# CAIS CAPITAL LLC X-17A-5 (2023-03-01) — Broker-dealer annual report - Company: CAIS CAPITAL LLC - Form: X-17A-5 - Filed: 2023-03-01 - Period: 2022-12-31 - Accession: 0001495902-23-000001 - CIK: 1495902 - File #: 8-68646 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young LLP - Auditor location: New York, NY - Contact: Timothy Shannon - Phone: 212-201-2327 - Email: finance@caisgroup.com - Website: caisgroup.com - Signed by: Timothy Shannon (President) Original filing: https://www.sec.gov/Archives/edgar/data/1495902/000149590223000001/caispublic123122.pdf --- {0}------------------------------------------------ ### UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 sec file number # ANNUAL REPORTS FORM X-17A-5 PART III 8-68646 | Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | FACING PAGE | | | | |-------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|---------|-------------------------------------------|--| | filing for the period beginning _01/01/2022
AND ENDING | | | 12/31/2022 | | | | MM/DD/YY | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF FIRM: CAIS Capital, LLC | | | | | | TYPE OF REGISTRANT (check all applicable boxes):
l Broker-dealer
□ Check here if respondent is also an OTC derivatives dealer | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | 527 Madison Avenue, Fl 2 | | | | | | | (No. and Street) | | | | | New York | NY | | 10022 | | | (City) | (State) | | (Zip Code) | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | Timothy Shannon | 212-201-2327
finance@caisgroup.com | | | | | (Name) | (Area Code - Telephone Number)
(Email Address) | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Ernst & Young LLP | | | | | | | (Name - if individual, state last, first, and middle name) | | | | | One Manhattan West | New York | NY | 10001 | | | (Address) | (City) | (State) | (Zip Code) | | | 10/20/2003 | | 42 | | | | (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, if applicable | | | * Claims for exemption from the requirement that the annual reports of an independent public | FOR OFFICIAL USE ONLY | | | | accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(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 currently valid OMB control number. {1}------------------------------------------------ | OATH OR AFFIRMATION | | | | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|--|--|--| | Timothy Shannon
financial report pertaining to the firm of CAIS Capital, LLC
12/31
partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely
as that of a customer. | swear (or affirm) that, to the best of my knowledge and belief, the
as of
, 2 022 | | | | | JANICE PARISE
Notary Public, State of New York
No. 41-4968956
Oualified in Queens County 9, 2019
Notary Public | Signature:
Itle:
President | | | | | This filing** contains (check all applicable boxes):
(a) Statement of financial condition.
(b) Notes to consolidated 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 § 210.1-02 of Regulation S-X).
[d) Statement of cash flows.
[ (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. | | | | | - □ (f) Statement of changes in liabilities subordinated to claims of creditors. - [ (g) Notes to consolidated financial statements. - [ (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - [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. - □ (I) 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. - 口 (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-2, 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, or 17 CFR 240.18a-7, as applicable. - □ (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - [ (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - (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 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. - □ (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. - | 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). - O (z) Other: \*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable. {2}------------------------------------------------ # CAIS Capital, LLC Statement of Financial Condition December 31, 2022 {3}------------------------------------------------ # CAIS Capital, LLC Index December 31, 2022 ## Page(s) | Report of Independent Registered Public Accounting Firm | |---------------------------------------------------------| | Financial Statements | | Statement of Financial Condition | | Notes to the Statement of Financial Condition | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) - -- !-""#- \$%-&'(''-)%- \*%+-,--\*--.../01.2- 3%45-6-77-889-9...- %:;<=- - #### >?@ABC-AD-EFG?@?FG?FC->?HIJC?B?G-KLMNIO-POOALFCIFH-QIBR- -ST-UVW-XWYZW[-\]^-X\]\\_WYW]U-T`abcda\efU\ghiia- #### j@IFIAF-AF-Ck?-QIFlFOIlNmClC?R?FC- - - nW-V\oW-\p^fUW^-UVW-\qqTYe\]rf]\_sU\UWYW]U-T`-`f]\]qf\gqT]^fUfT]-T`abcda\efU\ghiiatUVW- aTYe\]ru-\s-T`vWqWYZW[wxhyzyy-\]^-UVW-[Wg\UW^-]TUWstUVW-{`f]\]qf\gsU\UWYW]U|u}c]-Tp[- Tef]fT]h-UVW-`f]\]qf\gsU\UWYW]Ue[WsW]Us-`\f[grhf]-\gg-Y\UW[f\g-[WseWqUsh-UVW-`f]\]qf\geTsfUfT]-T`- UVWaTYe\]r-\UvWqWYZW[wxhyzyyhf]qT]`T[YfUr-~fUV-}d}-\_W]W[\ggr-\qqWeUW^-\qqTp]Uf]\_- e[f]qfegWs}- #### lJIJ-DABj@IFIAF- -SVfs-`f]\]qf\gsU\UWYW]Ufs-UVW-[WseT]sfZfgfUr-T`-UVWaTYe\]rs-Y\]\\_WYW]U}p[-[WseT]sfZfgfUrfs- UT-We[Wss-\]-Tef]fT]-T]-UVWaTYe\]rs-`f]\]qf\gsU\UWYW]U-Z\sW^-T]-Tp[-\p^fU}nW-\[W-\epZgfq- \qqTp]Uf]\_-`f[Y-[W\_fsUW[W^-~fUV-UVWpZgfqaTYe\]rbqqTp]Uf]\_oW[sf\_VU-T\[^t]fUW^dU\UWsu- tabu-\]^-\[W-[Wpf[W^-UT-ZWf]^WeW]^W]U-~fUV-[WseWqU-UT-UVWaTYe\]rf]-\qqT[^\]qW-~fUV-UVW- }d}-`W^W[\gsWqp[fUfWsg\~s-\]^-UVW-\eegfq\ZgW-[pgWs-\]^-[W\_pg\UfT]s-T`-UVWdWqp[fUfWs-\]^qV\]\_W- aTYYfssfT]-\]^-UVWab}- nWqT]^pqUW^-Tp[-\p^fUf]-\qqT[^\]qW-~fUV-UVWsU\]^\[^s-T`-UVWab}-SVTsWsU\]^\[^s-[Wpf[W- UV\U-~Weg\]-\]^eW[`T[Y-UVW-\p^fU-UT-TZU\f]-[W\sT]\ZgW-\ssp[\]qW-\ZTpU-~VWUVW[-UVW-`f]\]qf\g- sU\UWYW]Ufs-`[WW-T`-Y\UW[f\g-YfssU\UWYW]Uh-~VWUVW[-^pW-UT-W[[T[-T[-`[\p^}p[-\p^fUf]qgp^W^- eW[`T[Yf]\_e[TqW^p[Ws-UT-\ssWss-UVW-[fss-T`-Y\UW[f\g-YfssU\UWYW]U-T`-UVW-`f]\]qf\gsU\UWYW]Uh- ~VWUVW[-^pW-UT-W[[T[-T[-`[\p^h-\]^eW[`T[Yf]\_e[TqW^p[Ws-UV\U-[WseT]^-UT-UVTsW-[fss}dpqV- e[TqW^p[Wsf]qgp^W^-W\Yf]f]\_h-T]-\-UWsU-Z\sfsh-Wof^W]qW-[W\_\[^f]\_-UVW-\YTp]Us-\]^-^fsqgTsp[Wsf]- UVW-`f]\]qf\gsU\UWYW]U}p[-\p^fU-\gsTf]qgp^W^-Wo\gp\Uf]\_-UVW-\qqTp]Uf]\_e[f]qfegWspsW^-\]^- sf\_]f`fq\]U-WsUfY\UWs-Y\^W-Zr-Y\]\\_WYW]Uh-\s-~Wgg-\s-Wo\gp\Uf]\_-UVW-ToW[\gg-`f]\]qf\gsU\UWYW]U- e[WsW]U\UfT]}nW-ZWgfWoW-UV\U-Tp[-\p^fUe[Tof^Ws-\-[W\sT]\ZgW-Z\sfs-`T[-Tp[-Tef]fT]}- - nW-V\oWsW[oW^-\s-UVWaTYe\]rs-\p^fUT[sf]qWyzyx}-W~-T[h-- WZ[p\[ryhyzyw- - - {5}------------------------------------------------ # CAIS Capital, LLC Statement of Financial Condition December 31, 2022 | Assets | | | |---------------------------------------------|------|------------| | Cash | S | 9,191,309 | | Accounts receivable | | 9,782,372 | | Prepaid expenses | | 74,704 | | Total Assets | ಕ್ಕಾ | 19,048,385 | | | | | | Liabilities and Member's Equity | | | | Due to affiliate - net | S | 1.833.833 | | Deferred revenue | | 15.975 | | Accounts payable and other accrued expenses | | 194,789 | | Total Liabilities | | 2,044,597 | | Member's Equity | | 17,003,788 | | Total Liabilities and Member's Equity | ಕ್ಕಾ | 19,048,385 | The accompanying notes are an integral part of this financial statement. {6}------------------------------------------------ #### 1. Organization CAIS Capital, LLC or the "Company" is a limited liability company established in the state of Delaware on July 27, 2009. 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"). The Company is engaged in a single line of business as a securities broker-dealer, with revenue generated from different classes of services, including direct selling agreement fees, underwriting revenue, and a platform distribution fee. The Company is wholly owned by Capital Integration Systems, LLC ("CAIS LLC"), an affiliated entity established in the state of Delaware. The Company's headquarters is located in New York, NY and its clients are primarily located throughout the United States. ### 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"). #### Cash Cash consists of cash at banks, primarily held at one financial institution and at times may exceed federally insured limits. The maximum insurable limit on cash deposits is \$250,000. Cash in excess of the insurable limit was \$8,941,309 as of December 31, 2022. The Company reduces its exposure to credit risk by depositing its cash with high credit-quality financial institutions. Management believes that the credit risk of the uninsured portion is remote. There was no restricted cash held as of December 31, 2022. ### Accounts Receivable Accounts receivable are stated at their net realizable value, which represents the account balance, less an allowance for balances not partially or fully collectable, if any. The Company uses current expected credit loss ("CECL") methodology in accordance with US GAAP to estimate expected credit losses over the entire life of the financial asset for accounts receivable. The allowance for credit losses is based on the Company's expectation of the collectability of financial instruments, including accounts receivable, utilizing the CECL framework. 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's expectation is that the credit risk associated with accounts receivable is not significant until they are 90 days past due based on the contractual arrangement and expectation of collection in accordance with industry standards. In addition, in certain cases management may determine that collection will not be realized, in which case either a direct charge-off is recorded or the allowance previously established is relieved. Management did not believe an allowance was necessary as of December 31, 2022. ### Prepaid Expenses Prepaid expenses are future expenses of the Company that are paid in advance and have not yet been incurred as of December 31, 2022. As these expenses are incurred, they are amortized to expense in accordance with the terms of the related agreement or invoice. {7}------------------------------------------------ ### 2. Summary of Significant Accounting Policies (continued) #### Business Risks The Company is subject to market and operational risks associated with the services it provides. The Company identifies, measures, and monitors risk through various control mechanisms and established formal risk management policies and procedures that are reviewed on an ongoing basis. #### Market Risk Market risk is the risk of potential adverse changes to the ongoing agreements or contracts because of changes in market conditions. The Company mitigates its exposure to market risk by performing extensive due diligence on any funds offered on its platform. Periods of market volatility could occur in response to events outside of the Company's control which could adversely affect the operating results of the Company. #### Operational Risk Operational risk is the risk of loss resulting from inadequate or failed processes, personnel or systems, or from external events. CAIS LLC has established an Operational Risk Management Committee ("ORMC") which provides a forum for senior management to discuss Firmwide Risks, Assessments, Risk Events, Risk Mitigation Strategies, Control Enhancements Initiatives and noteworthy industry topics. The ORMC has the responsibility for the oversight and maintenance of the company's Operational Risk Management Framework, which sets the basis for the comprehensive and proactive identification, assessment, monitoring, and reporting of Operational Risks for CAIS LLC. The Company seeks to mitigate operational risk through the adherence to policies and procedures and maintenance of systems for the Company's operations. ### Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"). ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services 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 (or as) the entity satisfies a performance obligation. The timing of revenue recognition may differ from the timing of payment. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. The balance of accounts receivable included in the Statement of Financial Condition is generally comprised of receivables for Direct Selling Agreement revenue and Underwriting revenue. The primary sources of revenue for the Company are as follows: #### Direct selling agreement fees Direct selling agreement fees consist of revenue earned from providing introducer and investor related services to managers of private investment vehicles, which are the Company's performance obligation. {8}------------------------------------------------ ### 2. Summary of Significant Accounting Policies (continued) The Company records direct selling agreement fees over the time the services for the transactions are completed under the terms of each contract. Variable amounts are recognized to the extent it is probable that a significant revenue reversal will not occur once the uncertainty is resolved. For variable amounts the uncertainty is dependent on various factors, commonly the value of the private investment vehicles' assets under management, which is highly susceptible to factors outside the Company's influence. The Company does not believe that it can overcome this constraint until these factors are known, which is generally on a quarterly basis. ### Underwriting revenue Underwriting revenue generally arises from securities offerings in which the Company provides introducer services to issuers of securities and the broker-dealer or registered investment advisor who represents the purchaser of the offering. Underwriting revenue can also arise from the Company participating in a private placement directly for an entity. Generally, the Company believes its performance obligation is satisfied when the investor, through its broker-dealer or registered investment advisor, purchases the security. The Company records underwriting revenue at a point in time on the trade date when the performance obligation is satisfied. 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. ### Platform distribution fee Platform distribution fee is earned from an agreement with CAIS LLC where the Company provides introducer services for investors to purchase interests in private investment vehicles sponsored by CAIS LLC, which is also the Company's performance obligation. The transaction price is a fee that is calculated as a fixed percentage of certain fees payable to CAIS LLC from the investment vehicles and is recognized as revenue when the performance obligation is satisfied, which is over time. Variable amounts are recognized to the extent it is probable that a significant revenue reversal will not occur once the uncertainty is resolved. For variable amounts the uncertainty is dependent on various factors, commonly the value of the private investment vehicles' assets under management, which is highly susceptible to factors outside the Company's influence. The Company does not believe that it can overcome this constraint until these factors are known, which is generally on a monthly basis. ### Interest Interest is earned from cash in bank accounts. Any interest is recorded as earned. ### Income Taxes The Company is considered a disregarded entity for federal and state income tax purposes and is included in the income tax returns filed by CAIS LLC is a limited liability company and is treated as a partnership for income tax purposes. The Company follows the reporting requirements of ASU-2019-12, Income Taxes, and therefore CAIS LLC is not required to allocate tax expense to the Company. No provision has been made for federal and state income taxes since these are the personal responsibility of the members of CAIS LLC. {9}------------------------------------------------ ### 2. Summary of Significant Accounting Policies (continued) The Company recognizes the effect of tax positions only when they are more likely than not to be sustained under audit by Taxing Authorities. At December 31, 2022 the Company did not have any unrecognized tax benefits or liabilities. The Company operated in the United States and in state and local jurisdictions, and the previous three years remain subject to examination by tax authorities. There are presently no ongoing income tax examinations. ### 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 the reported amount of revenue and expenses during the reporting period. Actual results could differ from these estimates. #### 3. Guarantees ASC Topic 460, "Guarantees" requires the disclosure of representations and warranties which the Company enters into 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 this would involve future claims that may be made against the Company that have not yet occurred. However, based on its experience, the Company expects the risk of loss to be remote. #### 4. Related Party The Company entered into a distribution agreement with CAIS LLC, whereby it receives a fee equal to 5% of certain fees payable to CAIS LLC from its affiliated private investment vehicles. During the year the fees received by the Company from CAIS LLC were \$572,376, of which \$37,319 remains receivable as of December 31, 2022 and is included in "Due to affiliate – net" in the Statement of Financial Condition. The Company also entered into a management services agreement with CAIS LLC, whereby CAS LLC provides administrative services, office space, and other services related to the development and operation of the Company's business. The Company's share of the expenses related to such services is calculated monthly based on the methodology described in the management services agreement and is paid periodically via intercompany transfer to CAIS LLC, net of any amounts that CAIS LLC owes the Company. During the year ended December 31, 2022, the Company incurred \$29,341,858 of expenses under the management services agreement. At December 31, 2022 the due to affiliate balance was \$4,733,695 and the due from affiliate balance was \$2,899,862 and is disclosed in the Statement of Financial Condition as "Due to affiliate - net" as \$1,833,833 and is due on demand without interest, and was settled in the normal course of business during January 2023. {10}------------------------------------------------ #### ! 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