# CANACCORD GENUITY LLC X-17A-5 (2024-05-30) — Broker-dealer annual report - Company: CANACCORD GENUITY LLC - Form: X-17A-5 - Filed: 2024-05-30 - Period: 2024-03-31 - Accession: 0000766050-24-000005 - CIK: 766050 - File #: 8-03271 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young - Auditor location: New York, NY - Contact: Stella Yan - Phone: 2123898085 - Email: dmacfayden@cgf.com - Website: cgf.com - Signed by: Donald D. MacFayden (CFO) Original filing: https://www.sec.gov/Archives/edgar/data/766050/000076605024000005/cgllcfsmar24.pdf --- {0}------------------------------------------------ | SEC FILE NUMBER | | |-----------------|--| | 8-03271 | | | (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 | | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Ernst & Young | | | | | | | | | | (Name - if individual, state last, first, and middle name) | | | | | | | | One Manhattan West | New York | NY | 10001 | | | | | | (Address) | (City) | (State)
42 | (Zip Code) | | | | | | (PCAOB Registration Number, if applicable)
(Date of Registration with PCAOB)(if applicable) | | | | | | | | {1}------------------------------------------------ | swear (or affirm) that, to the best of my knowledge and belief, the | |-------------------------------------------------------------------------------------------------------------------------| | tinancial report pertaining to the firm of Canaccord Genuity LLC
as of | | 2024 | | partner, officer, director, or equivalent person, as the case may proprietary interest in any account classified solely | | | | | | Signature:
LORENE MILLROY
Notary Public - State of New York
NO. 01Ml0016849 | | | - - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ Consolidated Financial Statements and Supplemental Information # **Canaccord Genuity LLC** As of and for the Year ended March 31, 2024 With Report of Independent Registered Public Accounting Firm *This report is deemed CONFIDENTIAL in accordance with Rule 17a-5(e)(3) under the Securities Exchange Act of 1934 and Regulation 1.10(g) under the Commodity Exchange Act.* A Statement of Financial Condition has been bound separately and filed with the Securities and Exchange Commission and Commodity Futures Trading Commission simultaneously herewith as a public document. {3}------------------------------------------------ # Canaccord Genuity LLC (A fully owned subsidiary of Canaccord Genuity Group Inc. "CGGI") Consolidated Financial Statements and Supplemental Information Year Ended March 31, 2024 ### **Contents** | Report of Independent Registered Public Accounting Firm | 2 | |------------------------------------------------------------------|---| | Consolidated Statement of Financial Condition
| 3 | | Consolidated Statement of Operations | 4 | | Consolidated Statement of Changes in Subordinated Borrowings | 5 | | Consolidated Statement of Changes in Member's Equity
| 6 | | Consolidated Statement of Cash Flows
| 7 | | Notes to Consolidated Financial Statements………………………………………………………8 | | ### **Supplementary Schedules** | Schedule I: Computation of Net Capital under SEC Rule 15c3-1 | 26 | |----------------------------------------------------------------------------------------|----| | Schedule II:
Computation for Determination of Reserve Requirements Pursuant to Rule | | | 15c3-3 Under the Securities Exchange Act of 1934……………………………………………28 | | | Schedule III
: Information for Possession or Control Requirements Pursuant to Rule | | | 15c3-3 Under the Securities Exchange Act of 1934 | 29 | {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 the Board of Directors 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, 2024, the related consolidated statements of operations, 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, 2024, 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, II and III 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 30, 2024 {5}------------------------------------------------ ## **Canaccord Genuity LLC Consolidated Statement of Financial Condition As of March 31, 2024** | ASSETS | | |-----------------------------------------------------------------------|---------------| | Cash and cash equivalents | \$34,912,571 | | Restricted cash | 2,060,456 | | Receivables from clearing brokers | 116,613,239 | | Securities owned, at fair value | 54,028,798 | | Corporate finance trading receivables | 3,071,615 | | Receivables from affiliates | 35,200,606 | | Deposits with clearing brokers and others | 1,767,989 | | Other receivables | 1,205,626 | | Fails to deliver/receivables from customers | 2,776,797 | | Fixed assets, at cost (net of accumulation depreciation of \$318,098) | 9,412,639 | | Right of use assets | 53,965,821 | | Prepaid assets | 1,818,094 | | Total assets | \$316,834,251 | | LIABILITIES AND MEMBER'S EQUITY
Liabilities | | | Securities sold, not yet purchased, at fair value | \$38,243,828 | | Accrued compensation payable | 77,069,653 | | Accounts payable and accruals | 30,576,569 | | Fails to receive/payables to customers | 2,776,797 | | Payables to affiliates | 2,074 | | Lease liabilities | 58,962,180 | | Total liabilities | \$207,631,101 | | Subordinated borrowings | 27,000,000 | | Member's equity: | | | Total member's equity | 82,203,150 | | Total liabilities and member's equity | \$316,834,251 | {6}------------------------------------------------ ### **Canaccord Genuity LLC Consolidated Statement of Operations Year Ended March 31, 2024** | Total expenses | \$277,708,774 | |---------------------------------------|---------------| | Other expenses | 9,136,544 | | Depreciation of fixed assets | 674,418 | | Professional fees | 11,182,590 | | Banking related underwriting expenses | 949,186 | | Interest and dividend expense | 6,969,270 | | Occupancy and equipment | 14,554,899 | | Promotional and travel | 9,311,465 | | Communications and data processing | 19,682,424 | | Brokerage, clearing, execution fees | 29,637,813 | | Compensation and benefits | 175,610,165 | | EXPENSES | | | Total revenues | \$255,628,642 | | Other revenue | 154,858 | | Interest and dividend income | 4,386,022 | | Investment banking | 120,992,484 | | Principal transactions, net | 68,414,933 | | Commissions | \$61,680,345 | | REVENUES | | {7}------------------------------------------------ ## **Canaccord Genuity LLC Consolidated Statement of Changes in Subordinated Borrowings Year Ended March 31, 2024** Subordinated borrowings at April 1, 2023 and March 31, 2024 \$27,000,000 *See accompanying notes* {8}------------------------------------------------ ## **Canaccord Genuity LLC Consolidated Statement of Changes in Member's Equity Year Ended March 31, 2024** | | | Member's Equity | Total | | |-----------------------------------|---------------|-----------------|---------------|--| | | April 1, 2023 | \$117,611,427 | \$117,611,427 | | | Net loss | | (22,080,132) | (22,080,132) | | | Share-based awards - purchases | | (19,000,000) | (19,000,000) | | | Share-based awards - amortization | | 5,671,855 | 5,671,855 | | | | March 31,2024 | \$82,203,150 | \$82,203,150 | | {9}------------------------------------------------ ### **Canaccord Genuity LLC Consolidated Statement of Cash Flows Year Ended March 31, 2024** | OPERATING ACTIVITIES | | |---------------------------------------------------------------------------------|----------------| | Net loss | (\$22,080,132) | | Adjustments to reconcile net loss to net cash provided by operating activities. | | | Depreciation of fixed assets | 674,418 | | Net changes in operating assets and liabilities: | | | Increase in deposits with clearing brokers and other | (91,801) | | Increase in receivables from clearing brokers | (12,007,864) | | Decrease in corporate finance trading receivables | 400,198 | | Increase in securities owned, at fair value | (2,025,468) | | Increase in receivables from affiliates | (5,367,159) | | Decrease in other receivables | 1,886,332 | | Decrease in prepaid assets | 1,739,788 | | Increase in securities sold, not yet purchased, at fair value | 6,798,373 | | Increase in accounts payable and accruals | 6,929,166 | | Increase in accrued compensation payable | 42,895,642 | | Increase in lease liabilities | 3,978,237 | | Decrease in payable to affiliates | (12,440,588) | | Net cash provided by operating activities | 11,289,142 | | INVESTING ACTIVITY | | | Purchase of fixed assets | (9,263,712) | | Net cash used in investing activity | (9,263,712) | | FINANCING ACTIVITIES | | | Share based awards purchases | (19,000,000) | | Share based awards amortization | 5,671,855 | | Net cash used in financing activities | (13,328,145) | | Net decrease in cash and cash equivalents | (11,302,715) | | Cash and cash equivalents at beginning of year | 48,275,742 | | Cash and cash equivalents at end of year | \$36,973,027 | | Supplemental cash flow disclosures | | | Cash paid during the year for interest: | \$2,955,111 | *Cash and cash equivalents include restricted cash* {10}------------------------------------------------ ### **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 ASC 810, Consolidation, 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 conducts brokerage activities consisting primarily of institutional sales of domestic and foreign securities and equity options, provides trading and equity research to its customers, and conducts market making of equity and fixed income securities. As a non-clearing broker, customer equities and fixed income 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. The Company also clears customer futures transactions through STONEX Financial Inc. 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. ### **2. SIGNIFICANT ACCOUNTING POLICIES** ### **Basis of Financial Information** The consolidated 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 consolidated 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 consolidated financial statements and accompanying notes. Actualresults could differfrom 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. {11}------------------------------------------------ ### **2. SIGNIFICANT ACCOUNTING POLICIES** ## **Cash and Cash Equivalents and Restricted Cash** 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. At March 31, 2024, there were no cash equivalents. The firm has \$2,060,456 in restricted cash at year end for securing a letter of credit as described in Note 12. ### **Deposits with Clearing Organizations and Others** Cash is kept on deposit with various clearing firms, 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 are for the account and risk of the Company and are recorded on a trade date basis. ### **Foreign Currency Translation** Assets and liabilities denominated in foreign currencies are translated to United States dollars using the foreign exchange rates at the date of the Consolidated Statement of Financial Condition. Gains and losses from foreign currency-denominated transactions are included in the Consolidated Statement of Operation 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 shares) are recognized at cost and deducted from {12}------------------------------------------------ ## **2. SIGNIFICANT ACCOUNTING POLICIES** equity. Shares held in the employee benefit trust were acquired by the trust 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 paid 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 no dividends are paid to the employee benefit trust 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 revenue is recorded on the trade date (the date that the Company fills the trade order by finding and contracting with a counterparty and confirms the 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, including private placement transactions, are completed, and the applicable revenue recognition criteria have been satisfied. The Company has concluded that the trade date is the appropriate point in time to recognize revenue for securities underwriting transactions, including at-the-market financing 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 (M&A), and other financial advisory services. Advisory fees consist of ongoing management and advisory fees such as retainer fees are recognized over the period of time that this performance obligation is delivered. Also included in advisory fees is revenue from M&A activities, which is recognized at the point in time when the underlying transaction is substantially completed under the engagement terms, and it is highly probable that a significant revenue reversal will not occur. Investment banking fee receivables of \$3,071,615 are reported in corporate finance trading receivables on the Statement of Financial Condition. Related expenses are recorded in Banking related underwriting expenses on the Consolidated Statement of Operations. Investment banking revenue earned from transactions involving the joint participation of the Company and its foreign affiliates is recorded through inter-company transfers and included in balances with affiliates which are settled on a periodic basis. [see Note 13] {13}------------------------------------------------ ### **2. SIGNIFICANT ACCOUNTING POLICIES** ### **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 and realized gains and losses reflected in the Consolidated Statement of 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. ### **Credit Losses** The Company accounts for estimated credit losses on financial assets not carried at fair value in accordance with ASC 326, Financial Instruments ("ASC 326"). ASC 326 requires the Company to estimate expected credit losses over the contractual term of its financial assets as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. In general, the assets that are not carried at fair value in the consolidated statement of financial condition include cash, receivables from clearing brokers, and corporate finance trading receivables. As a result of the daily settlement or short-term nature of receivables, the amount of unsettled credit exposures is limited to the amount owed to the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties and has not experienced any significant defaults. As a result, the Company has not recorded a credit loss allowance on these assets not carried at fair value. ### **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 Company's lessee arrangements consist of non-cancelable operating leases for office space. In accordance with ASC 842, the Company recognizes right-of-use assets and lease liabilities, which are recognized based on the present value of the remaining lease payments, discounted using the Company's incremental borrowing rates. The discount rate used by the Company is based on its incremental borrowing rate at the commencement of the lease, and ranges from 6.50% to 8.50%. When a lease grants an extension option, the Company does not factor the renewal option period into the calculation of the right-of-use asset and lease liability unless such option is reasonably certain to be exercised at the lease commencement date. ### **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 share- based 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 {14}------------------------------------------------ ## **2. SIGNIFICANT ACCOUNTING POLICIES** those awards made after the end of such fiscal year but were determined and earned in respect of that fiscal year. Typically, these awards vest ratably over a three-year vesting period and as 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 orretention 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 operation. 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 operation 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. ## **3. NEW ACCOUNTING PRONOUNCEMENTS** In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU provides amendments to ASC 280 and requires disclosure of incremental segment information, including significant segment expenses. This ASU will be applicable for financial statements issued for fiscal years beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on its Notes. ### **4. 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: {15}------------------------------------------------ ### **4. FAIR VALUE MEASUREMENT** 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, 2024, in valuing the Company's securities owned and securities sold, not yet purchased, carried at fair value on a recurring basis: | | Quoted Prices
in Active
Markets for
Identical
Assets | Significant Other
Observable Inputs | Significant
Unobservable
Inputs | | |----------------------------------------|------------------------------------------------------------------|----------------------------------------|---------------------------------------|---------------| | | | | | Balance as of | | | Level 1 | Level 2 | Level 3 | March 31,2024 | | | \$ | \$ | \$ | \$ | | Assets: | | | | | | Corporate equities | 6,546,433 | 31,937,197 | ― | 38,483,630 | | Other sovereign government obligations | ― | 6,135,692 | ― | 6,135,692 | | Corporate and other debt | ― | 9,409,476 | ― | 9,409,476 | | Total | 6,546,433 | 47,482,365 | ― | 54,028,798 | | Liabilities: | | | | | | Corporate equities | 10,423,989 | 12,158,587 | ― | 22,582,576 | | Other sovereign government obligations | ― | 3,072,883 | ― | 3,072,883 | | Corporate and other debt | ― | 12,588,369 | ― | 12,588,369 | | Total | 10,423,989 | 27,819,839 | ― | 38,243,828 | A description of the valuation techniques applied to the Company's major categories of securities owned and securities sold measured at fair value follows: {16}------------------------------------------------ #### **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 overthe-counter securities that are not listed on a national securities exchange. Similarly, OTC Link is an electronic interdealer quotation system 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 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. US Government Securities – Comprised of US Treasury securities measured at fair value using quoted prices for identical securities in active dealer markets. Federal agency securities are measured using a spread to the Treasury benchmark. Accordingly, US Treasury Securities are categorized in Level 1 of the fair value hierarchy when actively traded. Less actively traded US Treasury and federal agency securities are categorized in Level 2 of the fair value hierarchy. Foreign Government Bonds – The fair value of foreign government bonds is determined using recently executed transactions and third-party price quotations. Foreign government 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. During the year-ended March 31, 2024, the Company had no transfers between level 2 and level 3. {17}------------------------------------------------ ### **5. 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, 2024. - Currency risk arises from the possibility that changes in foreign currency exchange rates will result in losses. - 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, including reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. Credit risk can also be triggered by economic or political factors in the country in which the counterparty is based or where it has substantial assets. Collateral in respect of market transactions on behalf of customers is generally limited to securities purchased or cash received in connection with the transaction. The Company does not generally hold collateral in respect of investment banking or other receivables. #### **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 securitythreats. Operational risk exists in all the Company's activities, including processes, systemsand 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 {18}------------------------------------------------ ### **5. RISK MANAGEMENT** processing controls for transactions and accounts. The Company also has disaster recovery procedures, business continuity plans and built-in redundanciesin the event of a systems or technological failure. In addition, the Company utilizes third party service agreements where appropriate. Although the Company's systems, processes and procedures were effective in limiting the risk associated with the outbreak of the COVID-19 pandemic, there is a risk that such systems, processes and procedures may not be successful in the event of future pandemics. ### **Cybersecurity Risk** Cybersecurity risk is the risk that the Company's information networks, data or internal systems will be damaged, disrupted, misappropriated, stolen, accessed without permission or otherwise attacked. This risk exists due to the interconnected nature of the Company's business with its clients, suppliers, vendors, partners and the public via the internet and other networks. As a result of this interconnectivity, third parties with which the Company does business with or that facilitate the Company's business may also be a source of cybersecurity risk to the firm. The Company has implemented a third- party risk management framework as part of onboarding new vendors and other third parties as well as continuous monitoring of existing vendors. The purpose of this mitigant is to ensure all parties interacting with the Company are adhering to high standards as it relates to cybersecurity. The Company devotes considerable effort and resources to defend against and mitigate cybersecurity risk, including increasing awareness throughout the organization by implementing a firm-wide cybersecurity training program for all employees. The Company's management of cybersecurity risk, as well as any reported incidents is regularly presented to senior management via the Cybersecurity Committee. ### **6. RECEIVABLES FROM CLEARING BROKERS** Amounts receivable from clearing brokers represent amounts due to the Company from clearing and settlement services provided to the Company in connection with normal transactionsinvolving commissions earned and the trading of securities. ### **7. FAILS TO RECEIVE/DELIVER AND RECEIVABLES/PAYABLES FROM CUSTOMERS** The Company has recognized the amount of \$2,776,797 in connection with unsettled transactions which have failed to receive and failed to deliver 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). ### **8. FIXED ASSETS** At March 31, 2024, fixed assets were comprised of the following: | Leasehold improvements | \$7,775,123 | |--------------------------------|-------------| | Furniture and fixtures | 1,427,941 | | Equipment | 527,673 | | | 9,730,737 | | Less: Accumulated depreciation | (318,098) | | Total Fixed Assets | \$9,412,639 | | | | {19}------------------------------------------------ ### **9. 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, CADI and CAFGI are required to interpret complex tax laws and regulations, and utilize income and cost allocation methods, to determine taxable income. On an ongoing basis, CADI and CAFGI 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, 2021, 2022 and 2023 are considered to be open for examination by federal and state taxing authorities. ### **10. 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, 2024, Member's equity on the Company's consolidated Statement of Financial Condition was reduced by \$47,246,195 representing the obligations of the Company in connection 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 are held by the trustee of the rabbi trust. ### **11. 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, 2024, under the terms of the LTIP, the Company granted stock awards for 3,424,247 shares of CGGI stock, with a total fair value of \$20,225,072 at the date of grant with a weighted average fair value of \$5.91 per share. The Trust purchased 3,190,566 shares during the year ended March 31, 2024 for \$19,000,000. {20}------------------------------------------------ | | Number of shares | |---------------------------------------------|------------------| | Unvested awards outstanding, April 1, 2023 | 8,613,791 | | Granted | 3,424,247 | | Vested | (3,524,600) | | Forfeitures | (196,542) | | Unvested awards outstanding, March 31, 2024 | 8,316,896 | | | Number of shares | |----------------------------------------------------|------------------| | Common shares held be the trust, April 1, 2023 | 7,102,199 | | Acquired | 3,190,566 | | Released on vesting | (3,524,600) | | Common shares held by the Trust, March 31,
2024 | 6,768,165 | As of March 31, 2024, the Company had an investment of \$47,246,195 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, 2024 is as follows for the years ending: | March 31, 2025 | 2,543,599 | |----------------|-------------| | March 31, 2026 | 1,019,852 | | March 31, 2027 | 318,124 | | Total | \$3,881,575 | At March 31, 2024, 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, \$147,401 is included in securities owned, in the Consolidated 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, 2024 was \$2,739,406. {21}------------------------------------------------ ### **12. 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 and may include renewal option. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement, net of any future tenant incentives. The Company would not factor the renewal option period into the calculation of ROU assets or a lease liability unless such option is reasonably certain to be exercised at the lease commencement date. Operating lease expense for the year ended March 31, 2024 is \$10,941,052 and is recorded in the Occupancy and equipment expense line item in the Consolidated Statement of Operations. Maturities of lease liabilities under operating leases as of March 31, 2024 are as follows: | | March 31,2024 | |-------------------------|---------------| | | \$ | | 2025 | 6,529,223 | | 2026 | 9,206,260 | | 2027 | 9,121,874 | | 2028 | 8,525,750 | | 2029 | 8,406,872 | | Thereafter | 105,451,352 | | Less: Lease incentives | (22,410,701) | | | 124,830,630 | | Effect of discounting | (65,868,452) | | Total lease liabilities | 58,962,178 | | | | The weighted average remaining lease term and discount rates for all operating leases as of March 31, 2024 are 15 years and 8.02%. The Company entered into subleases for certain leased premises with its Parent, Canaccord Adams (Delaware) Inc. The leases have been classified as operating leases and are included in the data presented above. #### **Underwriting** In the normal course of business, the Company enters into underwriting commitments. At March 31, 2024, 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 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 {22}------------------------------------------------ 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. As a registered broker-dealer, the Company is subject to certain rules, regulations, and other regulatory requirements specific to the broker-dealer business and, as such, the Company operates within a regulatory framework involving certain governmental agencies and organizations. As a regulated entity and in the normal course, the Company is subject to periodic reviews and examinations by those agencies and organizations. The Company maintains policies and procedures designed to ensure compliance with these rules, regulations and requirements, but, in the event that a regulatory authority determines that there was a failure by the Company to follow or comply with certain procedures or a regulatory requirement or there is a deficiency in the Company's records or reports or some other compliance or financial failure then the Company may agree to pay a fine or penalty or agree to certain other sanctions, or, alternatively, a regulatory authority may impose a fine, penalty or other sanction. If such circumstances arise, the Company records a provision for any matter where a payment is considered probable and can be reasonably estimated. In connection with this regulatory oversight, the Company is involved in an enforcement matter and potential enforcement matters arising from regulatory reviews of the Company's wholesale market making and securities trading activities in the United States. Although the Company expects that the underlying enforcement matter or potential enforcement matters will be resolved in the ordinary course and expects that such resolution will not have a material impact on its Consolidated Financial Statements, the Company 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 matters has been recorded based on management's judgment and based on the information currently available to the Company, but because the ultimate resolution of these matters is not known and the amount of the loss is uncertain, the Company may be required to make a payment that is more than the amount recorded. In determining 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 current matter. Because the Company's estimate involves significant judgment due to the current status and ongoing nature of the reviews, the extent to which remediation efforts undertaken by the Company and other factors will be considered is unknown, the possibility that new facts or information may become available, and the fact that these other cases reflected a wide range of settlement payments, it is reasonably possible that an actual settlement will exceed the estimate currently recorded as of March 31, 2024. Accordingly, an actual estimate of any such excess or a range of estimates for such excess cannot be made at this time. Adjustments will be recorded in subsequent periods if further information becomes available that changes the estimate. 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 on the Company's business, revenues, operating results and Consolidated Statement of Financial Condition as well as the Company's reputation, 20 | Page {23}------------------------------------------------ even if such proceedings were concluded successfully in favor of the Company. The Company has determined that any such proceedings are not probable 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 insolvency of issuers and the consequent inability of such issuers to satisfy their indemnification obligations to the Company. Accordingly, in the event of a loss to the Company, the Company may be unable to recover amounts in respect of any indemnity claims. 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 Genuity Limited 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 of either the Company or one of its customers. The Company does not have a history of incurring material losses related to the clearing of Exempt k(2)(i) transactions and, as such, has not recorded a provision in respect of such guarantee or potential liability. However, while material losses due to the clearing of customer transactions is considered remote by the Company, the possibility exists that such losses may occur; therefore, the Company closely monitors all customer clearing activities. (See Note 7) As of March 31, 2024, the Company has provided a standby bank letter of credit issued by The Bank of America N.A., in the aggregate amount of \$2,060,456 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 \$2,060,456. This amount is recorded as restricted cash on the Consolidated Statement of Financial Condition. {24}------------------------------------------------ ### **13. RELATED PARTY TRANSACTIONS** The Company entered into subleases for certain leased premises with its Parent, Canaccord Adams (Delaware) Inc. (CADI). The Company has the right to direct the use of the leased premises and is responsible for the costs throughout the lease term. In the normal course of business, the Company executes securities transactions and has other transactions with affiliated entities within the US and other foreign jurisdictions. The transactions with other US affiliates relate to Canaccord Adams Financial Group Inc. (CAFGI), CG Sawaya LLC (CGSU) and Canaccord Genuity Petsky Prunier LLC (CGPP). There were also transactions between the Company and its foreign affiliates Canaccord Genuity Corporation (CGC), Canaccord Genuity (Australia) Limited (CGAL), and Canaccord Genuity Limited (CGL). As of March 31, 2024, the Company had balances with its parent and affiliates as follows: | | Assets | Liabilities | |------------------------------|-------------|-------------| | Due from Parent, CADI | \$2,955,389 | | | Due from Affiliate, CAFGI | 22,167,402 | | | Due from Affiliate, CGSU | 7,605,988 | | | Due from Affiliate, CGPP | 1,080,833 | | | Due from Affiliate, CGC | 756,573 | | | Due from other affiliates | 608,824 | | | Due from Other US Affiliates | 25,597 | | | Due to other affiliates | | 2,074 | | Subordinated debt (note 15) | | 27,000,000 | During the year ended March 31, 2024, the Company earned investment banking revenue from transactions in which it jointly participated with other foreign affiliates of \$1,613,658. Other types of intercompany transactions include reimbursements or payments for invoices paid on behalf of or by affiliates. Balances due from/to 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 CGC, CGAL and CGL (Note 16) the Company has recorded an amount of \$2,776,797 on the Consolidated Statement of Financial Condition in respect of trades with fails to receive/payables to customers and fails to deliver/receivables from customers and, as such, are unsettled. | Total | 1,613,658 | 4,362,206 | |--------------------------------------------|-----------------------------|--------------------| | Cross border mergers and acquisitions fees | 752,348 | 2,165,451 | | Cross border underwriting fees | 861,310 | 2,196,755 | | | Received from
affiliates | Paid to affiliates | {25}------------------------------------------------ ## **14. REVENUES FROM CONTRACTS WITH CUSTOMERS** The Company's revenue from contracts with customers which are subject to ASC 606, Revenue from Contracts with Customers ("ASC 606") consists of commissions, investment banking revenues and affiliate services income. The Company disaggregates revenues from contracts with customers by type of service in the table below. The Company's revenues from contracts with customers which are subject to ASC 606, Revenue from Contracts with Customers, were comprised of the following for the year ended March 31, 2024: | Total Commissions and fees | | \$61,680,345 | |---------------------------------------|-----------------------------|---------------| | Other commissions | | 3,840,877 | | Futures clearing commissions | | 610,708 | | Option commissions | | 8,037,478 | | Equity commissions | | \$49,191,282 | | Commissions and fees: | | | | Total Investment banking | | \$120,992,484 | | Total Advisory fees | | \$96,271,049 | | | Retainer fees | 1,662,500 | | | Mergers & acquisitions | 94,608,549 | | Advisory fees | | | | Total Underwriting fees | | \$24,721,435 | | | ATM fees | 5,816,548 | | | Private placement fees | 9,989,219 | | | IPO and follow on offerings | \$8,915,668 | | Underwriting fees | | | | Investment banking | | | | Revenues from Contract with Customers | | | ### **15. 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, 2025. 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 NFA is thus available for computing regulatory net capital under the SEC uniform net capital rule (Note 16). To the extent that this loan is required for the Company's continued compliance with minimum net capital requirements, it may not be repaid. {26}------------------------------------------------ ### **16. 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, 2024, the Company had net capital of \$29,088,795 which was \$28,088,795 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 therules 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 customerrelated 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 CGC, CGAL and CGL, the Company is exempt from Rule 15c3-3 pursuant to 15c3- 3(k)(2)(i). The Company is also filing an exemption report because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 amendments to 17 C.F.R. § 240.17a-5. " ### **17. 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 30, 2024, the date that the Company's financial statements are issued. {27}------------------------------------------------ # **SUPPLEMENTAL INFORMATION** {28}------------------------------------------------ ### **Canaccord Genuity LLC Computation of Net Capital under SEC Rule 15c3-1 March 31, 2024** | Net Capital | | | |----------------------------------------------------------------|---------------|---------------| | Member's equity | \$129,449,345 | | | Subordinated borrowings | 27,000,000 | \$156,449,345 | | | | | | Non-allowable assets: | | | | Investment Banking Receivables | 3,071,615 | | | Other Receivables | 1,695,082 | | | Fixed Assets | 9,412,639 | | | Due From affiliates | 35,200,606 | | | Prepaid Assets | 1,818,094 | | | Restricted Cash | 2,060,456 | | | Non Marketable Equities per SEC rules | 6,791,645 | | | Non Marketable Fixed Income per SEC rules | 8,758,101 | | | Perishing unsecured debit | 1,577 | 68,809,815 | | Stock-Based Compensation | 47,246,195 | | | Aged Fails Trades | 73,830 | 47,320,025 | | Net capital before haircuts | | 40,319,505 | | Haircuts: | | | | Stocks | 6,316,842 | | | Fixed Income | 3,757,590 | | | Other | 1,156,278 | 11,230,710 | | Net capital | | \$29,088,795 | | | | | | Computation of alternate net capital requirement | | | | Net capital | | \$29,088,795 | | Net Capital requirement of reporting broker or dealer (greater | | | | of 2% of aggregate debit items as defined, and \$1,000,000) | | 1,000,000 | | Excess net capital | | \$28,088,795 | | Reconciliation of Equity per Audited Financial | | | | Equity per Audited Financial Statements | | \$82,203,150 | | Equity per March 31, 2024 FOCUS as amended | | \$129,449,345 | | Difference | | \$47,246,195 | | CGGI Stock Held by Trust | | \$47,246,195 | | | | 26 Page | {29}------------------------------------------------ The difference of \$47,246,195 in Equity per the Audited Consolidated Financial Statements and the March 31,2024 Focus Report as amended is because the Audited Consolidated Financial Statements are prepared on the basis of consolidating Canaccord Genuity LLC and the rabbi trust, a variable interest entity of the Company (see note 10) and the March 31,2024 Focus Report as amended reflects the financial position of Canaccord Genuity LLC on an unconsolidated basis. The minimum net capital required by the CFTC equivalent to the 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 amountsincluded in the Company's March 31, 2024 amended unaudited FOCUS report filed on May 30, 2024. {30}------------------------------------------------ Schedule II # **Canaccord Genuity LLC** # Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3 Under the Securities Exchange Act of 1934 ### March 31, 2024 | Credit balances: | | |----------------------------------------------------------------------------|---------| | Free credit balances and other credit balances in customers' | | | security accounts | \$
0 | | Customers' securities failed to receive | 0 | | Credit balances in firm accounts which are attributable to principal | | | sales to customers | 0 | | Total credits | 0 | | | | | Debit balances: | | | Securities borrowed to effectuate short sales by customers and securities | | | borrowed to make delivery on customers' securities failed to deliver | 0 | | Failed to deliver of customers' securities not older than 30 calendar days | 0 | | Aggregate debit items | 0 | | Less: 3% for alternative method | 0 | | Total debits | 0 | | Excess of total credits over total debits | \$
0 | | | | | Amount on deposit in "Reserve Bank Account" | \$
0 | | Amount of deposit (or withdrawal) | 0 | | New amount in Reserve Bank Account after adding deposit or subtracting | | | withdrawal | \$ | | | | There are no material differences between the above computation and the corresponding computation included in the Company's unaudited Form X-17a-5 filing dated May 30, 2024. {31}------------------------------------------------ # Information for Possession or Control Requirements Pursuant to Rule 15c3-3 Under the Securities Exchange Act of 1934 ### March 31, 2024 - 1. Customers' fully paid securities and excess margin securities not in the respondent's possession or control as of the report date (for which instructions to reduce to possession or control had been issued as of the report date) but for which the required action was not taken by respondent within the time frames specified under Rule 15c3-3 None Number of items – 0 2. Customers' fully paid securities and excess margin securities for which - instructions to reduce to possession or control had not been issued as of the report date, excluding items arising from "temporary lags which result from normal business operations" as permitted under Rule 15c3-3 None Number of items – 0 There are no material differences between the above computation and the corresponding computation included in the Company's unaudited Form X-17a-5 filing dated May 30,2024. {32}------------------------------------------------ ![](_page_32_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 Material Inadequacies required by Commodity Futures Trading Commission Regulation 1.16 To the Member and Board of Directors of Canaccord Genuity LLC In planning and performing our audit of the consolidated financial statements and supplemental schedule (collectively "the financial statements") of Canaccord Genuity LLC (the "Company") as of and for the year ended March 31, 2024, in accordance with the standards of the Public Company Accounting Oversight Board (United States), we considered the Company's internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Company's internal control over financial reporting. Also, as required by Regulation 1.16 of the Commodity Futures Trading Commission ("CFTC"), we have evaluated the practices and procedures followed by the Company, including consideration of control activities for safeguarding customer and firm assets. This included 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 (as defined by CFTC Regulation 1.3), we did not evaluate the practices and procedures followed by the Company in making the following: - 1. The daily computations of the segregation requirements of Sections 4d(a)(2) and 4d(f)(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 over financial reporting and the practices and procedures referred to in the preceding paragraph. Two of the objectives of internal control over financial reporting 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 acquisition, use or disposition, and that transactions are being executed only in accordance with management's authorization and recorded as necessary to permit preparation of financial statements in conformity with U.S. 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 over financial reporting 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. {33}------------------------------------------------ ![](_page_33_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 and correct, 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 charged with governance. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's financial statements will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraphs and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses and therefore, material weaknesses may exist that were not identified. Given these limitations, during our audit, we did not identify any deficiencies in internal control over financial reporting or control activities for safeguarding customer and firm assets that we consider to be a material weakness as of or during the year ended March 31, 2024. 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 evaluation, we believe that the Company's practices and procedures, as described in the second paragraph of this report, were adequate as of March 31, 2024, to meet the CFTC's objectives. This communication is intended solely for the information and use of management, Board of Directors, others within the organization, the CFTC, NFA and 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 30, 2024 {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 ### Report of Independent Registered Public Accounting Firm To the Board of Directors 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 (k): (2)(i) and (2)(ii) (the "exemption provisions") - 2. The Company met the identified exemption provisions of §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: (1) proprietary trading; (2) receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients, referring securities and futures transactions to other broker-dealers, and providing financial advisory services to clients; (3) participating in distributions of securities as underwriter, selling group participant, or through private placement; and (4) receiving fees for providing securities research to clients and the Company (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers; (2) did not carry accounts of or for customers; and (3) 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. 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 30, 2024 {35}------------------------------------------------ ![](_page_35_Picture_0.jpeg) #### Canaccord Genuity LLC. 535 Madison Avenue New York, NY 10022 ### **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)(2): (i) and (ii). - 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: - (1) proprietary trading; - (2) receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients, referring securities and futures transactions to other broker- dealers, and providing financial advisory services to clients; - (3) participating in distributions of securities as underwriter, selling group participant or through private placement; and - (4) receiving fees for providing securities research to clients and the Company: \_\_\_\_\_\_\_ - (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers; - (2) did not carry accounts of or for customers; and - (3) did not carry PAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year without exception. Canaccord Genuity LLC 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 30, 2024 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.