# MFR SECURITIES, INC. X-17A-5 (2019-02-25) — Broker-dealer annual report - Company: MFR SECURITIES, INC. - Form: X-17A-5 - Filed: 2019-02-25 - Period: 2018-12-31 - Accession: 0000922104-19-000001 - CIK: 922104 - File #: 8-47186 - Material weakness: No - Auditor: Reynolds & Rowella, LLP - Auditor location: New Canaan, CT - Contact: George Ramirez - Phone: 2124165036 - Signed by: George Ramirez (President & CEO) Original filing: https://www.sec.gov/Archives/edgar/data/922104/000092210419000001/mfrpublicfs18.pdf --- {0}------------------------------------------------ # UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 | OMB APPROVAL | | | | |--------------------------------------|-----------------|-------|--| | OMB Number: | 3235-0123 | | | | Expires:
Estimated average burden | August 30, 2020 | | | | hours per response | | 12.00 | | # **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** | SEC FILE NUMBER | | |-----------------|--| | | | | | | | 8-47186 | | #### FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGJNNING | ____ | __
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l2~/3,_,lc!.'/2,0'-!.:l8,__ | | | | | |--------------------------------------------------------------------------|------------------------------------------------------|-----------------------------------------------|----------------------------------------|--|--|--|--| | | MMffiDNY | | MMillDNY | | | | | | | A. REGISTRANT IDENTIFICATION | | | | | | | | NAME OF BROKER-DEALER:
MFR Securities, Inc. | OFFICIAL USE ONLY | | | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | FIRM I.D. NO. | | | | | | | | 630 Third Avenue, Suite 1203 | | | | | | | | | New York | 10017 | | | | | | | | (C'Ity) | (State) | | (Zip Code) | | | | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | | | | | | | George Ramirez | (212) 416-5036 | | | | | | | | | | | ren Code- 'lelephone Number) | | | | | | | B. ACCOUNT ANT IDENTIFICATION | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | | | | Reynolds & Rowella, LLP | | | | | | | | | | (Name- if individual. slate lasl.jirs/, middle name) | | | | | | | | 5 I Locust Avenue- Suite 303 | New Canaan | CT | 06840 | | | | | | (Address) | (C1ty) | (State) | (Zip Code) | | | | | | CHECK ONE: | | | | | | | | | Certified Public Accountants
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Accountant not resident in United States or any of its possessions. | | | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | *•Claims for exemption/rom the requirement that/he annual report be covered by the opinion of an independent public accountant must be supporled by a statement offuc/s and circumsli.lnces relied on as the* ba.~isfor */he exemption. See Sec/ion 2·10.17a-5(e)(2)* > Potential persons who are to respond to the collection of Information contained in this fonn are not required to respond unless the fonn displays a currently valid OMB control number. SEC 1410 (06-02) {1}------------------------------------------------ #### OATH OR AFFIRMATION \_ \_;G~eo.wrg~e"-'-'R~am~i!.!.r:=. l! Z!!.-\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_ , swear (or affirm) that, to the best of my knowledge and belief the accompanying tinancial statement and supporting schedules pertaining to the tlrm of MFR Securities. Inc. , as of December 31 , 20 I 8, are true and correct. I further swear (or affirm) that neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows: #### No Exce tions ![](_page_1_Picture_4.jpeg) r:7 Signotun: f-; ~ *s;* "~/ ... ' r~a Title Notary Public This report\*\* contains (check all applicable boxes): - IBl (a) Facing Page. - IBl (b) Statement of Financial Condition. - D (c) Statement of Income (Loss). - D (d) Statement of Changes in Financial Condition. - D (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. - D (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. - D (g) Computation of Net Capital. - D (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. - D (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. - D U) A Reconciliation, including appropriate explanation of the Computation ofNet Capital Under Rule IScJ-1 and the Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. - D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. - !Rl (I) An Oath or Affirmation. - D (m) A copy of the SIPC Supplemental Report. - D (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. - D (o) Exemption Report pursuant to Securities and Exchange Commission Rule 17a5(d)(4). *\*\*For conditions ofcorifidentiallrealmenl of certain portions of !his filing, see section 24(). J7a-5(e)(3).* {2}------------------------------------------------ MFR Securities, Inc. Statement of Financial Condition December 31, 2018 {3}------------------------------------------------ # MFR Securitie\$, Inc. Index to Financial Statement December 31, 2018 | | Page(s) | |---------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm | 1 | | Financial Statement: | | | Statement of Financial Condition | 2 | | Notes to Financial Statement | 3-7 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### **Report of Independent Registered Public Accounting Firm** To the Board of Directors and Shareholder of MFR Securities, Inc. #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of MFR Securities, Inc. (the "Company") as of December 31, 2018, and the related notes (collectively referred to as the financial statement). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of MFR Securities, Inc. as of December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This 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 seNed as MFR Securities, Inc.'s auditor since 2007. New Canaan, Connecticut February 25, 2019 > '/Ot-:;,ov•:SI,ect 1 Riclgefield.crorl877120J 438 0161 1203 431 :3570 51 Locust Avenue I New CcmcJCin, CT 06840 I 203 972 5191 reynoldsrowello.com {5}------------------------------------------------ # MFR Securities, Inc. Statement of Financial Condition As of December 31, 2018 | Assets | | |----------------------------------------------------------|--------------| | Cash and cash equivalents | \$ 6,610,987 | | Due from clearing organization | 604,016 | | Commissions receivable | 6,573 | | Fees receivable | 79,988 | | Investment, at fair value | 24,471 | | Prepaid expenses and other assets | 53,840 | | Security deposits | 102,743 | | Office furniture and equipment, net | 63,633 | | Total Assets | \$ 7,546,251 | | | | | | | | Liabilities and Shareholder's Equity | | | Liabilities | | | Accounts payable, accrued expenses and other liabilities | \$
70,414 | | Employee compensation payable | 521,595 | | Income taxes payable | 2,334 | | Deferred rent | 96,000 | | Total Liabilities | 690,343 | | | | | Shareholder's Equity | | | Common stock, no par value, 200 shares authorized, | | | 100 issued, and outstanding | 2,000 | | Additional paid in capital | 5,042,242 | | Retained earnings | 1,811,666 | | Total Shareholder's Equity | 6,855,908 | | | | | Total Liabilities and Shareholder's Equity | \$ 7,546,251 | See accompanying notes to financial statement. {6}------------------------------------------------ # **1. Nature of Operations and Summary of Significant Accounting Policies** # Nature of Operations MFR Securities, Inc. (the "Company"), a wholly-owned subsidiary of Maria Fiorini Ramirez, Inc. (the "Parent"), is a broker-dealer registered with the Securities and Exchange Commission ("SEC") and a member of the Financial Industry Regulatory Authority ("FINRA"). The Company's operations consist primarily of engaging in riskless principal transactions and providing investment banking services. # Basis of Presentation The financial statement has been prepared in conformity with accounting principles generally accepted in the United States of America. # Cash Equivalents The Company has defined cash equivalents as highly liquid investments, with original maturities of three months or less. # Estimates The preparation of financial statements in conformity with accounting standards generally accepted in the 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 statement. Actual results could differ from those estimates. #### Due from Clearing Organization Due from clearing organization includes a required clearing deposit of \$250,000 that the Company maintains with its clearing broker. As of December 31, 2018, the remaining receivable amount due from the clearing organization of \$354,016 represents cash maintained by the Company with its clearing broker for net proceeds from trading activities that have not yet been remitted from the clearing organization to the Company. ### Commissions Receivable Commissions receivable represent amounts due to the Company for the distribution of commercial paper and Yankee certificates of deposit from the issuers of these securities. {7}------------------------------------------------ # **MFR Securities, Inc. Notes to Financial Statement December 31, 2018** # Fees Receivable Fees receivable are carried at cost, net of the allowance for doubtful accounts, which is an estimate for credit losses based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables by considering each customer's financial condition, credit history and the potential effect of current economic conditions. Fees receivable are written off when deemed uncollectible after reasonable collection efforts. Management does not believe that an allowance is required as of December 31, 2018. # Office Furniture and Equipment Office furniture and equipment is stated at cost less accumulated depreciation and amortization. The Company calculates depreciation using the straight-line method over an estimated useful life of 5 to 7 years. Office furniture and equipment at cost and accumulated depreciation was \$231,566 and \$167,933 respectively, with a net book value of \$63,633 at December 31, 2018. # Income Taxes The Company files a consolidated federal income tax return with its Parent and combined state and local tax returns. Effective January 1, 2007 the Company was granted S corporation status for federal and New York State income taxes. All federal and New York state income taxes owed by the Company are the responsibility of the Parent. The Company is responsible for New York City income taxes. Management has evaluated the Company's tax positions and concluded that the Company has taken no uncertain tax positions that require adjustment to or disclosure in the financial statements. The Company's 2015 through 2018 tax years are open for examination by the federal, state and local tax authorities. ### Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. The Company expects to adopt the provisions of this guidance on January 1, 2019. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to select to use certain transition relief. The Company's current lease arrangements expire in October 2024. On January 1, 2019 the Company expects to record a Right of Use Asset in the amount of \$2,015,438 and an offsetting Lease Liability in the amount of \$2,111,438. The Company does not expect any material impact to net capital as the operating lease asset will be added back to net capital {8}------------------------------------------------ ### Recent Accounting Pronouncements (Continued) to the extent of the associated operating lease liability. In addition, the Company does not expect any material impact to its minimum net capital requirement as the operating lease liability will be excluded from aggregate indebtedness to the extent of the associated operating lease asset. ### Fair Value Measurements The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level1 - Quoted prices in active markets for identical assets or liabilities. Level 2- Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3- Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value: #### Money Market Valued using amortized cost. #### Common Stock The fair value of equity securities is the market value based on quoted market prices, when available, or market prices provided by recognized broker dealers. Investments are used for trading purposes. Gains and losses are recorded in earnings. {9}------------------------------------------------ # **MFR Securities, Inc. Notes to Financial Statement December 31, 2018** # **2. Fair Value of Investments** The assets that are measured at fair value on a recurring basis and categorized using the three levels of fair value hierarchy consisted of the following as of December 31, 2018: | | Level1 | | Level2 | | Level3 | | Total | | |------------------------------|--------|---------------------|--------|--|--------|--|-------|---------------------| | Money market
Common stock | \$ | 5,268,333
24,471 | \$ | | \$ | | \$ | 5,268,333
24,471 | | Total | \$ | 5,292,804 | \$ | | \$ | | \$ | 5,292,804 | The Company's money market investments and common stock are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices derived from active markets. The money market investments are included in cash and cash equivalents. ## **3. Operating Leases** The Company leases office space under operating leases in New York and California. The Company maintains a security deposit of \$100,943 on its New York office lease and \$1,800 on its California office lease. The Company's office lease in New York commenced November 1, 2016 and expires October 31, 2024. The Company's office lease in California was for a period of twelve months which commenced November 1, 2017. The Company renewed the California office lease effective November 1, 2018 for a period of six months and the lease will expire April 30, 2019. The future minimum annual lease payments at December 31, 2018 were as follows: | 2019 | \$
343,547 | |------------|-----------------| | 2020 | 350,660 | | 2021 | 309,961 | | 2022 | 383,357 | | 2023 | 393,408 | | Thereafter | 334,978 | | | \$
2,115,911 | {10}------------------------------------------------ # **4. Net Capital and Aggregate Indebtedness Requirements** The Company is subject to the Securities and Exchange Commission's Uniform Net Capital Rule 15c3-1 (SEC Rule 15c3-1), which requires the Company to maintain a minimum net capital balance and a ratio of aggregate indebtedness to net capital not exceeding 15 to 1. At December 31, 2018, the Company's net capital balance as defined by SEC Rule 15c3-1 was \$6,545,442 which exceeded the minimum requirement of \$100,000. At December 31, 2018, the Company's aggregate indebtedness to net capital as defined by SEC Rule 15c3-1 was 0.11 to 1.0. ### **5. Rule 15c3-3 Exemption** The Company is exempt from the provisions of Part 240 Rule 15c3-3 of the Securities Exchange Act of 1934 (SEC Rule 15c3-3) under paragraph (k)(2)(ii) in that the Company, as an introducing broker or dealer, clears all transactions with and for customers on a fully disclosed basis with a clearing agent, and promptly transmits all customer funds and securities to the clearing agent who carries all of the accounts of such customers and maintains and preserves such books and records pertaining thereto pursuant to the requirements, as are customarily made and kept by a clearing agent. #### **6. Concentration of Credit Risk** The Company maintains cash in bank accounts in excess of the established limit insured by the Federal Deposit Insurance Corporation (FDIC). The Company has not experienced any losses in such accounts and believes there is little or no exposure to any significant credit risk. ### **7. Contingencies** Pursuant to its clearance agreement, the Company introduces all of its securities transactions to its clearing organization on a fully-disclosed basis. Therefore, all customer account balances and positions are carried on the books of the clearing organization. The Company has agreed to indemnify the clearing broker for losses, if any, which the clearing organization may sustain from carrying securities transactions introduced by the Company. The clearing deposit of \$250,000 is pursuant to this agreement and is included in due from clearing organization at December 31, 2018 in the statement of financial condition. The Company may be subject to claims and litigation in the ordinary course of business. In management's opinion, based upon the information available at this time there are no litigation claims against the Company that would have a material impact on the operating results of the Company. ## **8. Subsequent Events** The Company has evaluated subsequent events through February 25, 2019, the date of issuance of the accompanying financial statement. There were no subsequent events identified by the Company that require adjustments to or disclosure in the financial statement. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.