# CANACCORD GENUITY LLC X-17A-5 (2023-05-31) — Broker-dealer annual report - Company: CANACCORD GENUITY LLC - Form: X-17A-5 - Filed: 2023-05-31 - Period: 2023-03-31 - Accession: 0000766050-23-000015 - CIK: 766050 - File #: 8-03271 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young - Auditor location: New York, NY - Contact: Don MacFayden - Phone: 6046715416 - Signed by: Donald D. MacFayden (CFO) Original filing: https://www.sec.gov/Archives/edgar/data/766050/000076605023000015/cgllcfsfiled.pdf --- {0}------------------------------------------------ | | | UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, o.c. 20549 | | 0MB APPRO\Jill
OMS Number: 3235-C 123
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Information Requ'red Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange At:t ol 1934 | | | | | FILING FOR THE PERIOD BEGINNING 04/01 | | /22 | AND ENDING 03/31 /23 | | | | | | MM/DD/YY | | MM/DD/VY | | | | | A. REGISTRANT IDENTIFICATiON | | | | | NAME oF FIRM: Canaccord Genuity LLC | | | | | | | TYPE OF REGISTRAJ T (check all applicable boxes):
~ Broker-dealer | □ Security-based swap dealer
[] Check here if respondent is also an OTC derivatives dealer | | D Major security-based swap participa nt | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | 535 Madison Avenue | | | | | | | New York | | (No. and Street) | | | | | | (City) | NY
(SMe) | | 1002:e
(Zip Code) | | | | | | | | | | | | | | | | | Donald o_ MacFayden 416-687-5426 | | (Area Code - Telephone Number) · | ( Email Address) | c:L~ (le ~ J e-,, (Address)
I | | New York
(City) | NY
(State) | 10001
(Zip Code) | | | | | | #42 | | | | (Date of Registration witt, PCAOB)(if applicable)
I | | FOR OFFICIAL USE ONLY | | (PCAOB Registration Number, if ap1 licable) | | CFR 240.17a-S(e)(l)(it if applicable. **Persons who are to resp nd to the collection of information contained in this form are not required to respond unless• he form displays a currently valid 0MB control number.** {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | ~~ | ~A<(A'i~ | swear (or affirm) that, to the best of my knowled e and belief, the | | |------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|-------| | I,
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financial report pertaining to the firm of | c)o.JA-1'"-C'IZ (') | ~v
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It-- | as of | | HA-- ( 10 | • 2 o 2-.3, | is true and correct. I further swear (or affirm) that neither th company nor any | | | as that of a customer. | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any accou t classified solely | | | | | | | | | | | | | | State of Virginia
County of Norfolk | KETSIA MCCLEASE | Signature: | | | | Electronic Notary Public | | | | | Commonwealth of Virginia
Registration No. 327724 | Title: | | | | My Commission Expires Apr 30, 2027 | <=-H-•Ef | | | | | | | | | This notarial act was performed online by way of two-way audio/video communication technology. | | | | This filing** contains (check all applicable boxes): | | | | | Iii
(a) Statement of financial condition. | | | | | iiii (b) Notes to consolidated statement of financial condition. | | | | | I!!!! | (c) Statement of income (loss) or. if there is other comprehensive income in the period(s) presented, a state ent of | | | | | comprehensive income (as defined in§ 210.1-02 of Regulation S-X). | | | | Iii (d) Statement of cash flows. | | | | | | iiii (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. | | | | Iii (g) Notes to consolidated financial statements. | | | | | | iiii (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-l, as applicable. | | | | D (i) Computation of tangiple net worth under 17 CFR 240.18a-2. | | | | | 0 | (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c -3. | | | | D | (k) Computation for det~rmination of security-based swap reserve requirements pursuant to Exhibit B to 17 C R 240.15c3-3 or | | | | Exhibit A to 17 CFR 240h 8a-4. as applicable. | | | | | D | (I) Computation for Determination of PAB Requirements under Exhibit A to § 240.1Sc3-3. | | | | | Iii (m) Information relatin~ 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 C R 240.1Sc3-3(pl(2) or 17 CFR 240.18a-4, as applicable. - Iii (o) Reconciliations. including appropriate explanations, of the FOCUS Report with computation of net capital r tangible net worth under 17 CFR z4q,1sc3-1, 17 CFR 240.18a-l. or 17 CFR 240.lSa-2, as applicable, and the reserve requi ements 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 statemen t 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 appli able. - 0 (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - Iii! (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - iiii (t) Independent public accountant's report based on an examination of the statement of financial condition. - **li1** (u) Independent public accountant's report based on an examination of the financial report or financial state ents under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12. as applicable. - D (v) Independent public accountant's report based on an examination of certain statements in the compliance eport 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 or 17 CFR 240.18a-7, as applicable. - ~ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.1Sc3-le or 17 FR 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 p evious audit, or a statement that no material inadequacies exist, under 17 CFR 240.l 7a-12{k). 0 (z) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_ \_ \_\_\_ \_ \_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_ +------ - *\*\*To request confidential trratment of certain portions of this filing, see 17 CFR 240.17o-5(e)(3) or 17 CFR 24 .l8o-7(d)(2), as opplicoble.* {2}------------------------------------------------ Consolidated Financial Statements And Supplemental Information # **Canaccord Genuity LLC** Year ended March 31, 2023 With Report and Supplementary Report of Independent Registered Public Accounting Firm *(Confidential Pursuant to SEC Rule 17a-5(e)(3))* A statement of finf ncial condition has been bound separately and filed with the Securities and Exchange Commission simultaneously herewith as a public document *(CONFIDENTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* {3}------------------------------------------------ # Canaccord Genuity LLC (A fully owned subsidiary of Canaccord Genuity Group Inc. "CGGI") Consolidated Financial Statements and Supplemental Information Year Ended March 31 , 2023 # **Contents** | Report of Independent Register Public Accounting Firm 2 | | |-----------------------------------------------------------------------------------------------------------------------------------|--| | Consdolidated Statement of Financial Condition 3 | | | Consolidated Statement of Financial Income 4 | | | Consolidated Statement of Changes in Subordinated Borrowings 5 | | | Consolidated Statement of Changes in Member's Equity 6 | | | Consolidated Statement of Cash Flows 7 | | | to Fi.nancial Statements 9
Consolida~ed Notes | | | 1
Computat10n of Net Capital under SEC Rule 15c3-I •••••••••••••.••••••••••••••• 24 | | | Statement Regarding SEC Rule l 5c3-3 26 | | | Supplementary Report of Independent Registered Public Accounting Firm on Internal Co trol
Required by CFTC Regulation 1.16 27 | | *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* 1 /I age {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) New York, NY 10001 ey.com Ernst & Young LLP Tel: +1 212 773 3000 One Manhattan West Fax:+1212773 6350 #### **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 LC (the "Company") as of March 3 I, 2023, the related consolidated statements of income, changes in sub rdinated borrowings, changes in member's equity and cash flows for the year then ended, and the related notes (co lectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statemen s present fairly, in all material respects, the financial position of the Company at March 31, 2023, and the results of its o erations 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 toe press an opinion on the Company's financial statements based on our audit. We are a public accounting firm regist red with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be indepen ent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regu ations 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 Ian 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 o material misstatement of the financial statements, whether due to error or fraud, and performing procedures that re pond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and discl sures in the financial statements. Our audit also included evaluating the accounting principles used and significant stimates made by management, as well as evaluating the overall presentation of the financial statements. We believ 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 perfi rmed in conjunction with the aJ dit of the Company's financial statements. Such information is the responsibili of the Company's management. Our audit procedures included determining whether the information reconcile to the financial statements or the underlying accounting and other records, as applicable, and performing procedur s to test the completeness and accuracy of the information. In forming our opinion on the information, we evaluated hether such information, including its form and content, is presented in conformity with Rule I 7a-5 under the S curities Exchange Act of 1934 and Regulation 1.10 under the Commodity Exchange Act. In our opinion, the info ation 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 30, 2023 {5}------------------------------------------------ ### **Canaccord Genuity LLC Consdolidated Statement of Financial Condition March 31, 2023** | ASSETS | | |-------------------------------------------------------------------------|----------------| | Cash and cash equivalents | \$45, ~54,365 | | Restricted cash | 2, 32 1,377 | | Receivables from clearing organizations | 104, 05,375 | | Securities owned, at fair value | 52,1 03,330 | | Corporate finance trading receivables | 3, 7 1,813 | | Notes receivable from employees | , 80,960 | | Receivables from affiliates | 29,! 33,446 | | Deposits with clearing organizations and others | 1,t 76,188 | | Other receivables | 2,! 10,998 | | Unsettled trades | 5,! 24,380 | | Fixed assets, at cost (net of accumulation depreciation of \$2,707,681) | 823,346 | | Right of use assets | 9,506,134 | | I
Prepaid assets | 3,557,882 | | Total assets | 262,6 ,9,594 | | LIABILITIES AND MEMBER'S EQUITY | | | Current | | | Securities sold, not yet purchased, at fair value | 3 1,4 5,455 | | Accrued compensation payable | 34,1 4,0 1 I | | Accounts payable and accruals | 23,6 7,403 | | Unsettled trades | 5,8 4,380 | | Payables to affiliates | 12,4• 2,662 | | Lease liabilities | 10,5 4,256 | | | 118,0 8,167 | | Subordinated borrowings | 27,0( 0,000 | | Member's equity: | | | Total member's equity | 11 7,611,427 | | Total liabilities and member's equity | 262,619,594 | | See accompanying notes | | | | 3 I f' ag
e | | CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3)) | | {6}------------------------------------------------ # **Canaccord Genuity LLC Consolidated Statement of Financial Income Year Ended March 31, 2023** | REVENUES | | |-------------------------------------------------------|--------------| | Commissions, net | \$74, 77,974 | | Principal transactions, net | 79,l 61,297 | | Investment banking | 52,• 09, 165 | | Service fee from related party | 47, 57,808 | | Interest and dividend income | 4,( 8 1,438 | | Other revenue
j | 76,389 | | | 258,( 64,071 | | EXPENSES | | | Compensation and benefits | 123,088,733 | | Floor brokerage, exchange, trading, and clearing fees | 36,9 15,606 | | Communications and data processing | 17,616,324 | | Promotion and travel | 8,8~0,092 | | Occupancy and equipment | 9,3p6,529 | | Interest and dividend expense | 6,0 1,737 | | Banking related underwriting expenses | 4 ,4,801 | | Professional fees | 8,8 7,3 12 | | Depreciation of fixed assets | 1,0 6,363 | | Development costs | 6 1,400 | | Other expenses | 15,9 0,534 | | | 228,7 9,43 1 | | Net income | \$29,3 4,640 | *See accompanying notes* *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* 4 II age {7}------------------------------------------------ ### **Canaccord Genuity LLC Consolidated Statement of Changes in Subordinated Borrowings Year Ended March 31, 2023** Subordinated borrowings at March 3 I, 2022 and March 3 I, 2023 \$27,000 00 *See accompanying notes* *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* 5 I age {8}------------------------------------------------ ### **Canaccord ·Genuity LLC Consolidated Statement of Changes in Member's Equity Year Ended March 31, 2023** | | | Member's Equity | To al | |------------------------------------|------------|-----------------|--------------| | | 31-Mar-22 | 102,310,441 | 102, 10,441 | | Net income | | 29,324,640 | 29. 24,640 | | Share-based awards - purchases | | (35,500.000) | (35,5 0,000) | | Share-based awards - an~ortization | | 21,476,346 | 21, 76,346 | | | 3 1-Mar-23 | 117.611,427 | 117, 11,427 | *See accompanying notes* *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* 6 I a gc {9}------------------------------------------------ ### **Canaccord Genuity LLC Consolidated Statement of Cash Flows Year Ended March 31, 2023** | OPERA TING ACTIVI JES | | |---------------------------------------------------------------|------------------| | Net income | \$29, 24,640 | | Items not affecting cash | | | Depreciation of fixed assets | I, 16,363 | | Amortization of right of use assets | 6, 02,718 | | Amortization of notes receivable | 50,242 | | Net changes in operating assets and liabilities: | | | Increase in deposits with clearing organizations | (I 9,452) | | Decrease in receivables from clearing organizations | 23,
6,17 1 | | Decrease in corporate finance and trading receivables | | | Decrease in securities owned, at fair value | | | Increase in receivables from affiliates | | | Decrease in other receivables | 1,5 4,509 | | Increase in prepaid assets | (2,081
8,080) | | Decrease in securities sold, not yet purchased, at fair value | ( 15,4 1 ~.435) | | Increase in accounts pa able and accruals | 5,718,717 | | Decrease in accrued compensation payable | (8 I ,89 >,564) | | Decrease in payable to affiliates | (3,38 l,286) | | Rent payments | (6,3 I l,056) | | Net cash used in operating activities | (38,47 ,737) | | INVESTING ACTIVITY | | | Purchase of fixed assets | (42' ,564) | | Net cash used in investing activity | (42( ,564) | | FINANCING ACTIVITY | | | Share based awards purchases | (35,50( 000) | | Share based awards amortization | 2 1,47 ),346 | | Net cash used by fina ncin~ activity | (14,023 654) | | Net decrease in cash and cash equivalents | (52,927 955) | | | 7 I Pa g e | | CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3)) | | {10}------------------------------------------------ | Cash and cash equivalents at beginning of year | IOI, 03,697 | |---------------------------------------------------|--------------| | Cash and cash equivalents at end of year | \$48, 75,742 | | Supplemental cash flow disclosures | | | Cash paid for interest | \$3, 49,840 | | Cash and cash equivalents include restricted cash | | | See accompanying notes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fagc
8J | {11}------------------------------------------------ ### **Consolidated Notes to Financial Statements** ### **1. ORGANIZATION AND NATURE OF OPERATIONS** On March 15, 2018, Canaccord Genuity Inc. was converted into a limited liability company and renamed anaccord Genuity LLC (the "Company"). Pursuant to the Limited Liability Company Agreement, Canaccor Adams (Delaware) Inc. (the j'Parent" or "CADI"), is the sole member of the Company. The Company is regis ered as a broker-dealer with tHe Securities and Exchange Commission ("SEC") and as an introducing broker with the Commodity Futures 11rading Commission ("CFTC") and is a member of the Financial Industry Regulatory uthority ("FINRA"), the National Futures Association ("NFA") and the Securities Investor Protection Corporation "SIPC"). CADI is a wholly owned subsidiary of Collins Stewart Inc. ("CSI"), whichis a wholly owned subsidiary of anaccord Adams Financial Group Inc. ("CAFGJ"), which is a wholly owned subsidiary of Canaccord Genuity G oup Inc. ("COG!"), a publicly traded companybased in Vancouver, British Columbia. The Company has an employee benefit trust, a special purpose entity ("SPE"), to fulfill obligations to e ployees arising from the Company's share-based payment plans. The employee benefit trust has been consol dated in accordance with the required accounting treatment since its activities areconducted on behalf of the Com any, 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, includin services in respect of mergers and acquisitions, and brokerage activities consisting primarily of institutional sales of omestic and foreign securities and equity options, trading and equity research to its customers, and market making f equity and fixed income securities. As a non-clearing broker, customer transactions are cleared on a fully disclosed basis primarily throug Merrill Lynch, Pierce, Fenner1 & 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 agreem nts with Canaccord Genuity Corp., an affiliatedCanadian broker-dealer, Canaccord Genuity Limited, an affiliated U brokerdealer, and Canaccord Genuity (Australia) Limited, an affiliated Australian broker-dealer. ### **2. SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Information** The financial statements have been prepared in accordance with accounting principles generally accept d 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 statem nts and accompanying notes. Actual results could differ from thoseestimates. Such estimates include the valuation o certain securities, accrued expbnses including expenses in connection with investment banking transactions and f; rfeiture estimates in respect ofshare-based compensation. #### **Cash and Cash Equivalents** Cash and cash equivalents include highly liquid investments with original maturities ofless than 90 days, an 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 requir d to be maintained in order to utilize such clearing services. These balances are subject to withdrawal restrictions s ch that the Company would be prohibited from doing business with the clearing agent if the minimum cash bal nee on deposit was not maintained. *CONFIDENDTIAL PURSUANT TO SEC RULE* 17 A-5(E)(3)) 9 ! Page {12}------------------------------------------------ ### **2. SIGNIFICANT ACCOUNTING POLICIES** #### **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 secur ty at the contracted price and, t ereby, 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 aris ng from all securities transactions entered into for the account and risk of the Company are recorded on a trade dat basis. ### **Foreign Currency Translation** Assets and liabilities denominated in foreign currencies are translated to United States dollars at year-en rates of exchange. Gains and losses from foreign currency-denominated transactions areincluded in the statement o income in other expenses at the rate of exchange in effect at the timeof the transaction. #### **Fixed Assets** Fixed assets include furniture, fixtures, equipment, software, and leasehold improvements. Depreciation is rovided on a straight-line basis using estimated useful lives of five to seven years.Leasehold improvements are amorti ed 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 employe benefit trust that is considered a Variable Interest Entity ("VIE") of the Company. On consolidation, the Compan 'sown equity instruments in CGGI stock that are reacquired (treasury shares) are recognized at cost and deduct d from equity. Shares held in the employee benefit trust were acquired by the trust in order to meet obligations in co nection with the awards made pursuant to the Company's long-term incentive plan. Any difference between the arrying amount and consideration is recognized in Member's Equity on the Consolidated Statement of Financial C ndition. Voting rights related to treasury shares are nullified for the Company and no dividends are paid on such sha es. #### **Commission Revenue** Commission revenue consists of revenue generated through providing commission-based brokerage se ices 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 t e trade order by finding and contracting with a counterparty and confirms the trade with the customer). The C mpany believes that the performance obligation is satisfied on the trade date because that is when the underlying nancial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership ha e been transferred to/from the customer. The Company's share of any commission revenue received by affiliates r sted in Note **1,** is paid to the Company through inter-company transfers settled on a periodic basis. *CONFIDENDTIAL PURSUANT TO SEC RULE* 17A-5(E)(3)) 10 ! Page {13}------------------------------------------------ # **2. SIGNIFICANT ACCOUNTING POLICIES** **Investment Banking Revenue** Investment banking revenue and equity selling concessions are recorded at the time underwritingor financing transactions are completed, and the applicable revenue recognition criteria have been satisfied. The ompany believes that the trade date is the appropriate point in time to recognize revenue for securities un erwriting 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 ofthecapital markets offering at that point. Investment banking revenue als includes fees earned fromproviding mergers and acquisitions, and other financial advisory services. Revenue fo advisory arrangements is generally recognized at the point in time that performance under the arrangementis com eted (the closing date of the transaction) or the contract is cancelled. For certain contracts,revenue is recognized ove time for advisory arrangements in which the performance obligations are simultaneously provided by the Com any and consumed by the customer. Investment bankingrevenue earned by the Company and received by an affiliate is paid to the Company through inter-company transfers settled on a periodic basis. #### **Principal Transactions, net** Gains and losses from proprietary securities transactions and market making activities, and the related rev nues and expenses, are recorded on a trade date basis. Securities owned and securitiessold, not yet purchased, are sta ed at fair value with unrealized gains and losses reflected in currentoperations. Fair value is generally based on ublished market prices, quoted prices from dealers, recent market transactions, or on such other information and I aluation methods as may be reasonable in the circumstances. In certain circumstances, the Company has determine that the fair value of securities where price transparency is limited or not available is nil. #### **Leases** At the commencemen~ of a lease, the liability to make lease payments and an asset representing the right t use the underlying asset during the lease term is recognized. The right of use assets and lease liabilities are recogniz d based on the present value ofl future minimum lease paymentsover the lease term. ### **Share-based Compensation** The Company follows FASB ASC Topic 718, "Compensation-Stock Compensation" ("ASC Topic 18"), to account for its stock-based compensation plans. ASC Topic 718 requires all share- based payments to empl yees to be recognized in the consolidated financial statements using a fair value based method. #### Equity-settled transactions Grants are made pursuknt to the company's Long-term Incentive Plan ("L TIP"). The fair value of these a ards is determined at the date of the grant based upon the quoted market price of CGGI. For certain L TIP awards, the fair value of awards granted to employees is expensed in the period in which those awards are deemed to be earn d. This period is generally the fiscal period in which the awards are either made or the immediately preceding fiscal ear for those awards made after the end of such fiscal year but were determined and earnedin respect of that tis al year. Typically, these awards vest ratably over a three-year vesting period.So long as the employee does not violat certain post-termination restrictions and is not engaged in certain competitive or soliciting activities as provided in ~he Plan these awards wi II continue tovest during the vesting period. For al I other awards, typically new hire awards or r tention awards,vesting is directly subject to continued employment and therefore these awards are subject to a co tinuing service requirement. The fair value of these awards is expensed over the vesting period as compensation expe se on a graded amortization basis. There are no performance conditions attached to the L TIP awards. *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* 11 I age {14}------------------------------------------------ ### **2. SIGNIFICANT ACCOUNTING POLICIES** #### Cash-settled transactions Management may also receive performance share units (PSUs) and deferred share units (DSUs) as pa remuneration. The liability is remeasured to fair value at each reporting date up to and including the s ttlement date, with changes in {air value recognized through the consolidated statement of income. The PS Us and D Us were measured at fair value on grant date. Changes in value of the PSUs and DSUs at each reporting period are a ortized over the remaining vesting period and recorded as a compensation and benefits expense in the consolidated tatement 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 income tax returns filed by CAD! and CAFGI as applicable. Prior to its conversion to a limited liability co March 15, 2018, the Company was included in theincome tax returns of its U.S. based holding company, nd state pany on FGI. #### **3. FAIRVLAUE MEASUREMENT** The fair value hierarchy prioritizes the inputs to valuation techniques. Fair value is the price that would be eceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the mea urement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occu s in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques t~at are consistent with the market, income, or cost approach, as specified by ASC 20, are used to measure fair value. The measurement of fair value is based upon a hierarchy that gives the highest priority to unadjusted quot d prices in active markets for identical assets (Level I) 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 inpu that is significant to the fair value measurement. The three levels of the fair value hierarchy, and its applicabili y to the Company's investments, are described below: Level I - 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, 2023, in valuing the Company's s curities owned and securities sold, not yet purchased, carried at fair value on a recurring basis: *CONFIDENDTIAL PURSUANT TO SEC RULE* 17A-5(E)(3)) 12 I age {15}------------------------------------------------ | Balance as of
Level I
Level2
Leve 3
\$
\$
\$
\$ | | |----------------------------------------------------------------------|--------------| | | 3/31/2022 | | | | | Assets: | | | Corporate equities
8,406,846
28,975,403 | 37,382,249 | | U.S. Government securities
2 | 2 | | Other sovereign government obligations
3,482,3 11 | 3,482,311 | | Corporate and other debt
11 , 138,775 | 11 , 138,775 | | Total
8,406,848
43,596,489 | 52,003,337 | | Liabilities: | | | Corporate equities
10, 104,600
7,829,013 | 17,933,613 | | Other sovereign government obligations
3,254,991 | 3,254,991 | | Corporate and other debt
10,256,858 | 10,256,858 | | Total
10,104,600
21 ,340,862 | 31,445,462 | A description of the valuation techniques applied to the Company's major categories of trading assets and I abilities measured at fair value ollows: #### **Corporate equities** Exchange-traded equity securities - Securities traded on domestic and international exchanges are stated a the last reported sales price on the valuation date. To the extent these securities are actively traded, and valuation adj1 stments are not applied, they are categorized in level I of the fair value hierarchy. Over- The-Counter (OTC) equity securities - This includes securities traded on various bulletin board-basec trading platforms such as the OTC Bulletin Board (OTCBB) and OTC Link. The OTC Bulletin Board {OTCB 3) is an electronic quotation system that displays real-time quotes, last sales prices, and volume information for ma 1y overthe-counter securities t?at are not listed on a national securities exchange. Similarly, OTC Link is an electronic interdealer quotation syste1 that displays quotes from broker-dealers for many over-the-counter (OTC) securities Market makers such as the Company and other broker- dealers 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 minimurn 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 cate~orized in Level 2 of the fair value hierarchy, in certain cases, the Company also applies an adjustment for lack of I quidity or an adjustment for lack of price transparency to arrive at fair value from a market participant's perspectivf . The Company has an insignificant amount of OTC equity securities which have not traded for a significan period of time and are valued on a basis as determined by the Company to be the best estimate of the fair value t tilizing *CONFIDENDTIAL PURSUANT TO SEC RULE* 17A-5(E)(3)) 13 j Page {16}------------------------------------------------ assumptions and esti1~ates made with reference to historical market quotes and prices appropriate for such ecurities. Where there is no price transparency for an extended period of time (generally more than 90 days) and w ere there is uncertainty about fair value from a market participant's perspective and where an estimate cannot be ade, the Company has determined that the fair value of such securities is nil. Corporate and other debt Corporate bonds - T~e fair value of corporate bonds is determined using recently executed transactions a d market price quotations. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy; in instan es where prices, spreads or any of the other key inputs are unobservable, they are categorized in Level 3 of the air value hierarchy. U.S. Government securities - Comprised of U.S. Treasury securities valued using quoted market prices. aluation adjustments are not applied. Accordingly, U.S. Treasury securities are generally categorized in Level I o the fair value hierarchy. Foreign Government Bonds - The fair value of foreign government bonds is determined using recently xecuted transactions and market price quotations. Foreign government bonds are generally categorized in Level 2 fthe 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. During the year-ended March 31, 2023, the Company had no transfers of securities instruments owned and ecurities sold, not yet purchased amongst Levels I, 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 isks are managed in accordance with established risk management policies and procedures.To accomplish this, man gement has established a risk management process that includes: - A regular review of the risk management process by executive management as part of its oversigh role. I - Defined risk management policies and procedures supported by an established analytical framewo k. - Articulated risk tolerance levels as defined by executive management that are regularly reviewed t ensure that the Company's risk-taking is consistent with its business strategy,capital structure, and cu ent and anticipated market conditions. #### **Market Risk** - Equity price risk is the risk that the fair value of financial instruments will fluctuate becauseof ch nges 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 fut re date and will incur a loss if the purchase price of such financial instruments increases above the fair alue as recorded at March 31, 2023. - Currency risk arises from the possibility that changes in foreign currency exchange rates will result i losses. - Interest rate risk arises from the possibility that changes in interest rates will affect the fairvalue of nancial instruments held by the Company. *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* 14 I Page {17}------------------------------------------------ ### **4. RISK MANAGEMENT** #### **Credit Risk** The Company is exposed to risk of loss if an individual, counterparty or issuer fails to perform its obligati ns under contractual terms ("default risk"). The Company has established policies and procedures for mitigating c edit risk on principal transactions, including reviewing and establishing limits for credit exposure and continually ssessing the creditworthiness of counterparties. #### **Operational Risk** Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and system or from external events such as the occurrence of disasters or securitythreats. Operational risk exists in all the Cotpany's activities, including processes, systemsand controls used to manage other risks. Failure to manage operati nal risk can result in financial loss, reputational damage, regulatory fines and failure to manage market, credit or ot er risks. The Company operates in different markets and relies on its employees and systems to process a high n mber of transactions. In order to mitigate this risk, the Company has developed a system of internal controls and ch cks 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 ecurity, independent review procedures, documentation standards, billing and collection procedures, and authoriz ion and processing controls fo[ transactions and accounts. The Company also has disaster recovery procedures, usiness continuity plans and built-in redundancies in the event ofa systems or technological failure. In addition, the ompany utilizes third party service agreements where appropriate. Although the Company's systems, proce ses and procedures were effective in limiting the risk associated with the outbreak of the COVID-I 9 pandemic, t ere is a risk that such systems, processes and procedures may not be successful in the event of future pandemics r in the event that conditions under the COVID-19 pandemic deteriorate or persist for an extended period of time. #### **Cybersecurity Risk** Cybersecurity risk is the risk that the Company's information networks, data or internal systems will bed aged, disrupted, misapproprikted, stolen, accessed without permission or otherwise attacked. This risk exists d e to the interconnected nature of the Company's business with its clients, suppliers, vendors, partners and the publi via the internet and other networks. As a result of this interconnectivity, third parties with which the Company does usiness with or that facilitate the Company's business may also be a source of cybersecurity risk to the firn1 . The C mpany has implemented a third- party risk management framework as part of on boarding new vendors and other thir parties as well as vetting existing vendors. The purpose of this mitigant is to ensure all parties interacting with the C mpany are adhering to high standards as it relates to cybersecurity. The Company devotes considerable effort and r sources to defend against and mitigate cybersecurity risk, including increasing awareness throughout the organi tion by implementing a firm-wide cybersecurity training program for all employees. The Company's manage ent of cybersecurity risk, as well as any reported incidents is regularly presented to senior management via the Cybersecurity Committee. #### **5. RECEIVABLES FROM CLEARING ORGANIZATIONS** Amounts receivable from clearing organizations represent amounts due to the Company from clearing and se lement services provided to the Company in connection with normal transactionsinvolving commissions earned nd the trading of securities. #### **6. UNSETTLED TRADES** Amounts include \$5,824,380 of unsettled transactions involving foreign securities which are cleared an settled pursuant to operating agreements with affiliated foreign broker-dealers (see Note I). With respect o such transactions, the Company is exempt from SEC Rule I 5c3-3 under subparagraphs (k)(2)(i) and k(2)(ii) be ause it *CONFIDENDTIAL PURSUANT TO SEC RULE* /7A-5(E)(3)) 15 I Page {18}------------------------------------------------ ### **6. UNSETl)LED TRADES** does not carry securities accounts for customers orperform custodial functions relating to customer securi ies and in certain cases clears through another broker-dealer on a fully disclosed basis. (See Note 14 ). | 7.
FIXED ASSETS | | |-------------------------------------------------------------------|--------------| | At March 31 , 2023, fixed assets were comprised of the following: | | | Leasehold improvemel)ts | \$2,746,555 | | Furniture and fixtures | 455,861 | | Equipment | 328,61 1 | | | 3,531 ,027 | | Less: Accumulated depreciation | (2, 707,681) | | | \$823.346 | ### **8. INCOME TAXES** The Company is a single member limited liability company treated as a disregarded entity for federal nd state income tax returns filed by CADI and CAFGI as applicable. Prior to its conversion to a limited liability co pany on March 15, 2018, the Company was included in the income tax returns of its U.S. based holding company, AFG!. As a result of the Company's conversion to an LLC and characterization as a disregarded entity for in ome tax purposes, its deferred tax items transferred to its sole member, CADI, upon such conversion. As the Comp ny had a full valuation allowance against its deferred tax assets at the time of its conversion, the transfer of the defr rred 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 utiliz income and cost allocation methods, to determine taxable income. On an ongoing basis,the Company may be s bject to examinations by federal, state, and local government taxing authorities that may give rise to differing interp etations of these complex laws regulations and methods. Due to the nature of the examination process, it genera ly takes several years before tliese examinations are completed, and matters resolved. Income tax returns for the axation years ended March 3 11 2020, 2021 and 2022 are considered to be open for examination by federal and sta e taxing authorities. ### **9. VARIABLE INTEREST ENTITY** The assets and liabilities of the Company's deferred compensation plan are held in a rabbi trust which is co sidered a variable interest entity of the Company. The Company is considered the primary beneficiary of the ra bi trust because the Company directs the activities of the trust and can use the assets of the trust to satisfy the liab lities of the Company's deferred compensation plan. Accordingly, the assets and liabilities of the rabbi trust are cons lidated with the financial statements of the Company. At March 31, 2023, Member's equity on the Company's cons lidated Statement of Financial Condition was reduced by \$55,497,656 representing the obligations of the Com any in connection with the deferred compensation plan. The liability represents awards in respect of shares of GGI to satisfy awards made under the L TIP granted by the Company. These shares areheld by the trustee of the rab i trust. ### **10. EMPLOYEE BENEFIT AND STOCK-BASED INCENTIVE COMPENSAT ON PLANS** *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* {19}------------------------------------------------ #### **10. EMPLOYEE BENEFIT AND STOCK-BASED INCENTIVE COMPENSA ION PLANS** The Company has a stock-based compensation program in which participating employees are entitled t 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 "L TIP" or the "Plan"). The fair valu of these awards is determined ht the date of the grant based upon the quoted market price of CGGI. Participating e ployees receive common shares of CGGI at the time of vesting. The Company accounts for these awards as equi -settled transactions. As described in note I to these consolidated financial statements the Company has estab ished an employee benefit trus~ (the Trust). The Company funds the Trust with cash which is used by the trustee to urchase common shares on the open market that will be held in the Trust until the RS Us 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, 2023, under the terms of the L TIP, the Company granted stock awards for *5* 702,816 shares of CGGI stock, with a total fair value of \$45,182,970 at the date of grant with a weighted average ir value of \$7.92 per share. The Trust purchased 4,604, I 05 shares during the year ended March 31, 2023 for \$35,5 0,000. | | Number of shares | |--------------------------------------------------|------------------| | Unvested awards outstai:iding, March 31 , 2022 | 5,914,758 | | Granted | 5,702,816 | | Vested | (2,926,566) | | Forfeitures | (77,217) | | Unvested awards outstanding, March 31, 2023 | 8,613,791 | | | Number of shares | | Common shares held be the trust, March 3 I, 2022 | 5,424,660 | | Acquired | 4,604,105 | | Released on vesting | (2,926,566) | | Common shares held by the Trust, March 31, 2023 | 7,102,199 | As of March 31, 2023, the Company had an investment of\$55,497,656 in CGGI shares which were pure ased by the Trust and which have not yet vested. The remaining amortization expense associated with L TIP awards granted with a continued employment req irement as of March 31 , 2023 is as follows: | \$1,613,653 | |-------------| | 1,101,224 | | 222,606 | | \$2,937,483 | | | *CONFIDENDTIAL PURSUANT TO SEC RULE* /7A-5(E)(3)) 17 / Page {20}------------------------------------------------ At March 31, 2023, the Company held 22,410 shares of CGGI stock, resulting from shares that were reviously awarded to employees and purchased to satisfy such awards. In certain cases, the vesting terms for such aw rds were not satisfied and, accordingly, the awards were then forfeited by such employees. The fair value of the e shares, \$181,340 is included ;·n securities owned, in the statement of financial condition. It is expected that theses ares will be returned to CGGI n consideration for the fair value of such shares. **Senior executive deferred shares units** On June I, 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 ompany under certain conditions of the plan. The carrying amount of the liability recognized in accounts payable and accrued liabilities relating to DSUs t March 31, 2023 was \$2,250,253 #### **11. COMMITMENTS AND CONTINGENCIES Leases** I The Company leases office space, furniture, and communications and information technology equipme t under various non-cancelable operating leases. Office space leases are subject to escalation clauses covering perating expenses and real estate taxes. Future minimum aggregate annual rental commitments under these non-c ncelable operating leases for the years ending March 31,2023 are as follows: | | Minimum
Annual
Rental
Payments | |-------|-----------------------------------------| | 2024 | \$7,933,924 | | 2025 | 5,642,019 | | 2026 | 1,643,653 | | 2027 | 562,520 | | 2028 | 154,346 | | Total | \$15,936,462 | | | | #### **Underwriting** In the normal course of business, the Company enters into underwriting commitments. At March 31, 2 23, the Company did not have any open underwriting commitments. #### **Litigation proceedings and claims, regulatory matters, and contingent liabilities** In the normal course of business as a broker-dealer, the Company is involved in litigation, claims and th atened 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 out ome of these matters is unce11ain, in the opinion of management, after consultation with legal counsel, the ultimate re olution of such matters will not have a material adverse effect on the Company's financial position or results of ope ations. *CONFIDENDTIAL PURSUANT TO SEC RULE* 17A-5(E)(3)) ![](_page_20_Picture_13.jpeg) {21}------------------------------------------------ As a registered broker-dealer, the Company is subject to certain rules, regulations, and other regulatory re!irements specific to the broker-dealer business and, as such, the Company operates within a regulatory framework involving certain governmenta agencies and organizations. As a regulated entity and in the normal course, the C mpany is subject to periodic reviews and examinations by those agencies and organizations. The Company aintains policies and procedures designed to ensure compliance with these rules, regulations and requirements, ut, in the event that a regulator} authority determines that there was a failure by the Company to follow or comply w th certain procedures or a regulatory requirement or there is a deficiency in the Company's records or reports ors me other compliance or financial failure then the Company may agree to pay a fine or penalty or agree to ce ain other sanctions, or, alternatively, a regulatory authority may impose a fine, penalty or other sanction. If such circ mstances arise, the Company records a provision for any matter where a payment is considered probable and can be r asonably estimated. In connection with this regulatory oversight, the Company is involved in an enforcement matter arisi from a regulatory review of the Company's wholesale market making activities. Although the Company expect that the underlying enforcement matter will be resolved in the ordinary course and expects that the resoluti n of the enforcement matter will not have a material impact on its financial condition or results of operations, the ompany may incur a significant penalty and additional costs related to its business or become subject to other terms or conditions that may adversely impact its business. An estimate for a settlement of the enforcement matter has been recorded as of March 31, 2023, based on management's judgment and based on the infonnation currently vailable to the Company, but because the ultimate resolution of this matter is not known and the amount oft e loss is uncertain, the Company may be required to make a payment that is more than the amount recorded. In det rmining the estimate, management referred to previous enforcement matters that were settled by other companies recognizing that facts and circumstances in such cases were significantly different than those in the Company's curre t matter. These other cases reflected a wide range of settlement payments, and it is reasonably possible that n actual settlement will exceed the estimate currently recorded as of March 31, 2023. An actual estimate of any su excess cannot be made at this time. Adjustments will be recorded in subsequent periods if further information ecomes available that changes the estimate. The Company and its ~ffiliates provide financial advisory , underwriting and other services to, and trade the s curities of issuers that are invo1ved with new and emerging industries, including the US cannabis industry. Activiti s within such industries, including the US cannabis industry, typically have not had the benefit of a history of s ccessful operating results. In addition to the economic uncertainties associated with new industries, new activities nd new issuers, the laws applicable to such industries or activities, particularly the US cannabis industry and the act ities of issuers in that industry, and the effect or enforcement of such laws are undetermined, conflicting and unce in. With respect to the US cannabis industry, cannabis continues to be a controlled substance under the Unite States Controlled Substances Act and as such, there is a risk that certain issuers, while in compliance with applica le state law, may be prosecuted under federal law. Accordingly, the Company has adopted policies and pr~cedures reasonably designed to ensure compliance with the United States Currency and Foreign Transactions Repo ing Act of 1970 (the "Bank Secrecy Act") and the guidance issued by the United States Department of the Treasury iinancial Crimes Enforcement etwork, FIN-2014-G00 I (the "FinCEN Guidance") relating to providing financial sei ices 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 nnabis industry, and only provides services to those issuers where it determines that there is no material risk to the C mpany or where any risk is unlikely to result in a material adverse consequence to the Company, there is a risk hat the Company could be the subject of third party proceedings which may have a material adverse effect on the Company's business. revenues, operating results and financial condition as well as the Company's reputati n, even if such proceedings were concluded successfully in favor of the Company. The Company has determined hat any such proceedings are unlikely and, accordingly, has not recorded a provision in respect of such matters. Risks associated with emerging industries such as the cannabis industry also include the risk of the insolv ncy of issuers and the consequent inability of such issuers to satisfy their indemnification obligations to the Co pany. Accordingly, in the event of a loss to the Company, the Company may be unable to recover amounts in re pect of any indemnity claims. *CONF/DENDTIAL PURSUANT TO SEC RULE* / 7A-5(£)(3)) 19 I a g e {22}------------------------------------------------ The Company clears jts customers' transactions through Merrill Lynch Pierce Fenner & Smith and Persh ng LLC. In addition, the Company has entered into operating agreements with its affiliates, Canaccord Genuity Corpl in order to conduct DVP/RVPi brokerage business involving Canadian securities, Canaccord Genuity Limited in order to conduct DVP/RVP brokerage business involving European securities and Canaccord Genuity (Australia) L mited in order to conduct DVP)RVP brokerage business involving Australian securities. In connection with these ag ements, the Company may be required to indemnify these broker dealers if losses are incurred that are deemed to b the fault of either the Company or one of its customers. The Company does not have a history of incurring mater ,al losses related to the clearing of customer transactions and, as such, has not recorded a provision in respect of such uarantee or potential liability. ~owever, while material losses due to the clearing of customer transactions is considere remote by the Company, the possibility exists that such losses may occur; therefore, the Company closely mo itors all customer clearing activities. As of March 3 I, 2023 the Company has provided a standby bank letter of credit issued by The Bank of merica N.A., in the aggregate amount of \$2,321 ,377 as a guarantee for certain office space lease obligations. The ompany has secured this letter of credit by providing cash collateral to the lender in the amount of \$2,321,377. Thi amount is recorded as restricted cash on the consolidated statement of financial condition. ### **12 RELATEJ PARTY TRANSACTIONS .** The Company's Parent holds certain office space leases in its own name and provides such facilities to the mpany at cost. During the year an affi liate of the Company, Canaccord Genuity Sawaya LLC ("CGSU"), acquired the busi ess and assets of Sawaya LLC, a mergers and acquisitions advisory firm based in New York. In connection ith that transaction the employees of Sawaya LLC became employees of the Company. The Company has a service agreement with two affiliates of the Company, Canaccord Genuity Pestky Pru ·er LLC (CGPPLLC) and CGSU. This service agreement amended and superseded the Expense Sharing Ag eement previously in place bet~ een CGLLC and CGPPLLC. Under the service agreement, the Company provide 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 transacti ns with affiliated entities. As of March 31 , 2023, the Company had balances with affiliates as follows: | \$24,238,371 | |---------------| | | | 3,433,367 | | 1,069,915 | | 914,134 | | 120,768 | | 56,891 | | \$1 1,749,154 | | 693,508 | | 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 behal of the Company. CGLLC has provided epiployee loans totaling \$280,960 which are at prevailing interest rates and is show on the consolidated statement *bf* financial condition under Notes receivable from employees. *CONFIDENDTIAL PURSLNT TO SEC RULE 17A-5(E)(3))* 20 I >age {23}------------------------------------------------ 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/ VP basis pursuant to the operating agreement with Canaccord Genuity LLC, Canaccord Genuity (Australia) Li1 ited and Can accord Genuity Limited (Note 14) the Company has recorded unsettled transactions in the amount of\$ ,824,380 on the consolidated statement of financial condition. ### **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 3 1, 2024. The subordinated borrowing bears I terest at 10% per annum. The lender has agreed to subordinate its right of collection of principal and claims to all creditors of the ompany prior to the expiration of its note. The subordinated loan has been approved by FINRA and is thus ava fable for computing regulatory net capital under the SEC uniform net capital rule (Note 14). To the extent that th s loan is required for the Company's continued compliance with minimum net capital requirements, it may not be r paid. ### **14. NET CAPrTAL REQUIREMENTS AND OTHER REGULATORY MATT RS** The Company is subject to the SEC uniform net capital rule (Rule I 5c3-1 ). The Company computes its n t capital requirements under the alternative method provided for in Rule I 5c3- I, which requires that the Company aintain net capital equal to the greater of 2% of aggregate customer-related debit items, as defined, and \$1 ,000,00 . At March 31, 2023, the Company had net capital of\$78,719,437 which was\$77,719,437 in excess of the req ired net capital of \$1,000,000. Advances to affiliates, repayment of subordinated borrowings, dividend payments, and other equity withdr wals are subject to certain notification and other provisions of Rule I 5c3-I and therules and requirements of other r ulatory bodies Pursuant to SEC Rule I 5c3-3, brokers and dealers that hold cash and securities on behalf of customers are equired to maintain cash balances at financial institutions that are specifically reserved for customers when the c sternerrelated credit balances exceed the customer-related debit balances. As an introducing broker with trades o behalf of customers cleared on a fully disclosed basis, the Company does not hold any customer assets, and, in ac ordance with Rule 15c3-3(k)(2)(ii), the Company is exempt from Rule I 5c3-3. In connection with foreign trade by the Company on behalf of customers which are settled on a DVP/RVP basis pursuant to the operating agreem nt with Canaccord Genuity Corp., Canaccord Genuity (Australia) Limited and Canaccord Genuity Limited, the Co pany is exempt from Rule I 5c3-3 pursuant to I 5c3- 3(k)(2)(i). The Company is also exempt from SEC Rule I 5c3-3 because the Company's other business activities conte plated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240. l 7a-5 are limit d to: - a. proprietary trading - b. effecting securities transactions via subscription agreements by clients where funds are payable to he issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger and acquisition opportu ities for clients, referring securities transactions to other broker-dealers, otherwise providing financial a visory services to clients, or providing technology or platform services - d. participating in distributions of securities (other than firm commitment underwritings) in accordan e 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 paragrap (a) or (b )(2) of Rule I 5c2-4 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 ot to the Company) 21 I age! *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* {24}------------------------------------------------ #### **14. NET CAPITAL REQUIREMENTS AND OTHER REGULATORY MAT ERS** f. did not carry accounts of or for customers g. did not carry PAB accounts (as defined in Rule I 5c3-3) throughout the most recent fiscal year w thout exception. # **15. SUBSEQUENT EVENTS** In preparing the consolidated financial statements, the Company has evaluated the impact of all e ents and transactions for potential recognition or disclosure through May 30, 2023, the date that the Company's financial statement was available to be issued. *CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3))* 22 I age {25}------------------------------------------------ ![](_page_25_Figure_0.jpeg) {26}------------------------------------------------ Schedul I ### **Canaccord Genuity LLC Computation of Net Capital under SEC Rule 15c3-1 March 31, 2023** | Net Capital | | | |----------------------------------------------------------------|------------------------|---------------------------| | Member's equity | \$ 173,109,083 | | | Subordinated borrowings | --------
27,000,000 | 200, 09,083 | | Non-allowable assets: | | | | Stock-based Compensation | | | | Investment Banking Receivables | 55,497,655 | | | Other Receivables | 3,47 1,813 | | | Fixed Assets | 3,489,635 | | | Due From affiliates | 823,346 | | | Prepaid Assets | 29,833,446 | | | Restricted Cash | 3,557,882 | | | Non Marketable Equities 9er SEC rules | 2,321 ,377 | | | Non Marketable Fixed Income per SEC rules | 10,260,402 | | | Perishing unsecured debit | 2,853, 102 | | | | 1,555 | 112,1 0,212 | | Aged Fails | | | | Net capital before haircuts | | 125 | | Haricuts: | | 87,9 8,746 | | Stocks | | | | Fixed Income | 4,582,257 | | | Other | 3, 15 1,699 | | | Net capital | 1,545,353 | 9,2 9,309
\$78,719,437 | | | | | | Computation of alternate net capital requirement | | | | Net capital | | \$78,71 ,437 | | Net Capital requirement of reporting broker or dealer (greater | | | | of 2% of aggregate debit items as defined. and \$ I ,000,000) | | 1,000,000 | | Excess net capital | | \$77,7 1 ,437 | | Reconciliation of Equity per Audited Financial | | | | Equity per Audited Financial Statements | | | | Equity per March 3 1, 2023 OCUS as amended | \$ 117,61 ,427 | | | | | \$173, 10 ,083 | | Difference | \$55,49 ,656 | | | CGGI Stock Held by Trust | | \$55,49 ,656 | | | | 24 I ) age | | CONFIDENDTIAL PURSUANT TO SEC RULE 17A-5(E)(3)) | | | | | | | {27}------------------------------------------------ The difference of\$55,497,656 in Equity per the Audited Consolidated Financial Statements and the Mar h 31,2023 Focus Report as amended is because the Audited Consolidated Financial Statements are prepared on t e basis of consolidating Canaccord Genuity LLC and the rabbi trust, a variable interest entity of the Company (see note 9) and the March 31,2023 Focus ~eport as amended reflects the financial position ofCanaccord Genuity LLC on an unco solidated basis. The minimum net capital required by the CFTC equivalent to the net capital required by Rule 15c3- (a) of the SEC ( 17 CFR 240. I 5c3-I (a)). There were no other material differences between the amounts presented ab e and the amounts included in the Company's March 31, 2023 amended unaudited FOCUS report filed on May 24, 20 3. *CONFIDENDTIAL PURSUANT TO SEC RULE* 17A-5(E)(3)) 25 I > a g c {28}------------------------------------------------ Schedu e II ### **Canaccord Genuity LLC Statement Regarding SEC Rule 15c3-3 March 31, 2023** With respect to introduced customer transactions in domestic securities, the Company is exemptfrom SEC Rule 15c3- 3 under subparagraph (k)(2)(ii) because all customer transactions are cleared through another broker-deale on a fully disclosed basis. With respect to introduced customer transactions in foreign securities, the Company is exempt from SEC under subparagraph (k)(2)(i) because it does not carry sec11rities accountsfor customers or perform custodi I functions relating to customer securities. The Company is also exempt from SEC Rule l 5c3-3 because the Company's other business activities conte plated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240. I 7a-5 are limited t - a. proprietary trading - b. effecting securities transactions via subscription agreements by clients where funds are payable to he issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger and acquisition opportu ities 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 accordan e with the requirements of paragraphs (a) or (b)(2) of Rule I Sc2-4 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 paragrap (a) or (b )(2) of Rule I Sc2-4 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 ot to the Company) - f. did not carry accounts of or for customers - g. did not carry Pf.B accounts (as defined in Rule l Sc3-3) throughout the most recent fiscal year with ut exception. *CONFIDENDTIAL PURSUANT TO SEC RULE* /7A-5(£)(3)) 26 I a g c {29}------------------------------------------------ ![](_page_29_Picture_0.jpeg) {30}------------------------------------------------ ![](_page_30_Picture_0.jpeg) New York, NY 10001 ey.com Ernst & Young LLP Tel. +1 212 773 3000 One Manhattan West Fax.+1 212 773 6350 ### **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 Ca Genuity LLC (the Company) as of and for the year ended March 31, 2023, in accordance ith 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 b sis for designing our auditing procedures for the purpose of expressing our opinion on the cons lidated financial statements, but not for the purpose of expressing an opinion on the effectivenes of the Company's internal control. Accordingly, we do not express an opinion on the effectivenes of the Company's internal control. Also, as required by Regulation 1.16 of the Commodity Futures Trading Commission (CF C), we have made a study of the practices and procedures followed by the Company, in luding consideration of control activities for safeguarding customer and firm assets. This study i eluded tests of such practices and procedures that we considered relevant to the objectives st ted in Regulation 1.16 in making the periodic computations of minimum financial requirements p rsuant to Regulation 1.17. Because the Company is an introducing broker, we did not revi w 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 segreg tion of funds based on such computations - 2. The daily computations of the foreign futures and foreign options secured mount requirements pursuant to Regulation 30.7 of the CFTC The management of the Company is responsible for establishing and maintaining internal and the practices and procedures referred to in the preceding paragraphs. In fulfilli g this responsibility, estimates and judgments by management are required to assess the ex ected 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 expe ted to achieve the CFTC's above-mentioned objectives. Two of the objectives of internal control nd the practices and procedures are to provide management with reasonable but not absolute ass ranee that assets for which the Company has responsibility are safeguarded against los from unauthorized use or disposition, and that transactions are executed in accordanc with management's authorization and recorded properly to permit the preparation of fi ancial statements in conformity with generally accepted accounting principles. Regulation 1.16(d)( ) 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 refe red to above, error or fraud may occur and not be detected. Also, projection of any evaluation o them to future periods is subject to the risk that they may become inadequate because of chan es in conditions or that the effectiveness of their design and operation may deteriorate. {31}------------------------------------------------ ![](_page_31_Picture_0.jpeg) A deficiency in internal control over financial reporting exists when the design or opera on of a control does not allow management or employees, in the normal course of performihg their assigned functions, to prevent or detect misstatements on a timely basis. A significant d~ ciency is a deficiency, or a combination of deficiencies, in internal control over financial reporti~¥, that is less severe than a material weakness, yet important enough to merit attention b those responsible for oversight of the company's financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal cont ol over financial reporting, such that there is a reasonable possibility that a material misstateme t of the company's annual or interim financial statements will not be prevented or detected on timely basis. Our consideration of internal control was for the limited purpose described in the first and econd 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 defi iencies in internal control and control activities for safeguarding customer and firm assets that we c nsider to be material weaknesses, as defined above. We understand tha practices and procedures that accomplish the objectives referred t in the second paragraph of this report are considered by the CFTC to be adequate for their purp ses in accordance with the Commodity Exchange Act and related regulations, and that practic s and procedures that do not accomplish such objectives in all material respects indicate a aterial inadequacy for such purposes. Based on this understanding and on our study, we belie e that the Company's practices and procedures, as described in the second paragraph of this report, were adequate at March 31, 2023, to meet the CFTC's objectives. This report is intended solely for the information and use of the Board of Directors, manag ment, the CFTC, FINRA, bther regulatory agencies that rely on Regulation 1.16 of the CFTC n 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 30, 2023 {32}------------------------------------------------ ![](_page_32_Picture_0.jpeg) One Manhattan West Fax.+1 212 773 6350 **New** York, NY 10001 ey.com ### **Rf port of Independent Registered Public Accounting Firm** To the Member and Management of Canaccord Genuity LLC I We have reviewed management's statements, included in the accompanying Canaccord nuity 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 foreig 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) th oughout the most recent fiscal year without exception. - 3. The Company is also filing this Exemption Report because the Company's othe business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting a to 17 C.F.R. § 240.17a-5 are limited to: - a. Proprietary trading - b. Effecting securities transactions via subscription agreements by clients wher funds are payable to the issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger and cquisition opportunities for clients, referring securities transactions to other brok r-dealers, otherwise providing financial advisory services to clients, or providing tee nology or platform services - d. participating in distributions of securities (other than firm commitment unde ritings) 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 tra smitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4 and/or funds received an promptly transmitted for effecting transactions via subscriptions on a subscription way b sis 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 re ent fiscal year without exception. Management is responsible for compliance with 17 C.F.R. § 240.15c3-3 and its statements. {33}------------------------------------------------ ![](_page_33_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 pr cedures to obtain evidence about the Company's compliance with 17 C.F.R. § 240.15c3-3. A review is ubstantially 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 b made to management's statements referred to above for them to be fairly stated, in all material resp cts, based on the provisions set forth in Rule 15c3-3 under the Securities Exchange Act of 1934 and ursuant 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, mana ement, the SEC, FINRA, other regulatory agencies that rely on Rule 17a-5 under the Securities Exch,nge Act of 1934 in their regulation of registered brokers and dealers, and other recipients specified b~ Rule 17a-5(d)(6) and is not intended to be and should not be used by anyone other than these specified parties. May 30, 2023 {34}------------------------------------------------ Canaccord Genuity LLC. 535 Madison Avenue New York, NY 10022 # **C er I Canaccord ~/Genuity** ### **Canaccord Genuity LLC's Exemption Report** cgf.com Canaccord Genuity LLC (the "Company") is a registered broker-dealer subject to Rule 17a-S promulgated by the Securities and Exchange Commission (17 C.F.R. §240.17a-5, "Reports t be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C. .R. §240.17a-5(d)(1) and \4). To the best of its knowledge and belief, the Company states the f !lowing: - 1. The Company claimed an exemption from 17 C.F.R. §240.15c3-3 under the followin provisions of 17 C.F.R. §240.1Sc3-3 (k): Rule 1Sc-3-3(k)(2)(i) for customer transactio sin foreign securities and Rule 15c3-3{k)(2)(ii) for customer transactions in domestic sec rities. - 2. The Company met the identified exemption provisions in 17 C.F.R. §240.1Sc3-3{k) throughout the most recent fiscal year without exception. - 3. The Company is also filing this Exemption Report because the Company's other busi ess activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments *tb* 17 C.F.R. § 240.17a-5 are limited to: - a. Proprietary trading - b. Effecting securities transactions via subscription agreements by clients wher funds are payable to the issuer or its agents and not to the Company - c. receiving transaction-based compensation for identifying potential merger a acquisition opportunities for clients, referring securities transactions to other brokerdealers, otherwise providing financial advisory services to clients, or providin t echnology or platform services - d. participating in distributions of securities (other than firm commitment unde writings) in accoraance with the requirements of paragraphs (a) or (b)(2) of Rule 1Sc2- and the Company: - e. did not directly or indirectly receive, hold, or otherwise owe funds or securiti s for or to customers, (other than money or other consideration received and prompt y transmitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4 and/or unds received and promptly transmitted for effecting transactions via subscription on a subscription way basis where the funds are payable to the issuer or its agent nd 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 r cent fiscal year without exception. I, Donald D. MacFayden, affirm that, to my best knowledge and belief, this exemption report is true **and** correct. a ~ : *j A* Title: Chieffinancial Officer May 30, 2023 {35}------------------------------------------------ ![](_page_35_Picture_0.jpeg) New York, **NY** 10001 ey com One Manhattan West Fax:+1 212 773 6350 **Report of Independent Registered Public Accounting Firm on Applying Agreed-Upon Procedures** To the Board of Directors and Management of Canaccord Genuity LLC: We have performed the procedures included in Rule 17a-5(e)(4) under the Securities Ex hange 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 SIP -7) for the year ended March 31, 2023. Management of Canaccord Genuity LLC (Company) is res onsible 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 pe ormed are appropriate to meet the intended purpose of assisting you and SIPC in evaluating the ompany's compliance with the applicable instructions on Form SIPC-7 for the year ended Marc 31 , 2023. Additionally, SIPC has agreed to and acknowledged that the procedures performed are ppropriate for their intended purpose. This report may not be suitable for any other purpose. The rocedures performed may not address all the items of interest to a user of this report and may n t meet the needs of all users of this report and, as such, users are responsible for determining hether the procedures perforrried are appropriate for their purposes. The sufficiency of these pro edures 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 urpose for which this report hak 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 A sessment Payment Form (Form SIPC-6) and applied to the General Assessment calculatio 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 , 2023. As a result of applying the procedure, we found that the company over accrued the SIPC assessment by \$1,204. 3. Compared any adjustments reported in Form SIPC-7 with supporting schedules a d working papers supporting the adjustments. 1 No findings were found as a result of applying the procedure. {36}------------------------------------------------ 4. Recalculated the arithmetical accuracy of the calculations reflected in Form SIP -7 and in the schedules and working papers supporting the adjustments. As a result of applying the procedure we noted that the SIPC-7 calculation was verstated by \$1. 5. Compared the amount of any overpayment applied with the Form SIPC-7 on hich it was computed. As a resul~ of applying the procedure we noted that the SIPC-7 calculation was verpaid by \$1 We were engaged by the Company to perform this agreed-upon procedures enga ement and conducted our engagement in accordance with attestation standards established by t e American Institute of Certified Public Accountants and in accordance with the standards of the Pubic 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 ac, nowledged to be appropriate for the purpose of the engagement and reporting on findings b sed 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, espectively, 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, 2023. Accordingly, we do not express such an opinion o conclusion. Had we performed additional procedures, other matters might have come to our attentio that would have been reporte~ to you. We are required to be independent of the Canaccord Genuity LLC and to meet our ther ethical responsibilities in accordance with the relevant ethical requirements related to our reed-upon procedures engagement. This report is intended solely for the information and use of the specified parties listed a ove and is not intended to be, and should not be, used by anyone other than these specified parties May 30, 2023 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.