# WATERMARK SECURITIES, INC. X-17A-5 (2022-02-28) — Broker-dealer annual report - Company: WATERMARK SECURITIES, INC. - Form: X-17A-5 - Filed: 2022-02-28 - Period: 2021-12-31 - Accession: 0000876660-22-000003 - CIK: 876660 - File #: 8-43902 - Type: Broker-dealer - Material weakness: No - Auditor: BDO - Auditor location: New York, NY - Contact: Michael Link - Phone: 212-451-1187 - Email: mlink@zweig-dimenna.com - Website: zweig-dimenna.com - Signed by: Michael Link (President) Original filing: https://www.sec.gov/Archives/edgar/data/876660/000087666022000003/x1221-sfcsec1.pdf --- {0}------------------------------------------------ # **Watermark Securities, Inc.** Statement of Financial Condition December 31, 2021 FILED PURSUANT TO RULE 17a-5(e)(3) AS A PUBLIC DOCUMENT {1}------------------------------------------------ # Watermark Securities, Inc. ### Contents | Facing Page to Form X-17A-5 | 2A | |---------------------------------------------------------|-----| | Affirmation of Officer | 2B | | Report of Independent Registered Public Accounting Firm | 3 | | Statement of Financial Condition | 4 | | Notes to Statement of Financial Condition | 5-9 | {2}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** PUBLIC 0MB APPROVAL 0 MB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 # **ANNUAL REPORTS FORM X-17 A-5 PART Ill** SEC FILE NUMBER 8-43902 **FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING \_\_\_\_ 11\_1\_12\_1 \_\_\_ AND ENDING \_\_ 1\_2\_/3\_1\_/2\_1 \_\_\_ \_ MWDDNY MWDDNY **A. REGISTRANT IDENTIFICATION** NAME OF FIRM: Watermark Securites, Inc. TYPE OF REGISTRANT (check all applicable boxes): ~ Broker-dealer D Security-based swap dealer D Major security-based swap participant □ Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) 900 Third Avenue (No. and Street) New York New York 10022 (City) (State) (Zip Code) PERSON TO CONTACT WITH REGARD TO THIS FILING Michael Link 212-451 - 1187 mlink@zweig-dimenna.com (Name) (Area Code -Telephone Number) (Email Address) **B. ACCOUNTANT IDENTIFICATION** INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing \* 100 Park Avenue (Address) 10/08/2003 BOO USA, LLP (Name - if individual, state last, first, and middle name) New York New York (City) (State) 243 **FOR OFFICIAL USE ONLY** 10017 (Zip Code) \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-S(e)(l)(ii), if applicable. **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.** {3}------------------------------------------------ #### **OATH OR AFFIRMATION** | I,
Michael Link | swear (or affirm) that, to the best of my knowledge and belief, the | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------| | financial report pertaining to the firm of | as of
Watermark Securities Inc. | | December 31 | 2Qgj__, is true and correct. I further swear (or affirm) that neither the company nor any | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely | | as that of a customerN I MOSHE A. lUCHINS
o ary Public, State of New York
. No. 02LU5078353
Oualrf1ed in New York Count
Comm1ss1on Expires May 27, /ow2,~ | | | | Title: | | ~
~
Notary
Public | President | #### **This filing\*\* contains (check all applicable boxes):** - **0** (a) Statement of financial condition. - □ (b) Notes to consolidated statement of financial condition. - □ (c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in§ 210.1--02 of Regulation S-X). - □ (d) Statement of cash flows. - □ (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - D (f) Statement of changes in liabilities subordinated to claims of creditors. - D (g) Notes to consolidated financial statements. - D (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.lSa-1, as applicable. - D (i) Computation of tangible net worth under 17 CFR 240.18a-2. - D U} Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.1Sc3-3 or Exhibit A to 17 CFR 240.l&a-4, as applicable. - D (I) Computation for Determination of PAB Requirements under Exhibit **A** to§ 240.15c3-3. - □ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.lSa-4, as applicable. - D (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-l, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - **-0** (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.lSa-7, as applicable. - D (r) Compliance report in accordance with 17 CFR 240.17a-S or 17 CFR 240.18a-7, as applicable. - D (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - **-0** (t) Independent public accountant's report based on an examination of the statement of financial condition. - D (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - 0 (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-S or 17 CFR 240.18a-7, as applicable. - 0 (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - D (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). D(z} Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_ \_ - *\*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3)* or *17 CFR 240.18a-7(d)(2), as applicable.* {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) Fax: 212-697-1299 **www.bdo.com** #### **Report of Independent Registered Public Accounting Firm** The Director and Stockholders Watermark Securities, Inc. New York, New York #### **Opinion on Statement of Financial Condition** We have audited the accompanying statement of financial condition of Watermark Securities, Inc. (the "Company") as of December 31, 2021, 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 Company at December 31, 2021, 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 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 Company's auditor since 1992. New York, NY February 28, 2022 BDO is the brand name for the BDO network and for each of the BDO Member Firms. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BOO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. {5}------------------------------------------------ # **Watermark Securities, Inc.** ### **Statement of Financial Condition** | December 31, 2021 | | |------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------| | Assets
Cash and cash equivalents
Receivable from clearing broker
Due from affiliate
Prepaid expenses and other assets
Property and equipment, net | \$
763,459
145,843
29,972
14,386
4,525 | | Total Assets | \$
958,185 | | Liabilities and Stockholders' Equity
Liabilities:
Payable to clearing broker
Accrued expenses | \$
18,469
85,785 | | Total Liabilities | 104,254 | | Commitments (Notes 3, 8 and 9)
Stockholders' Equity:
Common stock, \$.001 par value -
20,000 shares authorized; 4,900 shares
issued and outstanding | 5 | | Additional paid-in capital
Retained earnings | 48,995
804,931 | | Total Stockholders' Equity | 853,931 | | Total Liabilities and Stockholders' Equity | \$
958,185 | See accompanying Notes to Statement of Financial Condition. {6}------------------------------------------------ ## **Notes to Statement of Financial Condition** ### **1. Business** Watermark Securities, Inc. ("Company") is a broker-dealer providing services for affiliated institutional clients. The Company is registered with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority. The Company clears all transactions through another broker-dealer pursuant to a clearance agreement on a fully disclosed basis. Accordingly, the Company operates under the exemptive provisions of the SEC Rule 15c3- 3(k)(2)(ii). ### **2. Significant Accounting Policies** ### *Basis of Presentation* The Statement of Financial Condition has been presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). ### *Cash and Cash Equivalents* The Company considers all highly liquid investments, with original maturities of ninety days or less, as cash equivalents. Included in cash and cash equivalents is \$700,000 in a money market mutual fund. Cash and cash equivalents held at financial institutions, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. #### *Property and Equipment* Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets which range from three to seven years. Leasehold improvements are amortized over the lesser of the economic useful life of the improvement or the term of the lease. The Company's management reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If asset impairment is identified, the asset is written down to fair value. As of December 31, 2021, no property or equipment have been deemed impaired. #### *Use of Estimates* The preparation of the Statement of Financial Condition in conformity with U.S. GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the Statement of Financial Condition. Actual results could significantly differ from those estimates. #### *Income Taxes* The Company has elected S Corporation status for income tax purposes and, as such, income flows through to the stockholders' individual income tax returns. As a result, the Company is not liable for Federal or New York State income taxes. The Statement of Financial Condition includes a provision for a New York State minimum tax and New York City corporate income taxes, as New York City does not recognize S Corporation status. Deferred income taxes arising from temporary timing differences between the tax basis of assets and liabilities and their reported amounts in the Statement of Financial Condition are immaterial. The Company applies the provisions of Accounting Standards Codification ("ASC") 740, "Income Taxes," which clarifies the accounting for and reporting of income tax uncertainties, and requires additional disclosures related to uncertain income tax positions. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of {7}------------------------------------------------ a tax position taken or expected to be taken in a tax return . ASC 740 requires that the Company determines whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Management has analyzed the Company's tax positions taken on Federal, New York State and New York City income tax returns for all open tax years and has concluded that, as of December 31, 2021, no liabilities are required to be recorded in connection with such uncertain tax positions in the Company's Statement of Financial Condition. However, the Company's conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The open tax years under potential examination vary by jurisdiction. No income tax returns are currently under examination. The Company is generally no longer subject to income tax examinations by the U.S. Federal, state or local tax authorities for the years ended December 31, 2017 and prior. The Company's New York City Corporation Business Tax provision is calculated at 8.85% of the greater of the Company's pre-taxable net income or its alternative tax base amount. Included in prepaid expenses and other assets on the Statement of Financial Condition is approximately \$3 ,000 of New York City tax and \$700 of New York State overpayments made in 2021, which the Company intends to apply to taxes otherwise due in 2022. #### *Financial Instruments* **-** *Credit Losses* The Company accounts for estimated credit losses on financial assets measured at an amortized cost basis and certain off-balance sheet credit exposures in accordance with FASB ASC 326-20, Financial Instruments - Credit Losses. FASB ASC 326-20 requires the Company to estimate expected credit losses over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. The Company records the estimate of expected credit losses as an allowance for credit losses. For financial assets measured at an amortized cost basis the allowance for credit losses is reported as a valuation account on the balance sheet that is deducted from the asset's amortized cost basis. Changes in the allowance for credit losses are reported in Credit Loss expense. Receivable from Clearing Broker. The Company's receivables from clearing broker include amounts receivable from unsettled trades and cash deposits. The Company's trades are cleared through the clearing broker and settled daily between the clearing broker and the Company. Because of this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time. ### **3. Significant Risk Factors** #### *Commitments and Financial Instruments With Off-Balance Sheet Risk* The Company is subject to the following: Off-Balance Sheet Risk and Concentration of Credit Risk Credit risk represents the maximum potential loss that the Company would incur if the counterparties failed to perform pursuant to the terms of their agreements with the Company. {8}------------------------------------------------ ### **Notes to Statement of Financial Condition** In the normal course of business, the Company facilitates the execution of securities transactions on behalf of customers as an agent. If the agency transactions do not settle because of failure to perform by either the customer or the counterparty, the Company may be obligated to discharge the obligation of the nonperforming party and, as a result, may incur a loss if the market value of the securities differs from the contract amount. The Company is also subject to credit risk to the extent that the Company's clearing broker may be unable to fulfill its obligations either to return the Company's cash held as deposits or repay net commissions owed. The Company's policy is to monitor its counterparty risk. **Covid 19 Risk** On March 11, 2020, the World Health Organization declared the novel coronavirus ("COVID-19") outbreak a pandemic. During 2021, COVID-19 and its new variants have continued to spread and have a negative impact on the economy and many businesses. While uncertain, the further spread of the COVID-19 outbreak, including its duration and severity and actions taken by authorities, could disrupt the U.S. and international economies and financial markets and therefore could adversely affect the Company's operations, financial condition and results of operations. The Company continues to monitor the impact of the pandemic on its operations. ### **4. Financial Instruments and Fair Value** The Company's assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC 820, Fair Value Measurement, as of December 31, 2021. | | Quoted Prices in | |---------------------------------------------|--------------------| | | Active Markets for | | | Identical Assets | | | (Level 1) | | United States: | | | Cash equivalents: | | | Certain registered money market mutual fund | \$700,000 | The Company values all investments at fair value. U.S. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that market participants would use in pricing the investment based on available market data. Unobservable inputs are inputs that reflect the Company's assumptions about the factors market participants would use in valuing the investment based on the best information available in the circumstances. The hierarchy is broken down into levels based on the observability of inputs, two of which are as follows: Level 1 - Valuations based on quoted prices in active markets for identical investments. Level 2 - Valuations based on (i) quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly; (ii) quoted prices for similar investments in active markets; and (iii) inputs other than quoted prices that are observable or inputs derived from or corroborated by market data for substantially the full term of the investment. {9}------------------------------------------------ ### **Notes to Statement of Financial Condition** ### **5. Receivable From Clearing Broker** The Company is required to maintain a collateral account with its clearing broker with a minimum market value of \$100,000. Included in receivable from clearing broker is \$100,000 in cash held in this account at December 31, 2021 . This cash serves as collateral for potential defaults of the Company and for any amounts due to broker. Receivable from clearing broker includes all cash balances held at this broker and net commissions due from this broker. ### **6. Property and Equipment** At December 31, 2021, property and equipment consists of: | | Amount | |-------------------------------------------------|--------------------| | Computer equipment | \$ 7,485 | | Furniture and fixtures | 11,250 | | Leasehold improvements | 40,997 | | Less: Accumulated depreciation and amortization | 59,732
(55,207) | | | \$ 4,525 | ### **7. Related Party Transactions** An affiliate provides certain administrative, operational, and other services whose costs are allocated to the Company based on an expense sharing agreement. As of December 31, 2021, the balance due from this affiliate was \$29,972. The company had a lease agreement with an affiliate for the period August 1, 2021 through December 31 , 2021 . ### **8. Regulatory Net Capital Requirements** Under the "Uniform Net Capital Rule" of the SEC, the Company is required to maintain regulatory net capital, as defined, equivalent to the greater of \$5,000 or 6-2/3% of aggregate indebtedness, as defined, and requires that the ratio of aggregate indebtedness to regulatory net capital, as defined, shall not exceed 15 to 1. While regulatory net capital and aggregate indebtedness may change from day to day, at December 31, 2021, the Company's regulatory net capital of \$791,048 exceeded minimum requirements by \$784,098 and the ratio of aggregate indebtedness to regulatory net capital was 0. 13 to 1. ### **9. Indemnifications** The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. {10}------------------------------------------------ ### **10. Subsequent Events** Management has evaluated the possibility of subsequent events through the date the Statement of Financial Condition was issued. Management has determined that there are no other material events that would require adjustment to or disclosure in the Company's Statement of Financial Condition. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.