# JAMES T. BORELLO & CO. X-17A-5 (2019-11-26) — Broker-dealer annual report - Company: JAMES T. BORELLO & CO. - Form: X-17A-5 - Filed: 2019-11-26 - Period: 2019-09-30 - Accession: 0000871185-19-000001 - CIK: 871185 - File #: 8-43398 - Material weakness: No - Auditor: Lerner & Sipkin CPAs, LLP - Auditor location: New York, NY - Contact: Daniel J. Borello - Phone: 847-426-0200 - Signed by: Daniel J. Borello (Vice President) Original filing: https://www.sec.gov/Archives/edgar/data/871185/000087118519000001/stmnt_fin_con_notes.pdf --- {0}------------------------------------------------ ## JAMES T. BORELLO & CO. # NOTES TO FINANCIAL STATEMENTS ## YEAR ENDED SEPTEMBER 30, 2019 #### NOTE I - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLI CIES Organization - James T. Borello & Co. (the "Company") was incorporated in the state of Illinois on February 14, 1990. The Company is registered as a broker/deal er with the Securiti es and Exchange Commission (SEC) and IS a member of the Financial industry Regulatory Authority (FIN RA). The Company is also registered with the SEC as an investment advisor. The Company's principal business acti vities are the sale of seclll'ities and providing investment advice. Basis of Presentation - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). #### Revenue Recognition: Effecti ve October 1, 20 18, the Company adopted ASC Topic 606, *Revenue pom Contracts with Customers* ("ASC Topic 606"). The new revenue recognition guidance requires that an entity recognize revenue to depict the transfer of promised goods 0 1' services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods 01' services. The guidance requires an entity to follow a five step model to (a) identifY the contract(s) with a customer, (b) identi fy the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfi es a performance obligation. In determining the transaction price, an entity may include variabl e consideration only to the extent that it is probable that a significant reve rsal in the amount of cumulative revenue recogni zed would not occur when the uncertainty associated with the variable consideration is resolved. The Company applied the modifi ed retrospective method of adoption which resulted in no adjustment to retained earnings as of October I, 20 18. The new revenue recognition guidance does not apply to revenue associated with financial instruments, interest income and expense, leasing and inslll'ance contracts. Seclll'ities Transactions - Commission revenue and rel ated expense arising from securities transactions are recorded on the trade date basis, whi ch is the same business day as the transaction date. {1}------------------------------------------------ # .J AMES T. BORELLO & CO. # NOTES TO FINANCIAL STATEMENTS ## YEAR ENDED SEPTEMBER 30, 20 19 ## NOTE I - ORGAN IZATION AND SIGN IFICANT ACCOUNTING POLICIES - *(continued)* Accounting and Tax Preparation Fees - The Company records revenue for acco unting and tax preparation fees when the services are paid. Advisory Fees - Advisory fees are recogni zed based on the average dail y balance of the previous quarter and are paid in arrears. Allowance fo r Doubtfu l Accounts - The allowance fo r doubtful accou nts is determined on a spec i fi e identifica tion basis as a result of a case-by-case review of receivables. As of September 30, 20 19, there was no allowance for doubtful accounts recorded fo r commissions' receivable as the Company's management beli eves all amounts are full y collectible. Depreciation - Depreciation of furniture, equipment and automobile is prov ided fo r using vari ous acce lerated and straight line methods over fi ve and seven year periods. Concentration of Risk - The Company's cash is on deposit at one financial institution and the balance at times may exceed the federa lly insured limit. Due to the strong credit rating of this financial institution, the Company bel ieves it is not exposed to any signifi cant cred it risk to cash. Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that a ffect the reported amounts of assets and liabil iti es and disclosure of contingent assets and liabilities at the date of the l'inancial statements and the reported amounts of revenues and expenses during the reporting peri od. Actual results could differ from those estimates. ### NOTE 2 - INCOME TAXES The Company has elected S Corporation status fo r income tax purposes. Income taxes are therefore the responsibility of the Company's sole shareholder. The Company is subj ect to certain 1Ilinois income taxes. The Company accoun ts fo r any potenti al interest or penalties related to possible future li abilities fo r unrecogni zed income tax benefi ts as other expense. The Company is no longer subj ect to examination by tax authoriti es for federal, state or local income taxes for peri ods before 201 5. {2}------------------------------------------------ # JAMES T. BORELLO & CO. ### NOTES TO FINANCIAL STATEMENTS ## YEAR ENDED SEPTEMBER 30, 2019 #### NOTE 3 - RETIREMENT PLAN The Company sponsors a 40 I (k) profit sharing plan for all employees that have atta ined the age of 2 1 and completed 1,000 hours of service during a 12-month period. The Company wi ll make an annual Safe Harbor Non-elective 3% contribution that is 100% vested immediately. All other discretionary profit sharing contributions made by the Company vest over a six-year period based on years of eligible service. Contributions to the plan for the year ended September 30, 20 19 were \$408,605. ### NOTE 4 - CAS H BALANCE PENSION PLAN The Company sponsors a cash balance pension plan. The Plan is a noncontributory defi ned benefit plan and a tax-qualitied retirement plan subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Company funds retirement costs through a trust and complies with the applicable minimum fu nding requirements specified by ERISA. Participants' accrued benefits vest 100% after three years of eligible service and are based on accumulation account balances, which are maintained for each individual. Participants receive an annual pay credit up to 80% of their compensation and a monthly interest credit at a fixed rate of 5% compounded annually. The Company expensed \$7,086 of contributions to the plan fo r the year ended September 30, 20 19. ### NOTE 5 - NET CAPITAL REQU IREMENTS As a registered broker/dealer and member of FINRA, the Company is subject to the Uni form Net Capital Rule, whi ch requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 1500%. At September 30, 20 19, the Company's net capital and required net capital were \$54 1,725 and \$25,000 respective ly. The ratio of aggregate indebtedness to net capital was 27%. #### NOTE 6 - RELATED PARTY During the year ended September 30, 20 19, the Company paid \$78,000 in rent for occupancy of its premises to an entity owned by the Company's sole shareholder and other re lated parties. No written lease agreement exists between the Company and this entity. In addition, this shareholder is a registered representative of the Company and is responsible for a sign ifi cant portion of the Company's revenue. The shareholder is not compensated based on a percentage of the revenue produced, but receives a salary and distributions. {3}------------------------------------------------ # JAMES T. BORELLO & CO. ## NOTES TO FINANCIAL STATEMENTS ## YEAR ENDED SEPTEMBER 30, 2019 ### NOTE 7 - CASH SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS The Company has a bank account designated as a Special Bank Account for the Exclusive Benefit of Customers pursuant to Rule 15c3-3 of the SEC. At September 30, 20 19, this special bank account had a zero balance. ### NOTE 8 - FURNITURE AND EQUIPMENT Furniture and equipment at September 30, 20 19 consists of: | Furniture & fixtures | \$
,102
191 | |--------------------------------|-------------------| | Office equipment | 138,934 | | Total | 330,036 | | Less: accumulated depreciation | 290,126 | | Net | \$
39,9
10 | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.