Oppenheimer(OPY) - 2021 Q4 - Annual Report

PART I Business Overview Oppenheimer Holdings Inc. is a global middle-market investment bank and full-service broker-dealer, offering diverse financial services - Oppenheimer Holdings Inc. (OPY) is a middle-market investment bank and full-service broker-dealer with roots tracing back to 1881, offering a broad range of financial services[11] - The company's legal existence was continued under the Canada Business Corporations Act in 2005 and then changed its jurisdiction of incorporation to Delaware, USA, in 2009[12] - Oppenheimer Holdings Inc. operates as a leading middle-market investment bank and full-service broker-dealer, engaged in retail securities brokerage, institutional sales and trading, investment banking, equity & fixed income research, market-making, trust services, and investment advisory and asset management services[11] - The company conducts international businesses through Oppenheimer Europe Ltd. (UK, Isle of Jersey, Germany, Switzerland), Oppenheimer Investments Asia Limited (Hong Kong), and Oppenheimer Israel (OPCO) Ltd. (Israel)[11] - As of December 31, 2021, the Company employed 2,913 employees (2,868 full-time and 45 part-time), with 996 financial advisors, highlighting human capital as a significant resource[58] Company Overview Oppenheimer Holdings Inc. is a long-standing middle-market investment bank and full-service broker-dealer, incorporated in Delaware since 2009 - Oppenheimer Holdings Inc. (OPY) is a middle-market investment bank and full-service broker-dealer with roots tracing back to 1881, offering a broad range of financial services[11] - The company's legal existence was continued under the Canada Business Corporations Act in 2005 and then changed its jurisdiction of incorporation to Delaware, USA, in 2009[12] Private Client Services The Private Client Division provides comprehensive financial services to high-net-worth individuals, families, and businesses through 996 financial advisors - Oppenheimer's Private Client Division provides comprehensive financial services through 996 financial advisors in 92 US offices, serving high-net-worth individuals, families, and businesses[13] - As of December 31, 2021, the Company held client assets under administration (CAUA) of $122.1 billion[13] - Services include full-service brokerage (transaction-based and fee-based accounts), wealth planning (asset management, retirement solutions, insurance, trust services), and margin lending[13][14][15] Asset Management Services Oppenheimer Asset Management Inc. (OAM) manages advisory programs and alternative investments for diverse clients, generating revenue from advisory and transactional fees - Oppenheimer Asset Management Inc. (OAM) manages advisory programs and alternative investments, offering tailored solutions to high-net-worth private clients, institutions, and corporations[16][17] - As of December 31, 2021, the Company had $46.2 billion of client assets under management (AUM) in fee-based programs[18] - Revenue is generated from investment advisory and transactional fees, as well as revenue-sharing arrangements from alternative investment vehicles[18] Capital Markets The Capital Markets division offers investment banking, equities, fixed income, public finance, proprietary trading, repurchase agreements, and securities lending services - The Capital Markets division includes Investment Banking, Equities Division, Taxable Fixed Income, Public Finance and Municipal Trading, Proprietary Trading, Repurchase Agreements, and Securities Lending[26][33][39][42][44][47][48] - Investment Banking provides strategic advisory services and capital markets products to emerging growth and middle-market businesses, focusing on sectors like consumer & retail, energy, healthcare, and technology[26] - The Equities Division employs 38 senior research analysts covering almost 700 equity securities and 75 sales and trading professionals, offering fundamental research, execution services, and various trading strategies[33] Consolidated Subsidiaries Key consolidated subsidiaries provide diverse financial services, including broker-dealer, investment advisory, trust, and discount brokerage operations - Key subsidiaries include Oppenheimer & Co. Inc. (broker-dealer, investment adviser), Oppenheimer Asset Management Inc. (investment adviser), OPY Credit Corp. (leveraged loan transactions), Oppenheimer Trust Company (trust services), and Freedom Investments, Inc. (discount brokerage)[49][50][51][52][53] - Oppenheimer Trust held custodial assets of $429.7 million as of December 31, 2021[52] Administration and Operations Administration and operations personnel manage securities transactions, funds, internal controls, and general office services, with the Company clearing its own and correspondents' transactions - Administration and operations personnel are responsible for processing securities transactions, managing funds and securities, maintaining internal financial controls, and providing general office services[54] - Oppenheimer clears its own and correspondents' securities transactions on US and non-US exchanges, and in the over-the-counter market, utilizing its own facilities and memberships in various clearing corporations[55] Human Capital Overview The Company considers human capital crucial for client services, employing 2,913 individuals, including 996 financial advisors, whose recruitment and retention are vital - The Company views human capital as its total workforce and supporting programs, crucial for providing high-level client services in financial advisory, research, investment banking, sales & trading, and portfolio management[56][57] - As of December 31, 2021, the Company employed 2,913 individuals, including 996 financial advisors, whose recruitment, retention, compensation, and productivity are vital to success[58] Compensation as a Percentage of Revenue by Business Segment (2019-2021) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Firm | 63.6 % | 64.3 % | 63.6 % | | Private Client | 67.2 % | 64.2 % | 55.5 % | | Asset Management | 26.6 % | 19.3 % | 28.4 % | | Capital Markets | 51.0 % | 59.0 % | 66.7 % | Competition Oppenheimer faces intense competition from various financial institutions and Fintech companies, primarily based on advisor quality, services, and reputation - Oppenheimer faces intense competition from other securities firms, banks, investment banking boutiques, commercial banks, insurance companies, private equity firms, and Fintech competitors offering online investment services[72] - Competition is primarily based on the quality of advisors, services, product selection, location, and reputation, with a substantial dependence on attracting, retaining, and motivating qualified professionals[73][74] Business Continuity Plan The Company maintains a business continuity plan for emergencies, with remote work arrangements successfully implemented during the COVID-19 pandemic - The Company has a business continuity plan to ensure continued operations and client services during emergencies, covering technology, staffing, equipment, and communication[75] - Since March 2020, the majority of employees have worked remotely due to the COVID-19 pandemic, with no significant business disruptions reported[78] Cybersecurity Cybersecurity is a significant challenge, with the Company maintaining vigilance, ongoing planning, and dedicated staff to prevent sophisticated attacks - Cybersecurity is a significant challenge, with increasing sophistication of attacks aimed at stealing data or disrupting operations; the Company maintains vigilance, ongoing planning, and systems to prevent attacks[79] - A Chief Information Security Officer (CISO) and dedicated staff oversee system development and defenses[79] Regulation The Company is subject to extensive regulation by various authorities, with compliance requirements impacting corporate governance, trading, and client interactions - The Company is subject to extensive regulation by the SEC, state securities regulators, other governmental authorities, and self-regulatory organizations (SROs) like FINRA and NFA[80][81] - Key regulations include the Sarbanes-Oxley Act, Dodd-Frank Act, Bank Secrecy Act, USA PATRIOT Act, MiFID II, and Reg BI, which impose requirements on corporate governance, trading practices, anti-money laundering, and client interactions[86][90][91][94] - The Consolidated Audit Trail (CAT) program requires reporting of all US securities transactions to a central repository, raising concerns about privacy and potential liabilities for data breaches[102](index=102&type