# CF SECURED, LLC X-17A-5 (2022-03-01) — Broker-dealer annual report - Company: CF SECURED, LLC - Form: X-17A-5 - Filed: 2022-03-01 - Period: 2021-12-31 - Accession: 0001688906-22-000001 - CIK: 1688906 - File #: 8-69863 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young LLP - Auditor location: New York, NY - Contact: Selin Ibabekci - Phone: 12128294890 - Email: paulson@cantor.com - Website: cantor.com - Signed by: Kenneth Paulson (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1688906/000168890622000001/CFSECUREDBS.pdf --- {0}------------------------------------------------ ![](_page_0_Picture_0.jpeg) #### STATEMENT OF FINANCIAL CONDITION CF Secured, LLC December 31, 2021 With Report of Independent Registered Public Accounting Firm {1}------------------------------------------------ #### **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** 0MB APPROVAL 0MB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 # **ANNUAL REPORTS FORMX-17A-5 PART III** **FACING PAGE** SEC FILE NUMBER 8-69863 **Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING \_\_ O�l�/O�l�/2�l \_\_\_ AND ENDING \_\_ 1=2�/3�1�/2=-l \_\_ MM/DD/YY MM/DD/YY **A. REGISTRANT IDENTIFIC ATION** NAME OF FIRM: \_,C=F---'S"-'e=cu=r=-e=d'-=L=L"-'C=--------------------------- TYPE OF REGISTRANT (check all applicable boxes): 0Broker-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 a P.O. box no.) 110 East 59th Street New York (City) (No. and Street) New York (State) **PERSON TO CONTACT WITH REGARD TO THIS FILING** Kenneth Paulson 212-294-7922 (Name) (Area Code - Telephone Number) **B. ACCOUNTANT IDENTIFIC ATION** 10022 (Zip Code) K paulson@cantor.com (Email Address) INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing\* Ernst & Young LLP (Name - if individual, state last, first, and middle name) One Manhattan West, 401 9 th Avenue (Address) 10/20/2003 New York (City) (Date of Registration with PCAOB)(if applicable) **FOR OFFICIAL USE ONLY** New York (State) 10001 (Zip Code) 42 (PCAOB Registration Number, if applicable) \* Claims 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 l 7CFR 240. l 7a-5( e )(1 )(ii), if applicable. {2}------------------------------------------------ #### **AFFIRMATION** I, Kenneth Paulson, affirm that, to the best of my knowledge and belief, the accompanying statement of financial condition pertaining to CF Secured, LLC (the "Company"), as of December 31, 2021, is true and correct. I further affirm that neither the Company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. Kenneth Paulson Chief Financial Officer **On this 28th day of February, 2022, Kenneth Paulson, to me known and known to me to be the person described in and who executed the foregoing instrument and he acknowledged to me that he executed the same.** *\_L\_aL* Notary Public ![](_page_2_Picture_7.jpeg) {3}------------------------------------------------ #### **This filing\*\* contains (check all applicable boxes):** 0 Statement of Financial Condition. 0 Notes to Statement of Financial Condition. **D** Statement of Operations. □Statement of Cash Flows. **D** Statement of Changes in Member's Equity. **D** Statement of Changes in Subordinated Borrowings. **D** Notes to Financial Statements. **D** Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. **D** Computation of tangible net worth under 17 CFR 240.18a-2. □Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. **D** Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. **D** Computation for Determination of PAB Requirements under Exhibit A to§ 240.15c3-3. **D** Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. **D** 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. **D** Reconciliations, 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 reserve requirements under 17CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. **D** Summary of financial data for subsidiaries not consolidated in the statement of financial condition. 0 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** Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. **D** Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. 0 Independent public accountant's report based on an examination of the statement of financial condition. **D** Independent public accountant's report based on an examination of the financial report or statement of financial condition under 17CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. **D** Independent public accountant's report based on an examination of certain statements in the compliance report under 17CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. **D** Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17CFR 240.18a-7, as applicable. **D** Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12,as applicable. **D** Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, ora statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). ### **D** Other: --------------------------------------- □ A copy of the SIPC Supplemental Report. *\*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240. l 7a-5(e)(3) or 17 CFR 240.18a- 7(d)(2), as applicable.* {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) **£�t & \bure llP one Manmttan West �wvork, r•N10C01** **Ti?l :+121277330:0 R:lx:+1 212773 6350 ey.com** #### Report of Independent Registered Public Accounting Firm To the Member and Management of CF Secured, LLC #### 0 pinion on the Financial Statement We have aud ted the accompanying state men! of fin an c a I cond tion of CF Se cu red, LLC (the "Comp any') as of December 31 , 2021 and the related notes (the "financial statement"). In our opin on, the financial statement presents fair y, in all mater a I respects, the f nanc al pos tion of the Company at December 31 , 2021 , n conformity w th U.S. generally accepted accounting p r n cip e s. #### Basis for Opinion This financial statement is the responsibil ty of the Company's management. Our respons bil ty is to express an opinion on the Company's financ al statement based on our aud t. We are a public accounting firm registered w th the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be in dependent w th respect to the Comp any in accord a nee wth the U.S. federal secur ties aws and the applicable rules and regu ations of the Secur ties and Exchange Commission and the PCAOB. We conducted our aud t in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance ab out whether the financial statement is free of mate r al misstatement, whether due to error or fraud. Our aud t included p erfo rmin g procedures to assess the r sks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those r sks. Such procedures ncluded examining, on a test bas s. evide nee regarding the amounts and d sc osures in the financial state men!. 0 ur aud t a so included evaluat ng the accounting pr nciples used and sign ficant estimates made by man a gem en!, as we II as evaluating the over all fin a nc a I stat em en! presentation. We believe that our aud I prov ides a re a son ab e basis for our opin on. We have served as the Company's audior since 2017. February 28, 2022 {5}------------------------------------------------ ### Statement of Financial Condition December 31, 2021 *(In Thousands)* | Assets | | | |------------------------------------------------------------------------|------------------|------------------| | Cash and cash equivalents | | \$
131,803 | | Cash and securities segregated under federal and other regulations | | 892,455 | | Collateralized agreements: | | | | Securities purchased under agreements to resell | \$
6,740,749 | | | Securities borrowed | 5,938,375 | | | | | 12,679,124 | | Receivables from broker-dealers, clearing organizations, and customers | | 3,163,871 | | Receivables from related parties | | 4,765 | | Fixed assets, net | | 989 | | Other assets | | 1 614 | | Total assets | | 16,874,621 | | Liabilities and member's equity | | | | Co llateralized financings: | | | | Securities sold under agreements to repurchase | \$
13,440,135 | | | Securities loaned | 1 944
576 | | | | | 15,384,711 | | Payables to broker-dealers, clearing organizations, and customers | | 1,089,095 | | Payables to related parties | | 98 | | Accounts payable and accrued liabilities | | 364 | | Total liabilities | | 16,474,268 | | | | | | Commitments and contingencies (Note 7) | | | | Member's equity: | | | | Total member's equity | | 400,353 | | Total liabilities and member's equity | | \$
16,874,621 | | | | | *See notes to statement of financial condition* {6}------------------------------------------------ # Notes to Statement of Financial Condition December 31, 2021 *(In Thousands)* ### **1. General and Summary of Significant Accounting Policies** **Description of Business** - CF Secured, LLC (the "Company") is a registered broker-dealer with the Securities and Exchange Commission ("SEC"). The Company acts as a prime broker for institutional and other professional trading firms, providing clearance and settlement as well as engaging in securities lending and other collateralized financing activities. The Company was organized as a limited liability company in the State of Delaware, on September 16, 2016. The Company is wholly owned by CF Secured Holdings, LLC ("CFSH"), which is controlled by its managing member, Cantor CF Secured Investor, LLC ("CFSI"). CFSI is a wholly owned subsidiary of Cantor Fitzgerald L.P. ("CFLP"). **Basis of Presentation** - The statement of financial condition is presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). **Use of Estimates** - Management makes estimates and assumptions that affect the reported amounts of the assets and liabilities, and the disclosure of contingent assets and liabilities. Management believes that the estimates utilized in preparing the statement of financial condition are reasonable. Estimates, by their nature, are based on judgment and available information. As such, actual results could differ materially from the estimates included in the statement of financial condition. **Revenue Recognition** - The Company recognizes its revenues primarily through interest income related to securities borrowed and securities purchased under agreements to resell on an accrual basis and interest expense related to securities loaned and securities sold under agreements to repurchase on an accrual basis as a component of Interest income and expense, respectively. Additionally, the Company earns fee-based revenues for clearing and settling certain customers' trading activity. See Note 11 - Revenue from Contracts with Customers. **Cash and Cash Equivalents** - The Company considers all highly liquid investments with maturity dates of 90 days or less at the date of acquisition to be cash equivalents. **Cash and Securities Segregated Under Federal and Other Regulations** - Cash and securities segregated under federal and other regulations are segregated for the protection of customers and for the proprietary accounts of brokers or dealers under the Securities Exchange Act of 1934. **Fair Value** - U.S. GAAP defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and requires certain disclosures about such fair value measurements. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to {7}------------------------------------------------ # Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* ### **1. General and Summary of Significant Accounting Policies** *(continued)* unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: - Level 1 measurements Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. - Level 2 measurements Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly. - Level 3 measurements Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company values its derivative contract at fair value. The derivative contract is a non-traded foreign exchange swap contract, and falls within Level 2 of the fair value hierarchy. It is valued based on the closing observable exchange rate as of the balance sheet date. See Note 2 - Derivative Contract. **Collateralized Agreements and Financings** -Collateralized agreements are securities purchased under agreements to resell ("Reverse Repurchase agreements") and securities borrowed. Collateralized financings are securities sold under the agreements to repurchase ("Repurchase agreements") and securities loaned. The Company enters into these transactions to obtain financing, satisfy cash and securities segregated deposit requirements, and cover short sales. - Reverse Repurchase and Repurchase agreements Reverse Repurchase and Repurchase agreements are recorded at the contractual amount for which the securities will be repurchased or resold, including accrued interest. The Company nets certain Reverse Repurchase agreements and Repurchase agreements when a legal right of offset exists under master netting arrangements, which are enforceable by law. It is the policy of the Company to obtain possession of collateral with a market value equal to, or in excess of, the principal amount loaned under Reverse Repurchase agreements. Collateral is valued daily and the Company may require counterparties to deposit additional collateral or return collateral pledged when appropriate. - Securities borrowed and Securities loaned transactions Securities borrowed and Securities loaned are recorded at the amount of cash collateral advanced or {8}------------------------------------------------ ## Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* #### **1. General and Summary of Significant Accounting Policies** *(continued)* received. Securities borrowed transactions require the Company to deposit cash with the lender. Fees received or paid in connection with these activities are recorded as Interest income or Interest expense, respectively, and are recognized over the life of the transaction. The Company monitors the market value of securities borrowed and loaned on a daily basis and obtains or refunds additional collateral as necessary to ensure such transactions are adequately collateralized. **Receivables from and Payables to Broker-Dealers, Clearing Organizations, and Customers** - Receivables from and Payables to broker-dealers, clearing organizations, and customers primarily represent customer receivables and payables. Also included in Receivables from and Payables to broker-dealers, clearing organizations, and customers are amounts due to/from customer margin deposits and free credit balances, as well as cash deposited with various clearing organizations to conduct ongoing clearance activities. Pursuant to the guidance in Accounting Standards Codification ("ASC") Topic 210, *Balance Sheet,* the Company presents receivables from and payables to customers related to their margin balances on a net basis in the statement of financial condition. **Fixed Assets, net** - Fixed assets are recorded at historical cost and depreciated over their estimated economic useful lives, generally three to five years, using the straight-line method. In accordance with U.S. GAAP guidance, the Company capitalizes qualifying computer software costs incurred during the application development stage and amortizes them over an estimated useful life of three years on a straight-line basis. **Income Taxes** - The Company is a single-member limited liability company that is treated as a disregarded entity for U.S. tax purposes and is ultimately wholly owned by CFSH. CFSH is taxed as a U.S. partnership and is subject to the Unincorporated Business Tax ("UBT") in New York City ("NYC") and Pass-Through Entity ("PE") Tax in Connecticut. The Company has not elected to push down and allocate current and deferred tax expense from CFSH and, therefore, no provision for income tax is required to be disclosed, in accordance with ASC 740, *Income Taxes.* **Foreign Currency Transactions, net** - Assets and liabilities denominated in nonfunctional currencies are converted at rates of exchange prevailing on the date of the Company's statement of financial condition. **Recently Adopted Accounting Pronouncements** - In December 2019, the F ASB issued ASU No. 2019-12, *Income Taxes (Topic 740): Simplifying theAccounting for Income Taxes.* The ASU is part of the F ASB 's simplification initiative; and it is expected to reduce cost and complexity related to accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, *Income Taxes* related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for {9}------------------------------------------------ ### Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* #### **1. General and Summary of Significant Accounting Policies** *(continued)* outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. Effective January 1, 2021, as part of the adoption of ASU No. 2019-12, the Company has not elected to push down and allocate current and deferred tax expense from CFSH. Accordingly, no income tax provision has been recorded by the Company. The adoption resulted in \$457 of current and deferred tax liabilities related to UBT being transferred to CFSH. In October 2020, the FASB issued ASU No. 2020-10, *Codification Improvements.* The standard amends the Codification by moving existing disclosure requirements to ( or adding appropriate references in) the relevant disclosure sections. The ASU also clarifies various provisions of the Codification by amending and adding new headings, cross-referencing, and refining or correcting terminology. The Company adopted the standard on the required effective date beginning January 1, 2021, using a modified retrospective method of transition. The adoption of this guidance did not to have a material impact on the Company's statement of financial condition. **New Accounting Pronouncements** - In March 2020, the FASB issued ASU No. 2020-04, *Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.* The guidance is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements ( e.g., loans, debt securities, derivatives, and borrowings) necessitated by reference rate reform as entities transition away from LIBOR and other interbank offered rates to alternative reference rates. This ASU also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. Application of the guidance is optional and only available in certain situations. The ASU is effective upon issuance and generally can be applied through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, *Reference Rate Reform (Topic 848): Scope.* The amendments in this standard are elective and principally apply to entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (referred to as the "discounting transition"). The standard expands the scope of ASC 848, *Reference Rate Reform* and allows entities to elect optional expedients for derivative contracts impacted by the discounting transition. Similar to ASU No. 2020-04, provisions of this ASU are effective upon issuance and generally can be applied through December 31, 2022. Management is evaluating and planning for adoption of the new guidance, including forming a cross-functional LIBOR transition team to determine the Company's transition plan and facilitate an orderly transition to alternative reference rates, and continuing its assessment on the Company's statement of financial condition. In August 2020, the F ASB issued ASU No. 2020-06, *Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity* {10}------------------------------------------------ # Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* ### **1. General and Summary of Significant Accounting Policies** *(continued)* *(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.* The standard is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity's own equity. The ASU also enhances information transparency by making targeted improvements to the related disclosures guidance. The new standard will become effective for the Company beginning January 1, 2024, can be applied using either a modified retrospective or a fully retrospective method of transition and early adoption is permitted. Management is currently evaluating the impact of the new guidance on the Company's statement of financial condition. ### **2. Derivative Contract** On April 30, 2021, the Company terminated a non-deliverable cross-currency swap agreement (the "Cross-currency Swap") and entered into a new non-deliverable cross-currency swap agreement (the "new Cross-currency Swap") with CFLP, with a settlement date of April 30, 2022. The new Cross-currency Swap was executed to mitigate the Company's exposure to foreign currency risk. The Company did not designate this derivative contract as a hedge for accounting purposes. U.S. GAAP requires that an entity recognizes all derivative contracts as either assets or liabilities in the statement of financial condition and measure those instruments at fair value. The new Crosscurrency Swap falls within Level 2 of the fair value hierarchy under U.S. GAAP, and it is valued based on a closing observable exchange rate as of the balance sheet date. As of December 31, 2021, the fair value of the new Cross-currency Swap was \$4.6 million, and it was recorded as part of Receivables from related parties in the Company's statement of financial condition. As of December 31, 2021, the new Cross-currency Swap had a notional amount of\$91.1 million. ### **3. Receivables from and Payables to Broker-Dealers, Clearing Organizations, and Customers** Receivables from and Payables to broker-dealers, clearing organizations, and customers are amounts due to/from customer margin deposits and free credit balances, short sale proceeds, as well as cash deposited with various clearing organizations to conduct ongoing clearance activities, and commissions receivable. {11}------------------------------------------------ ### Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* ### **3. Receivables from and Payables to Broker-Dealers, Clearing Organizations, and Customers** *(continued)* As of December 31, 2021, Receivables from and Payables to broker-dealers, clearing organizations, and customers included the following: | As of December 31, 2021 | Receivables | | Payables | | | |-----------------------------------------------------|-------------|-----------|----------|-----------|--| | Receivables/payables from/to customers | \$ | 3,057,481 | \$ | 843,080 | | | Contract values of fails to deliver/receive | | 65,846 | | 127,932 | | | Receivables/payables from/to clearing organizations | | 24,644 | | 4,152 | | | Receivables/payables from/to broker-dealers | | 548 | | 80,486 | | | Other receivables/payables | | 15,352 | | 33,445 | | | Total | \$ | 3,163,871 | \$ | 1,089,095 | | Substantially all open fails to deliver and fails to receive transactions as of December 31, 2021 have subsequently settled at the contracted amounts. Receivables from and Payables to customers also include amounts due on cash transactions. #### **4. Securities Financing Transactions** The following tables show the gross and net contract amounts of collateralized agreements and collateralized financings as of December 31, 2021: | | As of December 31, 2021 | | | | | | | | | | | | |---------------------------------------------------------------------------------|-------------------------|----------------------------------|--|------------|-------------|----------------|--|------------------------------------------|--|-------------|--|----------------| | | Assets | | | | Liabilities | | | | | | | | | | | Securities
purchased
under | | | | Total | | Securities
sold under
agreements | | | | Total | | | | agreements | | Securities | | collateralized | | to | | Securities | | collateralized | | | | to resell | | borrowed | | agreements | | re�urchase | | loaned | | financings | | Gross am aunt | | \$ 15,876,752 \$ 5,938,375 \$ | | | | | | 21,815,127 \$ 22,576,138 \$ 1,944,576 \$ | | | | 24,520,714 | | Less: gross amount offsets | | 9,136,003 | | | | 9,1 36,003 | | 9,136,003 | | | | 9,1 36,003 | | Net amount presented in the
Company's statement of
financial condition | | 6,740,749 | | 5,938,375 | | 12,679,124 | | 13,440,135 | | 1,944,576 | | 15,384,71 1 | | Less: amount not offset in
the Company's statement of
financial condition | | | | | | | | | | | | | | Collateral 1 | | 6,739,921 | | 5,815,709 | | 12,555,630 | | 13,373,000 | | 1,862,665 | | 15,235,665 | | Net amount | \$ | 828 \$ | | 122,666 \$ | | 123,494 \$ | | 67,135 \$ | | 81,9 I 1 \$ | | 149,046 | 1 Represents amounts which are not permitted to be offset on the Company's audited statement of financial condition in accordance with ASC 210- 20 but which provide the Company with the right of offset in the event of default. {12}------------------------------------------------ ### Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* #### **4. Securities Financing Transactions** *(continued)* As of December 31, 2021, the Company had securities borrowed and securities loaned transactions of \$68.2 million and \$800.3 million with an affiliate, respectively. As of December 31, 2021, the Company had no Repurchase agreements with an affiliate and \$140.0 million of Reverse Repurchase agreements with an affiliate. The following table shows collateralized financings by class of collateral pledged and maturity date as of December 31, 2021: | | As of December 31, 2021 | | | | |------------------------------------------------------------|---------------------------------------------------|-----------------|------------------|---------------------------------| | | Overni�ht
and
continuous | 2 to 30
days | 31 to 90
days | Total | | Securities sold under agreements to repurchase | | | | | | U.S. government and agency obligations | \$ 11,442,549 \$ | | | 452,401 \$ 163,376 \$12,058,326 | | Equities | 221,232 | 880,121 | 280,456 | 1,381,809 | | Total | 11,663,781 | 1,332,522 | | 443,832 13,440,135 | | Securities loaned | | | | | | Equities | 1,944,576 | | | 1,944,576 | | Total | 1 944 576 | | | 1 944 576 | | Total borrowings | \$ 13,608,357 \$1,332,522 \$ 443,832 \$15,384,711 | | | | | Gross am aunt of recognized liabilities for collateralized | | | | | | financings | | | | \$24,520,714 | | Amounts related to agreements not included in offsetting | | | | | | disclosure | | | | \$ 9,136,003 | In connection with secunttes financing transactions, the Company accepts collateral (U.S. government and agency obligations, corporate obligations, as well as equity securities) that it is permitted by contract or custom to sell or rep ledge. Such collateral consisted primarily of securities received from customers and other broker-dealers in connection with both reverse repurchase agreements and securities borrowed transactions. As of December 31, 2021, the gross and net fair value of such collateral received from counterparties was \$24.3 billion and \$15.1 billion, respectively. As of December 31, 2021, the gross and net fair value of such collateral loaned to counterparties was \$26.3 billion and \$17.1 billion, respectively. Additionally, a portion of collateral received is used by the Company to cover short sales, to obtain financing, and to satisfy deposit requirements at clearing organizations. {13}------------------------------------------------ ## Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* #### **5. Fixed Assets** Fixed assets, net consisted of the following: | | December 31,
2021 | |------------------------------------------------|----------------------| | Software, including software development costs | \$
3,603 | | Less: accumulated amortization | 2,614 | | Fixed assets, net | \$
989 | #### **6. Commitments and Contingencies** ### **Legal Matters** In the ordinary course of business, various legal actions could be brought and may be pending against the Company. The Company may also be involved, from time to time, in other reviews, investigations and proceedings by governmental and self-regulatory agencies (both formal and informal) regarding the Company's business. Any of such actions may result in judgments, settlements, fines, penalties, injunctions or other relief. As of December 31, 2021, no such claims or actions have been brought against the Company and therefore no reserves were recorded. Legal reserves are established in accordance with ASC 450, *Contingencies,* when a material legal liability is both probable and reasonably estimable. Once established, legal reserves are adjusted when additional information becomes available or when an event occurs requiring a change. **Financing** - As of December 31, 2021, in connection with its financing activities, the Company had commitments to enter into or extend resale agreements. As of December 31, 2021, there were \$0.5 billion and \$0.4 billion in repurchase commitments and resale commitments, respectively. #### 7. **Related Party Transactions** CFLP and other affiliates ("Cantor") provide the Company with administrative services and other support for which they charge the Company based on the cost of providing such services. Such support includes allocations for utilization of fixed assets, accounting, treasury, operations, human resources, legal and technology services. In addition, the Company was charged for allocated rent, utilities, maintenance and other occupancy related costs. The unpaid balances are included in Payables to related parties in the Company's statement of financial condition. An affiliate of the Company enters into various agreements with certain of its employees whereby these employees receive forgivable loans. Unpaid balances are included in Payables to related parties in the Company's statement of financial condition. As of December 31, 2021, the Company had a new Cross-currency Swap with CFLP, which was entered into on April 30, 2021. See Note 2 - Derivative Contract, for additional information. {14}------------------------------------------------ ## Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* ### **8. Regulatory Requirements** As a registered broker-dealer, the Company is subject to the SEC's Uniform Net Capital Rule ("Rule 15c3-1 "). The Company has elected to compute its net capital using the alternative method, which requires the Company to maintain minimum net capital equal to the greater of \$1,500, or 2% of aggregate debit balances included in SEC Customer Protection Rule ("Rule 15c3-3") arising from customer transactions as defined. As of December 31, 2021, the Company had net capital of \$299.3 million which was \$219.1 million in excess of its required net capital. The Company is required to perform a computation of the customer reserve requirements pursuant to Rule 15c3-3. As of December 31, 2021, the Company segregated \$131.7 million in cash and \$703.9 million in qualified securities into a special reserve account, which are included in Cash and securities segregated under federal and other regulations in the Company's statement of financial condition. The Company is also required to perform a computation of reserve requirements for Proprietary Accounts of Broker-Dealers ("PAB") pursuant to Rule 15c3-3. As of December 31, 2021, the Company segregated cash of \$28.1 million into a special reserve account for the exclusive benefit of P AB. Cash segregated for the exclusive benefit of P AB is included in Cash and securities segregated under federal and other regulations in the Company's statement of financial condition. ### **9. Financial Instruments and Off-Balance Sheet Risk** **Guarantees** - The Company is a member of various securities clearinghouses and exchanges. Under the standard membership agreement, members are required to guarantee the performance of other members and, accordingly, if another member becomes unable to satisfy its obligations to the clearinghouse or exchange, all other members would be required to meet the shortfall. The Company's liability under these arrangements is not quantifiable and could exceed the cash and securities it has posted as collateral. However, the potential for the Company to be required to make payments under these arrangements is remote. Accordingly, no liability was required to be recorded in the Company's statement of financial condition. **Credit Risk** -Credit risk arises from potential non-performance by counterparties. The Company has established policies and procedures to manage the exposure to credit risk. The Company maintains a thorough credit approval process to limit exposure to counterparty risk and employ stringent monitoring to control the counterparty risk for the matched principal businesses. The Company's account opening and counterparty approval process includes verification of key customer identification, anti-money laundering verification checks and a credit review of financial and operating data. The credit review process includes establishing an internal rating and any other information deemed necessary to make an informed credit decision, which may include financials, correspondence, due diligence calls and a visit to the entity's premises, as necessary. {15}------------------------------------------------ Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* #### **9. Financial Instruments and Off-Balance Sheet Risk** *(continued)* Furthermore, the Company enters into master netting agreements when feasible and demands collateral from certain counterparties or for certain types of transactions. The Company monitors required margin levels daily; pursuant to such guidelines, the Company requires the customer to deposit additional collateral or to reduce positions, when necessary. Such transactions may expose the Company to significant risk in the event the collateral is not sufficient to fully cover losses that customers may incur. In the event the customer fails to satisfy its obligations, the Company may be required to purchase or sell the collateral at prevailing market prices in order to fulfill the customer's obligations. The Company's customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing sources, such as securities loaned. Additionally, the Company pledges customer securities as collateral to satisfy margin deposits at the Options Clearing Corporation. In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its obligation. The Company controls this risk by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the event of excess market exposures. **Customer Activities** - Certain market and credit risks are inherent in the Company's business, primarily in facilitating customers' financing transactions in financial instruments. In the normal course of business, the Company's customer activities include financing of various customer securities, which may expose the Company to credit risk in the event the customer is unable to fulfill its contractual obligations. The Company's customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to customers, which is collateralized by cash and/or securities in the customer's account. In connection with these activities, the Company clears customer transactions involving securities. The Company seeks to control risks associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory, exchange and internal guidelines. As a securities broker and dealer, the Company is engaged in various activities servicing a diverse group of domestic and foreign corporations, governments, and institutional investors. A substantial portion of the Company's transactions is executed with and on behalf of institutional investors including broker-dealers, banks, U.S. government agencies, mutual funds, hedge funds and other financial institutions. **Market Risk** -Market risk is the potential loss the Company may incur as a result of changes in the market or fair value of a particular financial instrument. The Company's exposure to market risk is determined by a number of factors, including size, duration, composition and diversification of positions held, the absolute and relative level of interest rates and foreign currency exchange rates, as well as market volatility and liquidity. The Company manages market risk by setting and monitoring adherence to risk limits, including hedging, aging, notional and concentration limits. {16}------------------------------------------------ # Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* ### **9. Financial Instruments and Off-Balance Sheet Risk** *(continued)* **Operational Risk** - In providing its products and services, the Company may be exposed to operational risk. Operational risk may result from, but is not limited to, errors related to transaction processing, breaches of internal control systems and compliance requirements, fraud by employees or persons outside the Company or business interruption due to systems failures or other events. Operational risk may also include breaches of the Company's technology and information systems resulting from unauthorized access to confidential information or from internal or external threats, such as cyber attacks. Operational risk also includes potential legal or regulatory actions that could arise as a result of noncompliance with applicable laws and/or regulatory requirements. In the case of an operational event, the Company could suffer a financial loss as well as reputational damage. **Foreign Currency Risk** - The Company is exposed to risks associated with changes in foreign exchange rates. The remeasurement of the Company's foreign currency denominated financial assets and liabilities fluctuate with changes in foreign currency rates. CF Secured monitors the net exposure in foreign currencies on a daily basis and hedges its exposure as deemed appropriate with highly rated major financial institutions. **Coronavirus Disease 2019 (COVID-19) Pandemic** - Management has evaluated the impact of the COVID-19 pandemic on the industry and concluded that, while it is reasonably possible that the virus could have an effect on the Company's financial condition, the specific impact is not readily determinable as of the date of this statement of financial condition. The statement of financial condition does not include any adjustments that might result from the outcome of this uncertainty. ### **10. Revenue from Contracts with Customers** See Note 1 - General and Summary of Significant Accounting Policies for detailed information on the recognition of the Company's revenue from contracts with customers. **Contract Balances** - The timing of the Company's revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The Company had receivables related to revenue from contracts with customers of \$0.5 million and \$0.8 million as of December 31, 2020 and December 31, 2021, respectively, which is included in Receivables from broker-dealers, clearing organizations, and customers in the Company's statement of financial condition. {17}------------------------------------------------ ## Notes to Statement of Financial Condition *(continued)* December 31, 2021 *(In Thousands)* ### **10. Revenue from Contracts with Customers** *(continued)* The Company's deferred revenue primarily relates to customers paying advance or billed in advance where the performance obligation has not yet been satisfied. There was no deferred revenue at December 31, 2021. **Contract Costs** - The Company capitalizes costs to fulfill contracts associated with different lines of its business where the revenue is recognized at a point in time and the costs are determined to be recoverable. Capitalized costs to fulfill a contract are recognized at the point in time that the related revenue is recognized. At December 31, 2021, there were no capitalized costs recorded to fulfill a contract. ### **11. Subsequent Events** On January 31, 2022, the Company made a distribution of \$2.2 million to CFSH. The Company has evaluated all subsequent events through the date the statement of financial condition was available to be issued. There have been no additional material subsequent events that would require recognition in this statement of financial condition or disclosure in the notes to the statement of financial condition in addition to the distribution described above. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.