# KEMPEN & CO U.S.A., INC. X-17A-5 (2021-02-19) — Broker-dealer annual report

- Company: KEMPEN & CO U.S.A., INC.
- Form: X-17A-5
- Filed: 2021-02-19
- Period: 2020-12-31
- Accession: 0000946633-21-000003
- CIK: 946633
- File #: 8-48389
- Material weakness: No
- Auditor: Friedman LLP
- Auditor location: East Hanover, NJ
- Contact: Patrick Logan
- Phone: 2127514422
- Signed by: John McGowan (COO)

Original filing: https://www.sec.gov/Archives/edgar/data/946633/000094663321000003/kempenfs20.pdf

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## KEMPEN & CO. U.S.A., INC.

## ANNUAL AUDITED REPORT FORM X-17A-5 PART III

## SEC FILE NO. 8-48389

## YEAR ENDED DECEMBER 31, 2020

AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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llNfTl'.O STA TES SECURITIES ANO t:XC-IIANGf; COMMIS-'ilON **" '111tin11on,** D.C. 20~ 9

#### **ANNUAL AUDITED REPORT FORM X-17A-5 PART** Ill

|            | OMO i>l>PROVA.l           |                |
|------------|---------------------------|----------------|
| OMS Number |                           | 3235-0123      |
|            | Exl>"'OS Octob8< 31. 2023 |                |
|            | E.11ma,eo average but     |                |
| r'Olls~,e  |                           | 12 00          |
|            |                           | SEC FLE NUMBER |
|            | a.a3e1                    |                |
|            |                           |                |

#### **FACING PAGE Information Rtquirtd** of **Brokers and Dealers Pursuant to Stction 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder**

| _<br>REPORT FOR Tl-IE PERIOD BEGINNING                                   | __<br>__;:0:.:,1:.:I0:.:,112=02:.,0:__ ___    | AND ENDING ___ | __<br>.,_12,::13-"-1.:.:.12,:.:0,_,2~0 |
|--------------------------------------------------------------------------|-----------------------------------------------|----------------|----------------------------------------|
|                                                                          | MMJt>D/VYYY                                   |                | MM>DD/YYYY                             |
|                                                                          | A. REGISTRANT IDENTIFICATION                  |                |                                        |
| NAME OF BROKER-DEALER                                                    |                                               |                |                                        |
| Kempen & Co. U.S.A .• Inc.                                               |                                               |                | OFFICIAl USE ONLY                      |
|                                                                          |                                               |                | FIRM IO. NO.                           |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do 1101 use P 0 . Bo~ No.:      |                                               |                |                                        |
|                                                                          | 880 Thira Avenue. 17th Floor<br>(No and SuttO |                |                                        |
|                                                                          |                                               |                |                                        |
| NEWYORK                                                                  | NY                                            |                | 10022                                  |
|                                                                          | (Sutt)                                        |                | (LpCodc)                               |
| NAME AND TELEPHONE NUM:OF.R OF PERSON TO CONTACT lN REGARD TO nus REPORT |                                               |                |                                        |
| John McGowan                                                             |                                               |                | 212-376-0132                           |
|                                                                          |                                               |                | tArt11 ('odc - 'rtleohont No }         |
|                                                                          | 8. ACCOUNTANT IDENTIFICATION                  |                |                                        |
| INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained ,n 1hi! Rcpon• |                                               |                |                                        |
| Friedman LLP                                                             |                                               |                |                                        |
|                                                                          |                                               |                |                                        |
| 100 Eagle Rock Avenue Surte 200                                          | Easr Hanover                                  | NJ             | 07936                                  |
|                                                                          |                                               |                |                                        |

CHECK QI\;£:

f!l Cerufied Public Accounlanl

O l'ubhc ACWWlWII

0 ACCOWttanl oot resident ,n lJn,wd Stolts or **any** of its possessions

# I **FOR OFF[¢1AL USE ~NL Y**

*•rta11,u /br tumptwn /rum tlw rtqutremrnt 1/w1* ,N *unnwul* rt/J<Jrl *h, L·ovrrtd h\_v 1hr opmi'on of an i,Kkprndttll pt,t,l,c a,xo1m1m11 ,,,us, be- suppQnrd hJ, o s1u,~mr:n1 uf* fo<·u *and nrn,ms..tanc:rs rd,~d on* w *ti.• hw·,1 for tht• exrn1p1to1,. s~1 <sup>t</sup> · lVCllu11 }./(). I Ju ..* J(,:J(]).

SF.!: 1410 !06-02/

Potentlil **persona who are** to **reepond** to the collectlon of lnformAtlon contained In thla form aro not raqulred to respond unle11 the form dl1pi.y1 • currently valid 0MB control number.

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#### **OATH OR At'FIRII-IATION**

| I. |                                | John McGow1111                                                                                                                     | . swear (or affinn) that, to the |
|----|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|
|    |                                | best or my knowledge and belief the a«:ompanymg financial statement and supponing schedules penaining to the firm o                |                                  |
|    |                                | Kemper.&. Co. IJ.S.A , Inc.                                                                                                        | . as of                          |
|    | ~ember 31. 2020                | • are true and correct I funher swear (or affirm) that ncilhcr the company                                                         |                                  |
|    |                                | nor ani• pannrr. proprietor, pnnc,pal officer or director has any propoela!y in1erest in any ac<:OWII classified solely as lhat of |                                  |
|    | a CUStomer. except as follows: |                                                                                                                                    |                                  |

| coo                                                                                                                                                                                           |  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|
| •                                                                                                                                                                                             |  |
| 0(6RA ROS(lLI                                                                                                                                                                                 |  |
| Hotc1ry Pubhc - 5tdt 4~ or Ht\,., Y(.lnc.<br>1                                                                                                                                                |  |
| N0. 0 lR05009006<br>Quc, lit,(lo(J ,o Nusi.-':u (u1,nry                                                                                                                                       |  |
| My(omm1\!.1on ( ap JrC'>llµ, 14 _ } (}]]                                                                                                                                                      |  |
| This report•• contains (check a.II applicable boxes):                                                                                                                                         |  |
| 0 (a) Facing page.                                                                                                                                                                            |  |
| @<br>( b ) Slltlemtnl ofFi""""iaJ Condition                                                                                                                                                   |  |
| /c1 Statement of lnwm• /Loss) or. if llw:re is~, coml)CChcruive income 1n the oenodCs) prestnled. a. S1a1tmcn<br>Gl<br>of Comprehcm,ve Income (as defined 1n ~'210. 1--02 of Regulation S-X). |  |
| (dJ S1a11:,,,.n1 ofChan¥cS m f111anc1al Con<1,11on.<br>GJ                                                                                                                                     |  |
| GJ le) Suiu:men1 of Changes m S1ockholders· Equity or Panncr,· or Sole Propneto<S' Capital.                                                                                                   |  |
| D<br>lfJ Swcmen1 of Changes ,n l.lab1l11its Subo1d1na1ed ro Cla.ims or Crednors                                                                                                               |  |
| ( gJ Compui.111H1 of Ne1 Cap1ial                                                                                                                                                              |  |
| 0 {hJ Compu1auon for Oetttm111a110<t of Resc,vc: Rcquir~ments Pursuan1 10 Rule I Sc.l-3.                                                                                                      |  |
| 0 (i) lnfonnaiuon Rclaung IO the l'o,-scssion or ronirol Requirtments Under Rule 15'3•3                                                                                                       |  |
| EJ (JJ A Rtwru:il11tu,m, ,ncludlfl!! i<pp<opuak c•plllll&IIO<I, of the Coinpu1~uon or Net Capital Under Rule I Sc3• I end the                                                                 |  |
| C<Jmpulal,on for D<'1erm11u,11un of the Re'"'"'' Requ,rtmtnts Uodc, Exlub11 A of Ruk I Sc3•3                                                                                                  |  |

- 0 Ck) A Rewnc1l1•11on between the i1udt1od and un•ud11<d S121<m<-.nts of financial Coodnion wilh rospcct 10 n><,1hods of coosohdation
- liJ II t An Oa1h or Affirm1111on.
- 0 r m1 A copy of the SJ PC Suppl~iental Rtpon
- Q (n) A repon dt~rtt>lng lilly ma1cruJ 11tadl:.jUJ1Ci<:s found 10 tJCiSI or found to have cxis1ed since the date of the previous a.ud,t
- 0 /OJ fndopcndfflt aud,lo(s repon on ,ntcrnal ac<:oun11n11 ,ontrol.
- 0 (p) s,ti.dult of '4:g,tgauon requucmenu and fundi 1n ,egn:ga11on-cus10mcr.;' re11ula1ed commodity future, account pur>Wlnllo Ruic 171,S.
- @ Cq) Excmplton rcpon
- • *Por condtJtonJ of c,mfiUl!nJtul lreu.lm1n1 of c.1:r1tun porliOJU* **IJ/** *Jhl,; filing;* **Jet** *st-,·tion* **1•fJ. /7o-J(l}(J).**

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## **KEMPEN** & **CO. U.S.A., INC.**

## **TABLE OF CONTENTS**

| Report of Independent Registered Public Accounting Firm                                                    | l  |
|------------------------------------------------------------------------------------------------------------|----|
| Financial Statements                                                                                       |    |
| Statem.ent of Financial Condition                                                                          | 3  |
| Statement of Income                                                                                        | 4  |
| Statement of Changes in Stockholder's Equity                                                               | 5  |
| Statement of Cash Flows                                                                                    | 6  |
| Notes to Financial Statements                                                                              | 7  |
| Supplementary Information                                                                                  |    |
| Computation of Net Capital under Rule l 5c3-l<br>Schedule l -<br>of the Securities and Exchange Commission | 13 |
| Information Regarding compliance with Rule 15c3-3                                                          |    |
| Report of Independent Registered Public Accounting Firm                                                    | 14 |
| Statement of Exemption from SEC Rule l 5c3-3                                                               | 15 |

Page

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# **FRI EDMAN LLP®**

# ACCOUNTANTS AND ADVISORS

## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Stockholder of Kempen & Co. lJ.S.A., fnc.

#### **Opinion on the Financial Statements**

We have audited the accompanying statement of financial condition of Kempen & Co. U.S.A., Inc. as of December 31, 2020, the related statements of income, changes in stockholders' equity, and cash tlo\.VS for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Kempen & Co. U.S.A., Inc. as of December 31, 2020, and the results of its operatio11s 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 Kempen & Co. U.S.A., lnc.'s management. Our responsibility is to express an opinion on Kempen & Co. U.S.A., Inc. 's financial statements based on our audit. We are a public accounting finn registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent \.Vith respect to Kempen & Co. U.S.A., Inc. 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.

100 Eagle Rock Avenue, Suite 200, East Hanover, NJ 07936 p 973.929.3500 f 973.929.3501 friedmanllp.com

Your livelihood, empowered. **~~o-K An lnd;pe-ndQnt Membe< Firm of DFK W1th offices wor1dv.-ide ·3-:** . , .~ ....

![](_page_4_Picture_13.jpeg)

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### **Auditor's Report on Supplemental Information**

The supplementary information contained in Schedule I ("Computation of Net Capital under Rule l 5c3-1 of the Securities and Exchange Commission") has been subjected to audit procedures performed in conjunction with the audit of Kempen & Co. U.S.A., Inc.'s financial statements. The supplemental information is the responsibility of Kempen & Co. U.S.A., Inc. 's rnanagernent. 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 supplemental information, including its form and content, is presented in confonnity with 17 C.F.R. §240. l 7a-5. In our opinion, Schedule I is fairly stated, in all material respects, in relation to the financial statements as a whole.

We have served as the Company's auditor since 2008.

Friedman LLP East Hanover, New Jersey February 12, 2021

![](_page_5_Picture_5.jpeg)

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# **Kempen & Co. U.S.A., Inc. Statement of Financial Condition December 31 , 2020**

| Assets                                                   |                  |
|----------------------------------------------------------|------------------|
| Cash and cash equivalents                                | \$<br>9,318,444  |
| Fails to delil.er                                        | 12,164,054       |
| ln-.estment banking recei\0ble                           | 302,999          |
| Operating lease right-of-use asset                       | 991,703          |
| Property and equipment - at cost, net                    | 43,487           |
| Other assets                                             | 142,918          |
| TOTAL ASSETS                                             | \$<br>22,963,605 |
| LIABILITIES & STOCKHOLDER'S EQUITY                       |                  |
| Liabilities                                              |                  |
| Accounts payable, accrued expenses and other liabilities | \$<br>43,622     |
| Due to parent                                            | 518,721          |
| Taxes payable                                            | 25,372           |
| Due to customer                                          | 12,164,054       |
| Operating lease liability                                | 1,042,623        |
| Security deposit payable                                 | 57,128           |
| TOTAL LIABILITIES                                        | 13,851 ,520      |
|                                                          |                  |

| Commitments and contingencies                              |                  |
|------------------------------------------------------------|------------------|
| Stockholder's equity                                       |                  |
| Capital stock - \$0.01 par value; authorized 1,000 shares; |                  |
| 1,000 shares issued and outstanding                        | 10               |
| Additional paid-in capital                                 | 3,263,979        |
| Retained earnings                                          | 5,848,096        |
| Stockholder's Equity                                       | 9,112,085        |
| TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                 | 22,963,605<br>\$ |

The accompanying notes are an integral part of these financial statements.

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# **Kempen & Co. U.S.A., Inc. Statement of Income Year Ended December 31 , 2020**

| Revenues                         |                 |
|----------------------------------|-----------------|
| Re1Aenue - parent                | \$<br>3,058,414 |
| Re-.enue - in-.estment banking   | 638,308         |
| Other income                     | 176,289         |
| Interest income                  | 1,729           |
| TOTAL REVENUE                    | 3,874,740       |
| Expenses                         |                 |
| Compensation and benefits        | 1,487,970       |
| Occupancy                        | 340,141         |
| Communications                   | 164,695         |
| ln1Aestment banking expenses     | 7,923           |
| Professional and consulting fees | 181 ,343        |
| Depreciation                     | 16,753          |
| Other operating expenses         | 923,279         |
| TOTAL EXPENSES                   | 3,122,104       |
| Income before income tax         | 752,636         |
| Income taxes                     | 218,772         |
| NET INCOME                       | 533,864<br>\$   |

The accompanying notes are an integral part of these financial statements.

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# **Kempen & Co. U.S.A., Inc. Statement of Changes in Stockholder's Equity Year Ended December 31 , 2020**

|                             |        | Additional<br>Capital Stock<br>Paid-in |             | Retained    | Total<br>Stockholder's |
|-----------------------------|--------|----------------------------------------|-------------|-------------|------------------------|
|                             | Shares | Amount                                 | Capital     | Earnings    | Equity                 |
| Balance, January 1, 2020    | 1,000  | \$ 10                                  | \$3,263,979 | \$5,314,232 | \$8,578,221            |
| Net income                  |        |                                        |             | 533,864     | 533,864                |
| Balance, December 31 , 2020 | 1,000  | \$ 10                                  | \$3,263,979 | \$5,848,096 | \$9,112,085            |
|                             |        |                                        |             |             |                        |

The accompanying notes are an integral part of these financial statements.

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# **Kempen & Co. U.S.A., Inc. Statement of Cash Flows Year Ended December 31 , 2020**

| Cash flows from operating activities                                               |               |
|------------------------------------------------------------------------------------|---------------|
| Net income                                                                         | 533,864<br>\$ |
| Adjustments to reconcile net income to net cash pro'IAded by operating acti'IAties |               |
| Depreciation                                                                       | 16,753        |
| Amortization of right-of-use asset                                                 | 21 1,508      |
| Changes in assets and liabilities:                                                 |               |
| Due to parent                                                                      | 499,400       |
| Due from in1.estment banking receivable                                            | 1,936,744     |
| Due from customer                                                                  | 6,830,451     |
| Fail to deli1.er                                                                   | (1,962,680)   |
| Due to customer                                                                    | 1,962,680     |
| Fail to recei1.e                                                                   | (6,830,451)   |
| Operating lease liability                                                          | (210,060)     |
| Taxes payable                                                                      | (29,544)      |
| Other assets                                                                       | 52,148        |
| Accounts payable, accrued expenses and other liabilities                           | (19,116)      |
| Net cash pro'IAded by operating acti'IAties                                        | 2,991,697     |
| Net increase in cash and cash equivalents                                          | 2,991 ,697    |
| Cash and cash equivalents, beginning of year                                       | 6,326,747     |

| Cash and cash equivalents, end of year | \$ 9,318,444  |
|----------------------------------------|---------------|
| Supplemental cash flow disclosures     |               |
| Income taxes paid                      | 248,734<br>\$ |

The accompanying notes are an integral part of these financial statements.

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# **Kempen & Co. U.S.A., Inc. Notes to the Financial Statements December 31, 2020**

#### **1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

#### **Description of Business**

Kempen & Co. U.S.A., Inc. (the "Company"), is a wholly-owned subsidiary of Van Lanschot Kempen Wealth Management N.V. (the "Parent") which is based in Amsterdam. The Company is a securities broker-dealer and a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). The Company acts as an agent for institutional customers in the purchase and sale of foreign securities. The Company executes all trades with its Parent and uses its Parent's facilities to clear such trades. Trades are settled on a delivery versus payment basis. The Parent produces research on approximately 75 large, mid, and small cap companies located in Belgium, Luxembourg and Netherlands comprising a wide range of sectors. The Parent also provides property research into approximately 50 European real estate companies in more than 11 European countries. On behalf of the Parent, the Company sells research products to its customers, acquires new clients and organizes corporate road shows to large institutional investors within the United States to facilitate their investment decisions.

In 2018, the Company filed a CMA (Continuing Member Application) with FINRA to change its registered business operations to where it would serve as an underwriter or selling group participant for equity offerings of non-U.S. and U.S. issuers engaged in offerings registered with the United States Securities and Exchange Commission ("SEC") as well as nonregistered offerings, including Rule 144A offerings, on a "firm commitment" basis, with no contingencies or need for an escrow account. The Company expects to be a junior syndicate member on such transactions and therefore, will be brought into the syndicate only shortly before pricing. The Company will leverage their existing client bases, in Europe and the United States, to identify companies that aim to execute U.S.-registered initial public offerings and/or follow-on transactions; once such transactions are executed. The Company will solicit investments by institutional investors. For all such transactions, the Company's foreign associated persons will work with other investment banks to originate and price primary issuances and to distribute securities to the Company's customers. The Company will assess interest in the new issuance based upon customer suitability and customer demand. The Company anticipates that securities of U.S. issuers will be cleared through another member of the underwriting syndicate (i.e., the lead syndicate member or bookrunner), which will be determined on a transaction-by-transaction basis or through BNP Paribas USA, with which the Company currently has a relationship. All clearing firms will be large or medium-sized U.S. banks. Securities of non-U.S. issuers offered to U.S. investors will be cleared through the Company's parent, Van Lanschot Kempen Wealth Management N.V.

#### **Use of Estimates**

Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

### **Concentrations of Credit Risk for Cash**

The Company's cash balances are maintained at various banks. Balances are insured by the Federal Deposit Insurance Corporation subject to certain limitations.

The accompanying notes are an integral part of these financial statements.

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# **Kempen & Co. U.S.A., Inc. Notes to the Financial Statements December 31 , 2020**

## **1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

#### **Cash and Cash Equivalents**

For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

#### **Revenue Recognition**

The Company is remunerated for its activities based upon a cost plus mark-up percentage, which is established by an independent transfer pricing study. Revenue is recognized based upon the expenses incurred during the period, marked-up by 4.16°/o for the year ended December 31 , 2020.

Based on a transfer pricing study, for securities underwriting income, it was determined that 20% of revenue will be retained by the Company while 80% of the revenue will be allocated to the Parent.

#### **Depreciation**

Depreciation is computed using the straight-line method over estimated useful asset lives, which is five to seven years.

#### **Leases**

The Company recognizes and measures its leases in accordance with FASB ASC 842, Leases which was adopted in 2019. The Company is a lessee in a noncancellable operating leases, for office space. The Company recognized a lease liability and a right of use (ROU) asset as at January 1, 2019, the effective date of ASC 842. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. The discount rate is the implicit rate if it is readily determinable or otherwise the Company uses its incremental borrowing rate. The implicit rates of our leases are not readily determinable and accordingly, the Company used its incremental borrowing rate based on the information available at the commencement date for all leases. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. Lease cost for lease payments is recognized on a straight-line basis over the lease term.

The Company has elected, for all underlying classes of assets, to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement, and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes the lease cost associated with its short-term leases on a straight-line basis over the lease term.

The accompanying notes are an integral part of these financial statements.

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# **Kempen & Co. U.S.A., Inc. Notes to the Financial Statements December 31 , 2020**

### **2. PROPERTY AND EQUIPMENT- AT COST, NET**

Property and equipment consist of the following:

| Office equipment              | \$<br>158,954 |
|-------------------------------|---------------|
| Furniture and Fixtures        | 120,507       |
|                               | 279,461       |
| Less accumulated depreciation | (235,974)     |
|                               | \$<br>43,487  |
|                               |               |

## **3. RELATED PARTY TRANSACTIONS**

A portion of the Company's revenue is derived from the Parent for services provided to institutional investors in their sales district based upon a cost-plus transfer pricing study. The revenue is recorded at the Company's pretax expenses plus a markup percentage of 4.16% for the year ended 2020.

Additionally, the Company derives revenue from the underwriting services performed by the Company which is allocated between the Company and the Parent based on a transfer pricing study. Gross revenue from underwriting services was approximately \$3,100,000. Per the study, 20°/o of revenue will be retained by the Company while 80% of the revenue will be allocated to the Parent. The Company recorded revenue of \$638,308 and expenses of \$7,923 relating to underwriting securities for the year ended December 31 , 2020.

Due to Parent arises from the recording of revenue described above less the allocation of certain direct expenses.

The Company has recorded \$651 ,751 in expenses allocated from the Parent relating to the use of the securities trading platform and corporate overhead charges which are reflected in other operating expenses.

## **4. INCOME TAXES**

The Company provides for Federal and state income taxes in accordance with current rates applied to income before income taxes. The provision for income taxes is as follows:

|                | \$218,772 |
|----------------|-----------|
| State and city | 84,056    |
| Federal        | \$134,716 |
| Current:       |           |

Federal and state income taxes differ from statutory rates due to non-deductible expenses consisting primarily of meals and entertainment.

The accompanying notes are an integral part of these financial statements.

{13}------------------------------------------------

# **Kempen & Co. U.S.A., Inc. Notes to the Financial Statements December 31 , 2020**

## **5. PROFIT -SHARING PLAN**

The Company has a 401 (k) plan, which covers substantially all of its full-time employees who have attained three months of service. The plan includes employee contributions and matching contributions by the Company subject to certain limitations. The Company match during 2020 is equal to 100% of the matched employee contributions that are not in excess of 4°/4 of employee compensation. The Profit sharing plan expense for the year ended December 31 , 2020 was approximately \$50,000.

## **6. COMMITMENTS**

The Company has obligations as a lessee for office space, with initial noncancellable terms in excess of one year. The Company classified this lease as an operating lease. The Company's lease does not include termination options for either party to the lease or restrictive financial or other covenants.

The Company has deposited approximately \$115,000 in cash with the bank as collateral for a letter of credit agreement for the security deposit associated with the lease.

The discount rate used to present value the monthly lease expense is 7%.

The components of lease cost for the year ended December 31 , 2020 are as follows:

Operating lease cost \$340, 141

Amounts reported in balance sheet as of December 31 , 2020 were as follows:

Operating leases:

Operating lease right-of-use asset \$991 ,703

Operating lease liability \$1,042,623

Maturities of lease liabilities under noncancellable operating leases as of December 31 , 2020 are as follows:

| 2021                              | \$<br>295,209               |
|-----------------------------------|-----------------------------|
| 2022                              | \$<br>301,113               |
| 2023                              | \$<br>307,136               |
| 2024                              | \$<br>286,694               |
| Total undiscounted lease payments | \$<br>1, 190, 152           |
| Less imputed interest             | \$<br>(147,529)             |
| Total lease liabilities           | \$<br>---~-~--<br>1,042,623 |
|                                   |                             |

The accompanying notes are an integral part of these financial statements.

IO

{14}------------------------------------------------

# **Kempen & Co. U.S.A., Inc. Notes to the Financial Statements December 31, 2020**

#### **6. COMMITMENTS (continued)**

Gross rent expense was approximately \$340,000 for the year ended December 31, 2020. In addition to base rent on its office facilities, the Company is required to pay its proportionate share of real estate taxes and operating expenses.

The Company entered into a non-cancellable sublease with a subtenant on July 19, 2016 which expires on November 30, 2024. Sublease income is equal to one half of rent expense paid by the Company under the non-cancellable lease each month. Additionally, in accordance with the non-cancellable sublease the company has collected a security deposit in the amount of \$57,128.

The future minimum rental receipts are as follows:

|      | \$<br>595,000 |
|------|---------------|
| 2024 | \$<br>143,000 |
| 2023 | \$<br>154,000 |
| 2022 | \$<br>151,000 |
| 2021 | \$<br>147,000 |

Sublease income was approximately \$176,000 for the year ended December 31, 2020.

#### **7. REGULATORY REQUIREMENTS**

As a registered broker-dealer, the Company is subject to the SEC Uniform Net Capital Rule ("Rule 15c3-1 ") and elects to calculate the minimum net capital under the alternate standard as permitted under Rule 15c3-1 , paragraph (a)(1 )(ii}, which requires the maintenance of minimum net capital of the greater of \$250,000 or 2% of aggregate debit items (the latter of which is not applicable to the Company) and exempts the Company from the aggregate indebtedness standard of Rule 15c3-1, paragraph (a)(1 )(i). At December 31, 2020, the Company had net capital of approximately \$8,908,510, which exceeded the required net capital minimum of \$250,000 by approximately \$8,658,510.

The Company is exempt from Rule 15c3-3 of the Securities Exchange Commission under paragraph (k)(2)(i).

## **8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET CREDIT RISK**

In the normal course of business, the Company may execute, as agent, securities transactions on behalf of its customers. If the agency transactions do not settle because of failure to perform by either the customer or the counterparty, the Company may be obligated to discharge the obligation of the nonperforming party and, as a result, is subject to market risk if the market value of the securities is different from the contract amount of the transactions.

The Company does not anticipate nonperformance by customers or counterparties in the above situations. The Company's policy is to monitor its market exposure and counterparty risk. In addition, the Company has a policy of reviewing, as considered necessary, the credit standing of each counterparty and customer with which it conducts business.

The accompanying notes are an integral part of these financial statements.

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# **Kempen & Co. U.S.A., Inc. Notes to the Financial Statements December 31, 2020**

#### 9. **RISK AND UNCERTAINTIES**

In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company is unable to determine if it will have a material impact to its operations.

The accompanying notes are an integral part of these financial statements.

{16}------------------------------------------------

#### SUPPLEMENTARY INFORMATION

Pursuant to Rule 1 ?a-5 of the Securities Exchange Act of 1934

As of December 31, 2020

{17}------------------------------------------------

# **Kempen & Co. U.S.A., Inc. Computation of Net Capital under SEC Rule 15c3-1 December 31 , 2020**

| (250,000)       |
|-----------------|
| 8,605,511       |
| (17,170)        |
| 8,622,681       |
| (1 42,918)      |
| (43,487)        |
| (302,999)       |
|                 |
| \$<br>9,112,085 |
|                 |
|                 |

Reconciliation with Company's computation (included in Part II of Form X-17A-5 as of December 31, 2020)

| Net Capital as reported on Company's Part II (unaudited) Focus report       | \$<br>8,908,510 |
|-----------------------------------------------------------------------------|-----------------|
| Increase (decrease) resulting from December 31, 2020 audit adjustments, net | (302,999)       |
| Net capital, as included in this report                                     | \$<br>8,605,511 |

{18}------------------------------------------------

# **FRIEDMAN LLP®**

ACCOUNTANTS AND ADVISORS

#### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Stockholder of Kempen & Co. U.S.A., Inc.

We have reviewed management's statements, included in the accompanying Statement of Exemption from SEC Rule 15c3-3 Report, in which (I) Kempen & Co. U.S.A., Inc. identified the following provision of 17 C.F.R. § I 5c3-3(k) under which Kempen & Co. U.S.A., Inc. claimed an exemption from 17 C.F.R. §240. l5c3-3: (k)(2)(i) (exemption provision) and (2) Kempen & Co. U.S.A., Inc. stated that Kempen & Co. U.S.A., Inc. met the identified exemption provision throughout the most recent fiscal year without exception. Kempen & Co. U.S.A., Inc.'s management is responsible for compliance with the exemption provision and 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 about Kempen & Co. U.S.A., Inc.'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.

Friedman LLP East Hanover, New Jersey February 12, 2021

14

100 Eagle Rock Avenue, Suite 200, East Hanover, NJ 07936 p 973.929.3500 f 973.929.3501 friedmanllp.com

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![](_page_19_Picture_0.jpeg)

STATEMENT OF EXEMPTION FROM SEC RU LE 15(3-3

I John McGowan. Chief Operating Officer of Kempen & Co. U.S.A., Inc. to the best of my knowledge and belief. hereby certifies as follows:

1. The Company does not carry securities accounts for customers or perform custodial functions relating to customer securities.

2. All customer transactions are cleared through another broker-dealer on a fully disclosed basis.

3. As a consequence, the Company is exempt from Rule 15c3-3 pursuant to Ru le 15c3-3(k)(2)(i).

4. The Company met this exemption during the entire fiscal year ending December 31, 2020 without exception.


Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.