# SCF SECURITIES, INC. X-17A-5 (2024-04-01) — Broker-dealer annual report - Company: SCF SECURITIES, INC. - Form: X-17A-5 - Filed: 2024-04-01 - Period: 2023-12-31 - Accession: 0001085538-24-000001 - CIK: 1085538 - File #: 8-51760 - Type: Broker-dealer - Material weakness: No - Auditor: Citrin Cooperman & Company, LLP - Auditor location: New York, NY - Contact: Layne Meadows - Phone: 800-955-2517 - Signed by: Layne Meadows (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1085538/000108553824000001/SCFS_Public_SEC2023b.pdf --- {0}------------------------------------------------ SCF SECURITIES, INC. FINANCIAL STATEMENT WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THEREON DECEMBER 31, 2023 This report is filed in accordance with Rule 17a-5(e)(3) under the Securities Exchange Act of 1934 as a PUBLIC DOCUMENT. {1}------------------------------------------------ ![](_page_1_Picture_0.jpeg) {2}------------------------------------------------ # SCF SECURITIES, INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2023 | SCF SECURITIES, INC.
STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 2023
ASSETS | | |-----------------------------------------------------------------------------------------------------|-------------------| | Cash and cash equivalents | \$
1,355,101 | | Commissions receivable | 583,811 | | Due from clearing broker | 185,113 | | | | | Other receivables
Clearing deposit with broker | 57,509
50,000 | | | | | Due from affiliates | 1,660,770 | | Other assets
Deferred tax assets | 269,937
63,158 | | | | | TOTAL ASSETS | \$
4,225,399 | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | LIABILITIES | | | Accounts payable and accrued expenses | \$
1,036,218 | | Due to affiliates | 103,032 | | Commissions payable | 566,399 | | | | | TOTAL LIABILITIES | 1,705,649 | | Commitments and contingencies (Note 6) | | | STOCKHOLDER'S EQUITY | | | Common stock, \$0.01 par value, 1,000,000 shares authorized,
2,000 shares issued and outstanding | 560 | # LIABILITIES AND STOCKHOLDER'S EQUITY # LIABILITIES | LIABILITIES AND STOCKHOLDER'S EQUITY | | | |-----------------------------------------------------------------------------------------------------|-----------------|--| | LIABILITIES | | | | | | | | TOTAL LIABILITIES | 1,705,649 | | | Commitments and contingencies (Note 6)
STOCKHOLDER'S EQUITY | | | | Common stock, \$0.01 par value, 1,000,000 shares authorized,
2,000 shares issued and outstanding | 560 | | | Additional paid-in capital | 738,037 | | | Retained earnings | 1,781,153 | | | TOTAL STOCKHOLDER'S EQUITY | 2,519,750 | | | TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | \$
4,225,399 | | | | | | The accompanying notes are an integral part of this financial statement. {3}------------------------------------------------ # SCF SECURITIES, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2023 # NOTE 1. ORGANIZATION AND NATURE OF BUSINESS SCF Securities, Inc. (the "Company"), is a registered broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). The Company is a wholly owned subsidiary of SCF Holdings, Inc. ("Holdings"). Holdings is wholly owned by the Company's ultimate parent, Atria Wealth Solutions, Inc. ("AWSI"). The Company's principal office is located in San Diego, California. The Company has registered representatives located throughout the United States, and the Company provides broker-dealer services for independent registered representatives as an introducing broker-dealer, clearing customer transactions through another broker-dealer on a fully disclosed basis. Cash equivalents consist of highly liquid investments with original maturities of # NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ## Cash and cash equivalents less than ninety days that are not held for sale in the ordinary course of business. # Basis of presentation and use of estimates The preparation of a financial statement in conformity with accounting principles generally accepted in the United States of America ("US GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ## Revenue recognition The Company records commissions for the sale of insurance, mutual funds, variable annuity products and other securities as such commissions are earned. Refer to Note 3, Revenue from Contracts with Customers, for additional disaggregation of revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606. ## Securities transactions All securities transactions for the Company's customers are executed and cleared by other broker-dealers. Commissions are recorded on the trade date. The Company believes that the performance obligation is satisfied on the trade date 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. # Current Expected Credit Losses ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) introduced a credit loss methodology, Current Expected Credit Losses ("CECL"), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime "expected credit loss" measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The methodology replaced the multiple existing impairment methods in current US GAAP, which generally required that a loss be incurred before it is recognized. {4}------------------------------------------------ # SCF SECURITIES, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2023 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For financial assets measured at amortized cost (e.g. cash and cash equivalents and receivables from clients), the Company has concluded that there are de minimus expected credit losses based on the nature and contractual life or expected life of the financial assets and immaterial historic and expected losses. # Commissions and other receivables Commissions and other receivables are stated at the amounts the Company expects to collect. The Company considers accounts receivable to be fully collectible. The determination of the amount of credit losses is based on the estimated creditworthiness of the counterparty and the length of time a receivable has been outstanding. Other factors are considered by management based on relevant information about past events, current conditions and reasonable supportable forecasts as deemed necessary on a transaction-by-transaction basis. The Company continually monitors these estimates over the life of the receivable. The allowance for uncollectible accounts reflects the amount of loss that can be reasonably estimated by management. No allowance for credit losses were recorded as of December 31, 2023. The Company had receivables related to revenues from contracts with customers of \$583,811 at December 31, 2023 and \$579,841 at December 31, 2022. The Company had no liabilities related to contracts with customers at December 31, 2023 and December 31, 2022, respectively. ## Income taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the difference are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts that are more likely than to be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgement occurs. # NOTE 3. CONCENTRATIONS OF CREDIT RISK The Company is engaged in various trading and brokerage activities in which counterparties primarily include broker-dealers 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. Asset balances that potentially subject the Company to concentrations of credit risk consist principally of cash accounts in financial institutions that periodically exceed federally insured limits. At December 31, 2023, the amount in cash accounts exceeding federally insured limits was approximately \$1,104,751. {5}------------------------------------------------ # SCF SECURITIES, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2023 NOTE 4. AGREEMENT WITH CLEARING BROKER AND 15c3-3 EXEMPTION The Company, under Securities and Exchange Act ("Act") Rule 15c3-3(k)(2)(ii), is exempt from the reserve and possession or control requirements of Rule 15c3-3 of the Securities and Exchange Commission. The Company does not carry or clear customer accounts. Accordingly, all customer transactions are executed and cleared on behalf of the Company by its clearing broker on a fully disclosed basis. The Company's agreement with its clearing broker provides that as clearing broker, that firm will make and keep such records of the transactions effected and cleared in the customer accounts as are customarily made and kept by a clearing broker pursuant to the requirements of Rules 17a-3 and 17a-4 of the Act. The clearing broker also performs all services customarily incidental thereto, including the preparation and distribution of customers' confirmations and statements and maintenance margin requirements under the Act and the rules of the Self-Regulatory Organizations of which the Company is a member. The clearing agreement requires the Company to maintain a deposit of \$50,000 with the clearing broker. Such amount bears interest at current market rates. The Company's other business activities are contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 and are limited to effecting securities transactions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company, and the Company (1) does not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, and (2) does not carry accounts of or for customers; and (3) does not carry PAB accounts (as defined in Rule 15c3-3). # NOTE 5. INCOME TAXES The Company reports its income taxes as part of a consolidated federal income tax return filed by AWSI. Federal, state, and local income taxes are calculated as if the companies filed on a separate return basis, and the amount of current tax or benefit calculated is either remitted to or received from AWSI. The amount of current and deferred taxes payable or refundable is recognized as of the date of the financial statement, utilizing currently enacted tax laws and rates. Deferred tax expenses or benefits are recognized in the financial statement for the changes in deferred tax liabilities or assets between years. At December 31, 2023, the Company had a current tax liability of \$544,566 which is included in accounts payable and accrued expenses on the Statement of Financial Condition. The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Accounting for Income Taxes. Current income taxes are provided for estimated taxes payable or refundable based on tax returns filed on the accrual basis of the accounting. Under the asset and liability method of FASB ASC Topic 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences or benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. {6}------------------------------------------------ # SCF SECURITIES, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2023 # NOTE 5. INCOME TAXES (CONTINUED) The Company is required to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any tax related appeals or litigation processes, based on the technical merits of the position. The Company is not subject to income tax return examinations by major taxing authorities for years before 2020. The tax benefit recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized results in the Company recording a tax liability that reduces net assets. \$ 104,764 However, the Company's conclusions regarding this policy may be subject to reviews and adjustments at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The Company's deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2023 are as follows: | be sustained upon examination by the applicable taxing authority, including resolution
of any tax related appeals or litigation processes, based on the technical merits of the
position. The Company is not subject to income tax return examinations by major
taxing authorities for years before 2020. The tax benefit recognized is measured as
the largest amount of benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement. De-recognition of a tax benefit previously recognized results | | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|--| | in the Company recording a tax liability that reduces net assets. | | | | However, the Company's conclusions regarding this policy may be subject to reviews
and adjustments at a later date based on factors including, but not limited to, on-going
analyses of and changes to tax laws, regulations and interpretations thereof. | | | | The Company's deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 2023 are as | | | | Noncurrent deferred tax assets: | | | | Accrued Liabilities | \$
104,764 | | | Total deferred tax assets | 104,764 | | | Noncurrent deferred tax liabilities: | | | | Fixed assets | (2,976) | | | Prepaid insurance | (29,484) | | | Prepaid expenses | (9,146) | | | Net noncurrent deferred tax liabilities | (41,606) | | | Net deferred tax asset (liability) | \$
63,158 | | | Management has analyzed the Company's recorded tax benefits and concluded that
each material position satisfied the required recognition and measurement threshold
for inclusion within the financial statement. Consequently, the Company has not | | | Management has analyzed the Company's recorded tax benefits and concluded that each material position satisfied the required recognition and measurement threshold for inclusion within the financial statement. Consequently, the Company has not recorded any reserve for any uncertain tax positions and does not believe that a significant change will occur within the coming year as to any uncertain tax positions. To the extent that a deferred tax asset is determined to be less than more likely than not to be realized, a valuation allowance is recorded. Management has determined that a valuation allowance is not required for any of its deferred tax assets. In the event the Company is charged interest or penalties related to income tax matters, the Company would record such interest as income tax expense and would record such penalties as other expenses. {7}------------------------------------------------ # SCF SECURITIES, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2023 NOTE 6. COMMITMENTS AND CONTINGENCIES #### Leases The Company had one operating lease for its main office that expired on June 30, 2023. The Company's employees have shifted to a fully remote workforce strategy, and we expect to continue operating in a remote environment for the foreseeable future. #### Indemnification The Company functions as an introducing broker that places and executes customer orders. The orders are then settled by an unrelated clearing organization that maintains custody of customers' securities and provides financing to customers. Through indemnification provisions in agreements with the Company's clearing broker, customer activities may expose the Company to off-balance-sheet credit risk. Financial instruments may have to be purchased or sold at prevailing market prices in the event a customer fails to settle a trade on its original terms or in the event cash and securities in a customer's margin account is not sufficient to fully cover that customer's obligations. The Company seeks to control the risks associated with customer activities through customer screening and selection procedures, as well as through requirements on customers to maintain margin collateral with the clearing broker in compliance with various regulations and clearing organization policies. # Litigation In the normal course of business, the Company may be a party to litigation or other regulatory matters. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company's financial statement. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. c ert ain ex pens es wh ich are init ially paid by the Company are allocated From time to time the Company is involved in various inquiries by regulatory agencies, claims and litigation. In the opinion of management, following consultation with legal counsel, the ultimate liability of disposition thereof is not expected to have a material adverse effect on the financial condition, results of operations, or liquidity of the Company as of the year ended December 31, 2023. # NOTE 7. RELATED-PARTY TRANSACTIONS Pursuant to an expense sharing agreement ("SCF Affiliate Arrangement") with affiliated organizations ("Holdings Affiliates") which are commonly owned by Holdings, monthly to Holdings Affiliates. In addition to the SCF Affiliate Arrangement, the Company is party to other business transactions that create additional intercompany balances with Holdings Affiliates. At December 31, 2023, the Company has a receivable of \$1,573,011 from Holdings Affiliates which is included in due from affiliates on the Statement of Financial Condition. {8}------------------------------------------------ # SCF SECURITIES, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2023 NOTE 7. RELATED-PARTY TRANSACTIONS (CONTINUED) Pursuant to a Shared Services Agreement ("Parent Agreement") with AWSI, the Company pays for services provided by certain employees of AWSI which benefit the Company. In addition to the Parent Agreement, the Company is party to a separate Shared Services Agreement ("AWS Affiliate Agreement") by and among AWSI and its commonly owned broker-dealer affiliates (collectively, "AWS and Affiliates") in which AWSI has an equity interest. Pursuant to the AWS Affiliate Agreement, various operating expenses shared services and other pass-through costs are allocated by and among AWS and Affiliates to the Company, and these transactions include but were not limited to the settlement of passthrough costs from shared vendors. Similar to the AWS Affiliate Agreement, the Company is party to a Shared Services Agreement with CFS Insurance & Technology Services, LLC ("CITS"), a commonlyowned affiliate in which AWSI has an equity interest, in which shared expenses initially paid by CITS are allocated to the Company ("CITS Agreement"). At December 31, 2023, the Company has a payable of \$103,032 to AWSI and its commonly owned affiliates, which is included in Due to Affiliates in the accompanying Statement of Financial Condition. # NOTE 8. NET CAPITAL REQUIREMENT As a registered broker-dealer, the Company is subject to the SEC's Uniform Net Capital Rule ("SEC Rule15c3-1"), which requires the Company to maintain minimum net capital, as defined. Further, the rule requires that the ratio of aggregate indebtedness, as defined, to net capital shall not exceed 15 to 1. At December 31, 2023, the Company had net capital of \$404,439, which was \$290,729 in excess of its required net capital of \$113,710. The Company's percentage of aggregate indebtedness to net capital was 4.22 to 1 at December 31, 2023. ## NOTE 9. EMPLOYEE 401(k) RETIREMENT PLAN The Company has a qualified 401(k) retirement plan ("Plan") with an employer matching contribution provision covering all eligible employees as described in the Plan. ## NOTE 10. SUBSEQUENT EVENTS The Company evaluates events occurring after the date of the statement of financial condition for potential recognition or disclosure in its financial statement. On February 12, 2024, AWSI entered into a definitive purchase agreement to be acquired by LPL Financial LLC. FINRA approval is anticipated to be completed in the late third quarter or early fourth quarter of 2024. The Company did not identify any additional material subsequent events requiring adjustment to or disclosure in its financial statement. The Company evaluated subsequent events through April 1, 2024, which is the date the financial statement was issued. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.