# BHK SECURITIES, LLC X-17A-5 (2021-03-24) — Broker-dealer annual report
- Company: BHK SECURITIES, LLC
- Form: X-17A-5
- Filed: 2021-03-24
- Period: 2020-12-31
- Accession: 0001352126-21-000001
- CIK: 1352126
- File #: 8-67236
- Material weakness: No
- Auditor: DAVID LUNDGREN & COMPANY, CERTIFIED PULIC ACCOUNTANTS, CHARTERED
- Auditor location: OLATHE, KS
- Contact: MEREDYTH R. HAZZARD
- Phone: 205-322-2025
- Signed by: MEREDYTH R. HAZZARD (CEO)
Original filing: https://www.sec.gov/Archives/edgar/data/1352126/000135212621000001/bhksecaudit.pdf
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UNITED STATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549
OMB Number: 3235-0123 OMB APPROVAL Expires: October 31, 2023 Estimated average burden hours per response ...... 12.00
SEC FILE NUMBER
8-67236
# **ANNUAL AUDITED REPORT FORM X-17 A-5 PART Ill**
FACING PAGE
Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder
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{2}------------------------------------------------
**BHK** SECURITIES, LLC FINANCIAL STATEMENTS AND SUPPLEMENT ARY INFORMATION YEAR ENDED DECEMBER 31, 2020
{3}------------------------------------------------
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{4}------------------------------------------------
#### DAVID LUNDGREN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS, CHARTERED SOS NORTH MUR·LEN ROAD OLATHE, KANSAS 66062
DAVID 8.1.UNDGREN, MBA, CPA CATHERINE LUNDGREN MBA, CPA
TELEPHONE (913)782-9530 FACSIMILE (913) 782-9564
### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of BHK Securities, LLC
### Opinion on the Financfal Statements
We have audited the accompanying statement of financial condition of BHK Securities, LLC as of December 31, 2020, the related statements of operations, changes in member's equity, and cash flows for the year then ended, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of BHK Securities, LLC as of December 31, 2020, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
#### Basis for Opinion
These financial statements are the responsibility of BHK Securities, LLC's management. Our responsibility is to express an opinion on BHK Securities, LLC's financial statements 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 BHK Securities, LLC 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 statements are 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 statements, 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 statements. 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 statements. We believe that our audit provides a reasonable basis for our opinion.
#### · Supplemental Information
Schedule I, 11, and Ill have been subjected to audit procedures per.formed in conjunction with the audit of BHK Securities, LLC's financial statements. The supplemental information ·is the responsibility of BHK Securities, LLC's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental Information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, Is presented in conformity with 17 C.F.R. §240.17a-5. In our opinion, the Schedule I, II, and Ill are fairly stated, in all material· respects, in relation to the financial statements as a whole.
*P*�*/.-f=.(l*
We have served as BHK Securities LLC's auditor since 2017. Olathe, Kansas
March 22, 2021
{5}------------------------------------------------
## STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2020
## **ASSETS**
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M
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Y | \$
3
9
5
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1
1 |
See notes to financial statements
{6}------------------------------------------------
### STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020
| S
R
E
V
E
N
U
E | |
|------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|
| A
d
i
F
so
r
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4
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3
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| M
l
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ri
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tu
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s | 2
9
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3
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| C
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m
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| I
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| | 1
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| nd
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4 |
| B
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l
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s | 2
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| O
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| T
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| | 4
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| | |
| C
O
N
E
T
I
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M
E | \$
7
3
2
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7
8 |
See notes to financial statements
{7}------------------------------------------------
### STATEMENT OF CHANGES IN MEMBER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020
| M
b
r'
E
i
1
2
02
0
t
J
e
m
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,
, | 3
6
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5
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|--------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|
| D
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to
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a | (
)
7
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| N
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e | 73
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| M
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,
, | \$
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9
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1
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See notes to financial statements
{8}------------------------------------------------
### STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2020
| C
S
O
S
O
O
G
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S
A
H
F
L
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F
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M
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A
T
IN
A
T
IV
IT
IE | |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
| N
t
in
e
co
m
e | \$
73
2
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78 |
| A
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le
in
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st
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) |
| f
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| A
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) |
| A
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| C
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| C
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R | \$
28
, 1
5
5
7 |
See notes to financial statements
- 8 -
{9}------------------------------------------------
## BHK SECURITIES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
## 1. ORGANIZATION AND NATURE OF BUSINESS
BHK Securities, LLC (the Company) is an introducing Broker Dealer that was organized in 2006 as an LLC with perpetual duration for the purpose of engaging in the business of effecting transactions in securities for the accounts of others, effecting transactions in securities for the Company's own account, to act as intermediary between buyers and sellers, to charge commissions, to act as an agent when buying securities to act as a principal when selling securities and to engage in all other activities related incidental thereto. The Company is a broker-dealer registered with the Securities and Exchange Commission (SEC) and is a member of various exchanges and the Financial Industry Regulatory Authority ("FINRA"). The Company is a wholly owned subsidiary of BHK Holdings, LLC (the Parent).
### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
*Basis of Presentation -* The Company is engaged in a single line of business as a securities broker-dealer, which comprises several classes of services. The financial statements are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
*Use of Estimates -* The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
*Cash and Cash Equivalents -* For the purposes of the Statement of Cash Flows, the Company considers all highly liquid investments, with an original maturity of three months or less, that are not held for sale, to be cash equivalents. From time to time, the Company may maintain cash balances with financial institutions in excess of federally insured limits.
*Receivable from Clearing Organization -* The Company reports receivables at net realizable value. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables and once these receivables are determined to be uncollectible, they are written-off through a charge against an existing allowance account or against earnings. The Company is also required, by agreement, to maintain at all times a broker's deposit account with its clearing broker in the amount of \$100,000.
### *Revenue Recognition -*
On January 1, 2018, the Company adopted ASU 2014-09 *Revenue from Contracts with Customers* and all subsequent amendments to the ASU (collectively, "ASC 606"), which
{10}------------------------------------------------
creates a single framework for recognizing revenue from contracts with customers that fall within its scope.
Revenue is measured based on a consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over goods or service to a customer. Services within the scope of ASC 606 include advisory fee, mutual fund distribution fees and brokerage commissions.
#### *Revenue from Contracts with Customers*
#### Investment Advisory Fees:
The Company earns Investment Advisory Fees from its contracts with brokerage customers to manage assets for investment, and/or to transact on their accounts. The Investment Advisory Fees are primarily earned over time as the Company provides the contracted monthly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end.
#### Brokerage Commissions:
The Company earns brokerage fees from its contracts with brokerage customers to transact on their account. Fees are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e., the trade date. This includes riskless principal (government and corporate bonds) transactions in which the company receives a buy order from a customer and the Company purchases the security from another person or entity to offset the sale to the customer. Company buys the bond at a lower price than it sells it. The riskless principal revenue is earned at the time the transaction is executed.
#### Mutual Fund distribution fees:
Mutual Funds or pooled investment vehicles (collectively, "funds") have entered into agreements with the Company to distribute/sell its shares to investors. Fees are paid up front and over time ( l 2b- l fees) on the basis of a contractual rate applied to the monthly or quarterly market value of the fund (that is, net asset value), the fund may also pay, upon investor exit from the fund (that is, a contingent deferred sales charge), or as a combination thereof. Revenue is recognized monthly as services are provided.
*Income taxes -* The Company is a limited liability company. Accordingly, under the Internal Revenue Code, all taxable income or loss flows through to its member. Therefore, no income tax expense or liability is recorded in the accompanying financial statements.
The Company follows guidance pertaining to accounting for uncertainty in income taxes. As a result of this adoption, management assessed whether there were any uncertain tax positions which may give rise to income tax liabilities and determined that there were no such matters requiring recognition in the accompanying financial statements. The Company files income tax returns in the U.S. federal jurisdiction and the state of Alabama. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2013.
{11}------------------------------------------------
*Evaluation of subsequent events -* Management has assessed subsequent events through March 22, 2020, the date the financial statements were available to be issued and concluded no events or transactions occurred during that period requiring recognition or disclosure.
*Accounting Standards -* The Company is evaluating new accounting standards and will implement as required.
#### 3. TRANSACTIONS WITH CLEARING ORGANIZATION
The Company has entered into a clearing agreement with Wells Fargo Clearing Services, LLC under the trade name First Clearing. Under the terms of this agreement, the Company utilizes the clearing, execution and other services provided by First Clearing, (FC). Specific services include execution of orders for the Company's customers whose cash or margin accounts have been accepted by FC; generation, preparation and mailing of confirmations of customer accounts; preparation and mailing of summary monthly or quarterly statements; settlements of contracts and transactions in securities; engagement in all cashiering functions for the customer accounts; construction and maintenance of books and records for all transactions executed and cleared through FL; and, reporting of orders entered into FC's order entry system by FC on behalf of the Company in accordance with the FINRA Order Audit Trail System (OATS). Under this agreement, the Company is required at all times to maintain a minimum net capital of \$100,000, as computed in accordance with Rule l 5c3-1. The Company was in compliance with respect to this agreement at December 31, 2020.
#### 4. RELATED PARTY TRANSACTIONS
The Company is a wholly owned subsidiary of BHK Holdings, LLC. In connection with this relationship, the Company and its Parent have executed an expense sharing agreement whereby the Company receives a monthly allocation of expenses incurred by the Parent on its behalf. During 2020, the Company incurred expenses under this agreement totaling \$183,174. The Company owed its Parent Company \$0.00 related to these intercompany transactions. Included in these amounts is a provision for rent payments. The total amount of rent expensed by the Company for the year ended December 31, 2020 amounted to \$46,634. The Company's portion of future minimum rent payments as of December 31, 2020 is as follows:
$$\text{2021} \qquad \frac{46,477}{\text{\underline{S}} \quad 46,477}$$
#### 5. EMPLOYEE BENEFIT PLANS
The Company participates in the Parent Company's 40lk profit sharing retirement plan covering all employees who meet eligibility requirements. The Company's annual discretionary contribution to the plan is based on employee eligible earnings and results of the
{12}------------------------------------------------
Company's operations. The Company expensed \$0 for contributions to the plan on behalf of its employees for the year ended December 31, 2020.
### **6. NET CAPITAL REQUIREMENTS**
The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule l 5c3- l ), which requires the maintenance of minimum net capital and requires the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 ( and the rule of the "applicable" exchange also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1). At December 31, 2020, the Company had net capital of \$364,735 which was \$264,735, in excess of its required minimum net capital of \$100,000. The Company's percentage of aggregate indebtedness to net capital was 0.86% for 2020.
### **7. COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION**
The Company is exempt from the provisions of Rule 15c3-3 under the Security Exchange Act of 1934 pursuant to paragraph (k)(2)(ii) of the rule.
## **8. INFORMATION RELATING TO THE POSSESSION OR CONTROL REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION**
The Company is exempt from the provisions of Rule 15c3-3 under the Security Exchange Act of 1934 pursuant to paragraph (k)(2)(ii) of the rule.
### **9. CONTINGENCIES & CLAIMS**
The Company does not have any commitments, guarantees, or contingencies, including arbitration or other litigation claims that may result in a loss or a future obligation.
{13}------------------------------------------------
### SUPPLEMENTARY INFORMATION
{14}------------------------------------------------
### SCHEDULE I BHK SECURITIES, LLC
### COMPUTATION OF NET CAPITAL UNDER RULE 15c3-1 OF THE SECURITIES AND EXCHANGE COMMISSION ACT OF 1934 AS OF DECEMBER 31, 2020
### NET CAP IT AL:
| al
ck
h
ol
de
T
'
ui
ot
to
t
s
rs
eq
y | \$
37
9
41
0 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|
| L
al
lo
ab
le
et
es
s
no
n
w
a
ss
s:
th
O
et
er
a
ss
s | (6
.9
13
) |
| N
it
al
b
ef
ha
ir
et
ts
c
ap
or
e
cu | 37
2
,4
97 |
| ha
ir
L
ts
es
s
cu | (7
)
,7
62 |
| N
it
al
et
c
ap
in
im
M
it
al
ui
d
et
um
n
r
eq
re
c
ap | 36
4
,7
35
10
0
00
0 |
| E
it
al
et
x
ce
ss
n
c
ap | \$
26
4
,7
35 |
| in
de
bt
ed
al
li
ab
il
it
ie
l
ri
ti
A
b
gh
te
t
ot
t
gg
re
ga
ne
ss
s,
es
s
se
cu
es
ou
,
nd
A
it
ie
ld
ha
d
t
t
- s
ec
ur
s
so
no
ye
pu
rc
se
, | \$
31
2
5 |
| io
f
in
de
bt
ed
R
pi
l
at
t
t
at
ta
o
ag
gr
eg
e
ne
ss
o
ne
ca | 0.
86
% |
NOTE: There are no material differences between the above computation and the Company's corresponding amended unaudited Part II of Form X-17 A-5 as of December 31, 2020.
{15}------------------------------------------------
### SCHEDULE II COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION AS OF DECEMBER 31, 2020
The Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934, pursuant to paragraph (k)(2)(ii) of the Rule, and was in compliance with the conditions of the exemption at December 31, 2020.
## SCHEDULE III INFORMATION RELATING TO THE POSSESSION OR CONTROL REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION AS OF DECEMBER 31, 2020
The Company is exempt from the provisions of Rule l 5c3-3 under the Securities Exchange Act of 1934, pursuant to paragraph (k)(2)(ii) of the Rule, and was in compliance with the conditions of the exemption at December 31, 2020.
{16}------------------------------------------------
#### DAVID LUNDGREN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS, CHARTERED 505 NORTH MUR·LEN ROAD OLATI-IE, KANSAS 66062.
OAVIC B, LUNCGREN, MBA, CPA CATHERINE LUNDGREN MBA, CPA
TELEPHONE (913) 782·9530 FACSIMILE (9 f 3) 782-9564
#### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of BHK: Securities, LLC
We have reviewed management's statements, included in the accompanying Exemption Report for year ended December 31, 2020, in which (1) BHK Securities, LLC identified the following provisions of 17 C.F.R. §15c3-3(k) under which BHK Securities, LLC claimed exemptions from 17 C.F.R. §240.15c3-3: (k}(2)(i) and (k)(2)(ii) (exemption provisions) and (2) BHK Securities, LLC stated that BHK Securities, LLC met the identified exemption provisions throughout the most recent fiscal year without exception. BHK Securities, LLC's management is· responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight
Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about BHK Securities, LLC's compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's
statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(2)(i) or (k)(2)(ii) of Rule 15c3-3 under the Securities Exchange Act of 1934.
*o:{?:;;!#HC*
March 22, 2021
{17}------------------------------------------------
## **Exemption Report**
**BHK Securities, LLC** (the "Finn") is a registered broker-dealer subject to Rule l 7a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240. l 7a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. § 240.17a-5(d)(l) and (4). To the best of its knowledge and belief, the Finn states the following:
Throughout the fiscal year ended December 31, 2020, the Finn met the identified exemptions listed below:
- The Finn claimed an exemption to SEC Rule 15c3-3 pursuant to Paragraph k(2)(i); and
- The Firm claimed an exemption to SEC Rule l 5c3-3 pursuant to paragraph k(2)(ii).
The Firm met the exemptions identified above throughout the most recent fiscal year without exception.
I, Meredyth R. Hazzard, swear (or affirm) that, to my best knowledge and belief, this Exemption Report is true and correct.
Meredyth R. Hazzard CEO/FINOP/PFO/POO March 22, 2021
{18}------------------------------------------------
DAVID B. LUNDGREN, MBA, CPA CATHERINE LUNDGREN, MBA, CPA
TELEPHONE (913) 782-9530 FACSIMILE (913) 782·9564
### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON APPL YING AGREED-UPON PROCEDURES
Board of Directors of BHK Securities LLC
We have performed the procedures included in Rule 17a-5( e )( 4) under the Securities Exchange Act of 1934 and with the Securities Investor Protection Corporation (SIPC) Series 600 Rules, which are enumerated below, which were agreed to by BHK Securities LLC (Company) and the SIPC, solely to assist you and the SIPC in evaluating the Company's compliance with the applicable instructions of the General Assessment Reconciliation (Form SIPC-7) for the year ended December 31, 2020. Management of the Company is responsible for its Form SIPC-7 and for its compliance with those requirements. This agreed-upon procedures engagement was conducted in accordance with attestation standards of the Public Company Accounting Oversight Board (United States) and in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.
The procedures we performed and our findings are as follows:
- 1) Compared the listed assessment payments in Form SIPC-7 with respective bank disbursement records entries, noting no differences;
- 2) Compared the Total Revenue amount reported on the Annual Audited Report Form X-17A-5 Part Ill for the year ended December 31, 2020 with the Total Revenue amount reported in Form SIPC-7 for the year ended December 31, 2020, noting no differences;
- 3) Compared any adjustment� reported in Form SIPC-7 with supporting schedules and working papers, noting no differences;
- 4) Recalculated the arithmetical accuracy of the calculations reflected in Form SIPC-7 and in the related schedules and working papers supporting the adjustments, noting no differences; and
- 5) Compared the amount of any overpayment applied to the current assessment with the Form SIPC-7 on which it was originally computed, noting no differences.
We were not engaged to, and did not conduct an examination, the objective of which would be the expression of an opinion on compliance with the applicable instructions of the Form SIPC-7. Accordingly, we do not express such· an opinion. Had we performed additional procedures, other matters might have
come to our attention that would have been reported to you. This report is intended \$01ely for the information and use of the specified parties listed above and is not intended to be and should not be used by anyone other than these specified parties.
�*?2::J*�*/l*
March 22, 2021
{19}------------------------------------------------
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