# BAY CREST PARTNERS, LLC X-17A-5 (2022-03-31) — Broker-dealer annual report

- Company: BAY CREST PARTNERS, LLC
- Form: X-17A-5
- Filed: 2022-03-31
- Period: 2021-12-31
- Accession: 0001005393-22-000004
- CIK: 1005393
- File #: 8-48931
- Type: Broker-dealer
- Material weakness: No
- Auditor: WithumSmithBrown
- Auditor location: Whippany, NJ
- Contact: Alan Borrelli
- Phone: 9176472251
- Email: aborrelli@baycny.com
- Website: baycny.com
- Signed by: William Mulligan (Managing Member)

Original filing: https://www.sec.gov/Archives/edgar/data/1005393/000100539322000004/baycrestpublic2021sec.pdf

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**UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** 

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# **ANNUAL REPORTS FORM X-17A-5 PART** Ill

| SEC FILE NUMBER |  |
|-----------------|--|
| 8-48931         |  |

**FACING PAGE** 

**Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** 

| FILING FOR THE PERIOD BEGINNING O 1/01/2021 |  | AND ENDING 12/31/2021 |
|---------------------------------------------|--|-----------------------|
|                                             |  |                       |

MM/DD/VY

MM/DD/VY

**A. REGISTRANT IDENTIFICATION** 

# NAME oF FIRM: Bay Crest Partners, LLC

TYPE OF REGISTRANT (check all applicable boxes):

~ Broker-dealer □ Security-based swap dealer D 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.)

# 40 Wall Street 42nd Floor

|                                                                                                   | {No. and Street)                                           |                      |                                              |
|---------------------------------------------------------------------------------------------------|------------------------------------------------------------|----------------------|----------------------------------------------|
| New York                                                                                          | NY                                                         |                      | 10005                                        |
| {City)                                                                                            | {State)                                                    |                      | (Zip Code)                                   |
| PERSON TO CONTACT WITH REGARD TO THIS FILING                                                      |                                                            |                      |                                              |
| Alan Borrelli CPA,CFA,CAIA                                                                        | (917) 647-2251                                             | aborrelli@baycny.com |                                              |
| {Name)                                                                                            | (Area Code - Telephone Number)                             | {Email Address)      |                                              |
|                                                                                                   | B. ACCOUNTANT IDENTIFICATION                               |                      |                                              |
| INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*<br>WithumSmith+Brown PC |                                                            |                      |                                              |
|                                                                                                   | (Name - if individual, state last, first, and middle name) |                      |                                              |
| 200 Jefferson Park, Suite 400                                                                     | Whippany                                                   | NJ                   | 07981                                        |
| {Address)                                                                                         | (City)                                                     | {State)              | (Zip Code)                                   |
|                                                                                                   |                                                            | 100                  |                                              |
| l"<br>of Regfst<aboo wfth PCAOB)(ff applfcablel                                                   |                                                            |                      | {PCAOB Regfstcaboo No mbec, ff applfcableJ I |
|                                                                                                   | 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)(ii), 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.** 

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### **OATH OR AFFIRMATION**

|       | 1, William Mulligan |  |     |                                                                                   |  | swear (or affirm) that, to the best of my knowledge and belief, the |       |
|-------|---------------------|--|-----|-----------------------------------------------------------------------------------|--|---------------------------------------------------------------------|-------|
|       |                     |  |     | financial report pertaining to the firm of Bay Crest partners, LLC                |  |                                                                     | as of |
| 12/31 |                     |  | 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.

Signature: Title: ManeiinA Member

LISA CARB t<I RA Notary Public, State of New York Reg.No.01CA6326178 Qualified in Kings County Commission Expires June 15, *202"'i]* 

Notary Public

### **This filing\*\* contains (check all applicable boxes):**

- ~ (a) Statement of financial condition.
- ~ (b) Notes to consolidated statement of financial condition.
- D (c) 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 (d) Statement of cash flows.
- D (e) Statement of changes in stockholders' or partners' or sole proprietor's equity.
- □ (f) Statement of changes in liabilities subordinated to claims of creditors.
- D (g) Notes to consolidated financial statements.
- D (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-l, as applicable.
- D (i) Computation of tangible net worth under 17 CFR 240.18a-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 240.18a -4, as applicable.
- D (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.15c3-3.
- D (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3.
- D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-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 240.15c3-1, 17 CFR 240.18a-l, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-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 .
- ~ (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 (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
- ~ (t) Independent public accountant's report based on an examination of the statement of financial condition.
- D (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 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 240.18a-7, as applicable.
- D (w) 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 (y) 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(k). D (z) Other:----------------------------------------
- 
- *\*\*To 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.*

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FINANCIAL STATEMENT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDED DECEMBER 31, 2021

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## **FINANCIAL STATEMENTS DECEMBER 31, 2021**

Report oflndependent Registered Public Accounting Firm

Statement of Financial Condition

Notes to Financial Statements

3-9

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

To the Management and Member of Bay Crest Partners, LLC:

### **Opinion on the Financial Statement**

We have audited the accompanying statement of financial condition of Bay Crest Partners, LLC (the "Company"), as of December 31, 2021, 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, 2021, 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 this 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 2020.

March 30, 2022

WithumSmith+Brown, PC 200 Jefferson Pa1·k, Suite *1,00,* Whippany, New Jersey 07981- 1070 T (9'7'.l] 898 *91,91.* F ('1731898 0686 withum .com

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# **STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2021**

| ASSETS                                                                                                                                                  |                                         |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
| Cash and Cash Equivalents                                                                                                                               | \$<br>4,836,580                         |
| Due from Broker                                                                                                                                         | 1,951,098                               |
| Commissions Receivable                                                                                                                                  | 4,066,996                               |
| Marketable Securities owned at fair value                                                                                                               | 1,399,497                               |
| Other Assets                                                                                                                                            | 349,059                                 |
| Receivable from Related Patiy (Note 7)                                                                                                                  | 100,000                                 |
| Total assets                                                                                                                                            | \$<br>12,703,230                        |
| LIABILITIES AND MEMBER'S EQUITY<br>Liabilities:<br>Accounts Payable and Accrued Expenses (Note 7)<br>Soft Dollar Payables (Note 7)<br>Total liabilities | \$<br>7,224,588<br>798,674<br>8,023,262 |
| Member's Equity (Note 5)                                                                                                                                | 4,679,968                               |
| Total liabilities and member's equity                                                                                                                   | \$<br>12,703,230                        |

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### NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2021

#### Note 1 - Nature of business

Bay Crest Partners, LLC (The "Company") is a broker-dealer registered with the Securities & Exchange Commission ("SEC") for the year ended December 3 1, 2021 .

Bay Crest Partners, LLC, a limited liability company, is a New York State company formed in 1993 for the purpose of conducting brokerage business and it is a member in good standing with both the NFA and the New York Stock Exchange for the year ended December 3 1, 2021.

Freedom Holdings Group, LLC, a limited liability company (The "Parent") is a New York State company formed in 2008 and is the I 00% owner of the Company.

The Company operates under the provisions of Paragraph (k)(2)(ii) of Rule l 5c3-3 of the Securities and Exchange Commission and, accordingly, is exempt from the remaining provisions of that rule. Essentially, the requirements of Paragraph (k)(2)(ii) provide that the Company clears all transactions on behalf of customers on a fully disclosed basis with a clearing broker-dealer, and promptly transmits all customer funds and securities to the clearing broker-dealer. The clearing broker-dealer carries all the accounts of the customers and maintains and preserves all related books and records as are customarily kept by a clearing broker-dealer. ln addition the Company is exempt from Footnote 74 of the SEC Release No. 34-70073 adopting ammendments to 17 C. F. R. 240. l 7a-5 due to the Company not carrying of or for customers, does not carry PAB accounts (as defined under Rule I 5c3-3), and does not directly or indirectly receive, hold, or otherwise owe funds or securities.

#### Note 2 - Summary of Significant Accounting Policies

#### a) Revenue Recognition from Contracts with Customers

The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The 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 a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.

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The Company enters into contracts with customers with respect to the execution services provided to customers. Customers are charged a commission each time they enter into a buy or sell transaction. Commissions and related clearing charges are recorded on a trade date basis because that is when the underlying financial instrument and counterparties are identified, pricing is agreed upon and risks of ownership transfer to the customer.

The Company also permits certain customers to allocate a portion of their commissions to pay for research and other services provided by third party vendors ("soft dollar arrangements"). Soft dollar commissions and related expenses are recorded when the Company pays an invoice on behalf of its customer. The Company has determined itself to be acting as an agent under the soft dollar arrangement and records commissions on soft dollar transactions net of related expenses.

Contract assets arise when the revenue associated with the contract is recognized prior to the Company's unconditional right to receive payment under a contract with a customer (i.e. , unbilled receivable) and are derecognized when it becomes a receivable or the cash is received. There are no contract assets as of January I ,2021 and December 31 , 2021.

Contract liabilities arise when customers remit contractual cash payments in advance of the Company satisfying its performance obligations under the contact and are derecognized when the revenue associated with the contact is recognized when the performance obligation is satisfied.

There are no contract liabilities as ofJanuary I ,2021 and December 3 l, 2021.

The Company's outstanding accounts receivable balance as of January 1, 2021 was \$4,137,424

Disaggregation of revenue, for the year ended December 31 , 2021 , can be found on the accompanying Statement of Operations. The Company recognizes revenue to depict the transfer of promised goods or services to customers in statement of operations.

The Company segregates its cash in accordance with all regulations and there is a deposit account in the balance of in the soft dollar bank account account totalling \$115,757 on December 31, 2021.

#### **b) Income Taxes**

Income taxes are not payable by, or provided for, the Company. Members are taxed individually on their share of the Company earnings for federal and state income tax purposes. The accompany financial statements have been adjusted to provide unicorpororated business tax based on Company income, if applicable. The Company accrued NYC UBT Tax on all premises that are deemed commercial property in NYC.

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#### c) **Cash and Cash Equivalents**

The Company considers demand deposited money market funds to be cash equivalents. The Company maintains cash in bank accounts which, at times, may exceed federally insured limits or where no insurance is provided. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

#### **d) Fair Value Measurements**

The Company carries its investments at fair value. ASC 820, Fair Value Measurements and Disclosure, defines fa ir value as the price that would be received to sell an asset or paid to transfer a li ability (i.e. the "exit price") in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hieracrhy for inputs used in measuring fair value that maximizes the use of obervable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level I - Fair value derived from unadj usted quoted prices of identical assets in acti ve markets.

Level 2 - Fair value derived from quoted prices of similar assets in active markets, quoted prices for identi cal or similar assets in markets that are not active and model driven valuations in whi ch all significant inputs are observable in active markets.

Level 3 - Fair value derived from inputs whi ch are not obervable in markets.

The following table represents the Company's fair value hi erarchy for those asets and liabilities measured at fa ir value on a recurring basis as at December 3 1, 202 1.

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### **c) Use of Estimates**

Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, and the reported amounts of revenues and expenses.

#### **f) Subsequent Events**

The Company has evaluated events and transactions that occurred between January l, 2022 and March 30, 2022 which is the date of the financial statements were available to be isued, for posible disclosure and recognition in the financial statements. There are no material subsequent events to report.

#### **Note 3** - **Markertable Securities Owned**

Marketable securities consist of securities at quoted market values, as illustrated below:

Securities Held Equities \$ 1,399,497 \$ 1,399,497

|          |              | Fair Value Measuring Using |                                                     |                                        |                                                |  |  |  |  |  |
|----------|--------------|----------------------------|-----------------------------------------------------|----------------------------------------|------------------------------------------------|--|--|--|--|--|
|          |              | Industry                   | Quoted Prices in active<br>Markets identical assets | Significant Other<br>Observable Inputs | Significant<br>Unobervable inputs<br>(Level 3) |  |  |  |  |  |
|          | Total        |                            | (Level I)                                           | (Level 2)                              |                                                |  |  |  |  |  |
| Equities | \$           | 58,485 Food & Beverages    | \$<br>58,485                                        | -<br>\$                                | -<br>\$                                        |  |  |  |  |  |
| Equities | \$           | 111 ,996 Services          | \$<br>111 ,996                                      |                                        |                                                |  |  |  |  |  |
| Equities | \$           | 173,445 Energy             | \$<br>173,445                                       |                                        |                                                |  |  |  |  |  |
| Equities | \$           | 26 1,730 Financial         | \$<br>261,730                                       |                                        |                                                |  |  |  |  |  |
| Equities | \$           | 191,181 Healthcare         | \$<br>191 ,18 1                                     |                                        |                                                |  |  |  |  |  |
| Equities | \$           | 235,950 Industrials        | \$<br>235,950                                       |                                        |                                                |  |  |  |  |  |
| Equities | \$           | 366,710 Technology         | \$<br>366,710                                       |                                        |                                                |  |  |  |  |  |
| Equities | \$1 ,399,497 |                            | \$ 1,399,497                                        |                                        |                                                |  |  |  |  |  |

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#### **Note 4 - Commitments and Contigencies**

#### **PPP Loan**

On May 6, 20 IO the Company applied for a loan with Signature bank which was one of the government approved lenders of the enacted PPP Program. The terms of the loan were for \$1,609,787 at a I% interest rate with a maturity of 5/6/2022. This loan is subject to 100 % forgivesness if approved by the SBA including interest due. The entire principal amount and any interest accrued was forgiven in 2021. The amount recorded was \$ I ,609, 787 under other revenue.

#### **Note 5 - Profit Sharing**

The Company maintains a defined contribution pl an covering substantially all employees. The Company contributes annually at the discretion of management. The Company's maximum contribution is 5% of the eligible compensation. There was no profit sharing contribution for 2021. There was no balance outstanding as of December 31 , 2021 .

#### **Note 6 - Financial Statements with Off-Balance Sheet Credit Risk**

As a securities broker, the Company is engaed in buying and selling securities for a diverse group of institutional and individual investors. The Company introduces these transactions for clearance to another broker-dealer on a fully disclosed basis.

The Company's exposure to credit risk associated with non-performance of customers in fulfilling their contractual obligations pursuant to securities transactions can be directly impacted by volatil e trad ing markets which may impair customer's ability to honor their obl igations to the Company, and the Company's ability to liqudate the collateral at a n amount equal to the original contractual amount. The agreement between the Company and its clearing broker provides that the Company is obligated to assume any exposure related to such non-performance by its customers.

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The Company seeks to control the aforementioned risks by requiring customers to maintain margin collateral in compliance with various regulatory requirements and the clearing broker's internal guidelines. The Compamy monitors its customers actively be reviewing information it receives from its clearing broker on a daily basis, and requiring customers to deposit additional collateral, or reduced positions, where necessary.

Effective January I, 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 asset, recorded at inception or purchase. Under the accounting update, the Company has the ability to determine there are no expected credit losses in certain circumstances.

#### **Fees Receivable**

Fees receivable are carried at the amounts billed to customers, net of an allowance for credit losses, which is an estimate for credit losses based on a review of all outstanding amounts.

#### **Allowance for Credit Losses**

The Company identifies fees receivable carried at amortized cost as impacted by new guidance. ASC 326 specifies that the Company adopt the new guidance prospectively by means of a cumulative-effect adjustment to the opening retained earnings as of the beginning of the first reporting period effective. The Company believes there is no impact to opening member's equity upon adoption of ASC 326.

The allowance of credit losses is based on the Company's expectation of the colectibility of financial instruments carried at ammortized cost, including fees receivable utilizing the CECL framework. 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 collectibility in determining the allowance for credit losses. The Company's expectation is that the credit risk associated with fees receivables is not significant until they are 90 days past due on the contractual arrangement and expectation of collection in accordance with industry standards. Management does not believe that an allowance is required as of December 31, 2021.

#### **Note** 7 - **Related Party Transactions**

For the year ending December 31 , 2021 the Company paid service fees in the amount of \$9,093,468 to Freedom Holdings, LLC, for general operating expenses of the holding company in addition to guarenteed payments to partners.

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#### **Note 8 - Related Party Transactions**

For the year ended December 31, 2021 , the Company paid commission expense in the amount of \$345,382 to All Rise Trading LLC, a related party under common control. The Company has an outstanding receivable from All Rise Trading LLC of \$75,891 for healthcare costs remitted by the Company as of December 31, 2021.

#### **Note 9 - Net Capital Requirement**

The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (15c3-l) 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 December 31 , 2021 the Company had Net Capital of \$3,002,093 which was \$2,464,963 in excess of its required net capital of\$537,129. The Company's net capital ratio was 268%.


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