PART I [ITEM 1. BUSINESS](index=5&type=section&id=ITEM%201.%20BUSINESS) Siebert Financial Corp. is a diversified financial services firm offering brokerage, investment advisory, insurance, and corporate stock plan administration - Siebert Financial Corp. is a diversified financial services firm providing brokerage, investment advisory, insurance, and corporate stock plan administration services through its subsidiaries[12](index=12&type=chunk) - Key subsidiaries include MSCO (retail brokerage, clearing), SNXT (robo-advisory), PW (insurance), and STCH (technology development)[18](index=18&type=chunk) - The company operates 12 branch offices across the U.S. and had 117 full-time employees as of March 20, 2023[14](index=14&type=chunk)[64](index=64&type=chunk) - MSCO expanded its clearing services in May 2022 to act as a correspondent clearing firm for institutional and online broker-dealers, RIAs, and other asset managers[16](index=16&type=chunk) - SNXT offers proprietary robo-advisory technology utilizing Nobel Prize-winning Modern Portfolio Theory (MPT) to create optimal portfolios for clients[34](index=34&type=chunk) - The company faces significant competition from various financial institutions and is subject to extensive regulation, including the Dodd-Frank Act, Regulation Best Interest, and net capital requirements[42](index=42&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[59](index=59&type=chunk) [ITEM 1A. RISK FACTORS](index=15&type=page&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant regulatory, technological, operational, market, and common stock risks impacting its business and financial performance - New laws, rules, and regulations, or changes in their interpretation, could negatively impact business and financial results, increasing compliance costs and potentially limiting business lines[68](index=68&type=chunk)[71](index=71&type=chunk) - The company is subject to extensive government regulation by bodies like the SEC, FINRA, and MSRB, covering all aspects of the securities business, and faces risks of third-party litigation and regulatory proceedings[73](index=73&type=chunk)[74](index=74&type=chunk)[77](index=77&type=chunk) - Reliance on information processing and communications systems, including third-party platforms, poses risks of system failures, data breaches, and cybersecurity attacks, which could lead to significant liabilities and reputational damage[79](index=79&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - Acquisitions and business growth strategies involve risks such as integration difficulties, failure to achieve synergies, diversion of management attention, and assumption of unknown liabilities[93](index=93&type=chunk)[99](index=99&type=chunk) - The common stock may experience extreme price volatility due to factors beyond company fundamentals, including retail investor sentiment, speculation, and short squeezes, potentially leading to significant short-term price fluctuations[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - The business is highly susceptible to securities market volatility, interest rate changes, economic slowdowns, and intense competition from larger, more diversified firms, which can significantly impact revenues and operating results[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=25&type=page&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments to report - No unresolved staff comments[123](index=123&type=chunk) [ITEM 2. PROPERTIES](index=25&type=section&id=ITEM%202.%20PROPERTIES) The company operates 12 branch offices across the U.S., with its corporate headquarters in New York, NY, and other key locations - The company operates 12 branch offices across the U.S., with its corporate headquarters in New York, NY[124](index=124&type=chunk) Company Branch Offices and Approximate Square Footage | Location | Approximate Square Feet | | :--- | :--- | | Corporate Headquarters: New York, NY - 535 Fifth Avenue | 300 | | Beverly Hills, CA – 190 N Canon | 900 | | Beverly Hills, CA – 9378 Wilshire | 3,500 | | Boca Raton, FL | 1,600 | | Boston, MA | 1,700 | | Calabasas, CA | 3,200 | | Horsham, PA | 2,000 | | Jersey City, NJ | 11,000 | | Miami, FL | 11,600 | | Omaha, NE | 2,900 | | Seal Beach, CA | 800 | | Tampa, FL | 1,000 | | Troy, MI | 300 | [ITEM 3. LEGAL PROCEEDINGS](index=25&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in ordinary course legal claims, including a material FINRA investigation into prior UIT transactions by acquired entity StockCross - FINRA is investigating UIT transactions executed by StockCross prior to the company's acquisition, believing they were terminated early[126](index=126&type=chunk) - The outcome of the FINRA investigation is uncertain, and sanctions or restitution offers could be material[127](index=127&type=chunk) - Management believes all other legal matters are without merit or would not materially impact financial results[128](index=128&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=26&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[129](index=129&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=27&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Siebert Financial Corp.'s common stock trades on Nasdaq, experiencing volatility, with dividends considered and shares available under an equity incentive plan - Common stock trades on the Nasdaq Capital Market under the symbol "SIEB"[132](index=132&type=chunk) - As of March 20, 2023, there were 75 holders of record and approximately 4,304 beneficial holders of common stock[132](index=132&type=chunk) - The Board of Directors considers dividends based on earnings, capital requirements, and economic forecasts[133](index=133&type=chunk) - The common stock has been relatively thinly traded and subject to price volatility, with an average daily trading volume of approximately 25,010 shares from January 1, 2022, to December 31, 2022[134](index=134&type=chunk) Equity Compensation Plan Information (as of December 31, 2022) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | — | NA | 2,704,000 | | Equity compensation plans not approved by security holders | — | NA | NA | | Total | — | NA | 2,704,000 | - Unregistered sales of equity securities in 2022 included 186,000 restricted stock units as compensation and 1,449,525 shares issued to Tigress in 2021[136](index=136&type=chunk)[137](index=137&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=29&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSIONS%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) The company's financial results, highly correlated with market conditions, showed a net loss in 2022 due to decreased revenue and impairment losses, despite expense reductions - The company's financial results are highly correlated to general economic conditions and the direction of U.S. equity and fixed-income markets[146](index=146&type=chunk) - Transactions with Tigress and Hedge Connection resulted in a one-time loss of approximately $4.7 million for the year ended December 31, 2022, including a $4.0 million impairment of the investment in Tigress[152](index=152&type=chunk) - Termination of clearing arrangements with GSCO and Pershing led to a loss of approximately $12.6 million in revenue and $1.8 million in pre-tax income from institutional customers in 2021[154](index=154&type=chunk) - The company is enhancing its retail trading platform with a new technology provider to provide a seamless user experience and streamline operations[157](index=157&type=chunk) Client Account Metrics (in billions) | Metric | As of December 31, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Retail and institutional customer net worth | $13.5 | $17.3 | | Retail customer net worth | $13.5 | $16.8 | | Retail customer margin debit balances | $0.4 | $0.5 | | Retail customer credit balances | $0.6 | $0.8 | | Retail customer money market fund value | $0.6 | $0.8 | | Retail customer accounts | 122,394 | 115,380 | | Institutional customer net worth | $— | $0.5 | Statements of Operations Summary (Year Ended December 31) | Revenue Category | 2022 ($000) | 2021 ($000) | Change ($000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Commissions and fees | 7,477 | 18,252 | (10,775) | -59.03% | | Interest, marketing and distribution fees | 17,234 | 12,897 | 4,337 | 33.63% | | Principal transactions | 3,743 | 15,647 | (11,904) | -76.08% | | Market making | 2,443 | 5,897 | (3,454) | -58.57% | | Stock borrow / stock loan | 14,518 | 11,864 | 2,654 | 22.37% | | Advisory fees | 1,862 | 1,668 | 194 | 11.63% | | Other income | 2,825 | 1,282 | 1,543 | 120.36% | | **Total Revenue** | **50,102** | **67,507** | **(17,405)** | **-25.78%** | | **Total Expenses** | **49,662** | **60,925** | **(11,263)** | **-18.49%** | | Operating income | 440 | 6,582 | (6,142) | -93.31% | | Net income (loss) | (2,990) | 5,033 | (8,023) | -159.40% | | Net income (loss) available to common stockholders | (1,990) | 5,063 | (7,053) | -139.30% | | Basic and diluted EPS | (0.06) | 0.16 | (0.22) | -137.50% | Statements of Financial Condition Summary (as of December 31) | Category | 2022 ($000) | 2021 ($000) | Change ($000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | 728,048 | 1,404,235 | (676,187) | -48.15% | | Total Liabilities | 678,128 | 1,353,729 | (675,601) | -49.91% | | Total Stockholders' Equity | 48,949 | 49,263 | (314) | -0.64% | | Total Equity | 49,920 | 50,506 | (586) | -1.16% | Cash Requirements (as of December 31, 2022) | Category | 2023 ($000) | 2024 ($000) | 2025 ($000) | 2026 ($000) | Thereafter ($000) | Total ($000) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease commitments | 1,246 | 588 | 450 | 234 | 48 | 2,566 | | Mortgage with East West Bank | 75 | 84 | 88 | 91 | 4,048 | 4,386 | | Loan with East West Bank | 998 | 1,661 | — | — | — | 2,659 | | **Total** | **2,319** | **2,333** | **538** | **325** | **4,096** | **9,611** | - MSCO's net capital was **$30.6 million** as of December 31, 2022, exceeding its **$1.4 million** requirement by **$29.2 million**. RISE's net capital was **$1.2 million**, exceeding its **$250,000** minimum by **$0.9 million**[422](index=422&type=chunk)[428](index=428&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=41&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company avoids derivatives, faces minimal interest rate risk on most assets, but manages credit risk from counterparties and customers through monitoring and collateral - The company does not directly engage in derivative transactions[217](index=217&type=chunk) - Cash and cash equivalents are invested in dollar-denominated bank accounts, which are not subject to material changes in value due to interest rate movements[218](index=218&type=chunk) - Securities segregated for regulatory purposes, including U.S. government securities, may be subject to temporary value changes due to interest rate movements, but the company intends to hold them to maturity[219](index=219&type=chunk) - The company is exposed to credit risk if customers or counterparties fail to fulfill obligations, but monitors activity and requires collateral to mitigate this risk, with no material losses in the last five years[220](index=220&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=42&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents audited consolidated financial statements, with an unqualified auditor opinion, and detailed notes on accounting policies, related party transactions, and capital - Baker Tilly US, LLP issued an unqualified opinion on the consolidated financial statements for 2022 and 2021[224](index=224&type=chunk) - The impairment of equity method investment in Tigress was identified as a critical audit matter due to significant management judgment in fair value determination[228](index=228&type=chunk)[231](index=231&type=chunk) Consolidated Statements of Financial Condition (as of December 31) | ASSETS | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Cash and cash equivalents | 23,672 | 3,758 | | Cash and securities segregated for regulatory purposes | 276,166 | 326,826 | | Receivables from customers | 52,057 | 85,327 | | Receivables from broker-dealers and clearing organizations | 9,094 | 8,185 | | Receivables from non-customers | 100 | 81 | | Other receivables | 2,119 | 2,242 | | Prepaid service contract - current | — | 709 | | Prepaid expenses and other assets | 2,055 | 1,596 | | Securities borrowed | 336,909 | 939,518 | | Securities owned, at fair value | 3,204 | 3,991 | | **Total Current assets** | **705,376** | **1,372,233** | | Deposits with broker-dealers and clearing organizations | 1,311 | 5,541 | | Prepaid service contract – non-current | — | 295 | | Property, office facilities, and equipment, net | 8,328 | 7,463 | | Software, net | 991 | 752 | | Lease right-of-use assets | 2,222 | 2,662 | | Equity method investments in related parties | 2,584 | 8,156 | | Investments, cost | 850 | 850 | | Deferred tax assets | 4,397 | 4,294 | | Goodwill | 1,989 | 1,989 | | **Total Assets** | **728,048** | **1,404,235** | | **LIABILITIES** | | | | Payables to customers | 321,391 | 376,670 | | Payables to non-customers | 11,506 | 17,430 | | Drafts payable | 2,384 | 1,804 | | Payables to broker-dealers and clearing organizations | 660 | 254 | | Accounts payable and accrued liabilities | 2,507 | 3,677 | | Taxes payable | 1,052 | 1,748 | | Securities loaned | 327,180 | 931,735 | | Securities sold, not yet purchased, at fair value | 2 | 24 | | Notes payable - related party | — | 7,000 | | Current portion of lease liabilities | 1,158 | 1,234 | | Current portion of long-term debt | 1,073 | 998 | | Current portion of deferred contract incentive | 808 | 808 | | **Total Current liabilities** | **669,721** | **1,343,382** | | Lease liabilities, less current portion | 1,245 | 1,699 | | Long-term debt, less current portion | 5,974 | 6,710 | | Deferred contract incentive, less current portion | 1,188 | 1,938 | | **Total Liabilities** | **678,128** | **1,353,729** | | **STOCKHOLDERS' EQUITY** | | | | Common stock | 325 | 324 | | Additional paid-in capital | 29,642 | 27,967 | | Retained earnings | 18,982 | 20,972 | | **Total Stockholders' equity** | **48,949** | **49,263** | | Noncontrolling interests | 971 | 1,243 | | **Total Equity** | **49,920** | **50,506** | | **Total Liabilities and Equity** | **728,048** | **1,404,235** | Consolidated Statements of Operations (Year Ended December 31) | Revenue | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Commissions and fees | 7,477 | 18,252 | | Interest, marketing and distribution fees | 17,234 | 12,897 | | Principal transactions | 3,743 | 15,647 | | Market making | 2,443 | 5,897 | | Stock borrow / stock loan | 14,518 | 11,864 | | Advisory fees | 1,862 | 1,668 | | Other income | 2,825 | 1,282 | | **Total Revenue** | **50,102** | **67,507** | | **Expenses** | | | | Employee compensation and benefits | 28,734 | 36,424 | | Clearing fees, including execution costs | 2,143 | 4,817 | | Technology and communications | 4,471 | 4,762 | | Other general and administrative | 4,010 | 3,686 | | Data processing | 3,169 | 2,849 | | Rent and occupancy | 1,955 | 1,930 | | Professional fees | 3,202 | 2,695 | | Depreciation and amortization | 995 | 1,445 | | Referral fees | — | 1,213 | | Impairment loss | — | 699 | | Interest expense | 440 | 361 | | Advertising and promotion | 543 | 44 | | **Total Expenses** | **49,662** | **60,925** | | Operating income | 440 | 6,582 | | Earnings of equity method investment in related parties | 4 | 172 | | Impairment of equity method investment in related party | (4,015) | — | | Loss on sale of equity method investment in related parties | (719) | — | | Non-operating income (loss) | (4,730) | 172 | | Income (loss) before provision for (benefit from) income taxes | (4,290) | 6,754 | | Provision for (benefit from) income taxes | (1,300) | 1,721 | | Net income (loss) | (2,990) | 5,033 | | Less net loss attributable to noncontrolling interests | (1,000) | (30) | | Net income (loss) available to common stockholders | (1,990) | 5,063 | | Net income (loss) available to common stockholders per share of common stock (Basic and diluted) | (0.06) | 0.16 | | Weighted average shares outstanding (Basic and diluted) | 32,408,449 | 31,316,119 | Consolidated Statements of Cash Flows (Year Ended December 31) | Cash Flows From Operating Activities | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Net income (loss) | (2,990) | 5,033 | | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | Deferred income tax expense (benefit) | (655) | 523 | | Depreciation and amortization | 995 | 1,445 | | Net lease liabilities | (90) | (51) | | Downward adjustment due to changes in observable prices | — | 63 | | Loss on impairment | — | 699 | | Earnings of equity method investment in related parties | (4) | (172) | | Impairment of equity method investment in related party | 4,015 | — | | Loss on sale of equity method investment in related parties | 719 | — | | Share-based compensation | 461 | — | | Changes in: | | | | Receivables from customers | 33,270 | 10,031 | | Receivables from non-customers | (19) | (81) | | Receivables from and deposits with broker-dealers and clearing organizations | 3,321 | 9,298 | | Securities borrowed | 602,609 | (33,733) | | Securities owned, at fair value | 787 | (1,368) | | Prepaid expenses and other assets | (335) | (51) | | Prepaid service contract | 711 | 809 | | Payables to customers | (55,279) | (3,854) | | Payables to non-customers | (5,924) | 5,860 | | Drafts payable | 580 | (2,217) | | Payables to broker-dealers and clearing organizations | 406 | (1,556) | | Accounts payable and accrued liabilities | (1,170) | (100) | | Securities loaned | (604,555) | 10,924 | | Securities sold, not yet purchased, at fair value | (22) | 3 | | Taxes payable | (696) | 1,292 | | Deferred contract incentive | (750) | 2,746 | | **Net cash provided by (used in) operating activities** | **(24,615)** | **5,543** | | **Cash Flows From Investing Activities** | | | | Equity method investment in related party | — | (64) | | Purchase of Openhand common stock | — | (850) | | Distribution from equity method investment in related party | 259 | — | | Purchase of office facilities and equipment | (284) | (296) | | Purchase of property | — | (6,815) | | Build out of property | (985) | — | | Purchase of software | (830) | (343) | | **Net cash (used in) investing activities** | **(1,840)** | **(8,368)** | | **Cash Flows From Financing Activities** | | | | Issuance of RISE membership interests | 600 | — | | Transfers of RISE membership interests | 240 | — | | Net change in notes payable – related party | (4,470) | 1,800 | | Net change in long-term debt | (661) | 3,053 | | **Net cash provided by (used in) financing activities** | **(4,291)** | **4,853** | | Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes | (30,746) | 2,028 | | Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of year | 330,584 | 328,556 | | Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of year | 299,838 | 330,584 | [Note 1. Organization](index=51&type=section&id=Note%201.%20Organization) Siebert Financial Corp. is a holding company incorporated in 1934, operating through wholly-owned and majority-owned subsidiaries in securities brokerage and asset management - Siebert Financial Corp. is a holding company incorporated in 1934, operating through wholly-owned and majority-owned subsidiaries in securities brokerage and asset management[244](index=244&type=chunk)[245](index=245&type=chunk) - Key subsidiaries include MSCO (retail brokerage), SNXT (investment advisory), PW (insurance), STCH (technology development), RISE (broker-dealer), and STXD (inactive)[251](index=251&type=chunk) - The company operates as a single operating segment, with all revenues derived from U.S. operations[246](index=246&type=chunk)[254](index=254&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=51&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are prepared in conformity with U.S. GAAP, consolidating Siebert and its subsidiaries, with investments in non-majority-owned affiliates using the equity method - Financial statements are prepared in conformity with U.S. GAAP, consolidating Siebert and its wholly-owned/majority-owned subsidiaries, eliminating intercompany balances[247](index=247&type=chunk)[249](index=249&type=chunk) - Investments in non-majority-owned partnerships and affiliates are accounted for using the equity method[248](index=248&type=chunk)[252](index=252&type=chunk) - The company evaluates entities as Variable Interest Entities (VIEs) quarterly and consolidates those for which it is the primary beneficiary, as was the case for RISE from March 31, 2022[249](index=249&type=chunk)[253](index=253&type=chunk) - Fair value measurements are categorized into a three-level hierarchy based on input observability: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[259](index=259&type=chunk)[260](index=260&type=chunk) - Revenue recognition policies vary by stream: commissions, principal transactions, and market making are recognized on trade date; stock borrow/loan on contract date; advisory fees over time; and interest, marketing, and distribution fees as earned[307](index=307&type=chunk)[308](index=308&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk)[316](index=316&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) - The company accounts for income taxes under the asset and liability method, recognizing deferred tax assets and liabilities, and evaluates their realization based on future taxable income and tax-planning strategies[326](index=326&type=chunk)[327](index=327&type=chunk) [Note 3. Transactions with Tigress and Hedge Connection](index=64&type=section&id=Note%203.%20Transactions%20with%20Tigress%20and%20Hedge%20Connection) The company engaged in complex transactions with Tigress and Hedge Connection, including equity exchanges and an impairment charge on the Tigress investment - In November 2021, the company acquired 24% of Tigress in exchange for 24% of RISE and Siebert common stock[333](index=333&type=chunk) - A Reorganization Agreement on October 18, 2022, resulted in the company exchanging 7% of Tigress for all of Tigress's ownership in RISE, leading to a net loss of **$92,000**[334](index=334&type=chunk)[335](index=335&type=chunk) - An impairment test on October 18, 2022, due to adverse market conditions and declining performance, led to a **$4.015 million** impairment charge on the investment in Tigress[336](index=336&type=chunk) - In January 2022, RISE acquired 20% of Hedge Connection and an option for the remainder, in exchange for **$600,000** and 3.33% of RISE[338](index=338&type=chunk) - The Hedge Connection agreement was terminated on October 18, 2022, with the company re-conveying its interest in Hedge Connection in exchange for 3.17% of RISE and cancellation of a **$250,000** note payable, resulting in a net loss of **$627,000**[339](index=339&type=chunk)[341](index=341&type=chunk) [Note 4. RISE](index=65&type=section&id=Note%204.%20RISE) Siebert's ownership in RISE fluctuated through equity exchanges and asset increases, leading to its consolidation as a Variable Interest Entity - During Q1 2022, RISE issued 8.3% of its membership interests for a **$1 million** asset increase, and Siebert sold 2% of RISE to employees/affiliates[343](index=343&type=chunk) - On March 31, 2022, Siebert exchanged **$2.88 million** in notes payable to Gloria E. Gebbia for 24% ownership in RISE, reducing Siebert's direct ownership to approximately 44%[344](index=344&type=chunk) - Siebert consolidated RISE as a Variable Interest Entity (VIE) from March 31, 2022, to October 18, 2022, and continued consolidation under the Voting Interest Entity (VOE) model thereafter as its ownership increased to 68%[345](index=345&type=chunk)[346](index=346&type=chunk) - As of December 31, 2022, RISE reported assets of **$1.3 million** and liabilities of **$0.1 million**[347](index=347&type=chunk) [Note 5. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations](index=65&type=section&id=Note%205.%20Receivables%20From%2C%20Payables%20To%2C%20and%20Deposits%20With%20Broker-Dealers%20and%20Clearing%20Organizations) This note details receivables from and payables to broker-dealers and clearing organizations, with ongoing termination of certain clearing relationships Receivables From and Deposits With Broker-Dealers and Clearing Organizations (as of December 31) | Category | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | DTCC / OCC / NSCC | 8,187 | 10,968 | | GSCO | 31 | 335 | | Pershing | 96 | 1,193 | | NFS | 2,006 | 974 | | Securities fail-to-deliver | 3 | 174 | | Globalshares | 82 | 55 | | Other receivables | — | 27 | | **Total Receivables from and deposits with broker-dealers and clearing organizations** | **10,405** | **13,726** | Payables to Broker-Dealers and Clearing Organizations (as of December 31) | Category | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Securities fail-to-receive | 396 | 254 | | Payables to broker-dealers | 264 | — | | **Total Payables to broker-dealers and clearing organizations** | **660** | **254** | - The company is in the process of terminating its clearing relationships with GSCO and Pershing, with full termination anticipated by the end of Q1 2023[353](index=353&type=chunk) [Note 6. Prepaid Service Contract](index=67&type=section&id=Note%206.%20Prepaid%20Service%20Contract) The company terminated a technology development agreement, resulting in a write-off of a prepaid balance and recognition of other income - In April 2020, the company entered an agreement with a technology partner for **$2.1 million** (cash and restricted stock) to develop a new client and back-end interface[354](index=354&type=chunk) - In September 2022, the company and the technology partner mutually agreed to terminate their services, resulting in the write-off of a **$532,000** prepaid service contract balance and receipt of **$950,000** in other income[356](index=356&type=chunk) - Total expense related to the technology partner was **$711,000** in 2022, down from **$959,000** in 2021[357](index=357&type=chunk) [Note 7. Fair Value Measurements](index=67&type=section&id=Note%207.%20Fair%20Value%20Measurements) This note details financial assets and liabilities measured at fair value, including an impairment charge on the Tigress investment using Level 3 inputs Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (as of December 31, 2022) | Assets | Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | | :--- | :--- | :--- | :--- | :--- | | Cash and securities segregated for regulatory purposes: U.S. government securities | 140,978 | — | — | 140,978 | | Securities owned, at fair value: U.S. government securities | 2,808 | — | — | 2,808 | | Securities owned, at fair value: Certificates of deposit | — | 92 | — | 92 | | Securities owned, at fair value: Municipal securities | — | 52 | — | 52 | | Securities owned, at fair value: Corporate bonds | — | 7 | — | 7 | | Securities owned, at fair value: Equity securities | 63 | 182 | — | 245 | | **Total Securities owned, at fair value** | **2,871** | **333** | **—** | **3,204** | | Liabilities | | | | | | Securities sold, not yet purchased, at fair value: Equity securities | 2 | — | — | 2 | | **Total Securities sold, not yet purchased, at fair value** | **2** | **—** | **—** | **2** | Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (as of December 31, 2021) | Assets | Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | | :--- | :--- | :--- | :--- | :--- | | Securities owned, at fair value: U.S. government securities | 2,966 | — | — | 2,966 | | Securities owned, at fair value: Certificates of deposit | — | 91 | — | 91 | | Securities owned, at fair value: Corporate bonds | — | 12 | — | 12 | | Securities owned, at fair value: Equity securities | 489 | 433 | — | 922 | | **Total Securities owned, at fair value** | **3,455** | **536** | **—** | **3,991** | | Liabilities | | | | | | Securities sold, not yet purchased, at fair value: Equity securities | — | 24 | — | 24 | | **Total Securities sold, not yet purchased, at fair value** | **—** | **24** | **—** | **24** | - The company recognized an impairment charge of approximately **$4.015 million** for its investment in Tigress for the year ended December 31, 2022, measured using income and market approaches (Level 3 inputs)[362](index=362&type=chunk) - Short-term financial instruments, receivables, payables, securities borrowed/loaned, notes payable – related party, deferred contract incentive, and long-term debt are recorded at amounts approximating fair value, primarily classified as Level 2[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[368](index=368&type=chunk)[369](index=369&type=chunk) [Note 8. Property, Office Facilities, and Equipment, Net](index=70&type=section&id=Note%208.%20Property%2C%20Office%20Facilities%2C%20and%20Equipment%2C%20Net) This note details the company's property, office facilities, and equipment, including the Miami office building purchase and related depreciation Property, Office Facilities, and Equipment, Net (as of December 31) | Category | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Property | 6,815 | 6,815 | | Office facilities | 2,616 | 1,608 | | Equipment | 674 | 413 | | **Total Property, office facilities, and equipment** | **10,105** | **8,836** | | Less accumulated depreciation | (1,777) | (1,373) | | **Total Property, office facilities, and equipment, net** | **8,328** | **7,463** | - Total depreciation expense for property, office facilities, and equipment was **$404,000** in 2022 and **$410,000** in 2021[371](index=371&type=chunk) - The company purchased the Miami office building for approximately **$6.8 million** in December 2021 and invested **$985,000** in its build-out in 2022, with depreciation to commence in Q1 2023[372](index=372&type=chunk)[373](index=373&type=chunk) [Note 9. Software, Net](index=71&type=section&id=Note%209.%20Software%2C%20Net) This note details the company's software assets, including robo-advisor and other software, with ongoing development for a new retail trading platform Software, Net (as of December 31) | Category | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Robo-advisor | 763 | 763 | | Other software | 3,342 | 2,512 | | **Total Software** | **4,105** | **3,275** | | Less accumulated amortization – robo-advisor | (763) | (763) | | Less accumulated amortization – other software | (2,351) | (1,760) | | **Total Software, net** | **991** | **752** | - Total amortization of software was **$590,000** in 2022, down from **$925,000** in 2021[375](index=375&type=chunk) - The company partnered with a technology partner in Q4 2022 to develop a new retail trading platform, with **$241,000** in development work incurred in 2022 and amortization to begin in Q2 2023[374](index=374&type=chunk) [Note 10. Leases](index=71&type=section&id=Note%2010.%20Leases) All leases are operating leases, primarily for office space, with details on lease terms, discount rates, costs, and future minimum payments - All leases are classified as operating leases, primarily for office space, expiring between 2023 and 2027[376](index=376&type=chunk) Lease Term and Discount Rate (as of December 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Weighted average remaining lease term – operating leases (in years) | 2.7 | 2.9 | | Weighted average discount rate – operating leases | 5.0% | 5.0% | Lease Costs (Year Ended December 31) | Cost Category | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Operating lease cost | 1,299 | 1,653 | | Short-term lease cost | 366 | 97 | | Variable lease cost | 290 | 180 | | **Total Rent and occupancy** | **1,955** | **1,930** | Future Annual Minimum Payments for Operating Leases (as of December 31, 2022) | Year | Amount ($000) | | :--- | :--- | | 2023 | 1,246 | | 2024 | 588 | | 2025 | 450 | | 2026 | 234 | | 2027 | 48 | | **Remaining balance of lease payments** | **2,566** | | Less: Difference between undiscounted cash flows and discounted cash flows | 163 | | **Lease liabilities** | **2,403** | [Note 11. Equity Method Investments in Related Parties](index=72&type=section&id=Note%2011.%20Equity%20Method%20Investments%20in%20Related%20Parties) This note details the company's equity method investment in Tigress, including ownership changes, recognized losses, and cash distributions - The company's investment in Tigress is accounted for under the equity method, with a 17% ownership interest as of December 31, 2022, following a reorganization[379](index=379&type=chunk)[380](index=380&type=chunk) - The loss recognized from the investment in Tigress was **$16,000** in 2022, compared to earnings of **$172,000** in 2021[381](index=381&type=chunk) - Cash distributions received from Tigress were **$259,000** in 2022; none in 2021[382](index=382&type=chunk) Tigress Summary Consolidated Statements (Unaudited) | Metric | Year Ended December 31, 2022 ($000) | Year Ended December 31, 2021 ($000) | | :--- | :--- | :--- | | Revenue | 8,432 | 15,000 | | Operating income (loss) | (132) | 4,800 | | Net income (loss) | (132) | 4,800 | | Assets | 8,169 | 10,793 | | Liabilities | 5,301 | 6,096 | | Stockholders' Equity | 2,868 | 4,697 | - The investment in Hedge Connection was accounted for under the equity method prior to its termination, recognizing **$20,000** in earnings in 2022[385](index=385&type=chunk) [Note 12. Investments, Cost](index=73&type=section&id=Note%2012.%20Investments%2C%20Cost) This note details the company's cost investment in OpenHand, including its acquisition, partial termination, and recognized loss on sale - In January 2021, the company acquired 5% of OpenHand common stock for **$2.231 million** (cash and restricted shares)[387](index=387&type=chunk) - The agreement with OpenHand was terminated in August 2021, resulting in the company retaining 2% of OpenHand for **$850,000** cash and rescinding the stock issuance[389](index=389&type=chunk) - A loss on sale of **$63,000** was recognized in 2021 due to the amendment[392](index=392&type=chunk) - The carrying value of the investment in OpenHand remained **$850,000** as of December 31, 2022 and 2021, with no impairment[392](index=392&type=chunk) [Note 13. Long-Term Debt](index=75&type=section&id=Note%2013.%20Long-Term%20Debt) This note details the company's long-term debt, including a mortgage and a loan with East West Bank, and compliance with covenants - The company has a **$4.386 million** mortgage with East West Bank, partially financing the Miami office building, with a 3.6% interest rate for the first 7 years and a 30-year amortization period[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk) Mortgage with East West Bank - Remaining Principal Payments (as of December 31, 2022) | Year | Amount ($000) | | :--- | :--- | | 2023 | 75 | | 2024 | 84 | | 2025 | 88 | | 2026 | 91 | | Thereafter | 4,048 | | **Total** | **4,386** | - A loan with East West Bank had an outstanding balance of **$2.659 million** as of December 31, 2022, with a 7.5% interest rate and a four-year term[396](index=396&type=chunk)[401](index=401&type=chunk) Loan with East West Bank - Remaining Principal Payments (as of December 31, 2022) | Year | Amount ($000) | | :--- | :--- | | 2023 | 998 | | 2024 | 1,661 | | **Total** | **2,659** | - The company was in compliance with all covenants related to its debt agreements as of December 31, 2022[394](index=394&type=chunk)[399](index=399&type=chunk) [Note 14. Notes Payable - Related Party](index=76&type=section&id=Note%2014.%20Notes%20Payable%20-%20Related%20Party) This note details the company's notes payable to related parties, including Gloria E. Gebbia and Hedge Connection, and associated interest expense - As of December 31, 2022, the company had no outstanding balance on notes payable to Gloria E. Gebbia and Hedge Connection, which totaled **$3.6 million** in 2022[402](index=402&type=chunk) Notes Payable – Related Party (as of December 31, 2021) | Description | Issuance Date | Face Amount ($000) | Unpaid Principal Amount ($000) | | :--- | :--- | :--- | :--- | | 4.00% due December 30, 2022 | December 30, 2021 | 2,000 | 2,000 | | 4.00% due June 30, 2022 | December 31, 2021 | 2,000 | 2,000 | | 4.00% due November 30, 2022 | November 30, 2020 | 3,000 | 3,000 | | **Total Notes payable – related party** | | **7,000** | **7,000** | - Interest expense for these notes payable was **$151,000** in 2022, down from **$206,000** in 2021[404](index=404&type=chunk) [Note 15. Deferred Contract Incentive](index=77&type=section&id=Note%2015.%20Deferred%20Contract%20Incentive) This note details the deferred contract incentive from the NFS clearing agreement amendment, including credits received and recognized contra expense - An amendment to the NFS clearing agreement, effective August 1, 2021, extended the term to July 31, 2025[405](index=405&type=chunk) - The company received a one-time **$3 million** business development credit and four annual **$100,000** credits from NFS, recorded as deferred contract incentive[406](index=406&type=chunk) - The company recognized **$850,000** in contra expense in 2022, up from **$354,000** in 2021[407](index=407&type=chunk) - The balance of the deferred contract incentive was approximately **$2.0 million** as of December 31, 2022, down from **$2.7 million** in 2021[407](index=407&type=chunk) [Note 16. Principal Transactions and Proprietary Trading](index=77&type=section&id=Note%2016.%20Principal%20Transactions%20and%20Proprietary%20Trading) This note details principal transactions and proprietary trading activities, including investments in treasury bills and unrealized losses on government securities - In 2022, the company invested in treasury bills and notes to enhance yield on excess 15c3-3 deposits[408](index=408&type=chunk) - An increase in U.S. government securities yields in 2022 resulted in an unrealized loss of approximately **$3.9 million** on the government securities portfolio[408](index=408&type=chunk) Principal Transactions and Proprietary Trading (Year Ended December 31) | Category | 2022 ($000) | 2021 ($000) | Year over Year Decrease ($000) | | :--- | :--- | :--- | :--- | | Realized and unrealized gain on primarily riskless principal transactions | 7,643 | 15,675 | (8,032) | | Unrealized loss on portfolio of U.S. government securities | (3,900) | (28) | (3,872) | | **Total Principal transactions and proprietary trading** | **3,743** | **15,647** | **(11,904)** | [Note 17. Soft Dollar Arrangement](index=77&type=section&id=Note%2017.%20Soft%20Dollar%20Arrangement) The company had soft dollar and commission sharing arrangements for certain RISE clients, recognizing revenue net of costs in commissions and fees - For certain RISE clients, the company had soft dollar and commission sharing arrangements, charging additional fees on trades to pay third parties for research and brokerage services[411](index=411&type=chunk)[412](index=412&type=chunk) - Revenue from these arrangements was recognized net of cost in "Commissions and fees" on the statements of operations[412](index=412&type=chunk) - Client expenses related to these arrangements decreased significantly from **$625,000** in 2021 to **$8,000** in 2022[413](index=413&type=chunk) [Note 18. Referral Fees](index=77&type=section&id=Note%2018.%20Referral%20Fees) Referral fees, primarily related to RISE operations, significantly decreased to zero in 2022 - Referral fees, primarily related to RISE operations, decreased from **$1.213 million** in 2021 to **$0** in 2022[414](index=414&type=chunk) [Note 19. Income Taxes](index=78&type=section&id=Note%2019.%20Income%20Taxes) This note details the company's income tax provision, effective tax rate reconciliation, net deferred tax assets, and unrecognized tax benefits - The Inflation Reduction Act and CHIPS and Science Act had limited and immaterial impact on the company's financial statements[415](index=415&type=chunk) Provision For (Benefit From) Income Taxes (Year Ending December 31) | Category | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Current Federal | (749) | 1,084 | | Current State and local | 104 | 114 | | **Total Current** | **(645)** | **1,198** | | Deferred Federal | (305) | 96 | | Deferred State and local | (350) | 427 | | **Total Deferred** | **(655)** | **523** | | **Total Provision for (benefit from) income taxes** | **(1,300)** | **1,721** | Effective Tax Rate Reconciliation (Year Ending December 31) | Factor | 2022 | 2021 | | :--- | :--- | :--- | | Federal statutory income tax rate | 21.0% | 21.0% | | Tax amortization of intangible assets | 6.5% | (4.1%) | | Non-deductible fines and penalties | —% | 0.8% | | Share based compensation | —% | 1.0% | | Permanent differences | (6.1%) | 0.8% | | State and local taxes, net of federal benefit | 9.4% | 5.6% | | Change in valuation allowance | 2.0% | —% | | Other | (2.5%) | (0.4%) | | **Effective tax rate** | **30.3%** | **25.5%** | Net Deferred Tax Assets (as of December 31) | Category | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Deferred tax assets: Net operating losses | 5,023 | 5,437 | | Deferred tax assets: Lease liabilities | 648 | 749 | | Deferred tax assets: Investment in Tigress | 775 | — | | Deferred tax assets: Investment in RISE | 10 | 140 | | Deferred tax assets: Accrued compensation | — | 62 | | Deferred tax assets: Other | 45 | 13 | | **Subtotal Deferred tax assets** | **6,501** | **6,401** | | Less: valuation allowance | (978) | (1,070) | | **Total Deferred tax assets** | **5,523** | **5,331** | | Deferred tax liabilities: Fixed assets | (1,126) | (892) | | Deferred tax liabilities: Share-based compensation | — | (145) | | **Total Deferred tax liabilities** | **(1,126)** | **(1,037)** | | **Net Deferred tax assets** | **4,397** | **4,294** | - The company's valuation allowance decreased by **$92,000** in 2022, reflecting the realizability of U.S. deferred tax assets[418](index=418&type=chunk) Reconciliation of Unrecognized Tax Benefits (excluding interest and penalties) | Item | Amount ($000) | | :--- | :--- | | Balance as of December 31, 2020 | 1,105 | | Additions for tax positions taken during current year | 1,315 | | Reductions for tax positions taken during prior years | (2) | | **Balance as of December 31, 2021** | **2,418** | | Additions for tax positions taken during prior year | 12 | | Reductions for tax positions taken during prior years | (834) | | **Balance as of December 31, 2022** | **1,596** | [Note 20. Capital Requirements](index=80&type=section&id=Note%2020.%20Capital%20Requirements) This note details the regulatory capital requirements for MSCO and RISE, both exceeding their minimum net capital and reserve account requirements - MSCO's net capital was **$30.6 million** as of December 31, 2022, exceeding its **$1.4 million** requirement by **$29.2 million**[422](index=422&type=chunk) - MSCO maintained **$276.2 million** in cash and securities deposits in special reserve accounts, exceeding the **$264.3 million** requirement by **$11.9 million** as of December 31, 2022[424](index=424&type=chunk) - RISE's net capital was approximately **$1.2 million** as of December 31, 2022, exceeding its minimum requirement of **$250,000** by **$0.9 million**[428](index=428&type=chunk) [Note 21. Financial Instruments With Off-Balance Sheet Risk](index=81&type=section&id=Note%2021.%20Financial%20Instruments%20With%20Off-Balance%20Sheet%20Risk) The company faces credit risk from counterparties and off-balance sheet risks from customer activities, mitigated by collateral requirements and monitoring - The company is exposed to credit risk from counterparties in trading and brokerage activities, but has experienced no material historical losses[429](index=429&type=chunk)[430](index=430&type=chunk) - Off-balance sheet risks arise from customer activities involving execution, settlement, and financing of securities transactions, particularly in margin accounts and short sales[432](index=432&type=chunk)[433](index=433&type=chunk) - The company mitigates these risks by requiring customers to maintain margin collateral, monitoring levels daily, and adjusting collateral as needed[435](index=435&type=chunk) - Margin loans extended to customers were approximately **$365.4 million** as of December 31, 2022, with no material losses for unsettled customer transactions[438](index=438&type=chunk) [Note 22. Commitments, Contingencies and Other](index=82&type=section&id=Note%2022.%20Commitments%2C%20Contingencies%20and%20Other) This note details various commitments and contingencies, including a FINRA investigation, credit lines, potential stock sales, and clearing agreement termination fees - FINRA is investigating StockCross's UIT transactions prior to acquisition, with potential for sanctions or restitution offers[440](index=440&type=chunk)[441](index=441&type=chunk) - MSCO has an unutilized line of credit for short-term overnight demand borrowing with BMO Harris Bank, increased to **$25 million** in May 2022[443](index=443&type=chunk) - The company entered into a Capital on Demand Sales Agreement in May 2022 to potentially sell up to **$9.6 million** of common stock, but made no sales in 2022[445](index=445&type=chunk)[446](index=446&type=chunk) - The NFS clearing agreement includes early termination fees ranging from **$3.25 million** to **$7.25 million** depending on the termination date, but the company believes material payments are unlikely[447](index=447&type=chunk) - The company is self-insured for employee health claims through KCA, with stop-loss insurance capped at **$65,000** per employee[450](index=450&type=chunk) [Note 23. Employee Benefit Plans](index=85&type=section&id=Note%2023.%20Employee%20Benefit%20Plans) This note details the company's 401(k) plan and equity incentive plan, including shares reserved and restricted stock units granted to employees - The company sponsors a 401(k) plan for employees, but made no contributions in 2022 or 2021[454](index=454&type=chunk) - The Siebert Financial Corp. 2021 Equity Incentive Plan reserved **3 million** shares, with **296,000** shares issued in 2022 and **2.704 million** remaining[455](index=455&type=chunk) - **296,000** restricted stock units were granted to employees and consultants in 2022, resulting in **$461,000** in equity stock compensation expense[456](index=456&type=chunk) [Note 24. Related Party Disclosures](index=85&type=section&id=Note%2024.%20Related%20Party%20Disclosures) This note details transactions with related parties, including KCA for payroll, licensing fees, revenue from PW, and notes payable exchanges with Gloria E. Gebbia - KCA, an affiliate under common ownership, serves as a paymaster for payroll and related functions, passing through costs to subsidiaries[457](index=457&type=chunk) - KCA charges the company **$60,000** annually for the license to use the names "Muriel Siebert & Co., Inc." and "Siebert"[458](index=458&type=chunk) - PW, the insurance subsidiary, generated **$129,000** in revenue from related parties in 2022, up from **$70,000** in 2021[459](index=459&type=chunk) - Gloria E. Gebbia, the principal stockholder, exchanged approximately **$2.9 million** of her notes payable to the company for 24% ownership in RISE on March 31, 2022[460](index=460&type=chunk) - Sons of Gloria E. Gebbia and John J. Gebbia hold executive positions, with their aggregate compensation increasing from **$1.179 million** in 2021 to **$2.427 million** in 2022[463](index=463&type=chunk) [Note 25. Subsequent Events](index=86&type=section&id=Note%2025.%20Subsequent%20Events) No material subsequent events occurred between December 31, 2022, and March 29, 2023, requiring disclosure or recognition - No material subsequent events occurred between December 31, 2022, and March 29, 2023, requiring disclosure or recognition[467](index=467&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=87&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[468](index=468&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=87&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management, including the Executive Vice President/Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022 - Disclosure controls and procedures were deemed effective as of December 31, 2022[468](index=468&type=chunk)[469](index=469&type=chunk) - No material changes in internal control over financial reporting were identified during 2022[470](index=470&type=chunk) - Management concluded that internal controls over financial reporting were effective as of December 31, 2022, based on the 2013 COSO Framework[473](index=473&type=chunk) [ITEM 9B. OTHER INFORMATION](index=87&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) There is no other information to report under this item - No other information to report[474](index=474&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=88&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section identifies the company's directors and executive officers, details Board meetings, and notes its status as a "Controlled Company" under Nasdaq rules - The Board of Directors includes Gloria E. Gebbia, John J. Gebbia, Charles A. Zabatta, Francis V. Cuttita, Andrew H. Reich, and Jerry M. Schneider[477](index=477&type=chunk)[478](index=478&type=chunk)[479](index=479&type=chunk)[480](index=480&type=chunk)[481](index=481&type=chunk)[483](index=483&type=chunk) - Andrew H. Reich serves as Executive Vice President, Chief Operating Officer, Chief Financial Officer, and Secretary[485](index=485&type=chunk) - The company is a "Controlled Company" as Gloria E. Gebbia and her family members hold over 50% of the voting power, exempting it from certain Nasdaq independence requirements for the Board and committees[487](index=487&type=chunk) - The Audit Committee consists of Mr. Schneider (Chairman and financial expert), Mr. Zabatta, and Mr. Cuttita, all independent directors[488](index=488&type=chunk)[489](index=489&type=chunk) - The Board of Directors oversees risk management, receiving regular reports from senior management on operational, financial, legal, regulatory, strategic, and reputational risks[502](index=502&type=chunk)[503](index=503&type=chunk) - There were delinquent Section 16(a) reports for Ms. DiBartolo (Form 3) and Richard Gebbia (Form 4) in 2022[509](index=509&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=93&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) This section details compensation for the Named Executive Officer and directors, including salary, bonus, and equity awards, noting no employment or option agreements Summary Compensation Table (Named Executive Officer) | Name and Principal Position | Year | Salary ($000) | Bonus ($000) | Stock Awards ($000) | Option Awards | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation Earnings | Other Compensation | Totals ($000) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Andrew H. Reich | 2022 | 225 | 25 | 32 | — | — | — | — | 282 | | Andrew H. Reich | 2021 | 225 | 125 | — | — | — | — | — | 350 | - As of December 31, 2022, the company had **296,000** shares of common stock outstanding and fully vested as part of equity compensation[515](index=515&type=chunk) - The company is not party to employment agreements with Named Executive Officers, who are employees at will, and had no option agreements with them as of December 31, 2022[516](index=516&type=chunk)[517](index=517&type=chunk) Compensation of Directors (Year Ended December 31, 2022) | Name | Fees Earned or Paid in Cash ($000) | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total ($000) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gloria E. Gebbia | — | — | — | — | — | — | — | | John J. Gebbia | — | — | — | — | — | — | — | | Andrew H. Reich | — | — | — | — | — | — | — | | Francis V. Cuttita | 106 | — | — | — | — | — | 106 | | Charles Zabatta | 106 | — | — | — | — | — | 106 | | Jerry M. Schneider | 106 | — | — | — | — | — | 106 | | Cynthia DiBartolo | — | — | — | — | — | — | — | [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=95&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) This section details common stock ownership for directors, executive officers, and significant beneficial owners, highlighting the principal shareholders' control Security Ownership of Certain Beneficial Owners and Management (as of March 20, 2023) | Name and Address of Beneficial Owner | Shares of Common Stock | Percent of Class | | :--- | :--- | :--- | | Gloria E. Gebbia / John J. Gebbia | 17,539,200 | 54% | | Andrew H. Reich | 758,238 | 2% | | Charles Zabatta | 600,439 | 2% | | Francis V. Cuttita | 187,773 | 1% | | Jerry M. Schneider | 3,000 | <1% | | Directors and named executive officers as a group (6 persons) | 19,088,650 | 59% | | Kimberly Gebbia | 3,278,400 | 10% | | John M. Gebbia | 2,127,091 | 7% | | Andrew McDonald | 1,773,676 | 5% | - Gloria E. Gebbia and John J. Gebbia, as husband and wife, are the principal shareholders, controlling 54% of the common stock[523](index=523&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=96&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The Audit Committee reviews and approves all related party transactions, guided by the Code of Ethics to prevent conflicts of interest, with further details in Note 24 - The Audit Committee is responsible for reviewing and approving all related party transactions[524](index=524&type=chunk) - The Code of Ethics for Senior Financial Officers requires disclosure and approval of any actual or potential conflicts of interest by the Audit Committee[525](index=525&type=chunk) - Detailed related party disclosures are provided in Note 24 of the financial statements[526](index=526&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES](index=96&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Baker Tilly US, LLP serves as the independent auditor, with the Audit Committee pre-approving all audit and non-audit services to ensure independence - Baker Tilly US, LLP is the independent registered public accounting firm[527](index=527&type=chunk) - The Audit Committee pre-approves all audit and non-audit services to maintain auditor independence[531](index=531&type=chunk) Audit and Audit-Related Fees Billed by Baker Tilly US, LLP | Fee Type | 2022 ($000) | 2021 ($000) | | :--- | :--- | :--- | | Audit Fees | 112 | 156 | | Audit-Related Fees | 184 | 194 | PART IV [ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES](index=97&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all exhibits and financial statement schedules required by Regulation S-K, including consolidated financial statements and various agreements - The section lists exhibits and financial statement schedules required by Regulation S-K, including consolidated financial statements[534](index=534&type=chunk) - Exhibits include merger agreements, certificates of incorporation, by-laws, equity incentive plans, acquisition agreements, clearing agreements, loan agreements, and various certifications[537](index=537&type=chunk)[538](index=538&type=chunk)[542](index=542&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=100&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) There is no Form 10-K summary provided - No Form 10-K summary is provided[542](index=542&type=chunk) SIGNATURES [SIGNATURES](index=101&type=section&id=SIGNATURES) The report is duly signed by Andrew H. Reich, as principal executive and financial officer, and other directors, all dated March 29, 2023 - The report is signed by Andrew H. Reich (Principal executive, financial and accounting officer) and directors Gloria E. Gebbia, John J. Gebbia, Charles Zabatta, Francis V. Cuttita, and Jerry M. Schneider[545](index=545&type=chunk)[546](index=546&type=chunk) - All signatures are dated March 29, 2023[546](index=546&type=chunk)

FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 For the transition period from ____________________ to ____________________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) (S ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) (State ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) New York 11-179 ...

Regulatory and Compliance Risks - The company is subject to extensive government regulation, including compliance with SEC, FINRA, and other regulatory bodies, which could impact operations and financial results[77]. - The Dodd-Frank Act has introduced new rules that enhance the broker-dealer standard of conduct, potentially increasing compliance costs[74]. - The company is exposed to regulatory risks that could arise from changes in laws, rules, and regulations, which may adversely affect business operations[79]. - Compliance with net capital requirements may limit the company's ability to engage in capital-intensive operations, affecting growth strategies[81]. - The company is subject to litigation risks that could result in significant liabilities and impact its ability to retain clients[80]. - The company is subject to closing conditions for transactions, including regulatory approvals and material adverse changes, which could lead to stock price declines if transactions do not close as expected[98]. - The company is currently under investigation by FINRA regarding UIT transactions executed by StockCross prior to its acquisition[246]. - The company paid a fine of $250,000 to FINRA related to a consent agreement regarding excessive trading and suitability violations[244]. - The company agreed to pay $100,000 to the California Department of Financial Protection and Innovation for administrative costs related to supervisory failures[245]. Cybersecurity and Technology Risks - The company faces risks related to cybersecurity, including potential breaches that could lead to significant costs and reputational damage[89]. - The company relies heavily on information processing and communication systems, and any significant failure could disrupt operations and affect customer obligations[82]. - The company must continuously enhance its technology to avoid obsolescence, as rapid market changes could decrease the attractiveness of its services[94]. Strategic Growth and Acquisitions - The company is considering strategic acquisitions as part of its growth strategy, which could involve integration risks and increased costs[97]. - The company faces risks in identifying, consummating, and integrating acquisitions, which could adversely affect business and financial condition[99]. - The company acquired 85% of StockCross' outstanding shares on January 1, 2020, in exchange for 3,298,774 shares of its common stock[142]. Financial Performance and Market Conditions - Revenue for the year ended December 31, 2021, was $67.5 million, an increase of 22.9% from $54.9 million in 2020[175]. - Net income available to common stockholders for 2021 was $5.1 million, up from $3.0 million in 2020, representing a growth of 70%[175]. - The primary financial impact from the COVID-19 pandemic was lower interest revenue due to decreased benchmark interest rates starting in Q1 2020[148]. - The Federal Reserve's interest rate cuts have negatively impacted revenue from interest and distribution fees[107]. - The brokerage industry is facing intense competition, with price wars and lower commission rates affecting revenue[121]. Operational Adjustments and COVID-19 Impact - The COVID-19 pandemic has caused significant volatility in financial markets, potentially impacting the company's business and financial condition[106]. - The company has implemented remote work arrangements for nearly 100% of its employees and has reopened all branch offices as of the report date[149]. - The company is actively negotiating contracts with key vendors to reduce fixed costs and has transitioned branch offices to more cost-efficient locations[150]. - The company believes it can meet all obligations and maintain liquidity despite the challenges posed by COVID-19[151]. - The company is monitoring the ongoing COVID-19 situation and its potential impact on business operations and financial condition[152]. Asset and Liability Management - Total assets under management increased to $17.3 billion as of December 31, 2021, up from $16.2 billion in 2020[173]. - Total assets as of December 31, 2021, were $1,404,235,000, an increase of $31,248,000 from December 31, 2020[194]. - Total liabilities as of December 31, 2021, were $1,353,729,000, an increase of $18,728,000 from December 31, 2020[195]. - Cash and cash equivalents as of December 31, 2021, were approximately $3.8 million, an increase from $3.6 million in the prior year[202]. - The company had margin loans extended to customers of approximately $0.6 billion as of December 31, 2021[222]. Impairments and Provisions - The company recorded a full impairment of the RISE customer relationships intangible asset amounting to $699,000 in 2021[161]. - Impairment loss for the year ended December 31, 2021, was $699,000, reflecting a full increase from the prior year due to the impairment of intangible assets[189]. - Provision for income taxes for the year ended December 31, 2021, was $1,721,000, an increase of $1,500,000 from the prior year[192]. Risk Management and Financial Strategy - The company believes its current insurance coverage and reserves are sufficient to cover estimated exposures related to contingent liabilities[261]. - The company does not engage in derivative transactions and has no liabilities for the debt of another entity, indicating a conservative financial strategy[263]. - Customer transactions are cleared through clearing brokers on a fully disclosed basis, enhancing transparency and compliance with margin requirements[265]. - The company invests cash and cash equivalents in dollar-denominated bank accounts, which are not subject to significant value changes due to interest rate movements[264]. - The consolidated financial statements present fairly the financial position of the company as of December 31, 2021, and 2020, in accordance with generally accepted accounting principles[270]. - The company has significant judgment in estimating contingent liabilities, which may result in actual costs differing materially from estimates[261]. - The company regularly monitors customer account activity for compliance, mitigating potential risks associated with customer obligations[265].

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the company's condensed consolidated financial statements and accompanying detailed notes [CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) The company's total assets and liabilities decreased while stockholders' equity increased as of September 30, 2021 Financial Condition Summary | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | | :--------------------------------- | :------------- | :------------- | :----- | | Total Assets | $1,247,204,000 | $1,372,987,000 | -$125,783,000 | | Total Liabilities | $1,204,581,000 | $1,335,001,000 | -$130,420,000 | | Total Stockholders' Equity | $42,623,000 | $37,986,000 | +$4,637,000 | | Securities borrowed | $791,349,000 | $905,785,000 | -$114,436,000 | | Securities loaned | $789,836,000 | $920,811,000 | -$130,975,000 | [CONDENSED CONSOLIDATED STATEMENTS OF INCOME](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Revenue and net income grew significantly for both the three and nine months ended September 30, 2021 Three Months Ended September 30, 2021 vs 2020 | Metric | Sep 30, 2021 | Sep 30, 2020 | YoY Change | | :--------------------------------- | :------------- | :------------- | :--------- | | Total Revenue | $17,051,000 | $12,575,000 | +35.6% | | Net Income | $870,000 | $581,000 | +49.7% | | Basic and Diluted EPS | $0.03 | $0.02 | +50.0% | | Principal transactions | $3,924,000 | $2,342,000 | +67.5% | | Market making | $1,514,000 | $423,000 | +257.9% | | Stock borrow / stock loan | $3,465,000 | $1,267,000 | +173.5% | | Employee compensation and benefits | $9,294,000 | $6,584,000 | +41.2% | | Impairment loss | $699,000 | $0 | N/A | Nine Months Ended September 30, 2021 vs 2020 | Metric | Sep 30, 2021 | Sep 30, 2020 | YoY Change | | :--------------------------------- | :------------- | :------------- | :--------- | | Total Revenue | $52,768,000 | $39,995,000 | +31.9% | | Net Income | $4,574,000 | $2,056,000 | +122.5% | | Basic and Diluted EPS | $0.15 | $0.07 | +114.3% | | Principal transactions | $12,279,000 | $8,126,000 | +51.1% | | Market making | $4,886,000 | $1,508,000 | +224.0% | | Stock borrow / stock loan | $7,552,000 | $2,482,000 | +204.3% | | Employee compensation and benefits | $27,205,000 | $20,489,000 | +32.8% | | Impairment loss | $699,000 | $0 | N/A | [CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) Stockholders' equity increased due to net income and shares issued for an acquisition - Stockholders' Equity increased from **$37,986,000** at January 1, 2021, to **$42,623,000** by September 30, 2021[19](index=19&type=chunk) - Net income for the nine months ended September 30, 2021, contributed **$4,574,000** to equity[19](index=19&type=chunk) - Shares issued for OpenHand purchase added **$1,381,000**, while shares retired from the OpenHand transaction reduced equity by **$1,318,000**[19](index=19&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash from operating activities decreased significantly, while investing and financing activities used cash Nine Months Ended September 30 Cash Flow Summary | Cash Flow Activity | 2021 | 2020 | Change | | :--------------------------------- | :------------- | :------------- | :----- | | Net cash provided by / (used in) operating activities | $5,352,000 | $36,352,000 | -$31,000,000 | | Net cash provided by / (used in) investing activities | -$1,333,000 | -$334,000 | -$999,000 | | Net cash provided by / (used in) financing activities | -$948,000 | $2,904,000 | -$3,852,000 | | Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes | $3,071,000 | $38,922,000 | -$35,851,000 | - The significant decrease in operating cash flow was primarily due to changes in securities loaned (from **$96.3M provided** in 2020 to **$131.0M used** in 2021) and securities borrowed (from **$90.2M used** in 2020 to **$114.4M provided** in 2021)[21](index=21&type=chunk) - Investing activities in 2021 included the purchase of OpenHand common stock (**$850,000**) and furniture/equipment (**$274,000**)[21](index=21&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=11&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes detail the company's organization, accounting policies, acquisitions, and financial instruments [1. Organization and Basis of Presentation](index=11&type=section&id=1.%20Organization%20and%20Basis%20of%20Presentation) The company operates through subsidiaries in brokerage and asset management, with recent key clearing arrangement changes - Siebert operates through subsidiaries in retail brokerage (MSCO), investment advisory (SNXT), insurance (PW), robo-advisory tech (STCH), prime brokerage (WPS), and an inactive subsidiary (STXD)[27](index=27&type=chunk) - On August 23, 2021, the company signed a non-binding letter of intent with Tigress Holdings, LLC to exchange **24% membership interests** in Tigress Financial Partners, LLC for **24% of WPS** and Siebert common stock[26](index=26&type=chunk) - Goldman Sachs & Co LLC terminated its clearing arrangement with WPS on August 30, 2021, leading to a **full impairment** of WPS customer relationships intangible asset and expected **significant reduction in WPS revenue** in future periods[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [2. New Accounting Standards](index=13&type=section&id=2.%20New%20Accounting%20Standards) Recently adopted accounting standards for investments and income taxes did not have a material impact - ASU 2020-01, clarifying interactions between accounting for equity securities, equity method, and derivatives, was adopted on January 1, 2021, with **no material impact**[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - ASU 2019-12, simplifying income tax accounting, was adopted on January 1, 2021, with **no material impact**[43](index=43&type=chunk) - ASU 2016-13, changing the impairment model for credit losses, is yet to be adopted, and its impact is currently being assessed[44](index=44&type=chunk) [3. Acquisitions](index=14&type=section&id=3.%20Acquisitions) The acquisition of StockCross Financial Services, Inc was completed as a common control transaction - The company acquired the remaining **85%** of StockCross' outstanding shares on January 1, 2020, for **3,298,774 shares** of common stock, merging StockCross into MSCO[32](index=32&type=chunk)[47](index=47&type=chunk) - The acquisition was accounted for as a transaction between entities under common control, with net assets combined at historical carrying amounts and **no goodwill recorded**[33](index=33&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - Net assets acquired from StockCross totaled **$15,714,000**[49](index=49&type=chunk) [4. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations](index=15&type=section&id=4.%20Receivables%20From,%20Payables%20To,%20and%20Deposits%20With%20Broker-Dealers%20and%20Clearing%20Organizations) Receivables from broker-dealers decreased while payables increased as of September 30, 2021 Receivables from and deposits with broker-dealers and clearing organizations | Category | Sep 30, 2021 | Dec 31, 2020 | Change | | :------------------------------------------------- | :------------- | :------------- | :----- | | DTCC / OCC / NSCC | $11,030,000 | $17,841,000 | -$6,811,000 | | Total Receivables and Deposits | $15,877,000 | $23,023,000 | -$7,146,000 | Payables to broker-dealers and clearing organizations | Category | Sep 30, 2021 | Dec 31, 2020 | Change | | :------------------------------------------------- | :------------- | :------------- | :----- | | Securities fail-to-receive | $3,093,000 | $1,810,000 | +$1,283,000 | | Total Payables | $3,132,000 | $1,810,000 | +$1,322,000 | [5. Prepaid Service Contract](index=15&type=section&id=5.%20Prepaid%20Service%20Contract) The company has a prepaid asset with InvestCloud for platform development being amortized over three years - The company entered into a Master Services Agreement with InvestCloud on April 21, 2020, for platform development and an annual license fee of **$600,000**, plus an upfront professional service fee of **$1.0 million**[51](index=51&type=chunk) - A prepaid asset of **$2.1 million** for professional services is being amortized over the 3-year contract term[53](index=53&type=chunk) Total Cost Related to InvestCloud (Nine Months Ended Sep 30) | Year | Amount | | :--- | :----- | | 2021 | $782,000 | | 2020 | $436,000 | [6. Fair Value Measurements](index=16&type=section&id=6.%20Fair%20Value%20Measurements) Financial assets and liabilities are categorized into a three-level hierarchy based on input observability - Fair value measurements are categorized into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[58](index=58&type=chunk)[59](index=59&type=chunk) - Receivables, payables, securities borrowed, and securities loaned are primarily classified as **Level 2**, approximating fair value due to their short-term nature or daily mark-to-market adjustments[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) Securities Owned, at Fair Value (As of September 30, 2021) | Category | Level 1 | Level 2 | Level 3 | Total | | :------------------------ | :---------- | :-------- | :-------- | :---------- | | U.S. government securities | $2,990,000 | — | — | $2,990,000 | | Certificates of deposit | — | $92,000 | — | $92,000 | | Corporate bonds | — | $38,000 | — | $38,000 | | Equity securities | $648,000 | $248,000 | — | $896,000 | | **Total** | **$3,638,000** | **$378,000** | **—** | **$4,016,000** | [7. Leases](index=18&type=section&id=7.%20Leases) Lease assets and liabilities increased, while rent and occupancy expenses decreased due to office relocations Lease Right-of-Use Assets and Lease Liabilities | Metric | Sep 30, 2021 | Dec 31, 2020 | | :------------------------ | :------------- | :------------- | | Lease right-of-use assets | $3,002,000 | $2,290,000 | | Lease liabilities | $3,292,000 | $2,612,000 | Total Rent and Occupancy Expense | Period | 2021 | 2020 | Change | | :------------------------ | :--------- | :--------- | :----- | | Three Months Ended Sep 30 | $441,000 | $694,000 | -$253,000 | | Nine Months Ended Sep 30 | $1,481,000 | $2,119,000 | -$638,000 | Future Annual Minimum Lease Payments (Operating Leases, as of Sep 30, 2021) | Year | Amount | | :--- | :--------- | | 2021 | $397,000 | | 2022 | $1,344,000 | | 2023 | $940,000 | | 2024 | $399,000 | | 2025 | $325,000 | | Thereafter | $139,000 | | **Total Lease Liabilities** | **$3,292,000** | [8. Investments, Cost](index=19&type=section&id=8.%20Investments,%20Cost) The company terminated its working relationship with OpenHand, retaining a smaller interest for cash - On January 31, 2021, the company acquired a **5% interest** in OpenHand Holdings, Inc for **$850,000 in cash** and **329,654 restricted shares** of the company's common stock valued at **$1,381,000**[82](index=82&type=chunk) - The working relationship with OpenHand was terminated on August 18, 2021; the company now holds a **2% interest** for **$850,000 cash**, and the stock portion of the original purchase was rescinded[84](index=84&type=chunk) - A downward adjustment of **$63,000** was recorded for the three and nine months ended September 30, 2021, due to a change in an observable price related to the investment[88](index=88&type=chunk) [9. Goodwill and Intangible Assets, Net](index=21&type=section&id=9.%20Goodwill%20and%20Intangible%20Assets,%20Net) Goodwill remained unimpaired, but the WPS customer relationships intangible asset was fully impaired - Goodwill remained at **$1,989,000** as of September 30, 2021, with **no impairment recognized**[89](index=89&type=chunk)[92](index=92&type=chunk) - A full impairment loss of **$699,000** was recognized for the WPS customer relationships intangible asset for the three and nine months ended September 30, 2021[93](index=93&type=chunk) - The impairment was triggered by the termination of WPS's clearing arrangement with Goldman Sachs & Co LLC, which is expected to **significantly reduce WPS's revenue-producing customers**[91](index=91&type=chunk)[93](index=93&type=chunk) [10. Deferred Contract Incentive](index=21&type=section&id=10.%20Deferred%20Contract%20Incentive) An amended clearing agreement with NFS included a $3 million business development credit - MSCO's clearing agreement with National Financial Services LLC (NFS) was amended on August 1, 2021, extending the term for an additional four years until **July 31, 2025**[95](index=95&type=chunk) - The company received a one-time business development credit of **$3 million** from NFS, recorded as a deferred contract incentive[96](index=96&type=chunk) - This credit is recognized as a contra expense over the term of the agreement, with **$125,000** recognized for the three and nine months ended September 30, 2021, and a balance of **$2.9 million** as of September 30, 2021[96](index=96&type=chunk) [11. Long-Term Debt](index=22&type=section&id=11.%20Long-Term%20Debt) The company has a $10 million line of credit with an outstanding balance of $3.9 million - The company has a Loan and Security Agreement with East West Bank, allowing borrowing up to **$10 million**, with a 4-year term per draw and a 5-year amortization period[97](index=97&type=chunk) - As of September 30, 2021, **$5.0 million** has been drawn, with an outstanding balance of **$3.9 million** and an additional **$5.0 million** remaining to draw[101](index=101&type=chunk) Future Annual Minimum Payments for East West Bank Line of Credit (as of Sep 30, 2021) | Year | Amount | | :--- | :--------- | | 2021 | $250,000 | | 2022 | $998,000 | | 2023 | $998,000 | | 2024 | $1,661,000 | | **Total** | **$3,907,000** | [12. Notes Payable - Related Party](index=23&type=section&id=12.%20Notes%20Payable%20-%20Related%20Party) The company has $5.0 million in notes payable to a principal stockholder - As of September 30, 2021, the company had **$5,000,000** in notes payable to Gloria E Gebbia, the principal stockholder[103](index=103&type=chunk) - This includes a **$2,000,000** note at 4.00% due October 31, 2021 (renewed from September 30, 2021) and a **$3,000,000** note at 4.00% due November 30, 2022, which is subordinated to MSCO[103](index=103&type=chunk)[104](index=104&type=chunk) Interest Expense for Related Party Notes Payable (Nine Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $156,000 | | 2020 | $220,000 | [13. Revenue Recognition](index=23&type=section&id=13.%20Revenue%20Recognition) Revenue is primarily generated from trading activities, advisory fees, and interest, with varying recognition timing - The company has soft dollar arrangements where revenue from certain client trades is recognized **net of costs** paid to third parties for research, brokerage services, and market data[123](index=123&type=chunk) Revenue Categories and Recognition Timing | Revenue Category | Timing of Recognition | | :------------------------------------------------- | :-------------------- | | Commissions and fees | Recorded on trade date | | Principal transactions | Recorded on trade date | | Market making | Recorded on trade date | | Stock borrow / stock loan | Recorded as earned | | Advisory fees | Recorded as earned | | Interest, marketing and distribution fees | Recorded as earned | | Other income | Recorded as earned | Stock Borrow / Stock Loan Revenue (Nine Months Ended Sep 30) | Year | Gross Revenue | Expenses | Net Revenue | | :--- | :------------ | :------- | :---------- | | 2021 | $19,605,000 | $12,053,000 | $7,552,000 | | 2020 | $6,170,000 | $3,688,000 | $2,482,000 | [14. Referral Fees](index=27&type=section&id=14.%20Referral%20Fees) Referral fees related to institutional relationships increased significantly in 2021 - The increase in referral fees is primarily due to the expansion of institutional relationships and market activity[222](index=222&type=chunk)[236](index=236&type=chunk) Referral Fees Expense (Three Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $374,000 | | 2020 | $154,000 | Referral Fees Expense (Nine Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $1,134,000 | | 2020 | $427,000 | [15. Income Taxes](index=27&type=section&id=15.%20Income%20Taxes) The company recorded an income tax provision with an effective tax rate of 24% for the nine months of 2021 - As of September 30, 2021, the company recorded an uncertain tax position of **$1,103,000**, primarily related to anticipated tax refunds from 2017-2019 amended tax returns[134](index=134&type=chunk) Income Tax Provision and Effective Tax Rate (Three Months Ended Sep 30) | Year | Amount | Effective Tax Rate | | :--- | :--------- | :----------------- | | 2021 | $265,000 | 23% | | 2020 | -$486,000 | -512% | Income Tax Provision and Effective Tax Rate (Nine Months Ended Sep 30) | Year | Amount | Effective Tax Rate | | :--- | :--------- | :----------------- | | 2021 | $1,484,000 | 24% | | 2020 | $39,000 | 2% | [16. Earnings Per Share](index=28&type=section&id=16.%20Earnings%20Per%20Share) Basic and diluted earnings per share increased significantly, reflecting higher net income Net Income (Three Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $870,000 | | 2020 | $581,000 | Net Income (Nine Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $4,574,000 | | 2020 | $2,056,000 | Basic and Diluted EPS | Period | 2021 | 2020 | | :------------------------ | :---- | :---- | | Three Months Ended Sep 30 | $0.03 | $0.02 | | Nine Months Ended Sep 30 | $0.15 | $0.07 | [17. Capital Requirements](index=28&type=section&id=17.%20Capital%20Requirements) Subsidiaries MSCO and WPS maintained net capital well in excess of minimum regulatory requirements - As of September 30, 2021, MSCO's net capital was **$35.5 million**, exceeding its required net capital of **$2.1 million** by approximately **$33.4 million**[136](index=136&type=chunk) - MSCO had **$327.4 million** in cash deposits in its special reserve accounts as of September 30, 2021, which was **$30 million in excess** of the **$297.4 million** deposit requirement[138](index=138&type=chunk) - WPS's net capital was approximately **$3.2 million** as of September 30, 2021, exceeding its minimum requirement of **$250,000** by **$3.0 million**[141](index=141&type=chunk) [18. Financial Instruments with Off-Balance Sheet Risk](index=29&type=section&id=18.%20Financial%20Instruments%20with%20Off-Balance%20Sheet%20Risk) The company is exposed to off-balance sheet risk from customer margin and securities lending activities - The company's customer activities, including margin transactions and securities lending, expose it to off-balance sheet risk if customers or other brokers fail to fulfill contractual obligations[143](index=143&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk) - As of September 30, 2021, margin loans extended to customers totaled approximately **$1.2 billion**[144](index=144&type=chunk) - Risks are controlled by requiring customers to maintain margin collateral, daily monitoring of margin levels, establishing credit limits, and utilizing clearing organization programs to guarantee cash return in securities lending[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [19. Commitments, Contingencies, and Other](index=30&type=section&id=19.%20Commitments,%20Contingencies,%20and%20Other) The company is involved in legal matters from pre-acquisition activities and has various financial commitments - StockCross (pre-acquisition) faced FINRA actions, resulting in a **$250,000 fine**, and a California Consent Order, leading to **$100,000 administrative costs** and a **$315,000 restitution offer** (rejected by customers)[151](index=151&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) - The company has a **$15 million** available line of credit for short-term overnight demand borrowing with BMO Harris Bank, with no outstanding balance as of September 30, 2021[156](index=156&type=chunk) NFS Clearing Agreement Early Termination Fees | Date of Termination | Early Termination Fee | | :------------------ | :-------------------- | | Prior to August 1, 2022 | $8,000,000 | | Prior to August 1, 2023 | $7,250,000 | | Prior to August 1, 2024 | $4,500,000 | | Prior to August 1, 2025 | $3,250,000 | [20. Related Party Disclosures](index=32&type=section&id=20.%20Related%20Party%20Disclosures) The company engages in various transactions with related parties, including acquisitions, services, and debt agreements - The acquisition of StockCross on January 1, 2020, was a transaction between entities under **common control** of the Gebbia Family[164](index=164&type=chunk) - Kennedy Cabot Acquisition, LLC (KCA), an affiliate, serves as a paymaster for payroll and related functions and has purchased naming rights for the company, passing through all revenues and expenses[165](index=165&type=chunk)[167](index=167&type=chunk) - The company has various debt agreements with Gloria E Gebbia and its obligations under the East West Bank line of credit are guaranteed by John J Gebbia and Gloria E Gebbia[169](index=169&type=chunk)[170](index=170&type=chunk) [21. Subsequent Events](index=34&type=section&id=21.%20Subsequent%20Events) Subsequent events include a note renewal and an agreement to transfer WPS customers to JonesTrading - On October 31, 2021, a **$2 million note payable** to Gloria E Gebbia was renewed with a maturity of December 31, 2021[173](index=173&type=chunk) - On October 7, 2021, the company signed an agreement with JonesTrading to transfer certain WPS customers, with JonesTrading paying a percentage of revenue that will decline annually until October 2024[174](index=174&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=35&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) The company saw strong revenue growth in 2021 despite market challenges and significant operational changes [Overview](index=35&type=section&id=Overview) The company's financial results are highly dependent on economic conditions and U.S. financial markets - The company's business lines include retail brokerage (MSCO), investment advisory (SNXT), insurance (PW), robo-advisory technology (STCH), prime brokerage (WPS), and an inactive subsidiary (STXD)[182](index=182&type=chunk) - Financial results are **highly correlated** to general economic conditions and the direction of the U.S. equity and fixed-income markets[178](index=178&type=chunk) - Profitability is affected by market volatility, interest rates, economic, political, and regulatory trends, and industry competition, with certain expenses remaining relatively fixed[178](index=178&type=chunk) [COVID-19 Impact](index=35&type=section&id=COVID-19%20Impact) The pandemic's primary impact was lower interest revenue, which was managed through operational adjustments - The primary financial impact of COVID-19 was **lower interest revenue** due to the Federal Reserve cutting the federal funds target overnight rate to near zero[180](index=180&type=chunk) - The company implemented remote work arrangements, restricted business travel, and temporarily closed some branch offices, which **did not materially affect** business operations[181](index=181&type=chunk) - Management actively engaged in contract negotiations with key vendors to reduce fixed costs and transitioned branch offices to more cost-efficient locations, resulting in rent and occupancy savings[182](index=182&type=chunk) [Significant Events](index=37&type=section&id=Significant%20Events) Key events include a new partnership LOI, termination of a key clearing arrangement, and record securities finance revenue - A non-binding letter of intent was signed with Tigress Holdings, LLC to exchange **24% membership interests** in Tigress Financial Partners, LLC for **24% of WPS** and Siebert common stock[186](index=186&type=chunk) - Goldman Sachs terminated WPS's clearing arrangement, leading to a **full impairment** of the WPS customer relationships intangible asset and an expected material adverse effect on future WPS operations[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - The Securities Finance Group achieved its highest quarterly revenue of approximately **$3.5 million** for the three months ended September 30, 2021, representing a **173% increase** from the prior year[197](index=197&type=chunk) [Client Account and Activity Metrics](index=39&type=section&id=Client%20Account%20and%20Activity%20Metrics) Customer net worth and retail accounts grew, though total retail trades decreased Client Account Metrics | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | | :--------------------------------- | :------------- | :------------- | :----- | | Retail and institutional customer net worth (in billions) | $17.6 | $16.2 | +$1.4 | | Retail customer net worth (in billions) | $15.7 | $14.6 | +$1.1 | | Retail customer accounts | 114,155 | 110,699 | +3,456 | | Institutional customer net worth (in billions) | $1.9 | $1.6 | +$0.3 | Total Retail Trades | Period | 2021 | 2020 | Change | | :------------------------ | :------- | :------- | :----- | | Three Months Ended Sep 30 | 94,705 | 112,264 | -17,559 | | Nine Months Ended Sep 30 | 348,608 | 353,580 | -4,972 | [Statements of Income and Financial Condition](index=39&type=section&id=Statements%20of%20Income%20and%20Financial%20Condition) Revenue increased significantly in Q3 and YTD 2021, driven by strong market conditions and business growth Revenue (Three Months Ended Sep 30) | Revenue Category | 2021 | 2020 | YoY Change | Primary Driver | | :--------------------------------- | :--------- | :--------- | :--------- | :------------- | | Commissions and fees | $4,019,000 | $4,679,000 | -14.1% | Decrease in institutional business | | Interest, marketing and distribution fees | $3,435,000 | $3,226,000 | +6.5% | Increase in margin financing and institutional short stock interest | | Principal transactions | $3,924,000 | $2,342,000 | +67.5% | Strong market conditions | | Market making | $1,514,000 | $423,000 | +257.9% | Favorable market conditions and customer growth | | Stock borrow / stock loan | $3,465,000 | $1,267,000 | +173.5% | Business growth, key personnel, expansion of stock locate revenues | | Advisory fees | $441,000 | $305,000 | +44.6% | Overall expansion of advisory business | | Other income | $253,000 | $333,000 | -24.0% | Reduction in foreign exchange volumes | | **Total Revenue** | **$17,051,000** | **$12,575,000** | **+35.6%** | | Expenses (Three Months Ended Sep 30) | Expense Category | 2021 | 2020 | YoY Change | Primary Driver | | :--------------------------------- | :--------- | :--------- | :--------- | :------------- | | Employee compensation and benefits | $9,294,000 | $6,584,000 | +41.2% | Increased commission payouts | | Clearing fees, including execution costs | $986,000 | $1,270,000 | -22.3% | Decrease in institutional commissions | | Technology and communications | $1,196,000 | $1,322,000 | -9.6% | Decrease in InvestCloud monthly license fee | | Other general and administrative | $927,000 | $455,000 | +103.7% | Recovery of traveling activities, office expenses, exchange/regulatory fees | | Rent and occupancy | $441,000 | $694,000 | -36.4% | Transition to more cost-efficient locations | | Referral fees | $374,000 | $154,000 | +142.9% | Expansion of institutional relationships and market activity | | Impairment loss | $699,000 | — | N/A | Impairment of WPS customer relationships intangible asset | Financial Condition (Sep 30, 2021 vs Dec 31, 2020) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | Primary Driver | | :--------------------------------- | :------------- | :------------- | :----- | :------------- | | Total Assets | $1,247,204,000 | $1,372,987,000 | -$125,783,000 | Decrease in securities borrowed | | Total Liabilities | $1,204,581,000 | $1,335,001,000 | -$130,420,000 | Decrease in securities loaned | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity through operating cash flows and access to multiple credit facilities - The company has **strong operating cash flows** and sufficient liquidity to meet its needs, with expectations for this to continue[241](index=241&type=chunk)[242](index=242&type=chunk) - Available borrowing capabilities include a **$15 million** short-term overnight demand line of credit with BMO Harris Bank (no outstanding balance) and a **$10 million** line of credit with East West Bank (**$3.9 million** outstanding, **$5.0 million** remaining to draw)[156](index=156&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - MSCO and WPS consistently meet their respective regulatory net capital and segregated cash reserve requirements[247](index=247&type=chunk)[249](index=249&type=chunk) [Off-Balance Sheet Arrangements](index=45&type=section&id=Off-Balance%20Sheet%20Arrangements) Risks from customer margin transactions and securities lending are managed through collateral and monitoring - The company is exposed to off-balance sheet risk from customer securities activities, including margin transactions and securities lending, where customers or counterparties may fail to fulfill obligations[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[261](index=261&type=chunk) - As of September 30, 2021, margin loans extended to customers totaled approximately **$1.2 billion**[258](index=258&type=chunk) - Risks are mitigated by requiring customers to maintain margin collateral, daily monitoring of margin levels, establishing credit limits, and using clearing organization programs for securities lending[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) [Uncertain Tax Positions](index=46&type=section&id=Uncertain%20Tax%20Positions) The company recorded an uncertain tax position related to anticipated refunds from amended tax returns - As of September 30, 2021, the company recorded an uncertain tax position of **$1,103,000**[266](index=266&type=chunk) - This position is primarily related to anticipated tax refunds from 2017-2019 amended tax returns that exceed the "more likely than not" recognition threshold[266](index=266&type=chunk) [Long Term Contracts](index=46&type=section&id=Long%20Term%20Contracts) The company has long-term clearing and service agreements with NFS and InvestCloud - MSCO's clearing agreement with NFS was amended to extend until **July 31, 2025**, with provisions for early termination fees[267](index=267&type=chunk) - The company has a prepaid service contract with InvestCloud for development work and license fees related to its online platform over a three-year term[268](index=268&type=chunk) [Related Party Disclosures](index=46&type=section&id=Related%20Party%20Disclosures) The company engages in various transactions with related parties as detailed in the financial statement notes - The company has various agreements and transactions with related parties, as further detailed in Note 20[269](index=269&type=chunk) [Fair Value Measurements](index=46&type=section&id=Fair%20Value%20Measurements) Financial instruments measured at fair value are primarily classified as Level 1 or Level 2 - The majority of financial instruments measured at fair value are **Level 1** U.S. government securities and equity securities, and **Level 2** equity securities, within 'Securities owned, at fair value'[270](index=270&type=chunk) - Liabilities measured at fair value consist of relatively small amounts of **Level 2** equity securities in 'Securities sold, not yet purchased, at fair value'[270](index=270&type=chunk) [Impairment](index=46&type=section&id=Impairment) A full impairment loss was recognized for the WPS customer relationships intangible asset - **No impairment** was concluded for the carrying value of goodwill and tangible assets as of September 30, 2021[271](index=271&type=chunk) - A full impairment loss of **$699,000** was recognized for the WPS customer relationships intangible asset for the three and nine months ended September 30, 2021, due to the termination of its clearing arrangement with Goldman Sachs[271](index=271&type=chunk) [Segment](index=46&type=section&id=Segment) The company operates as a single operating segment from a management and resource allocation perspective - The company is comprised of a **single operating segment** as of September 30, 2021, based on management's consolidated evaluation of performance and resource allocation[272](index=272&type=chunk) [Critical Accounting Policies](index=47&type=section&id=Critical%20Accounting%20Policies) There have been no changes to the company's critical accounting policies or estimates - There have been **no changes** to the company's critical accounting policies or estimates as of September 30, 2021[273](index=273&type=chunk) [Subsequent Events](index=47&type=section&id=Subsequent%20Events) Subsequent events include a note renewal and an agreement to transfer certain WPS customers - A **$2 million note payable** to Gloria E Gebbia was renewed on October 31, 2021, with a maturity of December 31, 2021[274](index=274&type=chunk) - An agreement was signed with JonesTrading on October 7, 2021, to transfer certain WPS customers, with the financial impact yet to be determined[275](index=275&type=chunk) [Other Items](index=47&type=section&id=Other%20Items) Shareholders approved the 2021 Equity Incentive Plan, reserving 3 million shares for awards - The Siebert Financial Corp 2021 Equity Incentive Plan was approved by shareholders on September 17, 2021, reserving **3 million shares** for various equity awards[276](index=276&type=chunk) - **No securities were issued** under the Plan for the three and nine months ended September 30, 2021[276](index=276&type=chunk) [New Accounting Standards](index=47&type=section&id=New%20Accounting%20Standards) Adopted accounting standards and policies did not have a material impact on the financial statements - All accounting standards and policies adopted in the nine months ended September 30, 2021, **did not have a material impact** on the financial statements[277](index=277&type=chunk) [Regulatory Matters](index=47&type=section&id=Regulatory%20Matters) Regulatory actions against StockCross (pre-acquisition) resulted in fines and administrative costs - StockCross (pre-acquisition) entered into a Letter of Acceptance, Waiver, and Consent with FINRA, agreeing to a **$250,000 fine** for alleged excessive trading and supervisory failures[278](index=278&type=chunk) - StockCross also entered into a Consent Order with the California Department of Financial Protection and Innovation, agreeing to pay **$100,000** for administrative costs and offer **$315,000** in restitution for supervisory failures[279](index=279&type=chunk) - Accruals for the FINRA fine (**$250,000**) and California administrative costs (**$100,000**) were booked in Q2 2021 and paid in Q3 2021; the restitution offer was rejected by customers[281](index=281&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=48&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company does not engage in derivative transactions and has limited exposure to interest rate risk - The company **does not directly engage in derivative transactions** and has no interest in special purpose entities[283](index=283&type=chunk) - Cash and cash equivalents are temporarily invested in dollar-denominated bank accounts and are **not subject to material changes** in value due to interest rate movements[284](index=284&type=chunk) - The company is exposed to credit risk from unsettled customer transactions but mitigates this by regularly monitoring customer accounts for compliance with margin requirements[285](index=285&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=49&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective with no material changes identified - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by this Report[287](index=287&type=chunk)[288](index=288&type=chunk) - **No material changes** in the company's internal control over financial reporting were identified during the period[289](index=289&type=chunk) [PART II - OTHER INFORMATION](index=50&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=50&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in ordinary course legal matters not expected to have a significant impact - The company is party to certain claims, suits, and complaints arising in the ordinary course of business[292](index=292&type=chunk) - Management believes these matters are without merit or involve amounts that would **not have a significant effect** on the company's results of operations or financial position[292](index=292&type=chunk) [ITEM 1A. RISK FACTORS](index=50&type=section&id=ITEM%201A.%20RISK%20FACTORS) A supplemental risk factor regarding the limited public market and volatility of the company's stock is noted - A supplemental risk factor highlights the limited public market for the company's Common Stock and potential volatility due to a small "float" (approximately **37% of shares** outstanding held by non-affiliates as of November 12, 2021)[294](index=294&type=chunk) - **No other material changes** from the risk factors disclosed in the 2020 Form 10-K were reported[293](index=293&type=chunk) [ITEM 6. EXHIBITS](index=51&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the report, including agreements, certifications, and XBRL documents - Exhibits include an Amendment to Fully Disclosed Clearing Agreement with National Financial Services LLC and an Amendment No 1 to Common Stock Purchase Agreement with OpenHand Holdings, Inc[296](index=296&type=chunk) - Certifications pursuant to the Sarbanes-Oxley Act of 2002 (Sections 302 and 906) are included[296](index=296&type=chunk) - XBRL Instance Document and Taxonomy Extension files are provided[296](index=296&type=chunk) [SIGNATURES](index=52&type=section&id=SIGNATURES) The report is duly signed by the Executive Vice President, COO, and CFO on November 15, 2021 - The report was signed by Andrew H Reich, Executive Vice President, Chief Operating Officer, Chief Financial Officer, and Secretary of Siebert Financial Corp[299](index=299&type=chunk) - The report is dated **November 15, 2021**[299](index=299&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) (State ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) (State ...

Financial Performance - Total revenue for the year ended December 31, 2020, was $54,872,000, an increase of 28.2% compared to $42,777,000 in 2019[435]. - Stock borrow/stock loan revenue for 2020 was $4,045,000, up 151.5% from $1,607,000 in 2019[429]. - Total trading execution and clearing services revenue increased to $39,258,000 in 2020 from $22,920,000 in 2019, representing a growth of 71.0%[435]. - Margin interest revenue decreased to $8,725,000 in 2020 from $11,502,000 in 2019, a decline of 24.4%[435]. - Pro forma revenue for the year ended December 31, 2019, was $53,938,000, with net income of $1,704,000[370]. - For the 31-day period ended December 31, 2019, WPS generated revenue of $968,000 and net income of $203,000[366]. Acquisitions - The Company acquired StockCross for approximately $29.75 million, which included 3,298,774 shares of restricted common stock[349]. - The total assets acquired from StockCross amounted to $514.93 million, while total liabilities assumed were $499.21 million, resulting in net assets acquired of $15.71 million[357]. - The Company purchased WPS for approximately $7.1 million in cash, with an additional $3 million financed through a promissory note[360]. - The acquisition of StockCross was accounted for as a transaction between entities under common control, with no change in control over net assets[350]. - The acquisition of WPS was accounted for under the acquisition method of accounting for business combinations pursuant to ASC 805[361]. - The acquisition of WPS resulted in a purchase price of $7,125,000, with net assets acquired valued at $5,136,000 and goodwill of $1,989,000, all of which is expected to be tax-deductible[365]. - The Company acquired 85% of StockCross for 3,298,774 shares of its common stock, consolidating all receivables and payables upon merger on January 1, 2020[482]. Financial Position - As of December 31, 2020, total receivables from broker-dealers and clearing organizations amounted to $23,023,000, a significant increase from $8,475,000 as of December 31, 2019[372]. - The Company had total deferred tax assets of $5,758,000 as of December 31, 2020, after accounting for a valuation allowance[447]. - MSCO's net capital as of December 31, 2020, was $27.5 million, exceeding the required net capital of $2.3 million by approximately $25.2 million[453]. - As of December 31, 2020, MSCO had cash deposits of $324.9 million in special reserve accounts, which was $5.0 million in excess of the deposit requirement of $319.9 million[455]. - WPS's net capital was approximately $3.9 million as of December 31, 2020, exceeding its minimum requirement of $250,000 by approximately $3.7 million[460]. Expenses and Costs - The Company reported operating lease costs of $2,314,000 for 2020, up from $1,764,000 in 2019, with total rent and occupancy expenses reaching $2,767,000[401][404]. - The total cost related to InvestCloud for the year ended December 31, 2020, was $764,000, including $219,000 in share-based payments[376]. - The Company recognized expenses of $1,308,000 for self-insurance claims for the year ended December 31, 2020[477]. - The company paid client expenses related to soft dollar arrangements of approximately $693,000 in 2020, compared to $48,000 in 2019[437]. - Referral fees incurred by the company were approximately $738,000 in 2020, up from $86,000 in 2019[444]. Taxation - The total provision for income taxes for 2020 was $221,000, a significant decrease from $1,048,000 in 2019[446]. - The effective tax rate for the Company decreased to 6.9% in 2020 from 24.5% in 2019, primarily due to tax amortization of intangible assets and a change in valuation allowance[447]. - The Company's valuation allowance on deferred tax assets decreased by $166,000 during 2020, indicating a more favorable outlook on the realization of these assets[448]. - As of December 31, 2020, the Company had U.S. federal net operating loss carryforwards of approximately $13.8 million, with $12.8 million expiring between 2033 and 2036 if not utilized[449]. - The Company does not believe that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months, with a balance of $1,105,000 as of December 31, 2020[451]. Assets and Securities - As of December 31, 2020, the Company held U.S. government securities valued at $2,029,000, categorized as level 1 in the fair value hierarchy[390]. - The total securities owned at fair value as of December 31, 2020, amounted to $2,623,000, with $479,000 in equity securities[390]. - The Company recorded a balance of $288,000 in level 3 equity assets at the beginning of 2020, which was liquidated during the year[390]. - The total net value of furniture, equipment, and leasehold improvements was $762,000, a decrease from $1,150,000 in 2019[394]. - The total net value of software assets increased to $1,334,000 in 2020 from $1,888,000 in 2019, with total amortization expenses for software amounting to $951,000 in 2020[395]. Debt and Credit - The Company had a line of credit with East West Bank, with an outstanding balance of $4.7 million and an additional $5.0 million available to draw down[417]. - The Company entered into a Loan and Security Agreement with East West Bank allowing for term loans up to $10 million, with a minimum interest rate of 3.25%[413][414]. - The effective interest rate related to the line of credit was 3.25% for the year ended December 31, 2020, with interest expense also reported at $54,000[419]. - The Company has available lines of credit for short-term overnight borrowing of up to $15 million, with no outstanding loan balances as of December 31, 2020[472]. Employee and Operational Matters - The Company has a defined-contribution retirement plan covering substantially all employees, with no contributions made for the years ended December 31, 2020 and 2019[480]. - The Company issued 150,000 shares of restricted common stock to two new employees, each paying approximately $400,000 for their shares[441]. - The Company operates on a month-to-month lease agreement for its Omaha branch office, with rent expenses of $60,000 for both 2020 and 2019[489]. - The Company benefits from operational efficiencies through its partnership with OpenHand, leveraging cloud-based technology from Amazon Web Services[493]. Regulatory and Compliance - The Company had $0 and $1.3 million of securities segregated for regulatory purposes, respectively[306]. - The Company has experienced no material historical losses related to its contra-parties for the years ended December 31, 2020 and 2019, indicating stable credit risk management[302]. - The Company believes its estimates for deferred tax assets are reasonable, reflecting a proactive approach to tax planning and financial forecasting[330]. - The Company evaluated subsequent events through March 10, 2021, with no significant impacts reported[490].