# BREAKWATER GROUP DISTRIBUTION SERVICES, LLC X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: BREAKWATER GROUP DISTRIBUTION SERVICES, LLC - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0001574366-22-000001 - CIK: 1574366 - File #: 8-69269 - Type: Broker-dealer - Material weakness: No - Auditor: RSM US LLP - Auditor location: New York, NY - Contact: Richard Sobel - Phone: (212)751-4422 - Email: rsobel@dfppartners.com - Website: dfppartners.com - Signed by: Richard Sobel (FINOP / CFO) Original filing: https://www.sec.gov/Archives/edgar/data/1574366/000157436622000001/Breakwater2021ShortEdgar.pdf --- {0}------------------------------------------------ #### UNITED STATES SECURITIES AND EXCHANGE COMMISSION .... Washington, D.C. 20549 | OMB APPROVAL | | | |---------------------------|--|-----------------| | OMB Number: | | 3235-0123 | | Expires: October 31, 2023 | | | | Estimated average burden | | | | hours per response 12.00 | | | | | | SEC FILE NUMBER | | | | | ## ANNUAL AUDITED REPORT FORM X-17A-5 PART III | | SEC FILE NUMBER | |-----------|-----------------| | 8 - 69269 | | # FACING PAGE I nformation Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | REPORT FOR THE PERIOD BEGINNING | 01/01/2021 | AND ENDING | 12/31/2021 | | |--------------------------------------------------------------------------------------|-----------------------------------------------------------|---------------------------------------------|--------------------------------------------|--| | | MM/DD/YYYY | | MM/DD/YYYY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF FIRM: | | Breakwater Group Distribution Services, LLC | | | | TYPE OF REGISTRANT (check all applicable boxes): | | | | | | X Broker-dealer O Security-based swap dealer O Major security-based swap participant | | | | | | Check here if respondent is also an OTC derivatives dealer | | | | | | | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | | | | | 350 Madison Avenue - 19th Floor | | | | | | (No. and Street) | | | | | New York | NY | | 10017 | | | (City) | (সপ্প্লাব) | | (Zip Code) | | | | | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | Richard Sobe | 212-751-4422 | | rsobel@dfppartners.com | | | (Name) | (Area Code - Telephone No.) | (Email Address) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing" | | i | | | | | RSM US LLP | | | | | | (Name- if individual, state last, first, and middle name) | | | | | 4 Times Square 151 West 42nd Street | New York | NY | 10036 | | | (Address) | (City) | (State) | (Zip Code) | | | 9/24/2003 | | | 49 | | | (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, if applicable) | | | | 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 | | | I, Richard Sobel Sobel (or affirm) that, to the best of my knowledge and belief, the financial report pertaining to | |----------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------| | the firm of | | Breakwater Group Distribution Services, LLC , as of _______________________________________________________________________________________________ December 31, 2021 | | | | is true and correct. I turther sweer (or affirm) that neither the company nor any partner, of icer, director, or equivalent person, | | | as the case may be, has any proprietary interest in any account classified solely as that of a customer | | | | | | | | | | | | | Signature | | | | | | | CLAUDIA TAYLOR | FINOP / CFO | | | NOTARY PUBLIC, State of New York
Commission Expires 10/28/ 2022 | Title | | Notary Public | | | | | | | | | | | | This filing* * contains (check all applicable boxes): | | | | (a) Statement of financial condition. | | | | x] (b) Notes to consolidated statement of financial condition. | | | | | (c) Statement of income (loss) or, it there is other comprehensive 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. | | | (1) Computation of tangible net worth under 17 CFR 240.18a-2. | | | | | (1) Computation for delemination of customer reserve requirements pursuant to Exhibit A to 7 CFR 240.1503-3. | | | | | (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.1503-3 or | | Exhibit A to 17 CFR 240.18a-4, as applicable. | | | | | (1) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. | | | | (m) Intormation relating to possession or control requirements for customers under 17 CFR 240.15c3-3.
(n) Information relating to possession or control requirements for security-based swap customers under 17 CFR | | | 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. | | | | | | (o) Reconcliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net | | | | worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reservereguirements under 17 | | | | CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable it material differences exist, or a statement that no material différences | | exist. | | | | | (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. | | | | (q) Oath or aftirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a 12, or 17 CFR 240.18a7, 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 240.18a7, 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. | | | | | | (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.17a 12, | | as applicable. | | | | | | (y) Report describing any material inadequacres found to exist or found to have existed since the previous audit, or | | | a statement that no material inadequacies exist, under 17 CFR 240.17a 12(k). | | | (z) Other: | | | | | | | \*\* To request confidential treatment of cartain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable. {2}------------------------------------------------ # **Breakwater Group Distribution Services, LLC** **{a limited liability company) Statement of Financial Condition Pursuant to Rule 17a-5 under the Securities Exchange Act of 1934 December 31, 2021** {3}------------------------------------------------ ## **Contents** | | Page(s) | |--------------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm 1 | | | Financial Statement | | | Statement of Financial Condition 2 | | | Notes to Financial Statement 3-5 | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) **RSM US** LLP #### **Report of Independent Registered Public Accounting Firm** To the Member Breakwater Group Distribution Services, LLC #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Breakwater Group Distribution Services, LLC (the Company) as of December 31 , 2021 , and the related notes (collectively, the financial statement). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31 , 2021 , 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 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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. New York, New York February 23, 2022 **THE POWER OF BEING UNDERSTOOD** AUDI T I TAX I CONSULTING {5}------------------------------------------------ ## **Breakwater Group Distribution Services, LLC (a limited liability company) Statement of Financial Condition As of December 31, 2021** | Assets | | |---------------------------------------|-----------------| | Cash | \$
1,616,160 | | Distributor fees receivable | 464,288 | | Prepaid expenses | 16,515 | | Total assets | \$
2,096,963 | | | | | Liabilities and Member's Equity | | | Liabilities : | | | Accounts payable and accrued expenses | \$
53,457 | | Due to affiliates | 8,755 | | Total liabilities | 62,212 | | | | | Member's equity | 2,034,751 | | Total liabilities and member's equity | \$
2,096,963 | The accompanying notes are an integral part of this financial statement. {6}------------------------------------------------ #### **Note 1. Organization** Breakwater Group Distribution Services, LLC (the "Company") was formed under the laws of the State of Delaware on March 20, 2013. The Company is registered as a 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 earns its revenue from distribution fees. The Company does not claim an exemption under paragraph (k) of 17 C.F.R. § 240. 15c3-3, and the Company is filing this Exemption Report relying on Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.1 ?a-5. The Company limits its business activities exclusively to market shares of registered open-end and registered interval-type closed-end investment companies (RICs). The Company updated its Membership agreement with FINRA to reflect this in February 2021 . #### **Note 2. Significant Accounting Policies** Accounting Policies: The Company follows generally accepted accounting principles ("GAAP"), as established by the Financial Accounting Standards Board (the "FASB"), to ensure consistent reporting of financial condition, results of operations and cash flows. Cash: Cash consists of cash in banks, primarily held at one financial institution. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Accounting for Income Taxes: The FASB provides guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are more likely than not of being sustained when challenged or when examined by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and liability in the current year. For the year ended December 31 , 2021 , management has determined that there are no uncertain tax positions. ASU 2016-13 Topic 326: As a limited liability company, the Company is not subject to federal income taxes. The Company's member separately accounts for its share of the Company's items of income, deductions, losses and credits. Therefore, these financial statements do not include any provision for federal income taxes. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard's main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope. The Company has assets included in accounts receivable on the statements of financial condition that are in scope of Topic 326, however due to the short-term exposure, the expected credit loss is not material. {7}------------------------------------------------ ## **Note 3. Equipment** | Network equipment | \$
6,592 | |-------------------------------|-------------| | Less accumulated depreciation | 6,592 | | | \$ | #### **Note 4. Related Party Transactions** The Company paid a related entity under an administrative services agreement. The amount paid represents the Company's allocable share of rent, utilities and employee benefits as defined in the agreement. As of December 31, 2021 , \$8,755 included in due from affiliates on the statement of financial condition, represents amounts due under this agreement. All of the Company's revenue is derived from accounts that are managed by the managing member. The accounts receivable from this revenue at December 31 , 2021 was \$464,288. #### **Note 5. Off-Balance Sheet Risk and Concentration of Risk** The Company, at times, maintains its cash balances in bank deposit accounts in excess of federally insured 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. #### **Note 6. Regulatory Requirements** The Company is subject to the SEC's Uniform Net Capital Rule ("Rule 15c3-1"). The Company computes its net capital requirements under the basic method provided for in Rule 15c3-1 , which requires the Company to maintain net capital equal to the greater of \$5,000 or 6-2/3% of aggregate indebtedness. Net capital and aggregate indebtedness fluctuate on a daily basis; however, at December 31 , 2021 , the Company had net capital, as defined, of \$1 ,553,948, which was \$1,548,948 in excess of the required net capital of \$5,000. The Company's net capital ratio was 0.04 to 1. #### **Note 7. Indemnifications** In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties that provide indemnifications under certain circumstances. 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. The Company expects risk of loss to be remote. #### **Note 8. Novel Coronavirus** The outbreak of the novel coronavirus ("COVID-19") in many countries continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The World Health Organization has declared COVID-19 a "Public Health Emergency of International Concern." The Global impact of the outbreak continues to evolve, and as cases of the virus have continued to be identified, many countries have reacted by instituting quarantines and restrictions on travel. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 could have a material impact on the Company's financial statement. {8}------------------------------------------------ #### **Note 9. Subsequent Events** The Company has evaluated subsequent events through the date these financial statements were available to be issued. There are no subsequent events which require disclosure in the notes to the financial statement. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.