# PARETO SECURITIES INC. X-17A-5 (2020-02-28) — Broker-dealer annual report - Company: PARETO SECURITIES INC. - Form: X-17A-5 - Filed: 2020-02-28 - Period: 2019-12-31 - Accession: 0001054877-20-000001 - CIK: 1054877 - File #: 8-50796 - Material weakness: No - Auditor: RGNC&S Certified Public Accountants, PLLC - Auditor location: Woodbury, NY - Contact: Saule Sundetova - Phone: 212-751-4422 - Signed by: Antonella Spaventa (CEO & CCO) Original filing: https://www.sec.gov/Archives/edgar/data/1054877/000105487720000001/Pareto2019Short.pdf --- {0}------------------------------------------------ PARETO SECURITIES INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 {1}------------------------------------------------ | UNITED ST ATES | | | | |----------------|------------------------|------------------------------------|--| | | | SECURITIES AND EXCHANGE COMMISS10N | | | | Washington, D.C. 20549 | | | | | hours per response ••• 12.00 | | |-------------|------------------------------|-----------| | | Estlmaled average burden | | | | Expires: August 31, 2020 | | | OMBNumbtlr: | | 3235-0123 | | | | | # **ANNUAL AUDITED REPORT FORM X-17 A-5 PART Ill** # 8- 50796 # FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING | 01/01/2019 | AND ENDING | 12/31/2019 | | |---------------------------------------------------------------------------|----------------------------------------------------------|------------|-----------------------------|--| | | ~~~~~~~~~~~~
MM/DD/YYYY | | -~~~~~~~~~~
MM/DDNYYY | | | | A. REGISTRANT lD 1NTlFICATION | | | | | NAME OF BROKER-DEALER: | | | OFFICIAL USE ONLY | | | PARETO SECURITIES INC. | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM ID. NO. | | | | 150 EAST 52ND STREET, 29TH FLOOR | | | | | | {No. und Street) | | | | | NEW YORK | NY | | 10022 | | | (Citv) | (Slate) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT JN REGARD TO THIS REPORT | | | | | | ANTONELLA SPAVENTA | | | (212) 829-4200 | | | | | | (Area Code --Telephone No.) | | | | B. ACCOUNT ANT IDENTIFlCATION | | | | | INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report* | | | | | | RGNC&S Certified Public Accountants, PLLC | | | | | | | (Name -- if individual, state /a!!I, first. middle name) | | | | | 97 Froehlich Farm Blvd. | Woodbury | NY | 11797 | | | | IC'i1yl | (Stntt) | | | | CHECK ONE:
l!l Certified Public Accountant
D
Public Accountant | | | | | | 0
Accountant not resident in United States or any of its possessions | | | | | | | | | | | *\*Claims for exemption from the req11lremenl that the annual report be covered by the opinion of an indepe11de11t public accountant must be supported by a statement o.f facts and circumstances retied* 011 *as the basis for the e.xernption. See section 240. I 7a-5(e)(2).* > Potentlal 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 OMS control number. SEC 1410 (06-02) {2}------------------------------------------------ #### **OATH OR** AFFIRMATION | I, | , swear (or affirm) that, to the
ANTONELLA SPAVENTA | |----------|-------------------------------------------------------------------------------------------------------------------------------------| | | best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the finn of | | | , as of
PARETO SECURITIES INC. | | | , arc true and correct. I further swear (or affirm) that neither the company
December 31 , 2019 | | | nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of | | | a customer, except as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | This report"'* contains (check all applicable boxes): | | | ~ (a) Facing page. | | l!J
0 | (b) Statement of Financial Condition. | | 0 | (
c) Statement of Income (Loss). | | 0 | (d) Stntement ofChnnges in Financial Condition. | | D | (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. | | | (t) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | D | (g) Computation of Net Capital. | | 0 | (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. | | D | (i) Infonnation Relating to the Possession or control Requirements Under Rule 15c3-3. | | 0 | (j) A Reconciliation, including appropriate explanation, of the Computation of Net Capital Under Rule 15c3-1 and the | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | D | (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of con | | | solidation. | | | @ (I) An Oath or Affirmation. | | | (m) A copy of the SJPC Supplemental Report. | | | (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | | D | (o) Exemption report | | | | {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) Mark C. Goldberg, CPA Mark Raphael, CPA Florio Somii-Nikpour, CPA Allan B. Cohen, CPA Michael R. Sullivan, CPA Anita C. Jacobsen, CPA Founding Partner: Melvin Goldberg, CPA # **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Stockholders of Pareto Securities, Inc. # **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Pareto Securities, Inc. (the "Company") as of December 31, 2019, and the related notes to the financial statement. In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of Pareto Securities, Inc. as of December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. ## **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial 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. Raphael Goldberg Nikpour Cohen & Sullivan Certified Public Accountants PLLC We have served as the Company's auditors since 2016 Woodbury, New York February 28, 2020 {4}------------------------------------------------ ## PARETO SECURITIES INC. ST A TEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 ## ASSETS | Cash and cash equivalents | \$ | 5,816,465 | |------------------------------------------------------------|----|-------------| | Due from brokers | | 385,292 | | Fails to deliver | | 315,823 | | Receivable from customers | | 27,050 | | Furniture, equipment and improvements, (net of accumulated | | | | depreciation and amortization of\$1,389,901) | | 101,208 | | Prepaid taxes | | 4,085 | | Deferred tax asset | | 1,466,438 | | Security deposits | | 354,435 | | Operating lease right of use assets | | 2,144,263 | | Finance lease right of use assets | | 48,878 | | Other assets | | 60,782 | | TOT AL ASSETS | \$ | 10,724!719 | | LIABTLITTES & STOCK HOLD · R'S EOUTTY | | | | Liabilities: | | | | Fails to receive | \$ | 27,050 | | Payable to customers | | 315,823 | | Accounts payable and other liabilities | | 1,639,994 | | Payable to affiliates | | 276,317 | | Operating lease liabilities | | 2,274,428 | | Finance lease liabilities | | 48,878 | | TOT AL LIABILITIES | | 4,582,490 | | Liabilities subordinated to claims of general creditors | | 3,918,000 | | Stockholder's Equity: | | | | Common stock, par value \$1 per share; 500,000 shares | | | | authorized; 360,000 shares issued and outstanding | | 360,000 | | Additional paid-in capital | | 4,044,054 | | Accumulated earnings/( deficit) | | (2,179,825) | | TOT AL STOCKHOLDER'S EQUITY | | 2,224,229 | | TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | \$ | 10,724,719 | The accompanying notes are an integral part of this statement of financial condition. {5}------------------------------------------------ ## NOTE 1 BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES #### Business Pareto Securities Inc. (F/K/A Nordic Partners, Inc.) (the "Company") was incorporated in October 1997. On June 12, 2009, Pareto Securities AS (the "Stockholder") acquired all the shares of common stock in Nordic Partners, Inc. and changed the Company's name to Pareto Securities, Inc. The Company was registered with the Financial Industry Regulatory Authority, Inc. ("FJNRA") in November 1998 and operates as a broker/dealer registered with the Securities and Exchange Commission (the "SEC"). The business of the Company consists of the purchase and sale of publicly and privately traded Swedish, Finnish, and Norwegian corporate equity and debt securities for U.S. institutional customers. The Company has SEC Rule 15a-6 business agreements in place with Pareto Securities AS in Oslo, Norway, Pareto Securities AB, Stockholm Sweden, Pareto Securities Ltd, London and Pareto Securities Pte Ltd, Singapore. They are unregistered foreign broker-dealers who are not members of SIPC. The Company has clearing agreements with all its clearing agents. Domestic security transactions are cleared and carried through a U.S. clearing agent on a fully-disclosed basis. The U.S. clearing agent also performs record keeping functions and consequently, the Company operates under the (k)(2)(i) exemptive provisions of SEC Rule 15c3-3. The Company clears all foreign security transactions through its foreign clearing agents on an RVP/DVP basis. The Company does not hold customer funds or securities. ### Use of estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. #### Securities transactions The Company buys and sells securities on behalf of its customers. Each time a customer enters into a buy or sell transaction, the Company charges a commission. Commissions and related clearing expenses are recorded on the trade date. 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 agreed upon and the risks and rewards of ownership have been transferred to/from the customer. #### Fee income Fee income consists of consulting services and private placement fee income. Fee income and expenses are recorded on the accrual basis of accounting and recognized when the performance obligations have been satisfied. Income from private placement fees originates from transactions whereby the Company acts as a placement agent and is recognized on the closing date under the terms of the relevant agreement when the underlying transaction is completed. {6}------------------------------------------------ # NOTE 1 BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) # Advisory income Income from advisory fees includes success fees as well as retainers and client service fees earned for advising on transactions. Revenue for advisory arrangements is generally recognized at the point in time that performance under the arrangement is completed or the contract is cancelled. In certain instances, advisory fees are recognized over time when certain performance obligations are simultaneously provided by the Company and consumed by the customer based on the terms of the contract. Retainers and other fees received from customers prior to recognizing revenue are reflected as deferred revenue. ## Furniture. equipment, and improvements Furniture, equipment, and improvements are stated at cost. Depreciation provided on a straight-line basis over estimated useful lives of three to fifteen years. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the term of the lease. ## a h and cash equiva lents The Company considers highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. #### Income taxes The Company accounts for income taxes pursuant to the asset and liability method, which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities, that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision is the tax payable or refundable for the period in deferred tax assets and liabilities. The Company has determined that there are no uncertain tax positions which require adjustments or disclosure on the financial statements. The tax years that remain subject to examination by taxing authorities are 2015, 2016 and 2017. ### Fair value measurement FASB ASC 820, Fair Value Measurement has no material effect on these financial statements. {7}------------------------------------------------ #### NOTE2 RELATED PARTY TRANSACTIONS The Company enters into transactions with its Stockholder and its stockholder's subsidiaries in the normal course of business. Included in the financial statements is the following transaction with the Stockholder as of and for the year ended December 31, 2019: | Subordinated loans (Note 4) | :s
3.918.000 | |------------------------------|-----------------| | Commissions | 4.103.433
\$ | | Clearing and settlement fees | \$
860.614 | | Interest expense | \$
195.900 | The Company bears foreign currency risk on fee income derived from the Stockholder and the stockholder's subsidiaries. #### NOTE3 40l(k) PLAN The Company has a defined contribution 401 (k) plan (the "Plan"), with a I 00% employer match, covering all eligible employees, as defined. #### NOTE4 LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS At December 31, 2019, the Company has subordinated loans with its Stockholder as follows: | Amount | Interest
Rate | Date of Original
Subordination Agreement | Date Due | |---------------|------------------|---------------------------------------------|--------------------| | \$
850,000 | 5% | November 24, 1998 | December 31, 2021 | | 850,000 | 5% | November 24, 1998 | December 31, 2021 | | 850,000 | 5% | December 31, 1998 | December 31, 2021 | | 800,000 | 5% | August 28, 2001 | December 31, 2021 | | 568.000 | 5% | November 1, 2004 | December 3 J, 2021 | ## U,2 18,0QQ The subordinated borrowings are available in computing net capital under the SEC's Uniform Net Capital Rule (see Note 5). To the extent that such borrowings are required for the Company's continued compliance with minimum net capital requirements, they may not be repaid. These financial statements and schedules are deemed confidential pursuant to subparagraph (e)(3) of Rule 17a-5 of the Securities Exchange Commission. {8}------------------------------------------------ #### NOTE5 NET CAPITAL REQUIREMENT The Company is subject to the SEC Uniform Net Capital Rule (Rule l 5c3-l) which requires the maintenance of minimum net capital, as defined. The Company computes its net capital under the alternative method permitted by the net capital rule, which requires that minimum net capital shall not be less than the greater of \$250,000 or 2% of aggregate debit items arising from customer transactions. At December 31, 2019, the Company has net capital of \$4, 101,883, which was \$3,851,883 in excess of its required net capital of \$250,000. #### NOTE6 LEASE COMMITMENTS The Company have several obligations as a lessee for office space, and equipment with initial non-cancellable terms in excess of one year. The Company classified all its office space leases as operating, and equipment lease as financing leases respectively. The Company's leases do not include termination options for either party to the lease or restrictive financial or other covenants. As of December 31, the Company is not reasonably certain it will be exercising any available options to renew any of its operating or financing lease agreements. The Company is leasing premises at 150 East 52nd Street in New York City under an operating lease agreement that expires on August 3 I, 2026. The Company signed an amendment to the lease which commenced on May 1 · 2019. The first four months of rent under the amended lease have been abated and are being amortized over the life of the lease. The lease is subject to escalations for the increases in the Company's pro rata share of real estate taxes and other operating expenses. On April 7, 2015 the Company entered into a lease agreement for 8 Greenway Plaza, Suite 818, Houston, Texas with the lease commencing on April 6, 2015, expiring June 30, 2021. On April 25, 2018 the Company entered into a lease agreement for 620 Newport Center Drive, Suite 22, Newport Beach, California with the lease commencing on June 1, 2018, expiring May 31, 2019. {9}------------------------------------------------ # PARETO SECURITIES INC. NOTES TO STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 (continued) #### NOTE6 LEASE COMMITMENTS (continued) Maturities of lease liabilities under noncancellable operating leases as of December 31, 2019 are as follows: | ,.
415,552
384,540
31,012
2020
,.
400,336
384,540
15,796
2021
,. | | |------------------------------------------------------------------------------------------------|---------| | | | | | | | 2022
393,965
,. | 393,965 | | 412,815
412,815
2023
,. | | | 412,815
2024
412,815
,. | | | 412,815
2025
412,815
,. | | | 275,210
275,210
2026 | | | (449,079.90)
Less Imputed Interest
{ 447,088.63)
{l,991.272 | | | 44,817
\$ 2,274,428
Lease Liability
\$ 2,229,611
\$ | | Maturities of lease liabilities under finance lease as of December 31, 2019 are as follows: | Year Ending
December 31 | Konica
Equipment | | | |----------------------------|---------------------|------------|--| | 2020 | ,.
,. | 25,070 | | | 2021 | | 25,070 | | | Less Imputed Interest | | (1,262.34) | | | Lease Liability | \$ | 48,878 | | The Company had no underwriting commitments, no contingent liabilities and had not been named as defendant in any lawsuit at December 31, 2019 or during the year then ended. {10}------------------------------------------------ # PARETO SECURITIES INC. NOTES TO STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 (continued) NOTE7 FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK, AND CONCENTRATION OF CREDIT RISK > In the normal course of business, the Company's securities activities involve the execution, clearance, and settlement of various transactions with its clearing brokers (the principal clearing broker is the Stockholder). These securities activities are transacted on a delivery or receipt versus payment basis and the Company reports such transactions on a trade date basis. The Company is exposed to risk of Joss on these securities transactions in the event the counterparty fails to satisfy its obligations in which case the Company may be required to purchase or sell financial instruments at prevailing market prices in order to fulfill the counter-party's obligations. All transactions that were carried out before December 31, 2019 pending settlement subsequently settled at transacted amounts. > The Company maintains cash deposits with banks and brokers. At times, such deposits exceed applicable insurance limits. The Company reduces its exposure to credit risk by maintaining such deposits with major financial institutions and monitoring their credit ratings. #### NOTES GUARANTEES F ASB ASC 460, *Guarantees,* requires the Company to disclose information about its obligations under certain guarantee arrangements. F ASB ASC 460 defines guarantees as contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying value (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or nonoccurrence of a specified event) related to an asset, liability, or equity security of a guaranteed party. This guidance also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement, as well as indirect guarantees of the indebtedness of others. The Company has issued no guarantees effective at December 31, 2019 or during the year then ended, except as described in Note 7 above. #### NOTE9 SUBSEQUENT EVENTS Subsequent events have been evaluated and no events have been identified which require disclosure. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.