# UNLU SECURITIES INC. X-17A-5 (2022-02-24) — Broker-dealer annual report - Company: UNLU SECURITIES INC. - Form: X-17A-5 - Filed: 2022-02-24 - Period: 2021-12-31 - Accession: 0001643230-22-000002 - CIK: 1643230 - File #: 8-69627 - Type: Broker-dealer - Material weakness: No - Auditor: Mazars USA LLP - Auditor location: New York, NY - Contact: Matthew Butler - Phone: (212)-751-4422 - Email: dportnoff@dfppartners.com - Website: dfppartners.com - Signed by: David Portnoff (FinOp) Original filing: https://www.sec.gov/Archives/edgar/data/1643230/000164323022000002/lushorr.pdf --- {0}------------------------------------------------ # Unlu Securities Inc. (A Wholly-Owned Subsidiary of UNLU MENKUL DEGERLER A.S.) Statement of Financial Condition Year Ended December 31, 2021 {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** | 0MB APPROVAL | | | | | |-----------------------------|----|-----------------|--|--| | 0MB Number: | | 3235-0123 | | | | Expires: October 31, 2023 | | | | | | Estimated average burden | | | | | | hours per response . 12.00 | | | | | | | | SEC FILE NUMBER | | | | | 8- | 69627 | | | #### **ANNUAL AUDITED REPORT FORM X-17A-5 PART** Ill | FACING PAGE | | |-------------|--| | | | **Information 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: **Unlu Securities Inc** TYPE OF REGISTRANT (check all applicable boxes): X Broker-dealer □ Security-based swap dealer □ 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.) **250 Park Ave** (No, and Street) **New York NY** (City) PERSON TO CONTACT WITH REGARD TO THIS FILING **10177** (Zip Code) **David Portnoff 212-751-4422 dportnoff@dfppartners.com** {Name) {Area Code --Telephone No.) (Email Address) **B. ACCOUNTANT IDENTIFICATION** INDEPENDENT PUBLIC ACCOUNT ANT whose reports are contained in this filing\* **Mazars USA LLP** 135 West 50th Street (Address) 10/20/2003 {Name-if individual, state las~ first. and middle name) New York (City) NY (State) 339 10020 (Zip Code) (Date of Registration with PCAOB)(ifapplicable) (PCAOB Registration Number, if applicable) **FOR OFFICIAL USE ONLY** *•ct aims for exemption from the requirement that the annual reports be covered by the reports of an independent public 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)(l)(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 0MB control number.** {2}------------------------------------------------ #### **OAffl OR AFFIRMATION** | I, | David Portnoff | | , swear (or affirm) that, to the best of my knowledge and belief, the financial report pertaining to | | | | | |------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------|------------------|--|--|--| | | the lirm or | Unlu Securities lac | , as of___ December 31, 2021 | | | | | | | | is true and correct. I further swear (or aflim1) U1nt neither the company nor any partner, officer, director, or equivalent person, | | | | | | | | | as the cese mey he, h~s any proprit:tary interest in any account c lassilicd solely as that of n customc.r. | | | | | | | | | MARYROSE MERCADO
NOTARY PUBLIC, STAlE OF NEW YORK
Registration No. 01 ME6423025
Qualmed In Queens County _ 4i:::
Commission Expires October 4, | 2~:-+-----------
FT""~.,,_~::.P | _______
_ _ _ | | | | | | | | | | | | | | | | This filing** contains (check all applicable boxes): | | | | | | | | ~ ( a) Statement of financial condition. | | | | | | | | | | ~ (b) Notes to consoljdated statement of financial condition. | | | | | | | | | 0 ( c) Statement of income (loss) or, if tlJcre is other comprehensive income in the period( s) presented, a statement of
comprehensive income (as defined in ~ 2 I 0. 1-02 of Regulation S-X). | | | | | | | | D (d) Statement ofca~h Oows. | | | | | | | | | 0 (e) | tatement ofch:111J1;es in stockJJoldcrs· or oartners' or sole oroorictor's equity. | | | | | | | | | 0 (f) Slaternent of changes in liabilities s11bordi11ated to claims of creditors. | | | | | | | | 0 (g) Notes to co11solid111ed financial statements. | | | | | | | | | | 0 (h) Computation ofncl capital under 17 CFR 240.15c3- | I or 17 CJ<"R 240.1 Sa-t , as appl.icable. | | | | | | | | D (i) Comoutation ortan_gible net worth under l 7 CTR 240.1811-2. | | | | | | | 0 | | (i) Computation for dt:termination of customer re~erve rcquirt:mimts pursuant to Exliibit A to 17 | | f'R 240.15c3-3. | | | | | | D (k) Computation for determination of security-bas1:d swap reserve requirements pursuant to Exhibit D to 17 CFR 240. l Sc3-3 or | | | | | | | | | | Exhibit A to 17 CTR 240. I 8a-4. IIS applicable. | | | | | | | 0 (I) Compulation for Determination of PAB Requirements under Exhibit A to§ 240. l5c3-3. | | | | | | | | | | | 0 (m) lnfonnntion rclatin~ to possession or control requirements for customers under t 7 CFR 240.15c3-3. | | | | | | | | | 0 (n) Information relatillj!; to possession or control reQuiremcnls for security-based swao customers under 17 CFR | | | | | | | | | 240. I 5c3-3(p)(2) or 17 CFR 240.18a-4. as applicable. | | | | | | | | 0 (o) Reconciliations. including ao1>ro1>riatc explanations, of the FOCUS Report with computation of net caoital or tangible net
worth under 17 CFR 240.15c3-l, 17 CFR 240.18a-l, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17
CFR 240.15c3-3 or 17 CFR 240.1 Sa-4. as applicable. if material differences exist, or a statement that no material differences
exist. | | | | | | | | | | 0 (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. | | | | | | | | @ (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. | | | | | | | | | D (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240. l Sa-7. as applicable. | | | | | | | | | | 0 (s) Exemotion report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7. as aovlicable. | | | | | | | ~ | | (t) Independent public accountant's reoort based on an examination of the statement of financial condition. | | | | | | | □ | | (u) Independent oublic accountant's report based on an examination of the financial reoort or financial statements under 17 | | | | | | | | | CFR 240.17a-5, 17 CFR 240.1 Ba-7, or 17 CFR 240.17a-12. as applicable. | | | | | | | □ | | (v) Independent public accountant's reoort based on an examination of certain statements in the compliance report under 17 | | | | | | | | | CFR 240. l 7a-5 or 17 CFR 240. 18a-7, as applicable. | | | | | | | | | 0 (w) Independent public accountant's report based on a review of the exemotion repmt under 17 CFR 240. J 7a-5 or 17 | | | | | | | | | CFR 240.1 Sa-7. as applicable.
D (x) Supplemental reports on applying 3)!reed-uoon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.l 7a-12, | | | | | | | | | | | | | | | | | as applicable. | | | | | | | | 0 | | (y) Reoort describinp; any material inadequacies found to exist or found to have existed since the date of the l)revious audit, or | | | | | | | D | | 11 statement that no material inadequacies exist, under 17 CFR 240.l 7u-12(k).
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_ | _ | | | | *\*\*To request confldenJial treatment of certain portions of this filing, see 17 CFR 240.* J *7a-5(e)(3) or 17 CFR 240. I 8a-7(d)(2), as* applicable. {3}------------------------------------------------ | | Page(s) | |------------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm 1 | | | Financial Statement | | | Statement of Financial Condition 2 | | | Notes to Financial Statement 3-6 | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) Tel: 212.812 .7000 www.m azars.us # **Report of Independent Registered Public Accounting Firm** **To the Shareholder of Unlu Securities Inc.** #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Unlu Securities Inc., (the "Company") (a wholly-owned subsidiary of Unlu Menkul Degerler A.S.), as of December 31, 2021, and the related notes (collectively referred to as the "financial statement"). In our opinion, the statement of financial condition 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. 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 2016. New York, NY February 22, 2022 {5}------------------------------------------------ # **Unlu Securities Inc. (A Wholly-Owned Subsidiary of Unlu Menkul Deeerler A.S.) Statement of Financial Condition** ## **December 31, 2021** #### **Assets** | Cash
Prepaid expenses and other assets | 529,083
\$
13,882 | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------| | Total assets | 542,965
\$ | | Liabilities and stockholder's equity | | | Due to Parent
Accounts payable and accrued expenses
Total liabilities | 72,120
\$
30 347
102,467 | | Common stock, \$.01 par value, 1,000 shares
authorized, issued and outstanding
Additional paid-in capital
Accumulated deficit
Total stockholder's equity | 10
1,989,990
(125492502)
440,498 | | Total liabilities and stockholder's equity | 542,965
\$ | {6}------------------------------------------------ #### **1. Organization and Nature of Business** Unlu Securities Inc. (the "Company") is a wholly-owned subsidiary of Unlu Menkul Degerler A.S. (the "Parent"), a Turkish financial institution. The Company was incorporated in Delaware on February 9, 2015. The Company registered as a broker-dealer under the Securities Exchange Act of 1934 and became a non-clearing member of the Financial Industry Regulatory Authority (FINRA) on February 10, 2016 and commenced operations on the same date. The Company focuses primarily on sales and trading of Turkish-related fixed income and equity products, including private placements. ## **2. Summary of Significant Accounting Policies** #### **Basis of Presentation** The financial statement has been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). ### **Concentration of Risk - Cash** The Company maintains its cash balances in a single financial institution which, at times, exceeds federally-insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk on cash and cash equivalents. At December 31, 2021, the balance in excess of insured amounts is approximately \$280,000. ### **Revenue Recognition** The Company recognizes revenues in accordance with ASC 606, "Revenue from Contract with Customers". The Company buys and sells securities on behalf of its customers. Each time a customer enters into a buy or sell transaction, the Company charges a commission. Commissions and related clearing expenses are recorded on the trade date (the date that the Company fills the trade order by finding and contracting with a counterparty and confirms the trade with the customer). The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. The Company recognizes research revenue when the Company provides research to a customer and collectability is assured. The Company believes that the performance obligation is satisfied at a point in time when research is provided and collectability is probable as the customer can benefit from the research services alone. {7}------------------------------------------------ #### **2. Summary of Significant Accounting Policies** ( **continued)** #### **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 these estimates. #### **Income Taxes** The Company accounts for income taxes in accordance with ASC 740. The Company follows an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed as the difference between the financial statement and tax bases of assets and liabilities based on presently enacted tax laws and rates. Valuation allowances are established to reduce deferred tax assets when it is deemed more likely than not that such assets will not be realized. The determination of the Company's provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company's financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the financial statements as appropriate. Interest and penalties related to unrecognized tax benefits are recorded in the income tax provision. U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. The guidance requires the evaluation of tax positions taken or expected to be taken to determine whether the tax positions are "more likely-than-not" of being sustained by the applicable tax authority. The Company recognizes the effect of income tax positions if those positions are more likely than not of being sustained. #### **Related Party Transactions** During the normal course of business, the Parent provides various services that accounts for a portion of the Company's business activities. {8}------------------------------------------------ #### **2. Summary of Significant Accounting Policies (continued)** #### **Related Party Transactions** ( **continued)** Pursuant to a brokerage and services agreement, the Company earns commission on trades executed and cleared by the Parent. In return, the Company pays clearing costs equal to 50% of the commission earned in connection with the agreement. The Company earned commission income of approximately \$49,492 for the year ended December 31, 2021, from the Parent. Commission receivable amounted to approximately \$72,000 at December 31, 2021 and are offset against Due to Parent in the accompanying statement of financial condition. Commission receivable as of December 31, 2020 was approximately \$47,300. The related clearing fees charged by the Parent amounted to approximately \$24,700 for the year ended December 31, 2021 and reported as clearing fees in the accompanying statement of operations The Parent allocated salary expenses to the Company, based on the CEO's estimated time spent each month for the Company. Commission receivable earned from trades are offset against salary allocation and the net amount of \$72,120 was reported as due to Parent in the accompanying statement of financial condition. #### **3. Regulatory Net Capital Requirement** The Company is subject to the Securities and Exchange Commission ("SEC") Uniform Net Capital Rule (SEC Rule 15c3-1-a-2-i). The Company has elected the alternative standard, which requires the maintenance of the greater of \$250,000 or 2% of aggregate debit items in minimum net capital. At December 31, 2021, the Company had net capital (as defined) of \$426,616 which was \$176,616 in excess of the required minimum net capital of \$250,000. #### **4. Income Taxes** At December 31, 2021 , the Company had federal and state net operating loss carryforwards ("NOL") of approximately \$1,477,000 and \$1,473,000, respectively, available to offset future taxable income. There is \$813,000 of Federal NOL incurred in 2018 through 2021 which will be carried forward indefinitely and \$664,000 of accumulated Federal NOL incurred in the years before 2018 which will expire in 20 years. {9}------------------------------------------------ #### **4. Income Taxes ( continued)** The Company's net deferred tax asset before valuation allowance was approximately \$502,000, primarily as a result of net operating losses and amortization of startup costs. As of December 31, 2021, the Company recorded a full valuation allowance against its deferred tax asset since it is more likely than not that the deferred tax asset will not be realized. During 2021, the valuation allowance increased by approximately \$67,000 from \$435,000 to \$502,000. At December 31, 2021, management believes the Company did not have any uncertain tax positions. At December 31, 2021, the Company's income tax returns for the years 2018, 2019 and 2020 are subject to examination by the tax authorities. ## **5. Financial Instruments with Off-Balance-Sheet Risk** In the normal course of business, the Company executes, as agent, securities transactions on behalf of its customers. If the agency transactions do not settle because of failure to perform by either the customer or the counterparty, the Company may be obligated to discharge the obligations of the nonperforming party and, as a result, may sustain a loss if the value of the security is different from the contract amount of the transaction. #### **6. Commitments** In September 2021, the Company renewed its New York office lease from January 2022 through December 2022. Minimum rental payments attributable to the lease agreement are approximately \$18,000. Rent expenses for the year ended December 31, 2021 was approximately \$18,000. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.