# FARMERS FINANCIAL SOLUTIONS, LLC X-17A-5 (2020-02-27) — Broker-dealer annual report - Company: FARMERS FINANCIAL SOLUTIONS, LLC - Form: X-17A-5 - Filed: 2020-02-27 - Period: 2019-12-31 - Accession: 0001106728-20-000005 - CIK: 1106728 - File #: 8-52361 - Material weakness: No - Auditor: Moss Adams, LLP - Auditor location: Seattle, WA - Contact: Joshua Borkin - Phone: 818-584-0258 - Signed by: Joshua Borkin (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1106728/000110672820000005/FFS_SFC_2019.pdf --- {0}------------------------------------------------ # **Farmers Financial Solutions, LLC** (A wholly owned subsidiary of FFS Holding, LLC) Statement of Financial Condition December 31, 2019 {1}------------------------------------------------ **UNITEDSTATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549** 0MB APPROVAL 0MB Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours per response ...... 12.00 SEC FILE NUMBER a-52361 # **ANNUAL AUDITED REPORT FORM X-17 A-5 PARTIII** **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 /19
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12/31 /19
- | | | |----------------------------------------------------------------------------------------|--------------------------------------------------------|----------------------------------------------------------------------------------------------|---------------|----------------------------------|--|--| | | | MM/DD/YY | | MM/DD/YY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | | | | NAME OF BROKER-DEALER: FARMERS FINANCIAL SOLUTIONS, LLC | | OFFICIAL USE ONLY | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do nol use P.O. Box No.)
31051 AGOURA ROAD | | | FIRM 1.0. NO. | | | | | | | (No. and Street) | | | | | | | WESTLAKE VILLAGE | CA | | 91361 | | | | | (City) | (State) | | (Zip Code) | | | | JOSHUA BORKIN | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | (818) 584-0258 | | | | | | | | (Area Code - Telephone Number) | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | MOSS ADAMS, LLP | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | | | (Name - if individual, stale Jast,firsl, middle name) | | | | | | | 999 THIRD AVE, SUITE 2800 SEATTLE | | WA | 98104 | | | | (Address) | | (City) | (State) | (Zip Code) | | | | CHECK ONE:
B | ! .J !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 public accountant must be supported by a statement of facts and circu111sta11ces relied 011 as the basis for the exemption. See Section 240. l 7a-5(e)(2)* > **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 0MB control number.** {2}------------------------------------------------ ## **OATH OR AFFIRMATION** | ______________________
I, _J_O_S_H_U_A_ B_O_R_K_IN | , swear ( or affirm) that, to the best of | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
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FARMERS FINANCIAL SOLUTIONS, LLC | --
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are true and correct. I further swear (or affirm) that | | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account
classified solely as that of a customer, except as follows: | | | | Signature | | | CHIEF FINANCIAL!OFFICER
Title
GERSON ISMAEL OROZCO
Nolary Public · C1lllorni1
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;I
Los Angaln Counly
Commlulon # 2157867
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M Comm. Ex lrn Jun 24. 2020 | | of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
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(cl) Statement of Changes in Financial Condition.
(e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
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(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
(g) Computation of Net Capital. | Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement | | §
(h) Computation for Dete1mination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule l 5c3-3.
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(j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule l 5c3-l and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of | | D
consolidation.
An Oath or Affirmation.
(1)
(m) A copy of the SIPC Supplemental Report.
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** For conditions of confidential treatment of certain portions of this filing, see section 240. 17a-5(e)(3). | (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | {3}------------------------------------------------ | ACKNOWLEDGMENT | | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--| | A notary public or other officer completing this
certificate verifies only the identity of the individual
who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document. | | | State of California
Los Angeles
County of
) | | | before me, Gerson Ismael Orozco, Notary Public
on
February 27, 2020
(insert name and title of the officer) | | | __
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personally appeared _
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. | | | I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct. | | | @ GERSON ISMAEL OROZCO
Notary Public · California
J
Los Angeles County
Commission II 2157867
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M Comm E• i1n Jun 24. 2020
(Seal) | | | | | {4}------------------------------------------------ # **Farmers Financial Solutions, LLC** **(A wholly owned subsidiary of FFS Holding, LLC) Index December 31, 2019** | | Page(s) | |------------------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm 1 | | | Financial Statements | | | Statement of Financial Condition
2 | | | Notes to Financial Statements 3-6 | | {5}------------------------------------------------ ![](_page_5_Picture_0.jpeg) # **Report of Independent Registered Public Accounting Firm** To the Member and the Board of Directors Farmers Financial Solutions, LLC # *Opinion* **on** *the FinancialStatement* We haw audited the accompanying statementoffinancial condition ofFarmers Financial Solutions, LLC (the Company) as of December 31, 2019 that is filed pursuant to Rule 1 ?a-5 under the Securities Exchange Act of 1934, and the related notes (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, 2019, in conformity with accounting principles generally accepted in the United States of America. #### *BasisforOpinion* This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting O\€rsight 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 to 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 owrall presentation of the financial statement. We belie\€ that our audit provides a reasonable basis for our opinion. ~~LLP Phoenix, Arizona February 26, 2020 We haw ser\€d as the Company's auditor since 2017. {6}------------------------------------------------ **Farmers Financial Solutions, LLC (A wholly owned subsidiary of FFS Holding, LLC) Notes to Financial Statements December 31, 2019** # **Farmers Financial Solutions, LLC (A wholly owned subsidiary of FFS Holding, LLC) Statement of Financial Condition December 31, 2019** | Assets | | |------------------------------------------------------|------------------| | Cash and cash equivalents | \$
14,388,111 | | Commissions and fees receivable | 1,616,989 | | Commissions and fees receivable from related parties | 634,089 | | Total assets | \$
16,639,189 | | | | | Liabilities and Member's Equity | | | Liabilities | | | Commissions and fees payable | \$
1,961 ,593 | | Payable to FFS Holding, LLC | 1,485,105 | | Total liabilities | 3,446,698 | | Member's equity | | | Total member's equity | 13,192,491 | | Total liabilities and member's equity | \$
16,639,189 | The accompanying notes are an integral part of these financial statem ents. {7}------------------------------------------------ #### **1. Organization** #### **Background** Farmers Financial Solutions, LLC (the "Company"), a Nevada limited liability company formed on December 21, 1999, is a wholly owned subsidiary of FFS Holding, LLC (the "Parent"). The Parent, in turn, is a wholly owned subsidiary of Mid-Century Insurance Company ("Mid-Century"), which is wholly owned by the Farmers Property and Casualty Companies (the "Farmers P&C Companies"). The Farmers P&C Companies are comprised of Farmers Insurance Exchange ("FIE"), Fire Insurance Exchange ("Fire"), Truck Insurance Exchange ("Truck"), and their respective insurance subsidiaries. The Farmers P&C Companies' policies are marketed through its contracted agency force utilizing its trade name and logo, Farmers Insurance Group of Companies®. Farmers Group, Inc. ("FGI") is an insurance holding company that provides management services, either directly or indirectly through wholly owned subsidiaries, as attorney-in-fact for certain members of the Farmers P&C Companies. The members of the Farmers P&C Companies are not owned in whole or in part by FGI. FGI is owned by Zurich Insurance Group ("Zurich"), a Swiss company headquartered in Zurich. #### **Nature of Operations** The Company functions as the broker-dealer for the contracted agency force shared by Farmers New World Life ("Farmers Life"), a wholly owned subsidiary of FGI, and the Farmers P&C Companies. The Company acts as a distributor of the Farmers Life variable annuity and life insurance contracts and offers fixed and index annuities, and variable life insurance contracts issued primarily by AXA, Athene, AIG, and Farmers Life as a broker-dealer and insurance agency. The Company also offers mutual funds and 529 savings plans sponsored by various non-affiliates, collectively referred to as "funds". The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority ("FINRA"). FINRA is the Company's designated self-regulatory organization. In the normal course of business, the Company's customer activities involve the introduction or transmittal of customers' applications and funds to product sponsors for execution and settlement. The Company does not hold or maintain funds or securities, nor provide clearing services for customers or other broker-dealer(s). As a result, the Company claims exemption from SEC Rule 15c3-3 under the provisions of paragraph k(2)(i) for the fiscal year ended December 31, 2019. #### **2. Summary of Significant Accounting Policies** #### **Basis of Presentation** The accompanying financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). {8}------------------------------------------------ # **2. Summary of Significant Accounting Policies (continued)** # **Use of Estimates** The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ## **Cash and Cash Equivalents** Cash equivalents consist of funds invested in money market accounts and in other investments with original maturities not exceeding three months. The Company maintains its cash and cash equivalents primarily with one high credit quality financial institution. At times, cash balances may exceed the FDIC insurance limits. At December 31, 2019, an amount of \$8,166,088 was invested in the Blackrock Liquidity TempFund Institutional Money Market Fund. These funds are available to the Company on demand. This investment is carried at its net asset value, and is classified as a "Level 1" investment, and defined below. # **Fair Value of Financial Assets and Financial Liabilities** The carrying value of cash and cash equivalents, receivables and payables approximate their fair value as a result of the short term nature of these balances. In accordance with the authoritative guidance on fair value measurements and disclosures, the Company discloses the fair value of its investment in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows: - Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities. - Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active. - Level 3 Inputs that are derived from valuation techniques in which one or more inputs is unobservable. As of December 31, 2019, there were no fair value measurements using Level 2 or Level 3 inputs. | | Level 1 | | Level2 | | Level3 | | Total 12/31/2019 | | |--------------------|---------|-----------|--------|--|--------|--|------------------|-----------| | Money Market Funds | \$ | 8,166,088 | \$ | | \$ | | \$ | 8,166,088 | {9}------------------------------------------------ # **2. Summary of Significant Accounting Policies (continued)** #### **Commissions and Distribution Fees** All securities transactions for the Company's customers are executed and cleared by other broker-dealers. The Company earns revenue for selling affiliated and unaffiliated mutual funds, fixed and variable annuities, and insurance products. 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 by product sponsor and customer, and the risks and rewards of ownership have been transferred to/from the customer. The Company may receive distribution fees paid by the fund up front, over time, upon the investor's exit from the fund (that is, a contingent deferred sales charge), or as a combination thereof. Any fixed amounts are recognized on the trade date and variable amounts are recognized to the extent it is probable that a significant revenue reversal will not occur once the uncertainty is resolved. For variable amounts, as the uncertainty is dependent on the value of the shares at future points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible to factors outside the Company's influence, the Company does not believe that it can overcome this constraint until the market value of the fund and the investor activities are known, which are usually monthly or quarterly. Distribution fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods. #### **Contract Balances** The timing of the Company's revenue recognition may differ from the timing of payment by the Company's customers. The Company records a receivable when revenue is recognized prior to payment and has an unconditional right to payment. The Company had receivables related to revenues from contracts with customers of \$2,251,078 and \$2,542,266 at December 31, 2019 and January 1, 2019, respectively. #### **Income Taxes** The Company is a single member limited liability company, which is treated as a disregarded entity for federal income tax purposes. As a result, the Company is effectively treated as a division of the Parent for federal income tax purposes. For the year ended December 31, 2019, the Company has provided for income taxes as if it were a stand-alone taxpayer. However, because the Company is not required to settle any tax liability, benefit or credit resulting from its separate tax position with the Parent, all tax liabilities or recoverables accrued by the Company are deemed settled by way of a capital contribution or capital distribution by or to the Parent. For the year ended December 31, 2019, the Company recorded a capital contribution in the amount of \$546,849 related to the settlement of the current year tax provision. There were no deferred tax assets or liabilities as of December 31, 2019. There was no state income tax as the Company is owned by an insurance company which generally does not pay state income taxes. The Company believes that, as of December 31, 2019. it had no material uncertain tax position. {10}------------------------------------------------ # **3. Transactions with Affiliates and FGI** The Company has entered into an Administrative Service and Expense Sharing Agreement (the "Agreement") with the Parent dated November 27, 2003. The Company reimburses the Parent for costs incurred by the Parent to provide management and administrative services. Total expenses charged to the Company were \$10,682,492 for the year ended December 31, 2019, which are reflected in operating expenses in the accompanying Statement of Income. At December 31, 2019, the Company had accounts payable with the Parent in the amount of \$1,485,105. The employees of the Parent assigned to the Company are covered under benefit plans sponsored by FGI. All the compensation and benefit related expenses are allocated to the Company by the Parent. The Company has entered into a sales agreement with Farmers Life to act as distributors for the sale of variable annuity and variable life insurance contracts issued by Farmers Life. Commission revenue from Farmers Life variable annuity and life insurance contracts totaled \$14,031,694 for the year ended December 31, 2019. Receivables from Farmers Life as of December 31, 2019 were \$634,089. #### **4. Commitments and Contingencies** During the normal course of its operations, the Company may incur additional liabilities due to existing conditions, situations, legal claims, regulatory matters, or circumstances involving uncertainty as to possible loss to the Company that will ultimately be resolved when one or more future events occur or fail to occur. Management accrues for such liabilities to the extent that they are deemed probable and estimable. As of December 31, 2019, management believes that any such items would not have a material or adverse effect on its continuing operations. # **5. Net Capital Requirements** Under Rule 15c3-1 of the Securities Exchange Act of 1934 (the "Rule"), the Company is required to maintain a minimum net capital amount. The Company has elected to use the alternative method, permitted by the Rule, which requires that the Company maintain minimum net capital, as defined equal to the greater of \$250,000 or 2% of aggregate debit balances arising from customers' transactions, as defined. As the Company does not have aggregate debit balances arising from customers' transactions, the Company's minimum net capital requirement is \$250,000. At December 31, 2019, the Company had net capital of \$12,687,767, which was \$12,437,767 in excess of the amount required. The Company claims exemption from the provisions of Rule 15c3-3 pursuant to paragraph k(2)(i) for the fiscal year ended December 31, 2019 under the Securities Exchange Act of 1934 as a broker or dealer who carries no customer accounts, promptly transmits all customer funds, and delivers all securities received in connection with its activities as a broker or dealer, and does not otherwise hold funds or securities for, or owe money or securities to, customers. Operating under such exemption, the Company has not prepared a Determination of Reserve Requirements for Brokers or Dealer. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.