# BRADESCO SECURITIES, INC. X-17A-5 (2019-02-27) — Broker-dealer annual report - Company: BRADESCO SECURITIES, INC. - Form: X-17A-5 - Filed: 2019-02-27 - Period: 2018-12-31 - Accession: 0001121643-19-000004 - CIK: 1121643 - File #: 8-52806 - Material weakness: No - Auditor: KPMG - Auditor location: New York, NY - Contact: Dmitriy Rutitskiy - Phone: 2127514422 - Signed by: Isabela Behar (CCO) Original filing: https://www.sec.gov/Archives/edgar/data/1121643/000112164319000004/Bradesco2018public0.pdf --- {0}------------------------------------------------ 11 :\'ITF;D STATES ~~:("( JUI !ES A)';l) EXCllA;'\GI<: C"OM:\ llSSJO:'\ \\':1xhi111,1tcm, D.C. 205~9 # ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill | | ClMB APPR0Vf'1. | |------------|-----------------------------| | OMBNumbol. | | | | EJtpu11s Auyu1t 3 I, 2020 | | | Estimatod everaoe burden | | | hours per resrion'e . 12.00 | | | SEC FILE NUMBER | | | 8. 52806 | ### l'ACJNG PAGE Information Required of Brokers and Oealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Ruic f7a-5 Thereunder | Rl:I'ORT FOR TIH! PERIOD BEGINNING | 01/01/2018
~~~~~-'----'-~~~~~~ | AND ENDING | 12/31/2018
~~~~~~~~~~~- | |----------------------------------------------------------------------------------------------|------------------------------------------------------------|------------|-----------------------------------| | | /It M' OD 1 Y Y Y Y | | M~l f)J) Y\"VY | | | A. REGISTRANT IDENTlFICA TION | | | | NAME OF BROKER-DEAi.FR: | | | | | | | | OFFICIAL USE ONLY | | Bradesco Securities, Inc. | FIRM ID. NO. | | | | ADDRESS OF PRINCIPAL l'J./\CE Of BUSINESS: (Uo not use 1'.0. DClx No.) | | | | | | 450 Park Ave , 32nd Fl | | | | | (J\e> ~nd Strccr) | | | | New York | NY | | 10022 | | | 1:.1art) | | {:\ddrcn) | New York | NY | 10154 | | CllECh'. O:'\E:
~ Ceniticd Public Acl'0 Publ"' Accountant
0 Accountant not | re~idi.:nl in United Stales or any of its rns~cssinns | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | *•C/111111.r }fir exemprum ji·(•m the' req11ire111tmf that thit a11111ml ritport* Iii! *col'!m:cl* by f/11! *opinion of* 1111 indcJ.1<•1ute111public11ct·11111u11111 *must he supported by a* .t1a11:ml'11t *of facts and drcumsf{mces relied 011 as rhe ha.tis for the e.x1!111ptio11. S11e secrion 240 I 7a-5fe)(2j* > Potentlal persons who are to respond to the collection of Information contained In this form are not required to respond unless the form displays a currently valld OMB control number. Sl C1410 (06-0.2) {1}------------------------------------------------ #### **OATH O R A FFI RMATION** | l, | | . swear (or affim1) that. to the
lsabela Behar | | |----|------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------| | | | best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the finn of
Bradesco Securities. Inc. | . as of | | | December 31, 2018
a customer. except as follows: | , are true and correct. I further swear (or affim1) that neither the company
nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of | | | | | | | | | | | | | | | | | | | AMIR G. DASILVA | S11mature | | | | Notary Public • State or N•w Yortt
NO. 01DA61562H | cco | | | | My Commtsalon Expires 11/~1/.J i
NOIDIY Pu he | | | | | This report** contains (check all applicable boxes):
[;! (a) Facing page. | | | | | lliJ (b) Statement of Financial Condition. | | | | | 0 (c) Statement of Income (Loss). | | | | | D (d) Statement of Changes in Financial Condition. | | | | | | D (e) Statement of Changes in Stockholders· Equity or Partn.:rs' or Sole Proprietors· Capital. | | | | 0 (I) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | | | D (g) Computation of Net Capital. | | | | | 0 (h) Computation for Determination of Reserve Requirements Pursuant to Ruic I 5c3-3. | | | | | 0 (i) Information Relating to the Possession or control Requirements Under Rule l 5c3-3. | | | | | | D (j} A Reconciliation. including appropriate explanation, of the Computation ofNet Capital Under Rule 15c3-l and the | | | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule l 5c3-3. | | | | solidation. | 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of con | | | | | | | | | lliJ (I) An Oath or Affirmation. | | | | | 0 (m) A copy of the SIPC Supplemental Report. | 0 (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | | *\*\*For condi1io11s of confide111ial 1rea1111e111 of certain portions of this filing, see section 240. I 7a-5(e){3).* {2}------------------------------------------------ Statement of Financial Condition \_\_ December 31, 2018 . (With Report of Independent Registered Public Accounting Firm Thereon) {3}------------------------------------------------ ## **Table of Contents** **Page** | Report oflndependent Registered Public Accounting Firm | | |--------------------------------------------------------|-----| | Financial Statement: | | | Statement of Financial Condition | | | Notes to Statement of Financial Condition | 2-7 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) KPMG LLP 345 Park Avenue New York, NY 10154-0102 # Report of Independent Registered Public Accounting Firm To the Stockholder and the Board of Directors Bradesco Securities, Inc.: #### Opinion on the Flnanclal Statement We have audited the accompanying statement of financial condition of Bradesco Securities, Inc. (the Company) as of December 31 , 2018, and the related notes (collectively, 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, 2018, in conformity with U.S. generally accepted accounting principles. #### Basis for Opinion This 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 provides a reasonable basis for our opinion. We have served as the Company's auditor since 2011 . New York, New York February 27, 2019 > KPMG UP,.• Delawile limited habi111v p>rl11ersh1p and 1he US member hrm of the KPMG network of indopendenl member firms affihatod with KPMG ln1ernational Coopera11ve l"KPMG lntemat~"I. a Swiss entoly. {5}------------------------------------------------ # Statement of Financial Condition December 31, 2018 #### Assets | Cash and cash equivalents | | 5,531,803 | |-------------------------------------------------------------------------------|----|----------------------| | Short term investments | | 4,065,139 | | Receivables from clearing organization | | 9,320,081 | | Securities owned, at fair value | | 16,302,068 | | Equipment and leasehold improvements at cost | | | | (net of accumulated depreciation of\$1,160,687) | | 1,894,773 | | Receivables from affiliates | | 4,024,880 | | Taxes receivable | | 41,579 | | Deferred tax assets, net | | 1,461,421 | | Other assets | | 385,519 | | Total assets | \$ | 43,027,263 | | Liabilities and Stockholder's Equity | | | | Liabilities: | | | | Accounts payable, accrued expenses, and other liabilities | \$ | 7,879,491 | | Taxes payable | | 381,676 | | | | | | Total liabilities | | 8,261,167 | | Stockholder's equity: | | | | Common stock, \$1 par value. Authorized, issued and outstanding 11,000 shares | | 11,000 | | Additional paid-in capital | | 21,989,000 | | Accumulated earnings | | 12,766,096 | | | | | | Total stockholder's equity | | 34,766,096 | | Total liabilities and stockholder's equity | \$ | ======
43,027,263 | | | | | See accompanying notes to Statement of Financial Condition. {6}------------------------------------------------ Notes to Statement of Financial Condition December 31, 2018 ## (1) Description of Business Bradesco Securities, Inc. (the Company), a wholly owned subsidiary of Banco Bradesco S.A. (the Bank), is an introducing broker-dealer registered with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 and is a nonclearing member of the Financial Industry Regulatory Authority, Inc. (FINRA). During the normal course of business, the Bank, together with affiliated companies, provide and account for a significant portion of the Company's business activities. The Company assists in the marketing of IPO securities on behalf of the Bank and distributes the Bank's research outside Brazil. The Company also provides services by acting as an intermediary for securities purchases and sales by introducing institutional clients to Bradesco SA Corretora (Corretora). The Company's business consists of performing certain execution services for institutional clients in transactions in the U.S. capital markets. Securities transactions are made on a DVP/RVP (delivery versus payment/receipt versus payment) basis. The Company also functions in the capacity of a placement agent in private offerings. The accompanying Statement of Financial Condition has been prepared from the separate records maintained by the Company, and may not necessarily be indicative of the financial condition that would have existed if the Company had operated as an unaffiliated company (see note 4). ## (2) Summary of Significant Accounting Policies # *(a) Basis of Presentation* This Statement of Financial Condition has been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). #### *(h) Recent accounting pronouncements* In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. The Company expects to adopt the provisions of this guidance on January 1, 2019. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company's current lease arrangements expire in October 2020. On January 1, 2019 the Company expects to record a Right of Use Asset in the amount of \$1,737,214 and an offsetting Lease Liability in the amount of \$1,737,214. # *(c) Use of Estimates* The preparation of the Statement of Financial Condition in conformity with GAAP requires the Company's management to make estimates and assumptions. The reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Statement of Financial Condition, during the reporting period, are affected by these estimates, the most significant of which {7}------------------------------------------------ Notes to Statement of Financial Condition December 3 I, 2018 are disclosed in the notes to the Statement of Financial Condition. Estimates, by their nature, are based on available information. Therefore, actual results could materially differ from those estimates. ### *( d) Cash and Cash Equivalents* The Company has defined cash equivalents as highly liquid investments held in the ordinary course of business, with original maturities of less than ninety days that include cash and deposits held with affiliates. #### *(e) Clearing Arrangements* The Company clears all of its customer transactions through its correspondent clearing broker on a fully disclosed basis as outlined in the clearing agreement between the Company and its correspondent clearing broker. As of December 31, 2018 the Company had a \$9,320,081 receivable from clearing organization, of which \$100,000 held in deposit as required by the clearing agreement. #### *(/) Securities Transactions* Investment secw·ities owned, representing U.S. dollar denominated Euro Bonds (Euro Bonds) and U.S. Treasury Notes, are carried at fair value. See note 3 for more infonnation. Securities transactions are recorded on a trade date basis. #### (g) *Short Term Investments* Short term investments include time deposits held with an affiliate with original maturities of greater than ninety days, but less than one year. #### *(h) Deferred Taxes* The Company uses the asset and liability method to provide for income taxes in accordance with Accounting Standards Codification (ASC) 740, *Income Taxes.* Deferred tax assets and liabilities are recorded and adjusted for the future tax consequences of events that have been recorded in the financial statements or the tax returns. Differences between the carrying amounts of existing assets and liabilities on the financial statement and their respective tax bases are attributable to these deferrals. Deferred tax assets and liabilities are measured using enacted tax Jaws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing the realization 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 federal, state and local deferred tax asset is included in the deferred tax amount in the Statement of Financial Condition. The Company accounts for uncertainties in income taxes pursuant to ASC 740-10, Income Taxes. ASC 740-10 requires that the Company determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets this {8}------------------------------------------------ Notes to Statement of Financial Condition December 31, 2018 recognition threshold, the position is measured to determine the amount of benefit to be recognized in the financial statement. ## *(i) Equipment and Lease/told Improveme11ts* Equipment and leasehold improvements are carried at cost, Jess accumulated depreciation and amortization. Equipment is depreciated using the straight-line method, based on the estimated useful life. Leasehold improvements are amortized using the straight-line method over the shorter of their useful lives or the terms of the respective lease. # OJ *Fair Value of Financial Instruments* Fair value measurements are used to record fair value adjustments to certain assets and liabilities and to detennine fair value disclosures in accordance with Accounting Standards Codification (ASC) 820, Fair Value Measurements. Securities owned and securities sold, but not yet purchased are recorded at fair value on a recurring basis. ASC 820 outlines a fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels of the fair value hierarchy are defined as follows: *Level* I: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. This level of the fair value hierarchy provides the most reliable evidence of fair value and is used to measure fair value whenever available. *Level 2:* Inputs other than quoted prices included within Level l that are observable for the asset or liability, either directly or indirectly. These inputs include: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly; (c) inputs other than quoted prices that are observable for the asset or liability or (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means. *Level 3:* Inputs that are unobservable for the asset or liability. These inputs reflect the Company's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are developed based on the best information available in the circumstances, which include the Company's own data. The Company's own data used to develop unobservable inputs are adjusted if information indicates that market participants would use different assumptions. {9}------------------------------------------------ Notes to Statement of Financial Condition #### December 31, 2018 ## (3) Fair Value of Assets As of December 31, 2018, the Company has investments in Euro Bonds of \$11,338,867 stated at fair value. These investments are held by the affiliated custodian Banco Bradesco Grand Cayman. The fair values of the Euro Bonds are considered to be Level 2 on the fair value hierarchy, which is based on quoted prices. The Company's management continuously reviews the instruments in order to determine the fair value level that should be applied to those investments. As of December 31, 2018, the Company has investments in U.S. Treasury Notes of \$4,963,201 stated at fair value. These investments are held by National Financial Services LLC. The fair values of the U.S. Treasury Notes are considered to be Level I on the fair value hierarchy, which is based on quoted prices *in* active markets. At December 31 , 2018, the Company has investments in Certificate of Deposit of \$4,065, 139 stated at fair value. These investments are held by deposit with the Branch maturing on January 19, 2019. The fair values of Certificate of Deposit are considered to be Level t on the fair value hierarchy, which is based on quoted prices in active markets. The Company did not have any assets that would be reported in Level 3 at December 31, 2018. Additionally, there were no transfers between level I and level 2 during the year ended December 31 , 2018. #### ( 4) Transactions with Related Parties During the normal course of business, the Bank, together with affiliated companies, provide and account for a significant portion of the Company's business activities. The Company assists in the marketing of IPO securities on behalf of the Bank and distributes the Bank's research outside Brazil. The Company also provides services by acting as an intermediary for securities purchases and sales by introducing institutional clients to Bradesco S.A. Corretora (Corretora). As of December 31, 2018, the receivable from affiliates balance was \$4,024,880. At December 31, 2018, cash and cash equivalents included in the accompanying Statement of Financial Condition consists of operating accounts with the Branch and amounted to \$5,531,803. At December 31, 2018, short term investments included in the accompanying statement of financial condition consist of a time deposit with the Branch maturing on January 19, 2019. It amounted to \$4,065, 139. {10}------------------------------------------------ Notes to Statement of Financial Condition December 3 I, 2018 ## (5) Equipment and Leasehold Improvements The Company's equipment and leasehold improvements, at December 31, 2018, are summarized as follows: | Equipment | \$
1,010,040 | |-----------------------------------|-----------------| | Furniture & Fixtures | 630,585 | | Leasehold Improvements | 1,414,835 | | Less accumulated depreciation and | | | amortization | (I, 160,687) | | Total | \$
1,894,773 | ## (6) Employee Benefit Plan The Company has a 40l(k) Plan under the Branch whereby employees voluntarily participate in the Plan. Employees may contribute up to 15% of their compensation subject to certain limits based on federal tax Jaws. The Company makes matching contributions equal to 100% of the first *5%* of the employees' contribution, and then management has the ability to make discretionary contributions above the matching contribution. However, matching contributions cannot exceed defined limits set by the Bank. ## (7) Deferred Taxes The components of the deferred tax assets and liabilities at December 31, 20 t 8 are summarized as follows: | Deferred tax assets: | | |------------------------------|---------------------------| | Accrued bonuses | \$
1,614,428 | | Capital loss | 39,743 | | Unrealized gain/(loss) | 65,969 | | Less valuation allowance | (39,743) | | Deferred tax asset | 1,680,397 | | Deferred tax liability: | | | Depreciation | (218,976) | | Total deferred tax liability | (218,976) | | Net deferred tax assets | \$
1,461,421
====== | | | | As of December 31, 2018, the Company had a net deferred tax asset of \$1,461,421 on which a valuation allowance of \$39,743 was provided primarily related to a capital loss carry forward. The Company recorded the valuation allowance given the market uncertainties surrounding future capital gains to offset such loss carry forward which is due to expire in 2019. The net change in the valuation allowance during 2018 was \$550. The Company has not recognized any uncertain tax positions as of December 31, 2018. 6 (Continued) {11}------------------------------------------------ Notes to Statement of Financial Condition December 31, 2018 ## (8) Concentration of Credit Risk Credit risk is the amount of loss the Company would incur if a counterparty fails to perform its obligation under contractual terms. All of the clearing and depository operations for the Company are performed by clearing brokers pursuant to clearing agreements. The clearing brokers, as well as the Company, review the credit standing of the counterparties with which the Company conducts business. The Company's exposure to credit risk associated with the nonperformance by counterparties in fulfilling their obligations pursuant to securities transactions can be directly impacted by volatile securities markets, credit markets and regulatory changes. ## (9) Net Capital Requirement The Company is subject to the SEC Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital as defined. The Company computes its net capital under the alternative method permitted by the net capital rule, which requires that minimum net capital shall not be less than the greater of \$250,000 or 2% of aggregate debit items arising from customer transactions. At December 31, 2018, the Company had net capital of \$5,709,213, which was \$5,459,213 in excess of its required net capital of \$250,000. #### (10) Commitments and Contingent Liabilities The Company is not involved in any material litigation, nor is any material litigation threatened against the Company. #### (11) Financial Instruments with Off-Balance Sheet Risk In the normal course of business, the Company, acting as an agent, executes transactions on behalf of its customers. If the agency transactions do not settle because of failure by either the customer or the counterparty to perform, the Company may be required to discharge the obligation of the nonperforming party. In such circumstances, the Company may sustain a loss if the market value of the security is different from the contractual amount of the transaction. #### (12) Subsequent Events The Company has evaluated whether events or transactions have occurred after December 31, 2018 that would require recognition or disclosure in this Statement of Financial Condition through February 27, 2019, which is the issuance date of the Statement of Financial Condition. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.