# CETERA ADVISOR NETWORKS LLC X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: CETERA ADVISOR NETWORKS LLC - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0000718856-22-000003 - CIK: 718856 - File #: 8-29577 - Type: Broker-dealer - Material weakness: No - Auditor: Deloitte & Touche LLP - Auditor location: Los Angeles, CA - Contact: Keith Matz - Phone: 3206564316 - Email: tim.bowman@cetera.com - Website: cetera.com - Signed by: Timothy Bowman (Financial Principal) Original filing: https://www.sec.gov/Archives/edgar/data/718856/000071885622000003/canpub.pdf --- {0}------------------------------------------------ CETERA ADVISOR NETWORKS LLC AND SUBSIDIARY (SEC I.D. No. 8-29577) CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021 AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Filed pursuant to Rule 17a-5(d) under the Securities Exchange Act of 1934 as a Public Document {1}------------------------------------------------ #### Public UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 # ANNUAL REPORTS FORM X-17A-5 PART III | OMB APPROVAL | | |---------------------------|--| | OMB Number: 3235-0123 | | | Expires: Oct. 31, 2023 | | | Estimated average burden | | | 12
hours ner resnonse. | | SEC FILE NUMBER 8-29577 FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 FILING FOR THE PERIOD BEGINNING 01/01/2021 AND ENDING 12/31/2021 MM/DD/YY MM/DD/YY A. REGISTRANT IDENTIFICATION # NAME OF FIRM: Cetera Advisor Networks LLC TYPE OF REGISTRANT (check all applicable boxes): ■ Broker-dealer □ Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) # 2301 Rosecrans Ave #5100 | | (No. and Street) | | | | |----------------------------------------------------------------------------------------------------|------------------------------------------------------------|-----------------------|------------|--| | El Segundo | CA | | 90245 | | | (City) | (State) | | (Zip Code) | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | Tim Bowman
(619) 881-5262 | | Tim.Bowman@cetera.com | | | | (Name) | (Area Code - Telephone Number) | (Email Address) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Deloitte & Touche LLP | (Name - if individual, state last, first, and middle name) | | | | | 555 W. 5th Street, Floor 2700 Los Angeles | | CA | 90013 | | | (Address) | (City) | (State) | (Zip Code) | | | October 20, 2003 | 34 | | | | | (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 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 OMB control number. {2}------------------------------------------------ #### OATH OR AFFIRMATION | Tim Bowman swear (or affirm) that, to the best of my knowledge and belief, the Principal Financial Officer Title: financial report pertaining to the firm of Cetera Advisor Networks LLC and Subsidiary (the "Company") December 31 , 2 021 \_ , 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: moot Notary Public #### This filing \*\* contains (check all applicable boxes): - (a) Statement of financial condition. - = (b) Notes to consolidated statement of financial condition. - □ (c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in § 210.1-02 of Regulation S-X). - [ (d) Statement of cash flows. - [] (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - □ (f) Statement of changes in liabilities subordinated to claims of creditors. - □ (g) Notes to consolidated financial statements. - [ (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - [ (i) Computation of tangible net worth under 17 CFR 240.18a-2. - □ (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - □ (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 240.18a-4, as applicable. - [ (I) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. - [ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - [ (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - □ (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-2, 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. - [] (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - @ (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - □ (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - @ (t) Independent public accountant's report based on an examination of the statement of financial condition. - [] (u) Independent public accountant's report based on an examination of the financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - □ (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies 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). - □ (z) Other: - \*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(2), or 17 CFR 240.18a-7(d)(2), as applicable. {3}------------------------------------------------ #### CALIFORNIA JURAT WITH AFFIANT STATEMENT GOVERNMENT CODE § 8202 See Attached Document (Notary to cross out lines 1-6 below) D See Statement Below (Lines 1-6 to be completed only by document signer[s], not Notary) Signature of Document Signer No. 1 Signature of Document Signer No. 2 (if any) A notary public or other officer completing this certificate verifies only the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California Subscribed and sworn to (or affirmed) before me on this 25 day of February, 20 U County of Din by Month Year Date lim Bowman (1) -(and (2) \_ Name(s) of Signer(s) TRAN MY LY Notary Public - California proved to me on the basis of satisfactory evidence to San Diego County Commission # 2342185 be the person(s) who appeared before me. Comm. Expires Jan 18. 2025 Signature Signature of Notary Public Place Notary Seal and/or Stamp Above - OPTIONAL Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Document Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Signer(s) Other Than Named Above: \_\_ ARREACH A CONSULT A CONSULT A CONSULT A CONSULT CONSULT CONSULT CONSULT CONSULT CONSULT CONSULT CONSULTION CONSULTION CONSULTION CONSULTION CONSULTION CONSULTION CONSULTION C ©2019 National Notary Association {4}------------------------------------------------ #### Deloitte & Touche LLP 555 W. 5th Street, Suite 2700 Los Angeles, CA 90013-1010 USA Tel: +1 213 688 0800 Fax: +1 213-688 0100 www.deloitte.com #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Member of Cetera Advisors Networks LLC #### Opinion on the Financial Statement We have audited the accompanying consolidated statement of financial condition of Cetera Advisors Networks LLC and its subsidiary (the "Company") as of December 31, 2021, and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. #### Basis for Opinion The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit of the financial statement provides a reasonable basis for our opinion. February 25, 2022 We have served as the Company's auditor since 2016. {5}------------------------------------------------ ### CETERA ADVISOR NETWORKS LLC AND SUBSIDIARY ### CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021 | ASSETS | | |--------------------------------------------------------------------|-------------------| | Cash and cash equivalents | \$
57,466,963 | | Fees and commissions receivable | 53,273,137 | | Receivable from clearing broker | 1,195,393 | | Related party receivables | 100,654 | | Other receivables | 6,837,111 | | Prepaid expenses | 717,689 | | Deferred charges | 10,417,779 | | Operating lease assets | 1,238,878 | | Intangible assets, net of accumulated amortization of \$16,050,647 | 168,939,278 | | Goodwill | 46,736,273 | | Other assets | 1,219,068 | | Total assets | \$
348,142,223 | | | | | | | #### LIABILITIES AND MEMBER'S EQUITY | LIABILITIES | | |---------------------------------------|------------------| | Fees and commissions payable | \$
57,984,742 | | Accrued expenses and accounts payable | 915,434 | | Accrued compensation | 7,234,965 | | Deferred revenue | 1,822,469 | | Deferred credit | 3,322,518 | | Regulatory and legal reserves | 2,787,500 | | Operating lease liabilities | 1,256,554 | | Other liabilities | 3,620,235 | | Total liabilities | 78,944,417 | #### COMMITMENTS AND CONTINGENCIES (NOTE 10) | MEMBER'S EQUITY | 269,197,806 | |---------------------------------------|-------------------| | Total liabilities and member's equity | \$
348,142,223 | The accompanying notes are an integral part of this Consolidated Statement of Financial Condition. {6}------------------------------------------------ ## CETERA ADVISOR NETWORKS LLC AND SUBSIDIARY NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021 #### NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE COMPANY Cetera Advisor Networks LLC (the is an introducing broker-dealer registered under the Securities Exchange Act of 1934, a registered investment advisor and a member of the Financial Industry Regulatory Authority, Inc. The Company and its subsidiary, Bar Financial, LLC, provide brokerage, investment advisory and planning, and insurance services to individuals nationally through independent financial advisors. The Company is a wholly owned subsidiary of Cetera wholly owned subsidiary of Cetera Financial Holdings, Inc is a wholly owned subsidiary of Aretec Group, Inc. wholly owned subsidiary of GC Two Intermediate Holdings, Inc. which is wholly owned subsidiary of GC Two Holdings, Inc. #### NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES #### Basis of Presentation The Consolidated Statement of Financial Con was prepared in conformity with accounting principles generally accepted in the Un On May 21, 2021, the Company acquired certain assets and liabilities from Summit Financial Group, Inc. This transaction has been determined to be a combination of entities under common control that resulted in a change in the reporting entity. Accordingly, the financial results of the Company have been adjusted to include the impacts of the transaction in the current period as if the certain assets and liabilities acquired had been consolidated at the beginning of the period presented. The following tables summarize the impact of the transaction to the Compa s Consolidated Statement of Financial Condition as of December 31, 2020: | | As of December 31, 2020 | | | | | | | |-------------------------------------------------------|----------------------------|-------------|------------------------------|------------|----|-----------------------------|--| | | | | | | | As | | | | As Previously
Reported: | | Retrospective
Adjustments | | | Retrospectively
Adjusted | | | Fees and commissions receivable | \$ | 36,586,610 | \$ | 664,330 | \$ | 37,250,940 | | | Receivable from clearing broker | | 1,394,663 | | 53,626 | | 1,448,289 | | | Other receivables | | 4,952,086 | | 279,069 | | 5,231,155 | | | Prepaid expenses | | 621,790 | | 33,435 | | 655,225 | | | Intangible assets, net of accumulated
amortization | | 50,094,925 | | 14,450,831 | | 64,545,756 | | | Goodwill | | 29,815,465 | | 16,767,211 | | 46,582,676 | | | All other assets, net of allowance | | 60,927,594 | | - | | 60,927,594 | | | Total Assets | \$ | 184,393,133 | \$ | 32,248,502 | \$ | 216,641,635 | | | Fees and commissions payable | \$ | 38,769,607 | \$ | 897,328 | \$ | 39,666,935 | | | All other liabilities | | 20,356,012 | | 59,534 | | 20,415,546 | | | Total liabilities | | 59,125,619 | | 956,862 | | 60,082,481 | | | Member's equity | | 125,267,514 | | 31,291,640 | | 156,559,154 | | | Total liabilities and member's equity | \$ | 184,393,133 | \$ | 32,248,502 | \$ | 216,641,635 | | {7}------------------------------------------------ #### Use of Estimates The preparation of Consolidated Statement of Financial Condition in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the Consolidated Statement of Financial Condition. Accordingly, actual results could differ from those estimates, and these differences could be material. #### Reportable Segment The Company operates exclusively in the United States as one operating segment as it only reports financial information on an aggregate basis to its chief operating decision makers. #### Cash and Cash Equivalents Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and that are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. #### Fees and Commissions Receivable and Payable Fees and commissions receivable includes commissions from mutual funds, variable annuities, insurance product purchases transacted directly with the product sponsors, and mutual fund and annuity trailers. Fees and commissions payable related to these transactions are recorded based on estimated payout ratios for each product as commission revenue is accrued. #### Receivable from Clearing Broker clearing broker, but not yet remitted to the Company. #### Other Receivables Other receivables primarily consist of accrued receivables from t fees charged to client accounts and accrued reimbursements and allowances from product sponsors. #### Deferred Charges Deferred charges include unamortized deferred charges including recruiting and transition allowances useful life of approximately 20 years while transition allowances are typically amortized over the estimated customer useful life of 6 years. As of December 31, 2021, the Company had unamortized recruiting and transition allowances of \$10,417,779. As of December 31, 2021, the weighted average remaining useful life was 12.1 years. #### Goodwill and Other Intangible Assets Goodwill assets, are not amortized; however, intangible assets that are deemed to have definite lives are Intangible Assets, for additional information regarding the Company's goodwill and other intangible assets. Goodwill is tested annually on October 1st and between annual tests if certain events occur indicating that the carrying amounts may be impaired. If a qualitative assessment is used and the Company determines that the fair value of a reporting unit is more likely than not less than its carrying amount, a quantitative impairment {8}------------------------------------------------ test will be performed by comparing the fair value of a reporting unit with its carrying amount. No impairment of goodwill was recognized during the year ended December 31, 2021. Long-lived assets, such as intangible assets subject to amortization, are reviewed for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. There was no impairment of definite-lived intangible assets recognized during the year ended December 31, 2021. #### Securities Owned and Securities Sold, not yet purchased Securities owned, and securities sold, not yet purchased are recorded on a trade date basis and are stated at fair value. As of December 31, 2021, securities owned of \$119,978 is included in Other assets. Securities sold, not yet purchased of \$9,803 is included in Other liabilities. ### Other Assets The Company periodically extends credit to financial advisors in the form of commission advances which are included in Other assets. At December 31, 2021, advances due from advisors was \$738,016, net of an immaterial allowance for bad debt. In addition, property and equipment of \$101,681, net of accumulated depreciation of \$425,613 are recorded in Other assets. #### Deferred Credit Deferred credit consists of rebates received on the sign Pershing LLC, which is accreted on a straight-line basis. The unaccreted deferred credits of \$3,322,518 are included in Deferred credit in the Consolidated Statement of Financial Condition and will be accreted over the remaining life of 3.75 years. #### Deferred Revenue The Company records unearned income when cash payments are received or due in advance of its performance obligation, including amounts which are refundable. #### Contract Acquisition Costs The Company identifies all significant costs to obtain or fulfill a contract with a customer. These costs generally fall within recruiting costs, financial advisor related costs, and transfer costs incurred by underlying customers of the acquired financial advisor. Transfer costs related to customers are recognized as assets and are amortized over the estimated customer relationship life on a straight-line basis. Recruiting costs and other financial advisor related costs are recognized as assets and are amortized over the estimated financial advisor relationship life on a straight-line basis. These assets are presented in the other assets line of the Company's Consolidated Statement of Financial Condition. To the extent that these costs are initially estimated and accrued for, adjustments are made based on actual costs incurred. #### Recently Issued Accounting Pronouncements There are no recently issued accounting pronounce Consolidated Statement of Financial Condition and related disclosures. {9}------------------------------------------------ registered representatives with the Company. Contemporaneously with the purchase, Cetera Financial transferred certain net assets from Cetera Financial to the Company. #### NOTE 4 - FAIR VALUE MEASUREMENTS The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP defines three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. Level 3 own assumptions about the data inputs that market participants would use in the pricing of the asset or liability and are consequently not based on market activity. The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is the most significant to the fair value measurement in its entirety. A review of the fair value hierarchy classification is conducted on an annual basis. Changes in the type of inputs used in determining fair value may result in a reclassification for certain assets. The Company assumes all transfers occur at the beginning of the reporting period in which they occur. {10}------------------------------------------------ measured at fair value on a recurring basis by product category as of December 31, 2021 is as follows: | | Level 1 | | Level 2 | Level 3 | Total | |------------------------------------------------------------------------|---------------|---|-------------|---------|---------------| | Assets: | | | | | | | Cash equivalents - money market funds | \$
253,709 | | \$
- | \$
- | \$
253,709 | | Securities owned - recorded in Other assets: | | | | | | | Equity securities | 117,256 | | - | - | 117,256 | | Corporate bonds | | - | 2,722 | - | 2,722 | | Total securities owned | 117,256 | | 2,722 | - | 119,978 | | Total | \$
370,965 | | \$
2,722 | \$
- | \$
373,687 | | Liabilities: | Level 1 | | Level 2 | Level 3 | Total | | Securities sold, not yet purchased - recorded
in Other liabilities: | | | | | | | Corporate bonds | \$ | - | \$
9,803 | \$
- | \$
9,803 | | Total | \$ | - | \$
9,803 | \$
- | \$
9,803 | Cash equivalents include money market mutual fund instruments, which are short term in nature with readily determinable values derived from active markets. Publicly Equity traded securities with sufficient trading volume are fair valued by management using quoted prices for identical instruments in active markets. Accordingly, these securities are classified within Level 1. Corporate bonds are fair valued by management using third-party pricing services and are classified within Level 2. #### Fair Value of Financial Instruments not Measured at Fair Value The fair value of cash and cash equivalents was estimated to approximate the carrying value and are classified as Level 1 of the fair value hierarchy. The fair value of receivables from product sponsors, clearing organizations, other receivables, accounts payable, accrued expenses, related party payable, and other payables was estimated to approximate the carrying value and are classified as Level 2 of the fair value hierarchy due to their short-term nature. The Company amortizes intangible assets with definite lives on a straight-line basis over their useful lives. None of the intangible assets with definite lives is anticipated to have a residual value. The following tables present the components of intangible assets with definite lives subject to amortization at December 31, 2021: | As of December 31, 2021 | Gross
Carrying
Amount | Accumulated
amortization | Net
Carrying
Amount | Weighted
Average
Remaining
Useful Life
(years) | | |--------------------------------|-----------------------------|-----------------------------|---------------------------|------------------------------------------------------------|--| | Financial advisor relationship | \$
168,750,984 | \$
(13,503,214) | \$ 155,247,770 | 13.8 | | | Customer relationships | 11,800,000 | (1,180,000) | 10,620,000 | 9.0 | | | Trade names | 2,233,901 | (921,893) | 1,312,008 | 6.7 | | | Non-compete agreements | 2,205,040 | (445,540) | 1,759,500 | 2.5 | | | Total | \$
184,989,925 | \$
(16,050,647) | \$ 168,939,278 | | | {11}------------------------------------------------ #### Lease Recognition The Company determines if an arrangement is a lease or contains a lease at inception. The Company has operating leases for corporate offices with remaining lease terms of one year to five years. Operating lease assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at the comm not provide an implicit rate, the Company estimates its incremental borrowing rate based on information available at the commencement date in determining the present value of future payments. Supplemental weighted-average information related to leases is as follows: | | Year Ended
December 31, 2021 | |--------------------------------------------------------------------|---------------------------------| | Weighted-average remaining lease term (years):
Operating leases | 3.3 | | Weighted-average discount rate:
Operating leases | 5.26% | Maturities of lease liabilities as of December 31, 2021 are as follows: | | Operating Leases | | | |-----------------------|------------------|--|--| | 2022 | \$
462,971 | | | | 2023 | 392,883 | | | | 2024 | 286,179 | | | | 2025 | 181,387 | | | | 2026 | 45,682 | | | | Total lease payments | 1,369,102 | | | | Less imputed interest | 112,548 | | | | Total | \$
1,256,554 | | | ### NOTE 7 - EMPLOYEE BENEFIT PLANS The employees of the Company are covered by a 401(k) defined contribution plan and a health and welfare plan that are administered by Cetera Financial. Subject to eligibility requirements, all employees are eligible to participate. The 401(k) plan features an employer-matching program. The health and welfare plan is a selfinsured plan sponsored by Cetera Financial. Costs of the plans are allocated to the Company based on rates determined by Cetera Financial. The Company had no separate employee benefit plan in 2021 and relied on Cetera Financial to cover all eligible employees. All benefits that were paid by Cetera Financial were charged back to the Company for reimbursement. #### NOTE 8 - RELATED PARTY TRANSACTIONS Cetera Financial allocates a portion of its general administrative expenses to the Company based on factors including assets under management, sales volume, number of personnel, and producing advisors. Such expenses primarily include overhead services related to operations and risk management, finance and administration, information technology, and strategic integration. Because these transactions and agreements are with affiliates, they may not be the same as those recorded if the Company was not a wholly owned subsidiary of Cetera Financial. As of December 31, 2021, the Company has an outstanding payable of \$911,917 recorded in Other liabilities to Cetera Financial related to these services. In addition, the Company has \$40,826 related party payable to other affiliates. {12}------------------------------------------------ Cetera Financial may fund note receivables as pa advisors. Those notes typically require the payback of principal and interest to Cetera Financial over periods of three to four years. The issuance of these notes by Cetera Financial is typically accompanied by the execution of a bonus agreement, between the financial advisor and the Company, providing for the payment based on the attainment of certain production targets. Cetera Investment Services LLC, an affiliate, provides custodial services for certain customer retirement accounts of the Company. As of December 31, 2021, there were no material outstanding payables to Cetera Investment Services LLC. Related party receivable of \$53,786 is due from Cetera Advisors LLC, an affiliate, and \$46,868 related party receivables from other affiliates. Given the credit agreements Aretec has with its lend #### NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and temporary cash investments in bank deposit and other accounts, the balances of which, at times, may exceed federally insured limits. Exposure to s banking relationships with high credit quality financial institutions. #### NOTE 10 - COMMITMENTS AND CONTINGENCIES Legal and regulatory proceedings related to business operations proceedings from time to time arising out of business operations, including arbitrations and lawsuits involving private claimants, subpoenas, investigations and other actions by government authorities and self-regulatory organizations. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases in which claimants seek indeterminate damages, the Company cannot estimate what the possible loss or range of loss related to such matters will be. The Company recognizes a loss with regard to a legal proceeding when it believes it is probable a loss has occurred and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. At December 31, 2021 the Company had legal reserves of approximately \$0.2 million. The Company maintains insurance coverage, including general liability, directors and officers, errors and omissions, excess entity errors and omissions and fidelity bond insurance. The Company is a registered broker-dealer and, as such, is subject to the continual scrutiny of those who regulate its industry, including FINRA, the United States Securities and Ex various securities commissions of the states and jurisdictions in which it operates. As part of the regulatory compliance with rules and regulations promulgated by the examining regulatory authority. It is not uncommon for the regulators to assert, upon completion of an examination, that the Company has violated certain of these rules and regulations. Where possible, the Company endeavors to correct such asserted violations. In certain circumstances, and depending on the nature and extent of the violations, the Company may be subject to disciplinary action, including fines. The Company is being investigated by the SEC regarding whether the Company breached its fiduciary duties or other obligations by receiving SEC Rule 12b-1 fees from mutual funds and other fees in investment advisory accounts, including but not limited to revenue clearing firm. During the year ended December 31, 2019 the Company has recognized a liability as it believes it is probable a liability has occurred and disgorgement costs related to remediating the claims asserted have been estimated to be \$2.5 million, inclusive of any applicable interest or civil penalties. {13}------------------------------------------------ Defense costs related to legal and regulatory proceedings are expensed as incurred. When there is indemnification or insurance, the Company may engage in defense or settlement and subsequently seek reimbursement for such matters. Clearing broker Under the clearing arrangement with the clearing broker, the Company is required to maintain certain minimum levels of net capital and comply with other financial ratio requirements. At December 31, 2021, the Company complied with all such requirements. #### NOTE 11 - NET CAPITAL REQUIREMENTS The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule 15c3-1. The Company computes its net capital pursuant to the alternative method provided for in the Rule 15c3-1, which requires the maintenance of minimum net capital of the greater of \$250,000 or 2% of aggregate debit items. At December 31, 2021, the Company had net capital of \$15,597,825, which was \$15,347,825 in excess of required net capital of \$250,000. #### NOTE 12 - RESERVE REQUIREMENTS AND INFORMATION RELATING TO THE POSSESSION OR CONTROL REQUIREMENTS FOR BROKERS AND DEALERS The Company claims an exemption from the provisions of Rule 15c3-3 of the Securities Exchange Act of 1934, paragraph k(2)(ii) for all other transactions cleared on a fully disclosed basis with a clearing broker and that our other business activities met the requirements specified in Footnote 74 of the SEC Release No. 34 accounts, promptly transmits customer funds and customer securities to the issuer or the clearing broker and does not otherwise hold funds or securities of customers. Because the Company claims an exemption, the Company is not required to prepare a determination of reserve requirements for brokers and dealers or provide information relating to possession or control requirements for brokers and dealers. #### NOTE 13 - SUBSEQUENT EVENTS The Company has evaluated activity through the date the Consolidated Statement of Financial Condition was issued and concluded that no subsequent events have occurred that would require recognition or disclosure in the Consolidated Statement of Financial Condition, except as noted below. On September 28, 2021, CAN and First Financial Equi into an asset purchase ster with CAN. The closing date of the agreement is estimated to occur in the second quarter of 2022. \* \* \* \* \* \* Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.