# REEF SECURITIES, INC. X-17A-5 (2024-04-11) — Broker-dealer annual report - Company: REEF SECURITIES, INC. - Form: X-17A-5 - Filed: 2024-04-11 - Period: 2023-12-31 - Accession: 0000898982-24-000004 - CIK: 898982 - File #: 8-45583 - Type: Broker-dealer - Material weakness: No - Auditor: Sanville & Company - Auditor location: Dallas, TX - Contact: Paul F. Mauceli, Jr. - Phone: 2143798555 - Website: reefogc.com - Signed by: Paul F. Mauceli, Jr. (President) Original filing: https://www.sec.gov/Archives/edgar/data/898982/000089898224000004/RSIAuditReportDec312023.pdf --- {0}------------------------------------------------ | ANNUAL REPORTS | |----------------| | FORM X-17A-5 | | PART III | | Sanville & Company, LLC | | |-------------------------|--| |-------------------------|--| | 325 North Saint Paul St. Suite 3100 Dallas | X | 15201 | |--------------------------------------------------|---------|------------------------------------------------------------| | (City) | (State) | (Zip Code) | | | 169 | | | (Date of Registration with PCAOB)(if applicable) | | (PCAOB Registration Number, if applicable) | | FOR OFFICIAL USE ONLY | | | | | | (Name - if individual, state last, first, and middle name) | {1}------------------------------------------------ | Paul Maucelli | | , swear (or affirm) that, to the best of my knowledge and belief, the | |------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------| | financial report pertaining to the firm of Reef Securities, Inc. | | as of | | 12/31 | 2 023 | | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely | | ![](_page_1_Picture_2.jpeg) - - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ ## **REEF SECURITIES, INC.** ## **TABLE OF CONTENTS** | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
_____________________________________________________________________________________ | 1 - 2 | |--------------------------------------------------------------------------------------------------------------------------------------------------|---------| | FINANCIAL STATEMENTS | | | Statement of Financial Condition | 3 | | Statement of Operations | 4 | | Statement of Changes in Stockholder's Equity | 5 | | Statement of Cash Flows | 6 | | Notes to Financial Statements | 7 - 9 | | Supplementary Information Pursuant to Rule 17a-5
___________________________________________________________________________________ | 10 - 11 | | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 12 | | EXEMPTION REPORT
___________________________________________________________________________________ | 13 | {3}------------------------------------------------ *Sanville & Company* CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 1514 OLD YORK ROAD ABINGTON, PA 19001 (215) 884-8460 (215) 884-8686 FAX > 325 NORTH SAINT PAUL ST. SUITE 3100 DALLAS, TX 75201 (214) 738-1998 100 WALL STREET 8th FLOOR NEW YORK, NY 10005 (212) 709-9512 #### **Report of Independent Registered Public Accounting Firm** To the Board of Directors of Reef Securities, Inc. #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Reef Securities, Inc. (the Company) as of December 31, 2022, the related statements of operations, changes in stockholder's equity, and cash flows for the year then ended, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements 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 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 statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, 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 statements. 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 statements. We believe that our audit provides a reasonable basis for our opinion. #### **Supplemental Information** The supplementary information contained in The Schedule I, Computation of Net Capital Under SEC Rule 15c3-1, Schedule II, Computation for Determination of Reserve Requirements Under Rule SEC 15c3-3 and Schedule III, Information Relating to the Possession or Control Requirements Under SEC Rule 15c3-3 have been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. The supplemental information is the responsibility of the Company's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the {4}------------------------------------------------ supplemental information, including its form and content, is presented in conformity with 17 C.F.R. §240.17a-5. In our opinion, the supplementary information contained in the Schedule I, Computation of Net Capital Under SEC Rule 15c3- 1, Schedule II, Computation for Determination of Reserve Requirements Under SEC Rule 15c3-3 and Schedule III, Information Relating to the Possession or Control Requirements Under SEC Rule 15c3-3 are fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as the Company's auditor since 2020. Dallas, Texas March 21, 2023 {5}------------------------------------------------ # **REEF SECURITIES, INC. Statement of Financial Condition December 31, 2022** | ASSETS | | |--------------------------------------------|---------------| | Cash | \$
40,235 | | Employee receivables | 261,177 | | Total Assets | \$
301,412 | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | LIABILITIES | | | Accounts payable and accrued expenses | \$
1,668 | | Total liabilities | 1,668 | | Stockholder's Equity | | | Common stock, 500,000 shares authorized | | | with \$1.00 par value, 1,000 shares issued | | | and outstanding | \$
1,000 | | Additional paid-in capital | 107,027 | | Retained earnings | 191,717 | | Total stockholder's equity | 299,744 | | Total Liabilities and Stockholder's Equity | \$
301,412 | {6}------------------------------------------------ ## **REEF SECURITIES, INC. Statement of Operations For the Year Ended December 31, 2022** | Revenues | | |--------------------------------|---------------| | Commissions | \$
420,262 | | Exclusivity fee | 47,071 | | Placement fees | 20,442 | | Interest income | 869 | | Total Revenues | 488,644 | | Operating Expenses | | | Compensation and related costs | 439,359 | | Regulatory fees and expenses | 11,719 | | Professional fees | 9,909 | | Other expenses | 707 | | Total Expenses | 461,694 | | Net Income | \$
26,950 | {7}------------------------------------------------ ## **REEF SECURITIES, INC. Statement of Changes in Stockholder's Equity For the Year Ended December 31, 2022** | | | Additional | | | |-----------------------------|-------------|---------------|---------------|---------------| | | Common | Paid-in | Retained | | | | Stock | Capital | Earnings | Total | | Balances, December 31, 2021 | \$
1,000 | \$
107,027 | \$
164,767 | \$
272,794 | | Net income | - | - | 26,950 | 26,950 | | Balances, December 31, 2022 | \$
1,000 | \$
107,027 | \$
191,717 | \$
299,744 | {8}------------------------------------------------ # **REEF SECURITIES, INC. Statement of Cash Flows For the Year Ended December 31, 2022** | Cash flows from operating activities | | |---------------------------------------------------|--------------| | Net income | \$
26,950 | | Adjustments to reconcile net income to net cash | | | provided by operating activities: | | | Changes in assets and liabilities: | | | Increase in employee receivables | (700) | | Decrease in accounts payable and accrued expenses | (3,528) | | Net cash provided by operating activities | 22,722 | | Cash flows from financing activities | | | Net cash used in financing activities | - | | Net change in cash | 22,722 | | Cash, beginning of year | 17,513 | | Cash, end of year | \$
40,235 | ## **Supplemental Disclosures** There was no cash paid for either interest or taxes during the year. {9}------------------------------------------------ ## **REEF SECURITIES, INC. Notes to Financial Statements December 31, 2022** #### **Note 1 – Organization and Nature of Business** #### Organization Reef Securities, Inc. (the "Company") was organized in February 1993 as a Texas corporation. The Company is registered with the Securities and Exchange Commission ("SEC") as a broker-dealer in securities and is a member of the Financial Industry Regulatory Authority ("FINRA") and Securities Investor Protection Corporation ("SIPC"). #### Nature of Business The Company is in the business of offering and selling of interests in oil and gas development programs and real estate development. The Company acts as an exclusive selling agent for Reef Exploration, LP, Reef Oil & Gas Partners, LP, REI Energy, LLC, and MetroMarke Rehab Partners I, LP (collectively referred to as "Reef"), related parties. The Company does not hold customer funds or securities. ## **Note 2 – Significant Accounting Policies** #### *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 amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant estimates include the Company's assumptions used in fair value calculations. Actual results could differ from those estimates. ### *Revenue Recognition* Revenue from contracts with customers includes commission income and related fees from participation in private placements of equity securities. The majority of these private placements relate to oil and gas development programs and real estate. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events. The Company participates in the private placement offerings on behalf of Reef. Each time a customer enters into a buy transaction, the Company charges a commission. Commissions are recognized on the trade date (the date that the Company fills the trade order, receives the customer subscription funding and confirms the trade with the customer). The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying private placement interest is identified, the pricing is {10}------------------------------------------------ ## **REEF SECURITIES, INC. Notes to Financial Statements December 31, 2022** #### **Note 2 –Significant Accounting Policies, continued** agreed upon and the risks and rewards of ownership have been transferred to the customer. These amounts are considered variable consideration as the uncertainty is dependent on the achievement of certain levels of investment have been reached as specified in the private placement memorandums, which is highly susceptible to factors outside the Company's influence. Revenues are recognized once it is probable that a significant reversal will not occur. The Company earns exclusivity fees under an agreement with Reef for acting as Reef's exclusive brokerdealer. Exclusivity fees are recognized as the performance obligations are provided by the Company and consumed by Reef and are included in commissions and other placement fees in the accompanying statement of operations. ### *Income Taxes* Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to temporary differences between financial and income tax reporting. The deferred tax asset or liability, as applicable, represents the future tax return consequences of those differences, which will either be taxable or deductible when the asset or liability is recovered or settled. When applicable, deferred taxes are recognized for operating losses that are available to offset future taxable income. The Company has adopted financial reporting rules regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Company has reviewed all open tax years and concluded that there is no impact on the Company's financial statements and no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on a tax return. As of December 31, 2022, open Federal tax years subject to examination include the tax years ended December 31, 2018 through December 31, 2022. ### **Note 3 – Net Capital Requirements** The Company is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of a minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. Rule 15c3-1 also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. As of December 31, 2022, the Company has net capital of \$38,567 which was \$33,567 in excess of its net capital requirement of \$5,000. The Company's net capital ratio was 0.04 to 1. ### **Note 4 – Income Taxes** The Company's current year taxable income is fully offset by prior year's net operating loss carryforwards; therefore, there is no provision for income taxes. As of December 31, 2022, the Company has a federal net operating loss carry forward of approximately \$85,000 available to offset future taxable income, which begins expiring in 2035. The federal net operating loss carry forward creates a deferred tax asset of approximately \$15,000; however, the entire amount has been offset by valuation allowance, therefore, there is no deferred tax asset recognized in the accompanying statement of financial condition. {11}------------------------------------------------ ## **REEF SECURITIES, INC. Notes to Financial Statements December 31, 2022** ### **Note 5 – Related Party Transactions** The Company's sole shareholder is Paul Mauceli (the "Stockholder") whose brother serves as Chief Executive Officer of Reef Exploration, LP, Manager of the General Partner of both Reef Oil & Gas Partners, LP and MetroMarke Rehab Partners I, LP, and sole Manager and Executive Officer of REI Energy LLC. The Company is economically dependent on Reef and also has a concentration of services provided by Reef. The existence of that dependency and concentration creates operating results and financial position significantly different than if the Companies were autonomous. Transactions between the Company and Reef were not consummated on terms equivalent to arm's length transactions. Under the Sales Agency Agreement between the Company and Reef, the Company acts as Reef's exclusive broker-dealer. Under this agreement, the Company may receive up to 15% of all funds raised from investors. For the year ended December 31, 2022, the Company earned commission income of \$420,262 related to this agreement. In addition, the Company earned \$47,071 during 2022 for exclusivity fees from Reef in consideration of the Company acting as Reef's exclusive broker-dealer. Also under the Sales Agency Agreement, Reef agrees to pay all overhead expenses relating to the operations of the Company. These expenses include office space, office furniture, computers, telephone services, general and administrative support, insurance, printing, postage, and other ordinary administration and overhead expenses of the Company. Reef will also provide the Company with all offering materials to be used in conjunction with the offer and sale of interest in Reef programs at no cost to the Company. The Company has a note receivable from the Stockholder related to prepayment of commissions. The note bears interest at 2.42%, and due and payable on demand. As of the financial statement date, no demand has been made and the loan is still outstanding. The amount due to the Company as of December 31, 2022 amounted to \$261,177 which is reflected as Employee Receivable in the accompanying Statement of Financial Condition. Interest on the note during 2022 totaled \$869, which was added to the outstanding loan balance. #### **Note 6 – Contingencies** The Company's business subjects it to various claims, regulatory examinations, and other proceedings in the ordinary course of business. As of December 31, 2022, the Company had no open arbitration claims filed against it. {12}------------------------------------------------ # **Schedule I REEF SECURITIES, INC. Supplemental Information Pursuant to Rule 17a-5 December 31, 2022** | Computation of Net Capital | | |----------------------------------------------------------|---------------| | Total stockholder's equity qualified for net capital | \$
299,744 | | Deductions and /or charges: | | | Non-allowable assets: | | | Employee receivables | (261,177) | | | | | Net capital | \$
38,567 | | | | | Aggregate Indebtedness | | | Accounts payable and accrued expenses | \$
1,668 | | | | | Computation of basic net capital requirement | | | Minimum net capital required | \$
5,000 | | (greater of \$5,000 or 6 2/3% of aggregate indebtedness) | | | | | | Net capital in excess of minimum requirement | \$
33,567 | | | | | Ratio of aggregate indebtedness to net capital | .04 to 1 | ### **Reconciliation of Computation of Net Capital** The above computation does not materially differ from the computation of net capital under Rule 15c3-1 as of December 31, 2022 as filed by Reef Securities, Inc. on Form X-17A-5. Accordingly, no reconciliation is deemed necessary. See Accompanying Report of Independent Registered Public Accounting Firm. {13}------------------------------------------------ ## **Schedule II & III REEF SECURITIES, INC. Supplemental Information Pursuant to Rule 17a-5 December 31, 2022** The Company is considered a "Non-Covered Firm" exempt from 15c3-3 by relying on footnote 74 to SEC Release 34-70073 and therefore, is not required to maintain a "Special reserve bank account for the Exclusive benefit of customers." {14}------------------------------------------------ ROBERT F. SANVILLE, CPA MICHAEL T. BARANOWSKY, CPA JOHN P. TOWNSEND, CPA NATHANIEL S. HARTGRAVES, CPA *Sanville & Company* CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 1514 OLD YORK ROAD ABINGTON, PA 19001 (215) 884-8460 (215) 884-8686 FAX > > 325 NORTH SAINT PAUL ST. SUITE 3100 DALLAS, TX 75201 (214) 738-1998 100 WALL STREET 8th FLOOR NEW YORK, NY 10005 (212) 709-9512 #### **Report of Independent Registered Public Accounting Firm** To the Board of Directors of Reef Securities, Inc. We have reviewed management's statements, included in the accompanying Exemption Report, in which Reef Securities, Inc. (the Company) stated that: - 1. The Company does not claim an exemption under paragraph (k) of 17 C.F.R. § 240.15c3-3; - 2. The Company is filing an Exemption Report relying on Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 because the Company limits its business activities exclusively to (1) private or public primary placement of direct participations (2) broker selling limited partnerships in primary distributions throughout the most recent fiscal year; and - 3. The Company (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of 17 C.F.R. § 240.15c2-4; (2) did not carry accounts of or for customers; and (3) did not carry proprietary accounts of broker-dealers (as defined in 17 C.F.R. § 240.15c3-3) throughout the most recent fiscal year without exception. The Company's management is responsible for its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence that the Company limited its business activities exclusively to (1) private or public primary placement of direct participations (2) broker selling limited partnerships in primary distributions and (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of 17 C.F.R. § 240.15c2-4; (2) did not carry accounts of or for customers; and (3) did not carry proprietary accounts of broker-dealers (as defined in 17 C.F.R. § 240.15c3-3) throughout the most recent fiscal year without exception. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in 17 C.F.R. § 240.17a-5. Dallas, Texas March 21, 2023 {15}------------------------------------------------ ![](_page_15_Picture_0.jpeg) ## **Reef Securities,** Inc. **Exemption Report** Reef Securities, Inc. (the "Company") is a registered broker-dealer subject to Rule 17 a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240.17a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. §240.17a-5(d)(1) and (4). To the best of its knowledge and belief, the Company states the following: - (1) The Company is considered "Non-Covered Firm" exempt from 17 C.F.R. §240.15c3-3 and is filing an Exemption Report relying on footnote 74 to SEC Release 34-70073, and as discussed in Q&A 8 of the related FAQ issued by the SEC staff. The Company limits its business activities exclusively to: (1) private or public primary placement of direct participations. (2) broker selling limited partnerships in primary distributions. - (2) The Company (1) did not directly or indirectly receive, hold or otherwise owe funds or securities for or to customers, other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Rule 15c2-4; (2) did not carry accounts of or for customers; and (3) did not carry PAB accounts (as defined in Rule 15c3-3), throughout the most recent fiscal year without exception. I, Paul Mauceli, Jr., swear (or affirm) that, to my best knowledge and belief, this exemption report is true and correct Regards, Date of Report: February 13, 2023 1901 N Central Expy, Ste 400 Richardson, TX 75080 Phone. (972) 437-6895 Fax. (972) 994-0369 Toll Free. (BOO) 422-1606 **www.reefogc.com Member: FINRA and Sf PC** Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.