# PREFERRED CAPITAL SECURITIES, LLC X-17A-5 (2021-02-25) — Broker-dealer annual report - Company: PREFERRED CAPITAL SECURITIES, LLC - Form: X-17A-5 - Filed: 2021-02-25 - Period: 2020-12-31 - Accession: 0001771233-21-000001 - CIK: 1591456 - File #: 8-69382 - Material weakness: No - Auditor: Moore, Colson & Company, P.C. - Auditor location: Atlanta, GA - Contact: Jeffrey Smith - Phone: 855-330-6594 - Signed by: Jeffrey Smith (CEO) Original filing: https://www.sec.gov/Archives/edgar/data/1591456/000177123321000001/PCSPublic2020.pdf --- {0}------------------------------------------------ | ANNUAL AUDITED REPORT
FORM X-17A-5
PARTIII | 69382
8- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------| | FACING PAGE
Information Required of Brokers and Dealers Pursuant to Section 17 of the
Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | | | -----------
01/01/2020
REPORT FOR THE PERJOD BEGINNING
AND ENDING | --
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12/31/2020
- | | MM/DD/YY | MM/DD/YY | | A. REGISTRANT IDENTIFICATION | | | NAME OF BROKER-DEALER: | OFFICIAL USE ONLY | | Preferred Capital Securities, LLC | FIRM I.D. NO. | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | 3284 Northside Parkway, NW Suite 150 | | | (No. and Street) | | | Atlanta
GA | 30327 | | (City)
(State) | (Zip Code) | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | Jeffery Smith | 855-330-6594 | | | (Area Code - Telephone Number) | | B. ACCOUNTANT IDENTIFCATION | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | Moore, Colson & Company, P.C. | | | (Name - if individual, stale last,firsr, middle name) | | | Atlanta
GA
600 Galleria Parkway SE, Suite 600 | 30339 | | (Address)
(City)
(State) | (Zip Code) | | CHECK ONE:
Certified Public Accountant
1:8]
D
Public Accountant
D
Accountant not resident in United States or any of its possessions.
FOR OFFICIAL USE ONLY | | *\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement offacts and circumstances relied on as the basis for the exemption. See Section 240.1 7a-5(e)(2).* > **Potential 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.** SEC 1410 (06-02) {1}------------------------------------------------ # OATH OR AFFIRMATION | I. | Jeffery Smith | | | | , swear (or affirm) that, to the best of | | |----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|----------------|----------------------------------------------------------------|------| | | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of | | | | | | | | Preferred Capital Securities, LLC | | | | | , as | | | of December 31 | | | | , 20 20 are true and correct. I further swear (or affirm) that | | | | neither the company nor any partner, principal officer or director has any proprietary interest in any account | | | | | | | | classified solely as that of a customer, except as follows: | | | | | | | | | | | Signature | | | | | Notary Public | | | Circo
Title | | | | | This report** contains (check all applicable boxes): " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " | | | | | | | | (a) Facing page. | | | | | | | | (b) Statement of Financial Condition. | | | | | | | | (c) Statement of Income (Loss).
(d) Statement of Changes in Financial Condition. | | | | | | | | Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietor's Capital. | | | | | | | | (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | | | | | | (g) Computation of Net Capital. | | | | | | | | (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. | | | | | | | | (i) Information Relating to the Possession or Control Requirements under Rule 15c3-3. | | | | | | | | () A Reconciliation, including appropriate explanation, of the Computation of Net Capital Under Rule 15c3-1 and
the Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | | | | | | | (k) A Reconciliation between the audited statements of Financial Condition with respect to methods of
consolidation. | | | | | | | | X (1) An Oath or Affirmation. | | | | | | | | (m) A copy of the SIPC Supplemental Report. | | | | | | | | ] (n) A report describing any material inadequacies found to have existed since the date of the
previous audit. | | | | | | \*\*For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). {2}------------------------------------------------ #### PREFERRED CAPITAL SECURITIES, LLC STATEMENT OF FINANCIAL CONDITION WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DECEMBER 31, 2020 {3}------------------------------------------------ # Table of Contents # Report of Independent Registered Public Accounting Firm # Financial Statement | Statement of Financial Condition | | |----------------------------------|---| | Notes to Financial Statement | C | {4}------------------------------------------------ #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Member of Preferred Capital Securities, LLC Atlanta, Georgia #### Opinion on the Financial Statement We have audited the accompanying statement of financial condition of Preferred Capital Securities, LLC as of December 31, 2020, 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 Preferred Capital Securities, LLC as of December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. #### Basis for Opinion This financial statement is the responsibility of Preferred Capital Securities, LLC's management. Our responsibility is to express an opinion on Preferred Capital Securities, LLC'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 Preferred Capital Securities, LLC 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 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 Preferred Capital Securities, LLC's auditor since 2015. Atlanta, Georgia February 25, 2021 600 galleria parkway se suite 600 atlanta, georgia 30339 p 770.989.0028 f 770 989 0201 MooreColson.com ![](_page_4_Picture_13.jpeg) {5}------------------------------------------------ # &A454AA430?8C0;)42DA8C84B"" # )C0C4<4=C>58=0=280;>=38C8>= 424<14A | BB4CB | | |----------------------------------------------------------------|------| | 0B70=320B74@D8E0;4=CB |
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| | | | *!' \$#\$ #\$\$\$* {6}------------------------------------------------ # Notes to Statement of Financial Condition December 31. 2020 # NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES # Nature of Business Preferred Capital Securities, LLC (the Company) is a Georgia limited liability company that was formed on September 17, 2013, with minimal operations until February 2, 2015 (date approved for membership by the Financial Industry Regulatory Authority (FINRA)). The Company is a brokerdealer registered with the U.S. Securities and Exchange Commission (SEC) and is a member firm of FINRA. The Company's primary operating focuses are to identify capital sources, conduct due diligence, underwrite and manage the selling of security offerings, and address regulatory and compliance matters. The Company does not carry securities accounts for customers or perform custodial functions relating to customer securities. # Basis of Presentation The financial statements are presented on the accrual basis of accounting and are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) as promulgated by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). #### Use of Estimates The preparation of financial statements in conformity with U.S. 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 reported period. Actual results could differ from those estimates. #### Concentration of Credit Risk The Company holds a substantial amount of its cash at one bank. Cash in the bank account is insured by the Federal Deposit Insurance Corporation (FDIC). The Company maintains cash and cash equivalents in accounts with financial institutions that from time to time exceed the FDIC insured limit. At December 31, 2020, the Company's uninsured cash balances totaled \$6,908,143. The Company places its cash and cash equivalents with high-credit-quality institutions and minimizes its credit risk with formal credit policies and monitoring procedures. #### Clearing Deposit The Company is required to maintain a minimum balance of \$50,000 with its clearing broker as a condition of the Company's Fully Disclosed Clearing Agreement. {7}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{8}------------------------------------------------ # Notes to Statement of Financial Condition December 31. 2020 # NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) #### Cash Flow Information The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. #### Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which modifies the measurement of expected credit losses of certain financial instruments. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and will be applied as a cumulative effect adjustment to retained earnings as of the first reporting period for which the guidance is effective. The Company adopted this ASU on January 1, 2020 and there was no impact on its financial statements. #### NOTE 2 - FURNITURE, FIXTURES AND EQUIPMENT, NET Furniture, fixtures and equipment, net consists of the following at December 31, 2020: | Furniture and fixtures | ಲೆ | 313,169 | |----------------------------------------|----|-----------| | Computer hardware | | 255,014 | | Computer software | | 29.500 | | Office equipment | | 89,031 | | Less accumulated depreciation | | (401,018) | | Furniture, fixtures and equipment, net | | 285,696 | #### NOTE 3 - NET CAPITAL REQUIREMENTS The Company is subject to the U.S. Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1), which requires a) the maintenance of minimum net capital and b) that the ratio of aggregate indebtedness to net capital, as defined, shall not exceed 15 to 1. At December 31, 2020, the Company had net capital of \$6,035,430, which was \$5,970,472 in excess of its required net capital of \$64,958. 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| | {10}------------------------------------------------ # Notes to Statement of Financial Condition December 31. 2020 # NOTE 6 - PAYCHECK PROTECTION PROGRAM LOAN In April 2020, the Company issued a note payable to a bank totaling \$1,024,625 under the Paycheck Protection Program ("PPP"). The note payable is administered by the Small Business Administration ("SBA") and the loan proceeds were used by the Company for eligible costs during the covered period. The note bore interest at 1% and was scheduled to mature in April 2022. The terms of the note payable provide for the forgiveness of some or all of the principal and interest. In November 2020, the Company received forgiveness of the principal and accrued interest to date totaling \$1,030,659. #### NOTE 7 - CONCENTRATIONS The Company's distribution fee revenues were primarily earned under two wholesaling agreements as the exclusive dealer manager in which the Company marketed with the offering and sale of securities of an affiliate. Issuer service fees were earned from services provided to the same affiliate. Servicing revenue was earned from services provided to another affiliate. #### NOTE 8 - COMMITMENTS AND CONTINGENCIES In the normal course of operations, the Company may become involved with claims and disputes, and is subject to periodic examinations by regulatory agencies. At December 31, 2020, the Company does not believe there are any claims, disputes, or examinations that would have a material effect on the Company's financial position. #### NOTE 9 - RISKS AND UNCERTAINTIES During the year ended December 31, 2020, the effects of a novel strain of the coronavirus ("COVID-19") pandemic and the related actions by governments around the world to attempt to contain the spread of the virus significantly impacted economic conditions and global markets. The impact of COVID-19 continues to evolve and the extent of its effect on the Company's operational and financial performance will continue to depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact (including the distribution and effectiveness of vaccines), and the direct and indirect economic effects of the pandemic and related containment measures, among others. {11}------------------------------------------------ #### Notes to Statement of Financial Condition December 31. 2020 #### NOTE 10-GOING CONCERN The Company has historically experienced operating losses and negative cash flows and has funded its operations with capital contributions from its Member. The Company is taking several measures to improve its performance. During the third quarter of 2020, the Company secured a revenue contract with a new client. In January 2021, the Company received proceeds totaling \$1,032,835 from a seconddraw PPP loan. With a contract with an affiliate, the Company's fees for services will increase during 2021. In addition, the Company has increased its cash reserves. Having considered this information, management believes the Company possesses sufficient cash reserves to support its operations through February 25, 2022 as it continues to implement its performance improvement measures. Accordingly, management continues to use the going concern basis in preparing the Company's financial statements, which assumes the Company will continue in operation for a period of twelve months following the date these financial statements are available for issuance. #### NOTE 11 - SUBSEQUENT EVENTS The Company has evaluated subsequent events through February 25, 2021, the date these financial statements were available for issuance. Management has concluded that there were no significant events requiring recognition and/or disclosure in the financial statements, except for the following: In January 2021, the Company issued a note payable to a bank totaling \$1,032,835 under the PPP governed by the Consolidated Appropriations Act, 2021. The note payable is administered by the SBA and the loan proceeds are to be used by the Company for eligible costs during the covered period. The note bears interest at 1% and matures in January 2026. The terms of the note payable provide for the forgiveness of some or all of the principal and interest. Principal and interest payments may be deferred to the date the bank receives the forgiveness amount from the SBA. The deferral period lasts until ten months after the end of the covered period if the borrower does not apply for forgiveness. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.