Siebert(SIEB) - 2021 Q4 - Annual Report

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].