# COMERICA SECURITIES,INC. X-17A-5 (2021-03-02) — Broker-dealer annual report - Company: COMERICA SECURITIES,INC. - Form: X-17A-5 - Filed: 2021-03-02 - Period: 2020-12-31 - Accession: 0000781875-21-000003 - CIK: 781875 - File #: 8-35001 - Material weakness: No - Auditor: Ernst & Young LLC - Auditor location: Dallas, TX - Contact: Rhonda Brna - Phone: 313-222-0232 - Signed by: C. Scotto Divetta (COO) Original filing: https://www.sec.gov/Archives/edgar/data/781875/000078187521000003/comericasec2020public.pdf --- {0}------------------------------------------------ ![](_page_0_Picture_0.jpeg) # **Comerica Securities, Inc. Statement of Financial Condition December 31, 2020** 411 W. Lafayette, Detroit MI 48226 800-232-6983 Securities products and services are offered through Comerica Securities, Inc., which is a broker/dealer, federally Registered Investment Advisor, member FINRA/SIPC and subsidiary of Comerica Bank. Insurance products are offered through subsidiaries of Comerica Bank, including Comerica Insurance Services, Inc. and its affiliated insurance agencies. Securities and insurance products are not insured by the FDIC or any government agency; are not deposits or other obligations of, or guaranteed by Comerica Bank or any of its affiliates; and are subject to investment risks, including possible loss of the principal invested. Historical yields are not indicative of future performance. Insurance products are solely the obligation of the issuing insurance company; are not guaranteed by any person soliciting the purchase of or selling the policies; and Comerica is not obligated to provide benefits under the insurance contract. Not all products available in all states. Variable annuities are made available through Comerica Securities, Inc. Comerica Securities, Inc. and its affiliates do not provide tax advice. Please consult a tax advisor regarding any tax issues. {1}------------------------------------------------ # Statement of Financial Condition Year Ended December 31, 2020 ### **Contents** | Report of Independent Registered Public Accounting Firm 1 | | |-----------------------------------------------------------|--| | | | | | | | Statement of Financial Condition 2 | | | Notes to Financial Statements 3 | | {2}------------------------------------------------ ![](_page_2_Picture_0.jpeg) Ernst & Young LLP One Victory Park Suite 2000 2323 Victory Avenue Dallas, TX 75219 Tel: +1 214 969 8000 Fax: +1 214 969 8587 ey.com # Report of Independent Registered Public Accounting Firm To the Shareholder and the Board of Directors of Comerica Securities, Inc. #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Comerica Securities, Inc. (the Company) as of December 31, 2020 and the related notes (the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company at December 31, 2020, in conformity with U.S. generally accepted accounting principles. #### **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 1992. March 1, 2021 {3}------------------------------------------------ #### Statement of Financial Condition #### December 31, 2020 | Assets | | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------| | Cash and cash equivalents | \$
44,359,458 | | Cash segregated for the benefit of customers | 1,001,009 | | Equity securities | 51,062 | | Clearing deposit held at clearing organization | 500,000 | | Receivables from brokers, dealers and clearing organizations | 2,508,184 | | Receivables from affiliates | 1,095,107 | | Premises, equipment and software, net of accumulated | | | depreciation of \$5,218,698 | 120,395 | | Deferred tax assets | 1,084,181 | | Other assets | 1,026,994 | | Total assets | \$
51,746,390 | | Liabilities and shareholder's equity
Liabilities:
Payables to affiliates
Payables to customers
Accrued expenses and other liabilities
Total liabilities | \$
5,957,079
13,083
4,006,223
9,976,385 | | Shareholder's equity:
Common stock - \$1 par value:
50,000 shares authorized, issued and outstanding
Additional paid-in capital
Retained deficit
Total shareholder's equity
Total liabilities and shareholder's equity | \$
50,000
47,175,440
(5,455,435)
41,770,005
51,746,390 | *See accompanying notes.* {4}------------------------------------------------ # Notes to Financial Statements December 31, 2020 #### **1. Organization** Comerica Securities, Inc. (the Company) is a broker/dealer, a federally Registered Investment Advisor, and a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. The Company provides services to retail and institutional clients and may participate in firm commitment underwritings as a syndicate member. The Company operates as one reportable segment and is a wholly owned, indirect subsidiary of Comerica Incorporated (the Corporation). #### **2. Significant Accounting Policies** The following summarizes the significant accounting policies of the Company applied in the preparation of the accompanying financial statements. #### **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 reported amounts in the financial statements and accompanying notes. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from those estimates. #### **Cash and Cash Equivalents** The Company considers cash in commercial bank accounts and money market investments with maturity of three months or less when purchased to be cash and cash equivalents. Money market investments are held in listed money market funds and are reported at fair value. #### **Cash Segregated for the Benefit of Customers** Cash is segregated in an unaffiliated special reserve account for the exclusive benefit of customers pursuant to federal regulations under Rule 15c3-3(e) of the Securities and Exchange Commission (SEC). {5}------------------------------------------------ # Notes to Financial Statements (continued) #### **2. Significant Accounting Policies (continued)** #### **Equity Securities** Equity securities are recorded at fair value on a recurring basis. #### **Clearing Deposit Held at Clearing Organization** Cash is held in a deposit account at the Company's clearing organization pursuant to a clearing agreement. #### **Premises, Equipment and Software** Premises, equipment and software are carried at historical cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives are generally three to eight years for equipment and software. Capitalized software includes purchased software and capitalizable application development costs associated with internally-developed software and was fully amortized as of December 31, 2020. #### **Revenue Recognition** The Company's revenues from contracts with customers may be recognized when services are completed or as they are rendered, although contracts are generally short-term by nature. Services provided over a period of time are typically transferred to customers evenly over the term of the contracts and the corresponding revenue is recognized as services are provided. Contract receivables are included in receivables from brokers, dealers and clearing organizations on the Statement of Financial Condition. Payment terms vary by services offered, and the timing between completion of performance obligations and payment is typically not significant. #### **Income Taxes** The Company is included in a consolidated federal income tax return with the Corporation. The Company computes income tax expense and settles with the Corporation on the same basis as if the Company had filed a separate federal income tax return. The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences {6}------------------------------------------------ # Notes to Financial Statements (continued) #### **2. Significant Accounting Policies (continued)** between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. #### **3. Fair Value Measurements** Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction as of the measurement date. The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Equity securities and money market investments are recorded at fair value on a recurring basis. The Company had no liabilities that require fair value measurement as of December 31, 2020. Financial instruments are categorized into a three-level hierarchy based on the markets in which the instruments are traded and the reliability of the assumptions used to determine fair value. The valuation methodologies and key inputs used to measure financial instruments recorded at fair value are described below: - Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets, such as stocks, exchange-traded funds, mutual fund shares and negotiable certificates of deposit. Money market investments held in listed money market funds and reported in cash and cash equivalents on the Statement of Financial Condition are included in Level 1. - Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are less active and modelbased valuation techniques for which all significant assumptions are observable in the market. This category includes state and municipal securities, corporate debt securities and residential mortgage-backed securities. - Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset. Valuation techniques include use of discounted cash flow models and similar techniques. {7}------------------------------------------------ # Notes to Financial Statements (continued) #### **3. Fair Value Measurements (continued)** All financial assets were recorded at fair value on a recurring basis at December 31, 2020. The following table presents the recorded amount of assets measured at fair value on a recurring basis at December 31, 2020: | | Level 1 | TOTAL | |------------------------------|--------------|--------------| | Money market investments (a) | \$37,013,658 | \$37,013,658 | | Equity securities | \$51,062 | \$51,062 | | Total assets at fair value | \$37,064,720 | \$37,064,720 | | | | | a) Included in cash and cash equivalents in the Statement of Financial Condition. There were no transfers of assets recorded at fair value on a recurring basis into or out of Level 3 fair value measurements during the year ended December 31, 2020. No Level 2 or Level 3 assets were held at December 31, 2020. #### **4. Related-Party Transactions** In the normal course of business, the Company engages in transactions with related parties, primarily Comerica Bank and the Corporation. Comerica Bank also pays certain expenses on behalf of the Company and is subsequently reimbursed for such payments. Payables to affiliates of \$5,957,079 at December 31, 2020 included amounts due to Comerica Bank and the Corporation of \$5,597,651 and \$359,428, respectively. Receivables from affiliates totaled \$1,095,107 at December 31, 2020 and included current tax receivable and other receivables due from Comerica Bank. The Company has a \$10 million secured line of credit with Comerica Bank. Interest is charged on the short-term borrowings under the line at a variable rate based on the federal funds rate. There were no short-term borrowings outstanding at December 31, 2020. #### **5. Financial Instruments with Off-Balance Sheet Risk** In the normal course of business, the Company enters into various commitments to purchase securities from underwriters and sell such securities to customers. These commitments may have settlement terms up to 45 days. These transactions are not reflected in the Company's Statement of Financial Condition. They are conducted on a "when, as, and if-issued" basis and, as such, there is no obligation to the seller or the buyer if the securities are not issued. However, credit risk results from the possible inability of the purchaser to take delivery of issued securities in accordance with {8}------------------------------------------------ # Notes to Financial Statements (continued) #### **5. Financial Instruments with Off-Balance Sheet Risk (continued)** the agreement and, to the extent open purchase commitments exceed sales commitments, market risk exists related to any price movement between the time of purchase and the sale date. At December 31, 2020, there were approximately \$2,230,000 of outstanding commitments to purchase securities and \$2,230,000 of outstanding commitments to sell securities. #### **6. Net Capital Requirements** As a registered broker/dealer, the Company is subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1). Based on the provisions of this rule, the Company must maintain minimum net capital, as defined, equivalent to the greater of \$250,000 or 1/15th of aggregate indebtedness, as defined. At December 31, 2020, net capital was \$33,639,600 and required net capital was \$660,863. The ratio of aggregate indebtedness to net capital (which may not exceed 15 to 1) was 0.2947 to 1. #### **7. Income Taxes** The principal components of the deferred tax asset and liabilities were as follows: #### **Deferred balance** | Deferred tax asset | \$1,112,194 | |-------------------------------------------------|-------------| | Valuation allowance | 0 | | Net deferred tax asset | 1,112,194 | | Deferred tax liability | (28,013) | | Net deferred tax asset (deferred tax liability) | \$1,084,181 | The net deferred tax asset at December 31, 2020 primarily consists of allowance for depreciation, contingent liabilites and deferred compensation. #### **8. Commitments and Contingencies** The Company recognizes liabilities for contingencies when analysis indicates it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company is subject to various pending or threatened legal proceedings arising out of the normal course of business or operations. The Company cannot state the eventual outcome of these matters. Based on current knowledge and after consultation with legal counsel, management believes that current reserves are adequate, and the amount of any incremental liability arising from these matters is not {9}------------------------------------------------ # Notes to Financial Statements (continued) #### **8. Commitments and Contingencies (continued)** expected to have a material adverse effect on the Company's financial condition, results of operations or cash flows. For matters where a loss is not probable, the Company has not established legal reserves. Based on current knowledge, expectation of future earnings and after consultation with legal counsel, the Company believes the maximum amount of reasonably possible losses would not have a material adverse effect on the Company's financial condition, results of operations or cash flows. Depending on future developments, it is possible that the ultimate resolution of these matters may be material to the Company's financial condition, results of operations or cash flows. As a participant in underwriting syndicates, the Company may become contingently liable for its prorated portion of any trading loss assumed by the syndicate due to the syndicate's remarketing obligations arising with respect to an offering. At December 31, 2020, the Company included a reserve of \$2,800,000 related to an ongoing customer matter as part of accrued expenses and other liabilities on the Statement of Financial Condition and other expenses on the Statement of Income. Management believes that current reserves related to this matter are adequate in the event of an adverse outcome. The Company had no other contingent liabilities or commitments as of December 31, 2020. {10}------------------------------------------------ The audited financial statement is available for examination at the principal office of Comerica Securities: 411 W. Lafayette, Detroit, Michigan 48226 and at the Chicago Regional Office of the Securities and Exchange Commission. The internal control over compliance report is available for examination at the principal office of Comerica Securities: 411 W. Lafayette, Detroit, Michigan 48226 and at the Chicago Regional Office of the Securities and Exchange Commission. A copy of statement of financial condition will be sent free of charge upon request. To make a request, please call Comerica Securities at 800-232-6983. Securities products and services are offered through Comerica Securities, Inc., which is a broker/dealer, federally Registered Investment Advisor, member FINRA/SIPC and subsidiary of Comerica Bank. Insurance products are offered through subsidiaries of Comerica Bank, including Comerica Insurance Services, Inc. and its affiliated insurance agencies. Securities and insurance products are not insured by the FDIC or any government agency; are not deposits or other obligations of, or guaranteed by Comerica Bank or any of its affiliates; and are subject to investment risks, including possible loss of the principal invested. Historical yields are not indicative of future performance. Insurance products are solely the obligation of the issuing insurance company; are not guaranteed by any person soliciting the purchase of or selling the policies; and Comerica is not obligated to provide benefits under the insurance contract. Not all products available in all states. Variable annuities are made available through Comerica Securities, Inc. Comerica Securities, Inc. and its affiliates do not provide tax advice. Please consult a tax advisor regarding any tax issues. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.