# MML DISTRIBUTORS, LLC X-17A-5 (2021-02-23) — Broker-dealer annual report - Company: MML DISTRIBUTORS, LLC - Form: X-17A-5 - Filed: 2021-02-23 - Period: 2020-12-31 - Accession: 0001582604-21-000004 - CIK: 943903 - File #: 8-48203 - 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/943903/000158260421000004/mmld2020public.pdf --- {0}------------------------------------------------ Statement of Financial Condition As of December 31, 2020 With Report of Independent Registered Public Accounting Firm Thereon {1}------------------------------------------------ ### **Table of Contents** | | Page(s) | |----------------------------------------------------------|---------| | Report ofIndependent Registered Public Accounting Finn | 1 | | Statement of Financial Condition as of December 31, 2020 | 2 | | Notes to Statement of Financial Condition | 3-10 | {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 Members and the Board of Directors MML Distributors, LLC: ### Opinion on the Financial Statement We have audited the accompanying statement of financial condition of MML 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 2004. 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}------------------------------------------------ ### **Statement** of Financial **Condition December 31, 2020 (Dollars in thousands)** ### **Assets** | Cash and cash equivalents
Receivables from brokers or dealers
Receivables from related parties
Prepaid expenses and other assets | \$
1,762
16,488
1,144
256 | |-------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------| | Total assets | \$
19,650 | | Liabilities and Equity | | | Payables to related parties
Trail commissions payable
Accounts payable and accrued expenses
Total liabilities | \$
17,525
184
37
17,746 | | 11embers' equity
Accumulated deficit | 16,525
(14,621) | | Total equity | 1,904 | | Total liabilities and equity | \$
19,650 | The accompanying notes are an integral part of this financial statement. {4}------------------------------------------------ ### Basis of Presentation ### Cash and Cash Equivalents {5}------------------------------------------------ ### Revenue Recognition and Related Expense ### Fair Value of Financial Instruments ### Income Taxes {6}------------------------------------------------ ### New Accounting Pronouncements Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments {7}------------------------------------------------ ## Notes to Statement of Financial Condition December 31, 2020 (Dollars in thousands) Distribution fees represent fees paid to the Company by MassMutual in connection with underwriting and servicing related to the promotion, offering, marketing, and distribution of MassMutual proprietary variable products. Services are provided on a daily basis, which represents a performance obligation that is satisfied over time. Fees are calculated based on actual expenses incurred and are billed and received monthly in the month the services are performed (see Note 4). ### Contract Assets The timing of the Company's revenue recognition may differ from the timing of payment by its customers. The Company records receivables when revenue is recognized prior to payment and it has an unconditional right to payment. The Company recorded the following contract assets at December 31, 2020 and 2019: | | 2020 | 2019 | |-----------------------------------------------------------------------------------------------------|-----------------------|-----------------------| | Trail commissions receivable from brokers or dealers
Commissions receivable from related parties | \$
16,488
1.144 | \$
18,225
1.228 | | Total contract assets | 17,632
\$ | 19.453
\$ | Changes in contract assets are the result of ordinary business activities. ## Contract Costs The Company incurred transaction-related costs to fulfill its contracts with customers for which the following contract liabilities were recorded at December 31, 2020 and 2019: | | 2020 | 2019 | |-------------------------------------------------------------------------------------------|---------------------|---------------------| | Trail commissions payable to related parties
Commissions payable to brokers or dealers | \$
17,462
184 | \$
19,272
181 | | Total contract liabilities | 17,646
\$ | 19,453
\$ | Changes in contract liabilities are the result of ordinary business activities. {8}------------------------------------------------ ### 4. Related-Party Transactions and Agreements Through underwriting and service agreements, the Company is a principal underwriter of certain variable life insurance contracts issued by MassMutuai and its wholly-owned subsidiary, C.M. Life Insurance Company ("C.M. Life"). In addition, the Company is placement agent for certain unregistered private placement life insurance contracts issued by MassMutuai. The Company earned commission revenues that it reallowed to broker-dealers with which it had entered into selling agreements. Receivables from MassMutual and C.M. Life collectively as of December 31, 2020 were \$44 related to the above agreements. The Company is also principal underwriter of registered group variable annuities issued by the Talcott Resolution Life Insurance Company (formerly known as the Hartford Life Insurance Company). The Company earned commission revenue and incurred distribution support costs from MassMutual. Receivable from MassMutual as of December 31, 2020 was \$960 related to this agreement. The Company is party to a Broker-Dealer Servicing Agreement with MassMutual whereby the Company provides broker-dealer services in connection with the purchase and sale of investment company shares for executive benefit products. For the year ended December 31, 2020, the Company recorded \$20 in Trail commissions related to these programs and incurred distribution support costs from services provided by MassMutual equal to these revenues. The Company is party to a Broker-Dealer Servicing Agreement with MassMutual whereby the Company provides broker-dealer services, such as order aggregation services in connection with the purchase and sale of investment company shares for retirement plans. The Company also acts as the distributor of the mutual fund products that MassMutual acquired in 2013 from the Hartford Life Insurance Company. The Company earned unaffiliated Trail commissions related to these programs and incurred distribution support costs from services provided by MassMutual equal to these revenues. Invesco Distributors, Inc. ("IDI") is a related party of the Company, per Accounting Standards Codification ("ASC" 850), through MassMutual's ownership and influence over IDI's parent Invesco, Ltd. The Company earned affiliated Trail commissions from IDI and incurred distribution support costs from services provided by MassMutual equal to these revenues. Receivable from IDI as of December 31, 2020 was \$736 and is included in Receivables from brokers or dealers in the Statement of Financial Condition. {9}------------------------------------------------ ### Notes to Statement of Financial Condition December 31, 2020 (Dollars in thousands) On December 31, 2020, MassMutual completed the sale of its retirement plan business to Great-West Life & Annuity Insurance Company (Great-West). As of the date of the sale, the Company no longer provides order aggregation services for the purchase and sale of investment company shares for the retirement plans and is no longer the distributor of the mutual fund platform. In addition, the Company has Principal Underwriter Agreements with the MassMutual Premier Funds, and the MassMutual Select Funds, as well as Distribution Agreements with certain share classes of the MML Series Investment Fund, and the MML Series Investment Fund II (together, the "Funds"). The Funds are available for the investment of assets of various separate investment accounts established by MassMutual and C.M. Life. The Company earned Trail commissions related to these programs and incurred distribution support costs from services provided by MassMutual equal to these revenues. In addition, the Company earned commissions that it reallowed to broker-dealers with which it had entered into selling agreements. Receivables from MassMutual as of December 31, 2020 were \$140 related to the above agreements. The Company, MML Investors Services, LLC ("MMLIS"), and MML Strategic Distributors, wholly owned subsidiaries of MassMutual, have a reciprocal agreement whereby they mutually agree to reimburse each other for the amount of any 12b-l fees inadvertently paid to either firm by the Fund Companies. Pursuant to the distribution agreements noted above with MassMutual and C.M. Life, the Company is compensated for expenses it incurs. The Company has administrative services agreements with MassMutual and MMLIS, which provide for the performance by MassMutual and MMLIS of certain services for the Company 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 stand-alone basis. {10}------------------------------------------------ ### Payables to Related Parties Payables to related parties consist of the following as of December 31, 2020: | Management fees due to MMLIS
Payables to related parties | \$
13
11,525 | |-------------------------------------------------------------|--------------------| | Distribution fees due to MassMutual | 21 | | Management fees due to MassMutual | 29 | | Distribution costs due to MassMutual | \$
17,462 | 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. ### 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 method 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 ,566, which was \$1,316 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 \$1 00,000. {11}------------------------------------------------ ## Notes to Statement of Financial Condition December 31, 2020 (Dollars in thousands) ### 7. Litigation and Regulatory Inquiries The Company may from time to time become involved in litigation arising in and out of the nonnal 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.