Siebert Financial Corp. • 2002 Annual Report
Siebert Financial Corp. (“the Company”) is a
holding company conducting retail discount brokerage
and municipal and corporate investment banking
throughout the country. The Company’s retail discount
brokerage business is conducted through its wholly-
owned subsidiary, Muriel Siebert & Co., Inc.
(“Siebert”), which has seven offices. Siebert, through
its Retail division, provides discount brokerage and
related services to its retail investor accounts via branch
offices, telephone, the Internet and wireless devices.
Through its Capital Markets division, Siebert offers
institutional clients equity execution services on an
agency basis as well as equity and fixed income under-
writing and investment banking services. Through
Women’s Financial Network, Inc., a wholly-owned
subsidiary, the Company offers financial products and
financial education predominantly to women investors.
Muriel F. Siebert, the first woman member of
the New York Stock Exchange, is the Chairwoman and
President of the Company and, as of April 2003, owns
approximately 89% of the outstanding Common Stock
of the Company. The Company believes that it is the
largest Woman-Owned Business Enterprise (“WBE”)
that is a New York Stock Exchange member in the cap-
ital markets business in the country. Moreover, the
Company believes it is also the largest Minority and
Women’s Business Enterprise (“MWBE”) in the tax
exempt underwriting business in the country through
Siebert’s 49%-owned affiliate, Siebert Brandford Shank
& Co., L.L.C.
Siebert was incorporated on June 13, 1969,
under the laws of the State of Delaware. The principal
executive offices of the Company and Siebert are locat-
ed at 885 Third Avenue, 17th Floor, New York, NY
10022. The telephone number is (212) 644-2400. The
Web site is located at www.siebertnet.com.
April 2003
Dear Fellow Shareholders:
The economic recovery that many believed would arrive during 2002 did not occur.
Instead, we experienced a year of continued weakness in the capital markets, and
plummeting investor confidence in reaction to reports of corporate scandals and related
unethical behavior. As the year progressed, there was no improvement on the employment
front, and uncertainty developed over the situation in Iraq. These challenges posed
tremendous difficulty for the brokerage industry and the capital markets generally. Our
company was not immune to the impact of the tough environment.
Nonetheless, we achieved significant progress on many fronts and, in line with our business strategy, moved
forward on several initiatives, while taking advantage of the opportunities we found in various of our businesses.
Once again, our brokerage services were widely acknowledged by respected authorities as tops in terms of quality
and value.
Financial Performance
The sluggish economy affected our results across the board, yet, despite the adverse conditions, we managed to
generate significant revenue from our core business and other financial services. Total revenues for 2002 were
$24.1 million, down $7.9 million from 2001, based on lower volumes and commissions, less activity in
investment banking, decreased activity by our proprietary and riskless trading group, and lower interest income
from the firm’s investments. Yet absent one-time charges and expenses associated with the brokerage service we
launched in April with Intuit, this performance would have been more than sufficient to produce another
profitable year.
We experienced a net loss for the year of $1,633,000, or $0.07 per share, attributable to the $4.7 million incurred
in 2002 start-up costs related to the exclusive strategic alliance with Intuit, under which we offer a fully-integrated
joint brokerage service to customers of Quicken® and Quicken.com. (Our company’s net income was
$2,488,000, or $0.11 per share, in 2001.) We worked hard in the second half of 2002, and continue to work hard,
to reduce costs associated with the initiative, as well as in general.
Acquisitions
We were able to continue our strategy of growth by acquisition during the year, acquiring certain retail brokerage
accounts in separate transactions with three South Florida discount brokers – TradeStation Securities, Inc., State
Discount Brokers, Inc. and Your Discount Broker, Inc.
Underwriting
Siebert Brandford Shank & Co. LLC (SBS), our company’s 49 percent owned affiliate, had an active year, senior
managing over $1.8 billion of negotiated new issues and serving as co-manager on over $63.1 billion in municipal
bond offerings. They included $714 million for the New York City Municipal Water & Sewer Authority, $460
million for California State Public Works, $425 million for the Houston Water & Sewer System and $388 million
for the Detroit Public Schools. The SBS unit reported $1.8 million in net income in 2002, down from $2.3 million
in 2001, but still a significant and important contribution to our earnings.
Brokerage Services
We continue to receive multiple accolades and top rankings within the discount brokerage industry. Siebert is
currently rated the number one online broker by Kiplinger’s Personal Finance Magazine, and is the only broker
to place among SmartMoney’s top three discount brokers for the past five years. In 2003, we have already been
honored by Barron’s, as SiebertNet received its second consecutive four star rating in the magazine’s Online
Brokers Survey. These honors are apt acknowledgement of the customer-oriented approach we take to discount
brokerage. In 2002, our SiebertNet online brokerage service added additional automated research and analytic
tools and real-time e-mail alerts. At the same time, we held the line against rising trading costs, sparing our
customers commission hikes and other charges common in the industry, such as fees for inactivity, order-
handling, limit orders and postage. The retail investing public also prizes our independence. (We are unaffiliated
with any large institution or market maker.) We remain committed to obtaining the best price execution for our
customers. We continue to work large and sensitive orders on the floor of the New York Stock Exchange and
Nasdaq. These characteristics set us apart from our competition.
Stock Buy Back
Acting under the authorization given by our Board in 2000, we continue working to enhance shareholder value
through a stock buy back program. We purchase shares from time to time in the open market and in private
transactions. Through March 31, 2003, we had purchased 590,123 shares at an average price of $4.85 per share.
The board’s authorization permits us to buy back up to one million shares, and we plan to continue to make
purchases in the future as appropriate based on market conditions.
Sound Financial Footing
Clearly, 2002 was in some ways a disappointing year, and we must redouble our efforts in 2003 to return to
profitability. At the same time, it must be said that in these challenging conditions, our core business is
performing well and maintaining its position as a leader in an increasingly competitive and consolidating
marketplace. In addition, we have been able to move forward in executing our business plan, a strategy that we
believe will serve us well as the economy and the markets improve and retail trading activity picks up.
Fortunately, we are far better positioned to weather the downturn and stay our course than many other companies.
We have no debt, maintain a significant cash position and operate our business in a conservative fashion. Our
current rating from Weiss Ratings, Inc., the well-known firm that analyzes the financial strength of thousands of
financial institutions, including brokerage firms, is “A.”
We are confident that Siebert is financially sound and operationally strong. We have a loyal and growing
customer base, well matched to the service and value orientation we offer. We are committed to providing the
marketplace with the best in discount brokerage services, complemented by other financial services activities that
play to our strengths and generate additional revenue. And we are dedicated to enhancing our company’s value on
behalf of our shareholders. It is these objectives that we will pursue in the coming months, as we work to build
upon our solid foundation and resume our pattern of long-term growth and stability.
Muriel Siebert
Chairwoman and President
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:55) ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
(cid:133) TRANSITION REPORT UNDER 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)
New York
(State or other jurisdiction of
incorporation or organization)
885 Third Avenue, New York, New York
(Address of principal executive offices)
Registrant’s telephone number
11-1796714
(I.R.S. Employer
Identification No.)
10022
(Zip Code)
(212) 644-2400
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
NONE
Name of each exchange on which registered
NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $.01 Per Share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-
K (ss. 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes [X] No [ ]
The number of shares of the Registrant’s outstanding Common Stock, as of March 18, 2003, was
22,380,330 shares. The aggregate market value of the Common Stock held by non-affiliates of the
registrant (based upon the last sale price of the Common Stock reported on the Nasdaq Stock Market as of
the last business day of the registrant’s most recently completed second fiscal quarter (June 28, 2002),
was $9,076,479.
Documents Incorporated by Reference: Proxy Statement to be filed pursuant to Regulation 14A
of the Exchange Act on or before April 30, 2003, incorporated by reference into Parts II and III.
Special Note Regarding Forward-Looking Statements
Statements in this Annual Report on Form 10-K, as well as oral statements that may be made by
the Company or by officers, directors or employees of the Company acting on the Company’s behalf, that
are not statements of historical or current fact constitute “forward looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve risks
and uncertainties and known and unknown factors that could cause the actual results of the Company to
be materially different from historical results or from any future expressed or implied by such forward
looking statements, including without limitation: changes in general economic and market conditions;
changes and prospects for changes in interest rates; fluctuations in volume and prices of securities;
demand for brokerage and investment banking services; competition within and without the discount
brokerage business, including the offer of broader services; competition from electronic discount
brokerage firms offering greater discounts on commissions than the Company; the prevalence of a flat fee
environment; decline in participation in equity or municipal finance underwritings; limited trading
opportunities; the method of placing trades by the Company’s customers; computer and telephone system
failures; the level of spending by the Company on advertising and promotion; trading errors and the
possibility of losses from customer non-payment of amounts due; other increases in expenses and changes
in net capital or other regulatory requirements.
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PART I
Item 1. BUSINESS
General
Siebert Financial Corp. (the “Company”) is a holding company that conducts its retail discount
brokerage and investment banking business through its wholly-owned subsidiary, Muriel Siebert & Co.,
Inc., a Delaware corporation (“Siebert”). Muriel Siebert, the first woman member of the New York Stock
Exchange, is the Chairwoman and President and owns approximately 88.8% of the outstanding common
stock, par value $.01 per share (the “Common Stock”) of the Company.
The Company’s principal offices are located at 885 Third Avenue, New York, New York, 10022,
and its phone number is (212) 644-2400. The Company’s Internet address is www.siebertnet.com. The
Company’s SEC filings are available through its website, where you are able to obtain copies of the
Company’s public filings free of charge. The Company’s Common Stock trades on the Nasdaq National
Market under the symbol “SIEB”.
Business Overview
Siebert’s principal activity is providing internet and traditional discount brokerage and related
services to retail investors. Through its Capital Markets division, Siebert also offers institutional clients
equity execution services on an agency basis, as well as equity and fixed income underwriting and
investment banking services. The Company believes that it is the largest Woman-Owned Business
Enterprise (“WBE”) in the capital markets business in the country. In addition, Siebert, Brandford, Shank
& Co., LLC (“SBS”), a company in which Siebert holds a 49% ownership interest, is the largest Minority
and Women’s Business Enterprise (“MWBE”) in the tax-exempt underwriting business in the country.
The Retail Division
Discount Brokerage and Related Services. Siebert became a discount broker on May 1, 1975, a
date that would later come to be known as “May Day.” Siebert believes that it has been in business and a
member of The New York Stock Exchange, Inc. (the “NYSE”) longer than any other discount broker. In
1998, Siebert began to offer its customers access to their accounts through SiebertNet, its Internet
website. Siebert’s focus in its discount brokerage business is to serve retail clients seeking a wide
selection of quality investment services, including trading through a broker on the telephone, through a
wireless device or via the Internet, at commissions that are substantially lower than those of full-
commission firms and competitive with the national discount brokerage firms. Siebert clears its securities
transactions on a fully disclosed basis through National Financial Services Corp. (“NFSC”), a wholly
owned subsidiary of Fidelity Investments and with the Pershing division of Donaldson, Lufkin, & Jenrette
(“Pershing”).
Siebert serves investors who make their own investment decisions. Siebert seeks to assist its
customers in their investment decisions by offering a number of value added services, including easy
access to account information. Siebert’s representatives are available to assist customers with information
via toll-free 800 service Monday through Friday between 7:30 a.m. and 7:30 p.m. Eastern Time. Through
its SiebertNet, Mobile Broker, inter-active voice recognition and Siebert MarketPhone services, 24-hour
access is available to customers.
Independent Retail Execution Services. Siebert offers what it believes to be the best possible
trade executions for customers. Siebert does not make markets in securities, nor does it take positions
against customer orders.
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Siebert’s listed orders are routed in a manner intended to afford its customers the opportunity for
price improvement on all orders. Through a service called NYSE Prime(TM), Siebert also has the ability
to document to customers all price improvements received on orders executed on the NYSE when orders
are filled at better than the National Best Bid/Offer.
Siebert’s over the counter orders are executed through a network of Nasdaq market makers with
no single market maker executing all trades. Additionally, the firm offers customers execution services
through Nasdaq’s SelectNetTM and Reuters’ InstinetTM systems for an additional fee. These systems
give customers access to all Electronic Communication Networks listed on SelectNet and to Instinet
before and after regular market hours. Siebert believes that its OTC executions afford its customers the
best possible opportunity for consistent price improvement. Siebert does not have any affiliation with
market makers and therefore does not execute OTC trades through affiliated market makers.
Customers may also indicate online interest, in buying or selling fixed income securities,
including municipal bonds, corporate bonds, mortgage-backed securities, Government Sponsored
Enterprises, Unit Investment Trusts or Certificates of Deposit. These transactions are executed by
registered representatives.
Retail Customer Service. Siebert believes that superior customer service enhances its ability to
compete with larger discount brokerage firms and therefore provides retail customers, at no additional
charge, with personal service via toll-free access to dedicated customer support personnel for all of its
products and services. Customer service personnel are located in each of Siebert’s branch offices. Siebert
presently has retail offices in New York, New York, Jersey City, New Jersey, Boca Raton, Surfside, Palm
Beach and Naples, Florida and Beverly Hills, California. Siebert uses a proprietary Customer
Relationship Management System that enables representatives, no matter where located, to view a
customer’s service requests and the response thereto. Eventually, it is intended that this system will also
allow customers to enter their requests directly into the system and track the response. Siebert’s telephone
system permits the automatic routing of calls to the next available agent having the appropriate skill set.
Retirement Accounts. Siebert offers customers a variety of self-directed retirement accounts for
which it acts as agent on all transactions. Custodial services are provided through an affiliate of NFSC
and Pershing, the firm’s clearing agents, which also serves as trustee for such accounts. Each IRA, SEP
IRA, ROTH IRA, 401(k) and KEOGH account can be invested in mutual funds, stocks, bonds and other
investments in a consolidated account.
Customer Financing. Customers margin accounts are carried through Siebert’s clearing agents,
which lends customers a portion of the market value of certain securities held in the customer’s account.
Margin loans are collateralized by these securities. Customers also may sell securities short in a margin
account, subject to minimum equity and applicable margin requirements, and the availability of such
securities to be borrowed. In permitting customers to engage in margin, short sale or any transaction,
Siebert assumes the risk of its customers’ failure to meet their obligations in the event of adverse changes
in the market value of the securities positions. Both Siebert and its clearing agents reserve the right to set
margin requirements higher than those established by the Federal Reserve Board.
Siebert has established policies with respect to maximum purchase commitments for new
customers or customers with inadequate collateral to support a requested purchase. Managers have some
flexibility in the allowance of certain transactions. When transactions occur outside normal guidelines,
accounts are monitored closely until their payment obligation is completed; if the customer does not meet
the commitment, steps are taken to close out the position and minimize any loss. Siebert has not had
significant credit losses in the last five years.
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Information and Communications Systems. Siebert’s operations rely heavily on information
processing and communications systems which are provided by the Siebert’s clearing agents. The system
for processing securities transactions is highly automated. Registered representatives utilize personal
computer workstations to access customer account information, obtain securities prices and related
information and enter and confirm orders through dedicated lines to Siebert’s clearing agents.
Siebert maintains a computer network to support its customer service messaging systems, as well
as other applications such as record keeping and direct customer access to marketing information.
Through its clearing agents, Siebert’s computers are linked to the major registered United States securities
exchanges, the National Securities Clearing Corporation and The Depository Trust Company. Failure of
Siebert’s redundant private lines local area networks or communication systems for a significant period of
time could limit the ability to process a large volume of transactions accurately and rapidly. This could
result in Siebert being unable to satisfy its obligations to customers and other securities firms, and in such
an event could result in regulatory violations. External events, such as an earthquake or massive power
failure, loss of redundant external information feeds, such as security price information, as well as
massive internal malfunctions, could render part or all of such systems inoperative.
To enhance the reliability of its systems and backup data, Siebert maintains redundancies, backup
plans and recovery functions including complete backup trading facilities.
Siebert’s communications systems include a voice system that allows calls to be answered by the
next available agent having the appropriate skill set for the incoming call. Data is delivered to branches
over a frame relay system and is backed up by an ISDN network. Call center software provides statistical
reports, such as time on hold, duration of calls and the number of calls handled by each agent. The vendor
of the communications system monitors these systems on a twenty-four hour a day, seven day a week
basis and can make software repairs remotely.
Current Developments
Siebert agreed to acquire certain retail discount brokerage accounts from TradeStation Securities,
Inc. in May 2002. These accounts were transferred to Siebert in August 2002. Siebert agreed to acquire
the retail brokerage accounts of the Boca Raton office of State Discount Brokers, Inc. in July 2002. These
accounts were transferred to Siebert in October 2002. Siebert agreed to acquire the retail discount
brokerage accounts of Your Discount Broker Inc. in January 2003. These accounts were transferred to
Siebert in March 2003. The accounts acquired in the above acquisitions are being serviced from Siebert’s
Boca Raton office.
In April 2002, Siebert entered into an exclusive Strategic Alliance Agreement with Intuit, Inc. to
offer a joint brokerage service (the “JBS”) to customers of Quicken and Quicken.com. Under this
arrangement, Intuit provides the technology, marketing and content and Siebert provides certain
brokerage and other services. The financial arrangement between Siebert and Intuit generally provides
that gross revenue, as defined, generated from the JBS and incremental expenses, as defined, incurred by
Siebert and Intuit be split on an equal basis. The term of the agreement is for an initial period of ten years
and is extended automatically for successive two-year periods unless notice of termination is given by
either party. Siebert records its proportionate share of the JBS’s revenue and incremental expenses on a
gross basis. The JBS was launched on September 16, 2002. During 2002, revenue related to the JBS was
nominal and Siebert’s share of expenses amounted to approximately $4.7 million, which included
technology, marketing and content expenses of $2.9 million and certain brokerage and other services of
$380,000. Additionally, Siebert separately incurred other start-up costs for an advisory fee of $1.0
million, legal fees of $392,000 and considerable executive and management resources to the start-up of
the JBS. All expenses have been charged to operations in 2002.
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On April 30, 2002, Siebert signed a fully disclosed clearing agreement (the “Clearing
Agreement”) with Pershing. Pursuant to the Clearing Agreement and the JBS, Siebert and Intuit will
advance Pershing a total of $1.5 million, principally for software customization setup. Pershing has
agreed that it shall rebate such amount to Siebert payable in three equal annual installments, without
interest, over the initial three years of the Clearing Agreement, provided that the Clearing Agreement has
not been terminated. In addition, Siebert and Intuit will incur one-time charges aggregating approximately
$485,000 for the setup of the JBS’ website and related matters. Siebert and Intuit will share equally in the
advance and the one-time charges. The advance to Pershing was made in January 2003.
The Capital Markets Division
In 1991, Siebert created its Capital Markets division, which serves as a co-manager, underwriting
syndicate member, or selling group member on a wide spectrum of securities offerings for corporations
and Federal agencies.
Principal activities of the Capital Markets Division are investment banking and institutional
equity execution services.
During 1996, Siebert formed the Siebert, Brandford, Shank division of the investment banking
group to enhance the activities of Siebert’s tax exempt underwriting. The operations of the Siebert,
Brandford, Shank division were moved on July 1, 1998 to a newly formed entity, SBS. Two individuals,
Mr. Napoleon Brandford and Ms. Suzanne F. Shank, own 51% of the equity and are entitled to 51% of
the net profits of SBS and Siebert is entitled to the balance. Through its investment in SBS, Siebert has
become a more significant factor in the tax exempt underwriting area, and expects to enhance its
government and institutional relationships, as well as the breadth of products that can be made available
to retail clients. During 2002, SBS served as the lead manager of over $1.8 billion of negotiated
municipal new issues and served as a co-manager in over $63.1 billion of negotiated municipal new
issues.
Since its inception, the Siebert, Brandford, Shank division and its successor SBS have co-
managed offerings of approximately $192 billion and lead managed offerings of approximately $8 billion.
Clients include the States of California, Texas, Washington, Ohio, Michigan and the Cities of Chicago,
Detroit, Los Angeles, Houston, Dallas, Denver and St. Louis.
In addition to occupying a portion of Siebert’s existing offices in New York, SBS operates out of
offices in San Francisco, Seattle, Houston, Chicago, Detroit, Los Angeles, Washington, DC, San Antonio,
Miami and Dallas.
Certain risks are involved in the underwriting of securities. Underwriting syndicates agree to
purchase securities at a discount from the initial public offering price. If the securities must be sold below
the cost to the syndicate, an underwriter is exposed to losses on the securities that it has committed to
purchase. In the last several years, investment banking firms have increasingly underwritten corporate and
municipal offerings with fewer syndicate participants or, in some cases, without an underwriting
syndicate. In these cases, the underwriter assumes a larger part or all of the risk of an underwriting
transaction. Under Federal securities laws, other laws and court decisions, an underwriter is exposed to
substantial potential liability for material misstatements or omissions of fact in the prospectus used to
describe the securities being offered. While municipal securities are exempt from the registration
requirements of the Securities Act of 1933, underwriters of municipal securities nevertheless are exposed
to substantial potential liability in connection with material misstatements or omissions of fact in the
offering documents prepared in connection with offerings of such securities.
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Advertising, Marketing and Promotion
Siebert develops and maintains its retail customer base through printed advertising in financial
publications, broadcast commercials over national and local cable TV channels, as well as promotional
efforts and public appearances by Ms. Siebert. Additionally, a significant number of the firm’s new
accounts are developed directly from referrals by satisfied customers.
Competition
Siebert encounters significant competition from full-commission, online and discount brokerage
firms, as well as from financial institutions, mutual fund sponsors and other organizations, many of which
are significantly larger and better capitalized than Siebert. The reduced volume of trading starting in early
2001 is leading to consolidation in the industry in both the online and traditional brokerage business.
Siebert believes that additional competitors such as banks, insurance companies, providers of online
financial and information services and others will continue to be attracted to the online brokerage industry
as they expand their product lines. Many of these competitors are larger, more diversified, have greater
capital resources, and offer a wider range of services and financial products than Siebert. Some such firms
are offering their services over the Internet and have devoted more resources to and have more elaborate
websites than the Company. Siebert competes with a wide variety of vendors of financial services for the
same customers. Siebert believes that its main competitive advantages are high quality customer service,
responsiveness, cost and products offered, the breadth of product line and excellent executions.
Regulation
The securities industry in the United States is subject to extensive regulation under both Federal
and state laws. The SEC is the Federal agency charged with administration of the Federal securities laws.
Siebert is registered as a broker-dealer with the SEC, the NYSE and the National Association of
Securities Dealers (“NASD”). Much of the regulation of broker-dealers has been delegated to self-
regulatory organizations, principally the NASD and national securities exchanges such as the NYSE,
which is Siebert’s primary regulator with respect to financial and operational compliance. These self-
regulatory organizations adopt rules (subject to approval by the SEC) governing the industry and conduct
periodic examinations of broker-dealers. Securities firms are also subject to regulation by state securities
authorities in the states in which they do business. Siebert is registered as a broker-dealer in 49 states, the
District of Columbia and Puerto Rico.
The principal purpose of regulation and discipline of broker-dealers is the protection of customers
and the securities markets, rather than protection of creditors and stockholders of broker-dealers. The
regulations to which broker-dealers are subject cover all aspects of the securities business, including
training of personnel, sales methods, trading practices among broker-dealers, uses and safekeeping of
customers’ funds and securities, capital structure of securities firms, record keeping, fee arrangements,
disclosure to clients, and the conduct of directors, officers and employees. Additional legislation, changes
in rules promulgated by the SEC and by self-regulatory organizations or changes in the interpretation or
enforcement of existing laws and rules may directly affect the method of operation and profitability of
broker-dealers and investment advisers. The SEC, self-regulatory organizations and state securities
authorities may conduct administrative proceedings which can result in censure, fine, cease and desist
orders or suspension or expulsion of a broker-dealer or an investment adviser, its officers or its
employees. Neither the Company nor Siebert has been the subject of any such administrative proceedings.
As a registered broker-dealer and NASD member organization, Siebert is required by Federal law
to belong to the Securities Investor Protection Corporation (“SIPC”) which provides, in the event of the
liquidation of a broker-dealer, protection for securities held in customer accounts held by the firm of up to
$500,000 per customer, subject to a limitation of $100,000 on claims for cash balances. The SIPC is
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funded through assessments on registered broker-dealers. In addition, Siebert, through it’s clearing
agents, has purchased from private insurers additional account protection in the event of liquidation up to
the net asset value, as defined, of each account. Stocks, bonds, mutual funds and money market funds are
included at net asset value for purposes of SIPC protection and the additional protection. Neither SIPC
protection nor the additional protection insures against fluctuations in the market value of securities.
Siebert is also authorized by the Municipal Securities Rulemaking Board to effect transactions in
municipal securities on behalf of its customers and has obtained certain additional registrations with the
SEC and state regulatory agencies necessary to permit it to engage in certain other activities incidental to
its brokerage business.
Margin lending arranged by Siebert is subject to the margin rules of the Board of Governors of
the Federal Reserve System and the NYSE. Under such rules, broker-dealers are limited in the amount
they may lend in connection with certain purchases and short sales of securities and are also required to
impose certain maintenance requirements on the amount of securities and cash held in margin accounts.
In addition, those rules and rules of the Chicago Board Options Exchange govern the amount of margin
customers must provide and maintain in writing uncovered options.
Net Capital Requirements
As a registered broker-dealer, Siebert is subject to the SEC’s Uniform Net Capital Rule (Rule
15c3-1) (the “Net Capital Rule”), which has also been adopted by the NYSE. Siebert is a member firm of
the NYSE and the NASD. The Net Capital Rule specifies minimum net capital requirements for all
registered broker-dealers and is designed to measure financial integrity and liquidity. Failure to maintain
the required regulatory net capital may subject a firm to suspension or expulsion by the NYSE and the
NASD, certain punitive actions by the SEC and other regulatory bodies and, ultimately, may require a
firm’s liquidation.
Regulatory net capital is defined as net worth (assets minus liabilities), plus qualifying
subordinated borrowings, less certain deductions that result from excluding assets that are not readily
convertible into cash and from conservatively valuing certain other assets. These deductions include
charges that discount the value of security positions held by Siebert to reflect the possibility of adverse
changes in market value prior to disposition.
The Net Capital Rule requires notice of equity capital withdrawals to be provided to the SEC
prior to and subsequent to withdrawals exceeding certain sizes. The Net Capital Rule also allows the
SEC, under limited circumstances, to restrict a broker-dealer from withdrawing equity capital for up to 20
business days. The Net Capital Rule of the NYSE also provides that equity capital may not be drawn or
cash dividends paid if resulting net capital would be less than 5 percent of aggregate debits.
Under applicable regulations, Siebert is required to maintain regulatory net capital of at least
$250,000. At December 31, 2002 and 2001, Siebert had net capital of $16.4 million and $20.9 million,
respectively. Siebert claims exemption from the reserve requirement under Section 15c3-3(k)(2)(ii).
Employees
As of March 20, 2003, the Company had approximately 111 employees, five of whom were
corporate officers. None of the employees is represented by a union, and the Company believes that
relations with its employees are good.
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Item 2. PROPERTIES
Siebert currently maintains seven retail discount brokerage offices. Customers can visit the
offices to obtain market information, place orders, open accounts, deliver and receive checks and
securities, and obtain related customer services in person. Nevertheless, most of Siebert’s activities are
conducted on the Internet or by telephone and mail.
Siebert operates its business out of the following seven leased offices:
Location
Corporate Headquarters, Retail and
Investment Banking Office
885 Third Ave.
New York, NY 10022
Retail Offices
9693 Wilshire Boulevard
Beverly Hills, CA 90212
4400 North Federal Highway
Boca Raton, FL 33431
111 Pavonia Avenue(1)
Jersey City, NJ 07310
400 Fifth Avenue – South
Naples, FL 33940
240A South County Road
Palm Beach, FL 33480
9569 Harding Avenue
Surfside, FL 33154
Approximate
Office Area in
Square Feet
Expiration Date of
Current Lease
Renewal
Terms
7,828
4/30/04
None
1,000
1,038
11,000
1,008
770
1,150
Month to
Month
2 year option
2/28/07
None
6/30/05, 6/30/06
and 9/30/07
5 year option on a
portion of space
4/30/05
12/31/03
12/31/03
None
None
None
(1)
Certain of the Company’s administrative and back office functions are performed at this location.
The Company believes that its properties are in good condition and are suitable for the
Company’s operations.
Item 3. LEGAL PROCEEDINGS
The Company is involved in various routine litigation matters that it believes are customary and
incidental to its business. In the opinion of management, the ultimate disposition of these actions will not,
in the aggregate, have a material adverse effect on the financial position or results of operations of the
Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
- 9 -
PART II
Item 5. PRICE RANGE OF COMMON STOCK
The Company’s common stock trades on the Nasdaq Stock Market under the symbol “SIEB”.
The high and low sales prices of the Company’s common stock reported by Nasdaq during the following
calendar quarters were:
High
Low
First Quarter - 2001 ..................................................................................
$6.50
$4.13
Second Quarter - 2001 ..............................................................................
$5.97
$4.00
Third Quarter - 2001.................................................................................
$5.05
$4.45
Fourth Quarter - 2001 ...............................................................................
$5.46
$3.73
First Quarter - 2002 ..................................................................................
$5.55
$3.80
Second Quarter - 2002 ..............................................................................
$4.70
$3.59
Third Quarter - 2002.................................................................................
$4.05
$2.38
Fourth Quarter - 2002 ...............................................................................
$2.98
$1.77
January 1, 2003 - March 18, 2003 ..............................................................
$2.77
$2.18
On March 18, 2003, the closing price of the Company’s common stock on the Nasdaq Stock
Market was $2.49 per share and there were 164 holders of record of the Company’s common stock.
Dividend Policy
The Company paid no cash dividends to its shareholders in 2002 and 2001 and paid a dividend of
$.04 per share to its shareholders on June 28, 2000. Ms. Siebert, the majority shareholder of the
Company, has waived her right to receive the dividends declared by the Company to date. The Board of
Directors of the Company periodically considers whether to declare dividends. In considering whether to
pay such dividends, the Company’s Board of Directors will review the earnings of the Company, its
capital requirements, its economic forecasts and such other factors as are deemed relevant. Some portion
of the Company’s earnings will be retained to provide capital for the operation and expansion of its
business.
- 10 -
Item 6. SELECTED FINANCIAL INFORMATION
(In thousands except share and per share data)
The Following Selected Financial Information Should Be Read In Conjunction With The
Company’s Consolidated Financial Statements And The Related Notes Thereto.
Income statement data:
2002
2001
2000
1999
1998
Total Revenues.................................................................
Net (loss) income .............................................................
$24,104
$(1,633)
$32,020
$2,488
$44,341
$7,999
$36,118
$4,603
$30,491
$4,313
Net income per share of common stock
Basic.................................................................
Diluted..............................................................
$(0.07)
$(0.07)
$0.11
$0.11
$0.35
$0.34
$0.20
$0.20
$0.20
$0.19
Weighted average shares outstanding (basic)...................
Weighted average shares outstanding (diluted)................
22,403,990
22,403,990
22,438,719
22,698,934
22,886,100
23,265,897
22,725,452
23,238,100
21,598,406
22,241,860
Statement of financial condition data (at year-end):
Total assets ..................................................................
Total liabilities excluding subordinated borrowings ....
Subordinated borrowings to majority shareholder .......
Stockholders’ equity ....................................................
$40,451
$4,784
$ –
$35,667
$42,129
$4,829
$ –
$37,300
$41,428
$4,744
$ –
$36,684
$32,305
$2,851
$ –
$29,454
$21,494
$4,194
$3,000
$14,300
- 11 -
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
This discussion should be read in conjunction with the Company’s audited Consolidated
Financial Statements and the Notes thereto contained elsewhere in this Annual Report.
The economy continued to slow down during 2002 despite the record low interest rate
environment maintained by the Federal Reserve Bank. Consumer confidence continued to decline in the
wake of September 11, 2001, due to increased unemployment, corporate misconduct, threat of terrorist
activity and the threat of war. Consequently, trading activity and new account acquisitions slowed for the
Company, as well as for the entire discount brokerage industry.
Notwithstanding this slow down, competition continued to intensify among all types of brokerage
firms, including established discount brokers and new firms entering the on-line brokerage business.
Electronic trading continues to account for an increasing amount of trading activity, with some firms
offering very low flat rate trading execution fees that are difficult for any conventional discount firm to
meet. Some of these flat fee brokers, however, impose asset based charges for services such as mailing,
transfers and handling exchanges which the Company does not currently impose, and also direct their
executions to captive market makers. Continued competition could limit the Company’s growth or even
lead to a decline in the Company’s customer base which would adversely affect its results of operations.
Industry-wide changes in trading practices, such as the advent of decimal pricing and the increasing use
of Electronic Communications Networks, are expected to put continuing pressure on fees earned by
discount brokers while increasing volatility.
On May 15, 2000, the Board of Directors of the Company authorized a buy back of up to one
million shares of the Company’s common stock. Under this program, shares are purchased from time to
time, at the Company’s discretion, in the open market and in private transactions. Through March 13,
2003, 590,123 shares have been purchased at an average price of $4.85 per share.
The Company, like other securities firms, is directly affected by general economic and market
conditions including fluctuations in volume and prices of securities, changes and the prospect of changes
in interest rates, and demand for brokerage and investment banking services, all of which can affect the
Company’s profitability. In addition, in periods of reduced financial market activity, profitability is likely
to be adversely affected because certain expenses remain relatively fixed, including salaries and related
costs, portions of communications costs and occupancy expenses. Accordingly, earnings for any period
should not be considered representative of earnings to be expected for any other period.
Expenditures associated with the development and promotion of the Company’s financial website
for women, WFN, the Women’s Financial Network at Siebert (“WFN”), had an adverse effect on the
Company’s profitability during 2002, and may continue to have an adverse effect on future profits. The
Company continues to assess the operations of WFN and has taken additional steps to reduce costs.
However, there can be no assurance that a sufficient number of new accounts will be generated to offset
the costs or produce significant profits. In addition, in April 2002, Siebert entered into an exclusive
Strategic Alliance Agreement with Intuit, Inc. to offer a joint brokerage service (the “JBS”) to customers
of Quicken and Quicken.com. Under this arrangement, Intuit provides the technology, marketing and
content and Siebert provides certain brokerage and other services. During 2002, revenue related to the
JBS was nominal and Siebert’s share of expenses amounted to approximately $4.7 million, which
included technology, marketing and content expenses of approximately $2.9 million and certain
brokerage and other services of $380,000. In addition, Siebert separately incurred other start-up costs
relating to the JBS which included an advisory fee of $1 million, legal fees of $392,000 and considerable
executive staff and management resources to the start-up of the JBS. All expenses have been charged to
operations in 2002.
- 12 -
Critical Accounting Policies
The Company generally follows accounting policies standard in the brokerage industry and
believes that its policies are appropriately reflect its financial position and results of operations.
Management has identified the use of “estimates” as its critical policy. The estimates relate primarily to
revenue and expense items in the normal course of business as to which the Company receives no
confirmations, invoices, or other documentation, at the time the books are closed for a period. The
Company uses its best judgment, based on its knowledge of revenue transactions and expenses incurred,
to estimate the amount of such revenue and expenses. The Company is not aware of any material
differences between the estimates used in closing its books for the last five years and the actual amounts
of revenue and expenses incurred when the Company subsequently receives the actual confirmations,
invoices or other documentation. Estimates are also used in determining the useful lives of intangibles
assets, and the fair market value of intangible assets. Management believes that its estimates are
reasonable.
Results of Operations
Year Ended December 31, 2002 Compared to Year Ended December 31, 2001
Revenues. Total revenues for 2002 were $24.1 million, a decrease of $7.9 million, or 24.7%, from
2001. Commission and fee income decreased $5.8 million, or 23.0%, from the prior year to $19.3 million
due to lower overall trading volume and lower commissions earned per trade. Lower per trade
commissions were the result of smaller order sizes, reductions in fees from other related services caused
by increased competition, and a reduction of per share order flow fees. Investment banking revenues
decreased $644,000, or 30.3%, from the prior year to $1.5 million in 2002, primarily due to weaker
market conditions.
Income from the Company’s investment in Siebert, Brandford, Shank & Co., LLC (“SBS”) for
2002 was $1.8 million compared to income of $2.3 million for the prior year. This decrease in profits was
due in part to the decreased number of municipal bond offerings managed or co-managed by SBS as
interest in municipal bonds decreased and SBS’ share of the municipal bond underwriting market
decreased.
Trading profits decreased $100,000, or 10.5%, from the prior year to $850,000 primarily due to
decreased trading in municipal, government and corporate bonds within the Company’s proprietary and
riskless trading group.
Income from interest and dividends decreased $747,000, or 54.0%, from the prior year to
$638,000 primarily due to lower yields on money market funds held by the Company during 2002.
Expenses. Total expenses for 2002 were $27.3 million, a decrease of $361,000, or 1.3%, from the
prior year.
Employee compensation and benefit costs decreased $2.2 million, or 19.0%, from the prior year
to $9.2 million primarily due to a decrease in the number of employees and a decrease in discretionary
bonuses offset, in part, by an increase in employee expenses of $170,000 due to Siebert’s participation in
the JBS with Intuit described above.
Clearing and floor brokerage fees decreased $710,000, or 16.1%, from the prior year to $3.7
million due to the decreased volume of trades executed.
- 13 -
Advertising and promotion expense increased $347,000, or 13.6%, from the prior year to $2.9
million. Approximately $1.6 million of total advertising and promotion expenses related directly to
Siebert’s participation in the JBS with Intuit.
Communications expense decreased $427,000, or 15.6%, from the prior year, to $2.3 million
primarily due lower call volumes and lower quote usage by customers, offset in part by an increase in
communication expenses of $142,000 due to Siebert’s participation in the JBS.
Occupancy costs decreased $74,000, or 7.4%, from the prior year to $924,000 principally due to
the termination and buyout of Siebert’s lease in Freemont, California in 2001, offset in part by an increase
in occupancy costs of $21,000 due to Siebert’s participation in the JBS.
General and Administrative. General and administrative expenses increased $2.7 million, or
47.4%, from the prior year to $8.3 million primarily due to research and development costs of $1.4
million for the development of the JBS products and certain start-up costs of $1.4 million principally for
advisory and legal expenses relating to the JBS with Intuit.
Taxes. The benefit for income taxes of $1.6 million for 2002 is a result of a loss before taxes of
$3.2 million compared to net income before income tax of $4.3 million in 2001 and a provision for
income taxes $1.8 million.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Revenues. Total revenues for 2001 were $32.0 million, a decrease of $12.3 million, or 27.8%,
from 2000. Commission and fee income decreased $14.2 million, or 35.3%, from the prior year to $25.2
million due to lower overall trading volume and lower commissions earned per trade. Lower per trade
commissions were the result of smaller order sizes, reductions in fees from other related services caused
by increased competition from ultra low cost flat fee brokers, and a reduction of per share order flow fees.
Investment banking revenues increased $392,000, or 22.7%, from the prior year to $2.1 million in 2001,
primarily due to the Company’s participation, as a Woman Owned Business Enterprise, in several public
equity offerings and debt offerings.
Income from the Company’s investment in SBS was $2.3 million compared to the prior year’s
loss of $324,000.This increase in profits was due in part to the increased number of municipal bond
offerings managed or co-managed by SBS as interest in Municipal Bonds increased with the decline in
activity in the equity markets and SBS’ share of the municipal bond underwriting market increased.
Trading profits increased $236,000, or 33.1%, from the prior year to $950,000 primarily due to
increased trading in municipal bonds within the Company’s proprietary trading group.
Income from interest and dividends decreased $514,000, or 27.1%, from the prior year to $1.4
million primarily due to lower yields on money market funds held by the Company during 2001.
Expenses. Total expenses for 2001 were $27.7 million, a decrease of $2.8 million, or 9.2%, from
the prior year.
Employee compensation and benefit costs decreased $1.5 million, or 12%, from the prior year to
$11.3 million primarily due to a decrease in the number of employees and a decrease in discretionary
bonuses. This decrease was offset, in part, by an increase in the compensation level of the Company’s
mid-level management and the inclusion of management and operating personnel of WFN for a full year.
- 14 -
Clearing and floor brokerage fees decreased $1.7 million, or 27.6%, from the prior year to $4.4
million due to the decreased volume of trades executed.
Advertising and promotion expense decreased $237,000, or 8.5%, from the prior year to $2.6
million primarily due to a decreased level of television advertising.
Communications expense decreased $285,000, or 9.4%, from the prior year, to $2.7 million
primarily due lower call volumes and lower quote usage by customers, partially offset by costs relating to
temporary duplicate telephone lines and costs during the installation of the Company’s new telephone
system.
Occupancy costs increased $221,000, or 28.4%, from the prior year to $998,000 principally due
to incurring a full year of rent expense associated with two new leases entered into by the Company
during 2000 in connection with the move of certain of the Company’s operations to Jersey City, New
Jersey and the opening of the Company’s Fort Lauderdale call center.
General and Administrative. General and administrative expenses increased $733,000, or 15%,
from the prior year to $5.6 million primarily due to increased legal, consulting and amortization expenses.
Taxes. Provision for income taxes decreased $4.0 million, or 68.4%, from the prior year to $1.8
million due to a decrease in the Company’s net income before income tax to $4.3 million in 2001 from
$13.9 million in 2000.
Liquidity and Capital Resources
The Company’s assets are highly liquid, consisting generally of cash, money market funds and
securities freely saleable in the open market. The Company’s total assets at December 31, 2002 were
$40.5 million, of which, $28.8 million, or 71%, were regarded by the Company as highly liquid.
Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory
authorities. At December 31, 2002, Siebert’s regulatory net capital was $16.4 million, $16.2 million in
excess of its minimum capital requirement of $250,000.
Pursuant to the Clearing Agreement with Pershing and the JBS with Intuit, Siebert and Intuit will
advance Pershing a total of $1.5 million which they are entitled to recoup from Pershing in equal
installments, without interest, over the initial three years of the Clearing Agreement. In addition, Siebert
and Intuit will incur one-time charges aggregating approximately $485,000 for the setup of the JBS
website and related matters. Siebert and Intuit will share equally in the advance and the one-time charges.
The advance to Pershing was made in January 2003. Development and marketing costs for the next 12
months for the JBS are expected to exceed revenues generated from the new accounts, which may result
in losses for the Company.
The Company also intends to acquire additional shares of its common stock pursuant to its share
buy back program.
Siebert has entered into a Secured Demand Note Collateral Agreement with SBS under which it
is obligated to loan to SBS up to $1.2 million pursuant to a secured promissory note on a subordinated
basis. Amounts obligated to be loaned by Siebert under the facility are reflected on the Company’s
balance sheet as “cash equivalents - restricted”. SBS pays Siebert interest on this amount at the rate of
- 15 -
10% per annum. The facility expires on August 31, 2004, at which time SBS is obligated to repay to
Siebert any amounts borrowed by SBS thereunder.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial Instruments Held For Trading Purposes:
Through Siebert, the Company maintains inventories in exchange-listed and Nasdaq equity
securities on both a long and short basis. The fair value of all positions held by Siebert at December 31,
2002 was approximately $5.2 million in long positions. Using a hypothetical 10% increase or decrease in
prices, the potential loss in fair value, respectively, could be approximately $520,000, due to the offset of
change in fair value in long positions. The Company does not engage in derivative transactions, has no
interest in any special purpose entity and no liabilities, contingent or otherwise, for the debt of another
entity, except for Siebert’s obligation under its Secured Demand Note Collateral Agreement of $1.2
million executed in favor of SBS. SBS pays Siebert interest on this amount at the rate of 10% per annum.
Siebert earned interest of $120,000 from SBS in each of the years that Siebert’s commitment has been
outstanding.
Financial Instruments Held For Purposes Other Than Trading:
Working capital is generally temporarily invested in dollar denominated money market funds and
overnight certificates of deposits. These investments are not subject to material changes in value due to
interest rate movements.
In the normal course of its business, Siebert enters into transactions in various financial
instruments with off-balance sheet risk. This risk includes both market and credit risk, which may be in
excess of the amounts recognized in the Company’s financial statements. Retail customer transactions are
cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual
obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase
or sale of securities at prevailing market prices to satisfy the customers’ obligations. Siebert regularly
monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is
exposed to the risk of loss on unsettled customer transactions if customers and other counterparties are
unable to fulfill their contractual obligations.
Item 8. FINANCIAL STATEMENTS
See financial statements and supplementary data required pursuant to this item beginning on page
F-1 of this Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
- 16 -
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(a)
Identification of Directors
This information is incorporated by reference from the Company’s definitive proxy statement to
be filed by the Company pursuant to Regulation 14A on or prior to April 30, 2003.
(b)
Identification of Executive Officers
Name
Muriel F. Siebert
Daniel Jacobson(1)
Nicholas P. Dermigny
Joseph M. Ramos, Jr.
Age
Position
70
74
45
44
Chairwoman and President
Vice Chairman
Executive Vice President and
Chief Operating Officer
Executive Vice President and
Chief Financial Officer
Daniel Iesu
43
Secretary
(1) Mr. Jacobson retired from all positions with the Company during March 2003. Mr. Jacobson served as Vice
Chairman and a director of the Company from May 1999 to March 2003. He was a partner in Richard A. Eisner &
Company, LLP from June 1994 until May 1999. He is a director and chairman of the audit committee of Barnwell
Industries, Inc.
Certain information regarding each executive officer’s business experience is set forth below.
Muriel F. Siebert has been Chairwoman, President and a director of Siebert since 1967 and the
Company since November 8, 1996. Ms. Siebert became the first woman member of the New York Stock
Exchange on December 28, 1967 and served as the first woman Superintendent of Banks of the State of
New York from 1977 to 1982. She is director of the New York State Business Council and the Boy
Scouts of Greater New York. She is the founder and past president of the International Woman’s Forum,
a member of the State of New York Commission on Judicial Nomination and on the executive committee
of the Economic Club of New York.
Nicholas P. Dermigny has been Executive Vice President and Chief Operating Officer of Siebert
since joining the firm in 1989 and of the Company since November 8, 1996. Prior to 1993, he was
responsible for Siebert’s retail division. Mr. Dermigny became an officer and director of the Company on
November 8, 1996.
Joseph M. Ramos, Jr. has been Executive Vice President, Chief Financial Officer and Assistant
Secretary of Siebert since February 10, 2003. From May 1999 to February 2002, Mr. Ramos served as
Chief Financial Officer of A.B. Watley Group, Inc. From November 1996 to May 1999, Mr. Ramos
served as Chief Financial Officer of Nikko Securities International, Inc. From September 1987 to March
1996, Mr. Ramos worked at Cantor Fitzgerald and held various accounting and management positions,
the last as Chief Financial Officer of their registered broker-dealer based in Los Angeles. From October
- 17 -
1982 to September 1987, Mr. Ramos was an audit manager for Deloitte & Touche LLP, a public
accounting firm. Mr. Ramos is a Certified Public Accountant licensed in the state of New York.
Daniel Iesu has been Secretary of Siebert since October 1996 and the Company since November
8, 1996. He has been Controller of Siebert since 1989.
Item 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the Company’s definitive
proxy statement to be filed by the Company pursuant to Regulation 14A on or prior to April 30, 2003.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference from the Company’s definitive
proxy statement to be filed by the Company pursuant to Regulation 14A on or prior to April 30, 2003.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the Company’s definitive
proxy statement to be filed by the Company pursuant to Regulation 14A on or prior to April 30, 2003.
Item 14. CONTROLS AND PROCEDURES
Within 90 days of the date of this report an evaluation was performed by the Company under the
supervision and with the participation of management, including the President of the Company, of the
effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on
that evaluation, the Company’s management, including the President, concluded that the Company’s
disclosure controls and procedures are effective in timely alerting them to material information relating to
the Company that is required to be included in the Company’s periodic filings with the Securities and
Exchange Commission. There have been no significant changes in the Company’s internal controls or in
other factors that could significantly affect those internal controls subsequent to the date the Company
carried out its evaluation. During the period covered by this report and at the time of its filing, the
Company’s President was responsible for performing the functions of the Company’s principal financial
and accounting officer, as well as those of the Company’s principal executive officer.
- 18 -
PART IV
Item 15. EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibits
The exhibits required by Item 601 of the Regulations S-K filed as part of, or incorporated by
reference in, this report are listed in the accompanying Exhibit Index.
(b)
Reports on Form 8-K
None.
- 19 -
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIEBERT FINANCIAL CORP.
Independent Auditors’ Report
Consolidated Statements of Financial Condition at December 31, 2002 and 2001
Consolidated Statements of Operations for each of the years in the three-year period
ended December 31, 2002
Consolidated Statements of Changes in Stockholders’ Equity for each of the years
in the three-year period ended December 31, 2002
Consolidated Statements of Cash Flows for each of the years in the three-year
period ended December 31, 2002
Notes to Consolidated Financial Statements
SIEBERT, BRANDFORD, SHANK & CO., LLC
Independent Auditors’ Report
Statements of Financial Condition at December 31, 2002 and 2001
Statements of Operations for each of the years in the three-year
period ended December 31, 2002
Statements of Changes in Members’ Capital for each of the years
in the three-year period ended December 31, 2002
Statements of Cash Flows for each of the years in the three-year
period ended December 31, 2002
Notes to Financial Statements
Page
F-1
F-2
F-3
F-4
F-5
F-6
F-20
F-21
F-22
F-23
F-24
F-25
INDEPENDENT AUDITORS’ REPORT
Board of Directors and Stockholders
Siebert Financial Corp.
New York, New York
We have audited the accompanying consolidated statements of financial condition of Siebert Financial
Corp. and its wholly owned subsidiaries as of December 31, 2002 and 2001, and the related consolidated
statements of operations, changes in stockholders’ equity and cash flows for each of the years in the three-
year period ended December 31, 2002. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all material respects, the
consolidated financial position of Siebert Financial Corp. and its wholly owned subsidiaries as of
December 31, 2002 and 2001, and the consolidated results of their operations and their consolidated cash
flows for each of the years in the three-year period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.
Eisner LLP
New York, New York
February 13, 2003
F-1
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
Cash and cash equivalents
Cash equivalents - restricted
Receivable from clearing broker
Securities owned, at market value
Furniture, equipment and leasehold improvements, net
Investment in and advances to affiliate
Prepaid expenses and other assets
Intangibles, net
Deferred taxes
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
December 31,
2002
2001
$22,498,000
1,300,000
1,100,000
5,225,000
2,616,000
2,748,000
1,816,000
2,302,000
846,000
$25,670,000
1,300,000
1,572,000
6,079,000
1,703,000
2,702,000
853,000
2,250,000
$40,451,000
$42,129,000
Securities sold, not yet purchased, at market value
$
Deferred tax liability
Accounts payable and accrued liabilities
4,784,000
$ 4,000
489,000
4,336,000
$ 4,784,000
$ 4,829,000
Commitments and contingent liabilities:
Stockholders’ equity:
Common stock, $.01 par value; 49,000,000 shares authorized,
22,968,167 shares issued and 22,395,767 outstanding at
December 31, 2002 and 22,932,047 shares issued and
22,389,247 shares outstanding at December 31, 2001
Additional paid-in capital
Retained earnings
Less: 572,400 at December 31, 2002 and 542,800 shares of
treasury stock, at December 31, 2001, at cost
$ 229,000
17,880,000
20,377,000
$ 229,000
17,796,000
22,010,000
(2,819,000)
(2,735,000)
35,667,000
37,300,000
$40,451,000
$42,129,000
See notes to consolidated financial statements.
F-2
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue:
Commissions and fees
Investment banking
Trading profits
Income (loss) from equity investee
Interest and dividends
Expenses:
Employee compensation and benefits
Clearing fees, including floor brokerage
Advertising and promotion
Communications
Occupancy
Interest
Other general and administrative
2002
Year Ended December 31,
2001
2000
$19,366,000
1,478,000
850,000
1,772,000
638,000
$25,233,000
2,122,000
950,000
2,330,000
1,385,000
$40,322,000
1,731,000
713,000
(324,000)
1,899,000
24,104,000
32,020,000
44,341,000
9,181,000
3,701,000
2,900,000
2,311,000
924,000
1,000
8,304,000
11,338,000
4,411,000
2,553,000
2,738,000
998,000
11,000
5,634,000
12,884,000
6,088,000
2,790,000
3,022,000
778,000
23,000
4,901,000
27,322,000
27,683,000
30,486,000
(Loss) income before (benefit) provision for income taxes
(Benefit) provision for income taxes
(3,218,000)
(1,585,000)
4,337,000
1,849,000
13,855,000
5,856,000
Net (loss) income
$(1,633,000)
$2,488,000
$7,999,000
Net (loss) income per share of common stock - basic
Net (loss) income per share of common stock - diluted
$(0.07)
$(0.07)
$0.11
$0.11
$0.35
$0.34
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
22,403,990
22,403,990
22,438,719
22,698,934
22,886,100
23,265,897
See notes to consolidated financial statements.
F-3
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B
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization
(Income) loss from equity investee
Non-cash compensation
Tax benefit of exercised employee stock options
Deferred taxes
Changes in operating assets and liabilities:
Net decrease (increase) in securities owned, at market value
Net change in receivable from clearing broker
(Increase) decrease in prepaid expenses and other assets
Net (decrease) increase in securities sold, not yet
2002
Year Ended December 31,
2001
2000
$(1,633,000)
$2,488,000
$7,999,000
1,718,000
(1,772,000)
1,366,000
(2,330,000)
518,000
325,000
40,000
57,000
14,000
(303,000)
192,000
(1,448,000)
543,000
(3,618,000)
2,234,000
(154,000)
(1,335,000)
854,000
472,000
(963,000)
purchased, at market value
Increase in accounts payable and accrued liabilities
(4,000)
448,000
2,000
384,000
(48,000)
1,149,000
Net cash (used in) provided by operating activities
(2,215,000)
908,000
8,502,000
Cash Flows From Investing Activities:
Purchase of intangibles
Purchase of furniture, equipment and leasehold improvements
Collection of advances made to equity investee
Distribution from equity investee
(1,045,000)
(1,638,000)
43,000
1,683,000
(331,000)
609,000
(2,310,000)
(1,629,000)
54,000
(263,000)
Net cash (used in) provided by investing activities
(957,000)
278,000
(4,148,000)
Cash Flows From Financing Activities:
Purchase of treasury shares
Proceeds from exercise of options
Dividend on common stock
(84,000)
84,000
(1,932,000)
46,000
(803,000)
58,000
(121,000)
Net cash used in financing activities
0
(1,886,000)
(866,000)
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents - beginning of year
(3,172,000)
25,670,000
(700,000)
26,370,000
3,488,000
22,882,000
Cash and cash equivalents - end of year
$22,498,000
$25,670,000
$26,370,000
Supplemental Cash Flow Disclosures:
Cash paid for:
Interest
Income taxes
Noncash Investing and Financing Activities:
$1,000
$279,000
$11,000
$1,811,000
$23,000
$5,812,000
Tax benefit of employee stock options
Net deferred tax liability attributable to acquired companies
$14,000
$57,000
$792,000
See notes to consolidated financial statements.
F-5
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Organization And Basis Of Presentation:
Siebert Financial Corp. (“Financial”), through its wholly owned subsidiary, Muriel Siebert & Co.,
Inc. (“Siebert”), engages in the business of providing discount brokerage services for customers,
investment banking services for institutional clients and trading securities for its own account, and,
through its wholly owned subsidiary, Siebert Women’s Financial Network, Inc. (“WFN”), engages
in providing products, services and information all uniquely devoted to women’s financial needs.
All significant intercompany accounts and transactions have been eliminated. Financial, Siebert and
WFN collectively are referred to herein as the “Company”.
The municipal bond investment banking business is being conducted by Siebert Brandford Shank &
Co., LLC (“SBS”), an investee, which is accounted for by the equity method of accounting (see
Note C). The equity method provides that Siebert record its share of SBS’s earnings or losses.
In addition during 2002, management devoted a substantial amount of time and effort to develop a
new strategic alliance with Intuit, Inc. (See Note B).
[2] Securities Transactions:
Securities transactions, commissions, revenues and expenses are recorded on a trade date basis.
Siebert clears all its security transactions through two unaffiliated clearing firms on a fully
disclosed basis. Accordingly, Siebert does not hold funds or securities for or owe funds or securities
to its customers. Those functions are performed by the clearing firms, both of which are highly
capitalized.
Marketable securities are valued at market value.
[3]
Income Taxes:
The Company accounts for income taxes utilizing the asset and liability approach requiring the
recognition of deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the basis of assets and liabilities for financial reporting purposes and
tax purposes. Financial files a consolidated federal income tax return which includes Siebert and
WFN.
[4] Furniture, Equipment And Leasehold Improvements:
Property and equipment is stated at cost and depreciation is calculated using the straight-line method
over the lives of the assets, generally five years. Leasehold improvements are amortized over the
period of the lease.
[5] Cash Equivalents:
For purposes of reporting cash flows, cash equivalents include money market funds.
F-6
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[6] Advertising Costs:
Advertising costs are charged to expense as incurred.
[7] Use Of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
[8] Earnings Per Share:
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average
outstanding shares during the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the number of shares outstanding under the basic calculation and adding all
dilutive securities, which consist of options. The treasury stock method is used to reflect the dilutive
effect of outstanding options, which, for 2001 and 2000 amounted to 260,215 and 379,797
additional shares, respectively, added to the basic weighted average outstanding shares of
22,438,719 and 22,886,100 in 2001 and 2000, respectively. The Company recognized a net loss for
the year ended December 31, 2002. Accordingly, basic and diluted earnings per common share are
the same as the effect of dilutive securities would be anti-dilutive to loss per share. Potentially
dilutive securities consisting of outstanding options at December 31, 2002, 2001 and 2000
amounted to 1,855,260, 375,500 and 37,500, respectively.
[9]
Investment Banking:
Investment banking revenue includes gains and fees, net of syndicate expenses, arising from
underwriting syndicates in which the Company participates. Investment banking management fees
are recorded on the offering date, sales concessions on the settlement date and underwriting fees at
the time the underwriting is completed and the income is reasonably determinable.
[10] Cash Equivalents - Restricted:
Cash equivalents - restricted represents $1,300,000 of cash invested in a money market account
which Siebert is obligated to lend to SBS on a subordinated basis. Any outstanding amounts under
the note bear interest at 10% per annum and are repayable on August 31, 2004.
F-7
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[11] Stock-Based Compensation:
Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based
Compensation (“SFAS 123”), allows the fair value of stock-based compensation to be included in
expense over the period earned; alternatively, if the fair value of stock-based compensation awards
are not included in expense, SFAS 123 requires disclosure of net income (loss), on a pro forma
basis, as if expense treatment had been applied. As permitted by SFAS 123, the Company continues
to account for such compensation under Accounting Principles Board Opinion No. 25 (“APB 25”),
Accounting for Stock Issued to Employees, and related interpretations, pursuant to which no
compensation cost was recognized in connection with the issuance of stock options, as all options
granted under the 1997 Stock Option Plan (see Note H) had an exercise price equal to or greater
than the fair value of the underlying common stock on the date of grant. Had the Company elected
to recognize compensation expense for the stock option plan, consistent with the method prescribed
by SFAS 123, the Company’s net (loss) income and (loss) income per share for the years ended
December 31, 2002, 2001 and 2000 would have (increased) decreased to the pro forma amounts as
follows:
Net (loss) income, as reported
Stock-based employee compensation determined
under APB 25
Stock-based employee compensation determined
Year Ended December 31,
2002
2001
2000
$(1,633,000)
$2,488,000
$7,999,000
—
—
—
under the fair value based method, net of tax effect
(1,647,000)
(271,000)
(249,000)
Pro forma net (loss) income
$(3,280,000)
$2,217,000
$7,750,000
Net (loss) income per share - basic:
As reported
Pro forma
Net (loss) income per share - diluted:
As reported
Pro forma
The weighted average fair value of stock options is estimated at the
grant date using the Black-Scholes option pricing model with the
following weighted average assumptions:
Risk free interest rate
Expected life of options in years
Expected dividend yield
Expected volatility
Weighted average fair value
$.35
$.34
$.34
$.33
$(.07)
$(.15)
$(.07)
$(.15)
2002
4.00%
10.00
0.00%
82.00%
$3.50
$.11
$.10
$.11
$.10
2001
4.98%
10.00
0.00%
62.00%
$3.99
F-8
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[12] Start-Up Costs:
Start-up costs consist principally of advisory and legal fees and costs relating to the development
and marketing of a joint brokerage service with Intuit, Inc. ( the “JBS”). In accordance with the
American Institute of Certified Public Accountants’ Statement of Position (“SOP”) 98-5, start-up
costs are expensed as incurred. The JBS, as further discussed in Note B, was launched in September
2002. During 2002, Siebert’s share of expenses relating to the JBS amounted to approximately
$4,700,000, which included technology, marketing and content expenses of $2,910,000 and certain
brokerage and other services of $380,000. Siebert separately incurred other start-up costs for an
advisory fee of $1,000,000 and legal fees of $392,000.
[13] Intangibles:
Purchased intangibles are principally being amortized using the straight-line method over an
estimated useful life of three years.
[14] Valuation Of Long-Lived Assets:
The Company evaluates the recoverability of its long-lived assets and requires the recognition of
impairment of long-lived assets in the event the net book value of these assets exceeds the
estimated future undiscounted cash flows attributable to these assets. The Company assesses
potential impairment to its long-lived assets when there is evidence that events or changes in
circumstances have made recovery of the assets’ carrying value unlikely. Should impairment exist,
the impairment loss would be measured based on the excess of the carrying value of the assets over
the assets’ fair value.
[15] New Accounting Standards:
In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141,
“Business Combinations.” SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. This statement specifies that certain
acquired intangible assets in a business combination be recognized as assets separately from
goodwill and that existing intangible assets and goodwill be evaluated for these new separation
requirements. The adoption of this statement did not have a material impact on the Company’s
consolidated financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No.
142 changes the accounting for goodwill from an amortization method to an impairment-only
approach. Amortization of goodwill, including goodwill recorded in past business combinations,
will cease upon adoption of this statement. In addition, this statement requires that goodwill be
tested for impairment at least annually at the reporting unit level. The Company adopted SFAS No.
142 on January 1, 2002, which did not have a material impact on the Company’s consolidated
financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets.” This statement supercedes SFAS No. 121, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” The statement retains the
previously existing accounting requirements related to the recognition and measurement of the
impairment of long-lived assets to be held and used while expanding the measurement requirements
of long-lived assets to be disposed of by sale to include discontinued operations. It also expands the
previously existing reporting requirements for discontinued operations to include a component of
an entity that either has been disposed of or is classified as held for sale. The Company
implemented SFAS No. 144 on January 1, 2002, which did not have a material impact on the
Company’s consolidated financial position or results of operations.
F-9
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[15] New Accounting Standards (Continued):
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation -
Transition and Disclosure”, to provide alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee compensation. In addition,
SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported results. The
Company has adopted the disclosure requirements of SFAS No. 148.
NOTE B - STRATEGIC ALLIANCE AGREEMENT AND CLEARING ARRANGEMENT
On April 29, 2002, Siebert entered into an exclusive Strategic Alliance Agreement with Intuit, Inc. to
offer a joint brokerage service (the “JBS”), with Intuit as the technology, marketing and content provider
and Siebert as a broker-dealer and provider of certain brokerage and other services. The financial
arrangement between Siebert and Intuit generally provides that gross revenue, as defined, generated from
the JBS and incremental expenses, as defined, incurred by Siebert and Intuit be split on a 50/50 basis. The
term of the agreement is for an initial period of ten years and is extended automatically for successive
two-year periods unless notice of termination is given by either party. Siebert records its proportionate
share of the JBS’s revenue and incremental expenses on a gross basis. The JBS was launched on
September 16, 2002. During 2002, revenue related to the JBS was nominal and Siebert’s share of
expenses amounted to approximately $4,700,000, which included technology, marketing and content
expenses of $2,910,000 and certain brokerage and other services of $380,000. Siebert separately incurred
other start-up costs for an advisory fee of $1,000,000 and legal fees of $392,000. These expenses were
charged to operations in 2002.
On April 30, 2002, Siebert signed a fully disclosed clearing agreement (the “Clearing Agreement”) with
the Pershing division of Donaldson, Lufkin, & Jenrette Securities Corporation (“Pershing”). Pursuant to
the Clearing Agreement and the JBS, Siebert and Intuit will advance Pershing a total of $1,500,000,
principally for software customization setup. Pershing has agreed that it shall rebate such amount to
Siebert payable in three equal annual installments, without interest, over the initial three years of the
Clearing Agreement, provided that if the Clearing Agreement is terminated under certain circumstances,
Siebert must repay these rebated amounts to Pershing. In addition, Siebert and Intuit will incur other
charges aggregating approximately $485,000 for the setup of the JBS’s website and related matters.
Siebert and Intuit will share equally in the advance and the other charges. The advance to Pershing was
made in January 2003.
NOTE C - INVESTMENT IN AFFILIATE
In March 1997, Siebert and two individuals (the “Principals”) formed SBS to succeed to the tax-exempt
underwriting business of the Siebert Brandford Shank division of Siebert. The agreements with the
Principals provide that profits will be shared 51% to the Principals and 49% to Siebert. Siebert invested
$392,000 as its share of the members’ capital of SBS. SBS commenced operations on July 1, 1998.
F-10
NOTE C - INVESTMENT IN AFFILIATE (CONTINUED)
Summarized financial data of SBS is as follows:
Total assets
Total liabilities including subordinated liabilities of
$1,200,000, $1,200,000 and $1,200,000
Total members’ capital
Total revenue
Net income (loss)
Regulatory minimum net capital requirement
2002
2001
2000
$8,944,000
$8,351,000
$3,413,000
3,404,000
5,541,000
13,190,000
3,616,000
130,000
2,991,000
5,360,000
13,968,000
4,755,000
119,000
2,807,000
605,000
5,568,000
(661,000)
107,000
During each of 2002, 2001 and 2000, Siebert charged SBS $240,000 for rent and general and
administrative services, which Siebert believes approximates the cost of furnishing such services.
Siebert’s share of undistributed earnings from SBS amounts to $2,323,000 and $2,234,000 at December
31, 2002 and 2001, respectively. Such amounts may not be immediately available for distribution to
Siebert for various reasons including the amount of SBS’s available cash, the provisions of the agreement
between Siebert and the principals and SBS’s continued compliance with its regulatory net capital
requirements.
NOTE D - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Furniture, equipment and leasehold improvements consist of the following:
Equipment
Leasehold improvements
Furniture and fixtures
Less accumulated depreciation and amortization
December 31,
2002
2001
$3,562,000
484,000
154,000
$2,179,000
536,000
188,000
4,200,000
(1,584,000)
2,903,000
(1,200,000)
$2,616,000
$1,703,000
Depreciation and amortization expense for the years ended December 31, 2002, 2001 and 2000 amounted
to $725,000, $584,000 and $402,000, respectively.
F-11
NOTE E - INTANGIBLE ASSETS, NET
In several transactions during September and October of 2000, WFN acquired the stock of WFN
Women’s Financial Network, Inc. (“WFNI”) and HerDollar.com, Inc., respectively, companies in the
development stage which had yet to commence principal operations, had no significant revenue and had
assets consisting principally of websites, content and domain names, for aggregate consideration of
$2,310,000 including costs. The transactions have been accounted for as purchases of assets consisting of
domain name, website and content, and a non-compete agreement (the “Acquired Intangible Assets”).
Related deferred tax assets attributable to net operating loss carryforwards of the acquired companies and
deferred tax liabilities attributable to the excess of the statement bases of the acquired assets over their tax
bases have been reflected in the accompanying consolidated financial statements as an adjustment to the
carrying amount of such intangibles (see Note F).
During 2002, Siebert purchased certain retail discount brokerage accounts in two separate transactions for
an aggregate cost of approximately $1,045,000.
Intangible assets consist of the following:
Amortizable assets:
Website, content and non-compete
Retail brokerage accounts
Unamortized intangible assets:
Domain name/intellectual property
Amortization expense
Estimated amortization expense is as follows:
Year Ending
December 31,
2003
2004
2005
December 31, 2002
December 31, 2001
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
$2,350,000
1,045,000
$1,708,000
135,000
$2,350,000
$850,000
$3,395,000
$1,843,000
$2,350,000
$850,000
$ 750,000
$ 750,000
$ 993,000
$850,000
$896,000
444,000
212,000
$1,552,000
F-12
NOTE F - INCOME TAXES
Income tax provision (benefit) consists of the following:
Federal income tax provision (benefit):
Current
Deferred
State and local tax provision (benefit):
Current
Deferred
Total tax provision (benefit):
Current
Deferred
Year Ended December 31,
2002
2001
2000
$ (19,000)
(1,014,000)
$1,442,000
(203,000)
$4,194,000
(1,033,000)
1,239,000
4,194,000
(231,000)
(321,000)
710,000
(100,000)
1,662,000
(552,000)
610,000
1,662,000
(250,000)
(1,335,000)
2,152,000
(303,000)
5,856,000
$(1,585,000)
$1,849,000
$5,856,000
A reconciliation between the income tax provision (benefit) and income taxes computed by applying the
statutory Federal income tax rate to income (loss) before taxes is as follows:
Year Ended December 31,
2002
2001
2000
Expected income tax provision (benefit) at statutory Federal
tax rate
State and local taxes, net of Federal tax effect
Other *
$(1,094,000)
(241,000)
(250,000)
$1,475,000
374,000
$4,711,000
1,145,000
Income tax expense (benefit)
$(1,585,000)
$1,849,000
$5,856,000
* Change in estimated state business allocation percentage
F-13
NOTE F - INCOME TAXES (CONTINUED)
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and
liabilities for financial reporting purposes and the tax treatments of such amounts. The principal items
giving rise to deferred tax assets (liabilities) are as follows:
Net operating losses
Acquired Intangible assets
Start-up costs
Furniture, equipment and leasehold improvements
Retail brokerage accounts
December 31,
2002
2001
$485,000
(974,000)
$1,260,000
(616,000)
363,000
(207,000)
46,000
$ 846,000
$(489,000)
Management believes that it is more likely than not that the deferred tax asset will be realized, and
therefore no valuation allowance has been provided.
Net operating loss carryforwards of $3,000,000, which include net operating loss carryforwards of WFNI
of $1,115,000, expire through 2022. Utilization of the net operating loss carryforward relating to WFNI is
subject to annual limitations under Section 382 of the Internal Revenue Code. During 2001, the Company
realized a tax benefit of $26,000 relating to utilization of net operating loss carryforwards.
In 2001 and 2000, the Company reduced current taxes payable by $14,000 and $57,000, respectively,
resulting from the deductibility of the difference between the exercise price of nonqualifying stock
options granted by the Company and the market value of the stock on the dates of exercise. The tax
benefit was recorded as a credit to paid-in capital.
F-14
NOTE G - STOCKHOLDERS’ EQUITY
Siebert is subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance
of minimum net capital. Siebert has elected to use the alternative method, permitted by the rule, which
requires that Siebert maintain minimum net capital, as defined, equal to the greater of $250,000 or 2
percent of aggregate debit balances arising from customer transactions, as defined. (The Net Capital Rule
of the New York Stock Exchange also provides that equity capital may not be withdrawn or cash
dividends paid if resulting net capital would be less than 5% of aggregate debits.) At December 31, 2002
and 2001, Siebert had net capital of approximately $16,448,000 and $20,900,000, respectively, as
compared with net capital requirements of $250,000. Siebert claims exemption from the reserve
requirement under Section 15c3-3(k)(2)(ii).
The principal shareholder waived her right to receive her portion of dividends declared in 2000.
The 1998 Restricted Stock Award Plan (the “Award Plan”), provides for awards of not more than 60,000
shares of the Company’s common stock, subject to adjustments for stock splits, stock dividends and other
changes in the Company’s capitalization, to key employees, to be issued either immediately after the
award or at a future date. As provided in the Award Plan and subject to restrictions, shares awarded may
not be disposed of by the recipients for a period of one year from the date of the award. Cash dividends
on shares awarded are held by the Company for the benefit of the recipients and are paid upon lapse of the
restrictions. During 1998 and 1999, the Company awarded an aggregate of 41,400 shares, net of
forfeitures of 8,050 shares, under the Award Plan. The shares which vest one year from the date of grant,
were valued at market value on the date of grant and are being charged to expense over the vesting
periods. The Company recorded a non-cash compensation charge of $40,000 in 2000 relating to shares
awarded under the Award Plan.
On May 15, 2000, the Board of Directors of the Company authorized a buy back of up to one million
shares of common stock. Shares will be purchased from time to time in the open market and in private
transactions. Through December 31, 2002, 572,400 shares were purchased at an average price of $4.92.
NOTE H - OPTIONS
The Company’s 1997 Stock Option Plan, as amended, (the “Plan”) authorizes the grant of options to
purchase up to an aggregate of 4,200,000 shares, subject to adjustment in certain circumstances. Both
non-qualified options and options intended to qualify as “Incentive Stock Options” under Section 422 of
the Internal Revenue Code, as amended, may be granted under the Plan. A Stock Option Committee of
the Board of Directors administers the Plan. The committee has the authority to determine when options
are granted, the term during which an option may be exercised (provided no option has a term exceeding
10 years), the exercise price and the exercise period. The exercise price shall generally be not less than the
fair market value on the date of grant. No option may be granted under the Plan after December 2007.
Generally, employee options vest 20% per year for five years and expire ten years from the date of grant.
F-15
NOTE H - OPTIONS (CONTINUED)
A summary of the Company’s stock option transaction for the three years ended December 31, 2002 is
presented below:
2002
2001
2000
Weighted
Average
Exercise
Price
$5.62
$4.16
$3.69
$2.31
Shares
799,820
1,155,000
(63,440)
(36,120)
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Shares
$3.93
$5.33
$3.57
$2.31
521,700
$4.15
(5,600)
(21,500)
$22.35
$2.70
Shares
494,600
350,000
(23,920)
(20,860)
Outstanding - beginning of the year
Granted
Forfeited
Exercised
Outstanding - end of year
1,855,260
$4.39
799,820
$5.62
494,600
$3.93
Exercisable at end of year
575,660
$3.99
309,800
$3.32
182,250
$3.02
Weighted average fair value
of options granted
$3.50
$3.99
F-16
NOTE H - OPTIONS (CONTINUED)
The following table summarizes information related to options outstanding at December 31, 2002:
Options Outstanding
Options Exercisable
Range
Exercise
Prices
Number
Outstanding
Weighted Average
Remaining
Contractual Life
$0.00 - 2.31
$2.32 - 2.69
$2.70 - 5.33
$5.34 - 32.50
15,000
342,760
1,470,000
27,500
$0.00 - 32.50
1,855,260
9.8 Years
4.5 Years
9.1 Years
6.5 Years
8.2 Years
Weighted
Average
Exercise
Price
$2.12
$2.35
$4.44
$28.49
$4.39
Number
Exercisable
Weighted
Average
Exercise
Price
333,160
226,000
16,500
575,660
$2.34
$4.65
$28.49
$3.99
At December 31, 2002, approximately 1,947,900 shares of the Company’s common stock have been
reserved for future issuance under the Plan, the Award Plan and for options granted to directors.
NOTE I - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
In the normal course of business, Siebert enters into transactions in various financial instruments with off-
balance sheet risk. This risk includes both market and credit risk, which may be in excess of the amounts
recognized in the statement of financial condition.
Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. In the event
that customers are unable to fulfill their contractual obligations, the clearing broker may charge Siebert
for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to
satisfy customers’ obligations. Siebert regularly monitors the activity in its customer accounts for
compliance with its margin requirements.
Siebert is exposed to the risk of loss on unsettled customer transactions in the event customers and other
counterparties are unable to fulfill contractual obligations. Securities transactions entered into as of
December 31, 2002 settled with no adverse effect on Siebert’s financial condition.
NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES
The Company rents office space under long-term operating leases expiring in various periods through
2007. These leases call for base rent plus escalations for taxes and operating expenses.
Future minimum base rental payments under these operating leases are as follows:
Year Ending
December 31,
2003
2004
2005
2006
2007
Amount
$892,000
633,000
330,000
182,000
84,000
$2,121,000
F-17
NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Rent expense, including escalations for operating costs, amounted to approximately $844,000, $905,000
and $583,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Rent is being charged
to expense over the entire lease term on a straight-line basis.
Siebert is party to certain claims, suits and complaints arising in the ordinary course of business. In the
opinion of management, all such claims, suits and complaints are without merit, or involve amounts
which would not have a significant effect on the financial position or results of operations of the
Company. The Company believes that adequate provisions have been made for such matters.
Siebert sponsors a defined contribution retirement plan under Section 401(k) of the Internal Revenue
Code that covers substantially all employees. Participant contributions to the plan are voluntary and are
subject to certain limitations. Siebert may also make discretionary contributions to the plan. No
contributions were made by Siebert in 2002, 2001 and 2000.
Siebert is party to a Secured Demand Note Collateral Agreement with SBS which obligates Siebert to
lend SBS, on a subordinated basis, up to $1,200,000. Amounts that Siebert is obligated to lend under this
arrangement are reported as “cash equivalents - restricted”, currently in the amount of $1,300,000. This
obligation is not included in the Company’s statement of financial condition because it has not been
drawn down upon by SBS.
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated statements of financial condition for cash, cash
equivalents, receivable from broker, accounts payable and accrued liabilities approximate fair value due
to the short term maturities of those instruments. Securities owned and securities sold, not yet purchased
are carried at market value, in accordance with industry practice for broker-dealers in securities.
F-18
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L - SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
2002
2001
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Revenue
Net income (loss)
$6,221,000
$255,000
$6,371,000
$(868,000)
$5,697,000
$(726,000)
$5,815,000
$(294,000)
$9,862,000
$803,000
$8,555,000
$1,031,000
$6,974,000
$225,000
$6,629,000
$429,000
Earnings per share:
Basic
Diluted
$0.01
$0.01
$(0.04)
$(0.04)
$(0.03)
$(0.03)
$(0.01)
$(0.01)
$0.04
$0.04
$0.04
$0.04
$0.01
$0.01
$0.02
$0.02
F-19
INDEPENDENT AUDITORS’ REPORT
Board of Managers
Siebert, Brandford, Shank & Co., L.L.C.
New York, New York
We have audited the accompanying statements of financial condition of Siebert, Brandford, Shank & Co.,
L.L.C. as of December 31, 2002 and 2001 and the related statements of operations, changes in members’
capital, and cash flows for each of the years in the three-year period ended December 31, 2002. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all material respects, the
financial position of Siebert, Brandford, Shank & Co., L.L.C. as of December 31, 2002 and 2001, and the
results of its operations and its cash flows for each of the years in the three-year period ended December
31, 2002, in conformity with accounting principles generally accepted in the United States of America.
Eisner LLP
New York, New York
January 30, 2003
F-20
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
STATEMENTS OF FINANCIAL CONDITION
Assets
Cash and cash equivalents
Securities owned, at market value
Accounts receivable
Secured demand note
Furniture, equipment and leasehold improvements, net
Other assets
Liabilities And Members’ Capital
Liabilities:
Payable to broker-dealer
Payable to member
Accounts payable and accrued expenses
Subordinated debt
Members’ capital
December 31,
2002
2001
$6,173,694
778,876
544,022
1,200,000
91,578
156,164
$3,159,799
2,065,717
1,714,607
1,200,000
87,784
123,437
$8,944,334
$8,351,344
$ 246,044
32,972
1,924,745
2,203,761
1,200,000
$6,904
76,350
1,708,165
1,791,419
1,200,000
5,540,573
5,359,925
$8,944,334
$8,351,344
See Notes to Financial Statements
F-21
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
STATEMENTS OF OPERATIONS
Revenues:
Investment banking
Trading profits
Interest and other
Expenses:
Employee compensation and benefits
Clearing fees
Communications
Occupancy
Professional fees
Interest
General and administrative
Year Ended December 31,
2002
2001
2000
$12,809,840
288,834
91,308
$13,552,953
210,402
204,167
$5,035,926
269,099
263,004
13,189,982
13,967,522
5,568,029
6,563,459
38,349
189,414
440,804
398,746
120,000
1,823,022
6,611,201
45,343
205,287
433,491
319,331
153,315
1,445,015
3,827,488
53,332
236,663
379,453
167,007
296,561
1,268,859
9,573,794
9,212,983
6,229,363
Net Income (Loss)
$ 3,616,188
$4,754,539
$ (661,334)
See Notes to Financial Statements
F-22
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
Balance - January 1, 2000
Distributions to members
Net loss
Balance - December 31, 2000
Net income
Balance - December 31, 2001
Distributions to members
Net income
Balance - December 31, 2002
$1,375,992
(109,272)
(661,334)
605,386
4,754,539
5,359,925
(3,435,540)
3,616,188
$5,540,573
See Notes to Financial Statements
F-23
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2002
2001
2000
Cash Flows From Operating Activities:
Net income (loss)
$3,616,188
$4,754,539
$(661,334)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Changes in:
Securities owned, at market value
Accounts receivable
Other assets
Receivable from/payable to member
Accounts payable and accrued expenses
Payable to broker-dealer
45,737
51,892
47,166
1,286,841
1,170,585
(32,727)
(43,378)
216,580
239,140
(2,065,717)
(1,291,449)
(608,423)
11,118
785,809
6,904
2,627,667
(63,571)
261,801
(8,695)
425,922
(2,023,631)
Net cash provided by operating activities
6,498,966
1,644,673
605,325
Cash Flows From Investing Activities:
Purchase of property and equipment
(49,531)
(63,167)
(33,085)
Cash Flows From Financing Activities:
Borrowings of subordinated loans
Repayments of subordinated loans
Distributions to members
(3,435,540)
4,000,000
(4,000,000)
(5,000,000)
(109,272)
Net cash used in financing activities
(3,435,540)
0
(5,109,272)
Net Increase (Decrease) In Cash And
Cash Equivalents
Cash and cash equivalents - beginning of year
3,013,895
3,159,799
1,581,506
1,578,293
(4,537,032)
6,115,325
Cash And Cash Equivalents - End Of Year
$6,173,694
$3,159,799
$1,578,293
Supplemental Disclosures Of Cash Flow Information:
Taxes paid
Interest paid
$235,297
$120,000
$34,672
$153,315
$55,090
$296,561
See Notes To Financial Statements
F-24
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Organization and Basis of Presentation:
Siebert, Brandford, Shank & Co., L.L.C. (“SBS” or the “Company”) was formed on March 10,
1997 to engage in the business of tax-exempt underwriting and related trading activities. The
Company qualifies as a Minority and Women’s Business Enterprise in certain states.
The Company was formed to succeed the tax-exempt underwriting activities business of the
Siebert, Brandford, Shank Division of Muriel Siebert & Co., Inc. (“Siebert”), and commenced
operations on July 1, 1998. Two individuals (the “Principals”) and Siebert are the equity members
of the Company. The business arrangement provides that profits will be shared 51% to the
Principals and 49% to Siebert.
[2] Securities Transactions:
Securities transactions, commissions, revenues and expenses are recorded on a trade date basis.
Securities owned are valued at market value.
Dividends are recorded on the ex-dividend date, and interest income is recognized on an accrual
basis.
[3]
Investment Banking:
Investment banking revenues include gains and fees, net of syndicate expenses, arising primarily
from municipal bond offerings in which the Company acts as an underwriter or agent. Investment
banking management fees are recorded on offering date, sales concessions on settlement date, and
underwriting fees at the time the underwriting is completed and the income is reasonably
determinable.
[4] Furniture, Equipment and Leasehold Improvements, Net:
Furniture and equipment is stated at cost and depreciation is calculated using the straight-line
method over the lives of the assets, generally five years. Leasehold improvements are amortized
over the period of the lease.
[5] Cash Equivalents:
For purposes of reporting cash flows, cash equivalents include money market funds.
[6] Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-25
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[7]
Income Taxes:
The Company is not subject to federal income taxes. Instead, the members are required to include in
their income tax returns their respective share of the Company’s income. The Company is subject to
tax in certain state and local jurisdictions.
NOTE B - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE
The subordinated debt at December 31, 2002 and 2001 consist of a Secured Demand Note Collateral
Agreement, as amended, payable to Siebert, in the amount of $1,200,000, bearing interest at 10% and due
August 31, 2004. Interest expense paid to Siebert for each of 2002, 2001 and 2000 amounts to $120,000.
The subordinated borrowings are available in computing net capital under the Securities and Exchange
Commission’s (the “SEC”) Uniform Net Capital Rule. To the extent that such borrowing is required for
the Company’s continued compliance with minimum net capital requirements, it may not be repaid.
The secured demand note receivable of $1,200,000 is collateralized by cash equivalents of Siebert of
approximately $1,300,000 at December 31, 2002. Interest earned on the collateral amounted to
approximately $31,000, $69,000 and $95,000 in 2002, 2001 and 2000, respectively.
NOTE C - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Furniture, equipment and leasehold improvements consist of the following:
Equipment
Furniture and fixtures
Leasehold improvements
Less accumulated depreciation and amortization
NOTE D - NET CAPITAL
2002
2001
$217,422
42,690
56,851
$182,917
39,398
45,117
316,963
(225,385)
267,432
(179,648)
$ 91,578
$ 87,784
The Company is subject to the SEC’s Uniform Net Capital Rule 15c3-1, which requires the maintenance
of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as
defined, shall not exceed 15 to 1. At December 31, 2002 and 2001, the Company had net capital of
$6,288,000 and $6,056,000, respectively, which was $6,158,000 and $5,937,000, respectively, in excess
of its required net capital, and its ratio of aggregate indebtedness to net capital was .31 to 1 and .29 to 1,
respectively. The Company claims exemption from the reserve requirements under Section 15c-3-
3(k)(2)(ii).
Subsequent to December 31, 2002, the Company distributed $800,000 to its members.
F-26
NOTE E - COMMITMENTS AND CONTINGENCY
The Company rents office space under long-term operating leases expiring through 2005. These leases
call for base rent plus escalations for taxes and operating expenses. Future minimum base rent under these
operating leases are as follows:
Year
2003
2004
2005
Amount
$296,980
145,285
108,783
$551,048
Rent expense including taxes and operating expenses for 2002, 2001 and 2000 amounted to $440,804,
$433,491 and $379,453, respectively.
NOTE F - OTHER
During each of 2002, 2001 and 2000, the Company was charged $240,000 by Siebert for rent and general
and administrative services.
F-27
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SIEBERT FINANCIAL CORP.
By: /s/ Muriel F. Siebert
Muriel F. Siebert
Chair and President
Date: March 28, 2003
In accordance with the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Muriel F. Siebert
Muriel F. Siebert
Chair, President and Director
(principal executive officer)
March 28, 2003
/s/ Nicholas P. Dermigny
Nicholas P. Dermigny
/s/ Joseph M. Ramos, Jr.
Joseph M. Ramos, Jr.
/s/ Patricia L. Francy
Patricia L. Francy
/s/ Leonard M. Leiman
Leonard M. Leiman
/s/ Jane H. Macon
Jane H. Macon
/s/ Nancy S. Peterson
Nancy S. Peterson
Executive Vice President,
Chief Operating Officer and
Director
Chief Financial Officer
and Assistant Secretary
(principal financial and
accounting officer)
Director
Director
Director
Director
March 28, 2003
March 28, 2003
March 28, 2003
March 28, 2003
March 28, 2003
March 28, 2003
CERTIFICATION PURSUANT TO
RULE 13a-14 AND 15d-14 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED
I, Muriel F. Siebert certify that:
(1)
I have reviewed this annual report on Form 10-K of Siebert Financial Corp.;
(2)
Based on my knowledge, this annual report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;
(3)
Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this annual report;
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in
(4)
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(i)
Designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this annual report is being prepared;
(ii)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date
within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
(iii)
Presented in this annual report my conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
I have disclosed, based on my most recent evaluation, to the registrant’s auditors and the audit
(5)
committee of the registrant’s board of directors (or persons fulfilling the equivalent functions):
(i)
All significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant’s ability to record, process, summarize and report financial data and have
identified for the registrant’s auditors any material weaknesses in internal controls; and
(ii)
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal controls; and
(6)
I have indicated in this annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ Muriel F. Siebert
Muriel F. Siebert
Chair and President
(principal executive officer and principal financial and accounting officer)
Date: March 28, 2003
EXHIBIT INDEX
Exhibit No.
Description of Document
2.1
2.2
2.3
2.4
3.1
3.2
10.1
10.2
10.4
10.5
10.6
10.7
Plan and Agreement of Merger between J. Michaels, Inc. (“JMI”) and Muriel Siebert
Capital Markets Group, Inc. (“MSCMG”), dated as of April 24, 1996 (“Merger
Agreement”) (incorporated by reference to Siebert Financial Corp.’s Form 10-K for
the fiscal year ended December 31, 1996)
Amendment No. 1 to Merger Agreement, dated as of June 28, 1996 (incorporated by
reference to Siebert Financial Corp.’s Form 10-K for the fiscal year ended December
31, 1996)
Amendment No. 2 to Merger Agreement, dated as of September 30, 1996
(incorporated by reference to Siebert Financial Corp.’s Form 10-K for the fiscal year
ended December 31, 1996)
Amendment No. 3 to Merger Agreement, dated as of November 7, 1996 (incorporated
by reference to Siebert Financial Corp.’s Form 10-K for the fiscal year ended
December 31, 1996)
Certificate of Incorporation of Siebert Financial Corp., formerly known as J.
Michaels, Inc. originally filed on April 9, 1934, as amended and restated to date
(incorporated by reference to Siebert Financial Corp.’s Form 10-K for the fiscal year
ended December 31, 1997)
By-laws of Siebert Financial Corp. (incorporated by reference to Siebert Financial
Corp.’s Registration Statement on Form S-1 (File No. 333-49843) filed with the
Securities and Exchange Commission on April 10, 1998)
Siebert Financial Corp. 1998 Restricted Stock Award Plan (incorporated by reference
to Siebert Financial Corp.’s Form 10-K for the fiscal year ended December 31, 1997)
10(a) Siebert Financial Corp. 1997 Stock Option Plan (incorporated by reference to
Siebert Financial Corp.’s Form 10-K for the fiscal year ended December 31, 1996)
LLC Operating Agreement, among Siebert, Brandford, Shank & Co., LLC, Muriel
Siebert & Co., Inc., Napoleon Brandford III and Suzanne F. Shank, dated as of March
10, 1997 (incorporated by reference to Siebert Financial Corp.’s Form 10-K for the
fiscal year ended December 31, 1996)
Services Agreement, between Siebert, Brandford, Shank & Co., LLC and Muriel
Siebert & Co., Inc., dated as of March 10, 1997 (incorporated by reference to Siebert
Financial Corp.’s Form 10-K for the fiscal year ended December 31, 1996)
Siebert Financial Corp. 1998 Restricted Stock Award Plan (incorporated by reference
to Siebert Financial Corp.’s Form 10-K for the fiscal year ended December 31, 1997)
Stock Option Agreement, dated March 11, 1997, between the Company and Patricia
L. Francy (incorporated by reference to Siebert Financial Corp.’s Registration
Statement on Form S-8 (File No. 333-72939) filed with the Securities and Exchange
Commission on February 25, 1999)
Exhibit No.
Description of Document
10.8
10.9
10.10
10.11
10.12
21
23
99.1
Stock Option Agreement, dated March 11, 1997, between the Company and Jane H.
Macon (incorporated by reference to Siebert Financial Corp.’s Registration Statement
on Form S-8 (File No. 333-72939) filed with the Securities and Exchange
Commission on February 25, 1999)
Stock Option Agreement, dated March 11, 1997, between the Company and Monte E.
Wetzler (incorporated by reference to Siebert Financial Corp.’s Registration
Statement on Form S-8 (File No. 333-72939) filed with the Securities and Exchange
Commission on February 25, 1999)
Employment Agreement, dated as of April 9, 1999, between the Company and Daniel
Jacobson (incorporated by reference to Siebert Financial Corp.’s Form 10-Q for the
quarter ended September 30, 1999)
Strategic Alliance Agreement, dated as of April 29, 2002, by and between Intuit Inc,
Muriel Siebert & Co., Inc. and Investment Solutions, Inc. (incorporated by reference
to Siebert Financial Corp.’s Form 10-Q for the quarter ended June 30, 2002.
Fully Disclosed Clearing Agreement, dated April 30, 2002, by and between the
Pershing Division of Donaldson, Lufkin and Jenrette Securities Corporation and
Muriel Siebert & Co., Inc. (incorporated by reference to Siebert Financial Corp.’s
Form 10-Q for the quarter ended June 30, 2002.
Subsidiaries of the registrant (incorporated by reference to Siebert Financial Corp.’s
Annual Report on Form 10-K for the year ended December 31, 2001
Consent of Independent Auditors
Certification of Periodical Financial Report under Section 906 of Sarbenes-Oxley Act
of 2002
Siebert Shareholder Discount Program
Receive a 10% commission discount on
all trades, plus two free trades!
We are pleased to continue the Siebert Shareholder Discount Program. All registered holders of at
least 100 shares of Siebert Financial Corp. stock are entitled to receive a 10% commission discount
on all trades as well as two free trades in their Muriel Siebert & Co., Inc., brokerage account.* To
apply or receive additional information, please contact James in our New Accounts Department at
1 - 8 0 0 - 8 7 2 - 0 7 11 and identify yourself as a shareholder.
Accounts receive total net equity protection including 100% of your money market fund balances.
The first $500,000 of coverage is provided by Securities Investor Protection Corporation (SIPC),
up to $100,000 of which can be in cash. Additional protection for cash and securities to
supplement SIPC coverage is provided through our clearing agent. **
* Maximum credit $100 per trade. Certain restrictions apply. Please call for details.
** Neither SIPC nor excess coverage protects against a decline in the maket value of securities.
Compare Siebert to Other Leading Brokers!
Rates/Features
Online limit order
B r o k e r-assisted equity order
I n S m a r t M o n e y ’s top 3 discount
brokers for past 5 years 6
In K i p l i n g e r’s top 3 online
brokers for past 4 years 6
In B a r r o n ’s f o u r-star online
brokers for past two years 6
S u r c h a rge-free and direct
access to local branches
Fees/Restrictions
Quarterly inactivity fee
Minimum balance to avoid
inactivity fee
Minimum activity to avoid
inactivity fee
Postage fees
SI E B E RT
S c h w a b
Q u i c k
& Reilly
TD Wa t e r-
h o u s e
E * Tr a d e
1
3
$14.95
$37.50
YES
YES
YES
YES
None
None
None
None
$32.95
$57.95
2
2
$23.95
4
$62.50/$75
No
No
No
7
No
No
No
No
4
No
$45/$30 8
$50,000
8 trades in
12 months
Yes
$35
$5,000
1 trade in
6 months
Yes
$20.95
2
$45
No
No
No
7
No
$20
$10,000
2 trades in
6 months
Yes
$22.95
2
5
$64.99
No
No
No
No
$25
$5,000
2 trades in
6 months
Yes
Comparisons based on telephone survey 2/6/03. Different brokers offer different services. 1 Up to 1,000 shares; 1.5 cents per share for each additional share. 2 Includes $3 per trade order handling fee; for
Waterhouse, fee is waived after 10 qualifying trades per month. Siebert has no order handling fees. 3 Minimum order, Value Rates apply.
4 $75 per trade minimum (listed stocks over $2) for service at local
branches. 5 Includes $3 per trade order handling fee for the first 26 stock trades per quarter. 6 Siebert was ranked in the top three brokers in the 1998-2002, S m a rt M o n e y Discount Broker surveys and the 1999-
2002 K i p l i n g e r’s Online Broker surveys. Siebert was ranked #1 in the 2002 Kiplingers Online Broker Survey. SiebertNet received B a rro n ’s f o u r-star online brokers ranking in its 2003 Online Brokers Survey.
S m a rt M o n e y is the Wall Street Journal Magazine of Personal Business, a joint publication of the Hearst Corp. and Dow Jones & Co., Inc. K i p l i n g e r’sis published by Kiplinger Washington Editors, Inc. B a rro n ’s
is published by Dow Jones & Co., Inc. 7 Local branch numbers available upon request. 8 $45 fee for under $10,000’$30 fee for $10,000-$50,000.
Commission Schedule
To meet your individual investing needs, Siebert offers a tiered commission schedule for broker-assisted trades with Share
Rates for investors whose typical trades are over $8,000 or 300 shares, and Value Rates for those whose trades are gener-
ally smaller. Internet equity trades are $14.95 each, market or limit, up to 1,000 shares and 1.5 cents for each additional
share over 1,000.
Share Rate schedule.
•3 cents per share to buy or sell any exchange-listed stock of any price, with an overriding minimum of $75 per trade.
•2 cents per share to buy or sell any over-the-counter stock of any price, with an overriding minimum of $60 per trade.
Value Rate schedule.
Value Rates (Minimum $37.50 per trade)
•Value Rates shown in the chart apply when greater than
the following minimums or less than the following maximums.
Otherwise, minimum and maximum rates apply.
•Minimum fee per share is $.057 per share on the first
1,000 shares, plus $.028 per share thereafter.
Maximum fee per share is $0.45 per share on the
first 100 shares, plus $0.47 per share thereafter.
•The commission for stocks and warrants priced below
$1 is the greater of either 5% of the principal amount
of the transaction or a penny and a half per share, with
an overriding minimum of $37.50 per trade.
$0-2,500
$2,501-6,000
$6,001-22,000
$21 + 1.32% of Principal
$36 + .42% of Principal
$56 + .23% of Principal
$22,001-50,000
$73 + .16% of Principal
$50,001-500,000
$114 + .08% of Principal
$500,001+
$194 + .06% of Principal
Option commission schedule. Siebert
offers the following discounted commission schedule for
investors who make their own decisions when purchasing or
selling listed equity or index options. The commission is
based upon both the number of contracts in the individual
trade and the option trading price.
Option trading below $1. Our commission
charge for options priced below $1 is just $2 per contract,
subject to a minimum charge of $34 per order.
Negotiable rates. We will be pleased to
negotiate a special rate for option investors who regularly
trade 20 or more contracts. If you have an active or large
account and you wish to negotiate a special rate schedule for
option trading, please call our New Accounts Department
for assistance at 1-800-872-0711.
Corporate bond commission
schedule. This schedule is for agency trans-
actions only and is subject to an overriding mini-
mum commission charge of $35 for listed corporate
bonds.
• Up to 49 bonds - $3.50 per bond
• *From 50-99 bonds - $3.00 per bond
• 100 bonds or more - $2.50 per bond
* We individually negotiate commissions on any trade of 50 bonds or more.
All option transactions are subject to an over-
riding minimum commission charge of $34.
Option Price $1
$2
$3
$4
$5
$6
$7
$8
$9
No. of
Options
$10
& Over
1
2
3
4
5
6
7
8
9
10
15
20
25
30
35
40
45
50
$34 $34 $34 $34 $34 $34 $34 $34 $34
$34
34
34
34
34
34
35
37
40
43
48
53
60
70
85
34
34
34
34
38
42
46
50
54
58
65
73
34
34
35
38
43
49
53
57
60
65
77
34
34
37
42
50
55
57
60
65
75
34
36
39
45
53
60
65
70
75
90
34
37
42
47
58
64
70
77
82
35
40
46
52
63
68
78
84
88
36
42
48
58
68
75
82
86
92
37
43
52
62
73
80
85
88
95
99 107 113 120
90 105 120 130 140 150
84 100 115 130 145 165 180
85 100 115 130 150 170 190 210
95 105 125 145 165 190 215 240
95 105 110 135 160 185 215 245 275
105 115 120 145 170 200 230 260 295
115 125 130 155 180 220 260 300 335
38
45
55
65
75
85
88
90
98
127
160
195
230
265
300
335
370
OFFICERS
Muriel F. Siebert
Chairwoman & President
Nicholas P. Dermigny
Executive Vice President
Chief Operating Officer
Joseph M. Ramos, Jr.
Executive Vice President
Chief Financial Officer
Daniel Iesu
Secretary
DIRECTORS
Muriel F. Siebert
Chairwoman & President
Nicholas P. Dermigny
Executive Vice President
Chief Operating Officer
Patricia L. Francy
Treasurer and Controller
Columbia University
Leonard M. Leiman
Counsel
Fulbright & Jaworski L.L.P.
Jane H. Macon, Esq.
Partner
Fulbright & Jaworski L.L.P.
Nancy S. Peterson
President & Chief Executive Officer
Peterson Tool Company, Inc.
Transfer Agent
American Stock Transfer & Trust Company
Independent Auditor
Eisner L. L. P.
O ffices In:
Av e n t u r a
18999 Biscayne Boulevard, Aventura, Florida 33180
Telephone: 1.305.933-1155 Fax: 305.933.4293
Beverly Hills
9693 Wilshire Boulevard, Beverly Hills, CA 9 0 2 1 2
Telephone: 1.800.995.7880 Fax: 310.788.7888
Boca Raton
855 South Federal Highway, Boca Raton, Florida 33432
Telephone: 1.561.367.9800 Fax: 561.367.9836
___
4400 North Federal Highway, Suite 106D, Boca Raton, FL 3 3 4 3 1
Telephone: 1.800.728.3352 Fax: 561.368.9750
Jersey City
111 Pavonia Avenue, Jersey City, NJ 07310
Telephone: 1.800.559.9193 Fax: 201.239-5741
New York Headquarters
885 Third Avenue, 17th Floor, New York, NY 1 0 0 2 2
Telephone: 1.800.872.0711 Fax: 212.486.2784
N a p l e s
400 Fifth Avenue South, Suite 100, Naples, FL 3 4 1 0 2
Telephone: 1.800.293.3891 Fax: 239.435.9788
Palm Beach
2 4 0 A South County Road, Palm Beach, FL 3 3 4 8 0
Telephone: 1.800.909.4503 Fax: 561.802.4444
S u r f s i d e
9569 Harding Avenue, Surfside, FL 3 3 1 5 4
Telephone: 1.800.773.2980 Fax: 305.868.5670
Wo m e n ’s Financial Network at Siebert
885 Third Avenue, 17th Floor, New York, NY 1 0 0 2 2
Telephone: 1.877.936.4968 Fax: 212.486.2784
Siebert Brandford Shank offices located in
Chicago • Dallas • Detroit • Houston • Los Angeles
Miami• New York • San Antonio • San Francisco • Seattle • Washington D.C.
w w w. s i e b e r t n e t . c o m
I N C .
M U R I E L S I E B E R T & C O . ,
Member NYSE/NASD/SIPC • Established 1967 • Nasdaq symbol SIEB