# TELSEY ADVISORY GROUP LLC X-17A-5 (2021-02-26) โ€” Broker-dealer annual report - Company: TELSEY ADVISORY GROUP LLC - Form: X-17A-5 - Filed: 2021-02-26 - Period: 2020-12-31 - Accession: 0001443209-21-000001 - CIK: 1443209 - File #: 8-67988 - Material weakness: No - Auditor: EisnerAmpner - Auditor location: New York, NY - Contact: Jerry Arzu - Phone: 2125844614 - Signed by: Jerry Arzu (COO/CFO) Original filing: https://www.sec.gov/Archives/edgar/data/1443209/000144320921000001/2020tagshort.pdf --- {0}------------------------------------------------ UNITEDSTATES SECURITIES ANDEXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-0123 Expires: Estimated average burden hours per response.. . . . . . 12.00 # ANNUAL AUDITED REPORT FORM X-17A-5 PART III | | SEC FILE NUMBER | |----|-----------------| | 8- | | FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING 01/01/2020 | | | AND ENDING 12/31/2020 | | |------------------------------------------------------------------------------------------|--------------------------------------------------------|---------|--------------------------------|--| | | MM/DD/Y Y | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: TELSEY ADVISORY GROUP | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
555 FIFTH AVE | | | FIRM I.D. NO. | | | | (No. and Street) | | | | | NEW YOBKK | NY | | 10017 | | | (City) | (State) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
LEIGH EKSTEIN | | | 212.584.4604 | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | EISNERAMPER LLP | | | | | | | (Name - if individual, state last, first, middle name) | | | | | 733 THIRD AVENUE | NEW YORK | NY | 10017 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE: | | | | | | Certified Public Accountant | | | | | | Public Accountant | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | \*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent ma must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2) > Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. {1}------------------------------------------------ #### OATH OR AFFIRMATION #### LEIGH EKSTEIN , swear (or affirm) that, to the best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of TELSEY ADVISORY GROUP of DECEMBER 31 , 2020 Stature neither the company nor any partner, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows: Notary Public VICE CHAIRMAN Title IRIS SHERER Notary Public, State of New York No. 01SH5033569 Qualified in Bronx County This report \*\* contains (check all applicable boxes): - V (a) Facing Page. - > (b) Statement of Financial Condition. - (c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement of Comprehensive Income (as defined in ยง210.1-02 of Regulation S-X). - (d) Statement of Changes in Financial Condition. - (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. - (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. - (g) Computation of Net Capital. - (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. - (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. (i) A Reconciliation, including appropriate explanation of Net Capital Under Rule 15c3-1 and the Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. (k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of consolidation. - (1) An Oath or Affirmation. - (m) A copy of the SIPC Supplemental Report. (n) A report describing any material inadequacies found to have existed since the date of the previous audit. \*\* For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). {2}------------------------------------------------ STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTNG FIRM DECEMBER 31, 2020 {3}------------------------------------------------ # **CONTENTS** | Report of Independent Registered Public Accounting Firm | | |---------------------------------------------------------|-------------| | Financial Statement | | | Statement of Financial Condition | 2 | | Notes to Statement of Financial Condition | 3
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8 | {4}------------------------------------------------ ### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Members of Telsey Advisory Group LLC #### *Opinion on the Financial Statements* We have audited the accompanying statement of financial condition of Telsey Advisory Group LLC (the "Company") as of December 31, 2020 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 December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. #### *Basis for Opinion* This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting 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 2014. EISNERAMPER LLP New York, New York February 24, 2021 {5}------------------------------------------------ #### **STATEMENT OF FINANCIAL CONDITION** **December 31, 2020** | ASSETS | | |----------------------------------------------------------------------------------------------------|----------------------------------------| | Cash | \$
2,255,115 | | Cash segregated in compliance with federal regulations | 16,474 | | Accounts receivable | 606,324 | | Receivable from clearing broker, including clearing deposit of \$254,123 | 589,997 | | Securities pledged under subordinated loan agreement | 3,000,000 | | Property and equipment, net | 10,537 | | Security deposits and other assets | 194,772 | | | \$
6,673,219 | | LIABILITIES AND MEMBERS' EQUITY | | | Liabilities
Accounts payable and accrued expenses
Loan payable - paycheck protection program | \$
1,842,123
1,072,700
55,743 | | Deferred revenue
Due to Parent
Total liabilities | 596,265
3,566,831 | | Liabilities subordinated to claims of general creditors | 3,000,000 | | Members' equity | 106,388 | *See accompanying notes to the Statement of Financial Condition* {6}------------------------------------------------ ### **NOTES TO STATEMENT OF FINANCIAL CONDITION** #### **1. Nature of business and summary of significant accounting policies** #### *Nature of Business* Telsey Advisory Group LLC (the "Company") is a Limited Liability Company organized under the laws of the state of Delaware on May 28, 2008. The Company's operations consist primarily of generating and distributing financial equity research to institutions, providing investment banking services and institutional trading. The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). The Company became a registered broker-dealer in March 2009. #### *Basis of Presentation* The financial statement has been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). #### *Concentrations of Credit Risk* The Company maintains cash in bank accounts which, at times, may exceed federally insured limits. The Company is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf. #### *Accounts Receivable* The Company carries its accounts receivable at cost less an allowance for credit losses. #### *Allowance for Credit Losses* On January 1, 2020, the Company adopted ASC Topic 326, Financial Instruments - Credit Losses ("ASC 326"). ASC 326 impacts the impairment model for certain financial assets measured at amortized cost by requiring a current expected credit loss (CECL) methodology to estimate expected credit losses over the entire life of the financial assets as of the reporting date. The allowance for credit losses is based on the Company's expectation of the collectability of financial instruments carried at amortized cost, including fees receivable and receivable from clearing broker utilizing the CECL framework. The adoption of ASC 326 had no impact on the Company's opening members' equity. The Company's expectation is that the credit risk associated with fees receivable and receivable from clearing broker is that any client or financial institution with which it conducts business with is unable to fulfill its contractual obligations. Management monitors the credit risk of clients and currently there is not a foreseeable expectation of an event or change which could result in these receivables being unpaid based on individual facts and circumstances. The Company considers factors such as historical experience, credit quality, age of balances and current and future economic conditions that may affect the Company's expectation of the collectability in determining the allowance for credit losses. The Company has no allowance for credit losses as of and for the year ended December 31, 2020. #### *Revenue Recognition* The Company follows ASC 606- Revenue from Contracts with Customers ("ASC Topic 606"). The guidance requires that an entity recognize revenue to depict the transfer of promised goods or service to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires an entity to follow a five-step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when the entity satisfies a performance obligation. {7}------------------------------------------------ ### **NOTES TO STATEMENT OF FINANCIAL CONDITION** #### *Commissions* *Brokerage commissions.* The Company buys and sells securities on behalf of its customers and each time a customer enters into a buy or sell transaction, the Company charges a commission. Commissions and related clearing expenses are recorded on the trade date (the date that the Company fills the trade order by finding and contracting with a counterparty and confirms the trade with the customer). The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. #### *Direct Research* *Direct research revenue.* The Company compiles and distributes financial equity research reports to investment advisory institutions and financial business entities. Revenues are earned from direct billing related to the distribution of these reports. The Company believes that the date of distribution is the appropriate point to recognize revenue related to direct research, because that is when their performance obligation is satisfied, the pricing is agreed upon, and the benefit of information contained within the reports is available to the customer. Under some circumstances, the amount of consideration to be received for the delivery of reports is determined shortly subsequent to the date of delivery. In these cases, the Company recognizes revenue only when it is probable that a significant reversal of the cumulative amount of revenue recognized will not occur. #### *Investment Banking* *Underwriting fees.* The Company underwrites securities for business entities that want to raise funds through a sale of securities. Revenues are earned from fees arising from securities offerings in which the Company acts as an underwriter. Revenue is recognized on the trade date (the date on which the Company purchases the securities from the issuer) for the portion the Company is contracted to buy. The Company believes that the trade date is the appropriate point in time to recognize revenue for securities underwriting transactions as there are no significant actions which the Company needs to take subsequent to this date and the issuer obtains the control and benefit of the capital markets offering at that point. *M&A advisory fees.* The Company provides advisory services on mergers and acquisitions (M&A). Revenue for M&A contracts with customers is generally recognized at the point in time that performance obligations under the contract are satisfied (the closing date of the transaction) or the contract is cancelled. The Company believes the performance obligation for providing advisory services is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Company. Fee arrangements are based on a contractually agreed upon rate. Fees are received in accordance with the timeframe defined in each individual contract and are recognized as revenue at that time as they relate specifically to the services provided in that period, which are distinct from the services provided in other periods. #### *Significant Judgments* The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgement is required to determine whether performance obligations are satisfied at a point in time or over time and when to recognize revenue based on the appropriate measure of the Company's progress under the contract. {8}------------------------------------------------ ### **NOTES TO STATEMENT OF FINANCIAL CONDITION** #### *Receivable from Clearing Brokers* The Company has a clearing agreement with Mirae Asset Securities (USA), Inc. The Clearing Broker clears the Company's security transactions, and the Company is required to maintain certain deposits with the Clearing Broker. #### *Fair Value of Financial Instruments* At December 31, 2020, the carrying value of the Company's financial instruments, such as, cash, accounts receivable, receivable from clearing broker, and due from parent, approximate their fair values due to the nature of their short term maturities and categorized as Level 2 investments. #### *Property and Equipment* Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization is provided for utilizing the straight-line method over the estimated useful lives of the related assets as follows: | | Estimated | |-------------------------------|---------------| | Asset | Useful Lives | | Computer and office equipment | 3 years | | Furniture and fixtures | 5 years | | Website development | 3 years | | Leasehold improvements | Term of lease | {9}------------------------------------------------ ### **NOTES TO STATEMENT OF FINANCIAL CONDITION** #### *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 that affect the amounts disclosed in the statement of financial condition. Actual results could differ from those estimates. #### *Soft Dollar Payables* The Company ensures that all payments made on behalf of customers qualify for the safe harbor of Section 28(e) of the Securities Exchange Act of 1934 and that customers have appropriately disclosed and received approval from investors to pay for services outside of the Section 28(e) safe harbor. #### *Income Taxes* The Company is a limited liability company and is treated as a partnership for federal and state income tax purposes, accordingly, there is no provision for federal and state income taxes as the net income or loss of the Company is included in the income tax returns of the individual members. The Company is subject to New York City Unincorporated Business Tax. The Company follows an asset and liability approach to financial accounting and reporting for New York City Unincorporated Business Tax. Deferred income tax assets and liabilities are computed for the difference between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized. The determination of the Company's provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company's statement of financial condition only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the statement of financial condition as appropriate. In accordance with GAAP, the Company is required to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. At December 31, 2020, management has determined that the Company had no uncertain tax positions that would require financial statement recognition. The Company's conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The Company files its income tax returns in the U.S. federal and various state and local jurisdictions. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state and local tax laws. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. {10}------------------------------------------------ # **NOTES TO STATEMENT OF FINANCIAL CONDITION** #### **2. Property and equipment** Property and equipment consist of the following at December 31, 2020: | Computer and office equipment | \$
329,776 | |------------------------------------------------|---------------| | Furniture and fixtures | 33,125 | | Website development | 223,197 | | Leasehold improvements | 147,154 | | | 733,252 | | Less accumulated depreciation and amortization | 722,715 | | | | | | \$
10,537 | #### **3. Net capital requirement** The Company, as a member of FINRA, is subject to the Securities and Exchange Commission Uniform Net Capital Rule 15c3-1. This 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 or cash dividends paid if the resulting aggregate indebtedness to net capital ratio would exceed 10 to 1. At December 31, 2020, the Company's net capital was approximately \$3,727,000, which was approximately \$3,477,000 in excess of its minimum net capital requirement of \$250,000. #### **4. Soft dollar payables** The Company has soft dollar arrangements with certain clients within the provisions of Rule 28(e) which establishes a safe harbor for money managers, which allows them to purchase research and brokerage services for clients using soft dollars. Soft dollar payables amounted to approximately \$6,000 at December 31, 2020 and are included in accounts payable and accrued expenses on the accompanying statement of financial condition. Certain clients are not required to follow Rule 28(e), and these expenses are paid on their behalf by the Company, as directed and approved by them. The Company has a restricted cash account segregated on the statement of financial condition in accordance with SEC Rule 15c3-3(k)(2)(i) of approximately \$16,000, related to proceeds from soft dollar transactions. The Company disburses this cash to third parties on behalf of its customers following Rule 28(e) requirements and on behalf of customers paying for services outside of 28(e) if the Company is satisfied that customers have appropriately disclosed to and received approval from investors to pay for services outside of the Section 28(e) safe harbor. {11}------------------------------------------------ # **NOTES TO STATEMENT OF FINANCIAL CONDITION** #### **5. Loan payable โ€“ paycheck protection program** During April 2020, the Company applied for and received a promissory note (the "PPP Loan") evidencing an unsecured loan in the amount of approximately \$1,072,000 made to the Company pursuant to the Paycheck Protection Program (the "PPP") under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was enacted March 27, 2020. The PPP Loan may be forgiven, in part or in whole, subject to certain conditions as stipulated under the PPP. The Company has not started the process of applying for loan forgiveness. The PPP Loan is being administered by Pursuit Lending LLC and bears interest at a rate of 1.0% per annum. In accounting for the PPP Loan, the Company is guided by ASC 470 Debt, and ASC 450-30 Gain Contingency and recorded the proceeds of the PPP Loan as debt and it will derecognize the liability when the loan is paid off or when forgiveness is reasonably certain. The Company believes that the possibility of loan forgiveness is to be regarded as a contingent gain and therefore will not recognize the gain (and derecognize the loan) until all uncertainty is removed (i.e. all conditions for forgiveness are met). As of December 31, 2020, the PPP Loan amounted to approximately \$1,072,000. #### **6. Related party transactions** Pursuant to an expense sharing agreement, as effectively modified in 2020, (the "Agreement") with Telsey Holdings LLC (the "Parent"), the Company recognizes certain expenses based on the terms and conditions per the Agreement. The amount due to Parent was approximately \$596,000 at December 31, 2020. ### **7. Employee benefit plan** The Company maintains a retirement plan (the "Plan"), pursuant to Section 401(k) of the Internal Revenue Code, for eligible participants to make voluntary contributions of a portion of their annual compensation, on a deferred basis, subject to limitations provided by the Internal Revenue Code. The Company did not make contributions to the Plan for the year ended December 31, 2020. #### **8. Liabilities subordinated to claims of general creditors** The Company had a \$3,000,000 subordinated loan agreement at December 31, 2020, which was in accordance with agreements approved by FINRA. The subordinated loan agreement matured October 31, 2020 and was automatically renewed for another year. The loan bears interest at 6% per annum. #### **9. Other uncertainties** The extent of the impact of the coronavirus ("COVID-19") outbreak on the financial performance of the Company will depend on future developments, including the duration and spread of the outbreak, related advisories and restrictions, and the impact of COVID-19 on the financial markets and the overall economy, all of which are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period of time, the Company's results of operations may be materially adversely affected. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.