# M HOLDINGS SECURITIES, INC. X-17A-5 (2022-02-28) — Broker-dealer annual report - Company: M HOLDINGS SECURITIES, INC. - Form: X-17A-5 - Filed: 2022-02-28 - Period: 2021-12-31 - Accession: 0001038993-22-000002 - CIK: 1038993 - File #: 8-50214 - Type: Broker-dealer - Material weakness: No - Auditor: Baker Tilly US LLP - Auditor location: New York, NY - Contact: Maria Rogers - Phone: 15034147260 - Signed by: Casey Dougherty (CCO) Original filing: https://www.sec.gov/Archives/edgar/data/1038993/000103899322000002/MHSAFS2.pdf --- {0}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Financial Statements and Supplementary Information Pursuant to SEC Rule 17a-5 December 31, 2021 and 2020 (With Report of Independent Registered Public Accounting Firm Thereon) {1}------------------------------------------------ ## **hE/d^dd^ ^hZ/d/^Ey,E'KDD/^^/KE tĂƐŚŝŶŐƚŽŶ͕͘͘ϮϬϱϰϵ** KDWWZKs> KDEƵŵďĞƌ͗ϯϮϯϱͲϬϭϮϯ džƉŝƌĞƐ͗KĐƚ͘ϯϭ͕ϮϬϮϯ ƐƚŝŵĂƚĞĚĂǀĞƌĂŐĞďƵƌĚĞŶ ŚŽƵƌƐƉĞƌƌĞƐƉŽŶƐĞ͗ # **EEh>ZWKZd^ &KZDyͲϭϳͲϱ WZd///** ^&/>EhDZ ϴͲϲϳϮϬϲ **&/E'W'** **/ŶĨŽƌŵĂƚŝŽŶZĞƋƵŝƌĞĚWƵƌƐƵĂŶƚƚŽZƵůĞƐϭϳĂͲϱ͕ϭϳĂͲϭϮ͕ĂŶĚϭϴĂͲϳƵŶĚĞƌƚŚĞ^ĞĐƵƌŝƚŝĞƐdžĐŚĂŶŐĞĐƚŽĨϭϵϯϰ** | | &/>/E'&KZd,WZ/K'/EE/E' | ϬϭͬϬϭͬϮϭ
DDͬͬzz | | EE/E'ϭϮͬϯϭͬϮϭ | | DDͬͬzz | | | | |------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------------------------------------------|-------------------------------------|-------|-----------------------|--|--|--| | ͘ Z'/^dZEd/Ed/&/d/KE | | | | | | | | | | | | EDK&&/ZD͗ͺͺͺͺͺD&ŝŶĂŶĐŝĂů^ĞĐƵƌŝƚŝĞƐDĂƌŬĞƚŝŶŐ͕/ŶĐ͘ͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺ | | | | | | | | | | ܆
9
ƌŽŬĞƌͲĚĞĂůĞƌ | dzWK&Z'/^dZEd;ĐŚĞĐŬĂůůĂƉƉůŝĐĂďůĞďŽdžĞƐͿ͗
܆^
ĞĐƵƌŝƚLJͲďĂƐĞĚƐǁĂƉĚĞĂůĞƌ
܆ ŚĞĐŬŚĞƌĞŝĨƌĞƐƉŽŶĚĞŶƚŝƐĂůƐŽĂŶKdĚĞƌŝǀĂƚŝǀĞƐĚĞĂůĞƌ | | ܆ | DĂũŽƌƐĞĐƵƌŝƚLJͲďĂƐĞĚƐǁĂƉƉĂƌƚŝĐŝƉĂŶƚ | | | | | | | | Z^^K&WZ/E/W>W>K&h^/E^^͗;ŽŶŽƚƵƐĞĂW͘K͘ďŽdžŶŽ͘Ϳ | | | | | | | | | | | ϭϭϮ5EtŽƵĐŚ^ƚƌĞĞƚ͕^ƵŝƚĞϵϬϬ | | ;EŽ͘ĂŶĚ^ƚƌĞĞƚͿ | | | | | | | | WŽƌƚůĂŶĚ | KZ | | | | ϵϳϮϬϵ | | | | | | ;ŝƚLJͿ | ;^ƚĂƚĞͿ | | | ;ŝƉŽĚĞͿ | | | | | | | ;EĂŵĞͿ | WZ^KEdKKEddt/d,Z'ZdKd,/^&/>/E'
DĂƌŝĂZŽŐĞƌƐϱϬϯͲϰϭϰͲϳϮϲϬ | | ;ƌĞĂŽĚĞʹdĞůĞƉŚŽŶĞEƵŵďĞƌͿ | ;ŵĂŝůĚĚƌĞƐƐͿ | | ŵĂƌŝĂ͘ƌŽŐĞƌƐΛŵĨŝŶ͘ĐŽŵ | | | | | | | | ͘ KhEdEd/Ed/&/d/KE | | | | | | | | | /EWEEdWh>/KhEdEdǁŚŽƐĞƌĞƉŽƌƚƐĂƌĞĐŽŶƚĂŝŶĞĚŝŶƚŚŝƐĨŝůŝŶŐΎ
ĂŬĞƌdŝůůLJ | h^͕>>W | | | | | | | | | | | | ;EĂŵĞʹŝĨŝŶĚŝǀŝĚƵĂů͕ƐƚĂƚĞůĂƐƚ͕ĨŝƌƐƚ͕ĂŶĚŵŝĚĚůĞŶĂŵĞͿ | | | | | | | | ;ĚĚƌĞƐƐͿ | KŶĞWĞŶŶWůĂnjĂ͕^ƵŝƚĞϯϬϬEĞǁzŽƌŬ | ;ŝƚLJͿ | | ;^ƚĂƚĞͿ | | ;ŝƉŽĚĞͿ
EzϭϬϭϭϵ | | | | | | KĐƚŽďĞƌϮϮ͕ϮϬϬϯ
ͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺ | | | | Ϯϯ | | | | | | | ;ĂƚĞŽĨZĞŐŝƐƚƌĂƚŝŽŶǁŝƚŚWKͿ;ŝĨĂƉƉůŝĐĂďůĞͿ | | | ;WKZĞŐŝƐƚƌĂƚŝŽŶEƵŵďĞƌ͕ŝĨĂƉƉůŝĐĂďůĞͿ | | | | | | | | ΎůĂŝŵƐĨŽƌĞdžĞŵƉƚŝŽŶĨƌŽŵƚŚĞƌĞƋƵŝƌĞŵĞŶƚƚŚĂƚƚŚĞĂŶŶƵĂůƌĞƉŽƌƚƐďĞĐŽǀĞƌĞĚďLJƚŚĞƌĞƉŽƌƚƐŽĨĂŶŝŶĚĞƉĞŶĚĞŶƚƉƵďůŝĐ | | &KZK&&//>h^KE>z | | | | | | | ĂĐĐŽƵŶƚĂŶƚŵƵƐƚďĞƐƵƉƉŽƌƚĞĚďLJĂƐƚĂƚĞŵĞŶƚŽĨĨĂĐƚƐĂŶĚĐŝƌĐƵŵƐƚĂŶĐĞƐƌĞůŝĞĚŽŶĂƐƚŚĞďĂƐŝƐŽĨƚŚĞĞdžĞŵƉƚŝŽŶ͘^ĞĞϭϳ &ZϮϰϬ͘ϭϳĂͲϱ;ĞͿ;ϭͿ;ŝŝͿ͕ŝĨĂƉƉůŝĐĂďůĞ͘ **WĞƌƐŽŶƐǁŚŽĂƌĞƚŽƌĞƐƉŽŶĚƚŽƚŚĞĐŽůůĞĐƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶĐŽŶƚĂŝŶĞĚŝŶƚŚŝƐĨŽƌŵĂƌĞŶŽƚƌĞƋƵŝƌĞĚƚŽƌĞƐƉŽŶĚƵŶůĞƐƐƚŚĞĨŽƌŵ ĚŝƐƉůĂLJƐĂĐƵƌƌĞŶƚůLJǀĂůŝĚKDĐŽŶƚƌŽůŶƵŵďĞƌ͘** {2}------------------------------------------------ ## **Kd,KZ &&/ZDd/KE** /͕ ĂƐĞLJ ŽƵŐŚĞƌƚLJ͕ ƐǁĞĂƌ ;Žƌ ĂĨĨŝƌŵͿ ƚŚĂƚ͕ ƚŽ ƚŚĞ ďĞƐƚ ŽĨ ŵLJ ŬŶŽǁůĞĚŐĞ ĂŶĚ ďĞůŝĞĨ͕ ƚŚĞ ĨŝŶĂŶĐŝĂů ƌĞƉŽƌƚ ƉĞƌƚĂŝŶŝŶŐ ƚŽ ƚŚĞ Ĩŝƌŵ ŽĨ D &ŝŶĂŶĐŝĂů ^ĞĐƵƌŝƚŝĞƐ DĂƌŬĞƚŝŶŐ /ŶĐ͕͘ ĂƐ ŽĨ ĞĐĞŵďĞƌϯϭ͕ϮϬϮϭ͕ŝƐƚƌƵĞĂŶĚĐŽƌƌĞĐƚ͘/ĨƵƌƚŚĞƌ ƐǁĞĂƌ;ŽƌĂĨĨŝƌŵͿƚŚĂƚŶĞŝƚŚĞƌƚŚĞĐŽŵƉĂŶLJŶŽƌĂŶLJ ƉĂƌƚŶĞƌ͕ ŽĨĨŝĐĞƌ͕ ĚŝƌĞĐƚŽƌ͕ Žƌ ĞƋƵŝǀĂůĞŶƚ ƉĞƌƐŽŶ͕ ĂƐ ƚŚĞ ĐĂƐĞ ŵĂLJ ďĞ͕ ŚĂƐ ĂŶLJ ƉƌŽƉƌŝĞƚĂƌLJ ŝŶƚĞƌĞƐƚ ŝŶ ĂŶLJ ĂĐĐŽƵŶƚĐůĂƐƐŝĨŝĞĚƐŽůĞůLJĂƐƚŚĂƚŽĨĂĐƵƐƚŽŵĞƌ͘ by Casey Dougherty, as Chief Compliance & Risk Officer, Sworn to and subscribed before me on 02/22/2022 of M Financial Securities Marketing Inc. State of Texas § ,, County of Dallas § ͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺ ͺͺͺͺͺͺͺͺͺͺ EŽƚĂƌLJWƵďůŝĐ , State of Texas Notarized online using audio-video communication ## **dŚŝƐĨŝůŝŶŐΎΎĐŽŶƚĂŝŶƐ;ĐŚĞĐŬĂůůĂƉƉůŝĐĂďůĞďŽdžĞƐͿ͗** ܆; ĂͿ^ƚĂƚĞŵĞŶƚŽĨĨŝŶĂŶĐŝĂůĐŽŶĚŝƚŝŽŶ͘ 9 - ܆; ďͿEŽƚĞƐƚŽĐŽŶƐŽůŝĚĂƚĞĚƐƚĂƚĞŵĞŶƚŽĨĨŝŶĂŶĐŝĂůĐŽŶĚŝƚŝŽŶ͘ 9 - ܆; ĐͿ^ƚĂƚĞŵĞŶƚŽĨŝŶĐŽŵĞ ;ůŽƐƐͿŽƌ͕ŝĨƚŚĞƌĞŝƐŽƚŚĞƌĐŽŵƉƌĞŚĞŶƐŝǀĞŝŶĐŽŵĞŝŶƚŚĞƉĞƌŝŽĚ;ƐͿƉƌĞƐĞŶƚĞĚ͕ĂƐƚĂƚĞŵĞŶƚŽĨ ĐŽŵƉƌĞŚĞŶƐŝǀĞŝŶĐŽŵĞ;ĂƐĚĞĨŝŶĞĚŝŶΑϮϭϬ͘ϭͲϬϮŽĨZĞŐƵůĂƚŝŽŶ^ͲyͿ͘ 9 - ܆; ĚͿ^ƚĂƚĞŵĞŶƚŽĨĐĂƐŚĨůŽǁƐ͘ 9 - ܆; ĞͿ^ƚĂƚĞŵĞŶƚŽĨĐŚĂŶŐĞƐŝŶƐƚŽĐŬŚŽůĚĞƌƐ͛ŽƌƉĂƌƚŶĞƌƐ͛ŽƌƐŽůĞƉƌŽƉƌŝĞƚŽƌ͛ƐĞƋƵŝƚLJ͘ 9 - ܆; ĨͿ^ƚĂƚĞŵĞŶƚŽĨĐŚĂŶŐĞƐŝŶůŝĂďŝůŝƚŝĞƐ ƐƵďŽƌĚŝŶĂƚĞĚƚŽĐůĂŝŵƐŽĨĐƌĞĚŝƚŽƌƐ͘ - ܆; ŐͿEŽƚĞƐƚŽ ĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘ 9 - ܆; ŚͿŽŵƉƵƚĂƚŝŽŶŽĨŶĞƚĐĂƉŝƚĂůƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϭŽƌϭϳ&Z ϮϰϬ͘ϭϴĂͲϭ͕ĂƐĂƉƉůŝĐĂďůĞ͘ 9 - ܆; ŝͿŽŵƉƵƚĂƚŝŽŶŽĨ ƚĂŶŐŝďůĞŶĞƚǁŽƌƚŚƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϴĂͲϮ͘ - ܆; ũͿŽŵƉƵƚĂƚŝŽŶĨŽƌĚĞƚĞƌŵŝŶĂƚŝŽŶŽĨĐƵƐƚŽŵĞƌƌĞƐĞƌǀĞƌĞƋƵŝƌĞŵĞŶƚƐƉƵƌƐƵĂŶƚƚŽdžŚŝďŝƚƚŽϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϯ͘ 9 - ܆; ŬͿŽŵƉƵƚĂƚŝŽŶĨŽƌĚĞƚĞƌŵŝŶĂƚŝŽŶŽĨ ƐĞĐƵƌŝƚLJͲďĂƐĞĚƐǁĂƉ ƌĞƐĞƌǀĞƌĞƋƵŝƌĞŵĞŶƚƐƉƵƌƐƵĂŶƚƚŽdžŚŝďŝƚƚŽϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϯŽƌ džŚŝďŝƚ ƚŽ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϰ͕ĂƐĂƉƉůŝĐĂďůĞ͘ - ܆; ůͿŽŵƉƵƚĂƚŝŽŶĨŽƌĞƚĞƌŵŝŶĂƚŝŽŶŽĨWZĞƋƵŝƌĞŵĞŶƚƐƵŶĚĞƌdžŚŝďŝƚ ƚŽΑϮϰϬ͘ϭϱĐϯͲϯ͘ - ܆; ŵͿ /ŶĨŽƌŵĂƚŝŽŶƌĞůĂƚŝŶŐƚŽƉŽƐƐĞƐƐŝŽŶŽƌĐŽŶƚƌŽůƌĞƋƵŝƌĞŵĞŶƚƐĨŽƌĐƵƐƚŽŵĞƌƐƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϯ͘ 9 - ܆; ŶͿ /ŶĨŽƌŵĂƚŝŽŶƌĞůĂƚŝŶŐƚŽƉŽƐƐĞƐƐŝŽŶŽƌĐŽŶƚƌŽůƌĞƋƵŝƌĞŵĞŶƚƐĨŽƌƐĞĐƵƌŝƚLJͲďĂƐĞĚƐǁĂƉĐƵƐƚŽŵĞƌƐƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϯ;ƉͿ;ϮͿŽƌϭϳ &Z ϮϰϬ͘ϭϴĂͲϰ͕ĂƐĂƉƉůŝĐĂďůĞ͘ ܆; ŽͿZĞĐŽŶĐŝůŝĂƚŝŽŶƐ͕ŝŶĐůƵĚŝŶŐĂƉƉƌŽƉƌŝĂƚĞĞdžƉůĂŶĂƚŝŽŶƐ͕ŽĨƚŚĞ&Kh^ZĞƉŽƌƚǁŝƚŚĐŽŵƉƵƚĂƚŝŽŶŽĨŶĞƚĐĂƉŝƚĂůŽƌƚĂŶŐŝďůĞŶĞƚ ǁŽƌƚŚƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϭ͕ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϭ͕Žƌ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϮ͕ĂƐĂƉƉůŝĐĂďůĞ͕ĂŶĚƚŚĞƌĞƐĞƌǀĞƌĞƋƵŝƌĞŵĞŶƚƐ ƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϯŽƌ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϰ͕ĂƐĂƉƉůŝĐĂďůĞ͕ŝĨŵĂƚĞƌŝĂůĚŝĨĨĞƌĞŶĐĞƐĞdžŝƐƚ͕ŽƌĂƐƚĂƚĞŵĞŶƚƚŚĂƚŶŽŵĂƚĞƌŝĂůĚŝĨĨĞƌĞŶĐĞƐ ĞdžŝƐƚ͘ - ܆; ƉͿ^ƵŵŵĂƌLJŽĨ ĨŝŶĂŶĐŝĂůĚĂƚĂĨŽƌƐƵďƐŝĚŝĂƌŝĞƐŶŽƚĐŽŶƐŽůŝĚĂƚĞĚŝŶƚŚĞƐƚĂƚĞŵĞŶƚŽĨĨŝŶĂŶĐŝĂůĐŽŶĚŝƚŝŽŶ͘ - ܆; ƋͿKĂƚŚŽƌĂĨĨŝƌŵĂƚŝŽŶ ŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ ϭϳ&ZϮϰϬ͘ϭϳĂͲϱ͕ ϭϳ&ZϮϰϬ͘ϭϳĂͲϭϮ͕Žƌ ϭϳ&ZϮϰϬ͘ϭϴĂͲϳ͕ĂƐĂƉƉůŝĐĂďůĞ͘ 9 - ܆; ƌͿŽŵƉůŝĂŶĐĞƌĞƉŽƌƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ ϭϳ&Z ϮϰϬ͘ϭϳĂͲϱŽƌ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϳ͕ĂƐĂƉƉůŝĐĂďůĞ͘ - ܆; ƐͿdžĞŵƉƚŝŽŶƌĞƉŽƌƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ ϭϳ&Z ϮϰϬ͘ϭϳĂͲϱŽƌ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϳ͕ĂƐĂƉƉůŝĐĂďůĞ͘ - ܆; ƚͿ/ŶĚĞƉĞŶĚĞŶƚƉƵďůŝĐ ĂĐĐŽƵŶƚĂŶƚ͛ƐƌĞƉŽƌƚďĂƐĞĚŽŶĂŶĞdžĂŵŝŶĂƚŝŽŶŽĨƚŚĞƐƚĂƚĞŵĞŶƚŽĨ ĨŝŶĂŶĐŝĂůĐŽŶĚŝƚŝŽŶ͘ ܆; ƵͿ/ŶĚĞƉĞŶĚĞŶƚƉƵďůŝĐĂĐĐŽƵŶƚĂŶƚ͛ƐƌĞƉŽƌƚďĂƐĞĚŽŶĂŶĞdžĂŵŝŶĂƚŝŽŶŽĨƚŚĞĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŽƌĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϳĂͲϱ͕ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϳ͕Žƌ ϭϳ&Z ϮϰϬ͘ϭϳĂͲϭϮ͕ĂƐĂƉƉůŝĐĂďůĞ͘ 9 ܆; ǀͿ/ŶĚĞƉĞŶĚĞŶƚƉƵďůŝĐĂĐĐŽƵŶƚĂŶƚ͛ƐƌĞƉŽƌƚďĂƐĞĚŽŶ ĂŶĞdžĂŵŝŶĂƚŝŽŶŽĨĐĞƌƚĂŝŶƐƚĂƚĞŵĞŶƚƐŝŶƚŚĞĐŽŵƉůŝĂŶĐĞƌĞƉŽƌƚƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϳĂͲϱŽƌ ϭϳ&Z ϮϰϬ͘ϭϴĂͲϳ͕ĂƐĂƉƉůŝĐĂďůĞ͘ ܆; ǁͿ/ŶĚĞƉĞŶĚĞŶƚƉƵďůŝĐĂĐĐŽƵŶƚĂŶƚ͛ƐƌĞƉŽƌƚďĂƐĞĚŽŶĂƌĞǀŝĞǁŽĨƚŚĞ ĞdžĞŵƉƚŝŽŶƌĞƉŽƌƚƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϳĂͲϱŽƌϭϳ &Z ϮϰϬ͘ϭϴĂͲϳ͕ĂƐĂƉƉůŝĐĂďůĞ͘ ܆; džͿ^ƵƉƉůĞŵĞŶƚĂůƌĞƉŽƌƚƐŽŶĂƉƉůLJŝŶŐĂŐƌĞĞĚͲƵƉŽŶƉƌŽĐĞĚƵƌĞƐ͕ŝŶĂĐĐŽƌĚĂŶĐĞ ǁŝƚŚϭϳ &Z ϮϰϬ͘ϭϱĐϯͲϭĞŽƌ ϭϳ&Z ϮϰϬ͘ϭϳĂͲϭϮ͕ ĂƐĂƉƉůŝĐĂďůĞ͘ ܆; LJͿZĞƉŽƌƚĚĞƐĐƌŝďŝŶŐĂŶLJŵĂƚĞƌŝĂůŝŶĂĚĞƋƵĂĐŝĞƐĨŽƵŶĚƚŽĞdžŝƐƚŽƌĨŽƵŶĚƚŽŚĂǀĞĞdžŝƐƚĞĚƐŝŶĐĞƚŚĞĚĂƚĞŽĨƚŚĞƉƌĞǀŝŽƵƐĂƵĚŝƚ͕Žƌ ĂƐƚĂƚĞŵĞŶƚƚŚĂƚŶŽŵĂƚĞƌŝĂůŝŶĂĚĞƋƵĂĐŝĞƐĞdžŝƐƚ͕ƵŶĚĞƌϭϳ &Z ϮϰϬ͘ϭϳĂͲϭϮ;ŬͿ͘ ܆; njͿKƚŚĞƌ͗ ͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺ **5P SFRVFTU DPOGJEFOUJBM USFBUNFOU PG DFSUBJO QPSUJPOT PG UIJT GJMJOH TFF \$'3 B F PS \$'3 B E BT** **BQQMJDBCMF** ![](_page_2_Picture_36.jpeg) ^ŝŐŶĂƚƵƌĞ͗ ͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺ Casey Dougherty dŝƚůĞ͗ ͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺͺ ŚŝĞĨŽŵƉůŝĂŶĐĞΘZŝƐŬKĨĨŝĐĞƌ {3}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) December 31, 2021 and 2020 ### **Table of Contents** | | Page(s) | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm | 1 | | Financial Statements: | | | Statements of Financial Condition | 2 | | Statements of Operations | 3 | | Statements of Changes in Stockholder's Equity | 4 | | Statements of Cash Flows | 5 | | Notes to Financial Statements | 6 – 13 | | Supplemental Information Pursuant to Rule 17a-5 of the Securities Exchange Act of 1934 | | | Schedule I – Computation of Net Capital under Rule 15c3-1 of the Securities and Exchange
Commission | 15 | | Schedule II – Computation for Determination of Reserve Requirement and Information Relating
to Possession or Control Requirements under Rule 15c3-3 of the Securities and Exchange
Commission | 16 | | | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## **Report of Independent Registered Public Accounting Firm** To the Audit Committee and Board of Directors of M Holdings Securities, Inc. #### **Opinion on the Financial Statements** We have audited the accompanying statements of financial condition of M Holdings Securities, Inc. (the "Company") as of December 31, 2021 and 2020, the related statements of operations, changes in stockholder's equity, and cash flows for the years 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 the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years 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 the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. 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 audits 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 statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, 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 audits 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 audits provide a reasonable basis for our opinion. ### **Supplemental Information Pursuant to Rule 17A-5 of the Securities Exchange Act of 1934** The Schedule I – Computation of Net Capital under Rule 15c3-1 of the Securities and Exchange Commission and Schedule II – Computation for Determination of Reserve Requirement and Information Relating to Possession or Control Requirements under Rule 15c3-3 of the Securities and Exchange Commission (collectively, the "supplemental information"), has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. The supplemental information is the responsibility of the Company's management. 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 conformity with 17 C.F.R. § 240.17a5. In our opinion, the supplemental information 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 2015. New York, New York February 24, 2022 {5}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Statements of Financial Condition December 31, 2021 and 2020 | Assets | 2021 | 2020 | |----------------------------------------------------------|------------------|------------------| | Cash and investments: | | | | Cash and cash equivalents | \$
9,499,812 | \$
6,167,082 | | Short-term investments | 1,999,298 | 2,997,274 | | Total cash and investments | 11,499,110 | 9,164,356 | | Commissions receivable | 7,851,934 | 6,662,608 | | Accounts receivable | 385,756 | 473,468 | | Deposits with clearing organizations and others (note 2) | 145,011 | 145,011 | | Prepaid expenses and other assets | 61,269 | 22,298 | | Total assets | \$
19,943,080 | 16,467,741 | | Liabilities and Stockholder's Equity | | | | Liabilities: | | | | Commissions payable | \$
14,031,630 | \$
11,543,692 | | Payable to Parent (note 4) | 3,002,197 | 3,119,839 | | Other liabilities | 295,163 | 9,750 | | Total liabilities | 17,328,990 | 14,673,281 | | Stockholder's equity: | | | | Common stock, no par value. Authorized 1,000 shares; | | | | issued and outstanding 10 shares | 25,000 | 25,000 | | Additional paid-in capital | 44,653,696 | 40,853,696 | | Accumulated deficit | (42,064,606) | (39,084,236) | | Total stockholder's equity | 2,614,090 | 1,794,460 | | Total liabilities and stockholder's equity | \$
19,943,080 | \$
16,467,741 | | | | | See accompanying notes to financial statements. {6}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) #### Statements of Operations #### Years ended December 31, 2021 and 2020 | | 2021 | 2020 | |----------------------------------------|-------------------|-------------------| | Revenues: | | | | Insurance commissions | \$
142,850,200 | \$
130,823,581 | | Investment advisory fees | 33,035,929 | 26,740,248 | | Mutual fund commissions | 3,885,490 | 3,307,582 | | Supervisory fees | 3,176,865 | 3,201,015 | | Investment fees | 1,244,000 | 973,036 | | Securities commissions | 1,087,297 | 1,109,927 | | Other income | 435,636 | 486,688 | | Investment income | 25,413 | 54,521 | | Total revenues | 185,740,830 | 166,696,598 | | Expenses: | | | | Registered representative compensation | 170,809,580 | 152,953,936 | | Employee compensation and benefits | 10,729,711 | 9,261,354 | | Office | 4,073,447 | 3,705,215 | | Outside professional services | 2,108,011 | 2,335,757 | | General and administrative | 756,842 | 594,056 | | Other | 243,609 | 282,247 | | Total expenses | 188,721,200 | 169,132,565 | | Net loss | \$
(2,980,370) | \$
(2,435,967) | See accompanying notes to financial statements. {7}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Statements of Changes in Stockholder's Equity Years ended December 31, 2021 and 2020 | | Common stock | | | Additional
paid-in | | Accumulated | | | |-----------------------------------------------|--------------|----|--------|-----------------------|----|------------------|----|--------------------------| | | Shares | | Amount | capital | | deficit | | Total | | Balances as of
January 1, 2020 | 10 | \$ | 25,000 | \$
39,053,696 | \$ | (36,648,269) | \$ | 2,430,427 | | Capital contributions from Parent | — | | — | 1,800,000 | | — | | 1,800,000 | | Net loss | — | | — | — | | (2,435,967) | | (2,435,967) | | Balances as of
December 31, 2020 | 10 | | 25,000 | 40,853,696 | | (39,084,236) | | 1,794,460 | | Capital contributions from Parent
Net loss | —
— | | —
— | 3,800,000
— | | —
(2,980,370) | | 3,800,000
(2,980,370) | | Balances as of
December 31, 2021 | 10 | \$ | 25,000 | \$
44,653,696 | \$ | (42,064,606) | \$ | 2,614,090 | See accompanying notes to financial statements. {8}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) #### Statements of Cash Flows #### Years ended December 31, 2021 and 2020 | | 2021 | 2020 | |----------------------------------------------------------------|-------------------------|-------------| | Cash flows from operating activities: | | | | Net loss | \$
(2,980,370)
\$ | (2,435,967) | | Adjustments to reconcile net loss to net cash | | | | provided by (used in) operating activities: | | | | Changes in operating assets and liabilities: | | | | Commissions receivable | (1,189,326) | (65,416) | | Accounts receivable | 87,712 | 16,735 | | Prepaid expenses and other assets | (38,971) | (5,530) | | Commissions payable | 2,487,938 | (4,141,593) | | Payable to Parent | 3,682,358 | 1,899,090 | | Other liabilities | 285,413 | (40,059) | | Net cash provided by (used in) operating activities | 2,334,754 | (4,772,740) | | Cash flows from investing activities: | | | | Purchases of short-term investments | (6,992,726) | (8,715,946) | | Maturities of short-term investments | 7,990,702 | 5,718,672 | | Net cash provided by (used in) investing activities | 997,976 | (2,997,274) | | Net increase (decrease) in cash and cash equivalents | 3,332,730 | (7,770,014) | | Cash and cash equivalents at beginning of year | 6,167,082 | 13,937,096 | | Cash and cash equivalents at end of year | \$
9,499,812
\$ | 6,167,082 | | Supplemental cash flow disclosures: | | | | Noncash operating activity - capital contributions from Parent | \$
3,800,000
\$ | 1,800,000 | {9}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 ## **(1) Basis of Presentation and Significant Accounting Policies** ## *(a) Organization and Nature of Business* M Holdings Securities, Inc. (the Company), an Oregon corporation, was incorporated on March 21, 1997. The Company is registered as a securities broker pursuant to the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority (FINRA). The Company is a wholly owned subsidiary of M Financial Holdings Incorporated (the Parent). The Company is also a Registered Investment Advisor pursuant to the Investment Advisors Act of 1940. The Company has been appointed as exclusive agent and distributor for M Fund, Inc., a registered investment company and an affiliate of the Parent. M Fund, Inc. offers its shares to separate accounts of certain insurance companies as the underlying funding vehicle for certain life insurance policies offered by Member Firms. The Company commenced retail operations in May 2000. The Company is engaged as an introducing broker-dealer and registered investment adviser, which comprises several classes of services, including but not limited to insurance and investment advisory business. #### *(b) Basis of Presentation* The financial statements and footnotes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). #### *(c) Revenue Recognition* Revenues from contracts with customers include both commissions and fees. 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, whether multiple performance obligations exist and whether constraints on variable consideration should be applied due to uncertain future events. #### *Commissions* Commissions and any related clearing expenses are recorded on a trade-date basis as transactions occur. The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is fixed, and the risks and rewards of ownership have been transferred to/from the customer. Such revenues primarily arise from transactions in insurance products, mutual funds, and securities. {10}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 ### *Investment Advisory, Investment and Supervisory Fees* Investment advisory fees are based upon a percentage applied to the assets under management (AUM) of a customer's account. Investment fees are based upon the total net asset value (NAV) of a mutual fund or other pooled investment vehicle in which the Company has entered into agreements. These fees are generally received quarterly and are recognized as revenue at that point in time as they relate specifically to the services provided during that period and the Company believes the performance obligation is satisfied at that time. Supervisory fees are recognized on a monthly basis. ### *(d) Cash and Cash Equivalents* The Company's cash and cash equivalents consist of bank deposits, money market instruments and investments, primarily commercial paper. For purposes of the Statements of Financial Condition and Cash Flows, the Company considers all highly liquid debt instruments with a remaining maturity of three months or less, when purchased, to be cash equivalents. The amounts may exceed federally insured limits but management does not believe that the Company is exposed to any significant risks. #### *(e) Short Term-Investments* Short term investments are comprised primarily of short-term commercial paper with a remaining maturity of greater than three months but less than one year, when purchased, and are reported at amortized cost plus accrued interest. #### *(f) Accounts Receivable* Management believes accounts receivable at December 31, 2021 and 2020 are collectible; accordingly, no provision for uncollectible accounts has been recorded. Accounts receivable are reviewed regularly for credit losses and if deemed necessary an allowance will be established. ### *(g) Income Taxes* The Company is included in the consolidated federal income tax return filed by the Parent. The Company recognizes deferred income taxes for the tax consequences in future years of the differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end, based upon statutory income tax rates applicable to the periods in which the differences are expected to affect taxable income. The Company provides a valuation allowance, if necessary, to reduce deferred income tax assets, if any, to their estimated realizable values. {11}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 The Company recognizes and measures its unrecognized income tax benefits in accordance with FASB ASC 740, *Income Taxes*. Under that guidance, the Company assesses the likelihood, based on their technical merits, that tax positions will be sustained upon examination based on the facts, circumstances, and information available at the end of each period. The measurement of unrecognized income tax benefits is adjusted when new information is available, or when an event occurs that requires a change. As of December 31, 2021 and 2020, the Company did not have any unrecognized income tax benefits. ### *(h) Use of Estimates* The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ## *(i) Reclassifications* Certain balances on the statement of operations have been reclassified to conform with current year presentation. #### *(j) Subsequent Events* The Company has evaluated subsequent events through the date that the financial statements were issued, noting no material events that would require disclosure. #### **(2) Deposits with Clearing Organizations and Others** The Company settles commissions and other transactions through another broker-dealer, Pershing LLC (Pershing), on a fully disclosed basis. The Company follows the guidance prescribed in a Securities and Exchange Commission (SEC) No-Action Letter (the Letter) dated November 3, 1998, which allows introducing broker-dealers to include assets in the proprietary account of an introducing broker-dealer (PAIB assets) as allowable assets in their net capital computations, providing the clearing broker-dealer establishes a separate reserve account for PAIB assets in accordance with SEC Rule 15c3-3 and both the introducing broker-dealer and the clearing broker-dealer enter into a written agreement in accordance with the Letter. On September 6, 1999, the Company and Pershing entered into a written agreement in accordance with the provisions of the Letter. The agreement requires Pershing to calculate the reserve requirement in accordance with the Letter. As of December 31, 2021 and 2020, Pershing computed the reserve requirement for proprietary accounts of the introducing broker-dealer. The amount held on deposit in the Company's reserve bank account is \$100,000 as of December 31, 2021 and 2020 (included in deposits with clearing organizations and others in the Statements of Financial Condition). As of December 31, 2021 and 2020, the Company held \$20,011 on deposit with the National Securities Clearing Corporation for commission net settlement activities and \$25,000 with Financial Database Services for software support (included in deposits with clearing organizations and others in the Statements of Financial Condition). {12}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 #### **(3) Net Capital and Reserve Requirements** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital. The Company has elected to use the alternative method, permitted by the rule, which requires that the Company maintain minimum net capital as defined, equal to the greater of \$250,000 or 2% of the aggregate debit balances arising from customer transactions, as defined. The net capital rule of the "applicable" exchange also provides that equity capital may not be withdrawn or cash dividends paid if resulting net capital would be less than 5% of aggregate debits. As of December 31, 2021 and 2020, the Company has regulatory net capital of \$2,123,621 and \$1,242,008, which is \$1,873,621 and \$992,008 in excess of its required net capital of \$250,000. The Company is exempt from the provisions of Rule 15c3-3 under paragraph (k)(2)(ii) of the Rule because all customer transactions are cleared through another broker-dealer, as defined by the Rule, on a fully disclosed basis and customer funds and securities are promptly transmitted to the clearing broker-dealer. The Company is also exempt from the provisions of Rule 15c3-3 as the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 are limited to effecting securities transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company. #### **(4) Related-Party Transactions** The Company's Parent allocates certain overhead and indirect expenses to the Company. These overhead and indirect expenses include, but are not limited to, those expenses related to shared occupancy, equipment, utilities, employees, supplies and administrative costs of the Company. Direct expenses are incurred and expensed by the Company. Such direct expenses include, but are not limited to, registrations, assessments, fees, marketing, taxes, insurance, outside professional services, and compensation related to production, which are specific to the Company. All expenses are paid by the Parent and then reimbursed by the Company to the Parent. As of December 31, 2021 and 2020, \$3,002,197 and \$3,119,389, respectively, is payable to the Parent for expenses. The Company, by mutual agreement with the Parent, has established a minimum net capital balance of \$300,000. To the extent that the reimbursement of expenses will cause net capital to decline below \$300,000, the Parent will make additional capital contributions to maintain a net capital balance of at least \$300,000. In addition, the Parent has represented that in the event the Company may no longer have revenues large enough to fund its operations, the Parent will provide financial support to the Company until such time that the revenues earned are sufficient to cover the Company's operating expenses and required net capital. The Company incurred net losses of \$2,980,370 and \$2,435,967 in the years ended December 31, 2021 and 2020, respectively. The Company received \$3,800,000 and \$1,800,000 in non-cash capital contributions from the Parent in the form of forgiveness of the Payable to Parent for the years ended December 31, 2021 and 2020, respectively. {13}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 As of December 31, 2021 and 2020, the Company has approximately \$80,000 and \$49,000, respectively, in amounts payable to Registered Representatives who are employees of Management Compensation Group Northwest, LLC (dba M Benefit Solutions), a wholly owned subsidiary of the Parent. These amounts are included in commissions payable in the Statements of Financial Condition. The commission expense between M Benefit Solutions (included in registered representative compensation in the Statements of Operations) amounted to approximately \$3,118,000 and \$2,896,000 for the years ended December 31, 2021 and 2020, respectively. ### **(5) Income Taxes** The Company is included in the consolidated federal income tax return filed by its Parent. The Company is also included in consolidated income tax returns filed by its Parent, and files its own separate income tax returns, in various states. With few exceptions, the Company is no longer subject to examination by taxing authorities for years prior to 2018. For purposes of the financial statements, federal and state income taxes are calculated as if the Company filed separate federal and state income tax returns. Reconciliations of the amounts computed by applying the statutory U.S. federal income tax rate of 21% in both 2021 and 2020 to income before income taxes and the actual provision for the years ended December 31, 2021 and 2020 are as follows: | | 2021 | 2020 | |--------------------------------------------------------|-----------------|-----------------| | Computed "expected" income tax benefit | \$
(625,878) | \$
(511,553) | | Change in income tax expense (benefit) resulting from: | | | | State income taxes | (222,750) | (36,782) | | Political contributions | 18,986 | 11,403 | | Other | 7,811 | 2,386 | | Non-deductible parking | 7,595 | 22,449 | | Total income tax benefit | (814,236) | (512,097) | | Valuation allowance | 814,236 | 512,097 | | Provision for income taxes | \$
— | \$
— | {14}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 The temporary differences that give rise to deferred income tax assets and liabilities as of December 31, 2021 and 2020, relate to the following: | | 2021 | 2020 | |---------------------------------------------------------------|-----------------|-----------------| | Deferred income tax assets (liabilities): | | | | Net operating loss carryforward | \$
8,116,818 | \$
8,340,438 | | Deferred state income taxes, net of federal income tax effect | 1,951,560 | 1,726,153 | | Deferred rent | 77,447 | (19,252) | | Total deferred income tax assets | 10,145,825 | 10,047,339 | | Valuation allowance | (10,145,825) | (10,047,339) | | Net deferred income tax assets | \$
— | \$
— | As of December 31, 2021, the Company has net operating loss carryforwards of approximately \$38,651,515, of which \$28,111,588 will expire starting in the year 2022 through the year 2037, and \$10,539,927 will be carried forward indefinitely. As noted above, management has established valuation allowances of \$10,145,825 and \$10,047,339 as of December 31, 2021 and 2020, respectively, to fully reserve against its deferred income tax assets as the Company's deferred income tax assets are not expected to be realized. ## **(6) Concentrations of Credit Risk** The Company is engaged in various trading and brokerage activities in which counterparties primarily include broker-dealers, insurance companies and other financial institutions. In the event 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. ### **(7) Disclosures about Fair Value of Financial Instruments** The financial instruments of the Company, which consist of cash, cash equivalents and short-term investments, are reported in the Statements of Financial Condition at carrying values that approximate fair values, because of the short maturities of the instruments. {15}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 ## **(8) Credit Losses** The Company accounts for estimated credit losses in accordance with FASB ASC 326-20, Financial Instruments - Credit Losses. A portion of the Company's trades that are contracts are cleared through clearing organizations and settled daily between the clearing organizations and the Company. Because of this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties and if deemed necessary an allowance will be established. As of December 31, 2021 and 2020, no allowance for credit losses has been recorded. #### **(9) Commitments and Contingencies** The Company clears its securities transactions through clearing brokers. The clearing brokers have the right to charge the Company for losses that may result from a counterparty's failure to fulfill its contractual obligations. There is no maximum amount assigned to this right to charge and this applies to all trades executed through the clearing brokers. The Company also believes there is no maximum amount assignable to this right. As of December 31, 2021 and 2020, the Company has recorded no liabilities with regard to this right. During 2021 and 2020, the Company did not pay the clearing brokers any amounts related to these guarantees. There are certain situations where the Company may be charged back for commissions or fees received such as an early insurance policy lapse, partial surrender, or trade correction. In these situations, the Company has the right to charge back the Registered Representative and the Member Firm. In such a circumstance, the risk of default depends on the creditworthiness of the Registered Representative and the Member Firm. Any commissions or fees charged back are included in accounts receivable and other liabilities, when appropriate. The Company, its Parent, and its Parent's subsidiaries, in common with the insurance industry in general, may be subject to litigation in the normal course of their business. In addition, the Company may be named in claims before FINRA relating to the actions of its Registered Representatives or before the SEC relating to the actions of its Investment Advisors. The Company maintains an insurance policy for errors and omissions which covers such claims. In the event of such claims, the Company is only liable for its per claim deductible with the insurance company. The Company's management does not believe that such litigation, any claims before FINRA, or any claims before the SEC, will have a material effect on its financial position. ## **(10) Regulatory Matters** As a regulated entity, the Company may be subject to certain audits, examinations, reviews, etc., by various regulatory agencies in the ordinary course of its business. During 2019, FINRA conducted examinations of three branch offices. As of December 31, 2021, one examination remains open and has been referred to FINRA's Department of Enforcement. In January 2019, FINRA announced the 529 Plan Share Class Initiative ("529 Initiative"). As part of the 529 Initiative broker-dealers were encouraged to self-report possible securities laws violations related to mutual fund share class selection and the selection of one class of shares when {16}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Notes to Financial Statements December 31, 2021 and 2020 a lower cost share class may have been available. The Company decided to voluntarily participate in the 529 Initiative which resulted in the Company making payments of principal and interest of approximately \$43,000 to affected clients in October 2021. The matter was closed in November 2021. In June 2019, the SEC adopted a new standard of conduct applicable to retail accounts, Regulation Best Interest ("Reg BI"), with an effective date of June 30, 2020. Reg BI requires that brokerdealers and investment advisors act in the best interests of retail customers without placing their own financial or other interests ahead of the customer's and imposes new obligations related to disclosure, duty of care, conflicts of interest and compliance. Certain state securities and insurance regulators have also adopted, proposed, or are considering adopting similar laws and regulations. In addition, it is unclear how and whether other regulators may respond to or attempt to enforce similar enhanced fiduciary protections addressed by the former Department of Labor (DOL) Retirement Advice Rule. In 2019, the SEC conducted anti-money laundering (AML) and cybersecurity examinations of the Company. In early 2020, the Company responded to those findings and adopted procedures designed to address the SEC's concerns. As of December 31, 2021, the SEC issued an order finding possible violations of federal law or regulation related to cybersecurity or AML issues at the Company, or branch offices supervised by the Company. Pursuant to that order, the Company is engaged in records requests with the SEC. The investigation is in its early stages and, as such, it is difficult to evaluate potential exposure. During 2020, FINRA began a routine examination of the Company. As part of the examination FINRA also conducted examinations of two branch offices. As of December 31, 2021, the routine examination has been closed with no material findings, but FINRA is pursuing a cause examination related to certain concerns it noted during its routine examination. In 2021, the SEC conducted a branch exam. As of December 31, 2021, preliminary findings have been issued to which the Company is responding. The Company does not anticipate these findings will be material when this exam is closed. In 2021, the State of Oregon began an exam related to compliance with Reg BI. The Company has responded to the initial records request, and as of December 31, 2021, the exam remains open. Uncertainty regarding pending and future laws and regulations, including with regard to the implementation of Reg BI, a new private transaction exemption adopted by the DOL, and pending or adopted state rules relating to the standards of conduct applicable to both retirement and nonretirement accounts, may have impacts on the Company's business in ways which cannot be anticipated or planned for, and which may have further impacts on the Company's products and services, cash flows, and results of operations. {17}------------------------------------------------ # **SUPPLEMENTAL INFORMATION PURSUANT TO RULE 17A-5 OF THE SECURITIES EXCHANGE ACT OF 1934** {18}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Schedule I - Computation of Net Capital under Rule 15c3-1 of the Securities and Exchange Commission #### December 31, 2021 | Computation of net capital: | | |-----------------------------------------------------------------------------------------|-----------------| | Total stockholder's equity in the Statement of Financial Condition | \$
2,614,090 | | Less nonallowable assets: | | | Accounts receivable | 385,756 | | Commissions receivable | 19,499 | | Deposits with others | 25,000 | | Prepaid expenses and other assets | 54,149 | | Net capital before haircuts on cash equivalents and short-term investments | 2,129,686 | | Haircuts on cash equivalents and short-term investments | 6,065 | | Net capital | \$
2,123,621 | | Computation of alternative net capital requirement: | | | Minimum dollar net capital requirement (greater of 2% of aggregate debits or \$250,000) | \$
250,000 | | Excess net capital | 1,873,621 | | Net capital in excess of 5% of combined aggregate debits or 120% of minimum net | | | capital requirement | 1,823,621 | There are no material differences between the above computation of net capital under Rule 15c3-1 and the corresponding computation prepared by the Company for inclusion in its unaudited Part II Focus Report as of December 31, 2021, as amended. {19}------------------------------------------------ (A Wholly Owned Subsidiary of M Financial Holdings Incorporated) Schedule II – Computation for Determination of Reserve Requirements and Information Related to Possession or Control Requirements under Rule 15c3-3 of the Securities and Exchange Commission December 31, 2021 The Company is exempt from the provisions of Rule 15c3-3 under paragraph (k)(2)(ii) of the Rule because all customer transactions are cleared through another broker-dealer on a fully disclosed basis and customer funds and securities are promptly transmitted to the clearing broker-dealer. The Company is also exempt from the provisions of Rule 15c3-3 as the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 are limited to effecting securities transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.