# BATES SECURITIES, INC. X-17A-5 (2022-05-02) — Broker-dealer annual report - Company: BATES SECURITIES, INC. - Form: X-17A-5 - Filed: 2022-05-02 - Period: 2022-01-31 - Accession: 0000704744-22-000003 - CIK: 704744 - File #: 8-29005 - Type: Broker-dealer - Material weakness: Yes - Auditor: Bauer & Company LLC - Auditor location: Austin, TX - Contact: Jennifer Charles - Phone: 8155197411 - Email: gebates@batessecurities.com - Website: batessecurities.com - Signed by: George E Bates (President) Original filing: https://www.sec.gov/Archives/edgar/data/704744/000070474422000003/2022bsiaudit.pdf --- {0}------------------------------------------------ #### **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** 0MB APPROVAL 0MB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 # **ANNUAL REPORTS FORM X-17A-5 PART Ill** | | SEC FILE NUMBER | |--|-----------------| **8-29005** **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 | ___ 2I
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MM/DD/VY | | | | MM/DD/VY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | Bates Securities, Inc.
NAME OF FIRM: | | | | | | TYPE OF REGISTRANT (check all applicable boxes):
~ Broker-dealer
□ Check here If respondent is also an OTC derivatives dealer | □ Security-based swap dealer | □ Major security-based swap participant | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | 8437 Northern Avenue | | | | | | | (No. and Street) | | | | | Rockford | IL | | 61107 | | | (City) | (State) | | | (Zip Code) | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | George E. Bates | 815-332-4020 | | | gebates@batessecurities.com | | (Name) | (Area Code -Telephone Number) | | (Email Address) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Bauer & Company | | | | | | | (Name- if individual, state last, first, and middle name) | | | | | P.O. Box 27887 | Austin | | TX | 78755 | | (Address) | (City) | (State) | | (Zip Code) | | 11/20/2014 | | 6072 | | | | (Date of Registration with PCAOB)(if applicable) | | | | (PCAOB Registration Number, if applicable) | | | FOR OFFICIAL USE ONLY | | | | | * Clalms 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 the basis of the exemption. See 17 CFR 240.17a-S(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.** {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | George E. Bates
I, | , swear (or affirm) that, to the best of my knowledge and belief, the | |----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------| | financial report pertaining to the firm of | as of
Bates Securities, Inc. | | January 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. | | | ~
7 ~-~-----;;:: 'My Commission Expires Sept 22 2024
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OFFICIAL SEAL
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Signatur
Jennifer Schwarze
~ OTARY PUBLIC, STATE OF ILLINOIS
Title:
President and CCO | Notary Public #### **This filing\*\* contains (check all applicable boxes):** - @ (a) Statement of financial condition. - D (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). - 0 (d) Statement of cash flows. - 0 (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - D (f) Statement of changes in liabilities subordinated to claims of creditors. - 0 (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. - D (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 secwrity-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. - 0 (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 appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-l, 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. - 0 (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. - D (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - 0 (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (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. - 0 (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. - 0 (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 that no material inadequacies exist, under 17 CFR 240.l 7a-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 240.18a-7(d)(2), as applicable. {2}------------------------------------------------ # **Bates Securities, Inc. Table of Contents** | Report oflndependent Registered Public Accounting Firm 1 | |------------------------------------------------------------------------| | Financial Statements: | | Statement of Financial Condition 2 | | 3
Statement of Operations | | Statement of Changes in Stockholders' Equity .4 | | Statement of Cash Flows 5 | | Notes to the Financial Statements
6 | | Computation of Net Capital Under SEC Rule 15c3-l .12 | | Report oflndependent Registered Public Accounting Firm on Management's | | Exemption Report. 13 | | Management's Assertion of Exemption 14 | {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) # REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of Bates Securities, Inc. # **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Bates Securities, Inc. as of January 31 , 2022, the related statements of operations, changes in stockholder's equity, and cash flows for the year then ended, and the related notes and schedules ( collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Bates Securities, Inc. as of January 31 , 2022, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. # **Basis for Opinion** These financial statements are the responsibility of Bates Securities, Inc. 's management. Our responsibility is to express an opinion on Bates Securities, Inc.'s financial statements 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 Bates Securities, Inc. 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 statements are 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 statements, 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 statements. 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 statements. We believe that our audit provides a reasonable basis for our opinion. # **Auditor's Report on Supplemental Information** The Computation of Net Capital and Aggregate Indebtedness Pursuant to Rule 15c3-l of the Securities and Exchange Commission (Schedule I) (the "Supplemental Information") has been subjected to audit procedures performed in conjunction with the audit of Bates Securities, Inc. 's financial statements. The supplemental information is the responsibility of Bates Securities, lnc.'s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with 17 C.F.R. §240. l 7a-5. In our opinion, the Supplemental Information is fairly stated, in all material respects, in relation to the financial statements as a whole. **BAUER** & **COMP ANY, LLC** We have served as Bates Securities, Inc.'s auditor since 2021. Austin, Texas April 30, 2022 {4}------------------------------------------------ #### **Assets** | 48,928
25,158 | |------------------| | | | | | 72,038 | | 48,449 | | | | Liabilities and Stockholder's Equity | | |-------------------------------------------------------------------------------|---------------| | | | | Liabilities: | | | Related party payable | \$
38,721 | | | | | Total liabilities | 38,721 | | | | | Stockholder's Equity: | | | Common stock, no par value, \$IO per share, 360 shares issued and outstanding | 3,600 | | Additional paid-in capital | 218,100 | | Retained earnings | (65,848) | | Total stockholder's equity | 155,852 | | | | | Total liabilities and stockholder's equity | \$
194,573 | {5}------------------------------------------------ #### **Revenue:** | Commissions revenue | \$
548,986 | |---------------------------------------------------|----------------| | Change in unrealized loss on equity investment | 51 | | Total revenue | 549,037 | | Expenses: | | | Employee compensation, benefits and taxes | 29,036 | | Fees and reimbursements of expenses to affiliates | 466,718 | | Professional fees | 44,642 | | Regulatory fees | 19,257 | | Other expenses | 24,215 | | Total expenses | 583,868 | | Loss before income taxes | (34,831) | | Income tax expense | 7,931 | | Net loss | \$
(42,762) | {6}------------------------------------------------ # **Bates Securities, Inc. Statement of Changes in Stockholders' Equity For the Year Ended January 31, 2022** | | Common
Stock
360 shares | Additional
Paid In
Capital | Retained
Earnings | Total | |----------------------------|-------------------------------|----------------------------------|----------------------|---------------| | Balance, January 3 1, 2021 | \$
3,600 | \$
218,100 | \$
226,9
14 | \$
448.614 | | Net loss | | | (42,762) | (42,762) | | Distributions | | | (250,000) | (250,000) | | Balance, January 31, 2022 | \$
3,600 | \$
218,100 | \$
(65,848) | \$
155,852 | The accompanying notes to the financial statements are an integral part of these financial statements. {7}------------------------------------------------ | Cash Flows from Operating Activities: | | |-----------------------------------------------------------------------------|-----------------| | Net loss | \$
(42,762) | | Adjustments to reconcile net loss to net cash used by operating activities: | | | Change in unrealized gain on equity investment | (51) | | Decrease (increase) in operating assets: | | | Accounts receivable | 16,796 | | Prepaid expenses | (5,050) | | Due from affiliate | 7,715 | | Increase (decrease) operating liabilities: | | | Accounts payable and accrued expenses | (39,366) | | Accrued income tax | (25,769) | | Related party payable | 38,721 | | Net cash used by operating activities | (49,766) | | Cash Flows from Financing Activities: | | | Distributions | 250,000 | | Net Cash Used in Financing Activities | \$
(250,000) | | | | | Net decrease in cash | (299,766) | | Cash and cash equivalents, beginning | 348,215 | | Cash and cash equivalents, ending | \$
48,449 | | Supplemental disclosure of cash flow information: | | | Income taxes paid
Interest paid | \$
33,700 | The accompanying notes to the financial statements are an integral part of these financial statements. {8}------------------------------------------------ # **Bates Securities, Inc. Notes to the Financial Statements For the Year January 31, 2022** #### **Note 1: Organization** Nature of Operations- Bates Securities, Inc. ("the Firm") is a registered broker-dealer in securities under the Securities and Exchange Act of 1934, as amended. The Firm is registered with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FlNRA"). On October 1, 2018, the Firm was acquired by QCR Holdings, Inc. and is a wholly owned subsidiary of the Company. Prior to this date, the Firm was owned by George E. Bates and the Carol E. Bates Charitable Remainder Unit Trust. On August **11,** 2020, QCRH sold Bates Securities, Inc. back to George E. Bates. # **Note 2: Summary of Significant Accounting Policies** A summary of the Firm's significant accounting policies consistently applied m the preparation of the accompanying financial statements are as follows: Cash and Cash Equivalents- Cash and cash equivalents include cash and investments in money market mutual funds. For purposes of the statements of cash flows, the Firm considers all highly liquid debt instruments with maturities of three months or less when purchased to be cash equivalents. There were no cash equivalents at January 31,2022. The Firm places its cash in accounts with two local financial institutions. At times, balances in these accounts may exceed FDIC insured limits. Commissions Receivable-Commissions Receivable consists of commissions, fees and other amounts owed to the Firm. The Firm considers all commissions receivable to be fully collectible. Uncollectible accounts receivable are charged directly against operations when they are determined to be uncollectible. Use of this method does not result in a material difference from the valuation method required by accounting principles generally accepted in the United States of America. Management believes an allowance is unnecessary. Commissions receivable are written-off when collection efforts have been exhausted. During the year ended January 31, 2022, \$7,715 was recorded as bad debts expense. At January 31, 2022, commission receivable was \$72,038. Investment in Marketable Securities-The Firm has an investment in a marketable equity security that is listed and traded on a national exchange. The Firm's investment in marketable equity securities has been classified as available-for-sale and is stated at fair value. Unrealized holding gains and losses are reported in the Statement of Operations on the line titled unrealized gain on equity investment. Dividends on marketable equity securities are recognized in income when declared. Realized gains and losses, including losses from declines in the value of specific securities determined by management to be other-than-temporary, are included in income. No other-than temporary impairment was recognized in the year ended January 31, 2022. Basis of Accounting - These financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America. Revenues are recognized in the period earned and expenses when incurred. {9}------------------------------------------------ **Bates Securities, Inc. Notes to the Financial Statements For the Year January 31, 2022** # **Note 2: Organization and Summary of Significant Accounting Policies (continued)** Revenue Recognition-Revenue from contracts with customers include commissions from the sale of variable annuity and mutual fund products. The recognition and measurement of revenue is based on the assessment of the individual contract terms. Significant judgement is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract and whether constraints on variable consideration should be applied to due to uncertain future events. The Firm recognizes commissions revenue on variable annuities and mutual fund products once received with an estimate booked representing outstanding commissions due. Commissions are recorded on a trade-date basis. Use of Estimates- Preparation of the statement of financial condition in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the statement of financial condition. Actual results could differ from those estimates. Recent Accounting Pronouncements - Accounting standards that have been issued by the Financial Accounting Standards Board are not expected to have a material impact on the Firm's financial position, results of operations or cash flows. #### **Note 3: Related Party Transactions** The Firm has an operating agreement with an affiliated company. The agreement provides for the affiliated company to pay the Firm's operating expenses, including occupancy, payroll and administrative expenses. These expenses totaled \$466,718 for the year ended January 31, 2022 and are included in the Statement of Operations. At January 31, 2022, \$31,441 was owed to the related party. On December 23, 2021 the Firm, along with an affiliate, entered into a note payable agreement with George E. Bates for \$26,000. The Firm's allocated share for the note payable is \$7,280. The note bears interest at 5.11 % per annum. The principal and accrued interest on the note payable were paid on January 7, 2022. #### **Note 4: Exemption Under Rule 15c3-3** The Firm is exempt from the provisions of Rule **l** 5C3-3 under the Securities Act of 1934 pursuant to paragraph (k)(2)(i) of the rule. The Firm does not carry customer margin accounts and promptly transmits all customer funds and securities received in connection with its activities as a broker dealer. The Firm does not hold funds or securities for, or owe money or securities to customers. {10}------------------------------------------------ #### **Note 5: Fair Value Measurements** Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. Fair value if defined as the exchange price that would be received for an asset or paid to transfer a liability (or exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Firm. Unobservable inputs are inputs that reflect the Firm's assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy input levels are as follows: - Level **1** Quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. - Level 2 Observable inputs other than quoted market prices included in Level **1,** such as quoted prices for similar assets and liabilities in active markets, or quoted market prices for identical or similar assets or liabilities in markets that are not active. - Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At January 31, 2022, the Firm did not have any Level 2 or 3 inputs. There were also no transfers between level 2 and level 3 investments during the year ended January 31, 2022. As of January 31, 2022, the Firm held certain financial assets that are required to be measured at fair value on a recurring basis. These marketable equity securities are valued at a Level **1** fair value of \$48,928. These marketable equity securities have an original cost of \$33,032, resulting in an accumulated unrealized gain of \$15,896. The carrying amounts of the Company's financial instruments, which include cash and cash equivalents, other assets, accounts payable and accrued expenses, approximate their fair values due to their short maturities. # **Note 6: Commitments and Contingencies** #### *Litigation* The Firm from time to time may be involved in litigation relating to claims arising out of its ordinary course of business. Management believes that there are no claims or actions pending or threatened against the Firm, the ultimate disposition of which would have a material impact on the Firm's financial position, results of operations or cash flows. # *Risk Management* The Firm maintains various forms of insurance that the Firm's management believes are adequate to reduce the exposure of these risks to an acceptable level. {11}------------------------------------------------ #### **Note 6: Commitments and Contingencies (continued)** # *Global Pandemics* On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 outbreak") and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based n the increase n exposure globally. The full impact of the COVID-19 outbreak continues to evolve throughout the discovery of various variants of COVID-19. On November 26, 2020, the WHO designated variant B.1.1.529, named Omnicron as a Variant of Concern. As such, it is uncertain as to the full magnitude that the pandemic will have on the Firm's financial condition, liquidity, and future results of operations. Management continues to actively monitor the global situation and any impacts it may have on its financial condition, liquidity, operation, industry and workforce. As of the date of the independent registered public accounting firms' report, the Firm cannot reasonably estimate the length or severity of the COVID-19 pandemic, or the extent to which the disruption may materially impact the Firm's financial condition, liquidity, operations, industry and workforce in the fiscal year ending January 31, 2023. #### **Note 7: Net Capital Requirements** The Firm is required to maintain a minimum net capital under Rule 15c3-l of the Securities and Exchange Commission. Net capital required under the rule is the greater of \$5,000 or 6 2/3 percent of the aggregate indebtedness of the Firm. At January 31 , 2022, net capital as defined by the rules, equaled \$51,614, which was \$46,614 in excess of its required net capital of \$5,000 and its aggregate indebtedness was \$38,721. The Firm's ratio of aggregated indebtedness to net capital was . 7 5 to **1.** # **Note 8: Income Tax Expense and Accounting for Uncertainty in Income Taxes** In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain. The Firm regularly assess uncertain tax positions in each of the tax jurisdictions in which it has operations and accounts for the related financial statement implications. Unrecognized tax benefits are reported using the twostep approach under which tax effects of a position are recognized only if it is "more-likely-than-not" to be sustained and the amount of the tax benefit recognized is equal to the largest tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement of the tax position. Determining the appropriate level of unrecognized tax benefits requires the Firm to exercise judgement regarding the uncertain application of tax law. The amount of unrecognized tax benefits is adjusted when information becomes available or when an event occurs indicating a change is appropriate. The Firm includes interest and penalties related to its uncertain tax positions as part of income tax expense, if any. As of January 31, 2022, the Firm did not have any uncertain tax positions. The Firm is subject to federal and Illinois income tax. {12}------------------------------------------------ ### **Note 9: Reserve Requirements and Possession or Control Requirements Under Rule 15c3-3** The Firm does not hold funds or securities for or owe money or securities to customers, and therefore.is exempt from the customer reserve and possession or control requirements pursuant to paragraph (k)(2)(i) of Rule 15c3-3 of the Securities Exchange Act of 1934. # **Note 10: Filing Requirements** There were no liabilities subordinated to claims of creditors during the year ended January 31, 2022. Accordingly, no Statement of Changes in Liabilities Subordinated to Claims of Creditors has been included in these financial statements as required by rule 17a-5 of the Securities and Exchange Commission. # **Note 11: Subsequent Events** The Company has evaluated subsequent events through April 30, 2022, the date of the Report of independent Registered Public Accounting Firm, which was the date the financial statements was available to be issued. Based on this evaluation, there were no such matters requiring recognition or disclosure in the financial statements for the year ended January 31, 2022. {13}------------------------------------------------ | | SCHEDULE I | |--------------------------------------------------------------|---------------| | Computation of net capital: | | | Total ownership equity from Statement of Financial Condition | \$
155,852 | | Non-allowable assets | | | Commissions receivable | 72,038 | | Prepaid expenses | 25,158 | | Total nonallowable assets | 97,196 | | Net capital before haircuts on securities positions | 58,656 | | Less: haircuts on securities | (7,042) | | Net capital | \$
51,614 | | Aggregate indebtedness | | | Accounts payable and accrued expenses | \$
38,721 | | Total aggregate indebtedness | \$
38,721 | | Minimum net capital requirement (greater of \$5,000 or | | | 6 2/3 % of aggregate indebtedness) | \$
5,000 | | Net Capital in excess or minimum requirement | \$
46,614 | | Net capital less 10% of aggregate indebtedness | \$
45,614 | | Ratio of aggregate indebtedness to net capital | .75 to 1 | | | | # **Net capital reconciliation pursuant to Rule 17A-5(D)(4):** There were no material differences between the computation of net capital presented above and the computation of net capital reported int the Firm's unaudited Form X-17A-5, Part IIA filing as of January 31, 2022 and as amended on April 22, 2022. {14}------------------------------------------------ ![](_page_14_Picture_0.jpeg) # REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of Bates Securities, Inc. We have reviewed management's statements, included in the accompanying Exemption Report Year Ended January 31, 2022, in which (1) Bates Securities, Inc. identified the following provisions of 17 C.F.R. § 15c3-3(k) under which Bates Securities, Inc. claimed exemption from 17 C.F.R. §240. l 5c3-3: (k)(2)(i) (the "exemption provision") and (2) Bates Securities, Inc. stated that Bates Securities, Inc. met the identified exemption provision throughout the most recent fiscal year of January 31 , 2022, without exception. Bates Securities, Inc. 's management is responsible for compliance with the exemption provision and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about Bates Securities, Inc. 's compliance with the exemption provision. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraphs (k)(2)(i) of Rule I 5c3-3 under the Securities Exchange Act of 1934. **BAUER& COMPANY,LLC** Austin, Texas April 30, 2022 {15}------------------------------------------------ # **Exemption Report January 31, 2022** Bates Securities, Inc,, ("Company") is a registered brokerwdealer subject to Rule 17aw5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240.l 7aw5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. §240.17aw5(d)(l) and (4). To the best of its knowledge and belief, the Company states the following: - 1) The Company claims an exemption from 17 C.F.R. §240.15c3w3 under Section (k)(2)(i). - 2) The Company met the identified exemption provisions in 17 C.F .R. §240. l Sc3 w3 (k)(2)(i) for the entire period February 1, 2021 through January 31, 2022, without exception. I, George E. Bates, swear ( or affirm) that, to the best of my knowledge and belief, this Exemption Report is true and correct. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.