# WRIGHT INVESTORS' SERVICE DISTRIBUTORS, INC. X-17A-5 (2021-03-01) — Broker-dealer annual report - Company: WRIGHT INVESTORS' SERVICE DISTRIBUTORS, INC. - Form: X-17A-5 - Filed: 2021-03-01 - Period: 2020-12-31 - Accession: 0000718854-21-000010 - CIK: 718854 - File #: 8-29579 - Material weakness: No - Auditor: PKF O'Connor Davies, LLC - Auditor location: Shelton, CT - Contact: Ernest Kappotis - Phone: 9783357015 - Signed by: Ernest D Kappotis (FINOP) Original filing: https://www.sec.gov/Archives/edgar/data/718854/000071885421000010/WISDseca.pdf --- {0}------------------------------------------------ **SECURIT1ESAND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL AUDiTED REPORT FORM X-17A-5 PARTIII FACING PAGE** 0MB Number: 3235-0123 Expires: October 31, 2023 Estimated average burden hours per response ...... 12.00 SEC FILE NUMBER 8-29579 **Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder** REPORT FOR THE PERIOD BEGINNING **01/01/20** AND EN DING 12/31/20 ----------- ----------- MM/DD/YY **A. REGISTRANT IDENTIFICATION** NAM E OF BROKER-DEALER: Wright Investors' Service Distributors, Inc. ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) 2 Corporate Drive, Suite 770 (No. and Street) Shelton CT (City) (State) MM/DD/YY OFFICIAL USE ONLY FIRM I.D. NO. 06484 (Zip Code) NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT Bruce Underhill **B. ACCOUNTANT IDENTIFICATION** INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report\* PKF O'Connor Davies, LLP (Name - *if individual, state last, first, middle name)* 4 Corporate Drive, Suite 488 Shelton (Address) (City) **CHECK ONE:** I/ I certified Public Accountant B Public Accountant Accountant not resident in United States or any of its possessions. **FOR OFFICIAL USE ONLY** 305-815-0680 (Area Code - Telephone Number) CT 06484 (State) (Zip Code) **UNITED STATES** 0MB APPROVAL *\*Claims/or exemption from the requirement 1hat the anmtal report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2)* > **Potential persons who are to re;spond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OM B control number.** {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, Bruce Underhill | , swear ( or affirm) that, to the best of | |-------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Wright Investors' Service Distributors, Inc. | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
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, as | | of December 31 | are true and correct. I further swear ( or affirm) that | | | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account | | classified solely as that of a customer, except as follows: | | | | | | | | | | !!]£ | | | '""""""
Chief Executive Officer | | | Title | | | | | | | | | | | This report** contains (check all applicable boxes):
0 (a) Facing Page. | · | | 0 (b) Statement of Financial Condition. | | | | [Zj (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 §2 l 0. i-02 of Regulation S-X). | | | D (d) Statement of Changes in Financial Condition.
[2] (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. | | | D (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | (g) Computation of Net Capital.
✓✓ | | | (h) Computation for Determination of Reserve Requirements Pursuant to Rule l 5c3-3 . | | | (i) Information Relating to the Possession or Control Requirements Under Rule l 5c3-3. | | | | D U) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule l 5c3-
I and the | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule I 5c3-3.
D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of | | consolidation. | | | 0 (1) An Oath or Affirmation. | | | D (m) A copy of the SIPC Supplemental Report. | | | | D (n) A report describing any material inadequacie~ found to exist or found to have existed since the date of the previous audit. | *\*\*For conditions of confidential treatment of certain portions of this filing, see section 240. /7a-5(e)(3).* {2}------------------------------------------------ REPORT PURSUANT TO SEC RULE 17a-S(d) DECEMBER 31, 2020 (with supplementary information) {3}------------------------------------------------ #### **Contents** | Report of Independent Registered Public Accounting Firm | | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----| | Financial Statements | | | Statement of financial condition as of December 31
, 2020 | 2 | | Statement of operations for the year ended December 31
, 2020 | 3 | | Statement of changes in shareholder's equity for the year ended December 31
, 2020 | 4 | | Statement of cash flows for the year ended December 31
, 2020 | 5 | | Notes to financial statements | 6 | | | | | Supporting Schedules: | | | Computation of Net Capital pursuant to the SEC Uniform Net Capital
Schedule I -
Rule 15c3-l of the Securities and Exchange Commission | 9 | | Computation for Determination of Reserve Requirements and
Schedule II -
Information Relating to Possession or Control Requirements Pursuant to
Securities and Exchange Commission Rule 15c3-3 | | | Exemption Report Pursuant to SEC Customer Protection Rule 15c3-3 | 12 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) # **Report of Independent Registered Public Accounting Firm** The Board of Directors and Shareholder Wright Investors' Service Distributors, Inc. Shelton, Connecticut #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Wright Investors' Service Distributors, Inc. (the "Company") as of December 31, 2020, the related statements of operations, changes in shareholder's equity, and cash flows for the year then ended, and the related notes to the financial statements (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, 2020, 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 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 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. PKF O'Connor Davies. LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any oiher individual member firm or firms. {5}------------------------------------------------ #### **Opinion on Supporting Schedules** The supporting schedules required by Rule 17a-5 under the Securities and Exchange Act of 1934 ("SEA") have been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. The supporting schedules are the responsibility of the Company's management. Our audit procedures included determining whether the information in the supporting schedules 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 supporting schedules. In forming our opinion on the supporting schedules, we evaluated whether the supporting schedules, including their form and content, are presented in conformity with 17 C.F.R. §240.17a-5. In our opinion, the supporting schedules are fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as Wright Investors' Service Distributors, Inc. auditor since 2018. February 26, 2021 Shelton, Connecticut {6}------------------------------------------------ # **Statement of Financial Condition December 31, 2020** | ASSETS | | |-------------------------------------------------------------------------|--------------| | Cash | \$
29,370 | | Accounts receivable | 33,429 | | Prepaid expenses | 6,102 | | Tota I assets | \$
68,901 | | LIABILITIES AND SHAREHOLDER'S EQUITY | | | Liabilities: | | | Accounts payable | \$
2,700 | | Shareholder's equity: | | | Common stock, \$1 par; authorized, issued and outstanding, 1,000 shares | 1,000 | | Capital in excess of par | 150,856 | | Retained earnings | 1,070,838 | | Less: Due from Parent | {1,156,493) | | | | | Total shareholder's equity | 66,201 | | Total liabilities and shareholder's equity | \$
68,901 | {7}------------------------------------------------ #### **Statement of Operations Year Ended December 31, 2020** | Revenue: | | |---------------------------------------------------------|---------------| | Mutual fund distribution fees from non-affiliated funds | \$
237,440 | | Interest | 80 | | | 237,520 | | Expenses: | | | Salaries | 69,280 | | Outside services | 50,206 | | Occupancy | 31,099 | | Wire services | 16,471 | | Dues and registrations | 11,775 | | Professional fees | 10,247 | | Other | 7,394 | | | | | Total expenses | 196,472 | | | | | Income before income taxes | 41,048 | | Income tax expense | 8,700 | | | | | Net income | \$
32,348 | {8}------------------------------------------------ # Statement of Changes in Shareholder's Equity Year Ended December 31, 2020 | | | Common Stock | Capital In | Retained | Due From | Total
Shareholder's | |------------------------------------|--------|--------------|---------------|--------------|----------------|------------------------| | | Shares | Amount | Excess of Par | Earnings | Parent | Equity | | Balance, January 1, 2020 | 1,000 | \$ 1,000 | \$
150,856 | \$ 1,038,490 | \$ (1,047,209) | \$
143,137 | | Allocation of expenses from Parent | | | | | 140,016 | 140,016 | | Income tax payable to Parent | | | | | 8,700 | 8,700 | | Payments to Parent | | | | | (258,000) | (258,000) | | Net income | | | | 32,348 | | 32,348 | | | | | | | | | | Balance, December 31, 2020 | 1,000 | \$ 1,000 | \$
150,856 | \$ 1,070,838 | \$ (1,156,493) | \$
66,201 | | | | | | | | | {9}------------------------------------------------ #### **Statement of Cash Flows Year Ended December 31, 2020** | Cash flows from operating activities: | | |-----------------------------------------------------------------------------------|--------------| | Net income | \$
32,348 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | Allocation of expenses from Parent | 140,016 | | Income tax payable to Parent | 8,700 | | Changes in operating assets and liabilities: | | | Accounts receivable | 17,086 | | Prepaid expenses | 1,228 | | Accounts payable | 300 | | | | | Net cash provided by operating activities | 199,678 | | Cash flows from financing activities: | | | | | | Payments to Parent | (258,000) | | Net cash used in financing activities | (258,000) | | | | | Net decrease in cash | (58,322) | | Cash - beginning of year | 87,692 | | | | | Cash - end of year | \$
29,370 | {10}------------------------------------------------ **Notes to Financial Statements December 31, 2020** ## **NOTE A** - **DESCRIPTION OF BUSINESS** Wright Investors' Service Distributors, Inc. (the "Company") is a wholly owned subsidiary of The Winthrop Corporation ("TWC", or the "Parent") which, in tum, is a wholly owned subsidiary ofKhandwala Capital Management, Inc. The Company is a registered broker-dealer with the Securities and Exchange Commission (the "SEC") and a member of the Financial Industry Regulatory Authority ("FINRA"). The Company is registered as a broker-dealer in eight of the contiguous U.S. states. The Company acts solely as the distributor for mutual funds sponsored by other companies. The Company does not maintain customer accounts and neither receives nor holds customer securities or funds. ## **NOTE B** - **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### **[1] Use of estimates:** The preparation 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. #### **[2] Revenue recognition:** The Company earns revenue by providing underwriting and distribution services to non-affiliated mutual funds known as l 2b-l fees. Mutual fund distribution fees are recorded monthly based on a percentage of fund assets. l 2b-l fee revenue is earned based on a percentage of the average daily market value of clients' investment holdings in non-affiliated funds. l 2b-l fee revenue is estimated and recorded on a monthly basis and adjusted to actual upon receipt of payment from non-affiliated funds. In accordance with Financial Accounting Standards Board ("F ASB") Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014- 09"), the Company enters into arrangements with managed accounts or other pooled investment vehicles (funds) to distribute shares to investors. The Company receives distribution fees paid by the fund up front, over time, upon the investor's exit from the fund (a contingent deferred sales charge), or as a combination thereof. The Company believes that its performance obligation is the sale of securities to investors and as such this is fulfilled on the trade date. {11}------------------------------------------------ #### **[2] Revenue recognition (continued):** Any fixed amounts are recognized on the trade date and variable amounts are recognized to the extent it is probable that a significant revenue reversal will not occur once the uncertainty is resolved. For variable amounts, as the uncertainty is dependent on the value of the shares at future points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible to factors outside the Company's influence, the Company does not believe it can overcome this constraint until the market value of the fund and the investor activities are known, which are usually monthly or quarterly. Distribution fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods. #### **[3] Fair Value Measurements:** The recorded amounts of the Company's cash, accounts receivable and accounts payable approximate their fair values principally because of the short-term nature of these items. ## **[4] Cash:** The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company does not believe it is exposed to any significant credit risk. #### **[5] Accounts receivable:** The Company continuously monitors the creditworthiness of customers and establishes an allowance for uncollectible amounts based on current economic trends, historical payment and bad debt write-off experience, and any specific customer related collection issues. As of December 31 , 2020, no allowance was considered necessary. #### **[6] Subsequent events:** The Company's management has evaluated subsequent events through the issuing date of this report on February\_, 2021 and has not observed any events subsequent to December 31 , 2020 that require recognition or disclosure. # **NOTE C** - **RELATED PARTY TRANSACTIONS** The Company advances funds on an as-needed basis to TWC. These advances are non-interest-bearing and are payable on demand. Such balance has been classified as a reduction of shareholder's equity in the accompanying statement of financial condition as the Company does not anticipate that the amount due from TWC will be repaid, and would ultimately be distributed as a dividend to TWC. {12}------------------------------------------------ # **NOTE C-RELATED PARTY TRANSACTIONS (continued):** The Company has an expense-sharing agreement with TWC whereby indirect general and administrative expenses are allocated to the Company. During the year ended December 31 , 2020, TWC allocated approximately \$140,016 of expenses to the Company, which were offset against the balance due from TWC. The expenses were comprised of approximately \$69,280 of Salaries, \$27,058 of Occupancy costs, \$16,471 of Wire services, \$15,190 of Outside services & Professional fees, and \$12,018 of Dues and registrations & Other. # **NOTED - NET CAPITAL AND OTHER REGULATORY REQUIREMENTS** As a registered broker-dealer, the Company is subject to the Uniform Net Capital requirement of the SEC under Rule 15c3-l, 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. Net capital and the related aggregate indebtedness to net capital ratio may fluctuate on a daily basis. At December 31 , 2020 the Company had net capital and a minimum net capital requirement of \$26,670 and \$5,000, respectively, and an aggregate indebtedness to net capital ratio of 0.10 to 1. The Company claims exemption from the provisions of SEC's Rule 15c3-3 in that the Company's activities are limited to those set forth in the conditions for exemption described in paragraph (k)(l ). # **NOTE E - INCOME TAXES** The Company is included in the consolidated federal income tax return of The Winthrop Corporation and also is included in a combined Connecticut tax return with its parent TWC and other subsidiaries ofTWC. However, for financial reporting purposes, the Company determines its federal and state income tax provisions on a separate company basis with any liability for taxes payable to TWC. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to carryforwards and to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for deferred tax assets if realization is not considered more likely than not. At December 31 , 2020 the Company had no deferred tax assets or liabilities. The Company's income tax expense for the year ended December 31 , 2020 consisted of federal income taxes of \$5,800 and state income taxes of \$2,900. The Company applied the "more-likely-than-not" recognition threshold to all tax positions taken or expected to be taken, which resulted in no unrecognized tax benefits as of December 31 , 2020. Interest and penalties that would accrue according to relevant tax law would be classified as interest and other expense, respectively, on the statement of operations. {13}------------------------------------------------ # **Schedule of Computation of Net Capital Pursuant to the SEC Uniform Net Capital Rule 15c3-1 December 31, 2020** | Total Shareholder's Equity | \$
66,201 | |-------------------------------------------------------------------------------------------------------|--------------| | Deductions and/or charges:
Non-allowable assets: | | | Accounts receivable | 33,429 | | Prepaid expenses | 6,102 | | Total deductions and/or charges | 39,531 | | Net capital | 26,670 | | Minimum net capital required pursuant to Uniform
Net Capital Rule 15c3-1 | 5,000 | | Excess of net capital over minimum requirements | \$
21,670 | | Total aggregate indebtedness | \$
2,700 | | Required minimum net capital (greater of 6.67% of total aggregate
indebtedness (\$180) or \$5,000) | \$
5,000 | | Ratio of total aggregate indebtedness to net capital | 0.10 to 1 | There is no difference between the computation of net capital pursuant to Rule 15c3-1 included in this report and the computation included with the Company's corresponding December 31, 2020 unaudited Form X-17A-5 Part IIA Filing. {14}------------------------------------------------ #### **Wright Investors' Service Distributors, Inc.** #### **Schedule** II - **Computation for Determination of Reserve Requirements and Information Relating to Possession or Control Requirements Pursuant to Securities and Exchange Commission Rule 15c3-3** #### **December 31, 2020** The Company is exempt from the provisions of Rule 15c3-3 under paragraph (k)(l) in that the Company carries no accounts, does not hold funds or securities for, or owe money or securities to customers. Accordingly, there are no items to report under the requirement of this Rule. {15}------------------------------------------------ ![](_page_15_Picture_0.jpeg) # **Report of Independent Registered Public Accounting Firm on Review of the Exemption Report** #### **The Board of Directors and Shareholder Wright Investors' Service Distributors, Inc.** We have reviewed management's statements, included in the accompanying Exemption Report, in which Wright Investors' Service Distributors, Inc. (the "Company") stated that (1) it is designated to operate under the exemptive provisions of paragraph 17 C.F.R. §240.15c3-3:(k)(1) (the "exemption provisions") and (2) the Company met the identified exemption provisions throughout the year ended December 31, 2020 without exception. The 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 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)(1) of Rule 15c3-3 under the Securities Exchange Act of 1934. February 26, 2021 Shelton, Connecticut > PKF O'CONNOR DAVIES, LLP Four Corporate Drive, Suite 488, Shelton, CT 06484 I Tel: 203.929.3535 I Fax: 203.929.5470 I www.pkfod.com PKF O'Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. {16}------------------------------------------------ #### **Wright Investors' Service Distributors, Inc. Exemption Report** **Wright Investors' Service Distributors, Inc.** (the "Company") is a registered broker-dealer subject to Rule l 7a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. 240. l 7a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. 240. l 7a-5( d)(l) and ( 4). To the best of its knowledge and belief, the Company states the following: (1) The Company claimed an exemption from 17 C.F.R. 240.15c3-3 under the following provisions of 17 C.F.R. 240.15c3-3(k)(l ). (2) The Company met the identified exemption provision in 17 C.F.R. 240.15c3-3(k)(l) throughout the year ended December 31 , 2020 without exception. Wright Investors' Service Distributors, Inc. I, Bruce Underhill, affirm that, to my best knowledge and belief, this Exemption Report is true and correct. By:---------------- Title: Chief Compliance Officer February 252021 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.