# HANDELSBANKEN MARKETS SECURITIES, INC. X-17A-5 (2021-02-25) — Broker-dealer annual report - Company: HANDELSBANKEN MARKETS SECURITIES, INC. - Form: X-17A-5 - Filed: 2021-02-25 - Period: 2020-12-31 - Accession: 0000945039-21-000002 - CIK: 945039 - File #: 8-48279 - Material weakness: No - Auditor: Eisner Amper LLP - Auditor location: New York, NY - Contact: Richard Sobel - Phone: 212-751-4422 - Signed by: Richard Sobel (Finop/CFO) Original filing: https://www.sec.gov/Archives/edgar/data/945039/000094503921000002/HMSIShortEdgarv2.pdf --- {0}------------------------------------------------ (A Wholly-Owned Subsidiary of Svenska Handelsbanken AB) FINANCIAL STATEMENT AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DECEMBER 31 , 2020 {1}------------------------------------------------ **UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** | 0MB APPROVAL | | |--------------------------|------------------| | 0MB Number: | 3235-0123 | | Expires: | October 31, 2023 | | Estimated average burden | | | hours per response | 12.00 | ### **ANNUAL AUDITED REPORT FORM X-17A-5 PARTIII** ### SEC FILE NUMBER **B-48279** **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
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MM/DD/YY | |----------------------------------------------------------------|---------------------|-----------------------------------------------------------------------------|---------------------------------|------------------------------------------------------------------------------------------------------| | | A. REGISTRANT | IDENTIFICATION | | | | AME OF BROKER-DEALER: | | Handelsbanken
Markets | Securities
, Inc. | OFFICIAL USE
ONLY | | ADDRESS OF PRI
Cf PAL PLACE OF | BUSINESS : (Do not | use P.O. Box | o.) | | | 900 | Third | Avenue
17
Floor
- | | FIRM I.D. NO. | | | | o. and Street) | | | | New
York | | NY | | 10022 | | (City) | | (State) | _ | (Zip Code) | | | B. ACCOUNT | ANT
IDENTIFICATION | | 212-751-4422
(Area Code - Telephone
umber) | | DEPENDENT PUBLIC
ACCOU TANT whose
Eisner
Amper
LLP | ame - | opinion is contained
if individual. s1a1e | in this Report* | | | 733
Third
Avenue | | New
York | las/. first. middle name)
NY | | | (Address) | (City) | | | 10017 | | CHECK ONE: | | | (State) | (Zip Code) | | certified Public Accountant
Public Accountant
D | | | | | | Accountant not resident | in United States or | any of its possessions. | | | | | | FOR OFFICIAL
USE ONLY | | | | | | | | | | | | | | | *\*Claims.for exemption.from must be supported by a statement the requ ojfacts irement that the annual report be covered by the opinion of an independent public accountant and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2)* SEC 1410 (11-05) **Potential persons who are to respond to the collection of information contained unless** in **this form are not required to respond the form displays a currently valid 0MB control number.** {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, ____ __ | _ _________ _ R_ic_h_a_r_d_S_o_b_e_l _ | | |-------------------------------------------------------------|------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------| | knowledge and belief
my
Handelsbanken Markets | the accompanying
financial statement and
Securities, Inc. | , swear (or affirm) that, to the
best of
________
supporting schedules pertaining
to the firm of | | of | December 31
. 20 20 | . as | | neither the company nor
classified solely as that | any partner, proprietor, principal officer
of a customer. except as
follows: | are true and correct. I further swear
(or affirm) that
or director has any proprietary
interest in any account | | NO | EXCEP
I | IONS | | | | Signature | | | | FinOp/ CFO | | di[ | '/ | Title | | ~ i ' L- | CLAUDIA TAYLOR
NOTARY PUBLIC. | | | otary Pub~ | State of New
No. 01TA5068172 | York | | This report** | (?u~li!led In Kings | 2--
Cou~~ | | (a) Facing Page. | contains (check all applicabl~8i!~S10!1
Expires 10/281 | 2: | | {2]
(b} Statement of Financia | l Condition. | | | O
(c) Statement of Income | (Loss) or. if there is other | | | of Comprehensive | comprehensive
Income (as defined in §2
10. 1-02 of Regulation S-X). | income in the period(s)
presented. a Statement | | (d) Statement of Changes | in Financial Condition | | | §
(e} Statement of Changes | in Stockholders' Equity
or Partners· or Sole Proprietors' | Capital. | | (f} Statement of Changes | in Liabilities Subordinated
to Claims of Creditors. | | | (g) Computation of Net
(h) Computation for Determination | Capital. | | | §
(i)
Information Relating to | of Reserve Requirements | Pursuant to Rule I 5c3-3 | | U)
A
Reconciliation. | the Possession or Control
Requirements Under Rule
including appropriate | I 5c3-3. | | Computation | explanation of the Computation
for Determination of | ofNet Capital Under Rule
J 5c3-I and the | | (k)
A Reconciliation between | the Reserve Requirements | nder Exhibit A of Rule
15c3-3. | | consolidation | the audited and unaudited
Statements of Financial | Condition with respect
to methods of | | (I)
An Oath or Affirmation. | | | | (m) A copy of the SIPC | Supplemental Report. | | | §
(n) A report describing | any material inadequacies found | to exist or found to have existed | | | | since the date of the previous
audit. | \*\* *For c:ondirions of confidenrial 1rea1ment qf cer1ain portions of 1his filing. see sec1ion 240. I 7a-5(e}(J).* {3}------------------------------------------------ # **HANDELSBANKEN MARKETS SECURITIES, INC.** (A Wholly-Owned Subsidiary of Svenska Handelsbanken AB) **CONTENTS** **Report of Independent Registered Public Accounting Firm** #### **Financial Statement** | Statement of Financial
Condition | 2 | |-------------------------------------|-----| | Notes to Financial Statement | 3-6 | {4}------------------------------------------------ ## **El PE EisnerAmper LLP** 733 Third Avenue New York, NY 10017 T 212.949.8700 F 212.891.4100 - #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Stockholder of Handelsbanken Markets Securities, Inc. #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Handelsbanken Markets Securities, Inc. (the "Company") as of December 31 , 2020 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 as of December 31 , 2020, in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibil ity 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 2014. EISNERAMPER LLP New York, New York February 23, 2021 {5}------------------------------------------------ (A Wholly-Owned Subsidiary of Svenska Handelsbanken AB) #### **STATEMENT OF FINANCIAL CONDITION** #### **December 31, 2020** #### **ASSETS** I | Cash and cash equivalents | | |------------------------------------------------------------|------------------| | Fees receivable | \$
7,964,151 | | Property and equipment, net | 348,258 | | Due from Parent | 55,863 | | Other assets | 50,882
39,577 | | | \$
8,458,731 | | LIABILITIES AND STOCKHOLDER'S
EQUITY | | | Liabilities | | | Due to affil iates | \$
223,533 | | Deferred bonus | 50,600 | | Accounts payable and accrued
expenses | 309,149 | | Liabilities subordinated to claims
of general creditors | 2,000,000 | | Total liabilities | 2,583,282 | | | | #### **Stockholder's Equity** | Common stock, \$.01 par
value, 1,000 shares
authorized, issued, and outstanding | 10 | |---------------------------------------------------------------------------------------|-----------------| | Additional paid-in capital | 18,099,990 | | Accumulated deficit | (12,224,551) | | Total stockholder's equity | 5,875,449 | | | \$
8,458,731 | {6}------------------------------------------------ (A Wholly-Owned Subsidiary of Svenska Handelsbanken AB) #### **NOTES TO FINANCIAL STATEMENT** #### **DECEMBER 31, 2020** #### **1. Nature of business and summary of significant accounting policies** #### Nature of Business Handelsbanken Markets Securities, Inc. (the "Company"}, a wholly-owned subsidiary of Svenska Handelsbanken AB (the "Parent"), was incorporated in the State of Delaware on January 9, 1995. The Company is a broker-dealer registered with the Securities and Exchange Commission ("SEC") and a member of the Financial Industry Regulatory Authority ("FINRA"). The Company engages primarily in equity brokerage services. The Company acts as a chaperoning broker-dealer pursuant to Rule 15a-6 for institutional customers and other broker-dealers in the purchase and sale of foreign securities. The Company executed and cleared all of these foreign trades through the Parent and affiliates which are settled on a delivery versus payment basis. Effective August 1, 2019, the Parent and Company entered into a cost plus agreement where the Company is compensated 110% of its operating expenses in lieu of commissions. All domestic securities transactions are cleared through a clearing broker on a fully-disclosed basis and, accordingly, the Company does not carry securities accounts for customers or perform custodial functions relating to the customers' securities. #### Cash and Cash Equivalents The Company considers its holdings in bank money market accounts to be cash equivalents. #### Basis of Presentation The financial statement has been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). #### Fees Receivable Fees receivable are carried at the amounts billed to customers, net of an allowance for credit losses, if any. #### Allowance for Credit Losses Effective January 1, 2020, the Company adopted ASC Topic 326, Financial Instruments - Credit Losses ("ASC 326"). ASC 326 impacts the impairment model for certain financial assets measured at amortized cost by requiring a current expected credit loss (CECL) methodology to estimate expected credit losses over the entire life of the financial assets as of the reporting date. The allowance for credit losses is based on the Company's expectation of the collectability of financial instruments carried at amortized cost, including fees receivable utilizing the CECL framework. The adoption of ASC 326 had no impact on the Company's opening stockholder's equity. The Company's expectation is that the credit risk associated with fees receivable is that any client with which it conducts business with is unable to fulfill its contractual obligations. Management monitors the credit risk of clients and currently there is not a foreseeable expectation of an event or change which could result in the fees receivable being unpaid based on individual facts and circumstances. The Company considers factors such as historical experience, credit quality, age of balances and current and future economic conditions that may affect the Company's expectation of the collectability in determining the allowance for credit losses. The Company has no allowance for credit losses as of and for the year ended December 31 , 2020. #### Fair Value of Financial Instruments At December 31 , 2020, the carrying value of the Company's financial instruments, fees receivable, due from Parent, due to broker and dealers, due to affiliates approximate their fair values due to the nature of their short term maturities. {7}------------------------------------------------ (A Wholly-Owned Subsidiary of Svenska Handelsbanken AB) #### **NOTES TO FINANCIAL STATEMENT** #### **DECEMBER 31, 2020** #### **1. Nature of business and summary of significant accounting policies (continued)** #### Property and Equipment, net Property and equipment is stated at cost less accumulated depreciation. The Company provides for depreciation as follows: | Asset | Estimated
Useful Life | Principal Method | |------------------------|--------------------------|------------------| | Furniture and fixtures | 5-7 years | Straight-Line | | Computer equipment | 5 years | Straight-line | #### Deferred Bonus The Company typically defers 40% of the current year bonus pool for three years. The deferred bonus is paid in March of the subsequent year, with the year's current bonus payout. #### Income Taxes The Company follows an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for difference between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized. The determination of the Company's provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company's financial statements only after determining a more-likelythan-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the financial statement as appropriate. Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce stockholder's equity. This policy also provides guidance on thresholds, measurement, de-recognition, classification , interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities. Management'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 Company files its income tax returns in the U.S. federal and various state and local jurisdictions. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state and local tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. {8}------------------------------------------------ (A Wholly-Owned Subsidiary of Svenska Handelsbanken AB) #### **NOTES TO FINANCIAL STATEMENT** #### **DECEMBER 31, 2020** ### **1. Nature of business and summary of significant accounting policies (continued)** #### Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statement. Actual results could differ from those estimates. #### **2. Liabilities subordinated to claims of general creditors** At December 31 , 2020, the Company had a \$2,000,000 subordinated loan agreement with its Parent which was in accordance with an agreement approved by FINRA. The subordinated loan matures on January 3, 2022 and bears interest at 2.96% per annum. #### **3. Net capital requirement** The Company is a member of FINRA, and is subject to the SEC's Uniform Net Capital Rule 15c3-1. The Company has elected to compute its net capital requirement, pursuant to SEC Rule 15c3-1 , which requires minimum net capital of \$250,000. At December 31 , 2020, the Company's net capital was approximately \$7,381 ,000, which was approximately \$7,131 ,000 in excess of its minimum net capital requirement of \$250,000. #### **4. Income taxes** As of December 31 , 2020, the Company had U.S. federal net operating loss ("NOL") carryforwards of approximately \$12,836,000 which are available to reduce future taxable income. The federal NOL carryforwards of approximately \$6,705,000 will expire through 2037. The federal NOL of approximately \$6,1 31 ,000 can be carried forward indefinitely but limited to offset 80% of taxable income. The Company's income and expenses for the New York State and New York City income tax returns are included within the filings of the Parent's combined tax return. The Parent allocates consolidated amounts of current and deferred tax expense to the Company with respect to these tax filings. | Deferred tax ass ets, net: | | | |----------------------------|----|-------------| | Depreciation | \$ | (12,000) | | NOL | \$ | 2,696,000 | | Vacation | \$ | 10,000 | | Bonus accrual | \$ | 11,000 | | Valuation Allowance | | 2,705,000 | | | \$ | !2,1os,oool | | | \$ | | | | | | #### **5. Concentrations of credit risk** The Company is engaged in various brokerage activities whose counterparties are primarily · institutions. In the normal course of business, the Company is involved in the execution and settlement of various securities transactions whose counterparties are primarily institutions and affiliates. These activities may expose the Company to risk in the event that the counterparty is unable to fulfill its contracted obligations and the Company has to purchase or sell the securities underlying the contract at a loss. {9}------------------------------------------------ (A Wholly-Owned Subsidiary of Svenska Handelsbanken AB) #### **NOTES TO FINANCIAL STATEMENT** #### **DECEMBER 31, 2020** #### **5. Concentrations of credit risk (continued)** The Company has receivables and payables for financial instruments sold to and purchased from brokers and dealers. The Company is exposed to risk of loss from the inability of the brokers and dealers to pay for purchases or to deliver the financial instruments sold, in which case the Company would have to sell or purchase the financial instruments at prevailing market prices. Pursuant to the terms of the agreement between the Company and the clearing broker, the clearing broker has the right to charge the Company for losses that result from a counterparty's failure to fulfill its contractual obligations. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits. The Company is subject to credit risk to the extent any financial institutions with which it conducts business is unable to fulfill contractual obligations on its behalf. #### **6. Related party transactions** The Parent and Company has a cost plus agreement where the Company is compensated 110% of its operating expenses. The Company has a receivable from its Parent related to this agreement of approximately \$51 ,000 as of December 31 , 2020. Pursuant to a service agreement between the Company and Svenska Handelsbanken New York Branch (the "Branch"), an affiliate, the Branch allocates expenses to the Company based on expenses incurred by the Branch on behalf of the Company related to its daily operations. The Company has an amount due to affiliates of approximately \$224,000 at December 31 , 2020, representing both allocated and other expenses paid by the Branch principally for December 2020. #### **7. Employee benefit plan** #### Money Purchase Plan The Company maintains a money purchase plan (the "Plan") which covers all current employees. Annual contributions to the Plan are at the sole discretion of the Company. During the year, the Company contributed 10% of each employee's annual salary, up to a maximum of \$28,000 per employee, to the Plan. #### **8. Other uncertainties** The outbreak of the coronavirus ("COVID-19") continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The World Health Organization has declared COVID-19 a "Public Health Emergency of International Concern." The global impact of the outbreak continues to evolve. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. COVID-19 could have a material impact on the Company's financial statements. The extent of the impact of the coronavirus ("COVID-19") outbreak on the financial performance of the Company will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions and the impact of COVID-19 on the financial markets and the overall economy, all of which are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company's results may be materially adversely affected are impacted for an extended period, the Company's results may be materially adversely affected. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.