# CAPITAL ONE SECURITIES, INC. X-17A-5 (2022-02-23) — Broker-dealer annual report

- Company: CAPITAL ONE SECURITIES, INC.
- Form: X-17A-5
- Filed: 2022-02-23
- Period: 2021-12-31
- Accession: 0001048281-22-000002
- CIK: 1048281
- File #: 8-50561
- Type: Broker-dealer
- Material weakness: No
- Auditor: Keiter
- Auditor location: Glen Allen, VA
- Contact: Gabrielle Halprin
- Phone: 5049206648
- Email: gabrielle.halprin@capitafone.com
- Website: capitafone.com
- Signed by: Gabrielle Halprin (Chief Financial Operations Officer)

Original filing: https://www.sec.gov/Archives/edgar/data/1048281/000104828122000002/COS2021PUBLICFS.pdf

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UNITED STATES SECURmES AND EXCHANGE COMMISSION Washington, D.C. 20549

| ANNUAL REPORTS |
|----------------|
| FORM X-17A-S   |
| PART Ill       |

| 0"8 AP•R=•At           |  |
|------------------------|--|
| OMS Number. 3235-0123  |  |
| Expires: Oct. 31. 2023 |  |
| £\$:tlm~ted ~~ burden  |  |
| hours per response: 12 |  |

|                                                                                                           |                                       | SEC ALE NUMBER       |                                  |
|-----------------------------------------------------------------------------------------------------------|---------------------------------------|----------------------|----------------------------------|
| FORM X-17A-S                                                                                              |                                       | 8-50561              |                                  |
|                                                                                                           | PART Ill                              |                      |                                  |
|                                                                                                           | FACING PAGE                           |                      |                                  |
| Information Required Pursuant to Rules 17a-5, 17a-U, and llla-7 under the Securities Elcchange Ad of 1934 |                                       |                      |                                  |
| FILING FOR THE PERIOD BEGINNING                                                                           | __<br>___<br>ol_/_0l/_<br>_202_<br>_1 | AND ENDING _;1;;:2.: | /3;;:1.: /2.:.;0_2_1 _<br>_<br>_ |
|                                                                                                           | MM/00/YY                              |                      | MM/DD/YY                         |
|                                                                                                           | A. REGISTRANT IDENTIFICATION          |                      |                                  |
| NAME OF FIRM:<br>capital One Securities, Inc.                                                             |                                       |                      |                                  |
|                                                                                                           |                                       |                      |                                  |

TYPE OF REGISTRANT (check all applicable boxes): 0 Broker-dealer D Security-based swap dealer D Major security-based swap part.icipant **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.)

201 St. Charles Ave., Suite 1830

|                                              | (No. and Street)                                                          |                                  |            |
|----------------------------------------------|---------------------------------------------------------------------------|----------------------------------|------------|
| New Orleans                                  | LA                                                                        | 70170                            |            |
| (Oty)                                        | (State)                                                                   |                                  | (Zip Code) |
| PERSON TO CONTACT WITH REGARD TO THIS FILING |                                                                           |                                  |            |
| Gabrielle Halprin                            | (504)533-7377                                                             | gabrielle.halprin@capitafone.com |            |
| (Name)                                       | (Area Code -Telephone Numb<!r)                                            | (Email Address)                  |            |
|                                              | 8. ACCOUNTANT IDENTIFICATION                                              |                                  |            |
| Keiter                                       | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing• |                                  |            |
|                                              | (Name -II lndlvldual. stite last. first, and middle name)                 |                                  |            |
| 4401 Dominion Blvd.                          | Glen Allen                                                                | VA                               | 23060      |
| (Address)                                    | (City)                                                                    | (State)                          | (Zip Code) |
| 10/22/2003                                   |                                                                           | 80                               |            |

(Oate of Re"'~ration with PCAOQih/ •••licablcl

**FOR OFFICIAL USE ONLY** 

• **da1ms for exemption from the r-equirement that the. annual reports be covered bv the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the ba\$is of the exemption. See 17**  CfR 240.17a-5(e)(ll(ii). If applicable.

PeNOM who are to ,...,.,nd to the colledlon of information contalned In this form are not required to respond unless the form displays a currently valid 0MB control number.

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#### OATH OR AfflRMATION

litle: Chief inan lal Operations Officer

# This filing' .. contains (check all applicable boxes):

- 0 (a) Statement of financial condition.
- 0 (b) Notes to consolidated statement offlnancial 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) Statement of cash flows.
- D (e) Statement of changes in stockholders' or partners' or sole proprietor's equity.
- D (f) Statement of changes in liabilities subordinated to daims of creditors.
- D (g) Notes to consolidated financial statements.
- D (h) Computation of net capital under 17 CFR 240.15c3-l or 17 CFR 240.18a-l, as applicable.
- 0 (i) Computation of tangible net worth under 17 CFR 240.l.Sa-2.
- D (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3.
- 0 (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.
- 0 (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 240.1Sc3-3.
- □ (n) Information relating to possession or control requirements for security-based swap customers under 17 CfR 240.1Sc3-3(p)(2) or 17 CFR 240.18a-4, as applicable.
- 0 (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-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 11 CFR 240.15c3-3 or 17 CFR 240.183-4, as applicable, if material differences exist, or a statement that no material differences exist.
- 0 (p) Summary of financial data for sobsicliaries not consolidated in the statement of financial condition.
- 0 (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 aC(X)rdance 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.
- **ca (t) Independent public accountant's report based on an ex.aminatlon of the \$1:atement or 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.lSa-7, or 17 CFR 240.17a-12, as appllcable\_
- D (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-S or 17 CFR 240.l 8a•7, as applicable.
- D (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-s or 17 CFR 240.lSa-7, as applicable.
- 0 (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 ex.1st or found to have existed since the date of the previous audit, or a statement that no mat&rial Inadequacies exist, under 17 CFR 240.17a-12(k). D (z)Ot""ner. \_\_\_\_\_\_ \_ \_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_ \_\_\_\_\_\_\_\_\_ \_ \_\_ \_
- 
- •-ro *request confidentiol treotment of certain portions of this filing, see* 17 *CFR* 240.17a-5(e)/3) or 17 *CFR* 24D.18a-7(d)/2), as applicable.

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(A Wholly Owned Subsidiary of Capital One Financial Corporation)

FINANCIAL REPORT

Years Ended December 31, 2021 and 2020 With Report of Independent Registered Public Accounting Firm

SEC ID 8 - 50561

Filed pursuant to Rule 17a-5(e)(3) as a PUBLIC DOCUMENT.

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(A Wholly Owned Subsidiary of Capital One Financial Corporation)

### Table of Contents

Page

| Report of Independent Registered Public Accounting Firm            |        |
|--------------------------------------------------------------------|--------|
| Financial Statements:                                              |        |
| Statements of Financial Condition<br>Notes to Financial Statements | 2<br>ന |

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

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

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#### **Basis for Opinion**

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|                                                | December 31, |  |      |
|------------------------------------------------|--------------|--|------|
|                                                | 2021         |  | 2020 |
| Assets:                                        |              |  |      |
| &DVKRQGHSRVLWZLWKDIILOLDWHGFRPSDQ\             |              |  |      |
| ,QYHVWPHQWLQPRQH\PDUNHWPXWXDOIXQG              |              |  |      |
| &RPPLVVLRQVUHFHLYDEOHIURPFOHDULQJFRUUHVSRQGHQW |              |  |      |
| \$FFRXQWVUHFHLYDEOHV                           |              |  |      |
| 2WKHUUHFHLYDEOHV                               |              |  | ²    |
| 'HSRVLWZLWKFOHDULQJFRUUHVSRQGHQW               |              |  |      |
| *RRGZLOO                                       |              |  |      |
| 'XHIURPDIILOLDWHV                              |              |  |      |
| 'HIHUUHGWD[DVVHW                               |              |  |      |
| Total assets                                   |              |  |      |
| Liabilities:                                   |              |  |      |
| &RPPLVVLRQVSD\DEOHWREURNHUVDQGGHDOHUV          |              |  |      |
| \$FFUXHGH[SHQVHV                               |              |  |      |
| 'HIHUUHGUHYHQXH                                |              |  | ²    |
| 'XHWRDIILOLDWHV                                |              |  |      |
| Total liabilities                              |              |  |      |
| Stockholder's equity:                          |              |  |      |
| &RPPRQVWRFNQRSDUYDOXHVKDUHVDXWKRUL]HGRQH       |              |  |      |
| VKDUHLVVXHGDQGRXWVWDQGLQJ                      |              |  |      |
| \$GGLWLRQDOSDLGLQFDSLWDO                       |              |  |      |
| 5HWDLQHGHDUQLQJV                               |              |  |      |
| Total stockholder's equity                     |              |  |      |
| Total liabilities and stockholder's equity     |              |  |      |

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(A Wholly Owned Subsidiary of Capital One Financial Corporation)

#### Notes to Financial Statements

#### Note 1-Organization

Capital One Securities, Inc. (the "Company") is a wholly owned subsidiary of Capital One Financial Corporation ("Capital One"). The Company is a full-service investment banking firm providing equity research and institutional sales and trading services in both fixed income and equity securities to large, institutional accounts primarily in North America. The Company also provides corporate finance services primarily to middle-market companies in the United States. Investment banking services are occasionally provided to companies outside of the United States. The Company is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA").

### Note 2-Summary of Significant Accounting Policies

#### Basis of Accounting

The financial statements of the Company are prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").

#### Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While management makes its best judgment, actual results could differ from those estimates.

#### Cash on Deposit with Affiliated Company

The Company considers all highly liquid investments with a stated maturity of three months or less when purchased to be cash equivalents. The Company does not consider its investment in the money market mutual fund to be a cash equivalent in the statements of cash flows based on regulatory guidance. Cash includes amounts held at Capital One, National Association ("CONA"), a related party, totaling \$2,556,613 and \$2,337,189 at December 31, 2021 and 2020, respectively. CONA is a major financial institution and is insured up to \$250,000 by the Federal Deposit Insurance Corporation.

#### Investment in Money Market Mutual Fund

Investment in the money market mutual fund is measured at fair value. The market value is based on quoted prices received from various pricing services.

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(A Wholly Owned Subsidiary of Capital One Financial Corporation)

Notes to Financial Statements (continued)

#### Accounts Receivables

Accounts receivables primarily represent receivables due from lead underwriters for investment banking transactions where the Company acted as an underwriter.

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2016-13 - Current Expected Credit Losses ("CECL"). The Company adopted the standard on January 1, 2020 using the modified retrospective approach. This guidance requires use of the current expected credit loss model that is based on expected losses (net of expected recoveries), rather than incurred losses, to determine its allowance for credit losses on financial assets measured at amortized cost, which includes other receivables and certain off-balance sheet arrangements. The adoption of this standard did not have a material impact on the Company's financial statements.

The Company has no historical credit losses. There are no current indications of non-receipt from counterparties. The Company projects no probability of future losses related to these balances. Due to these factors, as well as the short-term nature of these receivables, management has determined that these receivables have minimal credit risk and, therefore, no allowance was deemed necessary as of December 31, 2021 and 2020.

#### Goodwill

In connection with the acquisition of the Company by Capital One, the Company recorded goodwill of \$3,493,211 representing the amount by which the purchase price exceeded the fair value of the net assets acquired.

Goodwill is not amortized but is tested for impairment annually and between annual tests if events or circumstances indicate potential impairment. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. Based upon the results of the Company's 2021 and 2020 goodwill impairment testing, management has determined that the fair value of goodwill exceeded its carrying value. Accordingly, the goodwill of the Company was not considered impaired. The Company will continue to regularly monitor overall economic conditions and other events or circumstances that may impair the goodwill in the future.

#### Income Taxes

The Company is included in Capital One's consolidated federal income tax return but files a separate state income tax return. Capital One allocates federal income tax expense to the Company using a separate return basis. The Company is reimbursed by Capital One for federal income tax losses, if applicable. Amounts owed to or due from Capital One for federal income taxes are reported as a component of due to or from affiliates in the accompanying statements of financial

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(A Wholly Owned Subsidiary of Capital One Financial Corporation)

Notes to Financial Statements (continued)

condition. Taxes payable amounts included in due to affiliates totaled \$1,636,781 and \$1,890,609 at December 31, 2021 and December 31, 2020, respectively.

Deferred tax assets and liabilities are based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company has evaluated the effect of accounting guidance surrounding uncertain income tax positions and concluded that the Company has no significant financial statement exposure to uncertain income tax positions as of December 31, 2021 and 2020.

## Note 3-Fair Value of Financial Instruments

Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (also referred to as an exit price). The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. The fair value measurement of a financial asset or liability is assigned to a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described below:

- · Level 1-Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
- · Level 2-Valuation is based on observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities, quoted prices in markets that are not active, or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities.
- · Level 3-Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation techniques include pricing models, discounted cash flow methodologies or similar techniques.

The accounting guidance for fair value measurements requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value.

All of the investments held by the Company are categorized as Level 1, as the valuation of each is based on quoted prices of each asset. The Company does not have any financial liabilities within the scope of the accounting guidance.

The following tables display the Company's assets on the statements of financial condition measured at fair value on a recurring basis as of December 31, 2021 and 2020:

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#### *Assets Measured at Fair Value on a Recurring Basis*

|                        | <br>December 31, 2021             |  |         |         |  |                         |  |
|------------------------|-----------------------------------|--|---------|---------|--|-------------------------|--|
|                        | Fair Value Measurements Using     |  |         |         |  | Total                   |  |
|                        | Level 1                           |  | Level 2 | Level 3 |  | Estimated<br>Fair Value |  |
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|                        | <br>December 31, 2020             |  |         |         |  |                         |  |
|                        | <br>Fair Value Measurements Using |  |         |         |  | Total                   |  |
|                        | Level 1                           |  | Level 2 | Level 3 |  | Estimated<br>Fair Value |  |
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#### **Note 4—Income Taxes**

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#### **Note 5—Related Party Transactions**

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#### **Note 6—Commitments and Contingencies**

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(A Wholly Owned Subsidiary of Capital One Financial Corporation)

Notes to Financial Statements (continued)

capacities. The maximum liability under these obligations is unlimited; however, the Company's insurance policies serve to limit its exposure.

### Note 10-Financial Instruments with Off-Balance Sheet Risk

As a securities broker, the Company is engaged in buying and selling securities as an agent for a diverse group of individuals and institutional investors. The Company introduces these transactions for clearance to another firm on a fully-disclosed basis. The agreement between the Company and its clearing correspondent provides that the Company is obligated to assume any exposure related to nonperformance by its customers. If any transactions do not settle, the Company may incur a loss if the market value of the security is different from the contract value of the transaction.

The Company monitors its customer activity by reviewing information it receives from its clearing correspondent on a daily basis, requiring customers to deposit additional collateral, or reduce positions when necessary.

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

## Note 11-Regulatory Requirements

The Company is subject to the Securities and Exchange Commission Uniform Net Capital 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 15 to 1. At December 31, 2021, the Company had net capital of \$243,707,128 which was \$242,632,126 in excess of the required minimum net capital of \$1,075,002. The Company's net capital ratio was 0.07 to 1.

The Company does not carry the accounts of its customers, and accordingly, is exempt from SEC Rule 15c3-3.

## Note 12-Subsequent Events

In accordance with U.S. GAAP, the Company evaluates subsequent events that have occurred after the statement of financial condition date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence about conditions that existed at the date of the statement of financial condition, including estimates inherent in the process of preparing financial statements, and (2) nonrecognized, or those that provide evidence about conditions that did not exist at the date of the statement of financial

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