# LIGHTSPEED FINANCIAL SERVICES GROUP LLC X-17A-5 (2023-09-25) — Broker-dealer annual report - Company: LIGHTSPEED FINANCIAL SERVICES GROUP LLC - Form: X-17A-5 - Filed: 2023-09-25 - Period: 2023-06-30 - Accession: 0001122636-23-000012 - CIK: 1122636 - File #: 8-52843 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young LLP - Auditor location: Stamford, CT - Contact: David R Chaskin - Phone: 646 395-3926 - Email: dchaskin@lightspeed.com - Website: lightspeed.com - Signed by: David R Chaskin (CFO and FinOp) Original filing: https://www.sec.gov/Archives/edgar/data/1122636/000112263623000012/publicsec.pdf --- {0}------------------------------------------------ **UNITED STATES SECURmES AND EXCHANGE COMMISSION Washington, D.C. 20549** **0MB APPROVAL 0MB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12** > **SEC FILE NUMBER 8-52843** ## **ANNUAL REPORTS FORM X-17A-S PART Ill** **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 07/01/2022 AND ENDING 06/30/23** **MM/DD/YY MM/DD/YY** **A. REGISTRANT IDENTIFICATION** # **NAMEoF FIRM:** Lightspeed Financial Services Group LLC **TYPE OF REGISTRANT (check all applicable boxes):** **[!] Broker-dealer D Security-based swap dealer** □ **Major security-based swap participant** □ **Check here if respondent is also an OTC derivatives dealer** **ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.)** ## 20 Headquarters Plaza | Morristown | (No. and Street)
NJ | | 07960
(Zip Code) | | | |---------------------------------------------------------------------------|-----------------------------------------------------------|-------------------------|---------------------|--|--| | (City) | (State) | | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | David R Chaskin | 646-395-3926 | dchaskin@lightspeed.com | | | | | (Name) | (Area Code -Telephone Number) | (Email Address) | | | | | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing* | B.
ACCOUNTANT IDENTIFICATION | | | | | | Ernst & Young LLP | | | | | | | | (Name -if individual, state last, first, and middle name) | CT | 06902 | | | | 300 First Stamford Place | Stamford
(Oty) | (State) | (Zip Code) | | | | (Address)
10/20/2003 | | 42 | | | | **• Claims for 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-S(e)(l)(ii), if applicable.** Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a a1rrently valid 0MB control number. {1}------------------------------------------------ - - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ Statement of Financial Condition and Report of Independent Registered Public Accounting Firm ### LIGHTSPEED FINANCIAL SERVICES GROUP LLC June 30, 2023 {3}------------------------------------------------ ## **LIGHTSPEED FINANCIAL SERVICES GROUP LLC TABLE OF CONTENTS** | | Page | |---------------------------------------------------------|--------------| | Report of Independent Registered Public Accounting Firm | 1 | | Statement of Financial Condition | 2 | | Notes to Statement of Financial Condition | 3
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10 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) {5}------------------------------------------------ ## **LIGHTSPEED FINANCIAL SERVICES GROUP LLC Statement of Financial Condition As of June 30, 2023** | ASSETS | | |--------------------------------------------------------|------------------| | Cash | \$
1,641,189 | | Cash segregated for the benefit of customers | 250,897 | | Due from clearing brokers, net | 6,402,323 | | Goodwill | 2,466,401 | | Right-of-use assets | 754,679 | | Intangible assets, less | 1,159,000 | | accumulated amortization of \$1,735,000 | | | Accounts receivable, less | 245,545 | | allowance for doubtful accounts of \$461,738 | | | Due from other brokers | 217,874 | | Furniture, equipment, and leaseholds, less accumulated | 89,780 | | depreciation of \$9,671,208 | | | Due from affiliates | 43,064 | | Deferred tax assets | 47,172 | | Other assets | 575,661 | | Total assets | \$
13,893,585 | | LIABILITIES AND MEMBERS' EQUITY | | | Accrued expenses and other liabilities | \$
1,267,372 | | Lease liabilities | 896,010 | | Accrued compensation | 412,625 | | Accounts payable | 750,642 | | Due to other brokers | 339,147 | | Total liabilities | 3,665,796 | | Members' equity | 10,227,789 | | Total liabilities and members' equity | \$
13,893,585 | *The accompanying notes are an integral part of these statements.* {6}------------------------------------------------ ### **Notes to Statement of Financial Condition June 30, 2023** #### **1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** Lightspeed Financial Services Group LLC (Company), a subsidiary of Lightspeed Holdings, LLC (Parent), is a broker-dealer registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA); is an introducing broker registered with the Commodity Futures Trading Commission (CFTC); and is a member of the National Futures Association (NFA). The Company conducts business on a fully disclosed basis with Wedbush Securities Inc. (WSI) and Interactive Brokers (IB) pursuant to clearing agreements (collectively referred to as the Clearing Brokers). WSI is a wholly owned subsidiary of Wedbush Capital (Wedbush). Wedbush is the majority owner of the Company's Parent. The Company files an Exemption Report as described in SEA Rule 17a-5. A summary of significant accounting policies is either discussed below or included in the following footnotes. #### (a) Basis of Presentation The Company follows accounting principles generally accepted in the United States of America (U.S. GAAP), as established by the Financial Accounting Standards Board (FASB), to ensure consistent reporting of financial condition, results of earnings and cash flows. The U.S. dollar is the functional currency of the Company. #### (b) Use of Estimates In preparing the statement of financial condition, management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the statement of financial condition. Although estimates and assumptions are based on the best available information, actual results could be different from these estimates. #### (c) Fair Value of Financial Instruments Certain assets and liabilities, including Cash, Cash segregated for the benefit of customers, Accounts receivable, Accounts payable and Accrued expenses and other liabilities, Due from and Due to clearing and other brokers, have a carrying value that approximates fair value due to their short-term nature. #### (d) Cash The Company maintains cash in accounts held by major banks and financial institutions, which at times exceed the amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses related to these balances. #### (e) Cash Segregated for the Benefit of Customers Cash segregated for the benefit of customers consist of cash segregated in a special reserve bank account for the exclusive benefit of customers. {7}------------------------------------------------ **Notes to Statement of Financial Condition June 30, 2023** #### (f) Accounts Receivable Accounts receivable represents fees, commissions, and other balances receivable from customers. This includes balances owed to the Company from customers who have equity deficits with the WSI. The \$461,738 in allowance for doubtful accounts is related to equity deficits which are unlikely to be collected from the customers. Details to the allowance for doubtful accounts as of June 30, 2023 are as follows: | June 30, 2022 | (137,095) | |-----------------------|-----------------| | Increase in Allowance | (585,351) | | Bad Debt | 260,708 | | June 30, 2023 | \$
(461,738) | #### (g) Allowance for Credit Loss The Current Expected Credit Losses (CECL) model requires the measurement of expected credit losses for financial assets measured at amortized cos using relevant information about past events, including historical credit loss experience on financials assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. The overall estimate of the allowance for credit losses is based on both quantitative and qualitative considerations. For all the financial assets subject to CECL, there is no history of significant credit losses and reasonable expectation of minimal future credit losses with any potential measurement of credit losses being immaterial. Other than the \$461,738 discussed above, no other CECL allowance against outstanding balances were deemed necessary on June 30, 2023. #### (h) Goodwill and Intangible Assets The Company tests goodwill for impairment annually or when an event occurs, or circumstances change that signify the existence of impairment. The Company also carries intangible assets which have an indefinite life which are not subject to amortization. The Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of goodwill and indefinite life intangible assets is less than the respective carrying value. The Company amortizes finite-lived intangible assets on a straight-line basis over their useful lives and tests for recoverability whenever events indicate that the carrying amounts may not be recoverable. #### (i) Furniture, Equipment and Leaseholds Furniture, equipment, and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives of the assets range from 3 to 7 years. Leasehold improvements are amortized over the lesser of the asset's economic life or the lease period. {8}------------------------------------------------ **Notes to Statement of Financial Condition June 30, 2023** #### (j) Income Taxes The Company is a limited liability company taxed as a partnership for federal and state income tax purposes. As such, income or loss of the Company is allocated to its members in proportion to their ownership interest in the Company. Because the Company is subject to Unincorporated Business Tax in New York City (NYC), the Company incurred tax expenses for the reporting period. #### (k) New Accounting Pronouncements No new accounting pronouncements relevant to the Company were adopted during the year ended June 30, 2023. #### **2. DUE FROM CLEARING BROKERS** The Company conducts business with the Clearing Brokers on behalf of its customers. The Company earns commissions and other fees as an introducing broker for transactions of its customers. The clearing and custodial operations for the Company's customer accounts are performed by the Clearing Brokers pursuant to clearing agreements. Due from clearing brokers is related to the Company's clearing relationship with WSI and IB. On June 30, 2023, Due from clearing brokers includes required deposits totaling \$534,545 with the Clearing Brokers pursuant to the clearing agreements, as well as \$5,867,778 in cash, commissions, and other receivables earned by the Company, net of clearing and other charges payable to the Clearing Brokers. #### **3. DUE TO/FROM OTHER BROKERS** Certain customer trades are executed on Electronic Communications Networks, Exchanges, and other execution venues for which the Company receives payment for order flow and trading rebates. On June 30, 2023, \$217,874 of net rebates were reported as Due from other brokers. On June 30, 2023, the Company had \$261,564 of net trading fees reported as Due to other brokers for the execution of its customer orders. The Company has commission sharing agreements with other broker dealers for referring customers to the Company. . On June 30, 2023, \$77,583 was reported as Due to other brokers pursuant to these arrangements. #### **4. FURNITURE, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS** Details of furniture, equipment, and leasehold improvements on June 30, 2023 are as follows: {9}------------------------------------------------ ### **Notes to Statement of Financial Condition June 30, 2023** | Leasehold improvements | 2,565,622 | |--------------------------|--------------| | Furniture | 952,424 | | Office equipment | 943,985 | | Computer equipment | 5,298,957 | | Subtotal | 9,760,988 | | Accumulated depreciation | 9,671,208 | | Net | \$
89,780 | #### **5. INTANGIBLE ASSETS, NET AND GOODWILL** Intangible assets with a finite useful life are amortized over their economic useful life on a straight-line basis. All intangible assets are evaluated for impairment when events or changes in circumstances suggest that the carrying value of an asset may not be fully recovered. Any impairment loss is recognized when the carrying amount is less than the fair value. On May 1, 2018, the Company acquired certain assets of Lightspeed Trading LLC. In conjunction with the acquisition, the Company recorded \$2,294,000 in intangible assets and \$4,271,000 in goodwill. The goodwill was subsequently reduced to \$2,466,401 when the Company completed an asset sale on November 30, 2020. The Company is amortizing certain definite-lived intangible assets over their respective useful lives of 4 and 5 years. The accumulated amortization of such definite-lived assets as of June 30, 2023, was \$1,735,000. On August 9, 2021, the Company entered into an agreement with Professional Trading Solutions, Inc. (PTS), to purchase source-code to multiple trading platforms it uses in the normal course of business. Payments pursuant to this agreement are tied to certain deliverables by PTS. To date, the Company has received deliverables and made payments to PTS totaling \$600,000. The carrying value of the Company's intangible assets as of June 30, 2023 is as follows: | | | | | Weighted | |-------------------------------|-----------------|-------------------|-----------------|----------------| | | | Accumulated | | Average Useful | | | Gross Value | Amortization | Net Value | Life | | Customer relationships | \$
1,159,000 | \$
(1,159,000) | \$
- | 4.00 | | Trademarks | 576,000 | (576,000) | - | 5.00 | | Customer lists | 527,000 | - | 527,000 | - | | Source-code | 600,000 | - | 600,000 | - | | Internally developed software | 32,000 | - | 32,000 | - | | | \$
2,894,000 | \$
(1,735,000) | \$
1,159,000 | | {10}------------------------------------------------ ### **Notes to Statement of Financial Condition June 30, 2023** The Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of goodwill is less than the carrying value. #### **6. OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK** In the normal course of business, securities transactions of customers are introduced to and cleared through the Clearing Brokers. Pursuant to the respective agreements between the Company and the Clearing Brokers, the Clearing Brokers have the right to charge the Company for unsecured losses that result from a customer's failure to complete such transactions. The Company has not historically experienced nonperformance by customers in the above situations. In addition, the Company has a policy of reviewing, as considered necessary, the credit standing of the customers, the Clearing Brokers, and financial institutions with which it conducts business. In the normal course of business, customers may sell securities short. Subsequent market fluctuations may require the Clearing Brokers to obtain additional collateral from the Company's customers. It is the policy of the Clearing Brokers to value the short positions daily and to obtain additional collateral when deemed appropriate. #### **7. NET CAPITAL REQUIREMENT** The Company is a member of FINRA and is subject to the SEC Uniform Net Capital Rule 15c3-1 (the Rule). The Rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn if the resulting net capital ratio would exceed 10 to 1. The Company is also subject to the CFTC's minimum financial requirements, which require that the Company maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under The Commodity Exchange Act or Rule 15c3-1. On June 30, 2023, the Company's net capital was \$5,383,245 which was \$5,133,245 in excess of its minimum requirement of \$250,000. The ratio of aggregate indebtedness to net capital was 0.54:1.00. #### **8. COMMITMENTS AND CONTINGENCIES** (a) Office Lease Commitments The Company's operations are conducted in leased premises under lease agreements requiring minimum annual payments as follows: | Years Ending June 30, | | |------------------------------------|---------------| | 2024 | \$
483,277 | | 2025 | 282,163 | | 2026 | 200,501 | | Total future office lease payments | \$
965,941 | | Less: Interest | (69,931) | | Total lease liability | \$
896,010 | {11}------------------------------------------------ **Notes to Statement of Financial Condition June 30, 2023** > For purposes of determining the present value of the total lease liability, the Company used a discount rate of 6.53% which is equal to the Company's estimated incremental borrowing rate. #### (b) Contingencies Without admitting or denying the findings, the Company agreed to a Letter of Acceptance, Waiver, and Consent and a \$290,000 fine with NYSE ARCA, Inc., regarding Market Access Rule (15c3-5). This was regarding its execution only business for a FINRA broker dealer relating to the sale of its former Lime algo business for the period December 1, 2020 through November 2, 2021. This arrangement was terminated in December 2021. The issue was with the setting of certain credit limits for the customer accounts of the FINRA broker dealer and the documentation that the limits were considered reasonable. In the ordinary course of business, the nature of the Company's business subjects it to claims, lawsuits, regulatory examinations or investigations, and other proceedings. The Company is subject to on-going regulatory inquiries at the present time. Given the inherent difficulty in predicting the outcome of such regulatory matters in which substantial or indeterminate damages or fines are sought, the Company cannot estimate losses or ranges of losses for such matters where there is only a reasonable possibility that a loss may be incurred. #### **9. RELATED PARTY TRANSACTIONS** As of June 30, 2023, the Company had receivable balances of \$39,440 from its Parent and \$3,624 from Lightspeed Technology Services LLC. These balances are reflected in Due from affiliates on the Statement of Financial Condition. For the year ended June 30, 2023, the Company operated under a service level agreement covering commission sharing, connectivity services, shared office space, and other expenses shared with WSI. As of June 30, 2023, the Company owed \$289 to WSI pursuant to the service level agreement. This amount is included in Accrued expenses and other liabilities on the Statement of Financial Condition. The Company also utilizes WSI as a clearing broker for equities and options trading as well as a futures commission merchant for futures related transactions. As of June 30, 2023, the Company had a clearing deposit of \$534,545 and a clearing account balance of \$5,867,778 with WSI. The clearing account balance with WSI includes \$1,553,511 in net transaction fees receivable and \$4,314,267 in cash held in various brokerage accounts. These amounts are included in Due from clearing brokers on the Statement of Financial Condition. {12}------------------------------------------------ **Notes to Statement of Financial Condition June 30, 2023** #### **10. INCOME TAXES** The Company is a taxed as a partnership for federal and state income tax purposes. The Company's recorded tax expense for the year ended June 30, 2023 includes taxes due to New York City (NYC) for unincorporated business tax (UBT) and Illinois for personal property tax replacement. The Company had no net operating loss carryforwards nor any tax credit carryforwards available to offset future taxable income. The Company does not anticipate any significant changes to its total unrecognized tax liabilities in the next 12 months. Income taxes are provided under the provision of ASC Section 740, "Income Taxes". As required by the uncertain tax provision guidance, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant authority would more likely than not uphold the position following an audit. There are no uncertain tax positions recorded in the financial statements. If there was any interest or penalties related to uncertain tax positions, it would be recorded in tax expense. Tax years 2020 – 2023 remain subject to examination by taxing authorities. #### **Deferred Tax Assets** The Company recognizes deferred tax assets for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. It should be noted that deferred tax assets and liabilities arose primarily due to the Company's tax obligation pursuant to NYC's UBT. Temporary differences and carry-forwards, which give rise to deferred tax assets, consist of the following as of June 30, 2023: | Deferred tax assets | | |---------------------------------|--------------| | Depreciation | \$
10,705 | | Amortization | 12,118 | | Allowance for doubtful reserves | 5,479 | | Accrued expenses | 5,000 | | Lease liabilities | 8,684 | | ROU Asset | (7,314) | | Deferred rent | 12,500 | | Total deferred tax assets | \$
47,172 | {13}------------------------------------------------ **Notes to Statement of Financial Condition June 30, 2023** > The Company has reviewed all its deferred tax assets to assess whether a valuation allowance should be established. The Company recognizes tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. The Company's management believes it is more likely than not the deferred tax assets will be realized. ### **11. 401(K) PLAN** The Company participates in a 401(k) Retirement Plan (Plan) administered by WSI for eligible employees. Under the terms of the Plan, participants can contribute a portion of their annual compensation, subject to limitations provided by the Internal Revenue Code. The Company can make a discretionary matching contribution to the Plan on behalf of participating employees. For the plan year ended December 31, 2023, the Company made a discretionary matching contribution. #### **12. SUBSEQUENT EVENTS** The Company has evaluated subsequent events for adjustment to or disclosure in the financial statements through September 20, 2023, the date the financial statements were issued, and has not identified any reportable or disclosable events not otherwise reported in these financial statements or the notes thereto. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.