# MCG SECURITIES LLC X-17A-5 (2020-02-28) — Broker-dealer annual report
- Company: MCG SECURITIES LLC
- Form: X-17A-5
- Filed: 2020-02-28
- Period: 2019-12-31
- Accession: 0001545099-20-000001
- CIK: 1545099
- File #: 8-69068
- Material weakness: No
- Auditor: DeMarco Sciaccotta Wilkens & Dunleavy, LLP
- Auditor location: Frankfort, IL
- Contact: Carol Ann Kinzer
- Phone: 678-525-0992
- Signed by: Brian Shevland (President)
Original filing: https://www.sec.gov/Archives/edgar/data/1545099/000154509920000001/public2019mcg.pdf
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**UNITED STATES SECURITIES AND FXCHANGECOMMlSSION Washin['.t•m, D.C. 20549**
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| 0MB Number: | 3235-0123 | |
| Expires: | August 31, 2020 | |
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#### **ANNUAL AUDITED REPORT FORM X-17A-5 PAJ~T Ill**
-------~ Sl:C FILE NUMBER 8-69068
**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 01/01/2019
AND ENDING 12/31/2019 | | ----------- |
|--------------------------------------------------------------------------|---------------------------------------------------------------------|---------|-------------------------------------------------|
| | MM/DD/YY | | MM/DD/YY |
| | A. REGISTRANT IDENTIFICATION | | |
| NAME OF BROKER-DEALER: MCG Securities, LLC | | | OFFICIAL USE ONLY |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. |
| 37 West Avenue, Suite 301 | | | |
| | (No. and Street) | | |
| Wayne | PA | | 19087 |
| (City) | (State) | | (Zip Code) |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | |
| Carol Ann Kinzer | | | 678-525-0992
(Arca Code .: Telephone Number) |
| | B. ACCOUNTANT IDENTIFICATION | | |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Rep01i* | | | |
| DeMarco Sciaccotta Wilkens & Dunleavy, 'LLP | | | |
| | (Name - if individual, state last, first, middle name) | | |
| 9645 Lincolnway Lane | Frankfort | IL | 60423 |
| (Address) | (City) | (Slate) | (Zip Code) |
| CHECK ONE: | | | |
| I I
jcertified Public Accountant | | | |
| Public Accountant | | | |
| B | Accountant not resident in United States or any of its possessions. | | |
| | FOR OFFICIAL USE ONLY | | |
| | | | |
| | | | |
*\*Claims/or exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of/acts and circumstances relied on as the basis/or 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 0MB control number.
SEC 1410 (06-02)
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#### **OATH OR AFFIRMATION**
| I, Brian Shevland | , swear (or affirm) that, to the best of |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ------------------------
MCG Securities, LLC | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
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| -
-
of December 31 | -
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, as
2019
are true and correct. I further swear (or affirm) that |
| classified solely as that of a customer, except as follows: | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account |
| | |
| . tfM:Mllth ol '-'•:.'""'111 • ~IHI
JONRJt L, TURNE , Notary Mlle
·
Delaware County
My Convnlsslon Expires February 10, 2022
Commission rivmbt>r 1222059 | President |
| | Title |
| - ·~-··•·
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| This report** contains (check all applicable boxes):
12] (a) Facing Page.
✓ (b) Statement of Financial Condition.
✓ (c) Statement oflncome (Loss).
✓ ( 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.
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | O (j) A Reconciliation, including appropriate explanation of the Computation ofNet Capital Under Rule 15c3-1 and the
0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of |
| consolidation.
[Z1 (I) An Oath or Affirmation.
0 (m) A copy of the SIPC Supplemental Report. | 0 (n) A report describing any material inadequacies found to exist or 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).*
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#### **STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PURSUANT TO RULE 17a-5(d)**
**DECEMBER 31, 2019**
The report is filed in accordance with Rule I 7a-5(e)(3) under the Securities Exchange Act of 1934 as a **PUBLIC DOCUMENT.**
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# **TABLE OF CONTENTS**
| | Page (s) |
|---------------------------------------------------------|----------|
| Report of Independent Registered Public Accounting Firm | 3 |
| Statement of Financial Condition | 4 |
| Notes to Financial Statements | 5-9 |
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#### **STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019**
#### **ASSETS**
| Total liabilities and members' equity | \$
540,545 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
| MEMBERS' EQUITY (Note 2) | 319,088 |
| Total liabilities | 221,457 |
| LIABILITIES:
Salaries and commissions payable
Accounts payable and accrued expenses | \$
143,592
77,865 |
| Total assets
LIABILITIES AND MEMBERS' EQUITY | \$
540,545 |
| Cash and cash equivalents
Fees receivable
Due from affi I iate
Furniture and equipment, at cost, less accumulated depreciation of \$17,536
Other assets | \$
263,867
167,311
52,854
628
55,885 |
The accompanying notes are an integral part of this statement.
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## **MCG SECURITIES, LLC**
(A Limited Liability Company)
#### **NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019**
### *NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES*
#### *Organization and Business*
MCG Securities, LLC, a Pennsylvania Limited Liability Company, (the "Company") is a registered broker-dealer in securities with the Securities and Exchange Commission (the "SEC") and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). The Company received its approval for membership on October 31, 2012. The Company is an independent firm that is approved to engage in mutual funds, municipal securities, variable life insurance and annuities and private placements. The Company also earns revenue by providing merger and acquisition advisory services, raising capital, publishing research and collecting commissions from other unaffiliated broker-dealers on referrals of equities, fixed income, options, mutual funds and variable annuities.
Since the Company is a limited liability company, the members are not liable for the debts, obligations, or liabilities of the Company, whether arising in contract, tort or otherwise, unless the members have signed a specific guarantee.
#### *Basis o{Accounting*
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
#### *Rule 15c3-3 Exemption*
The Company, under Rule 15c3-3(k)(2)(i), is exempt from the reserve and possession or control requirements of Rule 15c3-3 of the Securities and Exchange Commission. The Company does not carry or clear customer accounts.
#### *Revenue Recognition*
The Company recognizes revenue in accordance with Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The revenue recognition guidance 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 the customer, (b) identify the performance obligations in the contract, (c) determine the transaction price and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probably that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.
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# **MCG SECURITIES, LLC**
(A Limited Liability Company)
#### **NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019**
#### *NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)*
### *Revenue Recognition (concluded)*
Commissions and service fees include fees arising from the sale of mutual funds, municipal securities, variable life insurance and annuities, securities offerings and private placements in which the Company acts as an agent. Commissions and services fees are recorded on the trade-date of the securities transaction or completion date of the securities offering. Research fees and other income is recorded as revenue when the services have been rendered. As of December 31, 2019, the Company has determined all fees receivable are collectible.
The following table presents our total revenue disaggregated by investment product category:
| Certificates of deposit | \$
2,078,278 |
|-------------------------|-----------------|
| Research | 727,777 |
| Alternative investments | 289,272 |
| Commission sharing | 137,752 |
| Group annuities | 162,217 |
| Variable annuities | 1,239,211 |
| Other | 23,188 |
| | \$
4,657,695 |
#### *Furniture and Equipment*
Furniture and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company follows the policy of capitalizing all major additions, renewals and betterments. Minor replacements, maintenance and repairs are expensed currently.
#### *Leases*
The Company adopted the new guidance for leases prospectively effective January I, 2019. The new guidance requires that the Company determine if an arrangement is a lease at inception of the transaction. Operating lease assets are included in right-of-use ("ROU") assets while the corresponding lease liabilities are included in operating lease liabilities in the statement of financial condition. Finance leases are included in property and equipment while the related liabilities are included in loans payable in the statement of financial condition.
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#### **NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019**
#### *NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)*
#### *Leases (concluded)*
A ROU asset represents the Company's right to use an underlying asset for the lease term while the related operating lease liability represents the obligations to make future lease payments arising from the lease. A ROU asset and related operating lease liability are recognized at lease commencement date, based on the present value of lease payments over the lease term. The Company does not borrow funds and does not have a determinable incremental borrowing rate. The incremental borrowing rate used is the Treasury Bill Rate approximating the term of the operating lease.
The ROU asset also includes any lease payments made and excludes lease incentives. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company exercise that option. The lease expense for a ROU asset is recognized on a straight-line basis over the lease term.
As discussed further in Note 3, the Company does not have any leases that exceed the twelve month minimum requirement and therefore, do not have any leases to capitalize under the standard.
#### *Income Taxes*
The Company is not considered a separate taxable entity for tax purposes. All income is reported on the respective members' tax return.
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 tax related appeals or litigation processes, based on the technical merits of the position. The Company files an income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. states. The Company is not subject to income tax return examinations by major taxing authorities for years before 2016.
#### *Fair Value o{Financial Instruments*
The carrying amounts reflected in the financial statements for cash, fees receivable, due from affiliate, other assets, salaries and commissions payable and accounts payable and accrued expenses approximate their respective fair values due to the short maturities of these instruments.
#### *Cash and Cash Equivalents*
For purposes of reporting the Statement of Cash Flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash balances in excess of FDIC and similar insurance coverage are subject to the usual banking risks associated with funds in excess of those limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.
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**NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019**
#### *NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)*
#### *Advertising Costs*
Advertising costs are charged to expenses as incurred . During the year ended December 31, 2019, the Company incurred \$ I 0, 147 of advertising costs.
#### *Use of Estimates*
The preparation of financial statements in conformity with 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
#### *NOTE2- NET CAPITAL REQUIREMENTS*
Pursuant to the net capital provisions of Rule I 5c3- I of the Securities Exchange Act of 1934, the Company is required to maintain a minimum net capital, as defined under such provisions. At December 31 , 2019, the Company had net capital and net capital requirements of\$ I 86,002 and \$14,764, respectively, which was \$171,238 in excess of the required mm1mum. The Company's net capital ratio (aggregate indebtedness to net capital) was 1.19 to 1. According to Rule l 5c3-I , the Company's net capital ratio shall not exceed 15 to I .
#### *NOTEJ- RELATED PARTY TRANSACTIONS*
The Company and Bluestone Capital Management, LLC (the "Affiliate"), a company under common control, have entered into an expense sharing agreement (the "Agreement") wherein the Affiliate and the Company share telephone, internet and other office administrative expenses on monthly allocated basis. Expenses incurred in excess of expenses due by the Company on behalf of the Affiliate were approximately \$119,000 for the year ended December 31 , 2019, of which approximately \$67,000 were received and approximately \$53 ,000 is due from the Affiliate. During the year ended December 31 , 2019, the Company paid the affiliate approximately \$135,000.
Additionally, the Company rents office space from an affiliate with common ownership on a month-tomonth basis for \$2,000 per month under an informal agreement. For the year ended December 31 , 2019 the amount paid was \$24,000, which is included in Occupancy Costs.
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# **MCG SECURITIES, LLC**
(A Limited Liability Company)
#### **NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019**
#### *NOTE4- EMPLOYEE BENEFITS*
The Company has a 40 I (k) plan for all employees who have attained age 18 and completed one year of service. A participate may elect to defer up to I 00 of compensation on a pre-tax basis up to the maximum amount allowed by the Internal Revenue Code. The total expense related to the 40 I (k) plan totaled approximately \$1 ,700.
## *NOTE* **5-** *FURNITURE AND EQUIPMENT*
Furniture and equipment are summarized by major classifications as follows:
| Furniture and fixtures | \$
5,693 |
|-------------------------------|-------------|
| Office equipment | 11,591 |
| Software | 880 |
| | 18,164 |
| Less accumulated depreciation | (17,536) |
| Net furniture and equipment | 628
\$ |
Total depreciation expense was \$913 for the year ended December 31 , 2019.
### *NOTE6- BUSINESS CONCENTRATIONS*
There was one customer that comprised approximately 45% of revenue during the year ended December 31, 2019.
#### *NOTE* 7- *FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES*
The Company is engaged in various placement activities with counterparties that primarily include issuers with which the Company has an investment banking assignment. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company 's policy to review, as necessary, the credit standing of each counterparty with which it conducts business.
There are no commitments and contingencies that would have a material impact as of December 31, 2019.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.