# MIZUHO SECURITIES CANADA INC. X-17A-5 (2021-05-19) — Broker-dealer annual report - Company: MIZUHO SECURITIES CANADA INC. - Form: X-17A-5 - Filed: 2021-05-19 - Period: 2021-03-31 - Accession: 0001767248-21-000006 - CIK: 1767248 - File #: 8-70287 - Material weakness: No - Auditor: Ernst & Young LLP - Auditor location: New York, NY - Contact: David Kronenberg - Phone: 2122099499 - Website: ey.com - Signed by: David Kronenberg (Managing Director & Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1767248/000176724821000006/MSCNSOFCq.pdf --- {0}------------------------------------------------ Statement of Financial Condition March 31, 2021 With Report of Independent Registered Public Accounting Firm ![](_page_0_Picture_3.jpeg) {1}------------------------------------------------ ACKNOWLEDGEMENT STATE OF NEW YORK COUNTY OF NEW YORK On this the 18th day of May, 2021, before me, Julie A. Grossman, the undersigned Notary Public, personally appeared David Kronenberg, who is known to me (or satisfactorily proven) to be the person whose name he subscribed to in the Oath and Affirmation relating to the financial statements and supporting schedules of Mizuho Securities Canada Inc. as of March 31, 2021. In witness whereof I hereunto set my hand. Julie A. Grossman Notary Public My commission expires: December 20, 2023 Registration number: 02GR6174635 - - - - - - - - - - - - - - - {2}------------------------------------------------ Statement of Financial Condition March 31, 2021 ## Contents | Report of Independent Registered Public Accounting Firm | 1 | | |---------------------------------------------------------|---|--| | Statement of Financial Condition | 2 | | | Notes to Statement of Financial Condition | 3 | | {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) Ernst & Young LLP 5 Times Square New York, NY 10036-6530 Tel: +1 212 773 3000 Fax: + 1 212 773 6350 www.ey.com {4}------------------------------------------------ # Mizuho Securities Canada Inc. Statement of Financial Condition ## March 31, 2021 #### (In Thousands of U.S. dollars, Except Share Data) | Assets | | | |----------------------------------------------------------------|--------------|--| | Cash and cash equivalents | \$
5,046 | | | Securities owned, at fair value | 15,898 | | | Receivables from broker dealers and clearing organizations | 421 | | | Other assets | 146 | | | Total Assets | \$
21,511 | | | | | | | Liabilities and Stockholder's Equity | | | | Liabilities | | | | Payables to affiliates | 211 | | | Accrued expenses and other liabilities | 124 | | | Total Liabilities | 335 | | | Stockholder's Equity | | | | Common stock (100 shares issued and outstanding, no par value) | 19,891 | | | Accumulated deficit | (288) | | | Accumulated other comprehensive income | 1,573 | | | Total Stockholder's Equity | 21,176 | | | Total Liabilities and Stockholder's Equity | \$
21,511 | | The accompanying notes are an integral part of the Statement of Financial Condition. {5}------------------------------------------------ ## Notes to Statement of Financial Condition ### (In Thousands of U.S. dollars) #### 1. Organization and Description of Business ticipates in debt and equity underwritings functional currency is the Canadian dollar The Company is a corporation organized under the laws of British Columbia, Canada. The Company is also a registered broker-dealer with the Securities Excha and is a member of the U.S Financial Indus Investment Industry Regulatory Organization of regulatory organization, and is subject to the rules and regulations of these organizations. MSUSA is a registered broker-dealer incorporated in the United States and is a wholly-owned ultimately wholly-owned by Mizuho Financial company listed on the Tokyo, Osaka, and New York Stock Exchanges that provides comprehensive financial services through its subsidiaries. ## 2. Summary of Significant Accounting Policies ## Basis of presentation The Statement of Financial Condition is presented in accordance with U.S. generally accepted accounting principles ## Use of estimates The preparation of the Statement of Financial Condition in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Statement of Financial Condition. Actual results could differ from those estimates. The Company considered the current economic environment, including the effects of the global COVID-19 pandemic, on its businesses in preparation of the Statement of Financial Condition. The COVID-19 pandemic continues to impact the financial markets in which the Company operates, resulting in increased volatility and uncertainty. As the situation evolves, the Company is continuously monitoring the potential risks associated with both the direct and indirect impact of the COVID-19 pandemic on its estimates and assumptions. {6}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) (In Thousands of U.S. dollars) ## 2. Summary of Significant Accounting Policies (continued) ### Cash and cash equivalents The Company defines cash equivalents as overnight time deposits and short-term, highly-liquid investments with original maturities of three months or less at the time of purchase. The Company has cash equivalents of \$4,176 at March 31, 2021. ## Securities owned, at fair value Securities owned are recorded on a trade date basis at fair value. Fair value is generally based upon quoted market prices, when available. When quoted market prices are not available, the Company uses other market data, such as transaction prices for the same or similar securities. Securities owned consists of Canadian Treasury bills held as a deposit with a broker of \$15,898 at March 31, 2021 on the Statement of Financial Condition. ## Fair value measurements The Company reports certain assets and liabilities at fair value on the Statement of Financial Condition in accordance with ASC 820, Fair Value Measurements and Disclosures ASC 825, Financial Instruments Company to irrevocably elect fair value as the initial and subsequent measurement attribute for most financial assets and liabilities on an instrument-by-instrument basis. ## Credit Losses The Company accounts for estimated credit losses in accordance with FASB ASC 326-20, expected credit losses on financial assets measured at amortized cost over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. {7}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) (In Thousands of U.S. dollars) ### 2. Summary of Significant Accounting Policies (continued) #### Investment banking Investment banking includes fees earned from the fees earned from debt underwriting in accordance with ASC 606, Revenue from Contracts with Customers underwriter and earns revenue, which can include management fees, sales concessions, and underwriting fees. ASC 606 prescribes that fee revenue relating to underwriting commitments is recognized when all significant items relating to the underwriting cycle have been completed and the amount of the underwriting revenue has been determined. Generally, this would occur on trade date, when the deal is launched into the primary market. Investment banking revenues are presented gross of transaction related expenses and are recognized when the Company satisfies the performance obligation. Investment banking fees receivable of \$420 at March 31, 2021 is reported in receivables from broker dealers and clearing organizations on the Statement of Financial Condition. #### Income taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes or expected to be taken in a ta as to whether a tax position will be sustained upon examination, based on the technical merits of the position. Accordingly, the Company assesses this likelihood based on the facts, circumstances, and information available at the end of each period. A tax position that meets the MLTN recognition threshold is measured initially and subsequently as the largest amount of tax benefit that will likely be realized upon settlement with a taxing authority that has full knowledge of all the relevant information. The measurement of unrecognized tax benefits is adjusted when new information is available, or when an event occurs that requires a change. Deferred tax assets or liabilities are recognized in the Statement of Financial Condition at amounts expected to be realized. The Company recognizes the current and deferred tax consequences of all transactions in the Statement of Financial Condition using the provisions of the currently enacted tax laws. {8}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) (In Thousands of U.S. dollars) ## 2. Summary of Significant Accounting Policies (continued) #### Foreign exchange Assets and liabilities denominated in non-CAD currencies are revalued into CAD equivalents using the spot foreign exchange rates at the date of the Statement of Financial Condition. Assets and liabilities denominated in the non-CAD currencies are recorded in CAD equivalents using the effective spot foreign exchange rate at the date of the transaction. For the purposes of preparing the Statement of Financial Condition, the Company translates its balances into USD in accordance with the rules prescribed in ASC 830, Foreign Currency Matters. ### 3. Accounting Developments #### Accounting pronouncements adopted during 2020 326: Measurement of Credit Losses on Financial Instruments). This ASU requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, enhancement of disclosures regarding credit risk. Under the CECL model, expected credit losses will be measured using historical experience, current conditions, and reasonable and supportable forecasts. Subsequently, the FASB issued ASU 2019-11, 2019-04, for codification improvements related to ASU 2016-13. This ASU affects loans, debt securities, net investments in leases and off-balance-sheet credit exposures, as well as any other financial assets that are not excluded from the scope and have the contractual right to receive cash. The Company adopted the ASU on April 1, 2020 and the adoption did not have a material impact on its financial condition. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements in order to improve the effectiveness of disclosure in the notes to financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each adopted the ASU on April 1, 2020 and the adoption did not have a material impact on its financial condition. {9}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) (In Thousands of U.S. dollars) 4. Related Party Transactions In the normal course of business, the Company enters into transactions with affiliated companies for shared personnel and outsourced management services. nagerial and support services to the Company and charge fees pursuant to Service Level Agreements, which are recorded in payables to affiliates on the Statement of Financial Condition. 5. Income Taxes lated party balances on the Statement of Financial Condition at March 31, 2021: Liabilities Payables to affiliates \$ 211 The Company files U.S. Federal, state, local and Canadian income tax returns. On March 27, 2020, the President of the United States signed The Coronavirus Aid, Relief and ted comprehensive U.S. tax legislation, making broad and complex changes to the U.S. tax code. Management does not believe that the CARES Act has material impact to the Comp Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At March 31, 2021, the Company had \$171 of deferred tax assets, which related primarily to timing differences for net operatin of \$766 is for Canadian tax purposes and will expire beginning in 2039 (\$326 in 2039 and \$440 in 2040). The Company has a valuation allowance of \$171, a decrease of \$34 from the prior year, which fully offsets the DTA as the Company believes it is more likely than not that the DTA will not be realized. {10}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) ## (In Thousands of U.S. dollars) ## 5. Income Taxes (continued) The Company had no unrecognized tax benefits at March 31, 2021. As of March 31, 2021, management does not believe that there were any positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within the next 12 r the tax years ended March 31, 2019 and March 31, 2020 remain subject to examination by the Internal Revenue Service for U.S. federal tax purposes, the state and local tax authorities, and the Canada Revenue Agency for Canadian tax purposes. ## 6. Risk Management Risk is an inherent pa ities. The Company has established risk management policies and procedures to measure and monitor each of the various types of significant risks involved in its underwriting business. effectively identify, assess, monitor, and manage its risk is critical to the overall execution of the its profitability. Risk management at the Company requires independent Company-level oversight. Effective risk practices are carried out through constant communication, exercise of professional judgement, and knowledge of specialized products and market an active role in the identification, assessment, and management of risks at the Company level. Market Risk any may incur as a result of changes in the market value of a particular instrument. The Company manages market risk by economically hedging its exposure to risk factors if necessary. In 2020, there were no such contracts entered into or outstanding. Credit Risk obligations. The Company is engaged in underwriting activities with counterparties primarily in the financial services industry. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk of loss. The risk of default mainly depends on the creditworthiness of the counterparty or issuer of the instrument. There was no credit risk that had Statement of Financial Condition. Operational Risk whether direct or indirect, to which the Company is exposed due to inadequate or failed internal processes or systems, human error or misconduct, or external events. Operational risk includes legal and regulatory risk, business process and change risk, fiduciary or disclosure breaches, technology failure, financial crime, {11}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) ## (In Thousands of U.S. dollars) ### 6. Risk Management (continued) and environmental risk, but excludes strategic and reputational risk. Operational risk, in some nd support activities, and can result in financial loss, regulatory sanctions and damage to th risk that had a material impact on the Co ## 7. Fair Value Measurement ice that would be received to sell an asset or paid to transfer The valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs, using techniques that are appropriate and for which sufficient data is available. Additionally, for inputs based on bid and ask prices, the price within the bid-ask spread that is most representative of fair value is used to measure fair value. ## Fair value hierarchy ASC 820 prioritizes the inputs used to measure fair value into three broad levels, assigning the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest to unobservable inputs (Level 3 measurements). If the inputs used to measure an asset or liability fall into different levels within the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. The three categories are as follows: Level 1: Assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities. The Company did not have any Level 1 assets or liabilities at March 31, 2021. Level 2: Assets and liabilities whose values are based on inputs that are observable either directly or indirectly, but do not qualify as Level 1 inputs. Level 2 assets include Canadian Treasury bills. The Company did not have any Level 2 liabilities at March 31, 2021. {12}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) ## (In Thousands of U.S. dollars) ## 7. Fair Value Measurement (continued) Level 3: Assets and liabilities, whose values are based on inputs that are both unobservable and significant to the overall fair value measurement. The Company did not have any assets or liabilities measured at fair value using unobservable inputs or for which unobservable inputs were significant to their fair value measurement at March 31, 2021. In determining the appropriate measurement levels, the Company performs analyses on the assets and liabilities subject to ASC 820 at the end of each reporting period. Changes in the observability of significant valuation inputs during the reporting period may result in a reclassification of certain assets and liabilities within the fair value hierarchy. At March 31, 2021, there were \$15,898 of Canadian Treasury bills assigned as Level 2 securities, using the above fair value hierarchy. ## Valuation techniques Other sovereign obligations are measured at fair value by using observable bid offer markets from active dealers or benchmarking spreads to curves based on the risk of the issuer. Accordingly, these securities are categorized in Level 2 of the fair value hierarchy. #### Financial assets and liabilities not measured at fair value Other financial instruments are recorded by the Company at contract amounts and include cash and cash equivalents, receivables from brokers, dealers, and clearing organizations and payables to affiliates. All financial instruments carried at contract amounts either have short-term maturities (one year or less), or bear market interest rates and, accordingly, are carried at amounts approximating fair value. ## 8. Commitments and Contingencies ## Underwriting Commitments In the normal course of business, the Company enters into underwriting commitments. There were no open commitments at March 31, 2021. {13}------------------------------------------------ ## Notes to Statement of Financial Condition (continued) (In Thousands of U.S. dollars) ### Litigation 8. Commitments and Contingencies (continued) In accordance with the provisions of ASC 45 accrues for a litigation-related liability when the assessed likelihood of realizing a future loss is probable and the amount of loss can be reasonably estimated. In applying these principles, the information available may indicate that the estimated amount of loss is within a range of amounts. When an amount within a range of loss is identified as the most likely result within the range, that amount is accrued by the Company. It is the opinion of management, after consultation with counsel, that there are no matters pending against the Company that could have a material adverse s financial condition. 9. Regulatory Requirements 10. Subsequent Events As a broker-dealer, the Company is subject to th which requires the maintenance of minimum net capital in accordance with a formula set forth therein. The Company is required to maintain net capital, as defined, at the greater of \$100 or 6-2/3% of aggregate indebtedness under the Securities Exchange Act of 1934. At March 31, 2021, the Company had net capital of \$18,564, which was \$18,464 in excess of its \$100 requirement. The Company had no obligations under Rule 15c3-3 of the Securities Exchange Act of 1934 at March 31, 2021. Under the provisions of ASC 855, evaluate events and transactions that occur after the balance sheet date but before the date the Statement of Financial Condition is issued, or available to be issued in the case of non-public entities. As such, the Company is required to evaluate and recognize in the Statement of Financial Condition the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including estimates inherent in the Statement of Financial The Company evaluated events subsequent to March 31, 2021 through May 18, 2021, the date on which the Statement of Financial Condition were available to be issued. There were no material recognizable or non-recognizable subsequent events during this period. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.