# SAL EQUITY TRADING, GP X-17A-5 (2021-02-26) — Broker-dealer annual report - Company: SAL EQUITY TRADING, GP - Form: X-17A-5 - Filed: 2021-02-26 - Period: 2020-12-31 - Accession: 0000869101-21-000001 - CIK: 869101 - File #: 8-43174 - Material weakness: No - Auditor: EisnerAmper, LLP - Auditor location: New York, NY - Contact: Robert Sack - Phone: 610-617-2812 - Signed by: Robert C Sack (Treasurer) Original filing: https://www.sec.gov/Archives/edgar/data/869101/000086910121000001/saletsfc.pdf --- {0}------------------------------------------------ **UNITEDSTATES** SECURITIES AND **EXCHANGE** COMMISSION Washington, D.C. 20549 **0MB APPROVAL** 0MB Number: 3235-0123 Expires: October 31, 2023 **Estimated average burden** hours oer resoonse ...... 12.00 SEC FILE NUMBER s-43174 ## **ANNUAL AUDITED REPORT FORM X-17A-5 PARTIII** **FACING PAGE** **Information Required of Brokers** and **Dealers Pursuant to Section** 17 **of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder** | | 01/01 /20 | | 12/31/20 | |----------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|--------------|--------------------------------| | REPORT FOR THE PERIOD BEGINNING | MM/DDIYY | AND ENDING | --------
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MM/DD/YY | | | A. REGISTRANT IDENTIFICATION | | | | NAME OF BROKER-DEALER: SAL EQUITY TRADING, GP | | | OFFICIAL USE ONLY | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
401 CITY AVENUE, SUITE 220 | | | FIRM I.D. NO. | | | (No. and Street) | | | | BALACYNWYD | PA | | 19004 | | (City) | (State) | | (Zip Code) | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
ROBERT SACK | B. ACCOUNT ANT IDENTIFICATION | 610-617-2812 | (Area Code -Telephone Number) | | INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report•
EISNERAMPER, LLP | (Name - ifintlividuat, stale last, first, middle name) | | | | 733 THIRD AVENUE | NEW YORK | NY | 10017 | | {Address) | (City) | (Staie) | (Zip Code) | | CHECK ONE:
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Accountant not resident in United States or any of its possessions. | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | *\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported /Jy a statement of facts and circumstances relied 011 as the basis for the exemption. See Section 240. J 7a-5(e)(2)* > **Potential persons who are to respond to the collection** of Information contained In this form are not required to respond **unless the form displays a currently valid 0MB control number.** SEC 1410 (11-05) {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
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D (c) Statement of Income (Loss) or, if lhcre is other comp,ehensive income in tne perioa(s) presented, a Statement
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) Computatjon 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. | _E_B_T_RS_A_K C___________
1, __O_R | ___
_______ , swear (or affirm) that, to the best of | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------| | | S | | | | | | | | | | | | | | | | | | | | | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule I 5c3-3.
0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of
consolidation.
0 (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | This report "'* contains (check all applicable boxes):
0 (a) Facing Page.
0 (b) Statement of Financial Condition.
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0 (1) An Oath or Affirmation.
D (m) A copy of the SIPC Supplemental Report. | D (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule I 5c3-l and the | | ** For conditions of confidential treatment of certain portions of this filing, see section 240. J 7a-5(e)(3). | | | {2}------------------------------------------------ **(a general partncrshi1>)** **STATEMENT OF Fl�ANCIAL CONDITION** **December 31, 2020** {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Partners of SAL Equity Trading, GP #### *Opinion on the Financial Statement* We have audited the accompanying statement of financial condition of SAL Equity Trading, GP (the "Entity") as of December 31, 2020 and 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 Entity as of December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. #### *Basis for Opinion* This financial statement is the responsibility of the Entity's management. Our responsibility is to express an opinion on the Entity'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 Entity 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 presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Entity's auditor since 2010. EISNERAMPER LLP New York, New York February 23, 2021 {4}------------------------------------------------ ## **Statement of Financial Condition December 31, 2020** (dollars in thousands) | Assets | | |---------------------------------------------------|--------------| | Receivable from clearing broker | \$
7,165 | | Bond interest receivable | 38 | | Securities owned - at fair value | 10,118 | | Dividend receivable | 34 | | Accrued trading receivables | 4 | | Receivable from affiliates | 467 | | Exchange memberships - at cost (fair value \$417) | 573 | | Exchange shares - at cost (fair value \$1,821) | 131 | | Other assets | 161 | | Total assets | \$
18,691 | | Liabilities and partners' capital | | | Order execution payables | \$
93 | | Payable to affiliate | 15 | | Accrued expenses | 62 | | Total liabilities | 170 | | Partners' capital | 18,521 | | Total liabilities and partners' capital | \$
181691 | {5}------------------------------------------------ **Notes to Statement of Financial Condition December 31, 2020** (dollars in thousands) #### **NOTE A- ORGANIZATION** SAL Equity Trading, GP (the "Entity") is a registered broker-dealer with the Securities and Exchange Commission (the "SEC"). The Entity's designated examining regulatory authority is the Financial Industry Regulatory Authority, Inc. The Entity provides order execution services for affiliated registered broker-dealers. The Entity is owned 99.9% by SAL Equity Holding, LLC and 0.1% by SAL Equity Partner, LLC. #### **NOTE B - SIGNIFICANT ACCOUNTING POLICIES** The Entity records purchases and sales of securities and related revenues and expenses on a trade-date basis. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. The Entity maintains cash in a deposit account which, at times, may exceed federally insured limits. Depreciation of fixed assets is computed using the double-declining balance method over the estimated useful life of the asset. Revenue from contracts with customers consists of order execution services provided to affiliates. Each time the Entity executes an order, it has fulfilled all performance obligations, and therefore, recognizes and records the revenue associated with order execution on a trade date basis. Effective January 1, 2020, the Entity adopted Accounting Standards Codification ("ASC") Topic 326, Financial Instruments-Credit Losses ("ASC 326"). ASC 326 impacts the impairment model for certain financial assets measured at amortized cost by requiring a current expected credit loss ("CECL") methodology to estimate expected credit losses over the life of the financial asset, as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. Upon adoption of ASC 326, the Entity has determined that there are no expected credit losses using the prescribed CECL model. Receivable from clearing broker; the Entity has concluded that there are currently no expected credit losses based on the nature and contractual life or expected life of the financial assets held at the entity's clearing broker and clearing organizations. Certain trades and contracts are cleared through a centralized clearing organization and settled daily between the clearing organization and the entities' prime broker, therefore limiting the amount of unsettled credit exposure. The Entity continually monitors the capital adequacy of such organizations to ensure they are in compliance with respect to each of their regulatory mandated capital requirements. For bond interest receivable, no allowance for credit losses is recognized on accrued interest receivable that is presented separately from the related financial assets. It is the Entity's policy to write off accrued interest receivable against interest income when the related financial asset is placed on non-accrual status. This statement of financial condition has been prepared in conformity with accounting principles generally accepted in the United States of America, which require the use of estimates by management. {6}------------------------------------------------ #### **Notes to Statement of Financial Condition December 31, 2020** (dollars in thousands) #### **NOTE C - FAIR VALUE OF FINANCIAL INSTRUMENTS** The Entity measures its financial instruments in accordance with the Financial Accounting Standards Board Accounting Standards Codification Section for Fair Value Measurements. This codification section clarifies the definition of fair value financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. Fair Value Measurements establishes a fair value hierarchy and specifies that a valuation technique used to measure fair value shall maximize the use of observable inputs and minimize the use of unobservable inputs. The objective of a fair value measurement is to determine 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 (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under Fair Value Measurements are described below: - Level 1: Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Entity has the ability to access at the measurement date; - Level 2: Inputs that are observable for substantially the full term of the asset or liability (other than quoted prices for the specific asset or liability in an active market), including quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in a nonactive market, inputs other than quoted prices, and inputs derived principally from or corroborated by observable market data by correlation or otherwise; and - Level 3: Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity). As required by the Codification Section for Fair Value Measurements, financial instruments are classified within the level of the lowest significant input considered in determining fair value. Financial instruments classified within Level 3 whose fair value measurement considers several inputs may include Level 1 or Level 2 inputs as components of the overall fair value measurement. The table that follows sets forth information about the level within the fair value hierarchy at which the Entity's financial instruments are measured at December 31, 2020. {7}------------------------------------------------ #### **Notes to Statement of Financial Condition December 31, 2020** (dollars in thousands) #### **NOTE C -FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)** Assets measured at fair value: | Description | | Totals | Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1) | | Significant
Other
Observable
Inputs (Level 2) | |-------------------------------------------|---|-----------|----------------------------------------------------------------------------------|---|--------------------------------------------------------| | Debt Securities:
Government (Treasury) | | 10,118 \$ | | s | 10,118 | | (a) Exchange shares | S | 1 ,821 | 1,821 | | | | (b) Exchange memberships | | 417 | | | 417 | (a) Exchange shares reflected on the statement of financial condition at cost are valued in the above table at the last reported contracted sales price as of the valuation date. (b) Exchange memberships reflected on the statement of financial condition at cost are valued in the above table at either the last reported sales price as of the valuation date or at the mean between the last bid and last offer price as of the valuation date if the last reported sales price falls outside of this spread. Debt securities are generally valued using broker or dealer quotations or alternative pricing sources on the last business day of the year. #### **NOTE D - SECURITIES OWNED** Securities owned are summarized as follows: | | Securities
Owned | |-----------------|---------------------| | Debt securities | \$
10,118 | | | \$
10,118 | ### **NOTE E - RECEIVABLE FROM CLEARING BROKER AND CONCENTRATION OF CREDIT RISK** The clearing and depository operations for the Entity's securities transactions are provided by Merrill Lynch Professional Clearing Corp. At December 31, 2020, all of the securities owned and the amounts receivable from clearing broker reflected on the statement of financial condition are securities positions with and amounts due from this clearing broker. {8}------------------------------------------------ **Notes to Statement of Financial Condition December 31, 2020** (dollars in thousands) #### **NOTE F - RELATED PARTY TRANSACTIONS** The Entity is affiliated through common ownership with Susquehanna International Group, LLP rsIG") and Waves Licensing, LLC. SIG acts as a common payment agent for the Entity and various affiliates for various direct operating expenses. Included in payable to affiliates is \$4 related to these direct operating costs. The Entity had a licensing agreement with Waves Licensing, LLC. The agreement allowed the Entity to utilize Waves Licensing, LLC's intellectual property and research and development, of which Waves Licensing, LLC was the exclusive owner. As consideration for the license, the Entity paid an annual licensing fee equal to a percentage of the Entity's net trading profits, if any, as defined in the licensing agreement. No payable exists as of December 31, 2020. The agreement was cancelled on February 29, 2020. The Entity has entered into a sublicensing agreement with SIG. The agreement allows the Entity to utilize intellectual property and research and development, licensed by SIG from Wide Wing Financing LLC, an entity affiliated through common ownership, who is the exclusive owner. As consideration for the sublicense, the Entity pays an annual sublicensing fee equal to a percentage of the Entity's net trading profits, if any, as defined in the sublicensing agreement. Included in payable to affiliates are sublicensing fees to SIG amounting to \$11. The Entity executes trades for affiliated broker-dealers for which it receives a fee based on monthly order execution charges, plus a surcharge to cover other costs. As of December 31, 2020, these affiliates owed the Entity \$461 related to these fees. Because of their short-term nature, the fair values of the payable to and receivable from affiliates approximate their carrying amounts. The Entity and various other entities are under common ownership and control. As a result, management can exercise its discretion when determining which entity will engage in new or current business activities and/or trade new products. Therefore, the financial position presented herein may not necessarily be indicative of that which would be obtained had these entities operated autonomously. ## **NOTE G - EXCHANGE MEMBERSHIPS/SHARES** The amounts included in exchange memberships and exchange shares on the statement of financial condition represent ownership interests in the exchanges which provide the Entity with the right to conduct business on the exchanges. The exchange memberships and shares are recorded at cost on the statement of financial condition. Management believes there is no impairment to recognize on these exchange memberships and shares as of December 31, 2020. #### **NOTE H - FINANCIAL INSTRUMENTS AND RISK** Market risk represents the potential loss that can be caused by increases or decreases in the fair value of financial instruments resulting from market fluctuations. Interest rate risk is the risk that the fair value or future cash flows of fixed income or rate sensitive financial instruments will increase or decrease because of changes in interest rates. Generally, the value of fixed income securities will change inversely with changes in interest rates. As interest rates rise, the fair value of fixed income securities tends to decrease. Conversely, as interest rates fall, the fair value of fixed income securities tends to increase. This risk is generally greater for long-term securities than for short-term securities. {9}------------------------------------------------ **Notes to Statement of Financial Condition December 31, 2020** (dollars in thousands) #### **NOTE I - INCOME TAXES** No provision for federal income taxes has been made because the Entity is a partnership and, therefore, is not subject to federal income taxes. The Entity is currently not subject to state or local income taxes. At December 31 , 2020, management has determined that there are no material uncertain income tax positions. ## **NOTE J - NET CAPITAL REQUIREMENT** As a registered broker-dealer, the Entity is subject to the SEC's Uniform Net Capital Rule 1 5c3-1 . The Entity computes its net capital under the alternative method permitted by the rule, which requires it to maintain minimum net capital, as defined, of the greater of \$250 or an amount determinable based on the market price and number of securities in which the Entity is a market-maker, not to exceed \$1,000. As of December 31, 2020, the Entity had net capital of \$11,888, which exceeded its requirement of \$1,000 by \$10,888. #### **NOTE K - LITIGATION** On June 2, 2011, a lawsuit was filed (the "SLCFC Litigation") in the United States District Court for the Eastern District of Pennsylvania by Deutsche Bank Trust Company Americas, Law Debenture Trust Company of New York and Wilmington Trust Company (collectively, the "Plaintiffs"), in their capacities as successor indenture trustees for certain notes issued by Tribune Company ("Tribune"), against various former shareholders of Tribune which tendered their shares in connection with Tribune's 2007 leveraged buyout (the "LBO"), including the Entity and certain of its affiliates (the "Susquehanna Defendants"). The Plaintiffs allege that the payments by Tribune to the former shareholders in exchange for their Tribune shares in connection with the LBO constitute state law constructive fraudulent transfers. The Plaintiffs instituted at least fifteen other such lawsuits in various jurisdictions throughout the country. In 2011, the Judicial Panel on Multi-District Litigation transferred the action (and the FitzSimons case) to the United States District Court for the Southern District of New York (the �sDNY"). All of the former Tribune shareholders (including the Susquehanna Defendants) moved to dismiss the claims against them on various grounds. On September 23, 2013, the SONY granted this motion. Plaintiffs appealed this decision to the U.S. Court of Appeals for the Second Circuit (the "2nd Circuit"), which, on March 29, 2016, issued an opinion affirming dismissal of the claims albeit on different grounds. Plaintiffs next filed a petition for rehearing by the 2nd Circuit, which petition was denied. On September 9, 2016, Plaintiffs filed a petition for a writ of certiorari in the United States Supreme Court. On April 3, 2018, two Justices of the Un ted States Supreme Court issued a statement explaining that the Court might lack a quorum to decide the case and that consideration of the petition for certiorari would be deferred to afford the 2nd Circuit time to determine whether to recall its mandate and reconsider its opinion in light of a subsequent United States Supreme Court decision in another case. Following this, on May 5, 2018, the 2nd Circuit recalled its mandate in anticipation of further review by that court. On December 19, 2019, the same panel of the 2nd Circuit that had issued the March 2016 opinion once again affirmed the SDNY's dismissal of the claims. Plaintiffs again filed a petition for rehearing by the 2nd Circuit, which petition was denied on February 6, 2020. On July 6, 2020. plaintiffs once again filed a petition for a writ of certiorari in the United States Supreme Court, which petition remains pending. Accordingly, this case remains in its early stages. The Entity has been advised by counsel that an estimate for the range of possible loss cannot be determined at this time. The Entity believes that the allegations against it are without merit and intends to defend itself vigorously. No provision for any costs that may be incurred has been made in the accompanying statement of financial condition. On December 1 9, 2011, EGI-TRB LLC, an investor in Tribune in connection with the LBO, commenced an action in Illinois state court with the stated purpose of preserving its right of recovery related to the LBO. The plaintiff alleges that in the event that the defendants are found liable for a fraudulent transfer in connection with the LBO through other proceedings, the plaintiff is entitled to recover from defendants an amount equal to its investment in Tribune. The Susquehanna Defendants are not named defendants in this action. However, the complaint purports to name "John Doe Defendants" who allegedly received cash in exchange for their shares of Tribune stock in connection with the LBO. It is unknown whether the Susquehanna Defendants are John Doe Defendants or will be named as defendants in this action. During 2012, this action was removed to federal court and then transferred {10}------------------------------------------------ **Notes to Statement of Financial Condition December 31, 2020** (dollars in thousands) #### **NOTE K - LITIGATION (CONTINUED)** and consolidated, for pretrial purposes, with the SLCFC Litigation. Following its decision to grant the motion to dismiss in the SLCFC Litigation, the SDNY dismissed the complaint in this action. Plaintiffs' notice of appeal to the 2nd Circuit of this dismissal was consolidated with the similar appeal in the SLCFC Litigation. The subsequent history of this action is the same as for the SLCFC Litigation discussed above, including with respect to the plaintiffs' filing of a petition for a writ of certiorari in the United States Supreme Court, which petition remains pending. As with the SLCFC Litigation, this case remains in its early stages. The Susquehanna Defendants have been advised by counsel that an estimate for the range of possible loss cannot be determined at this time. The Susquehanna Defendants believe that any allegations against them would be without merit and intend to defend themselves vigorously. No provision for any costs that may be incurred has been made in the accompanying statement of financial condition. On November 1, 2010, the Official Committee of Unsecured Creditors (the "Committee"), which represents the bankruptcy estate of Tribune, filed suit in the United Slates Bankruptcy Court for the District of Delaware against former Tribune shareholders (including the Susquehanna Defendants), Tribune's former officers and directors, Tribune's financial advisors, Sam Zell and others who benefitted from the LBO (Official Comm. of Unsecured Creditors of Tribune Co. v. FitzSimons). Among other things, the Committee seeks to unwind the LBO by asserting that the buyout payments to the former Tribune shareholders (including the Susquehanna Defendants) constituted intentional fraudulent conveyances by Tribune. As discussed above, this case was transferred to the SONY and the claims in this action were transferred to a litigation trust. The former Tribune shareholder defendants in this action (including the Susquehanna Defendants) filed comprehensive threshold motions to dismiss. On January 6, 2017, the SONY granted the motion to dismiss, which included the only claim that was pending against the Susquehanna Defendants. In April 2019, the litigation trust filed a motion with the SONY to amend its complaint to add a constructive fraudulent transfer claim against the Susquehanna Defendants and other former Tribune shareholders. The SONY denied this motion. On July 12, 2019, the litigation trust appealed to the 2nd Circuit the SDNY's dismissal of its intentional fraudulent conveyance claims and its denial of leave to file a constructive fraudulent conveyance claim. This appeal remains pending before the 2nd Circuit. Accordingly, this case remains in its early stages. The Susquehanna Defendants believe that the allegations against them are without merit and intend to defend themselves vigorously. No provision for any costs that may be incurred has been made in the accompanying statement of financial condition. 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