# RAINE SECURITIES LLC X-17A-5 (2024-03-19) — Broker-dealer annual report - Company: RAINE SECURITIES LLC - Form: X-17A-5 - Filed: 2024-03-19 - Period: 2023-12-31 - Accession: 0001341962-24-000002 - CIK: 1341962 - File #: 8-67121 - Type: Broker-dealer - Material weakness: No - Auditor: Deloitte & Touche LLP - Auditor location: New York, NY - Contact: Brandon Gardner - Phone: 212-603-5500 - Signed by: Jeffrey A. Sine (Co-Chief Executive Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1341962/000134196224000002/rs2023publ.pdf --- {0}------------------------------------------------ # RAINE SECURITIES LLC (SEC I.D. No. 8-67121) STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2023 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}------------------------------------------------ | State of New York - County of New York as | | |------------------------------------------------|------| | Subscribed and affirmed before me Aline Scheck | | | This 15 day of March | 2024 | | By Jeffrey A. Give | | | Personally known XOR Produced Identification | | {2}------------------------------------------------ # Table of Contents # This filing\*\* contains (check all applicable boxes): - (a) Statement of financial condition. - (b) Notes to consolidated statement of financial condition. - (c) Statement of operations. - (d) Statement of cash flows. - (e) Statement of changes in member's equity. - (f) Statement of changes in liabilities subordinated to claims of creditors. - (g) Notes to financial statements. - (h) Computation of net capital under 17 CFR 240.15c3-1. - (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 of security-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 requirements for customers under 17 CFR 240.15c3- 3. - (n) Information relating to possession or control requirements for 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 for subsidiaries 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. - (r) Compliance report in accordance with 17 CFR 240.17a-5. - (s) Exemption report in accordance with 17 CFR 240.17a-5 (Filed separately). - (t) Independent public accountant's report based on an examination of the statement of financial condition. - (u) Independent public accountant's report 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. - (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable (Filed separately). - (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable (Filed separately). - (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: Facing Page {3}------------------------------------------------ # Page(s) | Report of Independent Registered Public Accounting Firm
1 | | |--------------------------------------------------------------|--| | Financial Statements | | | Statement of Financial Condition 2 | | | Notes to Financial Statements 3–8 | | {4}------------------------------------------------ # REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Member and Management of Raine Securities LLC # Opinion on the Financial Statement We have audited the accompanying statement of financial condition of Raine Securities LLC (the "Company") as of December 31, 2023, 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, 2023, 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. March 15, 2024 We have served as the Company's auditor since 2013. {5}------------------------------------------------ # Raine Securities LLC Statement of Financial Condition As of December 31, 2023 | Assets | | |---------------------------------------------|------------------| | Cash | \$
24,113,701 | | Accounts receivable, net | 1,026,687 | | Accrued revenue | 166,667 | | Receivable from affiliate | 3,026,890 | | Prepaid expenses | 312,258 | | Deposit with Clearing Firm | 54,724 | | Total assets | \$
28,700,927 | | Liabilities and Member's Equity | | | Accounts payable and other accrued expenses | \$
761,461 | | Deferred Revenue | 3,800,985 | | Due to affiliate | 1,618,502 | | Total liabilities | 6,180,948 | | | | | Member's equity | 22,519,979 | | Total Liabilities and Member's Equity | \$
28,700,927 | {6}------------------------------------------------ # 1. Organization Raine Securities LLC ("Raine Securities" or the "Company") is a limited liability company established in the state of Delaware on August 23, 2005. The Company is registered as a securities broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). Raine Securities is an indirect wholly owned subsidiary of The Raine Group LLC ("Raine Group"). Raine Advisors LLC ("Raine Advisors") is the sole member of Raine Securities. The Company provides financial advisory services, acts as agent in the private placement of securities and acts as underwriter and selling group participant (for corporate securities other than mutual funds). The Company does not carry securities accounts for customers or perform custodial services and all other business activities are limited to receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients, participating in private placements of securities, participating in underwriting of securities, and acting as a 15a-6 chaperone to a foreign broker dealer. The Company claims exemption from Rule 15c3-3 under Section (k)(2)(ii) of the Securities Exchange Act of 1934 and in accordance with Footnote 74 of the SEC Release No. 34- 70073 adopting amendments to 17 C.F.R. § 240.17a-5. # 2. Summary of Significant Accounting Policies #### Basis of Presentation The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The following is a summary of the significant accounting policies followed by the Company. #### Cash Cash consists of cash held by First Republic Bank and HSBC Bank. #### Accounts Receivable Accounts receivable is presented net of allowance for credit losses of \$5,559,442 for balances not partially or fully collectable. The Company considers a receivable uncollectible when, based on current information or factors such as age and creditworthiness it is probable that the Company will not collect, in full, the receivable balance. An allowance is established when management believes that collection, after considering relevant factors, is in doubt. During the year-ended December 31, 2023, the company wrote-off \$4,027,571 after concluding the reserves were no longer collectable. #### Accrued Revenue Accrued revenue is recorded for revenue earned, but not yet invoiced. #### Fair Value of Financial Assets and Liabilities The Company's financial assets and liabilities are carried at cost which approximates fair value. The Company's financial assets and liabilities include cash, receivables, accrued revenue, and certain other assets and liabilities. The carrying value of these financial assets and liabilities has been determined to approximate fair value since they are short-term in nature. #### Revenue and Expense Recognition The Company recognizes revenue when there is a transfer of services to customers in an amount to which the Company expects to be entitled in exchange for those services. {7}------------------------------------------------ The services provided under contracts with customers include transaction-related advisory services, fairness opinion and valuation services and underwriting services, each of which are typically identified as a separate performance obligation in contracts that contain more than one type of service. #### Transaction-related Advisory Services The Company provides investment advisory services on strategic matters including mergers and acquisitions, private placements and similar strategic transactions. In some circumstances, and as a function of the engagement letter terms, the Company may receive fixed retainer fees for financial advisory services concurrent with, or soon after, the execution of the engagement letter or over the course of the engagement, where the engagement letter will specify a future service period associated with those fees. The Company may also receive announcement fees upon announcement of a transaction in addition to success fees upon closing of a transaction or another defined outcome, both of which represent variable consideration. This variable consideration will be included in the transaction price, as defined, and recognized as revenue to the extent that it is probable that a significant reversal of revenue will not occur. When assessing probability, the Company applies careful analysis and judgment to the remaining factors necessary for completion of a transaction, including factors outside of our control. A transaction can fail to be completed for many reasons which are outside of our control, including failure of parties to agree upon final terms with the counterparty, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals, as well as adverse market conditions. With respect to retainer, announcement and success fees, there are no distinct performance obligations aside from advisory activities, which are generally focused on achieving a milestone (typically, the announcement and/or the closing of a transaction). Although there may be individual advisory activities provided in a typical contract, the individual activities are not distinct within the context of the contract; rather the performance of these individual activities helps to fulfill one overall performance obligation to deliver advisory services to the customer. The Company recognizes revenue from these services when or as its performance obligations are fulfilled. These advisory services are provided over time throughout the contract period and the Company's clients are continuously benefitting from its counsel, and, accordingly, over time revenue recognition matches the transfer of such benefits. In circumstances in which retainer fees are received in advance of services, these fees are initially recorded as deferred revenue (a contract liability) and subsequently recognized as advisory fee revenue during the applicable time period within which the service is rendered. Announcement fees for advisory services are recognized upon announcement (the point at which it is determined that the reversal of revenue is not probable) and all other requirements for revenue recognition are satisfied. A portion of the announcement fee may be deferred based on the services remaining to be completed, if any. Success fees for advisory services, such as merger and acquisition advice, are recognized when it is determined that the reversal of revenue is not probable and all other requirements for revenue recognition are satisfied, which is generally at closing of the transaction. Payments for advisory services are generally due upon completion of a specified event or, for retainer fees, periodically over the course of the engagement. The Company recognizes accounts receivable between the date of completion of the event and payment by the customer. # Fairness Opinion and Valuation Services Although the Company may provide fairness opinion and valuation services in conjunction with and in the same contract as other transaction-related advisory services, these services are considered to be a distinct performance obligation in such contracts since the opinion is rendered separate from {8}------------------------------------------------ any other advisory service and could be obtained separately. The associated fee for these services is fixed and represents the standalone selling price of the services. The fee is recognized at the point in time at which the opinion is delivered rather than over the period of time during which the associated services are being performed because the customer does not simultaneously receive and consume the benefit of the Company's performance activities as it compiles the opinion but rather receives the benefit upon delivery of the opinion itself. Payments for these services are generally due upon delivery of (or upon the Company's communicating to its customer the Company's readiness to deliver) the opinion. The Company recognizes a receivable between the date of delivery of the opinion and payment by the customer. ### Underwriting Services The Company provides underwriting services as part of an underwriting syndicate where it is not the lead investment bank. The completion of the offering of securities is the performance obligation in these types of transactions. Once the Company has committed to the offering whether it is able to sell the securities does not impact the client and the Company recognizes revenue at the point in time when the offering is completed. Payments for underwriting services are generally due upon completion of the offering and any over-allotment options. The Company recognizes underwriting revenue gross of any underwriting expense reimbursements. ### Income Taxes The Company is a single-member limited liability company that, to the extent permitted by law, is treated as a "disregarded entity" for federal and state income tax purposes. The Company is included in the US federal income tax return for Raine Group. Raine Securities accounts for income taxes in accordance with ASC 740, "Income Taxes" ("ASC 740"). ASC 740 provides guidance for the financial accounting and reporting for income taxes, and requires that when a member of a consolidated group issues separate financial statements, the consolidated amount of current and deferred tax expense be allocated to such member using a method that is systematic, rational and consistent with the broader principles of ASC 740. ASC 740 also provides guidance regarding how certain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires evaluation of tax positions taken or expected to be taken in the course of preparing the tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The Company concluded that it does not have any unrecognized tax benefits or any additional tax liabilities for any uncertain positions as of December 31, 2023. The earliest tax year of Raine Group open for examination by tax authorities is 2020. #### Use of Estimates The preparation of financial statements in conformity with US 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 financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. ASC Topic 460, "Guarantees" requires the disclosure of the Company's representations and warranties which may provide general indemnifications to others. The Company in its normal course of business may enter into other legal contracts that contain a variety of these representations and warranties that provide general indemnifications. The Company's maximum exposure under these arrangements is unknown, as claims may be unasserted. However, based on its experience, the Company expects the risk of loss to be remote. {9}------------------------------------------------ # 3. Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate). The new guidance is effective for the Company for annual periods beginning after December 15, 2024. The Company does not expect the new guidance will have a material impact on the financial statements. # 4. Revenue from Contracts with Customers The Company earned its advisory revenue from services performed over time, services performed at a point in time and client reimbursements for the year ended December 31, 2023. The opening and closing balances of the Company's contract assets, deferred revenue (contract liabilities), and receivables are as follows; | | Receivables (1) | | | | Delemed Revenîre
Contract Asset (2) (Contract Liability) (2) | | |----------------------|-----------------|-----------|---|--|-----------------------------------------------------------------|-------------| | Opening (1/1/2023) | S | 175.000 | A | | F | | | Increase/(Decrease) | | 851.687 | | | | (3.800.985) | | Closing (12/31/2023) | | 1.026.687 | | | | (3.800.985) | (1) Receivables are presented net of allowance for credit losses. Refer to "Accounts Receivable" within footnote 2 for further details. (2) The difference between the opening and closing balances of the Company's contract assets and contract liabilities primarily results from the timing difference between the Company's performance and customers' payment. The Company's contract assets represent arrangements in which revenue has been recognized (i.e., services have been transferred to the customer), but customer payment is contingent on a future event. The Company's contract liabilities represent arrangements in which payment has been received from the client, but the performance obligation is not yet satisfied. Generally, performance obligations under client arrangements will be settled within one year. In accordance with ASC 606-10-50-14, the Company has elected to apply the practical expedient and does not disclose the expected timing and amount of revenue remaining related to such contracts. During the year ended December 31, 2023, the majority of revenue recognized was related to performance obligations that were partially satisfied in prior periods, mainly due to constraints on variable consideration in prior periods being resolved. Such amounts related to the Company's performance obligations of providing Transaction-related Advisory Services. # 5. Concentration of Credit Risk At times, the Company may maintain deposits in federally insured financial institutions in excess of the federally insured ("FDIC") limit of \$250,000. On December 31, 2023, the Company had \$23,977,489 in cash held at First Republic Bank and \$136,212 in cash held at HSBC Bank. The Company may be exposed to credit risk regarding its accounts receivable. The Company routinely assesses the financial strength of its clients and, based upon factors surrounding the credit risk of its clients, believes that its concentration and credit risk exposure with regard to its accounts {10}------------------------------------------------ receivable is limited. There is no collateral held for the accounts receivable as of December 31, 2023. Three clients accounted individually for more than 5% of client related receivable as of December 31, 2023. These clients represented in the aggregate 93% of gross client related receivable as of December 31, 2023. # 6. Expense Sharing Agreement On April 6, 2010, Raine Securities and Raine Group entered into an Administrative Services Agreement, as amended and restated (the "Expense Sharing Agreement"). In accordance with the Expense Sharing Agreement, the Company reimburses Raine Group for a proportional share of salaries, year-end cash bonus and related expenses of personnel employed by Raine Group performing services on behalf of Raine Securities, as well as a proportional share of certain other costs and expenses paid on behalf of Raine Securities, including office space, utilities, expenses for business travel and entertainment, certain insurance premiums and other general, administrative and overhead expenses. The parties to the Expense Sharing Agreement agree that Raine Securities has no obligation to any third party for the services that Raine Group provides. Raine Group is solely responsible for any amounts owed relating to costs incurred by it in providing services on behalf of Raine Securities. Refer to Note 8 for further discussion. # 7. Commitments and Contingencies The Company's customers' securities transactions are introduced on a fully-disclosed basis to its clearing broker. The clearing broker carries all of the customer accounts and is responsible for collection and payment of funds and receipt and delivery of securities relative to customer transactions. These transactions may expose the Company to off-balance-sheet risk, wherein the clearing broker may charge the Company for any losses it incurs in the event that customers may be unable to fulfill their contractual commitments and margin requirements are not sufficient to fully cover losses. As the right to charge the Company has no maximum amount and applies to all trades executed through the clearing broker, the Company believes there is no maximum amount assignable to this right. The Company has the right to pursue collection or performance from the counterparties who do not perform under their contractual obligations. The Company seeks to minimize this risk through procedures designed to monitor the creditworthiness of its customers and to ensure that customer transactions are executed properly by the clearing broker, subject to the credit risk of the clearing broker. The Company maintains a deposit of \$54,724 with its clearing broker. For the year ended December 31, 2023, the Company did not conduct any customer securities transactions. From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. There are no legal actions, pending, or to management's knowledge, threatened against the Company that the Company believes will have a material adverse effect on our business or financial statements. # 8. Related-Party Transactions From time to time, the Company renders advisory services to members of Raine Holdings LLC, the ultimate parent company of Raine Group. #### Due to and from Affiliate During the year ended December 31, 2023, Raine Securities incurred expenses under the Expense Sharing Agreement and \$303,160 is included in Due to affiliate on the Statement of Financial Condition. {11}------------------------------------------------ During the year ended December 31, 2023, in connection with transfer pricing, the Company allocated revenue to Raine Advisors Limited, an England-based affiliate of Raine Group and to Raine Europe SAS, a France-based affiliate of Raine Group. During the year ended December 31, 2023, in connection with transfer pricing, the Company was allocated revenue from Raine Advisors Limited. As of December 31, 2023, the Company is owed \$2,000,262 in connection with transfer pricing. Such amount is included in Receivable from affiliate on the Statement of Financial Condition. As of December 31, 2023, the Company owes \$90,644 to affiliates of Raine Group, in connection with shared services. Such amount is included in Due to affiliate on the Statement of Financial Condition. As of December 31, 2023, the Company owes \$203,505 to Raine Advisors in connection with the New York City UBT and shared services. Such amount is included in Due to affiliate on the Statement of Financial Condition. Refer to Income Taxes in Note 2 for further discussion. # 9. Member's Equity For the year ended December 31, 2023, Raine Advisors made capital withdrawals of \$91,100,000. # 10. Net Capital Requirements As a registered broker-dealer, Raine Securities is subject to the SEC Uniform Net Capital Rule ("Rule 15c3-1") of the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital. Under Rule 15c3-1 Alternative Standard under Section (a)(1)(ii), the minimum net capital requirement is \$250,000. On December 31, 2023, Raine Securities had net capital of \$17,987,477, see supplemental schedule, which was \$17,737,477 above its required net capital. # 11. Subsequent Events The Company evaluated subsequent events or transactions that occurred from January 1, 2024, through March 15, 2024, the date the financial statements were issued. Raine Advisors made \$10,000,000 withdrawal of profits on February 2, 2024, and \$20,000,000 withdrawal of profits on March 11, 2024. The Company recorded a benefit of \$4,556,524 in March 2024 after collection of an accounts receivable balance that was reserved in 2023 due to management's belief that the collection of the account was in doubt. There were no other subsequent events during this period that require adjustment to or disclosure in the financial statements. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.