# SAFRA SECURITIES LLC X-17A-5 (2021-02-26) — Broker-dealer annual report - Company: SAFRA SECURITIES LLC - Form: X-17A-5 - Filed: 2021-02-26 - Period: 2020-12-31 - Accession: 0001090474-21-000002 - CIK: 1090474 - File #: 8-51935 - Material weakness: No - Auditor: Deloitte & Touche - Auditor location: New York, NY - Contact: Ana Manning - Phone: 212-704-9323 - Signed by: Steven Paraggio & Ana Manning (Chief Financial Officer & Financial Operations Principal) Original filing: https://www.sec.gov/Archives/edgar/data/1090474/000109047421000002/SSLAuditStmtFinCondPublic.pdf --- {0}------------------------------------------------ SAFRA SECURITIES LLC (SEC. I.D. No. 8-51935) #### STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2020 AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM \*\*\*\*\*\* Filed pursuant to Rule 17a-5(e)(3) under the Securities Exchange Act of 1934 as a Public Document {1}------------------------------------------------ OMB APPROVAL UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 #### ANNUAL AUDITED REPORT FORM X-17A-5 PART III #### 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 | | 01/01/20 | AND ENDING | 12/31/20 | |--------------------------------------------------------------------------|---------------------------------------------------------------------|------------------------------------------------------|------------|-----------------------------------| | | | MM/DD/YY | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | NAME OF BROKER-DEALER: | | | | | | Safra Securities LLC | | | | OFFICIAL USE ONLY
FIRM ID. NO. | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | | | | 546 Fifth Avenue | | | | | | | (No. and Street) | | | | | New York | | New York | | 10036 | | (City) | | (State) | | (Zip Code) | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | | | | Ana Manning | | | | (212) 704-9323 | | | | | | (Area Code-Telephone No.) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | Deloitte & Touche LLP | | | | | | | | (Name-if individual, state last, first, middle name) | | | | 30 Rockefeller Plaza | New York | | NY | 10112-0015 | | (Address) | (City) | | (State) | (Zip Code) | | CHECK ONE: | | | | | | Certified Public Accountant
× | | | | | | Public Accountant | | | | | | | | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | \* Claims for exemption from the requirement that the annual report be covered by the opinion of an independent m must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See section 240.17a-5(e)(2) SEC 1410 (06-02) Potential 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 OMB control number. OMB Number: 3235-0123 Expires: October 31, 2023 Estimated average burden hours per response . . . . 12.00 | SEC FILE NUMBER | | |-----------------|--| | 8-51935 | | {2}------------------------------------------------ ### OATH OR AFFIRMATION We, Steven Paraggio and Ana Manning, affirm that, to the best of our knowledge and belief, the accompanying statement of financial condition pertaining to Safra Securities LLC (the "Company") as of December 31, 2020, is true and correct. We further affirm that neither the Company nor any principal officer or director has any proprietary interest in any account classified solely as that of a customer. | S/ Ana Manning | 2/26/2021 | |----------------------------------|-----------| | Financial & Operations Principal | Date | | S/ Steven Paraggio | 2/26/2021 | | Chief Financial Officer | Date | State of New York County of New York Subscribed and sworn to before me this Notary Public NOTE: Based upon the statement issued by the staff of the Division of Trading and Markets of the U.S. Securities and Exchange Commission on June 18, 2020, titled "Updated Division of Trading and Markets Staff Statement Regarding Requirements for Certain Paper Submissions in Light of COVID-19 Concerns", and difficulties arising from COVID-19, the Company is making this filing without a notarization. {3}------------------------------------------------ # SAFRA SECURITIES LLC ## TABLE OF CONTENTS | | This report contains **(check all applicable boxes): | Page | |-----------|------------------------------------------------------------------------------------------------------|------| | (x) | Report of Independent Registered Public Accounting Firm. | 1 | | (x) (a) | Facing Page. | | | (x) (b) | Statement of Financial Condition. | 2 | | ( ) (c) | Statement of Income. | | | ( ) (d) | Statement of Cash Flows. | | | ( ) (e) | Statement of Changes in Member's Capital. | | | ( ) (t) | Statement of Changes in Liabilities Subordinated to Claims | | | | of General Creditors (Not Applicable). | | | (x) | Notes to Statement of Financial Condition | 3-11 | | ( ) | (g) Computation of Net Capital for Brokers and Dealers Pursuant to | | | | Rule 15c3-1 under the Securities Exchange Act of 1934. | | | | ( ) (h) Computation for Determination of Reserve Requirements | | | | for Brokers and Dealers Pursuant to Rule 15c3-3 | | | | under the Securities Exchange Act of 1934. | | | | ( ) (i) Information Relating to the Possession or Control Requirements | | | | for Brokers and Dealers Pursuant to Rule 15c3-3 under the | | | | Securities Exchange Act of 1934. | | | | ( ) (j) A Reconciliation, including Appropriate Explanations, | | | | 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 | | | | (Not Required). | | | | ( ) (k) A Reconciliation Between the Audited and Unaudited Statements | | | | of Financial Condition with Respect to Methods of | | | | Consolidation (Not Applicable). | | | (x) (l) | An Oath or Affirmation. | | | | ( ) (m) A Copy of the SIPC Supplemental Report (filed separately). | | | | ( ) (n) A Report Describing the Existence of Internal Control over Compliance with the Financial | | | | Responsibility Rules and the Broker-Dealers's Compliance with the Financial Responsibility | | | | Rules ("the Compliance Report") and Report of Independent Registered Public Accounting Firm | | | | Thereon (filed separately). | | \*\* For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). {4}------------------------------------------------ **Deloitte & Touche LLP** 30 Rockefeller Plaza New York, NY 10112-0015 USA Tel: +1 212 489 1600 Fax: +1 212 489 1687 www.deloitte.com #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Member of Safra Securities LLC #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Safra Securities LLC (the "Company") as of December 31, 2020, and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit of the financial statement provides a reasonable basis for our opinion. February 26, 2021 We have served as the Company's auditor since 2000. {5}------------------------------------------------ # SAFRA SECURITIES LLC #### STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2020 ### ASSETS | Cash and cash equivalents
Cash and securities required to be segregated under federal or other regulations
Cash and securities deposited with clearing organizations
Securities borrowed
Receivable from brokers, dealers and clearing organizations
Receivable from customers
Securities owned - at fair value (including securities pledged as collateral of \$59,448,739)
Other assets | A | 129,580,599
40,352,525
83,812,636
2,877,300
1,603,038
3,525,159
59,448,739
2,568,292 | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|-----------------------------------------------------------------------------------------------------------| | TOTAL ASSETS | | 323,768,288 | | LIABILITIES AND MEMBER'S CAPITAL | | | | LIABILITIES:
Payable to customers
Payable to brokers, dealers and clearing organizations
Accrued expenses and other liabilities
Due to Parent and affiliate
Total liabilities | ਦੇ ਰੋ | 93,632,731
5,592,170
4,991,110
1,853,780
106,069,791 | | COMMITMENTS AND CONTINGENT LIABILITIES (Note 12) | | | | MEMBER'S CAPITAL | | 217,698,497 | | TOTAL LIABILITIES AND MEMBER'S CAPITAL | | 323,768,288 | See accompanying notes to statement of financial condition. {6}------------------------------------------------ #### 1. ORGANIZATION AND NATURE OF OPERATIONS Safra Securities LLC (the "Company") is a single member Delaware Limited Liability Company and a wholly owned subsidiary of Safra National Bank of New York (the "Bank" or the "Parent") and disregarded as an entity separate from the Bank for income tax purposes. The Company is registered with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA") and the Municipal Securities Rulemaking Board ("MSRB"). The Company's business includes providing foreign and domestic securities brokerage services to its customers. The Company also engages in proprietary investments. The Company clears and settles securities transactions and accordingly carries security accounts for customers and is subject to the requirements of Customer Protection Rule 15c3-3 ("Rule 15c3-3") and Net Capital Rule 15c3-1 ("Rule 15c3-1") under the Securities Exchange Act of 1934. #### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The Company maintains its accounts and prepares its statement of financial condition in accordance with accounting principles generally accepted in the United States of America (hereinafter referred to as "generally accepted accounting principles" or "U.S. GAAP"). Use of Estimates in the Preparation of Statement of Financial Condition - The preparation of the accompanying statement of financial condition in conformity with U.S. 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 statement of financial condition. Significant accounting estimates reflected in the Company's statement of financial condition include the measurement of fair value of the Company's securities owned. Management believes that the estimates utilized in the preparation of the statement of financial condition are prudent and reasonable based on the best available information. Actual results could be materially different from those estimates. Cash and Cash Equivalents - The Company has defined cash equivalents as highly liquid investments, with original maturities of three months or less that are not segregated and on deposit for federal or regulatory purposes. Cash and cash equivalents include deposits with banks and money market funds. Cash and Securities Required to be Segregated under Federal or Other Regulations - Cash and securities required to be segregated under federal or other regulations consists of non interest-bearing cash and U. S. Government securities held in a special reserve bank account pursuant to Rule 15c3-3. Cash and Securities Deposited with Clearing Organizations - The Company is a member of various clearing organizations at which it maintains cash and securities required for the conduct of its day-to-day clearance activities. Receivable from and Payable to Customers — Receivable from customers represents credit extended to customers to finance their purchases of securities on margin. The Company monitors margin levels and requires customers to deposit additional collateral, or reduce margin positions to meet minimum collateral requirements if the fair value of the collateral changes. Securities owned by customers, including those that collateralize margin or other similar transactions, are not reflected in the statement {7}------------------------------------------------ of financial condition. Payable to customers primarily represents deposits of customer cash, and also includes credits in customer accounts related to sales of securities and other funds pending completion of securities transactions. Customers' securities transactions are recorded on a settlement date basis. Receivable from and Payable to Brokers, Dealers and Clearing Organizations - Receivable from brokers, dealers and clearing organizations include amounts receivable for securities not delivered by the Company to a purchaser by the settlement date ("securities failed to deliver"), net receivables arising from unsettled trades, receivables from clearing organizations and commissions receivable. As of December 31, 2020 all receivables were collectible. Payable to brokers, dealers and clearing organizations include amounts payable for securities not received by the Company from a seller by the settlement date ("securities failed to receive") and payables due to clearing organizations. The Company presents securities failed to deliver/receive on a grossed up basis. Securities Borrowed and Loaned - Securities borrowed and securities loaned are recorded at the amount of cash collateral advanced or received. Deposits paid for securities borrowing transactions require the Company to deposit cash with the lender. With respect to deposits received for securities loaned the Company receives collateral in the form of cash in an amount generally in excess of the market value of the securities loaned. Interest income and interest expense are recorded on an accrual basis. The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded, as necessary. The Company did not have securities loaned at December 31, 2020. Securities Transactions - Securities owned are used in the Company's investment activities and are recorded at fair value in the statement of financial condition. Transactions in securities owned and securities sold, not yet purchased are recorded on a trade date basis. The Company did not have securities sold, not yet purchased at December 31, 2020. Goodwill and Other Intangible Assets - The Company is required to assess goodwill for impairment by comparing the estimated fair value of the reporting unit (currently one) with its carrying value on an annual basis (or more frequently when certain events or circumstances exist). If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the estimated fair value is less than the carrying value, further analysis is necessary to determine the amount of impairment, if any. Intangible assets with a definite life are amortized over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly to the Company's future cash flows. These assets are reviewed for impairment on an interim basis when certain events or circumstances occur or exist. Goodwill and other intangible assets are included in Other assets in the statement of financial condition. Translation of Foreign Currencies - Assets and liabilities denominated in foreign currencies are translated at year-end rates of exchange. Transactions denominated in foreign currency are accounted for at the exchange rates prevailing on the related transaction dates. Income Taxes - The Company accounts for income taxes in accordance with the provisions of ASC 740, which requires that an asset and liability approach be applied in accounting for income taxes and that deferred tax assets and liabilities be reflected for temporary differences using tax rates expected to be in effect when such differences reverse. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the statement of financial condition carrying amounts of existing assets and liabilities and their respective tax basis. In {8}------------------------------------------------ assessing the usability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The Company's results of operations as a disregarded entity are included in the Bank's federal, state and local tax returns which are then included in a consolidated combined return. Current and deferred taxes are allocated to the Company under the "separate-return" method. Under this method, the Company is assumed to file a separate return with the taxing authority, thereby reporting their taxable income or loss and paying the applicable tax to, or receiving the appropriate refund from, the Parent as if the Company was a separate taxpayer, except that net operating losses, if any, (or other current or deferred tax attributes) are characterized as realizable) by the Company when those tax attributes are realized (or realizable) by the consolidated federal/combined state/city tax return group even if the Company would not otherwise have realized the attributes on a stand-alone basis. Combined state apportionment factors are also utilized by the Company. Accrued income taxes are included in Due to Parent and affiliate or as a tax receivable in Other assets, as applicable, in the accompanying statement of financial condition. This method for allocating income tax expense, pursuant to this income tax allocation method is systematic, rational and consistent with the broad principles of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income Taxes. The Company recognizes tax positions in the statement of financial condition only when it is more likely than not that the position will be sustained upon examination by relevant taxing authorities based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the statement of financial condition including related interest and penalties. Fair Value of Financial Instruments — The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Financial instruments that the Company owns are measured at fair value using bid prices. Fair value measurements do not include transaction costs. Refer to Note 8 for further details of such financial instruments. As required by U.S. GAAP, the Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three broad levels of the fair value hierarchy are described below. #### Basis of Fair Value Measurements Level 1 Inputs - unadjusted quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Valuation of these assets and liabilities does not entail a significant degree of judgment. Level 2 Inputs - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Examples of financial instruments with such inputs include U.S. Agency securities, municipal bonds, corporate bonds. Level 3 Inputs - unobservable inputs for the asset or liability that rely on management's own assumptions which are assumptions that management determines market participants would use in pricing the asset or liability. The unobservable inputs should be developed based on the best information {9}------------------------------------------------ available in the circumstances and may include the Company's own data. An example of financial instruments with such inputs include certain mortgage-backed securities. Revenue Recognition-In accordance with the provisions of ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when it transfers promised services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. Trade execution and clearing services, when provided together, represent a single performance obligation as the services are not separately identifiable in the context of the contract. Each trade order represents a distinct performance obligation. 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 risks and rewards of ownership have been transferred to/from the customer. #### Recent Accounting Pronouncements Intangibles-Goodwill and Other-In January 2017, the FASB issued Accounting Standard Update ("ASU") No. 2017-04, Intangibles-Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment ("ASU No. 2017-04"). ASU No. 2017-04 outlines amendments to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. The amendments in this update are effective for public business entities for its annual or any interim goodwill imparment tests in fiscal years beginning after December 15, 2019. The amendments in this update should be applied prospectively and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this guidance on January 1, 2020 without a material impact on its statement of financial condition. Credit Losses-In June 2016, the FASB issued Accounting Standard Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amended the guidance on accounting for credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, which amends two areas of the new guidance. The new guidance is effective for the Company's interim and annual periods beginning January 1, 2020. The Company adopted this guidance on January 1, 2020 without a material impact on its statement of financial condition. Income Taxes- In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which modifies ASC 740. One section of this guidance clarifies ASC 740-10-30-27A in that legal entities that are not subject to tax, such as disregarded single member limited liability companies, are not required to include in their separate statement of financial condition, amounts of consolidated current and deferred taxes. An entity, however, may elect to allocate current and deferred tax expense from its consolidated parent entity in its stand-alone statement of financial condition, as long as the legal entity is not subject to tax and is disregarded by the taxing authority. The effective date of the ASU for public entities is for fiscal years beginning after December 15, 2020 but early adoption is permitted. The Company is a disregarded single member limited liability company for all taxing authorities and will continue to allocate the amount of current and deferred tax expense under the "separate-return" method. {10}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| | 5HFHLYDEOH | 3D\DEOH | |-----------------------------------------------------------------------------------------------------------------------------|--------------|--------------| | 6HFXULWLHVIDLOHGWRGHOLYHUUHFHLYH
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Amount
Recognized | | Gross
Amount
Offset in the | | Net
Amount
Presented | Not Offset in the
Statement of
Financial Condition | | | | | |--------------------------------------------------------|-------------------------------|--|----------------------------------------|--|-------------------------------------------|----------------------------------------------------------|-----------------------------------------|--------------------------------|--|---------------| | | | | Statement
of Financial
Condition | | in Statement
of Financial
Condition | Financial
Instruments | | Cash
Collateral
Received | | Net
Amount | | A SSI BI IS:
Securities borrowed \$ \$ 2.877.300 \$ | | | | | | | - \$ \$ 2,877,300 \$ \$ 2,689,961 \$ \$ | | | - \$ 187.339 | #### 8. FAIR VALUE MEASUREMENTS The Company's assets and liabilities recorded at fair value have been categorized based upon the fair value hierarchy described in Note 2. There were no transfers between Levels 1, 2, and 3 during the year ended December 31, 2020. #### Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the Company's fair value hierarchy for assets measured at fair value on a recurring basis as of December 31, 2020. There were no liabilities recorded at fair value as of December 31, 2020. {12}------------------------------------------------ | | Financial Assets at Fair Value as of December 31, 2020 | | | | | | | | | | |-----------------------------------------------------------------------------|--------------------------------------------------------|------------|------|-------------|---------|--|----|-------------------------|--|--| | | | Level 1 | | Level 2 | Level 3 | | | Total | | | | ASSIETS:
Cash equivalents:
Money market funds
U.S. Government | ಲ್ಲಿ ಮಾ | 6,150,863 | S | 1,999,999 | S | | S | 6,150,863
1,999,999 | | | | | S | 6,150,863 | ea | 1,999,999 | S | | S | 8,150,862 | | | | U.S. Government securities segregated
under federal or other regulations | ಲ್ಲಿ ಮಾ | | ನಾ | 11,999,997 | S | | ನಾ | 11,999,997 | | | | Securities deposited with
clearing organizations:
U.S. Government | ಲ್ಲಿಕಾ | | S | 49,997,213 | S | | ಸಾ | 49,997,213 | | | | Securities owned:
Corporate debt
Equity | | 7,702,021 | | 51,746,718 | | | | 51,746,718
7,702,021 | | | | | S | 7,702,021 | ಲ್ಲಿ | 51,746,718 | S | | S | 59,448,739 | | | | Total | ಿತ | 13,852,884 | ಲಿ | 115,743,927 | S | | S | 129,596,811 | | | A description of the valuation techniques applied to the Company's major categories of assets and liabilities measured at fair value on a recurring basis follows: #### U.S. Government and corporate debt securities The fair value of U.S. Government and corporate debt securities are based on quoted market prices. In the absence of quoted market prices, fair value is determined by pricing vendors using models which discount the future cash flows to their present value using current rates at which similar securities would be bought with similar credit ratings and for the same remaining maturities, or similar techniques. These models use inputs that are observable for substantially the full term of the security, inputs that are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the security or internally developed assumptions. U.S. Government securities and corporate debt securities are generally categorized in Level 2 of the fair value hierarchy. #### Equities Exchange-traded equity securities are generally valued based on quoted prices from the exchange. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. #### Other Financial Assets and Liabilities For all other financial assets and liabilities not measured at fair value, the carrying value approximates fair value due to their short term nature, and the items are categorized as Level 2 of the fair value hierarchy. These other financial assets and liabilities include cash deposited with clearing {13}------------------------------------------------ organizations, receivable and payable from/to customers, receivable and payable from/to brokers, dealers and clearing organizations, securities borrowed and loaned, due to Parent and affiliate, and accrued expenses and other liabilities. #### 9. INCOME TAXES The Company's primary temporary differences result from net unrealized gains and losses of securities owned that are recorded at fair value for book purposes and certain accrued expenses that are deductible on a cash basis for tax purposes. At December 31, 2020, the Company had a gross deferred tax asset of \$188,005 and a gross deferred tax liability of \$1,566,820 which is included in Other Liabilities in the accompanying statement of financial condition at the net amount of \$1,378,815. The Company is organized as a limited liability company and is treated as a disregarded entity for federal income tax purposes. The Company entered into a legal tax-sharing agreement with the Bank to be treated as a corporate division and recognizes an allocation of income taxes in its separate financial statements pursuant to ASC 740-10-30-27. This Accounting Standard allows an allocation of current and deferred taxes to the members of a consolidated tax group, including disregarded entities. As previously mentioned, current and deferred taxes are allocated to the Company under the "separatereturn" method with certain modifications. The method for allocating income tax expense, is systematic, rational, and consistent with the broad principles of ASC 740. Pursuant to the tax-sharing agreement discussed previously, the Company reimburses the Bank for all income taxes payable. As of December 31, 2020, the Company had a current federal, state, and local tax payable of \$952,066 and a current state tax receivable of \$20,434 with the Bank which are included in Due to Parent and affiliate and Other assets respectively, on the statement of financial condition. As of December 31, 2020, there were no unrecognized tax benefits recorded or related interest and penalties for which the Company had accrued. The Company is subject to taxation in the U.S. and state and local jurisdictions. As of December 31, 2020, the Company's tax years 2015 and after are subject to examination by the taxing authorities. ### 10. EMPLOYEE BENEFIT PLANS The Bank has a 401(k) profit sharing plan that covers all eligible employees of the Company who have attained the age and service requirements, as defined in the plan. Eligible employees are immediately vested. #### 11. RISK MANAGEMENT The Company's cash and cash equivalents at December 31, 2020 includes \$90,831,868 deposited at one unaffiliated depository institution, which is rated by credit rating agencies. The Company also has a netting agreement with the depository institution regarding foreign currency balances. In addition, at December 31, 2020, the Company has \$30,084,899 in a money market account at another institution, which is rated by credit rating agencies. The Company is engaged in various trading and brokerage activities in which counterparties primarily include broker-dealers, banks, 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 counterparties or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counterparty. {14}------------------------------------------------ The Company has policies and procedures in place to address overall market risk, credit risk, and settlement risk defined as follows: Market Risk - Risk of loss in a portfolio due to an adverse change in the value of a financial product Credit Risk - Risk that a borrower will default on any type of debt by failing to make required payments Settlement Risk - Risk that one party will fail to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the risk associated with default at settlement and any timing differences in settlement between the two parties. #### 12. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company may enter into contracts that contain various guarantees and indemnities including contracts where it executes, as agent or principal, transactions on behalf of customers. If the transactions do not settle because of failure to perform by either counterparty, the Company may be required to discharge the obligation of the nonperforming party and, as a result, may incur a loss if the market value of the underlying security is different from the contract amount of the transaction. The Company has the right to pursue collection or performance from the counterparties who do not perform under their contractual obligations. The Company has a \$40 million uncommitted line of credit signed with a U.S. depository institution. There were no borrowings against the line as of December 31, 2020. The Company also has a \$50 million uncommitted line of credit with the Bank, as mentioned in Note 6. The Company is not a party to any litigation involving the various aspects of its business at December 31, 2020. #### MEMBER'S CAPITAL 13. Contributions of capital are recognized when received. Cash distributions of capital are recognized when paid. In January 2020, the Company made a \$32 million cash distribution to the Parent. ### 14. NET CAPITAL REQUIREMENT As a broker-dealer registered with the SEC, the Company is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1). The Company computes its net capital requirement under the alternative method provided for in Rule 15c3-1, which requires the Company to maintain minimum net capital equal to the greater of 2% of aggregate customer-related debit items, as defined, or \$250,000. At December 31, 2020, the Company's net capital calculated in accordance with Rule 15c3-1 was \$206,164,400 which was \$204,735,111 in excess of its required minimum net capital of \$1,429,289. #### 15. SUBSEQUENT EVENTS On February 1, 2021, the Company paid a \$32 million cash distribution to the Parent. There were no other subsequent events through February 26, 2021, the date the statement of financial condition was issued that would require recognition or disclosure in the statement of financial condition. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.