# MERCER ALLIED COMPANY, L.P. X-17A-5 (2020-02-28) — Broker-dealer annual report - Company: MERCER ALLIED COMPANY, L.P. - Form: X-17A-5 - Filed: 2020-02-28 - Period: 2019-12-31 - Accession: 0000932517-20-000002 - CIK: 932517 - File #: 8-47739 - Material weakness: No - Auditor: PricewaterhouseCoopers LLP - Auditor location: New York, NY - Contact: Richard Bertani - Phone: 5188864309 - Signed by: Shelley Luks (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/932517/000093251720000002/merceralliedfs2019.pdf --- {0}------------------------------------------------ # **Mercer Allied Company, L.P.** **Financial Statements and Supplemental Schedules Pursuant to Rule 17a-5 of the Securities and Exchange Commission As of December 31, 2019 and for the year then ended** {1}------------------------------------------------ ### **UNITEDSTATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549** OMB APPROVAL OMB Number: 3235-0123 Expires: "VHVTU Estimated average burden hours per response.. . . . . 12.00 # **ANNUAL AUDITED REPORT FORM X-17A-5 PART III** | SEC FILE NUMBER | |-----------------| | 47739
8- | **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 BEGINNING______________________________ | 01/01/19 | | 12/31/19
AND ENDING______________________________ | | | |--------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|---------------|------------------------------------------------------|--------------------------------|--| | | MM/DD/YY | | MM/DD/YY | | | | A. | REGISTRANT IDENTIFICATION | | | | | | Mercer
NAME OF BROKER-DEALER: | Allied
Company,
L.P. | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | FIRM I.D. NO. | | | | | 321
Broadway
___________________________________________________________________________________________________________________ | | | | | | | | (No. and Street) | | | | | | Saratoga
Springs
_____________________________________________________________________________________________________________________ | New
York | | 12866 | | | | (City) | (State) | | (Zip Code) | | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Richard Bertani | | | 518-886-4309 | | | | _____________________________________________________________________________________________________________________ | | | | (Area Code – Telephone Number) | | | B. | ACCOUNTANT IDENTIFICATION | | | | | | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | | PricewaterhouseCoopers
LLP
_____________________________________________________________________________________________________________________ | | | | | | | | (Name – if individual, state last, first, middle name) | | | | | | 300
Madison
Avenue
_____________________________________________________________________________________________________________________ | New
York | New | York | 10017 | | | (Address) | (City) | (State) | | (Zip Code) | | | CHECK ONE: | | | | | | | ✔
Certified Public Accountant | | | | | | | Public Accountant | | | | | | | 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 by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2)* **Potential persons who are to respond to the collection of information contained in this form are not required to respond** SEC 1410 () **unless the form displays a currently valid OMB control number.** {2}------------------------------------------------ {3}------------------------------------------------ ### **Page(s)** | Report of Independent Registered Public Accounting Firm
1 | |---------------------------------------------------------------------------------------------------------------------------------------| | Financial Statements | | Statement of Financial Condition 2 | | Statement of Earnings 3 | | Statement of Changes in Partners' Capital 4 | | Statement of Cash Flows 5 | | Notes to Financial Statements……………………………………
6–8 | | Supplemental Schedules | | Computation of Net Capital Under Rule 15c3-1 of
the Securities and Exchange Commission (Schedule I) 9 | | Information for Determination of Reserve Requirements under Rule 15c3-3 of
the Securities and Exchange Commission (Schedule II) 10 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) {5}------------------------------------------------ # **Mercer Allied Company, L.P. Statement of Financial Condition As of December 31, 2019** | Assets | | |-----------------------------------------|------------------| | Cash | \$
18,046,113 | | Commissions receivable | 2,769,564 | | Due from affiliates | 1,161,350 | | Prepaid expenses | 876,459 | | Total assets | \$
22,853,486 | | | | | Liabilities and partners' capital | | | Other liabilities and accrued expenses | \$
261,415 | | Due to Parent | 7,446,377 | | Income tax payable | 976,812 | | Total liabilities | \$
8,684,604 | | | | | Partners' capital | 14,168,882 | | Total liabilities and partners' capital | \$
22,853,486 | | | | The accompanying notes are an integral part of the financial statements {6}------------------------------------------------ | Revenue | | |-------------------------------------|------------------| | Brokerage commissions | \$
47,561,296 | | Operating expenses | | | Administrative charges - affiliates | 29,007,857 | | Licenses | 1,317,120 | | Professional fees | 102,130 | | Total operating expenses | 30,427,107 | | Pre-tax earnings | 17,134,189 | | Provision for taxes | 4,140,919 | | Net earnings | \$
12,993,270 | {7}------------------------------------------------ # **Mercer Allied Company, L.P. Statement of Changes in Partners' Capital For the Year Ended December 31, 2019** | | General
Partner | Limited
Partner | Total | |----------------------------|--------------------|--------------------|------------------| | Balance, December 31, 2018 | \$
141,755 | \$
14,033,857 | \$
14,175,612 | | Net earnings | 129,933 | 12,863,337 | 12,993,270 | | Distributions to Parent | (130,000) | (12,870,000) | (13,000,000) | | Balance, December 31, 2019 | \$
141,688 | \$
14,027,194 | \$
14,168,882 | The accompanying notes are an integral part of the financial statements {8}------------------------------------------------ | Cash flows from operating activities | | |---------------------------------------------|---------------| | Net earnings | \$ 12,993,270 | | Changes in operating assets and liabilities | | | Commissions receivable | 4,001,497 | | Prepaid expenses | (20,550) | | Other liabilities and accrued expenses | 166,949 | | Due to Parent | (1,544,551) | | Due from affiliates | (973,313) | | Income tax payable | (240,252) | | Net cash provided by operating activities | 14,383,050 | | Cash flows from financing activities | | | Distributions to Parent | (13,000,000) | | Net cash used for financing activities | (13,000,000) | | Net increase in cash | 1,383,050 | | Cash, beginning of year | 16,663,063 | | Cash, end of year | \$ 18,046,113 | | | | ### SUPPLEMENTAL DISCLOSURE Cash payments for income taxes, net of refunds, were \$4,381,171. {9}------------------------------------------------ #### **1. Description of Business** Mercer Allied Company, L.P. (the Partnership) is a limited partnership which executed its Certificate of Limited Partnership in the State of Delaware as of October 5, 1994. The Partnership, which commenced operations on December 10, 1994, is a securities broker-dealer registered with the Financial Industry Regulatory Authority (FINRA). The Partnership is scheduled to expire December 31, 2044. The Partnership, through employees of affiliated companies, places variable life insurance policies and variable annuities with insurance carriers and earns a commission. GS Ayco Holding LLC (Parent) is the general partner of the Partnership and a wholly-owned subsidiary of the Goldman Sachs Group, Inc. (Group Inc). The Ayco Company, L.P. is the limited partner of the Partnership and is also an affiliate of the Partnership. ### **2. Basis of Presentation and Significant Accounting Policies** These financial statements are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). #### **Use of Estimates** Preparation of these financial statements requires management to make certain estimates and assumptions. These estimates and assumptions are based on the best available information but actual results could be materially different. #### **Cash** Cash balances are maintained at two institutions, each of which is insured by Federal Deposit Insurance Corporation (FDIC) up to \$250,000. The aggregate bank balances in excess of FDIC limits at these institutions were \$17,745,572 at December 31, 2019. #### **Revenue Recognition** The Partnership earns brokerage commissions for placing insurance policies with insurance carriers and from placing business with clearing brokers. Brokerage commissions are earned when the insurance policy becomes effective (insurance binder in place) and the premium has been collected by the insurance carrier. #### **3. Amended and Restated Limited Partnership Agreement** Allocations of income and losses are generally pro rata according to ownership interest (99% to the limited partner and 1% to the general partner), except in certain circumstances as outlined in the amended and restated limited partnership agreement whereby income and loss allocations are based on a prescribed formula. #### **4. Related-Party Transactions** The Partnership has significant transactions with affiliated companies. These transactions have a significant impact on the Partnership's financial condition, earnings and cash flows. Whether the terms of these transactions would have been the same had they been between non-affiliated companies cannot be determined. The Partnership, through relationships of affiliated companies, places insurance policies for clients with insurance carriers and earns brokerage commissions. Total brokerage commissions earned through affiliated companies for the year ended December 31, 2019 amounted to \$47,561,296. {10}------------------------------------------------ The Partnership, which has no employees, is provided operational and administrative support by its Parent and other affiliates, for which the Partnership was charged \$29,007,857, of which \$10,981,168 related to commissions expense. At December 31, 2019, amounts due to Parent for such services amounted to \$7,446,377. ### **5. Net Capital Requirements** The Partnership is a registered U.S. broker-dealer subject to Rule 15c3-1 of the Securities and Exchange Commission (SEC), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. There are restrictions on operations if aggregate indebtedness exceeds ten times net capital. Effective July 1, 2003, the National Association of Securities Dealers (NASD) approved the Partnership's election to reduce its minimum dollar net capital requirement from \$50,000 to \$5,000. At December 31, 2019, the Partnership had net capital of \$9,361,509, which was \$8,782,535 in excess of its minimum required net capital of \$578,974. The Partnership claims exemption from Rule 15c3-3 (k)(1) of the SEC as the Partnership promptly transmits all funds received in connection with its activities as a broker-dealer, and does not otherwise hold funds or securities for, or owe money or securities to, customers. #### **6. Income Taxes** #### **Provision for Income Taxes** The Partnership has elected to be taxed as a corporation for U.S. Federal income tax purposes. As a corporation for tax purposes, the Partnership is subject to U.S. Federal and various state and local income taxes on its earnings. The Partnership is included with Group Inc. and subsidiaries in the consolidated corporate federal tax return as well as the consolidated/combined state and local tax returns. The Partnership computes its tax liability on a modified separate company basis and settles such liabilities with Group Inc. pursuant to the tax sharing arrangement. To the extent the Partnership generates tax benefits from losses it will be reimbursed by Group Inc. pursuant to the tax sharing arrangement. The Partnership's state and local tax liabilities are allocated to reflect its share of the consolidated/combined state and local income tax liability. Income taxes are provided for using the asset and liability method under which deferred tax assets and liabilities are recognized for temporary differences between the financial reporting and tax bases of assets and liabilities. The Partnership reports interest expense related to income tax matters in provision for taxes and income tax penalties under operating expenses. The table below presents the components of the provision for taxes. | Current taxes: | | |---------------------|-----------------| | U.S. Federal | \$
3,458,426 | | State and local | 682,493 | | Provision for taxes | \$
4,140,919 | {11}------------------------------------------------ The difference between the reported provision for taxes and the amount computed by multiplying pretax earnings by the federal statutory rate is primarily attributable to state and local taxes. The tax true up for prior years was a net tax benefit of \$18,970. #### **Deferred Income Taxes** Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets to the amount that more likely than not will be realized. At December 31, 2019, no deferred tax liabilities or deferred tax assets were recognized and no valuation allowance was required. #### **Unrecognized Tax Benefits** The Partnership recognizes tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements. As of December 31, 2019, the Partnership did not record a liability related to accounting for uncertainty in income taxes. ### **Regulatory Tax Examinations** The Partnership is subject to examination by the U.S. Internal Revenue Service (IRS) and other taxing authorities in jurisdictions where the Partnership has significant business operations such as New York State and City. The tax years under examination vary by jurisdiction. New York State and City examinations of 2011 through 2014 began in 2017. IRS examinations of 2011 and 2012 began in 2013. Group Inc. has been accepted into the Compliance Assurance Process program by the IRS for each of the tax years from 2013 through 2019 and submitted an application for 2020. This program allows Group Inc. to work with the IRS to identify and resolve potential U.S. federal tax issues before the filing of tax returns. The 2013 through 2018 tax years remain subject to post-filing review. ### **7. Subsequent Events** The Partnership has evaluated whether any events or transactions occurred subsequent to the date of the statement of financial condition and through February 27, 2020, the date the financial statements were issued, and determined that there are no material events or transactions that would require recognition or disclosure in these financial statements. {12}------------------------------------------------ # **Mercer Allied Company, L.P. Schedule I Computation of Net Capital Requirement under Rule 15c3-1 of the Securities and Exchange Commission As of December 31, 2019** ### **Net capital** | Total partners' capital | \$
14,168,882 | |------------------------------------------------------------------------|------------------| | Deductions | | | Non-allowable assets – commissions receivable, due from affiliates and | | | prepaid expenses | (4,807,373) | | Net capital | \$
9,361,509 | | | | | Aggregate indebtedness | | | Total aggregate indebtedness liabilities (included in the Statement of | \$
8,684,604 | | Financial Condition) | | | Total aggregate indebtedness | \$
8,684,604 | | Percentage of aggregate indebtedness to net capital | 93% | | Percentage of debt to debt-equity total computed in accordance with | - | | Rule 15c3-1(d) | | | | | | Computation of basic net capital | | | Minimum net capital required (6-2/3% of aggregate indebtedness) | \$
578,974 | | Minimum dollar net capital requirement of reporting broker or dealer | \$
5,000 | |------------------------------------------------------------------------------|-----------------| | Net capital requirement | \$
578,974 | | Excess net capital | \$
8,782,535 | | Excess net capital at 1000% (net capital less 10% of aggregate indebtedness) | \$
8,493,049 | ### **Statement pursuant to paragraph (d)(4) of Rule 17a-5** There are no differences between this computation of net capital and the corresponding computation prepared by the Partnership included in its unaudited Part IIA FOCUS Report as of December 31, 2019 filed on January 24, 2020. {13}------------------------------------------------ # **Mercer Allied Company, L.P. Schedule II Information for Determination of Reserve Requirements under Rule 15c3-3 of the Securities and Exchange Commission As of December 31, 2019** The Partnership has claimed exemption from Rule 15c3-3 of the Securities and Exchange Commission under paragraph (k)(1) of that rule. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.