Siebert(SIEB) - 2024 Q4 - Annual Report

Strategic Initiatives - Siebert Financial Corp. acquired a media and entertainment company as part of its strategic initiatives to diversify and create synergies between its enterprises[17]. - MSCO received approval in May 2022 to expand its clearing services in the U.S., enhancing its core competencies and diversifying its business[22]. - The Company established an Investment Banking and Capital Markets division in Q1 2025, focusing on middle-market clients and hiring experienced professionals for this initiative[41]. - A new advisory committee was established in 2024, including prominent leaders from various industries to provide strategic guidance for growth[51]. - The Company is undertaking a strategic rebranding initiative to enhance its digital presence and offer innovative financial management solutions tailored to diverse clients[53]. - The company is considering strategic acquisitions as part of its growth strategy, which may involve risks related to costs and regulatory approvals[107]. Technology and Innovation - Siebert AdvisorNXT utilizes proprietary robo-advisory technology based on Modern Portfolio Theory to provide automated wealth management solutions[42]. - The Company is developing an enhanced equity management solution to capture new market opportunities amid industry consolidation[31]. - Significant investments in technology include the development of a mobile trading application and upgrades to operational infrastructure[47]. - The company plans to enhance existing products and develop new technologies to meet the evolving needs of clients[106]. - The company is focused on expanding into new markets and demographics through ongoing technology investments[165]. - The company utilizes the NIST Cybersecurity Framework to manage cybersecurity risks and enhance its security posture[139]. Regulatory Compliance - The company is registered as a broker-dealer in 50 states, the District of Columbia, and Puerto Rico, complying with extensive federal and state regulations[55]. - The Dodd-Frank Act has led to significant changes in regulatory expectations, particularly in compliance, risk management, and corporate governance[57]. - Regulation Best Interest requires broker-dealers to act in the best interest of retail customers, impacting the company's sales practices and compliance costs[58][59]. - The company must comply with numerous laws protecting consumer financial information, including the Gramm-Leach-Bliley Act and the California Consumer Protection Act[73]. - The company is subject to extensive government regulation, including compliance with SEC, FINRA, and other regulatory bodies, which could impact operational costs and business conduct[84]. - Regulatory changes may lead to increased costs and limitations on business operations, potentially affecting profitability and capital returns to stockholders[79][82]. Financial Performance - In 2024, earnings per share were $0.33, compared to$0.21 in 2023, reflecting a significant increase[158]. - Net revenues for 2024 were $83.9 million, up from$71.5 million in 2023, indicating a growth of approximately 17%[158]. - Net income rose to $13.3 million in 2024, compared to$7.8 million in 2023, representing an increase of about 70%[158]. - Retail customer net worth increased by 13% to $18.0 billion compared to 2023[162]. - Revenue related to stock borrow/stock loan increased by 19$19.2 million compared to 2023[162]. - Revenue from commissions and fees rose by 32% to $9.6 million compared to 2023[162]. Risk Management - The company faces significant competition from various brokerage firms, including zero commission firms, which impacts its market position[54]. - The company faces risks from customer credit defaults, which could lead to significant credit losses[113]. - The brokerage industry is experiencing intense competition, with price wars and lower commission rates impacting revenue[130]. - Economic slowdowns and market volatility could adversely affect Siebert's revenues and operating results[129]. - Interest rate changes are critical to profitability, with lower rates potentially compressing net interest margins[127]. - The company identified risks related to cybersecurity breaches, which could lead to significant remediation costs, legal liabilities, and reputational damage[96]. Operational Insights - The company has 10 branch offices across the U.S. and serves clients globally, with a focus on providing exceptional personal service[19]. - The company reported a material weakness in internal controls over financial reporting, specifically in IT controls and user access, which was remediated by December 31, 2024[105]. - The company relies heavily on information processing and communication systems, and any significant failure could disrupt operations and affect customer obligations[89]. - The company faces risks from third-party platforms for data technology, which are critical for operations and may pose security risks[90]. - The company is subject to net capital requirements that could limit its operational capabilities and growth strategies[88]. Capital and Investments - The company has purchased an additional$50 million in account protection above SIPC coverage, which provides up to $500,000 protection per customer[61]. - The company is subject to minimum net capital requirements under the SEC Uniform Net Capital Rule, ensuring sufficient liquid resources to meet financial obligations[70][71]. - The net capital infusion from Kakaopay was approximately$14.8 million, enhancing the company's regulatory capital[191]. - The company entered into a $20 million revolving credit facility with East West Bank to support strategic initiatives[193]. - Total liabilities decreased to$434,576,000 in 2024, down by $296,515,000 or 40.5$43,999,000, up by $12,063,000 or 37.9% compared to the prior year[175].