# MML STRATEGIC DISTRIBUTORS, LLC X-17A-5 (2021-02-23) — Broker-dealer annual report - Company: MML STRATEGIC DISTRIBUTORS, LLC - Form: X-17A-5 - Filed: 2021-02-23 - Period: 2020-12-31 - Accession: 0001582604-21-000003 - CIK: 1582604 - File #: 8-69322 - Material weakness: No - Auditor: KPMG LLP - Auditor location: Hartford, CT - Contact: Nathan Hall - Phone: 413-744-5006 - Signed by: Nathan Hall (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1582604/000158260421000003/msd2020public.pdf --- {0}------------------------------------------------ *Statement of Financial Condition As of December 31, 2020 With Report of Independent Registered Public Accounting Firm Thereon* 7KLVUHSRUWLVILOHGDVD3XEOLFGRFXPHQWLQDFFRUGDQFHZLWK 5XOHDH {1}------------------------------------------------ #### **7DEOHRI&RQWHQWV** | | 3DJHV | |----------------------------------------------------|-------| | 5HSRUWRI,QGHSHQGHQW5HJLVWHUHG3XEOLF\$FFRXQWLQJ)LUP | | | 6WDWHPHQWRI)LQDQFLDO&RQGLWLRQDVRI'HFHPEHU | | | 1RWHVWR6WDWHPHQWRI)LQDQFLDO&RQGLWLRQ | | {2}------------------------------------------------ ![](_page_2_Picture_0.jpeg) KPMG LLP One Financial Plaza 755 Main Street Hartford, CT 06103 #### **Report of Independent Registered Public Accounting Firm** To the Member and the Board of Directors MML Strategic Distributors, LLC: #### *Opinion on the Financial Statement* We have audited the accompanying statement of financial condition of MML Strategic Distributors, LLC (the Company) as of December 31, 2020, 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, 2020, in conformity with U.S. generally accepted accounting principles. #### *Basis for Opinion* This 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 provides a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company's auditor since 2014. Hartford, Connecticut February 17, 2021 > KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. {3}------------------------------------------------ ## **6WDWHPHQWRI)LQDQFLDO&RQGLWLRQ 'HFHPEHU 'ROODUVLQWKRXVDQGV** #### **\$VVHWV** | &DVKDQGFDVKHTXLYDOHQWV
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| *The accompanying notes are an integral part of this financial statement.* {4}------------------------------------------------ # **1RWHVWR6WDWHPHQWRI)LQDQFLDO&RQGLWLRQ 'HFHPEHU 'ROODUVLQWKRXVDQGV** ## **2UJDQL]DWLRQ** 00/ 6WUDWHJLF 'LVWULEXWRUV //& WKH ³&RPSDQ\´ LV D 'HODZDUH OLPLWHG OLDELOLW\ FRPSDQ\ RUJDQL]HG RQ -XQH 7KH &RPSDQ\ LV ZKROO\RZQHG E\ 0DVVDFKXVHWWV 0XWXDO /LIH ,QVXUDQFH&RPSDQ\³0DVV0XWXDO´ 7KH&RPSDQ\LVDFRSULQFLSDOXQGHUZULWHUDQGGLVWULEXWRU RI FHUWDLQ LQGLYLGXDO YDULDEOH DQQXLW\ DQG YDULDEOH OLIH SURGXFWV LVVXHG E\ 0DVV0XWXDO DQG LWV LQVXUDQFHFRPSDQ\DIILOLDWHV,QFRQQHFWLRQZLWKLWVXQGHUZULWLQJDFWLYLWLHVWKH&RPSDQ\HQWHUV LQWRVHOOLQJDJUHHPHQWVZLWKXQDIILOLDWHGEURNHUGHDOHUV7KH&RPSDQ\LVUHJLVWHUHGDVDEURNHU GHDOHU ZLWK WKH 6HFXULWLHV DQG ([FKDQJH &RPPLVVLRQ ³6(&´ LV D PHPEHU RI WKH )LQDQFLDO ,QGXVWU\5HJXODWRU\\$XWKRULW\,QF³),15\$´ DQGLVDOLFHQVHGEURNHUGHDOHULQVWDWHVDQGWKH 'LVWULFWRI&ROXPELD ## **6LJQLILFDQW\$FFRXQWLQJ3ROLFLHV** 7KHVLJQLILFDQWDFFRXQWLQJSROLFLHVDUHDVIROORZV ## *Basis of Presentation* 7KH&RPSDQ\¶VILQDQFLDOVWDWHPHQWVKDYHEHHQSUHSDUHGLQFRQIRUPLW\ZLWKDFFRXQWLQJSULQFLSOHV JHQHUDOO\DFFHSWHGLQWKH8QLWHG6WDWHVRI\$PHULFD³\*\$\$3´ 7KHSUHSDUDWLRQRIWKHILQDQFLDO VWDWHPHQWVLQFRQIRUPLW\ZLWK\*\$\$3UHTXLUHVPDQDJHPHQWWRPDNHHVWLPDWHVDQGDVVXPSWLRQVWKDW PD\DIIHFWWKHDPRXQWVUHSRUWHGLQWKHILQDQFLDOVWDWHPHQWV\$FWXDOUHVXOWVFRXOGGLIIHUIURPWKRVH HVWLPDWHV ## *Cash and Cash Equivalents* 7KH&RPSDQ\FRQVLGHUVDOOKLJKO\OLTXLGLQYHVWPHQWVSXUFKDVHGZLWKDQRULJLQDOPDWXULW\RIWKUHH PRQWKVRUOHVVWREHFDVKDQGFDVKHTXLYDOHQWV7KH&RPSDQ\PDLQWDLQVLWVRSHUDWLQJFDVKLQEDQN GHSRVLWDFFRXQWVZKLFKPD\H[FHHGIHGHUDOO\LQVXUHGOLPLWV7KH&RPSDQ\KDVQRWH[SHULHQFHG DQ\ORVVHVRQVXFKDFFRXQWV7KH&RPSDQ\LQYHVWVH[FHVVFDVKLQPRQH\PDUNHWPXWXDO IXQGV PDQDJHG E\ XQUHODWHGWKLUG SDUWLHVZKLFKDUHFODVVLILHGDVFDVKHTXLYDOHQWV\$W'HFHPEHU WKHUHZDVLQYHVWHGLQPRQH\PDUNHWPXWXDOIXQGVZKLFKDUHUHFRUGHGDWQHWDVVHW YDOXH {5}------------------------------------------------ #### Revenue Recognition and Related Expense The Company recognizes revenue from customers when it satisfies the performance obligation of transferring control over a service to a customer. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company's progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for those promised services (i.e., the "transaction price"). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue will not occur. This arises when there are no significant uncertainties with the transaction price. When variable consideration is included in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period of when uncertainties expect to be resolved and its susceptibility to factors outside of the Company's control, such as market volatility or the actions of its customers (see Note 3). ### Fair Value of Financial Instruments The reported carrying values of financial instruments, (including cash equivalents, receivables, and payables) approximate their fair values because of the short maturities of these assets and liabilities. ### Income Taxes The Company is treated as a disregarded entity for tax reporting purposes and is included in consolidated U.S. federal and state income tax returns with MassMutual and its eligible U.S. subsidiaries. The Company is not subject to the written tax allocation agreement between MassMutual and its eligible subsidiaries and certain affiliates. Certain states require the Company to file limited liability company returns. The Company has no uncertain tax positions. {6}------------------------------------------------ # *MML Strategic Distributors, LLC* **1RWHVWR6WDWHPHQWRI)LQDQFLDO&RQGLWLRQ 'HFHPEHU 'ROODUVLQWKRXVDQGV** #### *New Accounting Pronouncements* 2Q-DQXDU\WKH&RPSDQ\DGRSWHG\$FFRXQWLQJ6WDQGDUG8SGDWH ³\$68´ 1R *Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,* ZKLFKLV HIIHFWLYH IRU SHULRGV EHJLQQLQJ DIWHU 'HFHPEHU 7KLV JXLGDQFH DGRSWVWKHFXUUHQWH[SHFWHGFUHGLWORVV³&(&/´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¶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{7}------------------------------------------------ # *MML Strategic Distributors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¶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| &RPPLVVLRQVUHFHLYDEOHIURPEURNHUVRUGHDOHUV
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| | 7RWDO&RQWUDFWOLDELOLWLHV | | | | | &KDQJHVLQFRQWUDFWOLDELOLWLHVDUHWKHUHVXOWRIRUGLQDU\EXVLQHVVDFWLYLWLHV #### **5HODWHG3DUW\7UDQVDFWLRQVDQG\$JUHHPHQWV** 7KURXJKXQGHUZULWLQJDQGVHUYLFHDJUHHPHQWVWKH&RPSDQ\LVDFRSULQFLSDOXQGHUZULWHURIFHUWDLQ YDULDEOHOLIHLQVXUDQFHSROLFLHVDQGYDULDEOHDQQXLW\FRQWUDFWVLVVXHGE\0DVV0XWXDODQGLWVGLUHFW DQGLQGLUHFWZKROO\RZQHGVXEVLGLDULHV&0/LIH,QVXUDQFH&RPSDQ\³&0/LIH´ DQG00/ %D\ 6WDWH /LIH ,QVXUDQFH &RPSDQ\ ³00/ %D\ 6WDWH´ 7KH &RPSDQ\ HDUQHG FRPPLVVLRQ UHYHQXHVWKDWLWUHDOORZHGWREURNHUGHDOHUVZLWKZKLFKLWKDGHQWHUHGLQWRGLVWULEXWLRQDJUHHPHQWV 5HFHLYDEOHVIURP0DVV0XWXDO&0/LIHDQG00/%D\6WDWHFROOHFWLYHO\DVRI'HFHPEHU ZHUHUHODWHGWRWKHDERYHDJUHHPHQWV ,QDGGLWLRQWKH&RPSDQ\HDUQHGWUDLOFRPPLVVLRQVIURPPXWXDOIXQGFRPSDQLHVWKDWKDYHHQWHUHG LQWR SDUWLFLSDWLRQ DJUHHPHQWV IRU YDULDEOH OLIH DQG YDULDEOH DQQXLW\ SURGXFWV DQG LQFXUUHG GLVWULEXWLRQFRVWVIURPVHUYLFHVSURYLGHGE\0DVV0XWXDO {9}------------------------------------------------ # MML Strategic Distributors, LLC Notes to Statement of Financial Condition December 31, 2020 (Dollars in thousands) Invesco Distributors, Inc. ("IDI") is a related party of the Company, per Accounting Standards Codification ("ASC") 850, Related Party Disclosures, through MassMutual's ownership and influence over IDI's parent, Invesco, Ltd. Receivable from IDI for Trail commissions it earned as of December 31, 2020 was \$165 and is included in Receivables from brokers or dealers in the Statement of Financial Condition. Pursuant to the underwriting and service agreements noted above with MassMutual, C.M. Life, and MML Bay State, the Company is compensated for expenses it incurs. The Company has administrative services agreements with MassMutual and MML Investors Services, LLC ("MMLIS"), which provide the Company certain services including, but not limited to, accounting, legal, cash management, and other general corporate services. Under these service agreements, the Company pays a management fee to MassMutual and MMLIS as reimbursement for the services noted above. While management believes that these fees are calculated on a reasonable basis, they may not be indicative of the costs that would have been incurred on a standalone basis. ## Payables to Related Parties Payables to related parties consist of the following as of December 31, 2020: | Distribution costs due to MassMutual | S | 269 | |---------------------------------------|---|-----| | Management fees due to MassMutual | | 35 | | Distribution fees due from MassMutual | | (2) | | Management fees due to MMLIS | | | | Payables to related parties | | | Related party receivables and payables are reviewed monthly. Certain management fees are net settled against distribution fees in the current month. All other intercompany balances are generally settled in the following month. The Company reviews current and future capital needs with its parent on a periodic basis to ensure that adequate capital is maintained. {10}------------------------------------------------ ## Notes to Statement of Financial Condition December 31, 2020 (Dollars in thousands) #### 5. Regulatory Requirements As a broker-dealer registered with the SEC, the Company is subject to the SEC's uniform net capital rule (Rule 15c3-1), which requires the maintenance of minimum net capital. Advances to affiliates, dividend payments, and other equity withdrawals are subject to certain notification and other provisions of Rule 15c3-1 and other regulatory requirements. The Company has elected to operate under the alternative standard of calculating its minimum net capital, which requires the Company to maintain as its capital the greater of \$250 or 2% of aggregate debits used in computing its reserve requirement. Accordingly, the minimum net capital required is \$250. At December 31, 2020, the Company had net capital of \$1,175, which was \$925 in excess of its required net capital. The Company is exempt from Rule 15c3-3 of the Securities Exchange Act of 1934, pursuant to paragraph (k)(1). To qualify for the exemption under Rule 15c3-3 (k)(1), the Company's broker and dealer transactions are limited to the purchase, sale and redemption of redeemable securities of registered investment companies or of interests or participations in an insurance company separate account, whether or not registered as an investment company. The Company must also promptly transmit all funds and deliver all securities received in connection with its activities as a broker or dealer, and not otherwise hold funds or securities for, or owe money or securities to, customers. #### 6. Broker's Bond The Company carries a broker's blanket fidelity bond in the amount of \$600. In addition, the Company is afforded additional coverage under the MassMutual Corporate Fidelity Bond Program in the amount of \$100,000. ## 7. Litigation and Regulatory Inquiries The Company may from time to time become involved in litigation arising in and out of the normal course of business. The Company may from time to time also be involved in regulatory investigations, inquiries, and internal reviews, certain of which are ongoing. In all such regulatory matters, the Company has and is cooperating fully with the applicable regulatory agency or selfregulatory organization. #### 8. Subsequent Events The Company has evaluated subsequent events through February 17, 2021, the date the financial statement was available to be issued, and no events have occurred subsequent to the balance sheet date and before the date of evaluation that would require recognition or disclosure. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.