# SAFRA SECURITIES LLC X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: SAFRA SECURITIES LLC - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0001090474-22-000004 - CIK: 1090474 - File #: 8-51935 - Type: Broker-dealer - Material weakness: No - Auditor: Deloitte & Touche - Auditor location: New York, NY - Contact: Jimmy You - Phone: 212-704-9376 - Email: jimmy.you@safra.com - Website: safra.com - Signed by: Steven Paraggio (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1090474/000109047422000004/SSLAuditStmtFinCondPublic.pdf --- {0}------------------------------------------------ #### SAFRA SECURITIES LLC (SEC. I.D. No. 8-51935) #### STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021 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}------------------------------------------------ | SECURITIES AND EXCHANGE COMMISSION | OMB APPROVAL
OMB Number: 3235-0123
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hours per response: 12 | | | | | | | | | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|-------------|--------------------------------------------|------------|--|--|--|--|--|--| | | SEC FILE NUMBER
8-51935 | | | | | | | | | | | FACING
PAGE
Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | | | | | | | | | | | | FILING FOR THE PERIOD BEGINNING
01/01/21
AND ENDING
________ 12/31/21
MM/DD/YY
MM/DD/YY | | | | | | | | | | | | A.
REGISTRANT IDENTIFICATION | | | | | | | | | | | | NAME OF FIRM: _____SAFRA SECURITIES LLC____________________________________________ | | | | | | | | | | | | TYPE
OF
REGISTRANT
(check
all
applicable
boxes):
☐
☐

Security-based swap
dealer
Major
security-based swap
participant
Broker-dealer
□ Check here if respondent is also an OTC derivatives dealer
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | | | | | | | 546 Fifth Avenue | | | | | | | | | | | | | (No. and Street) | | | | | | | | | | | New York | New York | | 10036 | | | | | | | | | (City) | (State) | | | | | | | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | | | | | | Jimmy You | Jimmy.You@Safra.com | | | | | | | | | | | (Name) | (212) 704-9367
(Area Code – Telephone Number) | | (Email Address) | | | | | | | | | B. | ACCOUNTANT IDENTIFICATION | | | | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Deloitte & Touche LLP | (Name – if individual, state last, first, and middle name) | | | | | | | | | | | 30 Rockefeller Plaza | New York | New York | | 10112-0015 | | | | | | | | (Address) | (City)
(State) | | | | | | | | | | | 10/20/2003 | 34 | | | | | | | | | | | (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, if applicable) | | | | | | | | | | FOR
OFFICIAL | USE
ONLY | | | | | | | | | \* Claimsfor exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. **Persons who are to respond to the collection of information contained in thisform are notrequired to respond unlessthe form displays a currently valid OMB control number.** {2}------------------------------------------------ {3}------------------------------------------------ # **SAFRA SECURITIES LLC** # **TABLE OF CONTENTS** | | Thisfiling** contains (check all applicable boxes): | Page | | | | | | | |---|-----------------------------------------------------------------------------------------------------------------|-----------|--|--|--|--|--|--| |  | Facing Page. | | | | | | | | |  | (a) Statement of financial condition. | 2
3-11 | | | | | | | |  | (b) Notesto consolidated statement of financial condition. | | | | | | | | | □ | (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. | | | | | | | | | □ | (e) Statement of changesin stockholders' or partners' orsole proprietor's equity. | | | | | | | | | □ | (f) Statement of changesin liabilities subordinated to claims of creditors. | | | | | | | | | □ | (g) Notesto consolidated financialstatements. | | | | | | | | | □ | (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. | | | | | | | | | □ | (i) Computation of tangible net worth under 17 CFR 240.18a-2. | | | | | | | | | □ | (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. | | | | | | | | | □ | (k) Computation for determination ofsecurity-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. | | | | | | | | | □ | (l) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. | | | | | | | | | □ | (m) Information relating to possession or control requirementsfor customers under 17 CFR 240.15c3-3. | | | | | | | | | □ | (n) Information relating to possession or control requirementsfor security-based swap customers | | | | | | | | | | under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. | | | | | | | | | □ | (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 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, | | | | | | | | | | or a statement that no material differences exist. | | | | | | | | | □ | (p) Summary of financial data forsubsidiaries not consolidated in the statement of financial condition. | | | | | | | | |  | (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. | | | | | | | | | □ | (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | | | | □ | (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | | | | □ | (t) Independent public accountant'sreport based on an examination of the statement of financial condition. | | | | | | | | |  | (u) Independent public accountant'sreport based on an examination of the financial report or financial | | | | | | | | | | statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. | 1 | | | | | | | | □ | (v) Independent public accountant'sreport based on an examination of certain statementsin the compliance | | | | | | | | | | report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | | | | □ | (w) Independent public accountant'sreport based on a review of the exemption report under 17 CFR | | | | | | | | | | 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | | | - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). - □ (z) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ *\*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable.* {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, 2021, 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, 2021, 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 25, 2022 We have served as the Company's auditor since 2000. {5}------------------------------------------------ # **SAFRA SECURITIESLLC** ## **STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2021** # **ASSETS** | Cash
and
cash
equivalents | \$
121,136,633 | |-------------------------------------------------------------------------------------------------------------------|-------------------| | Cash
and
securities
required
to
be
segregated
under
federal
or
other
regulations | 113,352,528 | | Cash
and
securities
deposited
with
clearing
organizations | 116,527,946 | | Securitiesborrowed | 5,228,760 | | Receivable
from
brokers,
dealers
and
clearing
organizations | 460,106 | | Receivable
fromcustomers | 935,134 | | Securitiesowned-
atfair
value
(including
securitiespledgedas
collateral
of
\$50,321,904) | 50,321,904 | | Other
assets | 2,663,009 | | TOTALASSETS | \$ 410,626,020 | # **LIABILITIES AND MEMBER'S CAPITAL** | LIABILITIES: | | |--------------------------------------------------------------------------|-------------------| | Payable
to
customers | \$
163,850,513 | | Payable
to
brokers,
dealers
and
clearing
organizations | 9,989,405 | | Accrued
expenses
and
other
liabilities | 4,420,761 | | Due
to
Parent
and
affiliate | 142,965 | | Totalliabilities | 178,403,644 | | COMMITMENTS
AND
CONTINGENT
LIABILITIES
(Note
12) | | | | | | MEMBER'S
CAPITAL | 232,222,376 | | TOTAL
LIABILITIES
AND
MEMBER'S
CAPITAL | \$ 410,626,020 | | | | See accompanying notesto 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 ofPresentation**-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 andCashEquivalents**-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 andSecuritiesRequiredtobeSegregatedunderFederalorOtherRegulations** -Cash and securities required to be segregated under federal or other regulations consists of non interestbearing cash and U. S. Government securities held in a special reserve bank account pursuant to Rule 15c3-3. **Cash andSecuritiesDepositedwithClearingOrganizations**-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 fromandPayabletoCustomers**-Receivable from customers represents credit extended to customers to finance their purchases of securities on margin. The Company monitors {7}------------------------------------------------ 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 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, 2021 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, 2021. **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, 2021. **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 or indirectly 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. {8}------------------------------------------------ **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 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 realized (or 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 hierarchy gives 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. {9}------------------------------------------------ *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 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** **Income Taxes** -In December 2019, the FASB issued ASU No. 2019-12, S*implifying the Accounting for Income Taxes*, which modifies ASC 740. One section of this guidance clarifies ASC 740-10-30-27 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. Another section of this ASU, Hybrid Tax Regimes, amended ASC 740-10-15- 4(a) to state that an entity should include the amount of tax based on income in the tax provision and should record any incremental amount recorded as a tax not based on income. The effective date of this ASU for public business entities is for fiscal years beginning after December 15, 2020. The company has adopted ASU No. 2019-12 in the current year. However, as the Company is a disregarded single member limited liability company for all taxing authorities it is electing to continue to allocate the amount of current and deferred tax expense under the "separatereturn" method. Accordingly, adoption on a retrospective basis for this change has no impact on the current or prior financial statements of the Company nor does the adoption of the application of the Hybrid Tax Regimes under this ASU whether a retrospective or modified retrospective approach is adopted. # **3. CASH AND CASH EQUIVALENTS** The Company maintained cash of \$116,218,094 at one unaffiliated depository institution as of Decemer 31, 2021. Demand deposits of \$2,141,938 were held at the Bank at December 31, 2021. The Company also maintained money market accounts totaling \$625,471 at certain depository institutions, and held money market funds with a fair value of \$2,151,130 at December 31, 2021. See Note 8, Fair Value Measurements. {10}------------------------------------------------ # **4. CASH AND SECURITIES REQUIRED TO BE SEGREGATED UNDER FEDERAL OR OTHER REGULATIONS** In accordance with SEC Rule 15c3-3, the Company as a broker carrying customer accounts, is subject to requirements related to maintaining cash and/or U.S. Government securities in a segregated reserve account for the exclusive benefit of its customers, which as of December 31, 2021, amounted to cash of \$113,352,528. # **5. RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS** Amounts receivable from and payable to brokers, dealers and clearing organizations at December 31, 2021, consist of: | | Receivable | Payable | | | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------|----------------|--| | Securities
failed-to-deliver
/
receive
Securities
transactions
pending
settlement,
net
Receivables
from/payable
to
brokers,
dealers
and | \$
-
102,473 | \$ | 9,979,509
- | | | clearing
organizations | 357,633 | | 9,896 | | | Total | \$
460,106 | \$ | 9,989,405 | | #### **6. RELATED-PARTY TRANSACTIONS** The Company functions as a broker and has an omnibus account relationship with the Bank and customer relationships with various other affiliates. As of December 31, 2021, the Bank's omnibus account had a balance of \$935,134 which is included in Receivable from customers and other affiliates had a balance of \$2,650,110 which are included in Payable to customers. At December 31, 2021, the Company had a demand deposit of \$2,141,938 at the Bank, which is included in Cash and cash equivalents. The Company had a payable to the Bank of \$142,965 which is included in Due to Parent and affiliate, and a tax receivable from the Bank of \$626,136 which is included in Other assets in the accompanying statement of financial condition as of December 31, 2021. As of December 31, 2021, the Company pledged securities owned of \$50,321,904 as collateral for a \$50,000,000 uncommitted line of credit with the Bank. Based on the pledged collateral, the Company had an available line of credit of \$24,000,000. There were no borrowings against the line as of December 31, 2021. The securities cannot be repledged by the Bank. #### **7. COLLATERALIZED TRANSACTIONS** The Company borrows securities from other broker dealers to fulfill short sales by customers and delivers cash to the lender in exchange for securities. The fair value of these borrowed securities, which can be rehypothecated, was \$4,902,664 at December 31, 2021. The Company manages credit exposure arising from such transactions by, in appropriate circumstances, entering into master {11}------------------------------------------------ netting agreements and collateral agreements with counterparties that provide the Company, in the event of a counterparty default (such as a bankruptcy or counterparty's failure to pay or perform), with the right to net a counteparty's rights and obligations under such agreement and liquidate and set-off collateral held by the Company against the net amount owed by the counterparty. Securities borrowed are open maturity transactions. The following table presents information about the offsetting of securities and related collateral amounts as of December 31, 2021. | | | | | Gross
Amount
Offset in the | | Net
Amount
Presented | | Not Offset in the
Statement of
Financial Condition | | | | | | | |--------------------------------|----|----------------------------------------|----|-------------------------------------------|----|----------------------------|--------------------------|----------------------------------------------------------|----|---|---------------|---------|--|--| | Gross
Amount
Recognized | | Statement
of Financial
Condition | | in Statement
of Financial
Condition | | | Financial
Instruments | Cash
Collateral
Received | | | Net
Amount | | | | | ASSETS:
Securities Borrowed | \$ | 5,228,760 | \$ | - | \$ | 5,228,760 | \$ | 4,902,664 | \$ | - | \$ | 326,096 | | | # **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, 2021. #### **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, 2021. There were no liabilities recorded at fair value as of December 31, 2021. | | Financial Assets at Fair Value as of December 31, 2021 | | | | | | | | |--------------------|--------------------------------------------------------|-----------|---------|------------|---------|---|-------|------------| | | Level 1 | | Level 2 | | Level 3 | | Total | | | ASSETS: | | | | | | | | | | Cash equivalents: | | | | | | | | | | Money market funds | ಿತ | 2,151,130 | ಿತ | | S | | ಿತ | 2,151,130 | | | ಕಾ | 2,151,130 | ಕಾ | | S | | ಕಾ | 2,151,130 | | Securities owned: | | | | | | | | | | Corporate debt | | | | 42,777,804 | | - | | 42,777,804 | | Equity | | 7,544,100 | | | | | | 7,544,100 | | | S | 7,544,100 | ಕಾ | 42,777,804 | S | | S | 50,321,904 | | Total | ಕಾ | 9,695,230 | ಕಾ | 42,777,804 | ಳಿ | | ಕಾ | 52,473,034 | 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* {12}------------------------------------------------ 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 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, 2021, the Company had a gross deferred tax asset of \$659,355 and a gross deferred tax liability of \$1,190,493 which is included in Other Liabilities in the accompanying statement of financial condition at the net amount of \$531,138. 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 740-10-30-27A. 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 "separate-return" 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, 2021, the Company had a tax receivable of \$626,136 with the Bank which is included in Other assets on the statement of financial condition. The Company is subject to taxation in the U.S., New York State, Florida and New York City. As of December 31, 2021, the Company's tax years 2016 and after are subject to examination by the {13}------------------------------------------------ taxing authorities. Where tax returns have not been filed, the statute of limitations remains open indefinitely. # **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, 2021 includes \$116,218,094 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, 2021, the Company has \$625,471 in money market accounts at certain depository institutions, which are 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. 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, 2021. 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, 2021. {14}------------------------------------------------ # **13. MEMBER'S CAPITAL** Contributions of capital are recognized when received. Cash distributions of capital are recognized when paid. In February 2021, 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, 2021, the Company's net capital calculated in accordance with Rule 15c3-1 was \$220,393,631 which was \$218,373,502 in excess of its required minimum net capital of \$2,020,129. ## **15. SUBSEQUENT EVENTS** On February 18, 2022, the Company paid a \$40 million cash distribution to the Parent. There were no other subsequent events through February 25, 2022, 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.