# DST MARKET SERVICES, LLC X-17A-5 (2020-03-02) — Broker-dealer annual report - Company: DST MARKET SERVICES, LLC - Form: X-17A-5 - Filed: 2020-03-02 - Period: 2019-12-31 - Accession: 0000842730-20-000007 - CIK: 842730 - File #: 8-40530 - Material weakness: No - Auditor: PricewaterhouseCoopers, LLP - Auditor location: Chicago, IL - Contact: Kim Chapman - Phone: 612-238-1514 - Signed by: Todd Stucky (Director of Finance, FinOP) Original filing: https://www.sec.gov/Archives/edgar/data/842730/000084273020000007/DSTMS2019STMTFinCond.pdf --- {0}------------------------------------------------ # DST Market Services, LLC Statement of Financial Condition December 31, 2019 {1}------------------------------------------------ UNITEDSTATES SECURITIES ANDEXCHANGE COMMISSION Washington, D.C. 20549 # ANNUAL AUDITED REPORT FORM X-17A-5 PART III | OMB Number: | 3235-0123 | |-------------|---------------------------| | Expires: | August 31, 2020 | | | Estimated average burden | | | hours per response 12.00 | | | | OMB APPROVAL | SEC FILE NUMBER | | |-----------------|--| | 8-40530 | | FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Convition II. | | | Securities Exchange Act of 1954 and Rule 17a-5 Thereunder | | |------------------------------------------------------------------------------------------------|--------------------------------------------------------|-----------------------------------------------------------|------------------------------------------------| | REPORT FOR THE PERIOD BEGINNING 01/01/2019 | | AND ENDING 12/31/2019 | | | MM/DD/YY | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | NAME OF BROKER-DEALER: DST Market Services, LLC | | | OFFICIAL USE ONLY | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
920 2nd Ave S Suite 1500 | | | Firm I.D. No. | | | (No. and Street) | | | | Minneapolis | MN | 55402 | | | (City) | (State) | (Zip Code) | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | B. ACCOUNTANT IDENTIFICATION | | 612-238-1548
(Area Code - Telephone Number) | | | | | | | | | | | | PricewaterhouseCoopers LLP | (Name – if individual, state last, first, middle name) | | | | One North Wacker | Chicago | | 60606 | | (Address)
CHECK ONE: | (City) | (State) | (Zip Code) | \*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and the annual report over of the exemption. See Section 240 incoment public accountant SEC 1410 (11-05) Potential persons who are to respond to the collection of Potential porcono Who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OM {2}------------------------------------------------ # OATH OR AFFIRMATION | I Todd Stucky | and more and more and manness , swear (or affirm) that, to the best of | | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------| | DST Market Services, LLC | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of | , as | | of February 28 | , 20 20 ___ , are true and correct. I further swear (or affirm) that | | | classified solely as that of a customer, except as follows: | neither the company nor any partner, principal officer or director has any proprietary interest in any account | | | | Signature
Director of Finance, FINOP
Title | | | Notary Public
This report ** contains (check all applicable boxes):
(a) Facing Page. | Erin E Christensen
Notary Public, State of Wisconsin | | | (b) Statement of Financial Condition.
of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
(d) Statement of Changes in Financial Condition.
(e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
(g) Computation of Net Capital.
(h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. | (c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement
(i) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3-1 and the | | | consolidation.
(1) An Oath or Affirmation.
(m) A copy of the SIPC Supplemental Report. | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3.
(k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of
(n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | | \*\* For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). {3}------------------------------------------------ # DST Market Services, LLC Table of Contents December 31, 2019 | Report of Independent Registered Public Accounting Firm | Page
1 | |----------------------------------------------------------|-----------| | Financial Statement:
Statement of Financial Condition | 2 | | Notes to the Financial Statement | 3 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) # Report of Independent Registered Public Accounting Firm To the Board of Managers and Member of DST Market Services, LLC ## Opinion on the Financial Statement – Statement of Financial Condition We have audited the accompanying statement of financial condition of DST Market Services, LLC (the "Company") as of December 31, 2019, including the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. # Basis for Opinion The 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 of this financial statement 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 presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. February 28, 2020 We have served as the Company's auditor since 2001. {5}------------------------------------------------ # DST Market Services, LLC Statement of Financial Condition December 31, 2019 | Assets | | |--------------------------------------------------|------------------| | Cash and cash equivalents | \$
7,460,049 | | Accounts receivable, net of allowance of \$1,059 | 12,204,310 | | Other assets and prepaid expenses | 9,672,932 | | Property and equipment, net | 500,515 | | Intangible assets, net | 1,590,104 | | Goodwill | 4,457,008 | | Total assets | \$
35,884,918 | | | | | Liabilities and Member's Interest | | | Accounts payable | \$
397,754 | | Accrued liabilities | 2,775,819 | | Other liabilities | 334,895 | | Total liabilities | 3,508,468 | | Member's interest | | | Member's capital | 17,221,298 | | Retained earnings | 15,155,152 | | Total member's interest | 32,376,450 | | Total liabilities and member's interest | \$
35,884,918 | | | | The accompanying notes are an integral part of this financial statement. {6}------------------------------------------------ 1. Organization and Business DST Market Services, LLC ("we", "our", "us" or the "Company") is a wholly–owned subsidiary of DST Systems, Inc. ("DST" or "Parent"), which is a wholly-owned subsidiary of SS&C Technologies Holdings, Inc. ("SS&C"). We are a broker-dealer formed under the Securities Exchange Act of 1934 and are registered with the Securities and Exchange Commission ("SEC"). We provide mutual fund shareowner recordkeeping services to brokerage firms who perform recordkeeping functions in a subaccounting arrangement for mutual fund accounts that have been sold by the broker-dealer's financial advisors. We provide a platform for facilitating the transfer of rollover transactions from individual qualified retirement plan accounts to individual retirement accounts and the processing and servicing of alternative investments for broker-dealers. 2. Summary of Significant Accounting Policies The preparation of financial statements in conformity with accounting principles generally accepted in the We are a member of the Financial Industry Regulatory Authority ("FINRA") and the Securities Investor Protection Corporation ("SIPC"). ### Use of estimates United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. of the clients. Accounts receivable, net resulting from contracts with customers were \$11,794,633 at Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an ### Cash and cash equivalents Short-term liquid investments with original maturities of 90 days or less are considered cash equivalents. Due to the short-term nature of these investments, carrying value approximates market value. ### Accounts receivable Accounts receivable are stated at the amount billed to clients. We provide an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Delinquent receivables may be written off based on specific circumstances December 31, 2019. Level 1 - Unadjusted quoted prices in active markets for identical instruments that the reporting entity has Level 2 - Prices or valuations based on other significant observable inputs (including quoted prices for Level 3 - Prices or valuations based on significant unobservable inputs (including the entity's own ### Fair value of financial instruments orderly transaction between market participants at the measurement date. Various valuation inputs are used to determine fair value according to a three-level hierarchy. Such inputs are defined broadly as follows: - the ability to access at the measurement date. - similar securities, interest rates, etc.) for the instruments. - assumptions in determining fair value) for the instruments. {7}------------------------------------------------ The Company had no assets or liabilities measured on a recurring basis during the year or at December 31, 2019 which were deemed Level 1, Level 2 or Level 3 other than a Level 1 mutual fund of \$7,454,618 that is classified as cash and cash equivalents in the Statement of Financial Condition. Substantially all of the Company's financial assets and liabilities are carried at fair value or at amounts which, because of their short-term nature, approximate fair value. ### Property and equipment Property and equipment are recorded at cost with major additions and improvements capitalized. Furniture and fixtures, data processing and other equipment are depreciated using the straight-line method over the estimated useful lives, principally three to five years. Leasehold improvements are depreciated using the straight-line method over the lesser of the term of the lease or life of the improvement. We periodically review our property and equipment for possible impairment. useful life of our intangible assets is 16 years, of which 3.6 years are remaining. Goodwill will be tested In late December 2018, the Company made an election to be taxed as a single member Limited Liability Company (LLC) for federal income tax purposes effective January 1, 2018. We received acknowledgment from the IRS of this tax election in 2019 and, as such, the impacts of the conversion were recorded in 2019. deduction, gain, loss and credit are reported in the operations of DST Systems, Inc. DST Systems, Inc. is #### Goodwill and intangible assets Intangible assets represent customer relationships acquired through a business combination. The estimated for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. #### Income taxes As a single-member LLC, we are disregarded as an entity separate from our owner for income tax purposes. Hence, for federal income tax purposes, our assets and liabilities, as well as our items of income, included within the consolidated federal income tax return of SS&C. Our accounting policy is to not present an income tax provision for a single member LLC, as this presentation reflects the economic activity and obligations of the entity as the entity is disregarded for federal and state tax purposes. Furthermore, no formal tax-sharing arrangement exists with this entity, and this entity does not have any commitment or obligation to fund any tax liability of the member with its earnings. This accounting policy is consistent with how the income tax returns are prepared. The Company has performed an evaluation of subsequent events through February 28, 2020, which is the ### Share-based compensation We recognize expense related to SS&C restricted stock units and common stock options based on a Stock Compensation Recharge Agreement between us and SS&C. Pursuant to the terms of this agreement, we are charged an amount equivalent to the cost incurred by SS&C for equity awards related to our employees. #### Subsequent events date the financial statements were available to be issued. No subsequent events were identified which would require recognition or disclosure. {8}------------------------------------------------ 3. Property and Equipment The following table summarizes property and equipment and related accumulated depreciation at | | | DST Market Services, LLC | | |----|-----------------------------------------------------------------------------------------------|--------------------------|----------------------| | | Notes to the Financial Statement | | | | | December 31, 2019 | | | | 3. | Property and Equipment | | | | | The following table summarizes property and equipment and related accumulated depreciation at | | | | | December 31,
2019: | | | | | Leasehold improvements | \$ | 737,333 | | | Furniture and fixtures | | 116,772 | | | Accumulated depreciation | | 854,105 | | | | \$ | (353,590)
500,515 | | | | | | | | Property and equipment, net | | | | 4. | Other Assets
and Prepaid Expenses | | | We made certain transition assistance payments to customers in connection with entering into new customer agreements. These costs are deferred and amortized against revenue over the respective contract terms in proportion to revenues recognized. As of December 31, 2019, \$9,445,432 has been recorded as deferred costs and are included in Other assets and prepaid expenses in the Statement of Financial Condition. These costs are assessed for recoverability periodically based on the expected future cash flows from the contracts with the respective customers. No impairments were recorded for the year ended December 31, 2019. 5. Goodwill and Intangible Assets Our goodwill of \$4,457,008 at December 31, 2019 resulted from a business combination of TASS, LLC by DST in 2007, which was later merged into the Company. We test goodwill for impairment on an annual basis as of October 1st and at other times if a significant change in circumstances indicates it is more likely than not that the fair value of these assets has been reduced. Based on our 2019 annual goodwill impairment analysis performed using qualitative factors prescribed under ASC 350 (macroeconomic conditions, market and industry considerations, cost factors, our overall financial performance and other relevant entity-specific events), we concluded it was not more likely than not that the fair value of the business is less than the carrying value of the business. As such, no goodwill impairment was recorded for the year ended December 31, 2019. 6. Related Party Transactions We may contract with DST and affiliates of DST for certain administrative services including, but not We participated in certain services management programs, wherein cash disbursements are funded by Parent. At December 31, 2019, we had a receivable from Parent of \$409,677 and a payable to Parent of \$336,906 reflected in Accounts receivable and Accounts payable, respectively, in the Statement of Financial The following table summarizes intangible assets at December 31, 2019: | Customer relationships | \$
7,100,000 | | |--------------------------------|-----------------|--| | Less: accumulated amortization | 5,509,896 | | | Intangible assets, net | \$
1,590,104 | | #### Shared services limited to, information technology services, legal, accounting, tax and other various corporate support functions. Condition. These amounts are settled regularly throughout the year. {9}------------------------------------------------ ### Share-based compensation We participate in SS&C's share-based compensation plan and had outstanding share awards, primarily in the form of SS&C common stock options and SS&C restricted common stock units. 7. Commitments and Contingencies We adopted ASU Topic 842, Leases on January 1, 2019. ASU Topic 842 did not have a material impact on our financial statements. We lease office space under a non-cancelable operating lease, which expires in 2022. Total future minimum payments on our non-cancelable operating lease are as follows: | Future Minimum Lease Payments | Operating Leases | | | |-------------------------------|------------------|---------|--| | 2020 | \$ | 135,856 | | | 2021 | | 138,927 | | | 2022 | | 105,922 | | | Total lease payments | \$ | 380,705 | | We are involved in legal and regulatory proceedings arising in the normal course of our business. While the ultimate outcome of these proceedings cannot be predicted with certainty, it is the opinion of management, after consultation with legal counsel, that the final outcome in such proceedings, in the aggregate, would not have a material adverse effect on our financial condition, results of operations and cash flow. 8. Significant Estimates and Concentrations In the normal course of business, we enter into contracts that contain a variety of representations and warranties which provide general indemnifications. Our maximum exposure under these arrangements is unknown as the contracts refer to potential claims that have not yet occurred. However, management expects the risk of loss to be remote. Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following: ### Credit risk Cash balances which exceed Federal Deposit Insurance Corporation insurance coverage limits subject us to a concentration of credit risk. ### Current economic conditions Economic and financial market conditions could adversely affect the results of operations in future periods. Instability in the financial markets may significantly impact the volume of future sales, which could have an adverse impact on our future operating results. In addition, given the volatility of economic conditions, the values of assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments in allowances for accounts receivable that could negatively impact our ability to maintain sufficient liquidity. {10}------------------------------------------------ ### Reliability of systems The Company relies on service providers that are integral to its revenue generating activities, certain of which are affiliates of the Company. A disruption of services provided, such as connectivity, may have an impact on the financial results of the Company. 9. Regulatory requirements We are subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of a minimum net capital requirement. We have elected the alternative net capital method. This method establishes a minimum net capital requirement of the greater of \$250,000 or 2% of aggregate debits, pursuant to Rule 15c3-3. We had net capital at December 31, 2019 of \$3,981,224, which exceeded our net capital requirement by \$3,731,224. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.