# ACORNS SECURITIES, LLC X-17A-5 (2020-11-30) — Broker-dealer annual report - Company: ACORNS SECURITIES, LLC - Form: X-17A-5 - Filed: 2020-11-30 - Period: 2020-09-30 - Accession: 0001578860-20-000008 - CIK: 1578860 - File #: 8-69294 - Material weakness: Yes - Auditor: Deloitte & Touche LLP - Auditor location: Los Angeles, CA - Contact: Colin Lam - Phone: 9494384245 - Signed by: Colin Lam (Financial & Operations Principal) Original filing: https://www.sec.gov/Archives/edgar/data/1578860/000157886020000008/public_2020.pdf --- {0}------------------------------------------------ **Acorns Securities, LLC (SEC ID 008-69294) Statement of Financial Condition and Report of Independent Registered Public Accounting Firm For the Year Ended September 30, 2020** Filed pursuant to Rule 17a-5(e)(3) under the Securities Exchange Act of 1934 as a PUBLIC DOCUMENT. {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** # **ANNUAL AUDITED REPORT FORM X-17 A-5 PART Ill** | 0MB APPROVAL | | | | |---------------------------|--|------------------|--| | 0MB Number: | | 3235-0123 | | | Expires: | | October 31, 2023 | | | Estimated average burden | | | | | hours per response 12.00 | | | | | | | | | SEC FILE NUMBER 8-69294 **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 10/1/2019 | ----------- | | AND ENDING 9/30/2020 | | | | |----------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|----------|-------------------------------------------------|--|--|--| | | M M /0 D /Y Y | | MM/DD/YY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | | | NAME oF BROKER-DEALER: Acorns Securities, LLC | | | OFFICIAL USE ONLY | | | | | CIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
ADDRESS OF PRI
5300 California Avenue | | | FIRM I.D. NO. | | | | | | (No . and Street) | | | | | | | Irvine | CA | | 92617 | | | | | (City) | (Sia te) | | (Zip Code) | | | | | NAME A D TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Colin Lam | B. ACCOU TANT IDENTIFICATION | | 949-438-4245
(A rea Code - Telephone Number) | | | | | INDEPEN DENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
Deloitte & Touche LLP | arne - if individual, s/Clte last, first, middle name) | | | | | | | 555 West 5th Street, Ste 2700 | Los Angeles | CA | 90013 | | | | | (Address) | (Cit y) | (S tate) | (Zip Code) | | | | | CHECK O
E:
lvl
certifi
ed Publi c Accountant
Publi c Accountant
Acco unt ant not resi dent in United States or any of its possessions. | | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | *\*Claims fo r exemption Ji-om the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as th e 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 0MB control number.** SEC 1410 (11-05) {2}------------------------------------------------ #### **OATH OR AFFIRMATIO** | J, Colin Lam | | , swea r (or affirm) that, to the best of | |-----------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------| | my knowledge and beli ef the accompanying financi
Acorns Securities, LLC | | a l statement and supporting schedules pertaining to the firm of
----------------------------------------------
, as | | of September 30 | | are true and correct. I further swear (or affirm) that | | classified so le ly as that of a customer, except as fo | llows: | ne ith er the company nor any partner, proprietor, principa l officer or direc tor has any proprietary interest in any account | | | | | Signature Financial and Operations Principal Title This report\*\* contains (check a ll app lic abl e boxes): - **0** (a) Facing Page. - **0** (b) Statement of Financ ia l Condition . - D (c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement of Comprehensive lnco rn e (as defined in §2 10. 1-02 of Regulation S-X). - **8** (d) Statement of Changes in Financial Conditi on. - (e) Statement of Changes in Stockho lders' Equity or Partne rs' or Sole Propri etors' Capital. - (f) Statement of Changes in Li abiliti es Subordinated to Cla ims of Creditors. - □ § (g) Computati on of Net Ca pita l. - (h) Computatio n for Determination of Rese rve Requirements Pursuant to Rul e l 5c3-3. - ( i)' Info rmation Relating to the Possession or Contro l Requirements Under Rul e 15c3 -3 . - □ U) A Reconc iliati on, including appropriate explanation of the Computation of Net Capital Under Rul e l 5c3 - l and the Computation for Determination of the Reserve Requirements Under Exhib it A of Rul e l 5c3-3. - **0** (k) A Reconcili ation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. - **0** (I) An Oath or Affirmation. - **D** (m) A copy of the SIPC Supplemental Report. - **D** (n) A report desc ribing any materi a l inadequacies found to ex ist or fo und to have ex isted si nce the date of th e prev ious audit. \*\* *For conditions of confidential treatment of certain portions of this filing, see section 240.* J *7a-5(e)(3).* {3}------------------------------------------------ | | ACKNOWLEDGMENT | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | A notary public or other officer completing this
certificate verifies only the identity of the individual
who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document. | | | State of California
San Mateo
County of | | | | before me, D. Cooper, Notary Public
(insert name and title of the officer) | | l-!t
Co L l N
personally appeared
his/h~r/V,~ir authorized capacity(i~), and that by his/h\
person(~. or the entity upon behalf of which the person ts.} acted, executed the instrument. | who proved to me on the basis of satisfactory evidence to be the person~ whose name~ is/
e
subscribed to the within instrument and acknowledged to me that he!s"r\e!t~y executed the same in
r/t~ir signature~ on the instrument the | | paragraph is true and correct. | I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing | | WITNESS my hand and official seal. | | | | | {4}------------------------------------------------ # **Deloitte.** **Deloitte & Touche LLP** 555 West 5th Street Suite 2700 Los Angeles, CA 9001 3-1010 USA Tel: + 1 213 688 0800 Fax: +1 213 688 01 00 www.deloitte .com ### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Member of Acorns Securities, LLC #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Acorns Securities, LLC (the "Company") as of September 30, 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 of September 30, 2020, in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this 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 of the financial statement provides a reasonable basis for our opinion. November 25, 2020 We have served as the Company's auditor since 2020. {5}------------------------------------------------ # **Acorns Securities, LLC Statement of Financial Condition September 30, 2020** #### **Assets** | Cash and cash equivalents
Cash segregated under regulations
Receivable from clearing firm
Securities held at clearing firm
Receivable from affi Ii ates
Prepaid expenses | \$
996,402
1,725,256
46,890,513
928,880
269,696
54,756 | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------| | Deposit at clearing firm | 50,000 | | Equipment | 8,877 | | Total assets | \$
50,924,380 | | Liabilities and Member's Equity | | | Liabilities | | | Accounts payable and accrued expenses
Payable to customers
Payable to affiliates | \$
622,896
46,164,419
128,859 | | Total liabilities | 46,916,174 | | Commitments and contingencies | | | Member's Equity | | | Member's equity
Total member's equity | 4,008,206
4,008,206 | | Total liabilities and member's equity | \$
50,924,380 | {6}------------------------------------------------ # **Acorns Securities, LLC Notes to the Statement of Financial Condition September 30, 2020** #### **NOTE 1: GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### *Organization* Acorns Securities, LLC (the "Company") was organized in the State of Delaware on April 9, 2013. The Company is a registered broker-dealer in securities under the Securities and Exchange Act of 1934. The Company is a member of the Financial Industry Regulatory Authority ("FINRA") and the Securities Investor Protection Corporation ("SIPC"). The Company is a wholly-owned subsidiary of Acorns Grow Incorporated. (the "Parent"). Under its membership agreement with FINRA and pursuant to Rule 15c3-3(a)(1 )(ii), the Company maintains subaccounts pursuant to an omnibus arrangement with a clearing firm. The Company also transmits block trade and other orders placed by its affiliated investment adviser, Acorns Advisers, LLC ("Advisers"). #### *Summary of Significant Accounting Policies* The presentation of the statement of financial condition in conformity with accounting principles generally accepted in the United States of America ("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 statement of financial condition. Actual results could differ from those estimates. The Company does not actively trade securities of its own except to effect customer transactions. Securities held by the Company are traded on major stock exchanges and stated at market value. Equipment is stated at cost. Depreciation is provided on a straight-line basis using estimated life of 3 years. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/ or useful life are capitalized . When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized . In connection with Accounting Standards Codification ("ASC") No. 2019-11, Leases (Topic 842), the Company has a sublease arrangement with its Parent whereby the Company rents office space from the Parent for a monthly fee. The Company does not possess control over the lease terms. As such, the Company does not have an obligation to record a right to use asset or an offsetting lease obligation. There is no impact to the Company's net capital. The Company operates in one segment, based on similarities in economic characteristics between its operations, the common nature of its services and the regulatory environment under which it operates. {7}------------------------------------------------ #### *Recent Accounting Pronouncement* The Company has elected to early adopt ASU No. 2019-12, Simplifying Accounting for Income Taxes (Topic 740) as the Company is a Single Member LLC and Disregarded Entity which is not subject to and does not pay federal, state, or local taxes. #### **NOTE 2: CASH SEGREGATED UNDER SECURITIES REGULATIONS** At September 30, 2020, cash of \$1,725,256 has been segregated in a special reserve account for the exclusive benefit of customers pursuant to Rule 15c3-3 under the Securities Exchange Act of 1934. #### **NOTE 3: DEPOSITS AT CLEARING FIRM** The Company has an omnibus account trading agreement with a clearing firm, RBC Capital Markets, in order to execute trades on behalf of the clients of its affiliated adviser, Acorns Advisers, LLC. The clearing firm has custody of the Company's cash balances which serve as collateral for any amounts due to the clearing firm . Interest is paid monthly on these cash deposits at the average overnight repurchase rate. The balance on deposit at September 30, 2020 was \$50,000. #### **NOTE 4: FAIR VALUE OF SECURITIES OWNED** We apply fair value accounting for all financial instruments that are recognized or disclosed at fair value in the statement of financial condition on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. For certain instruments, including cash and cash equivalents, accounts receivable, and accounts payable, it is estimated that the carrying amount approximated fair value because of the short maturities of these instruments. Fair value is estimated using various valuation models, which utilize certain inputs and assumptions that market participants would use in pricing the asset or liability. The inputs and assumptions used in valuation models are classified in the fair value hierarchy as follows : Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Quoted market prices for similar instruments in an active market; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations inputs of which are observable and can be corroborated by market data. Level 3: Unobservable inputs and assumptions that are supported by little or no market activity and that are significant to the fair value of the asset and liability. The fair value hierarchy gives the lowest priority to Level 3 inputs. {8}------------------------------------------------ In determining the appropriate hierarchy levels, the Company analyzes the assets and liabilities that are subject to fair value disclosure. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. There were no assets and liabilities measured at fair value on a non-recurring basis at September 30, 2020. All securities held by the Company were exchange-traded funds. The following table presents the Company's securities that are measured at fair value on a recurring basis by fair value hierarchy at September 30, 2020: | Assets | | Level 1 | | Level2 | Levell | | |-------------------------------------------------|----|---------|----|--------|--------|--| | Securities held at clearing firm, at fair value | \$ | 928,880 | \$ | | \$ | | | Totals | \$ | 928,880 | \$ | | \$ | | #### **NOTE 5: RECEIVABLE FROM CLEARING FIRM** Pursuant to the clearing agreement, the Company introduces all of its securities transactions to its clearing firm on an omnibus basis. In accordance with the clearance agreement, the Company has agreed to indemnify the clearing firm for losses, if any, which the clearing firm may sustain from carrying securities transactions introduced by the Company. As of September 30, 2020, the receivable from clearing firm was \$46,890,513. # **NOTE 6: PAYABLE TO CUSTOMERS** Customer payables represent free credit balances from customer funds on deposit, and/or funds accruing to customers as a result of settled trades and other security related transactions. Total customer payables as of September 30, 2020 were \$46,164,419. #### **NOTE 7: EQUIPMENT NET** | Equipment | \$
25,641 | |--------------------------------|--------------| | Less: accumulated depreciation | (16,764) | | Equipment, net | \$
8,877 | #### **NOTE 8: RELATED-PARTY TRANSACTIONS** In September 2013, the Company and the Parent entered into a Technology License and Services Agreement whereby the Parent grants to the Company the right and license to utilize technology developed by the Parent for maintaining books and records for Clients and receiving orders from Advisers. As of September 30, 2020, \$0 was payable to the Parent. The Company is affiliated through common ownership with Acorns Advisers, LLC ("Advisers"). During April of 2014, the Company and Advisers entered into a Brokerage and Custodial Services Agreement whereby the Company agrees to establish and maintain an account on its books and records for each client of the Advisers ("Clients"). Accordingly, the Company has established several omnibus accounts for the benefit of Clients which are maintained by another clearing firm. Furthermore, the Company is responsible for instructing the clearing firm to maintain possession or control of investments in these omnibus accounts free of any charge, lien, or claim of any kind in favor of the clearing firm or any person claiming through the clearing firm. The Company is reimbursed for all orders and instructions {9}------------------------------------------------ obtained by Advisers and \$208,419 was receivable by the Company as of year-end. The Company earns fees from Advisers for its services, of which \$0 was receivable at year-end. Further, the Company allocates payroll costs to Advisers for services provided by the Company's employee on behalf of the affiliated investment adviser. As of September 30, 2020, \$61,277 of payroll costs were receivable from Advisers. In April 2015, the Company and the Parent entered into an expense sharing agreement whereby the Company agrees to reimburse the Parent payroll, equipment and other incidental expenses paid on behalf of the Company. As of September 30, 2020, \$25,795 was payable to the Parent. In February 2019, the Company and the Parent entered into a sublease agreement whereby the Company agrees to sublease office space from the Parent. As of September 30, 2020, \$0 was payable to the Parent. It is possible that the terms of certain of the related-party transactions are not the same as those that would result for transactions among wholly unrelated parties. # **NOTE 9: COMMITMENTS AND CONTINGENCIES** In April 2018, the Company entered into a four-year agreement with a related third-party to provide investor communications services on behalf of the Company. Early termination of this agreement may result in early-termination fees. At this time, management views the possibility of early termination as remote and cannot reasonably estimate the potential termination cost. In April 2018, the Company entered into a four-year agreement with a third-party to provide omnibus clearing firm services on behalf of the Company. Early termination of this agreement may result in early-termination fees. At this time, management views the possibility of early termination as remote and cannot reasonable estimate the potential termination cost. #### **NOTE 10: GUARANTEES** Financial Accounting Standards Board ("FASB") ASC Topic 460, Guarantees ("ASC 460") requires the Company to disclose information about its obligations under certain guarantee arrangements. ASC 460 defines guarantees as contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying factor (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or nonoccurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. This guidance also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement as well as indirect guarantees of indebtedness of others. The Company has issued no guarantees at September 30, 2020 or during the year then ended. #### **NOTE 11: CONCENTRATION OF CREDIT RISK** The Company maintains bank accounts at financial institutions. These accounts are insured either by the Federal Deposit Insurance Commission ("FDIC"), up to \$250,000, or the Securities Investor {10}------------------------------------------------ Protection Corporation ("SIPC"), up to \$500,000. At times during the year, cash balances held in financial institutions were in excess of the FDIC and SI PC's insured limits. The Company has not experienced any losses in such accounts and management believes that it has placed its cash on deposit with financial institutions which are financially stable. The Company is engaged in various trading and brokerage activities in which counter-parties primarily include broker-dealers, banks, and other financial institutions. In the event counter-parties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counter-party or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counter-party. # **NOTE 12: NET CAPITAL REQUIREMENTS** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC rule 15c3-1 ), which requires the maintenance of minimum net capital of not less than 2% of aggregate debit items arising from customer transactions or \$250,000, whichever is greater. SEC Rule 15c3-1 also requires that equity capital may not be withdrawn or cash dividends paid if the resulting net capital is less than 5% of such items. Net capital and aggregate indebtedness change day to day, but on September 30, 2020, the Company had net capital of \$3,531,330 which was \$2,601,893 in excess of its required net capital of \$929,407. \*\*\* Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.