# ZIMBALIST SMITH INVESTMENTS, LLC X-17A-5 (2020-02-11) — Broker-dealer annual report - Company: ZIMBALIST SMITH INVESTMENTS, LLC - Form: X-17A-5 - Filed: 2020-02-11 - Period: 2019-12-31 - Accession: 0000715563-20-000001 - CIK: 715563 - File #: 8-28971 - Material weakness: No - Auditor: Alvarez & Associates, Inc - Auditor location: Northridge, CA - Contact: Linda Zimbalist Smith - Phone: 541-330-6300 - Signed by: Linda Zimbalist Smith (Member/owner) Original filing: https://www.sec.gov/Archives/edgar/data/715563/000071556320000001/Full.pdf --- {0}------------------------------------------------ Zimbalist Smith Investments, LLC Report Pursuant to Rule 17a-5 Financial Statements For the Year Ended December 31, 2019 {1}------------------------------------------------ UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION 1hln1ton, D.C. 10549 ### **ANNUAL AUDITED REPORT FORM X•17A-5 PART** Ill 0MB APPROVAL OM8Number: 3235..()123 Expires: August 31, 2020 Estimated average burden hour8 rres nae ...... 12.00 > SEC FILE NUMBER B-28971 FACING PACE Jorormation Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchan1e Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING 1/01/2019 | ---------
AND ENDING 12/31/2019 | | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|-------------|--------------------------------| | | MMIDl>IYY | | -
MMIDU/YY | | | A. REGISTRANT IDENTIFICATION | | | | NAME OF BROKER-DEALER: Zimbalist Smith Investments, LLC
ADDRESS OF PRINCIPAL PI.ACI:. OF BUSINESS: (Do nol use P.O. Dox No.)
2900 Clearwater Drive, Ste 320 | | | OFFICIAL USE ONLY | | | | | FIRMI.D. NO, | | | (No and Slrect) | | | | | ()ff. | 97703 | | | (Clly) | (Sia,~) | (I.Ip Codd) | | | NAME AND 'l'ELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | (Arn Code - Tclcphon, N11mber) | | | B. ACCOUNTANT IDENTIFICATION | | | | INDEPENDENT PllRLIC ACCOUNTANT whose opinion is conlained in 1his Repon•
Alvarez & Associates, Inc. Certified Public Accountants
9221 Corbin Avenue, Suite 165 Northrldge | (Name if i1Hlll'ld1111/, stall! /1111. flm. 11t1ddl# "",, | CA | 91324 | | (Addrns> | (('II)) | (SIIIC) | (Zip Code) | | CHECK ON£:
§
Certilied Public Accounlanl
Public Accoun1an1
f | Accountanl not ricsident in United Slates or an)' of its possessions.
POii OPPICIAL UII! ONLY | | | *•claims/or exemption from lhe req11lrgn11mt tllat tire a11n11al n!pnrt be coJ·e,~d by the opinion of an Independent public acco11ntant ,nr,st be suppurled by a slatement of facts and circumstances relied on a:r the basis for th•* uempt/011. *See Sec1ion 140. /7a-J(e)(1)* > Potenll I per on■ who re to re pond to the oolleollon of lnform llon contained In Ihle rorm re not **required** to , .. pond unleH the formd .. pf1yu currently lld OM8control number, SEC 1410 (11-05) {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, _Linda Zlmballst S~th | | _ , _ ,,. _ • swear (or affirm) that, to the best of | |----------------------------------------------------------------|---------------|----------------------------------------------------------------------------------------------------------------------------| | Zlmballst Smith Investments. LLC | | my knowledge and belief the accompanying financial statement and supporting 5Chcdules pertaining to the firm or
' as | | or December 31 | . 20 19 ,, __ | ___ • are true and correct. I further swear (or affirm) that | | classified solely as that of II customer, except as follo\,·s: | | neither the company nor any partner, proprietor. principal olliccr or director has an) proprietary interest in any account | **Member/Owner** Title Notary Public This report O contains (check all applicable bmu:s): 0 (a} l'acing rage. - 0 (b) Statement or Financlsl Condition. - @ (c) Statement of Income ( Loss) or. if there is other comprel":nsivc income in 'the pcriod(s) presented. 11 Statement or Comprehensive Income (as defined in §210.1-02 of Regulotion S-X). - (d) Statement or Changes in Finoncial Condition. - (el S111tement of Changes in Stockholders' Equh}· or rarlners· or Sole Proprietors· Capltal. - - (g) Computation ofNel Capital. - (h) Computation for Determination of Reserve Rcquircmen1s Pursuant lo Ruic I ScJ-3. - (i) lnform111ion Relating to the Possession or Control Requirements Under Rule l5c3-J. - U) Statement of Changes in Llabllltics Subordinoted to Claims of Creditors, I 0 U) A Reconciliation, includin& appropriolc explanation of the Computation orNet Capit11I Under Ruic I ScJ-1 and the Computation for Determination oflhe Reserve Requirements Under fahlbit A of Ruic I ScJ-3. - 0 (k) A Reconciliation between the audited and unuudited Statements or Finaneiol Condition with respect to methods of consolidation. - - Cm) A copy oflhe SIPC Supplemental Report. ~ (I) An Oath or Aflirmation. - (n) A report describing any matcriul inadequacies found to ex isl or found lo have existed since the dale of the previous audil. •• *Fa,· condllions of confidential t1·eatme111 of cenaln portions of this jlli11g, SH section UO. I 1a-S (e)(JJ.* **A** *notary* public or other officer **completing** this certificate verifies only the identity of the lndwldual who **signed** lhe *document to which this certificate i5 attached, and not* **the** truthfulness, **accuracy, or validity of that document.** State of uYr;ttVJ Countyof'J)is4/4uk.S J Subscribed and sworn to {or affirmed) before me on thi~ day of ,JoW *Laa!~ Zlrn* w,~f f:rrvtti proved to me on the basis of satisfactory evidences to be the person wh~eared bef~,!Q8. ~ Notary Public . *U!ot/tl)y t:...JJ:..t* /,10 OFFICIAL STAMP ![](_page_2_Picture_27.jpeg) {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) ### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To Those Charged with Governance and the Members of Zimbalist Smith Investments, LLC: #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Zimbalist Smith Investments, LLC (the "Company") as of December 31, 2019, the related statements of income, changes in members' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, 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. #### **Basis for Opinion** These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company'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 the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial 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. #### **Supplemental Information** The information contained in Schedules I and II ("Supplemental Information") has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. The Supplemental Information is the responsibility of the Company'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, Schedules I and II are fairly stated, in all material respects, in relation to the financial statements taken as a whole. We have served as the Company's auditor since 2018. Northridge, California February 4, 2020 ![](_page_3_Picture_14.jpeg) {4}------------------------------------------------ # **Zimbalist Smith Investments, LLC Statement of Financial Condition December 31, 2019** #### **Assets** | \$
6,168 | |--------------| | 20,241 | | 51,921 | | 1,334 | | \$
79,664 | | | | | | \$
1,963 | | 1,963 | | | | | | 77,701 | | 77,701 | | \$
79,664 | | | {5}------------------------------------------------ ### **Zimbalist Smith Investments, LLC Statement of Income For the Year Ended December 31, 2019** #### **Revenues** | 188,840 | |----------------| | 3,084 | | 4,988 | | 196,912 | | | | 33,525 | | 8,775 | | 5,400 | | 42,484 | | 90,184 | | 106,728 | | \$
\$
\$ | {6}------------------------------------------------ ### **Zimbalist Smith Investments, LLC Statement of changes in Members' Equity For the Year Ended December 31, 2019** | | Total | | | |------------------------------|-------|-----------|--| | Balance at December 31, 2018 | \$ | 76,973 | | | Capital distributions | | (106,000) | | | Net income (loss) | | 106,728 | | | Balance at December 31, 2019 | \$ | 77,701 | | {7}------------------------------------------------ ### **Zimbalist Smith Investments, LLC Statement of Cash Flows For the Year Ended December 31, 2019** | Cash flow from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities: | | | \$
106,728 | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------|-----------------------------------------------| | (Increase) decrease in :
Receivable from clearing broker
Prepaid expenses | \$ | (6,924)
307 | | | (Decrease) increase in : | | | | | Account payable and accrued expenes
Total adjustments | | 1,963 | {4,654) | | Net cash provided by (used in) operating activities | | | 102,074 | | Net cash provided by (used in) investing activities | | | | | Cash flow from financing activities:
Capital distributions | | (106,000) | | | Net cash provided by (used in} financing activities
Net increase (decrease) in cash
Cash at December 31, 2018
Cash at December 31, 2019 | | | \$
(106,000)
(3,926)
10,094
6,168 | | Supplemental disclosure of cash flow information: | | | | | Cash paid during the year for:
Interest
Income taxes | \$
\$ | | | {8}------------------------------------------------ #### **NOTE 1: GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### Organization Zimbalist Smith Investments, LLC (the "Company") was organized in the State of Oregon on February 6, 1998. The Company is a registered broker-dealer in securities under the Securities and Exchange Act of 1934. The Company is a member of the Financial Industry Regulatory Authority ("FINRA"), and the Securities Investor Protection Corporation ("SIPC"). The Company is engaged in business as a securities broker-dealer, that provides several classes of services. The company is authorized to be a mutual fund retailer, and a broker selling corporate equity securities over-the-counter. Under its membership agreement with FINRA and pursuant to Rule 15c3-3(k)(2)(i) and (k)(2)(ii), the Company conducts business on a fully disclosed basis and does not execute or clear securities transactions for customers. Accordingly, the Company is exempt from the requirement of Rule 15c3-3 under the Securities Exchange Act of 1934 pertaining to the possession or control of customer assets and reserve requirements. #### Summary of Significant Accounting Policies The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Commissions consists of client transactions that are fully introduced to the Company's clearing broker on behalf of its client. Commission revenue is earned on the sale of mutual funds, equity securities, debt securities, and other exchange traded products. Commissions revenue and related clearing expenses are recorded on a trade-date basis. The Company also earns ongoing 12b-1 fees, or trailing commissions, which are recognized in the period received, and corresponds to the Company's satisfaction of its customer relations and market realization performance obligations. Commissions- other consists of ongoing direct 12b-1 fees, or trailing commissions. These commissions are recorded when received. Generally accepted accounting principles requires the Company to record commissions revenue on a trade-date basis. However, the Company records Commissions- other on a cash basis. The difference between trade-date and cash basis is immaterial to the financial statements. {9}------------------------------------------------ #### **NOTE 1: GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)** The Company, with the consent of its Members, has elected to be a Oregon Limited Liability Company. For tax purposes the Company is treated like a partnership, therefore in lieu of business income taxes, the Members are taxed on the Company's taxable income. Accordingly, no provision or liability for Federal Income Taxes is included in these financial statements. #### **NOTE 2: DEPOSIT AT CLEARING BROKER** The Company has a Tri-Party agreement with its Clearing Broker, whereby it serves as the secondary correspondent to the Clearing Broker, and another Broker-Dealer is the primary correspondent. The clearing broker has custody of the Company's cash balances which serve as collateral for any amounts 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 December 31, 2019 was \$51,921. ### **NOTE 3: RECEIVABLE FROM CLEARING BROKER** Pursuant to the clearing agreement, the Company introduces all of its securities transactions to its clearing broker on a fully disclosed basis. Customers' money balances and security positions are carried on the books of the clearing broker. In accordance with the clearance agreement, the Company has agreed to indemnify the clearing broker for losses, if any, which the clearing broker may sustain from carrying securities transactions introduced by the Company. In accordance with industry practice and regulatory requirements, the Company and the clearing broker monitor collateral on the customers' accounts. As of December 31, 2019, the receivable from clearing broker of \$20,241 is pursuant to this clearing agreement. #### **NOTE 4: INCOME TAXES** As discussed in the Summary of Significant Accounting Policies (Note 1 ), all tax effects of the Company's income or loss are passed through to the members. Therefore, no provision or liability for Federal Income Taxes is included in these financial statements. {10}------------------------------------------------ #### **NOTE 5: COMMITMENTS AND CONTINGENCIES** #### Commitments The Company had no commitments, no contingent liabilities and had not been named as defendant in any lawsuit at December 31, 2019 or during the year then ended. ### **NOTE 6: CONCENTRATION OF CREDIT RISK** The Company is engaged in various trading and brokerage activities in which counter-parties primarily include broker-dealers, 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 creditworthiness 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. #### **NOTE7: SUBSEQUENT EVENTS** The Company has evaluated events subsequent to the statement of financial condition date for items requiring recording or disclosure in the financial statements. The evaluation was performed through the date the financial statements were available to be issued. Based upon this review, the Company has determined that there were no events which took place that would have a material impact on its financial statements. #### **NOTE 8: RECENTLY ISSUED ACCOUNTING STANDARDS** Effective January 1, 2019, the Company adopted the new FASS accounting standard ASC 842, Leases, which governs the accounting and reporting of leases by lessees. Lessor accounting and reporting is largely unchanged. ASC 842 generally applies to leases that have a lease term greater than 12 months at lease commencement, or that include an option to purchase the underlying asset the Company is reasonably certain to exercise. ASC 842's principal changes are: 1) recognizing the leases on the Statement of Financial Condition by recording a Right-of-use asset and a Lease Liability; 2) changes in lease expense recognition during the lease term based on its classification as an Operating lease or Finance leases; and 3) expanded disclosures of lease agreements, costs and other matters. The Company leases its office space under a month-to-month agreement, and has no lease agreements subject to ASC 842. The adoption of ASC 842 had no effect on the Company's financial statements for the year ended December 31, 2019. {11}------------------------------------------------ #### **NOTE 9: NET CAPITAL REQUIREMENTS** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC 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. Rule 15c3-1 also provides that equity capital may not be withdrawn or cash dividends paid if the resulting new capital ratio would exceed 10 to 1. Net capital and aggregate indebtedness change day to day, but on December 31, 2019, the Company had net capital of \$61,367 which was \$56,367 in excess of its required net capital of \$5,000; and the Company's ratio of aggregate indebtedness (1,963) to net capital was 0.03 to 1. {12}------------------------------------------------ # **Zimbalist Smith Investments, LLC Schedule** I - **Computation of Net Capital Requirements Pursuant to SEC Rule 15c3-1 As of December 31, 2019** #### **Computation of net capital** | Members' equity | \$
77,701 | | |------------------------------------------------|--------------|--------------| | Total members' equity | | \$
77,701 | | Less: Non-allowable assets | | | | Prepaid expenses | {1,334) | | | Total non-allowable assets | | (1,334) | | Net capital before haircuts | | 76,367 | | Haircut on fidelity bond | (15,000) | | | Total haircuts and undue concentration | | (15,000) | | Net Capital | | 61,367 | | Computation of net capital requirements | | | | Minimum net capital requirement | | | | 6 2/3 percent of net aggregate indebtedness | \$
131 | | | Minimum dollar net capital required | \$
5,000 | | | Net capital required (greater of above) | | 5,000 | | Excess net capital | | \$
56,367 | | Aggregate indebtedness | | \$
1,963 | | Ratio of aggregate indebtedness to net capital | | 0.03: 1 | There was no material difference between the net capital computation shown here and the net capital computation shown on the Company's unaudited Form X-17 A-5 Part IIA report dated December 31, 2019. {13}------------------------------------------------ #### **Zimbalist Smith Investments, LLC** ### **Schedule** II - **Computation for Determination of the Reserve Requirements and Information Relating to Possession or Control Requirements For Brokers and Dealers Pursuant to SEC Rule 15c3-3** ### **As of December 31, 2019** The Company is exempt from the provision of Rule 15c3-3 under paragraphs (k)(2)(i) and (k)(2)(ii) in that the Company carries no accounts, does not hold funds or securities for, or owe money or securities to customers. The Company will effectuate all financial transactions on behalf of its customers on a fully disclosed basis. Accordingly, there are no items to report under the requirements of this Rule. {14}------------------------------------------------ Zimbalist Smith Investments, LLC Report on Exemption Provisions Pursuant to 17 C.F.R. § 15c3-3(k) For the Year Ended December 31, 2019 {15}------------------------------------------------ ![](_page_15_Picture_0.jpeg) #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To Those Charge with Governance and the Members of Zimbalist Smith Investments, LLC: We have reviewed management's statements, included in the accompanying Assertions Regarding Exemption Provisions, in which ( 1) Zimbalist Smith Investments, LLC identified the following provisions of 17 C.F .R. § l 5c3-3(k) under which Zimbalist Smith Investments, LLC claimed an exemption from 17 C.F.R. § 240.15c3-3: (k)(2)(i) and (k)(2)(ii) (the "exemption provisions") and (2) Zimbalist Smith Investments, LLC stated that Zimbalist Smith Investments, LLC met the identified exemption provisions throughout the year ended December 31, 2019 without exception. Zimbalist Smith Investments, LLC'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 Zimbalist Smith Investments, LLC's compliance with the exemption provisions. 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 paragraph (k)(2)(i) and (k)(2)(ii) of Rule l 5c3-3 under the Securities Exchange Act of 1934. Alvarez & Associates, Inc. Northridge, California February 4, 2020 ![](_page_15_Picture_10.jpeg) **11** 818-451-4661 {16}------------------------------------------------ *///ZIMBALIST SMITH INVESTMENTS, LLC* *MEMBt'R FINRA* & *SIPC 2900 CLEARWATER DRIVE SUITE J20 BEND. OREGON 97703* 541-330-6300 # **Assertions Regarding Exemption Provisions** We, as members of management of Zimbalist Smith Investments, LLC ("the Company"), are responslble for compliance with the annua! reporting requirements under Rule 17a-S of the Securities Exchange Act of 1934. Those requirements compel a broker or dealer to file annuals reports with the Securities Exchange Commission (SEC) and the broker or dealer's designated examining authority (DEA). One of the reports to be included in the annual filing is an exemption report prepared by an independent public accountant based upon a review of assertions provided by the broker or dealer. Pursuant to that requirement, the management of the Company hereby makes the following assertions: Identified **Exemption Provisions:** The Company claims exemption from the custody and reserve provisions of Rule 1Sc3-3 by operating under the exemption provided by Rule 1Sc3-3, Paragraphs (k)(2)(i) and (k)(2)(ii). **Statement Regarding Meeting hemption Provisions:** The Company met the identified exemption provisions without exception throughout the year ended December 31, 2019. Zimba list Smith Investments, LLC **By:** ~~~/<~~!Wfh Linda Zimbalist Smith, Member/Owner Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.