# CAPACUITY SECURITIES, INC. X-17A-5 (2021-03-23) — Broker-dealer annual report - Company: CAPACUITY SECURITIES, INC. - Form: X-17A-5 - Filed: 2021-03-23 - Period: 2020-12-31 - Accession: 0000752227-21-000003 - CIK: 752227 - File #: 8-32508 - Material weakness: No - Auditor: Morey, Nee, Buck & Oswald, LLC - Auditor location: Bethlehem, PA - Contact: Terry Adams - Phone: 3214996914 - Website: moreycpa.com - Signed by: Terry Adams (VP of Finance) Original filing: https://www.sec.gov/Archives/edgar/data/752227/000075222721000003/filing.pdf --- {0}------------------------------------------------ ![](_page_0_Picture_0.jpeg) March 23, 2021 Securities and Exchange Commission Division of Foreign Markets Mail Stop 7010 100 F Street, NE Washington, DC 20549 Dear Sir/Madam, Enclosed please find the Annual Audited Report and the Exemption Report for CapAcuity Securities, Inc. for the year 2020. Please call if you have any questions regarding the reports. Thank you. Sincerely, Bryant Kirk President CapAcuity Securities, Inc. Enclosures {1}------------------------------------------------ | UNITEDSTATES | |------------------------------------| | SECURITIES AND EXCHANGE COMMISSION | | Washington, D.C. 20549 | | OMB APPROVAL | | |--------------------------|------------------| | OMB Number: | 3235-0123 | | Expires: | October 31, 2023 | | Estimated average burden | | | hours ner response | 12.00 | | SEC FILE NUMBER | |-----------------| | 8-32508 | | REPORT FOR THE PERIOD BEGINNING UT/UT/20 | | AND ENDING 14/0 1/20 | | | |-------------------------------------------------------------------------------------------|-------------------------------------------------------|----------------------|--------------------------------|--| | | MM/DD/YY | | MM/DD/Y Y | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: CAPACUITY SECURITIES, INC | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | | 300 INTERNATIONAL PARKWAY, #350 | | | | | | | (No. and Street) | | | | | LAKE MARY | ច | | 32746 | | | (City) | (State) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
THOMAS HOPKINS | | | (603-216-8933) | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | MOREY, NEE, BUCK & OSWALD, LLC | | | | | | | (Name - if individual, state last, first middle name) | | | | | 2571 BAGLYOS CIR, STE B20 | BETHLEHEM | PA | 18020 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE: | | | | | | Certified Public Accountant | | | | | | Public Accountant | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | {2}------------------------------------------------ | Evelyn J. Velez
NOTARY PUBLIC
ESTATE OF FLORIDA
Comm# GG215959
Expires 5/9/2022
Luchm | Signature
C
President
Title | |------------------------------------------------------------------------------------------------------|--------------------------------------| | Notary Public | | - - - - - - - - - - - - - - {3}------------------------------------------------ # **CAPACUITY SECURITIES, INC.** # **CONTENTS** | Report of Independent Registered Public Accounting Firm | 1 | |---------------------------------------------------------|------| | Statement of Financial Condition | 2 | | Statement of Income | 3 | | Statement of Changes in Shareholder's Equity | 4 | | Statement of Cash Flow | 5 | | Notes to Financial Statements | 6-10 | # Supplementary Information | Computation of Net Capital | 11 | |----------------------------------------------------------------------------------------------|----| | Computation of Net Capital Requirement | 11 | | Computation of Aggregate Indebtedness | 11 | | Review Report of Independent Registered Accounting Firm Exemption Report
Under Rule 17a-5 | 12 | | Exemption Report | 13 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholder of CapAcuity Securities, Inc. #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of CapAcuity Securities, Inc. as of December 31, 2020, the related statements of income, changes in shareholder's 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 CapAcuity Securities, Inc. 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 CapAcuity Securities, Inc.'s management. Our responsibility is to express an opinion on CapAcuity Securities, Inc.'s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to CapAcuity Securities, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. #### **Auditor's Report on Supplemental Information** The Computation of Net Capital under Rule 15c3-1, Computation for Determination or Reserve Requirements Under SEC Rule 15c3-3, and Information Relating to Possession or Control Requirements Under SEC Rule 15c3- 3 has been subjected to audit procedures performed in conjunction with the audit of CapAcuity Securities, Inc.'s financial statements. The supplemental information is the responsibility of CapAcuity Securities, Inc.'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. §240.17a-5. In our opinion, the Computation of Net Capital under Rule 15c3-1, Computation for Determination or Reserve Requirements Under SEC Rule 15c3-3, and Information Relating to Possession or Control Requirements Under SEC Rule 15c3-3 is fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as CapAcuity Securities, Inc.'s auditor since 2016. Bethlehem, PA March 11, 2021 1120 N. Bethlehem Pike • Suite 107 • PO Box 459 • Spring House, PA 19477• Phone: 610-882-1000 2571 Baglyos Circle • Suite B20 • Bethlehem, PA 18020 • Phone: 610-882-1000 27 E. High Street • Suite A • Somerville, NJ 08876 • Phone: 908-393-0549 430 W. 24th Street • Suite 1A • New York, NY 10011• Phone: 212-741-5117 {5}------------------------------------------------ # **CAPACUITY SECURITIES, INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2020** #### **ASSETS** | Cash | \$
137,752 | |---------------------|---------------| | Accounts Receivable | 429,247 | | Prepaid expenses | 19,235 | | Total assets | \$
586,234 | #### **LIABILITIES AND SHAREHOLDER'S EQUITY** | Liabilities: | | |----------------------------------------------------------|---------------| | Commission Payable | \$
56,704 | | Accounts Payable | 9,863 | | Due to Related Parties | 501 | | Total liabilities | \$
67,068 | | Shareholder's equity: | | | Common stock, \$0.20 par value; 5,000 shares authorized; | | | 5,000 shares issued and outstanding | \$
1,000 | | Capital in excess of par value | 108,400 | | Retained earnings | 409,766 | | Total shareholders' equity | \$
519,166 | | Total liabilities and shareholder's equity | \$
586,234 | See Accompanying Notes {6}------------------------------------------------ ## **CAPACUITY SECURITIES, INC. STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2020** | Revenues: | | |------------------------------|-----------------| | Commission income | \$
3,907,149 | | Administrative Fees | 247,985 | | Mutual fund revenue | 9,086 | | Other Income | 15,402 | | Total revenues | 4,179,622 | | Expenses: | | | Commission expense | 1,114,151 | | Compensation | 781,707 | | Professional fees | 89,861 | | General and administrative | 64,330 | | Rent and occupancy costs | 59,342 | | Technology | 24,050 | | Regulatory fees and expenses | 23,171 | | Travel and entertainment | 22,038 | | Total expenses | 2,178,650 | | Net income | \$
2,000,972 | {7}------------------------------------------------ # **CAPACUITY SECURITIES, INC. STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY YEAR ENDED DECEMBER 31, 2020** | | Common
Stock | | Capital in
excess of
par value | | Retained
Earnings | | Total
Shareholder's
Equity | | |----------------------------|-----------------|----|--------------------------------------|----|----------------------|----|----------------------------------|--| | Balance, January 1, 2020 | \$
1,000 | \$ | 108,400 | \$ | 373,794 | \$ | 483,194 | | | Shareholder Distributions | | | | | (1,965,000) | | (1,965,000) | | | Net Income | | | | | 2,000,972 | | 2,000,972 | | | Balance, December 31, 2020 | \$
1,000 | \$ | 108,400 | \$ | 409,766 | \$ | 519,166 | | {8}------------------------------------------------ # **CAPACUITY SECURITIES, INC. STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2020** | Cash flows from operating activities: | | |------------------------------------------------------------------------------|---------------| | Net income | \$ 2,000,972 | | Adjustments to reconcile net income to net cash provided by | | | operating activities: | | | Accounts Receivable | (80,204) | | Prepaid expenses | (3,457) | | Commissions Payable | (83,930) | | Due to related parties | (1,041) | | Accounts Payable | 5,341 | | Total Adjustments to reconcile Net Income to Net Cash provided by operations | (163,291) | | Net cash provided by operating activities | 1,837,681 | | Cash flows from financing activities: | | | Shareholder Distributions | (1,965,000) | | Net cash used by financing activities | (1,965,000) | | Net decrease in cash | (127,319) | | Cash, beginning of year | 265,071 | | Cash, end of year | \$
137,752 | | Supplemental cash flow disclosures: | | | Cash paid for income taxes | \$
- | | Cash paid for interest | \$
- | See Accompanying Notes {9}------------------------------------------------ #### **Notes to Financial Statements** # **NOTE 1 NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### **Business Entity and Nature of Operations** CapAcuity Securities, Inc. (the Company), formerly Johnson Securities, Inc., is a registered broker/dealer operating since 1984. The Company operates within the exemptive provisions of Rule 15c3-3 pursuant to the provisions of subparagraph k(1) thereof. When acting as a broker/dealer, its marketing and sales activities are devoted primarily to private placement variable life insurance and mutual funds used as funding vehicles for corporate sponsored executive retirement programs. The Company target clients for these products and services are publicly held corporations and large private companies. The Company marketing and sales activities are conducted on a nation-wide basis. The Company is a wholly owned subsidiary of CapAcuity Financial, Inc., which purchased Johnson Securities, Inc on December 26, 2018 and subsequently changed the name of the Company to CapAcuity Securities, Inc. #### **Recently Issued Accounting Pronouncement** In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13 - Current Expected Credit Losses which replaces the current incurred loss model used to measure impairment loss with an expected loss model for trade and other receivables. The Company adopted the standard during 2020, under the modified retrospective approach to the earliest period presented. The adoption of ASU 2016-13 did not have a material effect on the Company's financial statements. {10}------------------------------------------------ #### **Notes to Financial Statements** # **NOTE 1 Nature of the Business and Summary of Significant Accounting Policies (Continued)** A summary of the Company's significant accounting policies follows: # **Revenue From Contracts With Customers** Commissions. The Company receives insurance product transactions (and related commission revenue and expenses, if applicable) which are recorded when received. Commissions are accrued for new business when the underwriters notify the Company that related premiums were collected and accrued for trails based on the transaction date per the carrier statement. Any adjustments to commissions, which may result from cancellations or other adjustments are recorded in the period the underwriters notify the Company. Administrative service fees. The Company receives sales distribution and service fees that are related to marketing and policy administrative services performed for the Insurance Carriers. This revenue is recognized over the period that the services are performed. Mutual fund revenue. The Company receives mutual fund revenue based upon a percentage of the asset values of mutual funds managed or on a fixed fee and is recognized when received. Other Income. The Company receives affiliation fees for insurance coverage including E&O, Bond coverage, FINRA related fees and state registration fees provided to the registered representatives associated with the Company. {11}------------------------------------------------ ### **Notes to Financial Statements** # **NOTE 1 Nature of the Business and Summary of Significant Accounting Policies (Continued)** # **Cash** Cash includes interest-earning deposits and are held at financial institutions that may exceed federally insured limits. The Company has not experienced any losses on these accounts and does not believe it is exposed to any significant credit risk with respect to cash balances held in these financial institutions. #### **Receivables** Receivables are primarily for commissions due from insurance carriers. These receivables are collected within the following month and require no allowance for credit losses. #### **Income Taxes** The Company is a qualified subchapter S subsidiary "Q-Sub" under applicable provisions of the Internal Revenue Code. In lieu of corporation income taxes, the shareholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. In accordance with accounting standards relating to accounting for uncertainty in income taxes, management assessed whether there were any uncertain tax positions which may give rise to income tax liabilities and determined that there were no such matters requiring recognition in the accompanying financial statements. The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is no longer subject to Federal, State or Local tax examinations for years prior to 2016. # **Use of Estimates** The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. {12}------------------------------------------------ # **Notes to Financial Statements** # **NOTE 1 Nature of the Business and Summary of Significant Accounting Policies (Continued)** # **Management's Review of Subsequent Events** The Company has evaluated all events subsequent to the balance sheet date of December 31, 2020 through March 11, 2021, which is the date the financial statements were available to be issued. # **Note 2 NET CAPITAL REQUIREMENTS** The Company is subject to the Securities and Exchange Commission's net capital rule (SEC Rule 15c3-l), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, as defined, shall not exceed 15 to 1. Essentially, net capital is defined as shareholder's equity plus subordinated liabilities less certain deductions for assets that are not readily convertible into cash. The Company's ratio of aggregate indebtedness to net capital, as defined, at December 31, 2020 was 0.53 to 1. At December 31, 2020, the Company had net capital, as defined, of \$127,138 and excess net capital of \$122,138. # **Note 3 EXEMPTION FROM SECURITIES AND EXCHANGE COMMISSION RULE 15c3-3** The company operates pursuant to SEC Rule 15c3-3(K)(1) limiting business to the distribution of mutual funds and variable life insurance or annuities and therefore, is exempt from the computation for determination of reserve requirements pursuant to SEC Rule 15c3-3. {13}------------------------------------------------ #### **Notes to Financial Statements** #### **Note 4 Risk and Uncertainties** The COVID-19 Pandemic developed rapidly in 2020, with a significant number of cases. Measures taken by various governments to contain the virus have affected economic activities. At this stage, the impact on our business has not been significant and based on our experience to date we expect this to remain the case. We will continue to follow the various government policies and advice and, in parallel, we will continue our operations in the best and safest way possible. #### **Note 5 Related-Party Transactions** On March 1, 2019, the Company entered into an expense sharing arrangement with Capacuity Consulting, LLC (Capacuity Consulting), a Florida limited liability company. Under the expense sharing agreement, Capacuity Consulting permits the Company to market and distribute its products and services from Capacuity Consulting's facilities used in conjunction with the Capacuity Consulting's business, subject to reimbursement of the expenses associated with such use. Such expenses include but are not limited to the following: rent, office supplies, telephone, postage, technology support. Capacuity Consulting also provides the Company with professional support services as it may require to conduct and administer its operations including but not limited to: executive, administrative, accounting, clerical, legal and sales services; and act as paymaster to those personnel employed by Capacuity Consulting and providing services to the Company. The term of this agreement is one year and is renewable for successive one-year terms unless terminated by either party upon written agreement with Capacuity Consulting. During 2020, the Company incurred \$911,049 in expenses related to its cost sharing agreement with Capacuity Consulting. The expenses are included in various expense items in the accompanying statement of operations. As of December 31, 2020, the Company owed \$501 to Capacuity Financial, Inc. {14}------------------------------------------------ #### **CAPACUITY SECURITIES, INC. SECURITIES AND EXCHANGE COMMISSION SUPPLEMENTARY INFORMATION AS OF DECEMBER 31, 2020** | Line* | Computation of Net Capital | | | |----------------------------------------|---------------------------------------------------------------------------------|----|-----------| | 1 | Total ownership equity from Statement of Financial Condition | \$ | 519,166 | | 5 | Total capital and allowable subordinated Liabilities | | 519,166 | | 6 | Deductions and/or charges:
A. Total non-allowable assets | | (392,028) | | 8 | Net capital before haircuts on securities positions | | 127,138 | | 10 | Net capital | \$ | 127,138 | | Computation of Net Capital Requirement | | | | | 11 | Minimum net capital required (6 2/3% of aggregate indebtedness) | \$ | 4,471 | | 12 | Minimum dollar net capital requirement reporting broker or dealer | \$ | 5,000 | | 13 | Net capital requirement | \$ | 5,000 | | 14 | Excess net capital | \$ | 122,138 | | 15 | Net capital less greater of 10% of
aggregate indebtedness or 120% of line 12 | \$ | 120,432 | | Computation of Aggregate Indebtedness | | | | | 16 | Total A.I. liabilities from Statement of Financial Condition | \$ | 67,068 | | 19 | Total aggregate indebtedness | \$ | 67,068 | | 20 | Percentage of aggregate indebtedness to net capital | | 53% | | | *Line references are to FOCUS report, Part IIA | | | There were no material differences between the computations of Net Capital computed above and the computation by the Company included in Form X-17A-5 as of December 31, 2020. {15}------------------------------------------------ #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Shareholder of CapAcuity Securities, Inc. We have reviewed management's statements, included in the accompanying Exemption Report, in which (1) CapAcuity Securities, Inc. identified the following provisions of 17 C.F.R. §15c3-3(k) under which CapAcuity Securities, Inc. claimed an exemption from 17 C.F.R. §240.15c3-3: (k)(1) (exemption provisions) and (2) CapAcuity Securities, Inc. stated that CapAcuity Securities, Inc. met the identified exemption provisions throughout the most recent fiscal year without exception. CapAcuity Securities, Inc.'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 CapAcuity Securities, Inc.'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. Bethlehem, PA March 11, 2021 1120 N. Bethlehem Pike • Suite 107 • PO Box 459 • Spring House, PA 19477• Phone: 610-882-1000 2571 Baglyos Circle • Suite B20 • Bethlehem, PA 18020 • Phone: 610-882-1000 27 E. High Street • Suite A • Somerville, NJ 08876 • Phone: 908-393-0549 430 W. 24th Street • Suite 1A • New York, NY 10011• Phone: 212-741-5117 **www.moreycpa.com** {16}------------------------------------------------ #### **CAPACUITY SECURITIES, INC. SECURITIES AND EXCHANGE COMMISSION SUPPLEMENTARY INFORMATION AS OF DECEMBER 31, 2020** #### EXEMPTION REPORT CapAcuity Securities, Inc. is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240.17a-5, "Reports to be made by certain brokers and dealers"). 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 claimed an exemption from 17 C.F.R. § 240.15c3-3 under the exemptive provisions of 17 C.F.R. § 240.15c3-3(K)(1) - **(2)** The Company met the identified exemptive provisions in 17 C.F.R. § 240.15c3-3(K)(1) throughout the year ended December 31, 2020 without exception. CapAcuity Securities, Inc. I, Bryant Kirk, affirm to the best of my knowledge and belief, this exemption report is true and correct. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Bryant Kirk Chief Operating Officer February 2, 2021 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.