# CANACCORD GENUITY LLC X-17A-5 (2022-05-27) — Broker-dealer annual report - Company: CANACCORD GENUITY LLC - Form: X-17A-5 - Filed: 2022-05-27 - Period: 2022-03-31 - Accession: 0000766050-22-000009 - CIK: 766050 - File #: 8-03271 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young LLP - Auditor location: New York, NY - Contact: Stella Yan - Phone: 2123898085 - Email: dmacfayden@cgf.com - Website: cgf.com - Signed by: Stella Yan (Managing Director of Finance) Original filing: https://www.sec.gov/Archives/edgar/data/766050/000076605022000009/cgfull.pdf --- {0}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** > **ANNUAL REPORTS FORM X-17A-5** | hours per response:
12 | | |---------------------------|--| | SEC FILE NUMBER | | | | | | | | OMBAPPROVAL 0MB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden **FACING PAGE** **PART** Ill **Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under** the **Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING **04/01 /21** AND ENDING **03/31 /22** MM/DD/VY MM/DD/VY **A. REGISTRANT IDENTIFICATION** # NAME oF FIRM: Can accord Genuity LLC TYPE OF REGISTRANT (check all applicable boxes): □ Broker-dealer □ Security-based swap dealer □ Check here if respondent is also an OTC derivatives dealer □ Major security-based swap participant ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) # 535 Madison Avenue | | (No. and Street) | | | |----------------------------------------------|----------------------------------------------------------|--------------------|-----------------------------------------| | New York | NY | | 10022 | | (City) | (State) | | (Zip Code) | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | Donald D. MacFayden | 416-687-5426 | dmacfayden@cgf.com | | | (Name) | (Area Code -Telephone Number) | (Email Address) | | | | B. ACCOUNTANT IDENTIFICATION | | | | Ernst & Young | (Name-if individual, state last, first, and middle name) | | | | One Manhattan West | New York | NY | 10001 | | r·
(Address) | (Clty) | (State) | (Zip Code) | | | | #42 | | | '"'"'"•I
of"'""""" with | | | IPCAOB R•1••"""'' N,mboc, W appl.,bl•I, | | PCADB}IW | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the eKemption. See 17 CFR 240.17a-S(e)(l)(ii), if applicable. Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid 0MB control number. {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | 1, Donald D. MacFayden | swear (or affirm) that, to the best of my knowledge and belief, the | | |------------------------------------------------------------------|-----------------------------------------------------------------------------------|-------| | financial report pertaining to the firm of Canaccord Genuity LLC | | as of | | 2~
MA-f 7:b | 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. # **Nota,** y Pa till?: ~I k,\_ *-,for* a. ,,... ct. C OI\AI\A \ ~ s:D-"1...r al (9cd\ 45, ~ \/'I at<--,:,-, *ie e...,* c:... { sir *4* JI.- 4-u 5 *'3* 2-.J #### **This filing\*\* contains (check all applicable boxes):** - Iii (a) Statement of financial condition. - Iii (b) Notes to consolidated statement of financial condition. - Iii {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). - Iii (d) Statement of cash flows. - Iii (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - Iii (f) Statement of changes in liabilities subordinated to claims of creditors. - **liiii** (g) Notes to consolidated financial statements. - **liiii** (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - D (i) Computation of tangible net worth under 17 CFR 240.18a-2. - D (j) Computation for determination of customer reserve requirements pursuant to Exhibit **A** to 17 CFR 240.15c3-3. - D (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. - D (I) Computation for Determination of PAS Requirements under Exhibit A to§ 240.15c3-3. - □ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.lBa-4, as applicable. - Iii (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.lBa-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - Iii (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. - I!! (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - **ii** (t) Independent public accountant's report based on an examination ofthe statement of financial condition. - Im (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.lSa-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. - Iii (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-S or 17 CFR 240.lBa-7, as applicable. - ii {x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - D (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). □ (z) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_ - &quot;'"'To requesr confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as *applicable.* {2}------------------------------------------------ #### C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S A N D S U P P L E M E N T A L I N F O R M A T I O N Canaccord Genuity LLC Year Ended March 31, 2022 With Report and Supplementary Report of Independent Registered Public Accounting Firm *(Confidential Pursuant to SEC Rule 17a-5(e)(3))* A statement of financial condition has been bound separately and filed with the Securities and Exchange Commission simultaneously herewith as a public document {3}------------------------------------------------ # (A fully owned subsidiary of Canaccord Genuity Group Inc. "CGGI") Consolidated Financial Statements and Supplemental Information Year Ended March 31, 2022 # **Contents** | Report
of
Independent
Registered
Public
Accounting
Firm1 | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------|--| | Consolidated
Financial
Statements | | | Consolidated
Statement
of
Financial
Condition
3 | | | Consolidated
Statement
of
Income
4 | | | Consolidated
Statement
of
Changes
in
Subordinated
Borrowings5 | | | Consolidated
Statement of
Changes
in
Member's
Equity
6 | | | Consolidated
Statement
of
Cash
Flows
7 | | | Consolidated
Notes
to
Financial
Statements8 | | | Supplementary
Information | | | Schedule I
-
Computation of
Net Capital
Under SEC
Rule 15c3-129 | | | Schedule II
-
Statement
Regarding SEC
Rule 15c3-3
31 | | | Supplementary
Report | | | Supplementary
Report
of
Independent
Registered Public
Accounting
Firm on
Internal
Control
Required
by CFTC
Regulation 1.1633 | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) Ernst & Young LLP One Manhattan West New York, NY 10001 Tel: +1 212 773 3000 Fax:+1 212 773 6350 ey.com #### Report of Independent Registered Public Accounting Firm To the Member and Management of Canaccord Genuity LLC #### Opinion on the Financial Statements We have audited the accompanying consolidated statement of financial condition of Canaccord Genuity LLC (the Company) as of March 31, 2022, the related consolidated statements of income, changes in subordinated borrowings, changes in member's equity and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2022, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. #### 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 accompanying information contained in Schedules I and II has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. Such information is the responsibility of the Company's management. Our audit procedures included determining whether the 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. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with Rule 17a-5 under the Securities Exchange Act of 1934 and Regulation 1.10 under the Commodity Exchange Act. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. We have served as the Company's auditor since 2006. May 26, 2022 {5}------------------------------------------------ # Consolidated Statement of Financial Condition # March 31, 2022 | Assets | | |-------------------------------------------------------------------------|---------------------| | Cash and cash equivalents | 98,284,148
\$ | | Restricted cash | 19,549
2,9 | | Receivables from clearing organizations | 128,091,546 | | Secmities owned, at fair vahre | 56,280,289 | | Corporate finance and trading receivables | 8,3
19,990 | | Notes receivable from employees | 531,202 | | Receivables from affiliates | 23,803,086 | | Deposits with clearing organizations and others | 1,566,736 | | Other receivables | 4,365,507 | | U mettled trades | 3,599,510 | | Fixed assets, at cost (net of accmnulation depreciation of \$2,404,476) | 1,410,145 | | Right of use assets | 15,009,088 | | Prepaid assets | 1,469,802 | | Total assets | 345,650,598 | | Liabilities and member's equity | | | Secmities sold, not yet pmchased, at fair value | 46,862,890 | | Accrued compensation payable | 116,070,575 | | Accounts payable and accruals | 17,938,686 | | U mettled trades | 3,599,510 | | Payables to affiliates | 15,825,948 | | Lease liabilities | 16,042,548 | | | 216,340,157 | | Subordinated bonowings | 27,000,000 | | Member's equity: | | | Total rrernber's equity | 102,3
10,44
1 | | Total liabilities and n~rnber's equity | 345,650,598 | {6}------------------------------------------------ # Consolidated Statement of Income # Year Ended March 31, 2022 #### **Revenues** | Commissions, net | \$ 75,306,960 | |-------------------------------------------------------|----------------| | Investment banking | 147,817,792 | | Principal transactions, net | 113,180,803 | | Interest and dividend income | 2,095,400 | | Services fee from related party | 57,843,915 | | Other revenue | 50,044 | | | \$ 396,294,914 | | Expenses | | | Compensation and benefits | \$ 206,284,564 | | Floor brokerage, exchange, trading, and clearing fees | 44,403,619 | | Communications and data processing | 15,285,234 | | Promotion and travel | 3,975,279 | | Occupancy and equipment | 8,850,059 | | Interest and dividend expense | 7,326,681 | | Banking related underwriting expenses | 772,526 | | Professional fees | 5,802,384 | | Depreciation of fixed assets | 1,062,319 | | Other expenses | 8,744,116 | | | \$ 302,506,781 | | | | | Net Income | \$ 93,788,133 | {7}------------------------------------------------ # Canaccord Genuity LLC Consolidated Statement of Changes in Subordinated Borrowings Year Ended March 31, 2022 Subordinated borrowings at March 31, 2021 and March 31, 2022 \$ 27,000,000 {8}------------------------------------------------ # Canaccord Genuity LLC Consolidated Statement of Changes in Member's Equity # Year Ended March 31, 2022 | | Member's Equity | Total | |-----------------------------------|-----------------|---------------| | March 31, 2021 | 149,182,681 | 149,182,681 | | Net income | 93,788,133 | 93,788,133 | | Share-based awards - purchases | (31,100,000) | (31,100,000) | | Share-based awards - amortization | 42,792,668 | 42,792,668 | | Dividends declared | (152,353,041) | (152,353,041) | | | | | | March 31, 2022 | 102,310,441 | 102,310,441 | {9}------------------------------------------------ # Canaccord Genuity LLC Consolidated Statement of Cash Flows Year Ended March 31, 2022 | Operating activities | | |---------------------------------------------------------------|-----------------| | Net income | \$ 93,788,133 | | Items not affecting cash | | | Depreciation of fixed assets | 1,062,319 | | Amortization of right of use assets | 6,374,873 | | Amortization of notes receivable | 185,492 | | Net changes in operating assets and liabilities: | | | Increase in deposits with clearing organizations and others | (15,693) | | Decrease in receivables from clearing organizations | 75,162,877 | | Decrease in corporate finance and trading receivables | 28,635,250 | | Increase in securities owned, at fair value | (1,685,190) | | Decrease in receivables from affiliates | 10,031,998 | | Increase in other receivables | (1,655,022) | | Increase in prepaid assets | (95,967) | | Increase in securities sold, not yet purchased, at fair value | 8,201,359 | | Decrease in accounts payable and accruals | (10,249,731) | | Decrease in accrued compensation payable | (13,359,714) | | Increase in payables to affiliates | (12,586,544) | | Rent payments | (6,318,056) | | Net cash provided by operating activities | 177,476,384 | | Investing activity | | | Purchase of fixed assets | (429,565) | | Net cash used in investing activity | (429,565) | | Financing activity | | | Share based awards purchases | (31,100,000) | | Share based awards amortization | 42,792,668 | | Dividends paid | (152,353,041) | | Net cash used by financing activity | (140,660,373) | | Net decrease in cash and cash equivalents | 36,386,446 | | Cash and cash equivalents at beginning of year | 64,817,251 | | Cash and cash equivalents at end of year | \$ 101,203,697 | | Supplemental cash flow disclosures | | | Cash paid for interest | \$
3,277,643 | | | | *Cash and cash equivalents include restricted cash* *See accompanying notes.* {10}------------------------------------------------ # Canaccord Genuity LLC Notes to Consolidated Financial Statements # March 31, 2022 ## **1. Organization and Nature of Operations** On March 15, 2018, Canaccord Genuity Inc. was converted into a limited liability company and renamed Canaccord Genuity LLC (the "Company"). Pursuant to the Limited Liability Company Agreement, Canaccord Adams (Delaware) Inc. (the "Parent" or "CADI"), is the sole member of the Company. The Company is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") and as an introducing broker with the Commodity Futures Trading Commission ("CFTC") and is a member of the Financial Industry Regulatory Authority ("FINRA"), the National Futures Association ("NFA") and the Securities Investor Protection Corporation ("SIPC"). CADI is a wholly owned subsidiary of Collins Stewart Inc. ("CSI"), which is a wholly owned subsidiary of Canaccord Adams Financial Group Inc. ("CAFGI"), which is a wholly owned subsidiary of Canaccord Genuity Group Inc. ("CGGI"), a publicly traded company based in Vancouver, British Columbia. The Company has an employee benefit trust, a special purpose entity ("SPE"), to fulfill obligations to employees arising from the Company's share-based payment plans. The employee benefit trust has been consolidated in accordance with the required accounting treatment since its activities are conducted on behalf of the Company, and the Company retains the majority of the benefits and risks of the employee benefit trust. The Company provides corporate finance and underwriting services, financial advisory services, including services in respect of mergers and acquisitions, and brokerage activities consisting primarily of institutional sales of domestic and foreign securities and equity options, trading and equity research to its customers, and market making of equity and fixed income securities. As a non-clearing broker, customer transactions are cleared on a fully disclosed basis primarily through Merrill Lynch, Pierce, Fenner & Smith Incorporated ("ML") and Pershing LLC ("Pershing") which are registered clearing broker-dealers. Certain trades in foreign securities are cleared and settled pursuant to operating agreements with Canaccord Genuity Corp., an affiliated Canadian broker-dealer, Canaccord Genuity Limited, an affiliated UK broker-dealer, and Canaccord Genuity (Australia) Limited, an affiliated Australian broker-dealer. {11}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** ### **2. Significant Accounting Policies** ### **Basis of Financial Information** The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and are stated in U.S. dollars. #### **Use of Estimates** The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Such estimates include the valuation of certain securities, accrued expenses including expenses in connection with investment banking transactions and forfeiture estimates in respect of share-based compensation. #### **Cash and Cash Equivalents** Cash and cash equivalents include highly liquid investments with original maturities of less than 90 days, and which are not held for sale in the ordinary course of business. ## **Deposits with Clearing Organizations and Others** Cash is kept on deposit with various clearing organizations, and represents the minimum balance required to be maintained in order to utilize such clearing services. These balances are subject to withdrawal restrictions such that the Company would be prohibited from doing business with the clearing agent if the minimum cash balance on deposit was not maintained. ### **Securities Owned and Sold, Not Yet Purchased** Securities owned and securities sold, not yet purchased, are stated at fair value. Securities sold, not yet purchased, represent obligations of the Company to deliver the specified security at the contracted price and, thereby, create a liability to purchase the security in the market at prevailing prices. Proprietary securities transactions in regular-way trades are recorded on the trade date. Profit and loss arising from all securities transactions entered into for the account and risk of the Company are recorded on a trade date basis. {12}------------------------------------------------ ## **Notes to Consolidated Financial Statements (continued)** #### **2. Significant Accounting Policies (continued)** #### **Foreign Currency Translation** Assets and liabilities denominated in foreign currencies are translated to United States dollars at year-end rates of exchange. Gains and losses from foreign currency-denominated transactions are included in the statement of income in other expenses at the rate of exchange in effect at the time of the transaction. #### **Fixed Assets** Fixed assets include furniture, fixtures, equipment, software, and leasehold improvements. Depreciation is provided on a straight-line basis using estimated useful lives of five to seven years. Leasehold improvements are amortized over the lesser of the economic useful life of the improvement or the term of the lease. #### **Prepaid assets** Prepaid assets consist of payments for invoiced assets for which the period of usage has not yet occurred. These prepaid assets will be amortized over the period covered by the invoice. #### **Treasury Stock** These consolidated financial statements include the financial statements of the Company and an employee benefit trust that is considered a Variable Interest Entity ("VIE") of the Company. On consolidation, the Company's own equity instruments in CGGI stock that are reacquired (treasury stock) are recognized at cost and deducted from equity. Shares held in the employee benefit trust were acquired by the trust in order to meet obligations in connection with the awards made pursuant to the Company's long-term incentive plan. Any difference between the carrying amount and consideration is recognized in Member's Equity on the Consolidated Statement of Financial Condition. Voting rights related to treasury shares are nullified for the Company and nodividends are paid on such shares. #### **Commission Revenue** Commission revenue consists of revenue generated through providing commission-based brokerage services to customers, including trade execution, clearing, and settlement. Commissions and related clearing expenses are recorded on the trade date (the date that the Company fills the trade order by finding and contracting with a counterparty and confirms the {13}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** ## **2. Significant Accounting Policies (continued)** trade with the customer). The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. The Company's share of any commission revenue received by affiliates listed in Note 1, is paid to the Company through inter-company transfers settled on a periodic basis. ## **Investment Banking Revenue** Investment banking revenue and equity selling concessions are recorded at the time underwriting or financing transactions are completed, and the applicable revenue recognition criteria have been satisfied. The Company believes that the trade date is the appropriate point in time to recognize revenue for securities underwriting transactions as there are no significant actions which the Company needs to take subsequent to this date and the issuer obtains the control and benefit of the capital markets offering at that point. Investment banking revenue also includes fees earned from providing mergers and acquisitions, and other financial advisory services. Revenue for advisory arrangements is generally recognized at the point in time that performance under the arrangement is completed (the closing date of the transaction) or the contract is cancelled. For certain contracts, revenue is recognized over time for advisory arrangements in which the performance obligations are simultaneously provided by the Company and consumed by the customer. Investment banking revenue earned by the Company and received by an affiliate is paid to the Company through intercompany transfers settled on a periodic basis. #### **Principal Transactions, net** Gains and losses from proprietary securities transactions and market making activities, and the related revenues and expenses, are recorded on a trade date basis. Securities owned and securities sold, not yet purchased, are stated at fair value with unrealized gains and losses reflected in current operations. Fair value is generally based on published market prices, quoted prices from dealers, recent market transactions, or on such other information and valuation methods as may be reasonable in the circumstances. In certain circumstances, the Company has determined that the fair value of securities where price transparency is limited or not available is nil. ### **Leases** At the commencement of a lease, the liability to make lease payments and an asset representing the right to use the underlying asset during the lease term is recognized. The right of use assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term. {14}------------------------------------------------ ## **Notes to Consolidated Financial Statements (continued)** #### **2. Significant Accounting Policies (continued)** #### **Share-Based Compensation** The Company follows FASB ASC Topic 718, "Compensation—Stock Compensation" ("ASC Topic 718"), to account for its stock-based compensation plans. ASC Topic 718 requires all sharebased payments to employees to be recognized in the consolidated financial statements using a fair value based method. #### Equity-settled transactions Grants are made pursuant to the company's Long-term Incentive Plan ("LTIP"). The fair value of these awards is determined at the date of the grant based upon the quoted market price of CGGI. For certain LTIP awards, the fair value of awards granted to employees is expensed in the period in which those awards are deemed to be earned. This period is generally the fiscal period in which the awards are either made or the immediately preceding fiscal year for those awards made after the end of such fiscal year but were determined and earnedin respect of that fiscal year. Typically, these awards vest ratably over a three-year vesting period.So long as the employee does not violate certain post-termination restrictions and is not engaged in certain competitive or soliciting activities as provided in the Plan these awards will continue tovest during the vesting period. For all other awards, typically new hire awards or retention awards,vesting is directly subject to continued employment and therefore these awards are subject to a continuing service requirement. The fair value of these awards is expensed over the vesting period as compensation expense on a graded amortization basis. There are no performance conditions attached to the LTIP awards. #### Cash-settled transactions Management may also receive performance share units (PSUs) and deferred share units (DSUs) as part of their remuneration. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognized through the consolidated statement of income. The PSUs and DSUs were measured at fair value on grant date. Changes in value of the PSUs and DSUs at each reporting period are amortized over the remaining vesting period and recorded as a compensation and benefits expense in the consolidated statement of income as a result of certain employment-related conditions. #### **Income Taxes** The Company is a single member limited liability company treated as a disregarded entity for federal and state income tax returns filed by CADI and CAFGI as applicable. Prior to its conversion to a limited liability company on March 15, 2018, the Company was included in the income tax returns of its U.S. based holding company, CAFGI. {15}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** ## **3. Fair Value Measurement** The fair value hierarchy prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income, or cost approach, as specified by ASC 820, are used to measure fair value. The measurement of fair value is based upon a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). The Company's investments are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy, and its applicability to the Company's investments, are described below: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date of identical, unrestricted assets. Level 2 – Quoted prices for markets that are not active, or financial instruments for which all significant inputs are observable, either directly or indirectly. Level 3 – Pricing inputs are unobservable for the asset and reflect management's own assumptions to determine fair value. The following table is a summary of the levels used, as of March 31, 2022, in valuing the Company's securities owned and securities sold, not yet purchased, carried at fair value on a recurring basis: {16}------------------------------------------------ ### **Notes to Consolidated Financial Statements (continued)** ### **3. Fair Value Measurement (continued)** | | Quoted Prices in
Active Markets for
Identical Assets | Significant Other
Observable Inputs | Significant
Unobservable
Inputs | | |------------------------------------------------------------------|----------------------------------------------------------------------------|----------------------------------------|---------------------------------------|-------------------------------------------------| | Assets: | (Level 1) | (Level 2) | (Level 3) | Balance as of
03/31/2022 | | Corporate equities | | | | | | U.S. government securities | 11,157,723 | 30,749,485 | 0 | 41,907,208 | | Other sovereign government obligations | 2
0 | -
2,821,925 | 0
0 | 2
2,821,925 | | Corporate and other debt | 0 | 11,551,154 | 0 | 11,551,154 | | Total | 11,157,725 | 45,122,564 | 0 | 56,280,289 | | Liabilities: | | | | | | Corporate equities | 11,406,117 | 22,923,446 | 0 | 34,329,563 | | Other sovereign government obligations | 0 | 3,622,083 | 0 | 3,622,083 | | Corporate and other debt | 0 | 8,911,244 | 0 | 8,911,244 | | Total | 11,406,117 | 35,456,773 | 0 | 46,862,890 | | A
description
of
the
assets
Corporate
equities | valuation
techniques
and liabilities measured at fair value follows. | applied
to
the | Company's
major | categories
of
trading | | | | | | | | • | Exchange-traded equity securities – | | | Securities traded on domestic and international | #### **Corporate equities** - **Exchange-traded equity securities –** Securities traded on domestic and international exchanges are stated at the last reported sales price on the valuation date. To the extent these securities are actively traded, and valuation adjustments are not applied, they are categorized in level 1 of the fair value hierarchy. - **Over–The-Counter (OTC) equity securities** This includes securities traded on various bulletin board-based trading platforms such as the OTC Bulletin Board (OTCBB) and OTC Link. The OTC Bulletin Board (OTCBB) is an electronic quotation system that displays real-time quotes, last sales prices, and volume information for many over-the-counter securities that are not listed on a national securities exchange. Similarly, OTC Link is an {17}------------------------------------------------ ## **Notes to Consolidated Financial Statements (continued)** #### **3. Fair Value Measurement (continued)** over-the-counter (OTC) securities. Market makers such as the Company and other brokerdealers that buy and sell OTC securities can use the electronic trading platforms to publish their bid and ask quotation prices. Except for some foreign issuers, the companies quoted on OTC Link may be closely held, small and/or thinly traded. Most of these issuers do not meet the minimum listing requirements for trading on a national securities exchange, such as the New York Stock Exchange or the Nasdaq Stock Market. OTC securities are generally valued based on quoted prices from market makers or composite quote providers such as bulletin boards. They are categorized in Level 2 of the fair value hierarchy. For securities which are categorized in Level 2 of the fair value hierarchy, in certain cases, the Company also applies an adjustment for lack of liquidity or an adjustment for lack of price transparency to arrive at fair value from a market participant's perspective. The Company has an insignificant amount of OTC equity securities which have not traded for a significant period of time and are valued on a basis as determined by the Company to be the best estimate of the fair value utilizing assumptions and estimates made with reference to historical market quotes and prices appropriate for such securities. Where there is no price transparency for an extended period of time (generally more than 90 days) and where there is uncertainty about fair value from a market participant's perspective and where an estimate cannot be made, the Company has determined that the fair value of such securities is nil. #### **Corporate and other debt** - **Corporate bonds –** The fair value of corporate bonds is determined using recently executed transactions and market price quotations. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy; in instances where prices, spreads or any of the other key inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy. - **U.S. Government securities –** Comprised of U.S. Treasury securities valued using quoted market prices. Valuation adjustments are not applied. Accordingly, U.S. Treasurysecurities are generally categorized in Level 1 of the fair value hierarchy. - **Foreign Government Bonds –** The fair value of foreign government bonds is determined using recently executed transactions and market price quotations. Foreign government bonds are generally categorized in Level 2 of the fair value hierarchy; in instances where {18}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** ### **3. Fair Value Measurement (continued)** prices, spreads or any of the other key inputs are unobservable, they are categorized in Level 3 of the fair value hierarchy. During the year-ended March 31, 2022, the Company had no transfers of securities instruments owned and securities sold, not yet purchased amongst Levels 1, 2, and 3 of the valuation hierarchy. ### **4. Risk Management** Trading activities expose the Company to market, credit and operational risks as described below. These risks are managed in accordance with established risk management policies and procedures. To accomplish this, management has established a risk management process that includes: - A regular review of the risk management process by executive management as part of its oversight role. - Defined risk management policies and procedures supported by an established analytical framework. - Articulated risk tolerance levels as defined by executive management that are regularly reviewed to ensure that the Company's risk-taking is consistent with its business strategy, capital structure, and current and anticipated market conditions. # **Market Risk** - Equity price risk is the risk that the fair value of financial instruments will fluctuate because of changes in market prices. - The company sells financial instruments that it does not currently own described as Securities sold, not yet purchased, at fair value. The Company is obligated to purchase such financial instruments at a future date and will incur a loss if the purchase price of such financial instruments increases above the fair value as recorded at March 31, 2022. - Currency risk arises from the possibility that changes in foreign currency exchange rates will result in losses. {19}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** ### **4. Risk Management (continued)** • Interest rate risk arises from the possibility that changes in interest rates will affect the fair value of financial instruments held by the Company. # **Credit Risk** The Company is exposed to risk of loss if an individual, counterparty or issuer fails to perform its obligations under contractual terms ("default risk"). The Company has established policies and procedures for mitigating credit risk on principal transactions, including reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. ### **Operational Risk** Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events such as the occurrence of disasters or security threats. Operational risk exists in all the Company's activities, including processes, systems and controls used to manage other risks. Failure to manage operational risk can result in financial loss, reputational damage, regulatory fines and failure to manage market, credit or other risks. The Company operates in different markets and relies on its employees and systems to process a high number of transactions. In order to mitigate this risk, the Company has developed a system of internal controls and checks and balances at appropriate levels, which includes overnight trade reconciliation, control procedures related to clearing and settlement, transaction and daily value limits within all trading applications, cash controls, physical security, independent review procedures, documentation standards, billing and collection procedures, and authorization and processing controls for transactions and accounts. The Company also has disaster recovery procedures, business continuity plans and built-in redundancies in the event of a systems or technological failure. In addition, the Company utilizes third party service agreements where appropriate. {20}------------------------------------------------ ### **Notes to Consolidated Financial Statements (continued)** #### **4. Risk Management (continued)** #### **Pandemic Risk** The global pandemic related to the outbreak of COVID-19 has cast additional uncertainty on the assumptions used by management in making its judgements and estimates. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 pandemic is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods. Given that the full extent of the impact that COVID-19, including government and/or regulatory responses to the outbreak, will have on the global economy and the Company's business is highly uncertain and difficult to predict at this time, there is a higher level of uncertainty with respect to management's judgements and estimates. The extent to which the Company's business and financial condition will continue to be affected by the COVID-19 pandemic will depend on future developments including the spread of variants, efficacy of vaccines against new variants, the achievement of mass vaccinations and the impact of related controls and public health restrictions imposed by government authorities. ### **5. Receivables from Clearing Organizations** Amounts receivable from clearing organizations represent amounts due to the Company from clearing and settlement services provided to the Company in connection with normal transactions involving commissions earned and the trading of securities. #### **6. Unsettled Trades** Amounts include \$3,599,510 of unsettled transactions involving foreign securities which are cleared and settled pursuant to operating agreements with affiliated foreign broker-dealers (see Note 1). With respect to such transactions, the Company is exempt from SEC Rule 15c3-3 under subparagraphs (k)(2)(i) and k(2)(ii) because it does not carry securities accounts for customers or perform custodial functions relating to customer securities and in certain cases clears through another broker-dealer on a fully disclosed basis. (See Note 16). {21}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** #### **7. Fixed Assets** At March 31, 2022, fixed assets were comprised of the following: | Leasehold improvements | \$
2,746,555 | |--------------------------------|-----------------| | Furniture and fixtures | 455,861 | | Equipment | 612,205 | | | 3,814,621 | | Less: Accumulated depreciation | (2,404,476) | | | \$
1,410,145 | #### **8. Income Taxes** The Company is a single member limited liability company treated as a disregarded entity for federal and state income tax returns filed by CADI and CAFGI as applicable. Prior to its conversion to a limited liability company on March 15, 2018, the Company was included in the income tax returns of its U.S. based holding company, CAFGI. As a result of the Company's conversion to an LLC and characterization as a disregarded entity for income tax purposes, its deferred tax items transferred to its sole member, CADI, upon such conversion. As the Company had a full valuation allowance against its deferred tax assets at the time of its conversion, the transfer of the deferred tax items to its sole member had no impact on the Company's tax expense. In preparing tax returns, the Company is required to interpret complex tax laws and regulations, and utilize income and cost allocation methods, to determine taxable income. On an ongoing basis, the Company may be subject to examinations by federal, state, and local government taxing authorities that may give rise to differing interpretations of these complex laws, regulations and methods. Due to the nature of the examination process, it generally takes several years before these examinations are completed, and matters resolved. Income tax returns for the taxation years ended March 31, 2019, 2020 and 2021 are considered to be open for examination by federal and state taxing authorities. {22}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** ## **9. Variable Interest Entity** The assets and liabilities of the Company's deferred compensation plan are held in a rabbi trust which is considered a variable interest entity of the Company. The Company is considered the primary beneficiary of the rabbi trust because the Company directs the activities of the trust and can use the assets of the trust to satisfy the liabilities of the Company's deferred compensation plan. Accordingly, the assets and liabilities of the rabbi trust are consolidated with the financial statements of the Company. At March 31, 2022, Member's equity on the Company's consolidated Statement of Financial Condition was reduced by \$43,221,369 representing the obligations of the Company inconnection with the deferred compensation plan. The liability represents awards in respect of shares of CGGI to satisfy awards made under the LTIP granted by the Company. These shares areheld by the trustee of the rabbi trust. ## **10. Employee Benefit and Stock-Based Incentive Compensation Plans** The Company has a stock-based compensation program in which participating employees are entitled to receive shares in CGGI which generally vest over a period of three years (the "RSUs"). This program is referred to as the Long- Term Incentive Plan (the "LTIP" or the "Plan"). The fair value of these awards is determined at the date of the grant based upon the quoted market price of CGGI. Participating employees receive common shares of CGGI at the time of vesting. The Company accounts for these awards as equity-settled transactions. As described in note 1 to these consolidated financial statements the Company has established an employee benefit trust (the Trust). The Company funds the Trust with cash which is used by the trustee to purchase common shares on the open market that will be held in the Trust until the RSUs vest. The Company estimates the number of equity instruments that will ultimately vest when calculating the expense attributable to equity-settled transactions. No expense is recognized for awards that do not ultimately vest. During the year ended March 31, 2022, under the terms of the LTIP, the Company granted stock awards for 2,757,561 shares of CGGI stock, with a total fair value of \$30,543,012 at the date of grant with a weighted average fair value of \$11.08 per share. The Trust purchased 2,835,214 shares during the year ended March 31, 2022 for \$31,000,000. {23}------------------------------------------------ ## **Notes to Consolidated Financial Statements (continued)** ### **10. Employee Benefit and Stock-Based Incentive Compensation Plans (continued)** | | Number of shares | |-------------------------------------------------|------------------| | Unvested awards outstanding, March 31, 2021 | 5,397,999 | | Granted | 2,757,561 | | Vested | (2,220,721) | | Forfeitures | (20,081) | | Unvested awards outstanding, March 31, 2022 | 5,914,758 | | | Number of shares | | Common shares held by the Trust, March 31, 2021 | 4,810,067 | | Acquired | 2,835,214 | | Released on vesting | (2,220,721) | | Common shares held by the Trust, March 31, 2022 | 5,424,660 | As of March 31, 2022, the Company had an investment of \$43,221,369 in CGGI shares which were purchased by the Trust and which have not yet vested. The remaining amortization expense associated with LTIP awards granted with a continued employment requirement as of March 31, 2022 is as follows: | Fiscal
2023 | \$
967,744 | |----------------|-----------------| | Fiscal
2024 | 452,543 | | Fiscal
2025 | 145,032 | | Total | \$
1,565,319 | {24}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** # **10. Employee Benefit and Stock-Based Incentive Compensation Plans (continued)** At March 31, 2022, the Company held 22,410 shares of CGGI stock, resulting from shares that were previously awarded to employees and purchased to satisfy such awards. In certain cases, the vesting terms for such awards were not satisfied and, accordingly, the awards were then forfeited by such employees. The fair value of these shares, \$221,606 is included in securities owned, in the statement of financial condition. It is expected that these shares will be returned to CGGI in consideration for the fair value of such shares. Senior executive deferred shares units On June 1, 2021, the Company adopted a deferred share unit (DSU) plan for certain key senior executives. All DSU awards will be cash settled on the retirement of the employee, a "good leaver" departure after three years from the date of grant, or death. The DSUs are settled in cash one year after the participants' departure from the Company under certain conditions of the plan. The carrying amount of the liability recognized in accounts payable and accrued liabilities relating to DSUs at March 31, 2022 was \$1,371,783. ## **11. Commitments and Contingencies** ### **Leases** The Company leases office space, furniture, and communications and information technology equipment under various non-cancelable operating leases. Office space leases are subject to escalation clauses covering operating expenses and real estate taxes. Future minimum aggregate annual rental commitments under these non-cancelable operating leases for the years ending March 31 are as follows: | | Minimum Annual
Rental Payments | | | |------------|-----------------------------------|--|--| | 2023 | \$
6,075,522 | | | | 2024 | 5,877,130 | | | | 2025 | 3,581,955 | | | | 2026 | 540,998 | | | | 2027 | 441,538 | | | | Thereafter | 113,692 | | | | Total | \$
16,630,835 | | | {25}------------------------------------------------ ### **Notes to Consolidated Financial Statements (continued)** #### **11. Commitments and Contingencies (continued)** #### **Underwriting** In the normal course of business, the Company enters into underwriting commitments. At March 31, 2022, the Company did not have any open underwriting commitments. #### **Litigation proceedings claims and contingent liabilities** In the normal course of business as a broker-dealer, the Company is involved in litigation, claims and threatened claims arising in the normal course of the securities business. The Company has recorded provisions for matters where payments for such matters are considered probable and can be reasonably estimated. While the outcome of these matters is uncertain, in the opinion of management, after consultation with legal counsel, the ultimate resolution of such matters will not have a material adverse effect on the Company's financial position or results of operations. The Company and its affiliates provide financial advisory, underwriting and other services to, and trade the securities of issuers that are involved with new and emerging industries, including the US cannabis industry. Activities within such industries, including the US cannabis industry, typically have not had the benefit of a history of successful operating results. In addition to the economic uncertainties associated with new industries, new activities and new issuers, the laws applicable to such industries or activities, particularly the US cannabis industry and the activities of issuers in that industry, and the effect or enforcement of such laws are undetermined, conflicting and uncertain. With respect to the US cannabis industry, cannabis continues to be a controlled substance under the United States Controlled Substances Act and as such, there is a risk that certain issuers, while in compliance with applicable state law, may be prosecuted under federal law. Accordingly, the Company has adopted policies and procedures reasonably designed to ensure compliance with the United States Currency and Foreign Transactions Reporting Act of 1970 (the "Bank Secrecy Act") and the guidance issued by the United States Department of the Treasury Financial Crimes Enforcement Network, FIN-2014-G001 (the "FinCEN Guidance") relating to providing financial services to marijuana related businesses in the United States (as that term is used in the FinCEN Guidance). While the Company takes steps to identify the risks associated with emerging industries, including the US cannabis industry, and only provides services to those issuers where it determines that there is no material risk to the Company or where any risk is unlikely to result in a material adverse consequence to the Company, there is a risk that the Company could be the subject of third party proceedings which may have a material adverse effect {26}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** # **11. Commitments and Contingencies (continued)** on the financial position of the Company. The Company has determined that any such proceedings are unlikely and, accordingly, has not recorded a provision in respect of such matters. The Company clears its customers' transactions through Merrill Lynch Pierce Fenner & Smith and Pershing LLC. In addition, the Company has entered into operating agreements with its affiliates, Canaccord Genuity Corp., in order to conduct DVP/RVP brokerage business involving Canadian securities, Canaccord GenuityLimited in order to conduct DVP/RVP brokerage business involving European securities and Canaccord Genuity (Australia) Limited in order to conduct DVP/RVP brokerage business involving Australian securities. In connection with these agreements, the Company may be required to indemnify these broker dealers if losses are incurred that are deemed to be the fault ofeither the Company or one of its customers. The Company does not have a history of incurring material losses related to the clearing of customer transactions and, as such, has not recorded a provision in respect of such guarantee or potential liability. However, while material losses due tothe clearing of customer transactions is considered remote by the Company, the possibility existsthat such losses may occur; therefore, the Company closely monitors all customer clearing activities. As of March 31, 2022, the Company has provided a standby bank letter of credit issued by The Bank of America N.A., in the aggregate amount of \$2,919,549 as a guarantee for certain office space lease obligations. The Company has secured this letter of credit by providing cash collateral to the lender in the amount of \$2,919,549. This amount is recorded as restricted cash on the consolidated statement of financial condition. #### **12. Related Party Transactions** The Company's Parent holds certain office space leases in its own name and provides such facilities to the Company at cost. During the year ended March 31, 2022, the Company declared and paid dividends of \$152,353,041 to its Parent. During the year an affiliate of the Company, Canaccord Genuity Sawaya LLC ("CGSU"), acquired the business and assets of Sawaya LLC, a mergers and acquisitions advisory firm based in New York. In connection with that transaction the employees of Sawaya LLC became employees of the Company. Effective April 1, 2021, the Company entered into a service agreement with two affiliates of the Company, Canaccord Genuity Petsky Prunier LLC (CGPPLLC) and CGSU. This service {27}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** # **12. Related Party Transactions (continued)** agreement amended and superseded the Expense Sharing Agreement previously in place between CGLLC and CGPPLLC. Under the service agreement, the Company provides certain services to the affiliates, including management, personnel and administrative services. In the normal course of business, the Company executes securities transactions and has other transactions with affiliated entities. As of March 31, 2022, the Company had balances with affiliates as follows: | | Assets | Liabilities | |------------------------------|-----------------|------------------| | Due from Parent, CADI | \$
4,058,233 | | | Due from Affiliate, CAFGI | \$
8,795,694 | | | Due from Other US Affiliates | \$
9,864,249 | | | Due from other affiliates | \$
359,326 | | | Due from Affiliate, CGC | \$
634,924 | | | Due from Affiliate, CGSU | \$
90,660 | | | Due to CG Limited (UK) | | \$
442,458 | | Due to CGPP | | \$
14,665,682 | | Due to other affiliates | | \$
717,808 | | Subordinated debt (note 15) | | \$
27,000,000 | Due from other affiliates consists primarily of reimbursements due from affiliates for invoices paid on their behalf. Due to other affiliates consists primarily of reimbursements due to affiliates for invoices paid on behalf of the Company. CGLLC has provided employee loans totaling \$531,202 which are at prevailing interest rates and is shown on the consolidated statement of financial condition under Notes receivable from employees. The interest income associated with these loans is \$8,388. Balances due from/to other affiliates are generally settled by the transfer of cash on a periodic basis. In connection with foreign trades by the Company on behalf of customers which are settled on a DVP/RVP basis pursuant to the operating agreement with Canaccord Genuity LLC, Canaccord Genuity (Australia) Limited and Canaccord Genuity Limited (Note 16) the Company has recorded unsettled transactions in the amount of \$3,599,510 on the consolidated statement of financial condition. {28}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** ### **13. Subordinated Debt** The Company has subordinated debt with its Parent, CADI, consisting of a \$27,000,000 subordinated loan, pursuant to a subordination agreement, with a maturity date of May 31, 2023. The subordinated borrowing bears interest at 10% per annum. The lender has agreed to subordinate its right of collection of principal and claims to all creditors of the Company prior to the expiration of its note. The subordinated loan has been approved by FINRA and is thus available for computing regulatory net capital under the SEC uniform net capital rule (Note 14). To the extent that this loan is required for the Company's continued compliance with minimum net capital requirements, it may not be repaid. # **14. Net Capital Requirements and Other Regulatory Matters** The Company is subject to the SEC uniform net capital rule (Rule 15c3-1). The Company computes its net capital requirements under the alternative method provided for in Rule 15c3-1, which requires that the Company maintain net capital equal to the greater of 2% of aggregate customer-related debit items, as defined, and \$1,000,000. At March 31, 2022, the Company had net capital of \$63,384,751 which was \$62,384,751 in excess of the required net capital of \$1,000,000. Advances to affiliates, repayment of subordinated borrowings, dividend payments, and other equity withdrawals are subject to certain notification and other provisions of Rule 15c3-1 and the rules and requirements of other regulatory bodies. Pursuant to SEC Rule 15c3-3, brokers and dealers that hold cash and securities on behalf of customers are required to maintain cash balances at financial institutions that are specifically reserved for customers when the customer-related credit balances exceed the customer-related debit balances. As an introducing broker with trades on behalf of customers cleared on a fully disclosed basis, the Company does not hold any customer assets, and, in accordance with Rule 15c3-3(k)(2)(ii), the Company is exempt from Rule 15c3-3. In connection with foreign trades by the Company on behalf of customers which are settled on a DVP/RVP basis pursuant to the operating agreement with Canaccord Genuity Corp., Canaccord Genuity (Australia) Limited and Canaccord Genuity Limited, the Company is exempt from Rule 15c3-3 pursuant to 15c3- 3(k)(2)(i). {29}------------------------------------------------ # **Notes to Consolidated Financial Statements (continued)** # **14. Net Capital Requirements and Other Regulatory Matters (continued)** The Company is also exempt from SEC Rule 15c3-3 because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 are limited to: - a. proprietary trading - b. effecting securities transactions via subscription agreements by clients where funds are payable to the issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients, referring securities transactions to other broker-dealers, otherwise providing financial advisory services to clients, or providing technology or platform services - d. participating in distributions of securities (other than firm commitment underwritings) in accordance with the requirements of paragraphs (a) or (b)(2) of Rule 15c2-4 and the Company: - e. did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company) - f. did not carry accounts of or for customers - g. did not carry PAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year without exception. # **15. Subsequent Events** In preparing the consolidated financial statements, the Company has evaluated the impact of all events and transactions for potential recognition or disclosure through May 26 2022, the date that the Company's financial statement was available to be issued. On April 8, 2022, the Company paid \$30.0 million of dividends that were declared on March 31, 2022 to its parent company CADI. The Company has determined that there were no other subsequent events requiring recognition or disclosure in the financial statement. {30}------------------------------------------------ Supplemental Information {31}------------------------------------------------ # Schedule I # Canaccord Genuity LLC Computation of Net Capital Under Rule 15c3-1 # March 31, 2022 | Net capital | | | |---------------------------------------------------|---------------|---------------| | Member's equity | \$145,531,810 | | | Subordinated borrowings | \$27,000,000 | | | | | \$172,531,810 | | Non-allowable assets: | | | | Stock-Based Compensation | 43,221,369 | | | Investment Banking Receivables | 8,319,990 | | | Other Receivables | 5,185,300 | | | Fixed Assets | 1,410,145 | | | Due From Affiliates | 23,803,086 | | | Prepaid Assets | 1,469,802 | | | Restricted Cah | 2,919,549 | | | Non Marketable Equities per SEC rules | 8,861,580 | | | Non Marketable Fixed Income per SEC rules | 2,695,744 | | | Pershing unsecured debit | 1,190 | | | | | \$97,887,755 | | Open Contractual Commitment | 0 | | | Aged Fails | 262 | | | Net capital before haircuts | | 74,643,793 | | Haircuts: | | | | Stocks | 7,301,811 | | | Fixed Income | 2,298,682 | | | Contractual securities commitments | 0 | | | Other | 1,658,549 | 11,259,042 | | Net capital | | \$63,384,751 | | Computation of alternate net capital requirement | | | | Net capital | | \$63,384,751 | | Net capital requirement of reporting broker | | | | or dealer (greater of 2% of aggregate debit items | | 1,000,000 | | as defined, and \$1,000,000) | | | | Excess net capital | | \$62,384,751 | | | | | {32}------------------------------------------------ # Canaccord Genuity LLC Computation of Net Capital Under Rule 15c3-1 (continued) The difference in equity per the Audited Consolidated Financial Statements and the Audited X-17a-5 of \$43,221,369 is due to the Audited Consolidated Financial Statements are prepared on the basis of consolidating Canaccord Genuity LLC and the rabbi trust (see note 10) while the Audited X-17a-5 reflects the financial position of Canaccord Genuity LLC on a stand-alone unconsolidated basis. The minimum net capital required by the CFTC is the same amount of net capital required by Rule 15c3-1(a) of the SEC (17 CFR 240.15c3-1(a)). There were no other material differences between the amounts presented above and the amounts included in the Company's March 31, 2022 unaudited FOCUS report filed on May 26, 2022. {33}------------------------------------------------ # Schedule II # Canaccord Genuity LLC Statement Regarding SEC Rule 15c3-3 # March 31, 2022 With respect to introduced customer transactions in domestic securities, the Company is exempt from SEC Rule 15c3-3 under subparagraph (k)(2)(ii) because all customer transactions are cleared through another broker-dealer on a fully disclosed basis. With respect to introduced customer transactions in foreign securities, the Company is exempt from SEC Rule 15c3-3 under subparagraph (k)(2)(i) because it does not carry securities accounts for customers or perform custodial functions relating to customer securities. The Company is also exempt from SEC Rule 15c3-3 because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 are limited to: - a. proprietary trading - b. effecting securities transactions via subscription agreements by clients where funds are payable to the issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients, referring securities transactions to other broker-dealers, otherwise providing financial advisory services to clients, or providing technology or platform services - d. participating in distributions of securities (other than firm commitment underwritings) in accordance with the requirements of paragraphs (a) or (b)(2) of Rule 15c2-4 and the Company: - e. did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company) - f. did not carry accounts of or for customers - g. did not carry PAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year without exception. {34}------------------------------------------------ ![](_page_34_Picture_0.jpeg) Ernst & Young LLP One Manhattan West New York, NY 10001 Tel: +1 212 773 3000 Fax:+1 212 773 6350 ey.com ### Supplementary Report of Independent Registered Public Accounting Firm on Internal Control Required by CFTC Regulation 1.16 The Member and Management of Canaccord Genuity LLC In planning and performing our audit of the consolidated financial statements of Canaccord Genuity LLC (the Company) as of and for the year ended March 31, 2022, in accordance with the auditing standards of the Public Accounting Oversight Board generally accepted in the United States, we considered its internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we do not express an opinion on the effectiveness of the Company's internal control. Also, as required by Regulation 1.16 of the Commodity Futures Trading Commission (CFTC), we have made a study of the practices and procedures followed by the Company, including consideration of control activities for safeguarding customer and firm assets. This study included tests of such practices and procedures that we considered relevant to the objectives stated in Regulation 1.16 in making the periodic computations of minimum financial requirements pursuant to Regulation 1.17. Because the Company is an introducing broker, we did not review the practices and procedures followed by the Company in making the following: - 1. The daily computations of the segregation requirements of Section 4d(a)(2) of the Commodity Exchange Act and the regulations thereunder, and the segregation of funds based on such computations - 2. The daily computations of the foreign futures and foreign options secured amount requirements pursuant to Regulation 30.7 of the CFTC The management of the Company is responsible for establishing and maintaining internal control and the practices and procedures referred to in the preceding paragraphs. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls, and of the practices and procedures referred to in the preceding paragraph, and to assess whether those practices and procedures can be expected to achieve the CFTC's above-mentioned objectives. Two of the objectives of internal control and the practices and procedures are to provide management with reasonable but not absolute assurance that assets for which the Company has responsibility are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in conformity with generally accepted accounting principles. Regulation 1.16(d)(2) lists additional objectives of the practices and procedures listed in the preceding paragraph. Because of inherent limitations in internal control and the practices and procedures referred to above, error or fraud may occur and not be detected. Also, projection of any evaluation of them to future periods is subject to the risk that they may become inadequate because of changes in conditions or that the effectiveness of their design and operation may deteriorate. {35}------------------------------------------------ ![](_page_35_Picture_0.jpeg) A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. Our consideration of internal control was for the limited purpose described in the first and second paragraphs and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control and control activities for safeguarding customer and firm assets that we consider to be material weaknesses, as defined above. We understand that practices and procedures that accomplish the objectives referred to in the second paragraph of this report are considered by the CFTC to be adequate for their purposes in accordance with the Commodity Exchange Act and related regulations, and that practices and procedures that do not accomplish such objectives in all material respects indicate a material inadequacy for such purposes. Based on this understanding and on our study, we believe that the Company's practices and procedures, as described in the second paragraph of this report, were adequate at March 31, 2022, to meet the CFTC's objectives. This report is intended solely for the information and use of the Board of Directors, management, the CFTC, FINRA, other regulatory agencies that rely on Regulation 1.16 of the CFTC in their regulation of registered introducing brokers, and is not intended to be and should not be used by anyone other than these specified parties. May 26, 2022 {36}------------------------------------------------ ![](_page_36_Picture_0.jpeg) Ernst & Young LLP One Manhattan West New York, NY 10001 Tel: +1 212 773 3000 Fax:+1 212 773 6350 ey.com # Report of Independent Registered Public Accounting Firm To the Member and Management of Canaccord Genuity LLC We have reviewed management's statements, included in the accompanying Canaccord Genuity LLC Exemption Report, in which Canaccord Genuity LLC (the Company) stated that: - 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): Rule 15c-3-3(k)(2)(i) for customer transactions in foreign securities and Rule 15c3-3(k)(2)(ii) for customer transactions in domestic securities. - 2. The Company met the identified exemption provisions in 17 C.F.R. §240.15c3-3(k) throughout the most recent fiscal year without exception. - 3. The Company is also filing this Exemption Report because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 are limited to: - a. Proprietary trading - b. Effecting securities transactions via subscription agreements by clients where funds are payable to the issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients, referring securities transactions to other broker-dealers, otherwise providing financial advisory services to clients, or providing technology or platform services - d. participating in distributions of securities (other than firm commitment underwritings) in accordance with the requirements of paragraphs (a) or (b)(2) of Rule 15c2-4 and the Company: - e. did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company) - f. did not carry accounts of or for customers - g. did not carry PAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year without exception. Management is responsible for compliance with 17 C.F.R. § 240.15c3-3 and its statements. {37}------------------------------------------------ ![](_page_37_Picture_0.jpeg) 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 17 C.F.R. § 240.15c3-3. 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 Rule 15c3-3 under the Securities Exchange Act of 1934 and pursuant to Footnote 74 of SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5. This report is intended solely for the information and use of the Board of Directors, management, the SEC, FINRA, other regulatory agencies that rely on Rule 17a-5 under the Securities Exchange Act of 1934 in their regulation of registered brokers and dealers, and other recipients specified by Rule 17a-5(d)(6) and is not intended to be and should not be used by anyone other than these specified parties. May 26, 2022 {38}------------------------------------------------ ## **Canaccord Genuity LLC's Exemption Report** Canaccord Genuity LLC (the "Company") 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 following provisions of 17 C.F.R. §240.15c3-3 (k): Rule 15c-3-3(k)(2)(i) for customer transactions in foreign securities and Rule 15c3-3(k)(2)(ii) for customer transactions in domestic securities. - 2. The Company met the identified exemption provisions in 17 C.F.R. §240.15c3-3(k) throughout the most recent fiscal year without exception. - 3. The Company is also filing this Exemption Report because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 are limited to: - a. Proprietary trading - b. Effecting securities transactions via subscription agreements by clients where funds are payable to the issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients, referring securities transactions to other brokerdealers, otherwise providing financial advisory services to clients, or providing technology or platform services - d. participating in distributions of securities (other than firm commitment underwritings) in accordance with the requirements of paragraphs (a) or (b)(2) of Rule 15c2-4 and the Company: - e. did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company) - f. did not carry accounts of or for customers - g. did not carry PAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year without exception. I, Donald D. MacFayden, affirm that, to my best knowledge and belief, this exemption report is true and correct. By: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Title: Chief Financial Officer May 26, 2022 {39}------------------------------------------------ ![](_page_39_Picture_0.jpeg) Ernst & Young LLP One Manhattan West New York, NY 10001 Tel: +1 212 773 3000 Fax:+1 212 773 6350 ey.com ## Report of Independent Registered Public Accounting Firm on Applying Agreed-Upon Procedures To the Member and Management of Canaccord Genuity LLC: We have performed the procedures included in Rule 17a-5(e)(4) under the Securities Exchange Act of 1934 and in the Securities Investor Protection Corporation (SIPC) Series 600 Rules, which are enumerated below on the accompanying General Assessment Reconciliation (Form SIPC-7) for the year ended March 31, 2022. Management of Canaccord Genuity LLC (Company) is responsible for its Form SIPC-7 and for its compliance with the applicable instructions on Form SIPC-7. Management of the Company has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of assisting you and SIPC in evaluating the Company's compliance with the applicable instructions on Form SIPC-7 for the year ended March 31, 2022. Additionally, SIPC has agreed to and acknowledged that the procedures performed are appropriate for their intended purpose. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures we performed and our findings are as follows: 1. Compared the assessment payments made in accordance with the General Assessment Payment Form (Form SIPC-6) and applied to the General Assessment calculation on Form SIPC-7 with respective cash disbursement record entries. No findings were found as a result of applying the procedure. 2. Compared the amounts reported in the audited financial statements required by SEC Rule 17a-5 with the amounts reported in Form SIPC-7 for the fiscal year ended March 31, 2022. As a result of applying the procedure we found that the Company over accrued the SIPC assessment by \$359,617. 3. Compared any adjustments reported in Form SIPC-7 with supporting schedules and working papers supporting the adjustments. No findings were found as a result of applying the procedure. {40}------------------------------------------------ ![](_page_40_Picture_0.jpeg) 4. Recalculated the arithmetical accuracy of the calculations reflected in Form SIPC-7 and in the schedules and working papers supporting the adjustments. No findings were found as a result of applying the procedure. We were engaged by the Company to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the AICPA and in accordance with the standards of the Public Company Accounting Oversight Board (United States). An agreed-upon procedures engagement involves the practitioner performing specific procedures that the engaging party has agreed to and acknowledged to be appropriate for the purpose of the engagement and reporting on findings based on the procedures performed. We were not engaged to, and did not conduct an examination or a review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the Company's Form SIPC-7 and for its compliance with the applicable instructions on Form SIPC-7 for the year ended March 31, 2022. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement. This report is intended solely for the information and use of the specified parties listed above and is not intended to be, and should not be, used by anyone other than these specified parties. May 26, 2022 {41}------------------------------------------------ | SIPC-7 | | P.O. Box 92185 Wasllington, D.C
202-371 ·8300 | . 20090-2185 | | | |-----------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--| | (36-REV 12/18) | | Genernl Assessment Reconciliation | | 1 (36-REV 12/18) | | | | | For Ille iiscal year ended ~t-11.?::Q~?- | | | | | | | (Read careiully the inslruc11ons in your Working Copy before completing lhis Form)
TO BE FILED BY ALL S!PC ME1\/iBERS WITH FISCAL YEAR ENDINGS | | | | | | 1. 1\Jarne of Member, address, Designated Examining Authority, 1934 Act i-egistration 11 0. :rnd month in which fiscal year encl:; 101
91.1poses of the audit requirement of SEC Rule 17a-5: | | | | | | FINRA
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CANACCORO GENUITY LLC
535 MADISON AVE
NEW YORK NY 10022-4214
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that all information contained herein is true, co rrect | | | ership or olher organizalion) | | | | | | | | | | | | | | | | | | | | | | | | Postmarked | Received | Rev iewed | | | | | a: Dales:
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c.) Exceptions: | | Documentation | | Forward Copy | | {42}------------------------------------------------ ### **DETERMINATION OF "Sf PC NET OPERA TING REVENUES" AND GENERAL ASSESSMENT** Amounts fo r the fiscal period beginning **t}-o\ - 2,Q~\** and ending **.3- ,3\** - **~2-,'2-** | Eliminate cents | |-------------------------| | \$
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39{,,2q4: | hem No. 2a. Total revenue (FOCUS Line 12/Parl IIA Line 9, Code 4030) 2b. Additions: - (i) Total revenues from the securities business of subsidiaries (except foreign subsidiaries) and predecessors not included above. - (2) Net loss from principal transactions in securities 1n trading accounts. - (3) Net loss lrom principal transactions in commodities in trading accounls. - (4) Interest and dividend expense deducted in determining item 2a. - (5) Net loss from management of or participation in the underwriting or distribution of securities. - (6) Expenses other than advertising, printing, registration fees and legal lees deducted in determining net profit from management of or participation in underwriting or dislribulion ol securities. - (7) Net loss from securilies in investment accounls. Tola! additions #### 2c. Deductions: - (1) Revenues from the distribution of shares of a registered open end investment company or unit investmenl trust, from the sale of variable annuities, from the business of insurance, from investment advisory services rendered to registered investment companies or insurance company separate accounts, and from transactions in security futures products. - (2) Revenues from commodity transactions. - (3) Commissions, floor brokerage and clearance paid to other SIPC members in connection with securities transactions. - (4) Reimbursements for postage in connection with proxy solicilalion. - (5) Net gain from securities in investment accounts. - (6) 100% of commissions and markups earned from transactions in (i) certificates of deposit and (ii) Treasury bills, bankers acceptances or commercial paper that mature nine months or less from issuance date. - (7) Direct expenses of printing advertising and legal fees incurred in connection with other revenue related to the securities business (revenue defined by Section 16(9l(L) of the Act). - (8) Other revenue not related either directly or indirectly to the securities business. (See Instruction C): (Deductions in excess ol \$100,000 require documentation) (9) (i) Total interest and dividend expense (FOCUS Line 22/PART IIA Line 13, Code 4075 plus line 2b(4) above) but not in excess **2 0 a5** I{ of Iota I interesl and dividend income. \$ \_ .\_ :i \_ **,':1'0 0 i** ' (ii) 40% of margin interest earned on customers securities accounts (40% ol FOCUS line 5, Code 3960). \$. \_\_\_ \_\_\_\_\_ \_ \_ \_ Enter the greater ol line (i) or (ii) Total deductions - 2d. SIPC Net Operating Revenues - 2e. General Assessment @ .OD 15 **\$==',,!\_,3.,,d.5~1,** *,~2~S~S\* ,* **4~Lf~8:6=:** *\$== ~5~3~4:,~3;.y,K~.3=* (lo page 1, line 2.A.) Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.