally insured limits. The Company has not experienced any losses on such accounts. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company invests excess cash in money market mutual funds managed by unrelated third parties, which are classified as Level 1 cash equivalents in the fair value hierarchy. At December 31, 2024, there was \$52,966 invested in money market mutual funds. Cash segregated under federal regulations includes funds held in a separate bank account for the exclusive benefit of MMLIS's customers, in accordance with Rule 15c3-3 of the Securities Exchange Act ("SEA") (see Note 6). #### *Revenue Recognition and Related Expense* Investment advisory fees, commissions, trail commissions, and other income from customers, which includes distribution fees, marketing support and strategic partnership revenue, and financial planning fees, are earned from contracts with customers. Revenue from contracts with customers is measured based upon the consideration specified in the contract and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue from customers when it satisfies the performance obligation of transferring control over a service to a customer. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company's progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for those promised services (i.e., the "transaction price"). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue will not occur. This arises when there are no significant uncertainties with the transaction price. When variable consideration is included in the transaction price, the Company considers the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company's influence, such as market volatility or the actions of its customers (See Note 3). For securities held in brokerage accounts, the Company uses National Financial Services, LLC ("NFS") as clearing agent and custodian to process customer trades and hold customer funds. {8}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* The Company acts as an agent for clients in connection with a cash sweep program pursuant to which the Company, via NFS, automatically sweeps client funds from their account(s) to one or more accounts at the FDIC-member "Program Banks" who participate in the cash sweep program. Each omnibus account at the Program Banks earns an overall sweep program interest rate on the balance in such account at a variable rate negotiated between the Company and each Program Bank. Clients earn interest on their funds in the cash sweep program at interest rate(s) established by the Company, which rate(s) is(are) subject to change by the Company at any time, in accordance with the terms of the client Account Agreement. Revenue that the Company earns for operating the cash sweep program is either variable based on the difference between (i) the aggregate interest paid to clients and vendors and (ii) the aggregate interest earned across the Program Bank accounts, or is a flat fee per account based on the effective federal funds rate. Fees are earned over time and are generally paid monthly in arrears by the Program Banks. Deferred revenues received by the Company from NFS are fully earned by the Company after a specified period following receipt. Accordingly, such amounts are recognized as revenues on a straight-line basis over the claw-back periods. The unearned portion of such payments totaling \$9,318 is included in Deferred revenue on the Consolidated Statement of Financial Condition ("Statement of Financial Condition"). #### *Fair Value of Financial Instruments* The reported carrying values of financial instruments, including cash equivalents, receivables, and payables, approximate their fair values because of the short maturities of these assets and liabilities. The Company's financial assets subject to credit losses are its receivables from registered representatives, which represent commission payments that are due back to the Company, as well as advisor loans (see Note 8). These receivables are recorded at amortized cost and are included in Prepaid expenses and other assets and Advisor loans, respectively, on the Statement of Financial Condition. In monitoring the credit quality of the receivables, the Company records an allowance for credit losses to reflect the expected amount that will be collected. The allowance is calculated based on collection experience for both active and termed registered representatives. Consideration for future events is not a specific factor in calculating the reserve due to the nature of the receivables. At December 31, 2024, commissions and advisor loan receivables from registered representatives totaled \$42,583, which is net of an allowance for credit losses of \$1,178. #### *Income Taxes* Income taxes are based upon the Company's best estimate of its current and deferred tax assets and liabilities. Deferred income taxes are provided for temporary differences that exist between financial reporting and tax bases of assets and liabilities. The Company's temporary differences primarily include accrued liabilities and prepaid expenses. The effective tax rate is different from the prevailing corporate U.S. federal tax rate primarily due to permanent differences caused by items such as state taxes. {9}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* #### *Errors and Omissions Claims/Recoveries* The Company records costs associated with errors and omissions claims as incurred. Recovery of such costs may be received from registered representatives, MassMutual general agents, or from errors & omissions insurance. #### *General Agent Commitment* In 2022, MMLIS committed to pay one of its general agents \$6,000 over an eighteen-month period extending from March 2022 to September 2024. After a thirty-six-month period the agent must meet certain criteria to retain the full amount, otherwise the general agent is obligated to pay back to MMLIS a pro-rata share of the payment. As such, MMLIS is amortizing the full amount of the obligation over the thirty-six-month period ending February 2025. Any payments in excess of the amount earned by the agent are recorded as a prepaid expense and amortized as earned. #### *New Accounting Pronouncements* In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures*, which was effective for annual periods beginning after December 15, 2023. This guidance requires the disclosure of segment information by all public entities, including entities with only one segment, and enhances disclosures over significant segment expenses. The Company adopted this guidance effective January 1, 2024 (see Note 4). In December 2023, the FASB issued ASU No. 2023-09, *Income Taxes (Topic 740) Improvements to Income Tax Disclosures*, which is effective for annual periods beginning after December 15, 2024 for public business entities*.* This guidance amends disclosure requirements related to the rate reconciliation and income taxes paid to improve the transparency of income tax disclosures. Specifically, it requires (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The Company is currently assessing the impact of this guidance and does not believe it will have a significant effect on its consolidated financial statements. ### **(3) Revenues from Contracts with Customers** The following provides detailed information on the recognition of the Company's revenue from contracts with customers. {10}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* Investment advisory fee revenue, which represents asset-based fees paid by customers for advisory and referral services related to investments in managed account programs, are determined based upon a percentage of assets under management and represent a series of distinct services that are substantially the same and have the same pattern of transfer. Services are provided to the customer on a daily basis, which represents a performance obligation that is satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Company. The Company uses the same measure of progress to determine when the consideration should be recognized. Payments are generally received in advance on a quarterly basis and are recognized evenly throughout the quarter. Investment advisory revenues are a form of variable consideration since the fees the Company is entitled to vary based upon fluctuations related to market performance and the ambiguity related to investor behavior. As such, the revenue is constrained until each month-end when a portion of the revenue becomes known. Related commission expenses, which are a cost to fulfill, are recognized as the revenue is earned. The Company estimates its accruals for revenues received in arrears based upon the volume of transactions, cash receipts, or assets under management in current and prior periods, as applicable. Commissions payable are accrued concurrently using the actual payout rate. Commission revenue is earned by the Company as the broker-dealer intermediary on the sale of mutual funds and variable products, and for the sale, execution and settlement of securities transactions within brokerage accounts for customers. This revenue, as well as the related commission, clearing, and distribution costs to fulfill, are recorded at a point in time on trade date, as the performance obligation is satisfied when the securities transactions occur. Commission revenue is primarily earned based upon transaction-based pricing as a percentage of the related sales, payment of which is generally received in arrears either on a weekly or a monthly basis. The Company estimates its accruals for revenues earned from mutual fund sales based upon historical cash receipts over the period from trade date to settlement date. Commission revenue is also earned for supervision and oversight over the distribution of variable products issued by MassMutual. This revenue, as well as the related commission costs to fulfill, is recorded at a point in time as the performance obligation is satisfied when the variable product is issued or renewed (see Note 5). Commissions payable associated with mutual fund and variable product sales is accrued concurrently using the actual payout rate. Trail commission revenue, which represents asset-based 12b-1 fees paid to the Company by open-end mutual fund companies as well as insurance carriers for variable annuities, are determined based upon the 12b-1 fee rate and average assets under management. These revenues represent a series of distinct services that are substantially the same and have the same pattern of transfer. Services are provided on a daily basis, which represents a performance obligation that is satisfied over time. The Company uses the same measure of progress to determine consideration. Trail revenues are a form of variable consideration since the fees the Company is entitled to vary based upon the customer maintaining assets in their account. Related commission expenses are recognized as the revenue is earned. The Company estimates its accruals for revenues earned in arrears based upon historical cash receipts or assets under management in current and prior periods, as applicable. Commissions payable are accrued concurrently using the actual payout rate. {11}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* Other income from customers includes distribution fees, marketing support and strategic partnership revenue, and financial planning fees. Distribution fees represent fees paid to the Company by MassMutual in connection with underwriting and servicing related to the promotion, offering, marketing, and distribution of MassMutual proprietary variable products. Services are provided on a daily basis, which represents a performance obligation that is satisfied over time. Fees are calculated based on actual expenses incurred and are billed and received monthly in the month the services are performed. (See Note 5). Marketing support and strategic partnership revenue represents fees paid to the Company by product sponsors, generally mutual fund and variable life and annuity issuers, and registered investment advisory vendors based on either prior or anticipated sales of their products, assets under management, or an agreed upon amount. Services provided may include training, educational conferences, and sales material that support the product sponsors offerings. These services are provided on a daily basis, which represents a performance obligation that is satisfied over time. The Company estimates its accruals for revenues earned based upon sales, historical trending, assets under management, or actual cash receipts in accordance with the respective agreements. Payments are generally received quarterly. There are no costs to obtain or fulfill the contract associated with this revenue. Financial planning fees are paid by customers for providing them with financial planning advice through the delivery of the financial plan. The financial planning services are ongoing and begin when the customer signs a financial planning agreement. The services and fees automatically renew on an annual basis unless the customer cancels the agreement. The customer may pay the fee up front or over a period of time. The customer must pay any fee balance upon delivery of the financial plan and before the agreement's renewal date. Revenue is recognized monthly as the performance obligation is satisfied. Related commission expenses, which are a cost to fulfill, are recognized as the revenue is earned. MMLIS estimates its accruals for revenues earned from the delivery of financial planning services for which payment has not been made based upon the financial planning contract date. MMLIS records deferred revenue, which is a contract liability, when consideration is received in advance of providing financial planning services. Deferred financial planning fees are included in Deferred revenue on the Statement of Financial Condition and are recognized in the subsequent year. #### **Contract Assets** The timing of the Company's revenue recognition may differ from the timing of payment by its customers. The Company records receivables when revenue is recognized prior to payment and it has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records prepaid commission expense associated with the advance payment, which is included in Prepaid expenses and other assets on the Statement of Financial Condition, until the performance obligations are satisfied. {12}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* The Company recorded the following contract assets at December 31, 2024 and 2023: | | | 2024 | 2023 | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|---------------------------|---------------------------------| | Commissions, trails, and other receivables from third parties
Commissions, trails, and other receivables from related parties
Prepaid financial planning commissions | | 53,050
5,316
14,733 | \$
42,424
4,883
13,441 | | Total Contract Assets | \$ | 73,099 | \$
60,748 | Changes in contract assets are the result of ordinary business activities. #### **Contract Costs** The Company recorded the following contract liabilities at December 31, 2024 and 2023: | | 2024 | 2023 | |---------------------------------------------------------|------------------------|------------------------| | Commissions payable
Deferred financial planning fees | \$
74,487
16,495 | \$
54,252
14,935 | | Total Contract Liabilities | \$
90,982 | \$
69,187 | All Deferred financial planning fees and related prepaid commissions at December 31, 2023 were recognized in 2024. Changes in contract liabilities are the result of ordinary business activities. #### **(4) Segment Reporting** The Company operates in a single line of business, that of a securities broker-dealer providing products and services to its customers (see Note 3). The Company has identified its President as the chief operating decision maker ("CODM"), who manages and evaluates the Company's business activities using information of the Company as a whole, including actual and forecasted net income. In addition, the CODM uses excess net capital (see Note 7) to make operational decisions and ensure capital adequacy (see Note 5). The accounting policies used to measure the net income of the segment are the same as those described in the summary of significant accounting policies (see Note 2). As the Company's operations constitute a single operating segment, other segment items are reflected in the Statement of Financial Condition. {13}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* #### **(5) Related Party Transactions and Agreements** Through underwriting and service agreements, MMLIS is either the retail distributor or the principal underwriter of certain variable life insurance policies and variable annuity contracts issued by MassMutual and its direct and indirect wholly-owned subsidiaries C.M. Life Insurance Company ("C.M. Life") and MML Bay State Life Insurance Company ("MML Bay State"), respectively. In addition, MMLIS is the subdistributor of the MassMutual Premier Funds and MassMutual Select Funds (the "MassMutual Funds") and is placement agent for certain unregistered private placement life insurance and annuity contracts issued by MassMutual. MassMutual agents and brokers who are MMLIS registered representatives sell these above referenced policies, contracts, funds, and private placements for which they receive commissions. Pursuant to the distribution, underwriting, and servicing agreements noted above with MassMutual, C.M. Life, and MML Bay State, MMLIS is also compensated for distribution services. MMLIS earned distribution fees from MassMutual, C.M. Life, and MML Bay State in 2024. MMLIS has a selling agreement with MassMutual Ascend Life Insurance Company ("MM Ascend"), an indirect wholly-owned subsidiary of MassMutual, whereby MassMutual agents and brokers who are MMLIS registered representatives are authorized to sell certain proprietary variable products for which they receive commissions. In 2024, MMLIS recognized commission revenue and expense from MM Ascend. In addition, MMLIS incurs a management fee for paymaster services provided by MassMutual for administering MM Ascend commission payments to MMLIS registered representatives. MMLIS earned commissions and trail commissions in 2024 from Invesco Distributors, Inc. ("IDI"), which is a related party of the Company per Accounting Standards Codification ("ASC") 850, *Related Party Disclosures,* through MassMutual's ownership and significant influence over IDI's parent, Invesco, Ltd. The commissions are paid in accordance with the terms of the prospectuses of the individual funds. In addition, the Company earned marketing support from IDI in 2024. MMLIS has an agreement with MassMutual Private Wealth & Trust, FSB (formerly known as MassMutual Trust Company, FSB) ("MMPWT"), a wholly-owned subsidiary of MassMutual, for the solicitation and referral of trust fiduciary services. Under the terms of the agreement, MMLIS earned referral fees from client assets invested through MMPWT. All employees of the Company are direct employees of MassMutual. Employee related costs, including compensation, funded and unfunded non-contributory defined benefit pension plans, funded (qualified 401(k) thrift savings) defined contribution plans, disability plan, and life and health insurance that is provided through group insurance contracts, some of which are issued by MassMutual are charged to the Company as part of Management fee expense in accordance with an intercompany service agreement with MassMutual. These plans comply with the requirements established by the Employee Retirement Income Security Act of 1974 ("ERISA"). As the plan's sponsor, MassMutual retains the liabilities. MMLIS funds the costs of these plans as they are incurred, which are settled on a monthly basis. For purposes of disclosure within these statements, MassMutual employees who perform work for the Company are referred to as MMLIS employees. {14}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* Applicable information regarding the actuarial present value of vested and non-vested accumulated plan benefits and the net assets of the plan available for benefits is omitted, as the information is not separately available for the Company's participation in the pension plan. MassMutual provides certain life insurance and healthcare benefits (other post-retirement benefits) that cover MMLIS's eligible retired employees and their beneficiaries and covered dependents. The healthcare plan is contributory; a portion of the basic life insurance plan is noncontributory. These benefits are funded by MassMutual as the benefits are provided to the participants. In addition, MassMutual provides access to health insurance coverage for covered retirees and their dependents through a private insurance marketplace, along with a company-funded health reimbursement account. MassMutual provides retiree life insurance coverage for the Company's eligible employees, who as of January 1, 2010, were age 50 with at least 10 years of service or had attained 75 points, generally age plus service, with a minimum of 10 years of service. The Company has service agreements with MassMutual that provide for the performance by MassMutual of certain services for the Company including, but not limited to, information systems, benefit plan administration, payroll, legal, compliance, licensing, cash management, and other general corporate services for which MMLIS is charged a management fee. While management believes that these fees are calculated on a reasonable basis, they may not be indicative of the costs that would have been incurred on a stand-alone basis. In addition, MMLIS utilizes a MassMutual wholly-owned subsidiary, MassMutual Global Business Services India LLC ("MM India"), for the performance of certain administrative services for the Company. MMLIS provides services to MML Strategic Distributors, LLC ("MSD") and MML Distributors, LLC ("MMLD"), both wholly-owned subsidiaries of MassMutual, including, but not limited to, accounting and other general corporate services. Under the service agreements, MSD and MMLD pay management fees to MMLIS for these services. ### *Receivables and Payables to Related Parties* Receivables from related parties consist of the following as of December 31, 2024: | Commissions due from MassMutual
Referral fees due from MMPWT | \$
4,178
1,729 | |-----------------------------------------------------------------|----------------------| | Management fees due from MSD
Management fees due from MMLD | 3
3 | | Receivables from related parties | \$
5,913 | In addition, commissions, trails, and marketing support receivables from related parties of \$1,138 are included in Commissions and other receivables on the Statement of Financial Condition. {15}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* Payables to related parties consist of the following as of December 31, 2024: | Management fees due to MassMutual
Administrative services due to MM India | \$
27,214
208 | |------------------------------------------------------------------------------|---------------------| | Expenses due to MassMutual | -- | | Payables to related parties | \$
27,422 | Related party receivables and payables are reviewed monthly. Certain management fees are net settled against distribution fees in the current month. All other intercompany balances are generally settled in the following month. The Company reviews current and future capital needs with its parent on at least an annual basis to ensure that adequate capital is maintained. In 2024, MMLIS paid a total of \$135,000 in dividends to MMH. #### **(6) Customer Protection Reserve under SEA Rule 15c3-3** As a fully computing broker-dealer registered with the SEC, MMLIS is subject to the SEC's Customer Protection rule ("Rule 15c3-3") and is required to maintain a separate bank account designated as "Special Account for the Exclusive Benefit of Customers of MML Investors Services, LLC" for customer funds received. As of December 31, 2024, the balance in this account totaled \$5,193, which is in excess of the required balance, and is included in Cash segregated under federal regulations on the Statement of Financial Condition. ### **(7) Net Capital Requirements** As a broker-dealer, MMLIS is subject to the SEC's Uniform Net Capital rule ("Rule 15c3-1"), which requires the maintenance of minimum net capital. Advances to affiliates, dividend payments, and other equity withdrawals are subject to certain notification and other provisions of Rule 15c3-1 and other regulatory requirements. In addition, in accordance with FINRA Rule 4110, equity capital may not be withdrawn for a period of one year after a contribution is made, unless otherwise permitted by FINRA, nor may a dividend be paid in any rolling 35-calendar-day period that would exceed 10 percent of excess net capital. The Company operates under the alternative standard of calculating its minimum net capital, which requires the Company to maintain as its capital the greater of \$250 or 2% of aggregate debits used in computing its reserve requirement. Accordingly, the minimum net capital required is \$250. At December 31, 2024, the Company had net capital of \$50,784, which was \$50,534 in excess of its required net capital. Certain net assets of MMLIA are included as allowable capital in the consolidated computation of MMLIS's net capital since these assets of the wholly owned subsidiary are readily available for the protection of the Company's customers, broker-dealers, and other creditors, as permitted by SEC Rule 15c3-1. {16}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* #### **(8) Secured Demand Notes** At December 31 2024, the Company holds two Secured Demand Note Collateral Agreements ("SDN") with MMH pursuant to which MMH transferred securities and/or cash to the Company to collateralize MMH's obligation to lend \$75,000 (\$37,500 per SDN) to the Company. The agreements, each of which contain an auto renew provision, are scheduled to mature on May 14, 2028 and May 15, 2029, respectively. At December 31, 2024, the collateral for the outstanding SDNs consisted of U.S. Government securities and cash equivalents with a fair value approximating \$96,912. The Company has not exercised its right to sell or repledge the collateral. The corresponding liabilities, "Subordinated liabilities under secured demand note collateral agreements," on the Statement of Financial Condition are subordinate to the claims of general creditors. To the extent that subordinated borrowings are required for the Company's continued compliance with the minimum net capital requirements under Rule 15c3-1, they may not be repaid. #### **(9) Registered Representative Loans** The Company may extend loans to certain of its registered representatives that may be either repayable or forgivable. The decision to extend credit for certain repayable loans is generally based upon the registered representative's ability to generate future revenues. In addition, the Company may extend credit to aid a registered representative in acquiring a seller's wealth management practice. In order to attract and retain experienced registered representatives, the Company may issue forgivable loans to facilitate the registered representatives' transition. The decision to issue a forgivable loan is generally based upon the registered representative's current book of business and the ability to generate future revenues. Repayment terms for repayable and forgivable loans are generally between three and ten years provided that the registered representative remains licensed with the Company. The principal amount of forgivable loans and accrued interest is forgiven by the Company on a straight-line basis over the term of the loans. Repayable loans become repayable immediately if a registered representative terminates their agreement with the Company or if the registered representative otherwise defaults on the loan. Certain repayable loans become immediately repayable if the registered representative ceases producing revenue in any sixty-day period prior to the loan maturity date. The unamortized balance of forgivable loans, plus accrued interest, becomes immediately repayable if a registered representative terminates their agreement with the Company prior to the loan maturity date. An allowance for uncollectible amounts may be recorded using estimates and assumptions based upon expectations of future loss rates and current facts. Registered representative loans, net of an allowance for credit losses, totaled \$42,406 at December 31, 2024 and are included in Registered representative loans on the Statement of Financial Condition. {17}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* ### **(10) Litigation, Regulatory Inquiries, Commitments and Contingencies** The Company is involved in litigation arising in and out of the normal course of business, including, but not limited to, alleged registered representative misconduct, which seeks both compensatory and punitive damages. The Company is, from time to time, also involved in regulatory investigations, inquiries, and internal reviews, certain of which are ongoing. In all such regulatory matters, the Company has and is cooperating fully with the applicable regulatory agency or self-regulatory organization. The Company evaluates the need for accruals of loss contingencies for each matter. When a liability for a matter is probable and can be estimated, the Company accrues an estimate of the loss and related insurance recoveries, if any. An accrual is subject to subsequent adjustment as a result of additional information and other developments. The resolution of matters are inherently difficult to predict, especially in the early stages of the matter. Even if a loss is probable, due to many complex factors, such as speed of discovery and the timing of court decisions or rulings, a loss or range of loss may not be reasonably estimated until the later stages of the matter. For matters where a loss is material and it is either probable or reasonably possible, then it is disclosed. For matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimated, no accrual is established, but the matter, if material, is disclosed. As of December 31, 2024, the Company has \$300 included in Accounts payable and accrued expenses on the Statement of Financial Condition for accrued loss contingencies. In the normal course of business, the Company indemnifies and guarantees clearing agents against specified potential losses in connection with their acting as an agent of, or providing services to, the Company or its affiliates. Pursuant to the terms of the agreements between the Company and the clearing agents, the clearing agents have the right to charge the Company for losses that result from a counterparty's failure to fulfill its contractual obligations. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that since it only trades with customer invested funds, that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for these indemnifications as of December 31, 2024. In addition, the Company has the right to pursue collection or performance from the counterparties who do not perform under their contractual obligations. #### **(11) Broker's Bond** The Company carries a broker's blanket fidelity bond in the amount of \$2,000. In addition, the Company is afforded additional coverage under the MassMutual Corporate Fidelity Bond Program in the amount of \$100,000. {18}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* #### **(12) Deferred and Incentive Compensation Plans** Nonqualified deferred compensation plans (unfunded defined contribution plans) are offered by MassMutual allowing certain executives to elect to defer a portion of their compensation. Key employees of the Company are eligible to participate in a long-term incentive compensation plan sponsored by MassMutual. An individual employee's participation may vary from one cycle to the next based on performance, impact on organization and relative contribution. Awards vest over three years, at which time they are paid in cash, and are subject to forfeiture in the event of termination prior to vesting (other than retirement, death, disability or job elimination). A short-term incentive compensation plan exists that is offered to substantially all employees not covered by another incentive plan. Employees are eligible for an annual bonus based upon certain factors, including individual and company performance. MMLIS records the costs of these plans as they are incurred on a monthly basis. The costs associated with these plans are settled on an annual basis, or such other time after payment is made to the employees. #### **(13) Income Taxes** The Company is included in a consolidated U.S. federal income tax return with MassMutual and its eligible U.S. subsidiaries. The Company also files income tax returns in various states. MassMutual, and its eligible subsidiaries and certain affiliates (the "Parties"), including the Company, have executed and are subject to a written tax allocation agreement (the "Agreement"). The Agreement sets forth the manner in which the total combined federal income tax is allocated among the Parties. The Agreement provides the Company with the enforceable right to recoup federal income taxes paid in prior years in the event of future net losses that it may incur. Further, the Agreement provides the Company with the enforceable right to utilize its net losses carried forward as an offset to future net income subject to federal income taxes. However, any future corporate alternative minimum tax ("CAMT") is outside of the scope of the general tax allocation method and, consequently, any future CAMT liability of a subsidiary shall be allocated solely to MassMutual. On August 16th, 2022, the Inflation Reduction Act ("IRA") was signed into law and includes certain corporate income tax provisions including the imposition of a CAMT. Any CAMT liabilities associated with the Company will be allocated to MassMutual effective January 1, 2023, in accordance with the Tax Allocation Agreement. The Internal Revenue Service ("IRS") has completed its examination of MassMutual and its subsidiaries for the years 2013 and prior. The 2014-2016 tax years are in Appeals for 3 carryforward issues. The IRS completed the examination of the 2017-2018 tax years and is being transferred to Appeals. The adjustments resulting from these examinations are not expected to materially affect the financial position or liquidity of the Company. {19}------------------------------------------------ ## **Notes to Consolidated Statement of Financial Condition December 31, 2024** *(Dollars in thousands)* Companies generally are required to disclose unrecognized tax benefits, which are the tax effect of positions taken on their tax returns which may be challenged by the various taxing authorities, in order to provide users of financial statements more information regarding potential liabilities. Management has determined that no reserves for material uncertain tax positions are required at December 31, 2024. The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets as of December 31, 2024 are as follows: | Deferred tax assets: | | |--------------------------------|-------------| | Legal and other accruals | \$
3,736 | | Deferred revenue | 2,060 | | Total deferred tax assets | 5,796 | | Deferred tax liabilities: | | | Prepaid commissions | 3,256 | | Prepaid expenses and other | 829 | | Total deferred tax liabilities | 4,085 | | Net deferred tax asset | \$
1,711 | In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the amount of taxes paid in prior years, scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment. The Company has established valuation allowances when it is more likely than not that deferred tax assets will not be realized. ### **(14) Subsequent Events** The Company has evaluated subsequent events through February 20, 2025, the date the financial statement was available to be issued. The following event has occurred subsequent to the balance sheet date and before the date of evaluation. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.