# JAMES RIVER SECURITIES CORP. X-17A-5 (2020-02-21) — Broker-dealer annual report - Company: JAMES RIVER SECURITIES CORP. - Form: X-17A-5 - Filed: 2020-02-21 - Period: 2019-12-31 - Accession: 0000944670-20-000001 - CIK: 944670 - File #: 8-48270 - Material weakness: No - Auditor: Keiter - Auditor location: Glen Allen, VA - Contact: Laura McGrath - Phone: 8045784500 - Signed by: Laura McGrath (President) Original filing: https://www.sec.gov/Archives/edgar/data/944670/000094467020000001/JRSCfs19facingsec1.pdf --- {0}------------------------------------------------ UNITEDSTATES SECURITIESANDEXCHANGECOMMISSlON Washington, D.C • .20549 ## **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** | Es
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5 | | | | | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## **REPORT** OF **INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors of James River Securities Corp. Manakin-Sabot, Virginia Opinion on the Financial Statements We have audited the accompanying statement of financial condition of James River Securities Corp. (the •company") as of December 31, 2019, the related statements of operations, changes in stockholders· equity, and cash flows for the year then ended and the related notes to the financial statements (collectively referred to as the "financial statements"}. In our opinion. the financial statements present fairly, in all material respects, the financial position of James River Securities COrp. as of December 31, 2019, and the resuhs 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. ## **Basia of 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 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 perfonn the audit to obtain reasonable assurance about whether the financial statements are 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 statements, whether due to error or fraud, and perfonning 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. > ) Cortifieet
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en | | {10}------------------------------------------------ #### **Noles To Financial Statements** ## **Note 1. Nature of Business And Significant Accounting Pollclea** Nature of business: James River Securities Corp. (the Company) operates in Virginia as an introducing broker-dealer. The Company is registered as a broker/dealer under the rules and regulations of the U.S. Securities and Exchange Commission (the SEC) and is a member of the Financial Industry Regulatory Aulhority (FINRA). The Company is also registered as an Introducing Broker with the Commodity Futures Trading Commission {the CFTC) and is a member of the National Futures Association (NFA). The broker/dealer registration with the SEC permits the Company to conduct business primarily in direct participation programs on a reasonable efforts basis and to act as a finder or marketing agent with respect to private placements. The Company operates under the exemptive provisions of paragraph (k)(2){i) of rule 15c3-3 of the SEC. Therefore, the Company does not have customer accounts and thus does not carry margin accounts, or receive customer funds or securities which it would have to transmil promptly in connection with its activities **as a** broker or dealer. The Company does not otherwise hold funds or securities for or owe money to customers, nor does it have financial transactions betw~n the broker or dealer and customers through which bank accounts have been designated as Special Accounts for the Exclusive Benefit of Customers of the Company. A summary of the Company's significant accounting policies follows: The Company follows principles generally accepted in the United States of America (GAAP) as promulgated by the Financial Accounting Standards Board (FASS). Accounting estimates: The preparation of financial statements in conformity with GAAP requi1es management to make estimates and assumptions that affect the 1eported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Allowance for Doubtful Accounts: The Company uses the reserve method of accounting for doubtful accounts for financial reporting purposes. Management has determined that no allowance is necessary at December 31, 2019. Risks and Uncertainties: Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash. The Company maintains its cash balances in financial institutions insured by the Federal Deposit Insurance Corporation up to \$250,000. A substantial portion of the Company's revenues in a year may be received from a small number of transactions or concentrated within an industry. During 2019, one customer comprised 100% of revenues and fees receivable. #### Revenue Recognition: The Company may derive ongoing revenue earned from previous placement transactions that is recognized as earned on the terms of the underlying placement agreements and is based on the market value of the private placement investments. The Company meets its performance obligations at the time of placement, though fees are earned for the duration of e.ich customer investment. The two components of Company revenue are: {A) Investment Trailing Fees: fees based as a percentage of market value (or net asset value) as of each month-end, thus a variable consideration which is recognized by the Company when such fees can be estimated with a high degree of certainty. and (8) Investment Incentive Fees: fees based as a perc:entage of investment performance that are calculated as of eaeh month-end but are paid to the Company on an annual basis based on the investment performance for the calendar year. Incentive Fees are subject to a claw-back provision whereby negative investment performance within a given month reduces the cumulative Incentive Fee for lhe year, until crystallization occurs as of calendar year-end and {11}------------------------------------------------ #### Notes To Flnanclal Statements the Incentive fee is known with a certainty of receipt by the Company. These performance-based fees are considered variable consideration and are recognized by the Company upon crystallization. During 2019, tna Company recognized trailing fee revenue of \$84,448 and recognized investment incentive fee revenue of\$109,790. The Company recorded contract assets of\$130,927 as of December 31. 2019 and \$20,449 as of January 1, 2019. Contract assets are recognized as fees receivable on the statement of financial condition. The Company recorded no contract liabilities for 2019. Leases: In February 2016, the fASB issued ASU 2016-02 - Leases (Topic 842). The updated requires lessees to recognize leases on the statement of financial condition with lease liabilities and corresponding right-of-use assets based in the present value of lease payments. TM new standard was effective for annual reporting periods beginning after December 15, 2018. The Company had not entered into any leases as of December 31, 2019. Income taxes: The Company may recognize the tax benefit from an uncertain tax position only if ii is morelikely-than-not that the tax position will be sustained on examination by taxing authorities. based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses derecognition. ciasslfication. interest and penalties on income taxes, and accounting in interim periods. The Company would recognize any interest and penalties on income taxes as **a** component of income **tax** expense in the statement of operations. ## **Note 2. Related Party Transactions** The Company has no paid employees. The Company has an Expense Sharing Agreement with James River Financial Corp dated April 1, 2018. The Company does not aocrue charges for the services rendered by JRFC as per the Agreement. The Company adheres to and complies with NASD Notice 03-63 in order to be exempt from any expense sharing related charges. The Company receives all trailing fee revenue and incentive fees from James River Capital Corp (JRCCJ. an affiliate and related party through common control. At December 31, 2019, all fees receivable were due from JRCC. ## **Note** 3. **Income Tax Status** The Company, with the consent of its stockholders. has elected to be taxed under Section 1362(a) of federal and the Commonwealth of Virginia Income tax law, which provide thal in lieu of corporation income taxes. the stockholders separately account for their pro rata shares of the Company's items of income. deductions. losses and credits. As a result of this election, no income taxes have been recognized in the aocompanying financial statements. Management has evaluated the Company's tax positions for the open tax years and concluded that the Company has taken no uncertain tax positions that require adjustment to the financial statements to oomply with the provisions of this guidance. The Company Is not currently under audit by any tax jurisdietion. {12}------------------------------------------------ #### **Notes To financial Statements** ## **Note 4. Regulatory Requirements** The Company is a broker-dealer subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1 ). 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. Rule 15c3-1 also provides that equity capttal may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 1 0 to 1. The Company is also subject to the net capital requirements of the CFTC Regulation 1.17 and requirements of the National Futures Association. At December 31. 2019, the Company had net capital of \$225,183 which was \$175,183 in excess of its required net capital of \$50,000. The Company's net capital ratio was 0.35 to 1. The Company is exempt under Rule 15c3-3(k)(2)(i) from preparing the Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. #### **Note 5. Guarantees** As permitted or required under Virginia corporation law, the Company has certain obligations to indemnify its managers and officers for certain events or occurrences while the managers or officers are, or were serving, at the Company's request in such capacities. The maximum liability under these obligations is limtted by the Code of Virginia. The Company's Securities Investor Protection Corporation (SIPC) policy serves to further limit exposure. #### **Note 6. Subsequent Events** Management has evaluated subsequent events for potential recognition and/or disclosure in the December 31. 2019 financial statements through February 14, 2020, which was the date the Company's financial statements were issued and determined that no events have occurred that would require disclosure in the financial statements. {13}------------------------------------------------ ## Schedule I - Computallon Of Net Capllal Under SEC Rule 15c3-1 and Statement Pursuanl to Rule 17a-6(d)(4) D~ember 31, 2019 | N
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e | above computation and the Company's Corresponding unaudited Part II of Form X-17A-5 as of December 31, 2019 and pursuant to CFTC Rule 1.17. See Report of Independent Registered Public Accounting Firm. {14}------------------------------------------------ **Schedule** II **Schedule** II - **Exemption Provision of Reserve Requirements Pursuant to Rule 1 Sc:3-3 of the Securitle& Exchange Act of 1934 December 31, 2019** The Company is exempt under Rule 15c3-3(k)(2)(i) from preparing the Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. See Report of Independent Registered Pvbllc Accounting Firm. {15}------------------------------------------------ ![](_page_15_Picture_0.jpeg) ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors of James River Securities Corp. Manakin-Sabot, Virginia We have reviewed management's statements. included in the accompanying Exemption Report. in which (1) James River Securities Corp. identified !he following provisions of 17 C.F.R. §15c3- **3(k)** under which James River Securities Corp. claimed an exemption from 17 C. F.R. §240.15c3-3: (k)(2)(i) (the "exemption provision') and (2} James River Securities Corp. stated that James River Securities Corp. met the identified exemption provisions throughout the most recent fiscal year without exception. James River Securities Corp.'s management is responsible for compliance with the exemption provisions and ~s 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 about James River Securities Corp.'s compliance with the exemption provisions. 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 paragraph (k)(2)(i) of Rule 15c3-3 under the Securities Exchange Act of 1934. Glen Allen. Virginia February 14, 2020 ) certified **Publl< At:(:Q1,1ntant\$ & ConsYltanu.** 4-401 Dominion 8ov1ev.11~ Gren Allen. VA 23060 T:804.747.0000 F:804.747.3\$32 **\VWW,kei'tercpa.com** {16}------------------------------------------------ ## **James River Securl!IH Corp's Exempllon Report** James River Securities Corp. (the ·company") is a registered broker-dealer subject to Rule 17a-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 prepare ) **Certifiect Pubtlc A<:count1Jnb & Consultents** -4401 Dominion Boule;-ar~ Glen Allen. VA 23060 T:804.747.0000 F:804.141.3632 **\.VYM'.kei1erq,a.com** {18}------------------------------------------------ Because of inherent limitations in internal control or the practices and procedures referred to above. error or fraud may occur and not be detected. Also, projection of any evaluation of them to future periods is subject to the risk that they may become inadequate because of changes in conditions or that the effectiveness of their design and operation may deteriorate. A deficiency in Internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions. to prevent or detect misstatements on a timely basis. **A** significant deficiency is a deficiency. or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. **A** material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control was for the limited purpose described in the first and second paragraphs and would not necessarily identify all deficiencies in internal control that might be material weaknesses. We did not identify any deficiencies in internal control and control activities for safeguarding securities and certain regulated commodity customer and firm assets that we consider to **be** material weaknesses, as defined above. We understand that practices and procedures that accomplish the objectives referred to in the second paragraph of this report are considered by the CFTC to be adequate for its purposes in accordance with the Commodity Exchange Act and related regulations, and that practices and procedures that do not accomplish such objectives in all material respects indicate a material inadequacy for such purposes. Based on this understanding and on our study, we believe that the Company's practices and procedures, as described in the second paragraph of this report, were adequate al December 31, 2019, to meet the CFTC's objectives. This report is intended solely for the information and use of the Board of Directors, management, the CFTC, the National Futures Association and other regulatory agencies that rely on CFTC Regulation 1. 16 under the Commodity Exchange Act in their regulation of introducing registered brokers and dealers. and is not intended to be and should not be used by anyone other than these specified parties. Glen Allen. Virginia February 14, 2020 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.