# SORSBY FINANCIAL CORP. X-17A-5 (2024-01-10) — Broker-dealer annual report - Company: SORSBY FINANCIAL CORP. - Form: X-17A-5 - Filed: 2024-01-10 - Period: 2023-09-30 - Accession: 0001002196-24-000004 - CIK: 1002196 - File #: 8-48718 - Type: Broker-dealer - Material weakness: No - Auditor: Davila Advisory LLC - Auditor location: St Louis, MO - Contact: Whitney Webster - Phone: 3127510469 - Email: webster@sorsbyfinancial.com - Website: sorsbyfinancial.com - Signed by: Charles Sorsby (President) Original filing: https://www.sec.gov/Archives/edgar/data/1002196/000100219624000004/public.pdf --- {0}------------------------------------------------ #### STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM SEPTEMBER 30, 2023 # **PUBLIC** {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORTS FORM X-17A-S PART Ill FACING PAGE 0MB APPROVAL 0MB Number: 3235-0123 Expires: Nov. 30, 2026 Estimated average burden hours per response: 12 SEC FILE NUMBER Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING **10/01/2022 MM/DD/VY** AND ENDING **09/30/2023 MM/DD/VY A. REGISTRANT IDENTIFICATION** NAME oF FIRM: Sorsby Financial Corp TYPE OF REGISTRANT (check all applicable boxes): [!] Broker-dealer □ Security-based swap dealer □ Major security-based swap participant **D Check here if respondent is also an OTC derivatives dealer** ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) 100 East Huron Suite 3503 **(No. and Street)** Chicago IL **(City) (State)** PERSON TO CONTACT WITH REGARD TO THIS FILING 60611 **(Zip Code)** Whitney Webster 312-751-0469 Webster@SorsbyFinancial.com **(Name) (Area Code -Telephone Number) (Email Address) B. ACCOUNTANT IDENTIFICATION** INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing\* Davila Advisory, LLC **{Name -if individual, state last, first, and middle name)** 10135 Manchester Rd Ste 206 St. Louis MO 63122 **(Address) (City) (State) (Zip Code)** 6667 **(Date of Registration with PCAOB)(if applicable) (PCAOB Registration Number, if aoolicable) FOR OFFICIAL USE ONLY • Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public** **accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(l)(li), if applicable.** **Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid 0MB control number.** {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | 1, Charles c. Sorsby | swear (or affirm} that, to the best of my knowledge and belief, the | |------------------------------------------------------------------|---------------------------------------------------------------------| | financial report pertaining to the firm of Sorsby Financial Corp | as of | **9/30** 2� is true and correct. I further swear (or affirm} that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. **�** **Slgna��-** Title: � **President 1 WHITNEY A WEBSTER 1 Official Seal** *1* **Notary Publfc - State of lllinoi\** *'I* **j• My Commission Expires Feb 19. 2025** ! **;,.....,"',. --u u u -u ... �.** #### **This filing\*\* contains (check all applicable boxes):** - ii (a) Statement of financial condition. - **!ii** (bl Notes to consolidated statement of financial condition. - D (cl Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in§ 210.1-02 of Regulation S-X). - D (dl Statement of cash flows. - D (el Statement of changes in stockholders' or partners' or sole proprietor's equity. - D (fl Statement of changes in liabilities subordinated to claims of creditors. - D (gl Notes to consolidated financial statements. - D (hl Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.lSa-1, as applicable. - D (i) Computation of tangible net worth under 17 CFR 240.lSa-2. - D {j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.lSa-4, as applicable. - D (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.15c3-3. - D (ml Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (nl Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2l or 17 CFR 240.lSa-4, as applicable. - D (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-l, 17 CFR 240.lSa-l, or 17 CFR 240.lSa-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.lSa-4, as applicable, if material differences exist, or a statement that no material differences **exist.** - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - **!ii** (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - D (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (sl Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - **!ii** (t) Independent public accountant's report based on an examination of the statement of financial condition. - D (ul Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-S, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - D (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.lSa-7, as applicable. - D (wl Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - D (yl Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies **exist,** under 17 CFR 240.17a-12(kl. - D (z)Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_ - 0To *request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable.* {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) #### DAVILA,VISORYS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Sorsby Financial Corp. #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Sorsby Financial Corp. (the "Company") as of September 30, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of Sorsby Financial Corp. as of September 30, 2023 in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial 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. We have served as Sorsby Financial Corp.'s auditor since 2020. Saint Louis, Missouri December 29, 2023 **T (314) 965-9775 F : (314) 476-9660 W : www.davilaadvisory.com A : 10135 Manchester Rd, Suite 206, St. Louis, MO 63122** {4}------------------------------------------------ #### SORSBY FINANCIAL CORP STATEMENT OF FINANCIAL CONDITION SEPTEMBER 30. 2023 #### **ASSETS** | Cash
Receivable From Broker/Dealer
Due From Affiliate
Other Assets | \$
73,104
26,749
18,624
90 | |-------------------------------------------------------------------------------------------------------------------------------|----------------------------------------| | TOTAL ASSETS | 118 567 | | LIABILITIES AND SHAREHOLDER'S EQUITY {DEFICIT} | | | LIABILITIES | | | Accounts Payable, Accrued Expenses, and Other Liabilities
Subordinated Loans | \$
5,571
288,100 | | TOTAL LIABILITIES | 293 671 | | SHAREHOLDER'S EQUITY (DEFICIT); COMMON STOCK, NON PAR VALUE; | | | Authorized 1,000,000 shares; issues and outstanding 1,000 shares
Additional Paid-In Capital
Retained Earnings (Deficit) | \$
1,000
531,554
(707,658) | | Total Shareholder's Equity (Deficit) | \$
{175,104) | TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) **\$ 118,567** The accompanying notes are an integral part of these financial statements. {5}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENTS #### YEAR ENDED SEPTEMBER 30, 2023 #### NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization - Sorsby Financial Corp. (the "Company") was incorporated in Illinois on August 7, 1995. The Company is registered as a broker/dealer with the Securities and Exchange Commission and an investment advisor with the state of Illinois. The Company is also a member of the Financial Industry Regulatory Authority (FINRA). The Company's principal business activities are the sale of securities and rendering investment advice. Basis of Presentation - The financial statements have been prepared in conformity with accounting principles generally accepted in the Unites States of America ("GAAP") Securities Transactions - Commission revenue and related expense arising from securities transactions are recorded on a trade date basis, which is the same business day as the transaction date. Concentrations of Credit Risk - The Company is engaged in various brokerage activities in which the counterparties primarily include broker/dealers, banks, other financial institutions and the Company's own customers. In the event the counterparties do not fulfill their obligations; the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counterparty. In addition, the Company's cash is on deposit at one financial institution and the balance at times may exceed the federally insured limit. The Company believes it is not exposed to any significant credit risk to cash. Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recognition of Revenue - The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"). The revenue recognition guidance requires an entity to follow a five step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, ( d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies the performance obligation. {6}------------------------------------------------ # NOTES TO FINANCIAL STATEMENTS # YEAR ENDED SEPTEMBER 30, 2023 # NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES -continued Significant Judgments - The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events. # NOTE 2 - RELATED PARTY TRANSACTIONS The Company is affiliated through common ownership and management with Capital Conservation Corp. ("CCC") and Capital Preservation Fund L.P. ("CPF") An expense sharing agreement exist between the Company and CCC. The agreement states that the Company is to reimburse CCC for 40% of the communication expenses it has incurred on its behalf and CCC must reimburse the Company for 60% of the compensation and related benefits it has expended. For the year ended September 30, 2023 the Company has reimbursed CCC \$448 for communication expenses and CCC has reimbursed the Company \$1 17,023 for compensation and related benefits. The latter amount reimbursed is reflected as an offset to compensation and related benefits on the Statement of Operations. For the year ended September 30, 2023, the Company earned \$715 in commission revenue from securities transactions made on behalf of CPF. {7}------------------------------------------------ # NOTES TO FINANCIAL STATEMENTS #### YEAR ENDED SEPTEMBER 30, 2023 #### NOTE 3 - NET CAPITAL REQUIREMENTS As a registered broker/dealer and member of the FINRA, the Company is subject to the U.S. Securities and Exchange Commission Uniform Net Capital Rule (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 1500%. At September 30, 2023, the Company's net capital and required net capital were \$94,282 and \$5,000, respectively. The ratio of aggregate indebtedness to net capital was 5 .13%. ### NOTE 4 - INCOME TAXES The Company has elected S Corporation status for federal income tax purposes. Income taxes are therefore the responsibility of the sole shareholder of the Company. The Company accounts for any potential interest or penalties related to possible future liabilities for unrecognized income tax benefits as interest/other expense. The Company is no longer subject to examination by tax authorities for federal, state or local income taxes for periods before 2019. # NOTE 5 - LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS The borrowings under subordination agreements at September 30, 2023, are as follows: | 0% Interest Expires September 30, 2025 | \$ | 50,000 | |----------------------------------------|----|------------| | 0% Interest Expires December 31, 2025 | | 98,100 | | 0% Interest Expires May 29, 2030 | | 50,000 | | 0% Interest Expires June 30, 2030 | | 90,000 | | Total | | \$ 288.100 | The subordinated borrowings are covered by agreements approved by FINRA and are thus available in computing net capital under the Securities and Exchange Commission's Uniform Net Capital Rule. To the extent that these borrowings are required for the Company's continued compliance with minimum net capital requirements, they may not be repaid. The subordinated lender is the sole shareholder of the Company. {8}------------------------------------------------ ### NOTES TO FINANCIAL STATEMENTS ### YEAR ENDED SEPTEMBER 30. 2023 #### NOTE 6 - OFF-BALANCE-SHEET RISK AND CLEARING AGREEMENTS The Company has entered into an agreement with another broker/dealer (Clearing Broker/dealer) whereby the Company forwards (introduces) customer securities transactions to the Clearing Broker/dealer, fully disclosing the customer name and other information. The processing and, if applicable, any financing pertaining to the introduced securities transactions are performed by the Clearing Broker/dealer. The customer account is therefore maintained and recorded in the books and records of the Clearing Broker/dealer on the Company's behalf. In consideration for introducing customers to the Clearing Broker/dealer, the Company receives commissions and other consideration, less the processing and other charges of the Clearing Broker/dealer. As part of the terms of the agreement between the Company and Clearing Broker/dealer, the Company is held responsible for any losses arising when the customers introduced by the Company to the Clearing Broker/dealer fail to meet their contractual commitments pertaining to the purchase, sale and possible financing of securities transactions. The Company may therefore be exposed to off-balance-sheet risk in the event the customer is unable to fulfill its contracted obligations and it is necessary for the Clearing Broker/dealer to purchase or sell the securities at a loss. The Company's exposure to risk would consist of the amount of the loss realized and any additional expenses incurred pertaining to the transaction or other customer activity. Under the terms of the agreement, the Company is prohibited from entering into a similar agreement with another broker/dealer and is required to maintain a deposit of \$36,206 in cash and/or government securities with the Clearing Broker/dealer to ensurethe Company's performance under the agreement. The \$36,206 is included in receivable from broker/dealer in the statement of financial condition. ### NOTE 7 -REVENUE FROM CONTRACTS WITH CUSTOMERS Interest income - The Company earns interest income from client margin accounts and cash equivalents. This revenue is not in scope for Topic 606 as it is not generated from contracts with customers. Commissions - The Company generates two types of commission revenue: sales-based commission revenue that is recognized on the settlement date, an industry standard, and trailing commission revenue that is recognized over time as earned. Sales-based {9}------------------------------------------------ # NOTES TO FINANCIAL STATEMENTS #### YEAR ENDED SEPTEMBER 30, 2023 ## NOTE 7 -REVENUE FROM CONTRACTS WITH CUSTOMERS -continued commission revenue varies by investment product and is based on a percentage of an investment product's current market value at the time of purchase. Trailing commission revenue is generally based on a percentage of the current market value of clients' investment holdings in trail-eligible assets, and is recognized over the period during which services, such as on-going support, are performed. As trailing commission revenue is based on the market value of clients' investment holdings, this variable consideration is constrained until the market value is determinable. Advisory fees - Advisory revenue represents fees charged to advisors' clients' accounts on the Company's corporate advisory platform. The Company provides ongoing investment advice, provides brokerage and execution services on transactions. This series of performance obligations transfers control of the services to the client over time as the services are performed. This revenue is recognized ratably over time to match the continued delivery of the performance obligations to the client over the life of the contract. The advisory revenue generated from the Company's corporate advisory platform is based on a percentage of the market value of the eligible assets in the clients' advisory accounts. As such, the consideration for this revenue is variable and an estimate of the variable consideration is constrained due to dependence on unpredictable market impacts on client portfolio values. The constraint is removed once the portfolio value can be determined. # NOTE 8 - SUBSEQUENT EVENTS The Company has evaluated subsequent events for potential recogmtlon and/or disclosure through the date the financial statements were issues, noting none. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.