# MUTUAL SECURITIES, INC. X-17A-5/A (2022-11-18) — Broker-dealer annual report - Company: MUTUAL SECURITIES, INC. - Form: X-17A-5/A - Filed: 2022-11-18 - Period: 2022-06-30 - Accession: 0000710025-22-000003 - CIK: 710025 - File #: 8-28580 - Type: Broker-dealer - Material weakness: No - Auditor: Farber Hass Hurley LLP - Auditor location: Chatsworth, CA - Contact: Nick Damiani - Phone: 8057646740 - Email: nick.damianl@mutual.group - Website: mutual.group - Signed by: Nick Damiani (Chief Administrative Officer) Original filing: https://www.sec.gov/Archives/edgar/data/710025/000071002522000003/audit2022.pdf --- {0}------------------------------------------------ | UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 | | | 0MB APPROVAL
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hours per response; J 2 | | | | |--------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|---------------------|-----------------------------------------------------------------------------------------------------------------------|--|--|--| | | ANNUAL REPORTS | | SEC FILE NUMBER | | | | | | FORM X-17A-S | | | | | | | | PART Ill | | | | | | | | FACING PAGE
Information Required Pursuant to Rules 17a-S, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | | | | | | | FILING FOR THE PERIOD BEGINNING 07/01 /21 | | AND ENDING 06/30/22 | | | | | | | MM/DD/YY | | MM/DD/YY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | | | | NAME OF FIRM: MUTUAL SECURITIES, INC. OF CALIFORNIA OBA MUTUAL SECURITIES, INC. | | | | | | | 'rYPE OF REGISTRANT (check all applicable boxes):
0 Broker-dealer
□ Check here if respondent Is also an OTC derivatives dealer | □ Sewrity-based swap dealer | | D Major security-based swap participant | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | | | 807-A CAMARILLO SPRINGS ROAD | | | | | | | | (No. and Street) | | | | | | | CAMARILLO | CA | | 93012 | | | | | (City) | (State) | | {2ip Code) | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | | NICK DAMIANI | 805-764-6740 | | NICK.DAMIANl@MUTUAL.GROUP | | | | | (Name) | (Area Code -Telephone Number) | | (Email Address) | | | | | | 8. ACCOUNTANT IDENTIFICATION | | | | | | | FARBER HASS HURLEY LLP | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing* | | | | | | | | (Name - If Ind ividual, ·state last, llrst, and middle name) | | | | | | | 9301 OAKDALE AVE | CHATSWORTH | CA | 91311 | | | | | (Address)
10/22/2003 | (City) | (State)
223 | (Zip Code) | | | | | (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, If applicable) | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | • Claims for exemption from the requirement that the annual reports be covered by the reports of an Independent public | | | | | | **accountant must be supported by a statement of facts and circumstances relied on as 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 0MB control number.** {1}------------------------------------------------ ## **OATH OR AFFIRMATION** I, NICK DAMIANI swear (or affirm) that, to the best of my knowledge and belief, the financial report pertaining to the firm of MUTUAL SECURITIES, INC. OF CALIFORNIA DBA MUTUAL SECURITIES, INC. as of 6/30 2� is true and correct. I further swear (or affirm) that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest In any account classified solely as that of a customer. Signature: �Ow Notary Public ( � � CHIEF ADMINISTRATIVE OFFICER � *a-&* **Co l;.Q,fY'l,ci. :Tun+ 11-1<. .. 22 Q?.** Title: ## This **filing•• contains (check all applicable boxes):** - ii!. (a) Statement of financial condition. - D {b) Notes to consolidated statement of financial condition. - ii! {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). - ii {d) Statement of cash flows. - !ii!! (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - !ii!! (fl Statement of changes In liabllities subordinated to claims of creditors. - ii! (g) Notes to consolidated financial statements. - ii! {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 2.40.18a-2. - ii! U) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - □ {k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.lSa-4, as applicable. - 0 {I) Computation for Determination of PAB Requirements under Exhibit A to§ 2.40.15c3-3. - ii! (ml Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240,1Sc3-3(p)(2) or 17 CFR 240.lSa-4, as applicable. - ii! (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.l.5c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - D (p) Summary of 'financial data for subsidiaries not consolidated ln 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.lSa-7, as applicable. - 0 (r) Compliance report In accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - ii {s) Exemption report in accordance with 17 CFR 240.l 7a-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) lhdependent public accountant's report based on an examination of the financial report or flnancial 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-S or 17 CFR 240.18a-7, as applicable. - ii!!! {w) Independent public accountant's report based or, a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (x) Supplemental reports on applying agreed-upon procedures, In accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable. - D {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). - D (z) Other: \_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_ - *"""'To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d){2), as applicable.* {2}------------------------------------------------ # **JURAT** A notary public or other off cer completing this certificate verifies only the identity of the ind vidual who signed the document to which this certificate is attached, and not the trnthfulness, accuracy. or validity of that document State of California } County of �V�e�n=tu�ra=----------} Subscribed and sworh to (or affirmed) before me on th.is l {.-lh day of **Novembt.r , 20\_2\_2�\_** proved to me on the basis of satisfactory evidence to be the person�) who appeared before me. Signature **cG.H.** � ![](_page_2_Picture_8.jpeg) (Seal) {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) Certified Public Accountants 9301 Oakdale Avenue, Suile 230 Chatsworth, CA 91311 www.fhhcpas.com Telephone (818) 895-1943 Facsmile {818) 727-7700 ## REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Mutual Securities Inc. ## Opinion on the Financial Statements We have audited the accompanying statement of Multial Securities Inc. as of June 30, 2022. the related statements of operations, changes in subordinated borrowings, changes in stockholders' equity, and cash flows for the vear then ended and the reigled notes (collectively referred to as the financial statements). In our opinion, the linancial statements present fairly, in all material position of Mutual Sceurities Inc. as of .lune 30, 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 Mutual Securities Inc. In responsibility is lo express an opinion on Mulual Securities Inc. is financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arc required to be independent with respect to Mulai Securities inc. in accordance with the U.S. federal securities laws and the applicable rales and regulations of the Securities and Exchange Commission and the PCAOB We conducted our andit in accordince 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 missialement of the financial statements, whether due to error or fraud, and performing proccures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the anounts and disolosures in the financial statements Our audit also included evaluating principles used and significant estimates made by management, as well as ex aluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. ## Supplemental Information The Schedule I, Computation of Net Capital Requirement to Rice 1503-1. and Schedule II, Computation For Determination Of Reserve Requirements and Information Relaining to Possession or Control Requirements for Brokers and Dealers Pursuant to Rule 153-3. have been subjected to audit procedures performed in conjunction with the andit of Mutual Securities Inc. The supplemental information is the responsibility of Mulual Securities Inc. 5 management. Our audit procedures included determining whether the supplemental information recountes to the financial statements or the underly ing accounting and other records, as applicable, and performing procedures to test the completency of the information presented in the supplying that information In forming our opinion on the supplemental information, we evaluated whether the supplying that information, including its form and content, is presented in conformity with 17 C.F.R. \$240.17a-5. In our opinion, the supplemental information is fairty stated, in all material respects, in relation to the financial statements as a whole. Farber Hass Huley, LLP We have served as Mutual Securities Inc. 's auditor since 2018. Chatsworth. California October 4. 2(1)22 {4}------------------------------------------------ Report on Audit of Financial Statements and Supplementary Information June 30, 2022 This report is deemed CONFIDENTIAL in accordance with Rule 17a-3(e)(3) under the Securities Eschange Act of 1934 A statement of financial condinon, hound separately, has becamines and Essenange Commusion smultancously heressuh as a Public Document {5}------------------------------------------------ #### Contents | As of and the the year ended Tune . W. 2027 | | |-----------------------------------------------------------------------------------------------------------------------------------|--------| | Report of Independent Registered Public Accounting Firm | | | Financial Statements | | | Statement of Financial Conclition | 2 | | Statement of Operations | 3 | | Statement of Changes in Subordinated Borrowings | 4 | | Statement of Changes in Stockholders' Equity | 5 | | Statement of Cash Flows | 6 | | Notes to Financial Statements | 7 - 11 | | Supplementary Information | | | Schedule 1 . Computation of Net Capital Under Rule 15e3-1 of
the Securities and Exchange Commission | 12 | | Schedule II - Computation of Customer Account Reserve Linder Rine 1503-3
of the Securities and Exchange Commission (Exemption) | 13 | | Report of Independent Registered Public Accounting Firm Regarding Rine 15cc 3-3 Exemption Report | 14 | | Exemplion Report | 15 | {6}------------------------------------------------ ## Statement of Ponancial Conclition June 30, 2022 ASSEIS | Casli | 1.405.024
A | |------------------------------------------------------------------------------------------------------|----------------| | Deposits with clearing organizations | 200,000 | | Receivables from broker-dealers and clearing organizations | 2.696,436 | | Receivables from all'illiate | (48.250) | | Furniture, equipment, and leasehold improvements, at cast, less iscommated depreciation of \$676,890 | 11,259 | | Operating lease right-of-use assets | 481.130 | | Other itssels | 165.95() | | TOTAL ASSETS | \$ 5.528.040 | | LIABILITIES AND STOCKHOLDERS' EQUITA | | | LIABILITIES | | | Payables to broker-dealers and clearing organizations | 2.888.696 | | Accounts payable, accrued expenses, and other habilities | 346,347 | | Operating lease liability | 2181.130 | | Subordinated borrowings | 250.000 | | TOTAL LIABILITIES | 3,966,173 | | STOCKHOLDERS. EQUILY | | | Countron stock, to par value. 100,000 shares authorized, 31.216 shares issued and outstanding | 23.413 | | Acteitional paid-in-capital | 142.726 | | Retamed carnings | 1.345.737 | | TOTAL STOCKHOLDERS' EQUITY | 1.561.876 | | TOTAL LIARILITIES AND STOCKHOLDERS. EQUITY | \$ 5.528.049 | The accompanying notes are an integral part of these financial statements {7}------------------------------------------------ ## Simement of Operations For the Year Ended June 30, 2022 | REVENCE: | | |----------------------------------------------|---------------| | Commissions | \$ 28,090.124 | | Other moone | 702, 194 | | Total revenue | 28,792,318 | | OPERATING EXPENSES: | | | Compensation and benefits | 23.719.950 | | Floor brokerage, exchange and clearance lies | 326,335 | | Technology and communications | 575.073 | | Occupanel and equipment | 203.483 | | Professional Fees | 1.037,182 | | Arburation settlement | 709.288 | | Other expenses | 1.201,783 | | Intal expenses | 27.773.094 | | NET INCOME | 1.019,224 | The accompanying notes are an integral part of these financial statements, ਤੇ {8}------------------------------------------------ Statement of Changes in Subordinated Borrowings For the Year I inded line 30 2022 | Balance-July 1.2021 | | |------------------------------------------|----------| | Increases | | | Issuance of subordinated loun agreements | 250.000 | | Balanse-June 30, 2022 | 250,0000 | The accompanying notes are an integral part of these financial statements 小 {9}------------------------------------------------ Statement of Clianges in Stockholders' Fajulty I or the Year I nded June 30 2022 | | Common Stock | | | Additional
Paid- n | Retained | Total
Stockholders' | |-------------------------|--------------|----|-----------------|-----------------------|-------------------------|------------------------| | | Shares | | Amount | Capilal | Earnings | Equity | | Balance - July 1, 2021 | | | 31.216 5 23,413 | \$ 142,726 | \$ 376,513 | \$ 542,652 | | Nel income | | | | | 1,019,224 | 1,019,224 | | Balance - June 30, 2022 | 31,216 -- | မာ | 23.413 | | \$ 142.726 \$ 1.395.737 | \$ 1.561.876 | The accompanying notes are an integral part of these financial statements 5 {10}------------------------------------------------ Statement of Cash Flows For the Year I uded June 30 2022 ## CASH FLOWS FROM OPERATING ACTIVITIES: | Net income | 1.019.224
P | |--------------------------------------------------------------------------|----------------| | Adjustments to reconcile net invome in net cash provided by | | | operating neuvit its | | | Depreciation und amortization | 2.507 | | Debt forgiveness-PPP loan | (.175,215) | | Changes in operating assets und frabilities. | | | I becrease in receivables from broker-dealers and clearing organizations | 669.661 | | Increase in receivables from affiliate | 168.250) | | Decrease in operating lease right-of-use assets | 77.115 | | Decrease in other assels | 20.629 | | Decrease in payables in broker-dealers and clearing organizations | (1.3 6.735) | | Increase in accounts payable, accrued expenses, and other fribilities | 110,779 | | Decrease in operating lease frability | (77.115) | | NET CASH USED IN OPERATING ACTIVITIES | (37.405) | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | Proceeds from issume of subordinated loans | 250 000 | | NET CASH PROVIDED BY FINANCING ACTIVITIES | 250,000 | | NET INCREASE IN CASH | 212.595 | | CASH AT BECINNING OF YEAR | 1693.439 | | CASH AT END OF YEAR | 1.905.024 | The accompanying notes are an integral part of these financial statements\_ 6 {11}------------------------------------------------ Nol!.?S to rrna11c1ul '.'.wtcmenL, **.luno** 10 2021 #### **1. Nature of Business** MutL1al Secur1tles, Inc. of California dba Mutual Securities, Inc. (lhe "Company'") was Incorporated In the State of California on February 4, 7 982 under the name Brokers Office Management-Encino, Inc and subsequently changed its name to Mutual Securities, Inc. of California on November 9, 1998. The Company s a registered broker-dealer in securities under the Securities and Exchange Act of 1934, a member of lhe Financial Industry Regulatory Authority ("FINRA''), and the Securities Investor Protectl on Corporation ("SIPC") The Company 1s engaged in the business as a securities broker-dealer which provides several classes of services. The mafority of its Income is earned from the sale of variable life insurance policies and annullles Income is also earned from agency commissions and equity transactions which Include the sale of corporate debt, equity securities, options, U.S. Government and municipal securiti es to institutional and retafl customers Under its membership agreement with FINRA and pursuant to SEC Rule 1 5c3-3 (k)(2)(ii), the Company conducts business on a fully disclosed basis and does not execute or clear securities transactions for customers The Company also relies on Footnote 74 of SEC Release 34-70073 Accordingly, the Company is exempt from the requirement of Rule 1 5c3-3 Linder the Securities Exchange Act of 1934 pertaining to the possession or control of customer assets and reserve requirement. #### **2. Summary of Significant Accounting Policies** #### **Basis of Presentation** These financial statements are prepared using the accrual basis of accountlnQ in accordance with accounting principles generally accepted in the United States of America, #### **Use of Estimates** The preparation of financial statements ln conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and hablllt1es and disclosure of contingent assets and liabilities at the date of the f nancial statements and the reported amounts of revenues and expenses during the period Accordingly, actual results could dffer materially from those estimates. #### Income **Taxes** The Company has elected to be treated as an "S" Corporation under the provisions of the Internal Revenue Code and Callfornia state tax regulations Under the provisions, the Company does not pay federal or state corporate income taxes on Its taxable income. Instead, the stockholder Is liable for individual income taxes on his respective share of the Company's taxable income. The Company recognizes and measures any unrecognized tax benef ts In accordance with FASB ASC 740, Income Taxes Under this guidance the Company assesses the likelihood, based an their technical merit, that tax positions will be sustained upon exam111abon based upon the facts, circumstances, and 1nformallon available al the end of each period The measurement of unrecognized tax benefits Is adjusted when new Information becomes available, or when an event occurs that requires a change The Company did not have material unrecognized tax benefits as of June 30, 2022, and does not expect this to change significantly over the next twelve months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of fncome tax expense As of June 30, 2022, the Company has no accrued interest or penalties associated with Lincertain tax positions #### **Cash and Cash Equivalents** Cash consists of deposits with banks and highly liquid Investments, With maturities of three months or less, that are not segregated and deposited for regulatory purposes {12}------------------------------------------------ !\n1cs to 1111w1ciul ',1u1e111c111s June 30. 11J'.l:! #### **2. Summary of Significant Accounting Policies (Continued)** #### **Receivable From and Payable** To **Clearing Organizations** The balances shown as receivable from and payable to clearing organizations represent amounts due in connection with the Company's normal transactions involving trading of securities. Management considers all receivables to be collectible, therefore no allowance for doubtful accounts has been provided. #### **Furniture, Equipment, and Leasehold Improvements** FLrniture, equipment and leasehold Improvements are recorded at cost and are depreciated over the estimated useful lives of the related assets, which range ·from five lo fifteen years. Repair and maintenance costs are expensed as incurred. Leasehold improvements are depreciated over the shorter of the lease term or estimated useful hfe. Improvements which increase the productive value of assets are capitalized and depreciated over the remaining useful life of the related asset. #### **Right-of-Use Assets-Operating Leases** The Company follows the Financial Account ng Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease llabllity The Company does not recognize right of use assets and liabilities for leases with a term of 12 months or less #### Revenue Recognition In accordance with FASS ASC 606, Revenue from Contracts wth Customers, the Company follows a five-step model to (a) ident fy the contract(s) wlth a customer, (b) Identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and ( e) recognize revenue when ( or as) the entity satisfies the performance obligation ### 3. Deposit with Clearing Organization The Company has a brokerage agreement with National Financial Services LLC ("Clearing Broker") to carry Its account and the accounts of its clients as customers or the Clearing Broker The Clearing Broker has custody of lhe Company's cash balances which serve as collateral for any amount due to the Clearing Broker as well as collateral for securities sold short or securities purchased on margin, Interest is paid monthly on these cash deposits at the average overnight repurchase rate. The balance at June 30, 2022 was \$200,000 ## 4. Equipment, and Leasehold Improvements As of June 30, 2022, equipment and leasehold improvements, net, consisted of the following: | Fumllllre and nxrures | \$ 67,986 | |----------------------------------------------------|-----------| | Machinery and equipment | 61,156 | | Leasehold Improvements | 59,007 | | Total cost of equipment and leasehold improvements | 1 88,149 | | Less: accumulated deprec1at1on | 176,890 | | Equipment and leasehold Improvements, nel | \$ 11,259 | {13}------------------------------------------------ Note, Lu 1111u11c1ul �lutl!mcnls **.lune** Jll. '.!0'.!2 #### **5. Revenue** From **Contracts With Customers** #### **Commissions** The Company buys and sells Insurance and annuity products, mutual funds, and other equity and financial instruments on behalf of its customers. Each time **a** customer enters into a buy or sell transaction, the Company charges a commission The Company also charges fees relating to the transactions executed on behalf of its customers Commissions, fees and related clearing expenses arc recorded on the trade date (the date that the Company fills the trade order by nnding and contracting with a counterparty and confirms the trade with the customer). The Company believes that the performance obligalton 1s satisfied on the trade date because that is when the underlying financial Instrument or purchaser is identfied, the pricing Is agreed upon and the risks and rewards of ownership have been transferred to or from the CL1stomer Sales of annullies, insurance products, and mutual funds include initial up-front (frst year) commissions where the performance obligation ls satisfied on the trade date as well as annual trailing commission payments for each product renewal and continued investment. Commissions on annuity, insurance products and mutual funds are considered variable consideration. ASC Topc 606 requires that, at the time of the Initial sale or investment. the Company must estimate the variable consideration (future renewal commissions) and determine the transaction price as the unconstrained net present value of expected future renewal commissions. Therefore, the transaction price for annuities, insurance products and mutual funds includes first year fixed commissions recognized for new sales as well as trailing commissions. The performance obligation of trailing commissions Is satisfied al product renewal and continued investment, which are estimated using the average value of trailing commissions received in the first month *of* the two previous quarters. The receivables at June 30, 2021 , were \$3,366,097. #### *Disaggregated Revenue* From *Contracts With Customers* The following table presents revenue by major source | Variable annuities
12b-1 fees
Brokerage commissions
Direct mutual funds
Administrative and other fees | \$ | 20,579,834
4,008,976
1 ,812.714
1 .700,960
216,365 | |-------------------------------------------------------------------------------------------------------------------|----|----------------------------------------------------------------| | | \$ | 28,317.849 | | Debt forgiveness income
Interest. net | \$ | 475.2'15
(746) | | | \$ | 474,469 | | Total | s | 28,792.318 | #### 6. Related Party Transactions On October 1, 2009, the Company entered into a lease agreement for office space with KCMA Investments, UC ("KCMA") with which the Company has common ownershi p. For the year ended June **30, 2022,** the Company recognized **\$160,996** In occupancy expense to KCMA See Note **12** for further Information on the lease agreement Mutual Advisors, LLC ("Mutual Advisors"), 1s affiliated with the Company through common control. The Company offers brokerage services to certain clients of Mutual Advisors, and either the clients or their Investment adviser representatives are charged for such brokerage services The Company shares portfolio accounting fee costs with Mutual Advisors LLC \$163,204 In total portfolio account ng fees were incurred by the Compan\_y and Mutual Advisors, UC reimbursed the Company \$131,991, based on respect ve usage, for a net expense of **\$31,213** in portfolio accounting for the year ended June **30, 2021** which 1s included in the Statement of Income under Operating Expenses, Other operating expenses. There were no reimbursements due from Mutual Advisors, LLC as of June **30, 2021** Effective May **1, 2022,** the Company and Mutual Advisors, LLC, enterl:ld into an agreement whereby Mutual Advisors, LLC, reimburses salary expenses paid by the Company that pertain to Mutual Advisors, LLC Al June 30, 2022, Mutual Advlsors, LLC owed the Company \$68,250 {14}------------------------------------------------ NOlCS lO rrnu11c1ul 'i1t11ell\�I\I� **June JO. 21122** ## **7. 401 (k) Plan** The Company has a qualified 401(k) P an (the "Plan") under IRC section 401(a) covering substantially all of its employees Employees are re·quired to have attained the age of 21 and to have completed one year of service In order to be eligible to participate in the Plan. The Plan provides lhat the employer may make matching contributions and/or annual discretionary contributions. For the year ended June 30, 2022, the Company recorded expenses of \$99,861 in matching contributions. ### 8. Financial Instruments The Company maintains several bank accounts at financial institutions. Tl1ese accounts are insured either by the Federal Deposit Insurance Commission ("FDIC") up to \$250,000 or the Securities Investor Protection Corporation ("SIPC'') up lo \$500,000. At times during the year ended June 30, 2022, cash balances held In financial institutions were in excess of the FDIC and SI PC's insured limits. The Company has not experienced *any* losses ln these accounts and management believes that it has placed its cash on deposit wlth fmanc1al inslttutlons which are financially stable The Company is engaged in various trading *and* brokerage activities In which counter-parties primarily include brokerdealers, banks, and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworlhlness of the counter-party or issuer of the Instrument It is the Company's policy to review, as necessary, the credit standing of each counter-party. ### **9.** Concentration **Risk** Two customers comprised approximately 28% of the Company's revenues ### **10. SBA PPP** Loan On May 4, 2020 1he Company received loan proceeds in the amount of \$475,215 from the Bank of America, N.A. (the "Lender") pursuant to the Small Business Administration ("SBA") Paycheck Protect1on Program ("PPP") under Division A, Title I of the CARES Act, which was enacted March 27, 2020 The Company sut;,sequently filed c1 loan forgiveness applicaUon with the lender on September 11, 2021, and lhe Joan was forgiven on October 20, 2021 ### **11.** Commitments and Contingencies ## *Leases* These assets and liablllties for operating leases are recognized on the commencement date based on the present value of remaining lease payments *over* the lease terms using the implicit rate as the discount rate if it is readily determinable, otherwise the Company will use its incremental borrowing rate as the discount rate Short-term operating leases, which represents those leases having an initial term of 12 months or less, are not recorded on the Statement of Financial Condition. The Company is obligated under a lease ror a twelve-month term beginning September 1, 2020 with five (5) consecutive one year oplJons to renew the lease for its office space 1n Camarillo, CA Management compared the renewal rents with expected fair market rents for equivalent property under similar terms and conditions and detern,ined It Is reasonably certain ltie Company will exercse the renewal options and have included the f ve consecutive renewal options in the lease commitment. The discount rate used to compute the lease liability and right of use asset at the commencement date of the lease 1s **10.69%,** which is the 1mplic1t *rate.* The implicit rate was computed using estimated market value data readily available to determine the asset value, lease costs, and estimates the Company made of the residual asset value, based on historical average market value data readily available. Lease expense for its office space 1n Cc1mar1llo, CA was \$154,692 for the year ended June 30, 2022 and is included on the Statement of Income under occupancy and equipmenl The total of the commitment over the remaining terms at June 30, 2022 is as follows: Year Ending June 30. | 2023 | s | 139,892 | |------------------------------------|----|-----------| | 2024 | | 139,892 | | 2025 | | 139,892 | | 2026 | | 139,892 | | thereafter | | 23,225 | | Total undlscour1ted lease payments | | 582,793 | | Less lnteres1 | | (101.663) | | Total lease liabilities | \$ | 481,130 | {15}------------------------------------------------ l'<i ves that are Included In the commission statements and payments to the registered representatives for technology, administrative, and insurance costs, These recurring registered representative charges are recorded as a reduction to commission expense. These charges were in total approximately \$1,344,000 for the year ended June 30, 2022. #### **14. Guarantees** FASB ASC 460, Guarantees requires the Company to disclose Information about its obligation.s under certain guaranlee arrangements. FASB ASC 460 effectively describes guarantees as contracts and Indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying (such as an interest or foreign exchange rate, security or commodity price, an Index or the occurrence or nonoccurrence of a specified event) related to an asset, liability or equity security of a guaranteed party, This guidance also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entitys failure to perform under an agreement as well as indirect guarantees of the indebtedness of others. The Company issued no guarantees as of June 30, 2022 or during the year then ended. #### **15. Net Capital Requirements** The Company 1s subJect to the Secur1tles and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1 ), which requires the maintenance of minimum net capital and requires that the ratio of aggregate Indebtedness to net capital, both as defined, shall not exceed 15 to *1* At June 30, 2022, the Company had net capital of \$520,372 which was \$304,702 in excess of its required net capital of \$215,670 The Company's ratio of aggregate indebtedness to nel capital was 6.22 to 1 ### **16. Subsequent Events** The Company has performed an evaluation of events that have occurred subsequent to June 30, 2022, and through issuance date of ll1is report There have been no material subsequent events that occurred during such period thal would require disclosure in this report or would be reql1ired to be recognized in lhe financial statements as of June 30, 2022 {16}------------------------------------------------ #### Schedule I - Computation of Nel Capital Under Rule 15c3-1 of the Securities and Exchange Commission As of June 30, 2022 | SCHEDULE I | | |---------------------------------------------------------------------------|---------------| | TOTAL STOCKHOLDERS' EQUITY QUALIFIED FOR NET CAPITAL | \$ 1 ,561,876 | | Add: Subordinated borrowings allowable in computation of net capital | 250,000 | | TOTAL CAPITAL AND ALLOWABLE SUBORDINATED BORROWINGS | 1,811,876 | | DEDUCTIONS AND NON-ALLOWABLE ASSETS: | | | Non-allowable assets· | (1,265,374} | | NET CAPITAL BEFORE HAIRCUTS | 546,502 | | HAIRCUTS | | | Other Securities | (17,784) | | Undue Concentration | (8,346) | | | (26,130) | | NET CAPITAL | 520,372 | | AGGREGATE INDEBTEDNESS: | 3,235,043 | | COMPUTATION OF BASIC NET CAPITAL REQUIREMENT | | | Minimum net capital required, based on 6 2/3% of aggregate indebtedness | 215,670 | | Minimum dollar net capital requirement | 100,000 | | Excess Net Capital | 304,702 | | Percentage of aggregate indebtedness to net capital | 621.68% | | There are no material differences between the audited computation of | | | net capital computed above and the corresponding schedule included In the | | Company's amended June 30, 2022 Part IIA FOCUS filing {17}------------------------------------------------ (Supplemental Information) Cornputatio11 for Determination of the Reserve Requirements and lnformahon Relating to Possession or Control Requirements for Brokers and Dealers Pursuant to Rllle l 5c3-3 For the Year Ended June 30, 2022 **SCHEDULE II** **The** Company Is exempt from the provisions of Rule 15c3•3 under the Securities Exchange Act of 1934 as of June 30, 2022 In accordance with Rule 15c3-3(k)(2)(fl). The Company also relies on Footnote 74 of SEC Release 34-70073 {18}------------------------------------------------ ![](_page_18_Picture_0.jpeg) **R Farber Hass Hurley LLP** *Cort,fiael P11bhc l\ccountants* 9301 Oakdale Avenue, Suite 230 ChalSworlh CA 91311 www lllhcpas con1 Telephone (818) 895-1943 Facs1m1le **(818)** 727-7700 ## REPORT OF INDEPENDENT REGISTERED PUBLfC ACCOUNTlNG FlRM ON APPLYfNG AGREED-UPON PROCEDURES To the Board of Directors and Stockbolders of Mut11al Securities Inc. We have perfom1cd the procedures included in Rule I 7a-5(e)(4) under the Securities Exchange Act of 1 934 and i11 the Securities Investor Protection Corporation (SIPC) Series 600 Rules. which am enumerated bclo"v on the accompanying General Assessment Reconciliation (Form SlPC-7) for the year ended June 30, 2022 Managcmcnr of Mutual Securities Lnc. (Company) *is* responsible for its Form SlPC-7 and for its compliance with the applicable instructions on Fo1111 SlPC-7. Management of the Company has agreed to and ackuowludged that the procedures performed arc appropriate to meet the intended purpose of assisting you and SU)C in evaluating the Company ·s compliance with the applicable instructions on Form SfPC-7 for the year ended June 30, 2022. Additional I'.), SrPC has agreed to and acknowledged that the procedures perfom1ecl arc appropriate for their intended purpose. This repo1t ma) not be suitable for any other purpose. The procedures po1fonned 1118)· not address all the items of interest to a user of this report and may not meet the needs of all users of this report and. as such, users arc responsible for determining whether the procedures perfo1111cd arc appropriate fur their purposes. The sufficiency of these procedures is solely the responsibilityof those p::nties specified in this report. ConsequcnU) . we make no representation regarding the suffiaienc) of the procedures described below either for the purpose for which this report has been requested or for any other piu-posc The procedures we performed and our findings are as follows: - J) Compared U1e listed assessment payments in Form SIPC-7 with respective cash disbursement records unlrics, noting no differences: - 2) Compared the Total Revenue amounts reported on U1e Annual Audited Report Form X-l 7 A-5 Part 111 for the year ended June 30, 2022 ,,iih the Total Revenue amount reported in Form SIPC-7 for the year ended June 30. 2022. noting no differences: - 3) Compared any adjustments reported in Fom1 STPC-7 with supporting schedules and working papers, noting no differences: - 4) Recalculated the arilhmet1cal accuracy of the calculations reflected in Forni SIPC-7 and in the rdated schedules and working papers supporting the adjustments. noting no differences: and - 5) Compared the amount of any overpayment applied to die current assessment with the Fonu SlPC-7 on which il was originally computed, noting no differences. Wi;:, were engaged by the Compru1y lo pe1for111 this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established b) the AJCPA and in accordance with the standards of the Public Company Accounting Oversight Board (United States). We were not engaged to and did not conducl an examination or a review engagement. U1e objective of \Vhich ,., ould be the expression or an opinion or conclusion. respective!). on the Company's Form SIPC-7 and for its compliance with the applicable instmctions 011 Fonn SlPC-7 for the year ended June 30, 2022. Accordingly, we do not express such au opinion or conclusion. Had we pcrfonncd additional procedures. other matters might have come to our attention that would have been reported to you. We arc required to be independent of the Company and to rneet our other ethical responsibilities in accordance ,,-iti1 the relevant ctbic.il requirements rclat0d to our agreed-upon procedures engagement. Tllis repott is intended sol el) for the infomrntion and use of the Company an.cl SIPC and is not intended to be and should not bl;) used by anyone other than these specified parties Farber Hass Hurlc� LLP Chatswo1tb. California October 4. 2022 {19}------------------------------------------------ | SIPC-7 | | |----------------|--| | (36-REV 12/18) | | ## **SECURITIES I NVESTOR PROTECTION CORPORATION** Mail Code: 8967 P.O. Box 7247 Philadelphia, PA 191 70-0001 **SIPC-7** (36-REV 12/18) ## General Assessment Reconciliation i scal year ended June 3o, 2022 For lhe f (Read carefully the instruollons in your Working Copy before complellng this Form) ## **TO BE FILED BY ALL SIPC MEMBERS WITH FISCAL VEAR ENDINGS** 1. Name cl Member, address, Designated Exc1mlning Authority, 1934 Act registration no. and month in which fiscal year ends for purposes cl the audit requirement ol SEC Rule 17a-5: | | I SEC #8-28580
Mutual Securities, Inc. | | 7
Note: If any of the Information shown on the
mailing label requires correclion, please e-mail
any corrections to form@slpc.org and so
indicate on the lorm filed. | | |---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------| | | 807-A Camarillo Springs Road
Camarillo, CA 93012 | | contact respec!ing this form. | Name ;and telephone number cl person to | | | | _J | | Nick Damiani 805-764-67 40 | | | | | | | | 2. A. | )
General Assessment (item 2e from page 2 | | \$ | 761 | | B. | Less payment made with SIPC-6 filed (exclude Interest) | | | | | | Date Paid | | | | | C. | Less prior overpayment applied | | | 1 ,757 l | | D. | Assessment balance due or (overpayment) | | | (996) | | | E. lnteresl computed on late payment (see Instruction E) for __ days at 20% per annum | | | | | | F. Total assessment balance and interest due (or overpayment carried forward) | | \$ | (996)
·----------'----'-- | | | □
✓ the box
G. PAYMENT:
Check malled to P.O. Box
Funds Wired
Total (must be same as F above) | □
q
AC
_________ _ | | | | | H. Overpaymenl carried forward | \$( _______ | 9_
9
_6 ) | | | | 3. Subsidiaries (S) and predeces&ors (Pl Included In lhls form (give name and 1934 Act registration number): | | | | | | The SIPC member submitting this form and the
person by whom It is executed represent thereby | Mutual Securities, Inc. | | | | | thal all Information contained herein Is lrue, correct | | | | | and complele. | | | | | | | , 20�.
Dated the 3rd | | (AalhPrited SignalUro)
Chief Administrative Officer | | | | day of October | | IT !lt) | | | | This form and the assessment payment Is due 60 days after the end of the fiscal year. Retain the Working Copy of this form
for a period of not less than 6 years, the latest 2 years In an easily accessible place.
� Dates: | | | | | 3: | Received
Postmarked | Reviewed | | | | > | Calculations __ _ | Documentation __ _ | | Forward Copy ___ _ | | 0 | c:, Excepffons: | | | | en Disposition of exceptfons: {20}------------------------------------------------ ## **DETERMINATION OF "SIPC NET OPERATING REVENUES" AND GENERAL ASSESSMENT** **Amounts for the fiscal period beginning \_or\_-0\_1-2\_0\_2, \_\_\_ \_ and e nd.in g \_..,\_"'---®n \_\_\_ \_** | Item No.
2a. Total revenue (FOGUS Line 12/Parl IIA Line 9, Gode 4030) | Eliminate cents
\$ ----------
28,792,318 | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------| | | | | 2b. Additions:
(1) Total revenues from the securities business of subsidiaries (except lorelgn subsidiaries) and
predecessors not included above. | | | (2) Net loss lrom principal transactions in securities In trading accounts. | | | (3) Net loss from principal transactions in commodities in trading accounts. | | | (4) Interest and dividend expense deducted in determining Item 2a. | | | (5) Net loss from management of or participation In the underwriting or distr1bution of securities. | | | (6) Expenses other than advertising, prlnllng, registration fees and legal fees deducted in determining net
profit from management of or participation in unde1writing or dlstribution of securities. | | | (7) Net loss from securltles in investment accounts. | | | Total additions | | | 2c, Deducllons: | | | ( 1) Revenues from the distribution of shares of a registered open end investment company or unit
investment trust. lrom the sale of variable annuities, from the business of Insurance, from Investment
advisory services rendered to registered investment companies or insurance company separate
accounts, and from transactions in security futures products. | 26,989,874 | | (2) Revenues from commodity transactions. | | | (3) Commissions, floor brokerage and clearance paid to other SIPG members in connection with
securities transactions. | 771
,325 | | (4) Reimbursements lor postage in connection wilh proxy solicitation, | | | (5) Nel gain lrom securilies in investment accounts. | | | (6) 100% of commissions and markups earned from transactions In (I) certificates of deposit and
(ii) Treasury bills, bankers acceptances or commercial paper that mature nine months or less
lrom issuance date. | | | (7) Direct expenses of printing advertising and legal lees incurred in connection with other revenue
related lo the securities business (revenue defined by Section 16(9){L) or the Act). | 48,820 | | (8) Other revenue not related either directly or Indirectly lo the securities business.
(See Instruction G): | | | PPP Loan Forgiv
en
ess | 475,215 | | (Deductions in excess ol \$100,000 require documenlation) | | | (9) (l) Total interest and dividend expense (FOGUS Line 22/PART IIA Line 13,
Code 4075 plus line 2b{4) above) but not in ex•cess
204
\$ _________ _
ol total interest and dividend income. | | | (ii) 40% or margin interest earned on customers securities
accounts (40% of FOCUS line 5, Gode 3960).
\$ _________ _ | | | Enter the greater of line (i) or (ii) | 204 | | Total deductions | 28,285,438 | | 2d. SIPC Nel Operating Revenues | 506,880
\$
=
=
= | | 2e. General Assessment @ .0015 | 761 | | | \$--��===
=
=
(to page 1, line 2.A.) | {21}------------------------------------------------ ![](_page_21_Picture_0.jpeg) **September 1 5, 2022** ## **Mutual Securities, Inc. Exemption Report pursuant to SEC Rule 1 7a-S(d) For the fiscal year ending June 30, 2022** **We, as members of management of Mutual Securities, Inc. (the "Company"), are responsible for compliance with the annual reporting requirements under Rule 1 7a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240.17a-5, "Reports to be made by certain brokers and dealers"). Those requi rements compel a broker or dealer to file annual reports with the Securities Exch ange Commisslon ("SEC") and the broker or deal er's designated examining authority (''DEA). Pursuant to that requirement, this Exemption Report was prepared as required by 17 C.F.R. § 240.17a-5(d)(1) and (4). To the best of its knowledge and belief, the Company states the following:** - **(1) The Company claims exemption from 17 C.F.R. § 240.1 5c3-3 under the provision of 17 C.F.R. §240.1 5c3-3 (k)(2)(ii).** - **(2) The Company has met the identified exemption provisions in paragraph (k) (2)(ii) of Rule 1 5c3-3 throughout the most recent fiscal year ended June 30, 2022, without exception.** - **(3) The Company is also filing this Exemption Report because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.1 7a-5 are limited to effecting securities transactions via subscriptions on a subscription way basis where the funds are payable to the issuer orits agent and not to the Company, and the Company (1) did not directly or indirectly receive, hold, or otherwiseowe funds or securities for or to customers, (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Rule1 Sc2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company); (2) did not carry accounts of or for customers; and (3) did not carry PAB accounts (as defined in Rule 1 Sc3-3) throughout the most recent fiscal year without exceptioh.** **Nick Damiani Chief Administrative Off**i **cer** {22}------------------------------------------------ ![](_page_22_Picture_0.jpeg) *Certified Pul)/1c Accountants* 9301 Oakdale Avenue, Suite 230 Chatsworth, CA 91311 www flihopas com Telept1one (818) 895-19,13 Facsrmile **(818)** 727-7700 ## REPORT OF LNDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Mut11al Securities Inc. We have reviewed management's statements. included in U1c accompanying Exemption Report pursuant to S.EC Rule I 7a-5(d), i11 which ( I) Mutual Securities Inc. ("'Company'') identified the following prO\ isions of 17 C.F.R. §15c3-3(k) under which the Comprul} claimed an exemption from 17 C F.R. §240 15c3-3: k(2)(ii) (the ··exemption provisions") and (2) The Companv stated tbat the Company mer the identified exemption provisions throughout fone 30. 2022. the most recent fiscal �car without exception. The Company i.s also filing this Exemption Report because the Company·s other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240. l 7a-5 are limited to effecting securities transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company. Ln addition, the Company did not dlrccll) or indirectly receive, hold. or otherwise owe funds or securities for or to customers. other U1a11 mone) or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subse11ption way basis where the fw1ds arc payable Lo the issuer or its agent and not to the Compa11y: did not carry accounts of or for customers: and did not carry PAB accounts (as defined i11 Rule 15c3-3) throughout the most recent r"iscal year without exception. 11,e Company"s management is responsible for compliance with the exemption provisions 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 the Company"s compliance with the exemption provisions A rcvie\\ is substantially less in scope than an exam 111arion, the objective of which is Lhc expression of au opinion on management's statements. Accordingly. we do not express such an opinion. Based on our review, we arc not aware of any material modifications that should be made to ma nagement's statements referred Lo above for them to be fairly slated, in all matenal respects. based on Lhe provisions scl forlh in paragraph (k)(2)(il) of Ruic 15c3-3 under the Securities Exchange Act of 1934 and the Company·s other business activities contemplated b) Foot.note 74 of lhe SEC Release No. 34-70073 adopting ru11cudments to 17 C.F.R. § 240. I 7a-5, and related SEC Staff Frequently Asked Questions. Farber Hass Hurle) **LLP** ChatS\\Orth, California October 4. 2022 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.