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Offices In:
Beverly Hills
9693 Wilshire Boulevard, Beverly Hills, CA 90212
Telephone: 800.995.7880 Fax: 310.788.7888
4400 North Federal Highway, Suite 152, Boca Raton, FL
Telephone: 800.728.3352 Fax: 561.368.9750
Boca Raton
Jersey City
111 Pavonia Avenue, Jersey City, NJ 07310
Telephone: 800.872.0711 Fax: 201.239.5741
New York
885 Third Avenue, 17th Floor, New Y
T
400 Fifth A
T
240A
T
Naples
Palm Beach
Surfside
9569 Harding A
T
Women’
885 Third Avenue, 17th Floor
T
Atlanta •
Miami • New York • Oakland • Orlando • San
www
M U R I E L S I E B E R T
Siebert Financial Corp. • 2005 Annual Report
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Siebert Financial Corp. (the “Company”) is a
holding company organized under the laws of the
State of New York conducting retail discount broker-
age and corporate investment banking throughout the
country, and a floor brokerage business on the New
York Stock Exchange.
The Company’s retail discount brokerage busi-
ness is conducted through its wholly-owned sub-
sidiary, 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 Siebert
Capital Markets, Siebert offers institutional clients
equity and fixed income 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 finan-
cial products and financial education predominantly to
women investors.
Muriel F. Siebert, the first woman member of
the New York Stock Exchange, is the Chairwoman,
President and Chief Executive Officer of the Company
and, as of April 2006, owns approximately 90% of the
outstanding Common Stock of the Company.
The Company believes that it is the most
prominent Woman-Owned Business Enterprise
(“WBE”) in the capital markets business in the coun-
try, which through Siebert, is a New York Stock
Exchange member. Moreover, the Company is also
prominent as a Minority and Women’s Business
Enterprise (“MWBE”) in the tax exempt underwriting
business through Siebert’s 49%-owned affiliate,
Siebert Brandford Shank & Co., L.L.C.
Siebert was incorporated on June 16, 1969,
under the laws of the State of Delaware. The princi-
pal executive offices of the Company and Siebert are
located at 885 Third Avenue, Suite 1720, New York,
NY 10022. The telephone number is (212) 644-2400.
The Web site is located at www.siebertnet.com.
DIRECTORS
Muriel F. Siebert
Chairwoman & President
Chief Executive Officer
Patricia L. Francy
Special Advisor for Alumni
Relations; Retired Treasurer &
Controller, Columbia University
Leonard M. Leiman
Counsel
Fulbright & Jaworski L.L.P.
Jane H. Macon, Esq.
Partner
Fulbright & Jaworski L.L.P.
Robert P. Mazzarella
Retired President
Fidelity Investment Brokerage
Services, LLC
Nancy S. Peterson
President and Chief
Executive Officer
Peterson Tool Company, Inc.
121757NAR_R1 5/3/06 2:32 PM Page 2
May 2006
Dear Fellow Shareholders:
Continued strength in the markets and the economy prevailed throughout the year 2005. The Dow
came close to its all-time high, corporate profits reached the highest level in 40 years and jobs were
more plentiful. The impact of the hurricanes, while severe and devastating to those involved, was,
fortunately, limited throughout the economy as a whole. In a year that saw the announcement of Alan
Greenspan’s retirement as Chairman of the Federal Reserve Board and the appointment of Ben
Bernanke, the Fed maintained its steady course, raising interest rates a quarter percentage point at
each of its eight meetings, helping keep inflation in check despite the high price of oil.
Financial Performance
Your Company made progress in this economic climate. Total 2005 revenue was $31.2
million, up $3.1 million, or 10.9 percent, from 2004. Commissions and fees from
the retail and institutional businesses were up 6.2 percent year over year to
$25.2 million. Net income of $1.9 million or $.08 cents per share was more
than three and half times 2004 net income of $523,000, or $.02 per share.
We continue to vigorously pursue our lawsuit against Intuit for breach of
contract, breach of fiduciary duty, misrepresentation and other claims
related to the strategic alliance we had with that firm. Our attorneys are
pleased that Intuit failed in its attempt to change the nature and jurisdic-
tion of the case from a litigation in New York to an arbitration in Cali-
fornia. In addition, Intuit’s counsel has been disqualified from represent-
ing Intuit in the case, which decision they have appealed. We continue to
believe in the strength of our case, despite the time, money and effort asso-
ciated with the undertaking and the resultant legal fees.
Retail Brokerage Services
With industry consolidation continuing and competition intensifying, our watchwords in
2005 were customer service and value-added. Our brokerage product and service offer-
ings again received the praise of multiple independent industry observers. Consider these
honors, which clearly recognize the success of our customer-focused approach:
• Siebert is the only broker to rank in SmartMoney’s top three discount brokers
for the past eight years, and Kiplinger’s top three online brokers for the most
recent five surveys (including #1 in 2002 and 2004).
121757NAR_R1 5/3/06 2:32 PM Page 3
•
•
Siebert received one of the top three rankings awarded by Barron’s in its Online Brokers Surveys
from 2002-2005 and, in early 2006, was named Barron’s “best broker for buy and hold investors.”
In 2006, Siebert was also named top-rated four-star broker and third overall in the Web-based bro-
ker category in the Barron’s 2006 Online Brokers Survey.
We are not resting on our laurels. In 2006, we enhanced our SiebertNet online brokerage service with
features important to our sophisticated client base, including Portfolio and Tax Reporting with enhanced
historic and cost basis information. We have added symbol-specific equity research from Prudential
Equity Group, along with daily market commentary and stock analysis from Argus Research and eco-
nomic commentary from Decision Economics. Our Web site has a cleaner, more integrated look and feel
to make navigation easier.
In the past year, consolidation in our industry has put a spotlight on our competitive strengths: excep-
tional customer service, combined SIPC and excess-SIPC protection to total net equity in each account,
a choice of competitive high-yielding money funds, highly competitive margin interest rates, and a reli-
able, comprehensive online offering at an all-inclusive commission charge which is negotiable based on
account activity and size. We believe that this wave of consolidation will give your Company the oppor-
tunity to attract the customers of recently merged firms who are disappointed in the service they are
receiving. The fact that we provide a small-firm boutique experience with big-firm stability, longevity
and resources accrues to our benefit in this environment. Our customers recognize that we treat them as
valued clients. Their appreciation is tangible. Every week, over 50 percent of our new accounts are
referred by or related to satisfied clients.
Whereas mergers at some competitors have caused reported disruptions in service quality, we continue
to provide an exceptional level of service while also offering excellent value. Our approach appeals to
those who appreciate the integrity of an independent firm that is committed to obtaining the best price
execution, does not internalize customer orders and is not owned or controlled by any large institution
or market maker. The investing public also values the ability of our representatives to work large and
sensitive orders on the floor of the New York Stock Exchange and on Nasdaq, to manage complex and
advanced options strategies and to direct orders to preferred market centers or electronic communica-
tions networks. Our seasoned brokerage professionals are skilled in the latest trading tools and technol-
ogy, positioning us well for the challenges of competing in the evolving world of high-speed electron-
ic transactions. We believe the appeal of our business proposition remains very strong and we are com-
mitted to enhancing it.
Excess-SIPC Account Protection: We continue to provide the highest level of account protection avail-
able, combining SIPC protection with excess-SIPC coverage to each account’s total net equity, with no
aggregate limit for the firm. Recently, several leading discount brokerages that offered similar benefits
have merged into organizations that offer less protection for each account and for the brokerage firm in
121757NAR_R1 5/3/06 2:32 PM Page 4
the aggregate. Siebert is one of the few leading discount brokers whose customers receive unlimited
account protection for the total net equity in their accounts. While we do not anticipate a disaster of the
magnitude that would require this level of protection, we believe that prudence outweighs possibility,
especially given the considerable level of risk in today’s system from the volume of derivatives present.
Competitive Money Fund Yields: Over the past year, a number of brokers have begun sweeping cash
awaiting reinvestment into bank affiliate interest-earning or money market accounts that are paying
lower yields than the money market mutual funds that had been previously provided. Other firms are
paying cash interest in the brokerage account at a rate that is well below competitive money market fund
yields. Siebert is committed to offering clients an automatic daily sweep of free cash in their brokerage
accounts to their choice among a selection of taxable and tax-exempt money market mutual funds, with
each paying a highly competitive yield. This positions us well in the current interest rate environment.
Siebert Capital Markets
The Capital Markets team that joined the Company in the third quarter of 2004 generated significant
growth for our Siebert Capital Markets division which provides high-quality brokerage services to insti-
tutional investors and investment banking services to corporations. Backed by the latest information
technology and systems, our trading desk and investment bankers offer value-added services to some of
the nation’s largest investment managers, corporations and public retirement systems.
Our investment banking team has acted as co-manager or underwriter in more than $50 billion of glob-
al equity offerings and $128 billion in global corporate bond offerings since January 2002. In 2005, the
firm acted as co-manager or syndicate member in equity underwritings for leading companies such as
Clear Channel Outdoor, Google, Inc., MetLife, Inc., Warner Music Group Corp. and Chipotle Mexican
Grill Inc. SCM acted as a co-manager in the corporate bond offerings of major issuers including CIT
Group, Inc., Wal-Mart Stores Inc., Morgan Stanley and Citigroup Inc.
Setting the stage for further positive results, SCM substantially expanded its institutional trading capa-
bilities by enhancing its trading platform. In 2005, SCM introduced Siebert Automated Solutions, a full
suite of electronic trading strategies utilizing algorithms.
Municipal Underwriting
Muriel Siebert and Co., Inc., owns 49 percent of Siebert Brandford Shank & Co., L.L.C., which had
Members’ Capital of approximately $7.6 million at year-end 2005. SBS has ranked in the top 25 senior
managing municipal bond underwriters for the past five years and is also the nation's #1-ranked woman
and minority-owned senior managing municipal bond underwriter. Through our affiliation with SBS,
we can offer our retail clients access to municipal new-issue securities at initial public offering prices.
In 2005, SBS served as lead manager on 19 negotiated new issues totaling over $2 billion, including
121757NAR_R1 5/3/06 2:31 PM Page 1
underwritings of $500 million for Detroit Public Schools, $426 million for Detroit Water, $250 million
for Philadelphia Water, and $209 million for Garden State Preservation Trust. SBS also acted as co-man-
ager on 200 new issues totaling over $54 billion, including underwritings for the states of California,
Connecticut, Illinois, Massachusetts, Michigan, New Jersey, New York, Texas, Virginia and Wisconsin
and the cities of Atlanta, Chicago, Cleveland, Dallas, Detroit, Houston, Los Angeles, New York,
Philadelphia and St. Louis. Siebert’s financial statements report only on its 49 percent share of earnings
and retained earnings of SBS.
Stock Buy Back
On May 15, 2000, the Board of Directors of the Company authorized the repurchase of up to one mil-
lion shares of the Company’s common stock. Through December 31, 2005, the Company had purchased
916,434 shares at an average price of $4.51 per share. The Company intends to continue acquiring
shares pursuant to its stock repurchase program based upon the price of the stock and in accordance with
applicable rules and regulations.
A Strong Foundation
We continue to operate on conservative business principles. Our balance sheet remains sound, with $43
million in assets at year-end, of which $32 million, or 78 percent, is in cash or cash equivalents, posi-
tioning us well for further growth and expansion. We believe our customer base appreciates the excep-
tional personal service and value we offer. Our commitment to providing the best discount brokerage
services is absolute, as is our dedication to integrity. We continue to pursue potential opportunities
throughout our core and ancillary businesses. We look forward to building on this strong foundation, as
we begin another year of shared progress and achievement, continuing to enhance the value and extend
the scope of your Company.
Thank you for your support,
Muriel Siebert
Chairwoman, President and Chief Executive Officer
P.S. We encourage all shareholders to take advantage of the Shareholder Discount Program through
which holders of at least 100 Siebert shares can receive a 10 percent commission discount plus two free
trades per year. For specific details, please contact James Burzynski, Manager, New Accounts at 800-
872-0711 and identify yourself as a shareholder. The New Accounts Department is open from 7:30 am
to 7:30 pm ET, Monday – Friday.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
(cid:95) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 2005
(cid:134) 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)
11-1796714
(I.R.S. Employer
Identification No.)
10022
(Zip Code)
(212) 644-2400
Registrant’s telephone number
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 checkmark if the registrant is a well know seasoned issuer, as defined in Rule 405 of the Securities Act. YES (cid:134) NO (cid:95)
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES (cid:134) NO (cid:95)
Indicate by checkmark 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 (cid:95) NO (cid:134)
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. (cid:95)
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. (See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act). Large accelerated filer (cid:134) Accelerated filer (cid:134) Non-accelerated filer (cid:95)
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2). YES (cid:134) NO (cid:95)
The number of shares of the Registrant’s outstanding Common Stock, as of March 16, 2006, was 22,125,254
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 30, 2005), was $7,287,677.
Documents Incorporated by Reference: Proxy Statement to be filed pursuant to Regulation 14A of the Exchange
Act on or before May 1, 2006, incorporated by reference into Part 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.
2
ITEM 1. BUSINESS
GENERAL
PART I
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 90% 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 and, through its wholly owned subsidiary, Siebert Woman’s Financial Network, Inc (“WFN”), engages in
providing products, services and information all uniquely devoted to woman’s financial needs. 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. (“NFS”), a wholly owned subsidiary of Fidelity Investments.
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.
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™, 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.
3
Siebert’s over the counter orders are executed through a network of Nasdaq market makers with no single
market maker executing all trades. The firm also offers customers execution services through Nasdaq’s SelectNet™
and Reuters’ Instinet™ systems for an additional fee. These systems give customer’s access to all Electronic
Communication Networks listed on SelectNet™ and to Instinet™ before and after regular market hours. Siebert
believes that its over-the counter executions afford its customers the best possible opportunity for consistent price
improvement.
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 serviced 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 NFS, the firm’s clearing agent, 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 agent, 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.
Information and Communications Systems
Siebert’s operations rely heavily on information processing and communications systems which are provided
by Siebert’s clearing agent. 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
4
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 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 multipoint Virtual
Private Network system. 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 filed a lawsuit against Intuit Inc. (“Intuit”) in New York State Supreme Court on September 17, 2003
seeking not less than $11.1 million in compensatory damages and $33.3 million in punitive damages for claims
relating to the Joint Brokerage Service (the “JBS”) conducted during the years ended December 31, 2003 and 2002
under the Strategic Alliance Agreement between Siebert and Intuit. The Court denied Intuit’s motion to dismiss
Siebert’s causes of action for breach of fiduciary duty, breach of contractual obligations to pay shared expenses,
promissory estoppel, and breach of the implied covenant of good faith and fair dealing. The Court granted Intuit’s
motion to dismiss Siebert’s causes of action for breach of the express covenant of good faith and fair dealing,
misrepresentation and/or fraud, and its request for punitive damages. Intuit has counterclaimed against Siebert,
seeking not less than $6.6 million. Siebert and Intuit have appealed from certain portions of the Court’s decision and
Siebert has also moved for reargument of that decision regarding punitive damages. In November 2005, Intuit’s
counsel was disqualified by the Court from representing Intuit in this action. Any further activity in the action is
stayed pending Intuit’s appeal from the Order of disqualification, which appeal is expected to be heard by the
Appellate Court in April 2006.
Siebert terminated the fully disclosed clearing agreement (the “Clearing Agreement”) with Pershing LLC
(formerly the Pershing division of Donaldson, Lufkin & Jenrette Securities Corporation) (“Pershing”) in 2003. Based
on consultation with counsel, Siebert believes that the $1,500,000 that it advanced to Pershing in January 2003 should
have been returned and that Pershing may be liable for damages. Pershing has expressed its belief that it is entitled to
retain the advance and receive a minimum of $3 million for its unreimbursed costs, a termination fee of $500,000 and
$5 million for lost revenues. Siebert believes the Pershing claims are without merit and that the ultimate result of this
matter will not have a material adverse effect on result of operations or financial position. Siebert in 2004 decided not
to commence proceedings against Pershing and charged off the $1,500,000 advance to Pershing. Siebert and Pershing
in 2005 entered into a Limited Release Agreement under which Siebert received a release from the $3 million disputed
claims for unreimbursed fees and costs, and Pershing was released from any liability to Siebert based upon the
disputed fees and costs, and Siebert paid a consideration to Pershing that had been previously accrued by Siebert.
The Company entered into an Operating Agreement, effective as of April 19, 2005 (the “Operating Agreement”),
with Suzanne Shank and Napolean Brandford III, the two individual principals of SBS ( the “Principals”) of SBS
Financial Products Company LLC, a Delaware limited liability company (“SBSFPC”). Pursuant to the terms of the
Operating Agreement, the Company and each of the Principals made an initial capital contribution of $400,000 in
exchange for a 33.33% initial interest in SBSFPC. SBSFPC engages in derivatives transactions related to the municipal
underwriting business. The Operating Agreement provides that profit and loss will be shared 66.66% by the Principals
and 33.33% by the Company.
On May 15, 2000, the board of directors of the Company authorized the repurchase of up to 1,000,000 shares of
the Company’s common stock. Shares will be purchased from time to time, in the discretion of the Company, in the
open market and in private transactions. Through December 31, 2005, 916,434 shares have been purchased at an
average price of $4.51 per share. The Company intends to continue acquiring shares pursuant to its stock repurchase
program based upon the price of the stock and in accordance with applicable rules and regulations.
5
THE CAPITAL MARKETS DIVISION
In 1991, Siebert created its Capital Markets Group (“SCM”) 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. In June 2004, Siebert expanded its SCM and New York Stock Exchange (“NYSE”) Floor Operations. SCM
provides high-quality brokerage service to both institutional investors and issuers of equity and fixed-income
securities.
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 2005, SBS served as the lead manager of over $2 billion of negotiated municipal new
issues and served as a co-manager in over $54 billion of negotiated municipal new issues.
Since its inception, the Siebert, Brandford, Shank division and its successor SBS have co-managed offerings of
approximately $371 billion and lead managed offerings of approximately $14 billion. Clients include the States of
California, Texas, Washington, Ohio and Michigan and the Cities of Chicago, Detroit, Los Angeles, Houston, Dallas,
Denver and St. Louis.
SBS operates out of offices in San Francisco, New York, Seattle, Houston, Chicago, Detroit, Los Angeles,
Washington, DC, San Antonio, Anchorage, 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. An underwriter is exposed to losses on the securities that it has
committed to purchase if the securities must be sold below the cost to the syndicate. 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.
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 Siebert. 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.
6
REGULATION
The securities industry in the United States is subject to extensive regulation under both Federal and state laws.
The Securities and Exchange Commission (“SEC”) is the Federal agency charged with administration of the Federal
securities laws. Siebert is registered as a broker-dealer with the SEC, and is a member of the New York Stock
Exchange (“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 50 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.
On March 4, 2005, Siebert consented without admitting or denying guilt to a $45,000 fine and censure by the
NYSE due to findings of books-and-records, financial, operational and supervisory deficiencies. This action was
based on technical record keeping and administrative deficiencies and there were no complaints from and no losses
to any Siebert customers. As the NYSE expressly noted, Siebert had no prior disciplinary history in its 37 years in
business.
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 funded through assessments on registered broker-
dealers. In addition, Siebert, through it’s clearing agent, 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
7
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, 2005 and 2004, Siebert had net capital of $25.6 million and $16.9 million, respectively. Siebert claims
exemption from the reserve requirement under Section 15c3-3(k)(2)(ii).
EMPLOYEES
As of March 16, 2006, the Company had approximately 93 employees, six 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.
ITEM 1A. RISK FACTORS
Securities market volatility and other securities industry risk could adversely affect our business
Our principal business activities include discount retail broker-dealer operations, as well as investment banking,
institutional sales and other related business lines. Like other businesses operating in the securities industry, our
business is directly affected by volatile trading markets, fluctuations in the volume of market activity, economic and
political conditions, upward and downward trends in business and finance at large, legislation and regulation affecting
the national and international business and financial communities, currency values, inflation, market conditions, the
availability and cost of short-term or long-term funding and capital, the credit capacity or perceived credit worthiness
of the securities industry in the marketplace and the level and volatility of interest rates. We also face risks relating
to trading losses, losses resulting from the ownership or underwriting of securities, counterparty failure to meet
commitments, customer fraud, employee fraud, issuer fraud, errors and misconduct, failures in connection with the
processing of securities transactions and litigation. The varied risks associated with our business and the securities
industry in general could adversely affect our commission and other revenues. A reduction in our revenues or a loss
resulting from our underwriting or ownership of securities or sales or trading of securities could have a material
adverse effect on our business, results of operations and financial condition. In addition, as a result of these risks, our
revenues and operating results may be subject to significant fluctuations from quarter to quarter and from year to
year.
Lower price levels in the securities markets may reduce our profitability adversely affecting the price of our
common stock.
Lower price levels of securities may result in (i) reduced volumes of securities, options and futures transactions,
with a consequent reduction in our commission revenues, and (ii) losses from declines in the market value of securities
we held in investment and underwriting positions. In periods of low volume, our levels of profitability are further
adversely affected because certain of our expenses remain relatively fixed. Sudden sharp declines in market values
of securities and the failure of issuers and counterparties to perform their obligations can result in illiquid markets
which, in turn, may result in our having difficulty selling securities. Such negative market conditions, if prolonged,
may also lower our revenues from investment banking and other activities. A reduction in our revenues from
investment banking or other activities could have a material adverse affect on our business, results of operations and
financial condition.
8
There is intense competition in the discount brokerage industry.
Siebert encounters significant competition from full-commission, online and other 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. Siebert equity investee, SBS, a municipal bond underwriter, also encounters
significant competition from firms engaged in the municipal finance business. The general financial success of the
securities industry over the past several years and the price wars encountered and lower commission rates in the
discount brokerage business in general have strengthened our existing competitors. Siebert believes that such changes
in the industry will continue to strengthen existing competitors and attract additional competitors such as banks,
insurance companies, providers of online financial and information services, and others 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. Siebert competes with a wide variety of vendors of financial services
for the same customers. Siebert may not be able to compete effectively with current or future competitors.
During 2005, competition continued to intensify both among all classes of brokerage firms and within the
discount brokerage business as well as from consolidation in the discount brokerage industry. Some competitors in
the discount brokerage business offer services which we do not, including financial advice and investment management.
In the last two years, some competitors have continued to offer lower flat rate execution fees that are difficult for any
conventional discount firm to meet. Industry-wide changes in trading practices are expected to cause continuing
pressure on fees earned by discount brokers for the sale of order flow. Many of the flat fee brokers impose charges
for services such as mailing, transfers and handling exchanges which Siebert does not and also direct their execution
to captive market makers. Continued or increased competition from ultra low cost, flat fee brokers and broader
service offerings from other discount brokers could limit our growth or lead to a decline in Siebert’s customer base
which would adversely affect our business, results of operations and financial condition.
We are subject to extensive government regulation.
Our business is subject to extensive regulation in the United States, at both the Federal and state level. We are
also subject to regulation by self–regulatory organizations and other regulatory bodies in the Untied States, such as
the SEC, the NYSE, the NASD and the Municipal Securities Rulemaking Board (the “MSRB”). We are registered as
a broker-dealer in 50 states, the District of Columbia and Puerto Rico. The regulations to which we are subject as a
broker-dealer cover all aspects of the securities business including: training of personnel, sales methods, trading
practices, uses and safe keeping of customers’ funds and securities, capital structure, record keeping, fee arrangements,
disclosure and the conduct of directors, officers and employees. Failure to comply with any of these laws, rules or
regulations, which may be subject to the uncertainties of interpretation, could result in civil penalties, fines, suspension
or expulsion and have a material adverse effect on our business, results of operations and financial condition.
Siebert, as a registered broker-dealer and NASD member organization, 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. SIPC is funded through assessments on registered broker-
dealers. In addition, Siebert, through its clearing agent, 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 MSRB 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.
9
The laws, rules and regulations, as well as governmental policies and accounting principles, governing our
business and the financial services and banking industries generally have changed significantly over recent years and
are expected to continue to do so. We cannot predict which changes in laws, rules, regulations, governmental policies
or accounting principles will be adopted. Any changes in the laws, rules, regulations, governmental policies or
accounting principles relating to our business could materially and adversely affect our business, results of operations
and financial condition.
We are subject to net capital requirements.
The SEC, the NYSE and various other securities and commodities exchanges and other regulatory bodies in the
United States have rules with respect to net capital requirements which affect us. These rules have the effect of
requiring that at least a substantial portion of a broker-dealer’s assets be kept in cash of highly liquid investments. Our
compliance with the net capital requirements could limit operations that require intensive use of capital, such as
underwriting or trading activities. These rules could also restrict our ability to withdraw our capital, even in
circumstances where we have more than the minimum amount of required capital, which, in turn, could limit our
ability to implement growth strategies. In addition, a change in such rules, or the imposition of new rules, affecting
the scope, coverage, calculation or amount to such net capital requirements, or a significant operating loss or any
unusually large charge against net capital, could have similar adverse effects.
Our customers may fail to pay us.
A principal credit risk to which we are exposed on a regular basis is that our customers may fail to pay for their
purchases or fail to maintain the minimum required collateral for amounts borrowed against securities positions
maintained by them. We have established policies with respect to maximum purchase commitments for new customers
or customers with inadequate collateral to support a requested purchase. However, our managers have some flexibility
in the allowance of certain transactions. When transactions occur outside normal guidelines, these accounts are
monitored until their payment obligation is completed. If the customer does not meet the commitment, we take steps
to close out the position in an attempt to minimize losses.
We have personnel specifically responsible for monitoring all customer positions for the maintenance of required
collateral. These personnel also monitor accounts that may be concentrated in one or more securities whereby a
significant decline in the value of a particular security could reduce the value of the account’s collateral below the
account’s loan obligation. While we have not had significant credit losses in the last five years, we cannot assure you
that the policies and procedures we have established will be adequate to prevent a significant credit loss.
We face risks relating to our investment banking activities.
Certain risks are involved in the underwriting of securities. Investment banking underwriting syndicates agree
to purchase securities at a discount from the public offering price. If the securities must be sold below the syndicate
cost, an underwriter is exposed to losses on the securities that it has committed to purchase. In the last several years,
investment banking firms increasingly have 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, underwriters of
municipal securities are exposed to substantial potential liability for material misstatements or omissions of fact in
the offering documents prepared for these offerings.
An increase in volume on our systems or other events could cause them to malfunction.
We presently receive and process up to 65% of our trade orders electronically. This method of trading is heavily
dependent on the integrity of the electronic systems supporting it. While we have never experienced a significant
failure of our trading systems, heavy stress placed on our systems during peak trading times could cause our systems
to operate at unacceptably low speeds or fail altogether. Any significant degradation or failure of our systems or the
systems of third parties involved in the trading process (e.g., online and Internet service providers, record keeping
10
and data processing functions performed by third parties, and third party software), even for a short time, could cause
customers to suffer delays in trading. These delays could cause substantial losses for customers and could subject us
to claims from these customers for losses. We cannot assure you that our network structure will operate appropriately
in the event of a subsystem, component or software failure. In addition, we cannot assure you that we will be able to
prevent an extended systems failure in the event of a power or telecommunications failure, an earthquake, terrorist
attack, fire or any act of God. Any systems failure that causes interruptions in our operations could have a material
adverse effect on our business, financial condition and operating results.
We rely on information processing and communications systems to process and record our transactions.
Our operations rely heavily on information processing and communications systems. Our system for processing
securities transactions is highly automated. Registered representatives equipped with online computer terminals can
access customer account information, obtain securities prices and related information and enter and confirm orders
online.
To support our customer service delivery systems, as well as other applications such as clearing functions,
account administration, record keeping and direct customer access to investment information, we maintain a computer
network in New York City. Through our clearing agent, our computers are also linked to the major registered U.S.
securities exchanges, the National Securities Clearing Corporation and the Depository Trust Company. Failure of the
information processing or communications systems for a significant period of time could limit our ability to process
a large volume of transactions accurately and rapidly. This could cause us to be unable to satisfy our obligations to
customers and other securities firms, and could result in regulatory violations. External events, such as an earthquake,
terrorist attack or power failure, loss of external information feeds, such as security price information, as well as
internal malfunctions such as those that could occur during the implementation of system modifications, could render
part or all of these systems inoperative.
We may not be able to keep up pace with continuing changes in technology.
Our market is characterized by rapidly changing technology. To be successful, we must adapt to this rapidly
changing environment by continually improving the performance, features and reliability of our services. We could
incur substantial costs if we need to modify our services or infrastructure or adapt our technology to respond to these
changes. A delay or failure to address technological advances and developments or an increase in costs resulting from
these changes could have a material and adverse effect on our business, financial condition and results of
operations.
We depend on our ability to attract and retain key personnel.
Our continued success is principally dependent on our founder, Muriel F. Siebert, Chairwoman, Chief Executive
Officer and President and our senior management. In addition, the continued success of the SBS may be dependent
on the services of Napoleon Brandford III and Suzanne Shank. The loss of the services of any of these individuals
could significantly harm our business, financial condition and operating results.
Our principal shareholder may control many key decisions.
Ms. Muriel Siebert currently owns approximately 90% of our outstanding common stock. Ms. Siebert will have
the power to elect the entire Board of Directors and, except as otherwise provided by law or our Certificate of
Incorporation or by-laws, to approve any action requiring shareholder approval without a shareholders meeting.
There may be no public market for our common stock.
Only approximately 2,200,000 shares, or approximately 10% of our shares outstanding, are currently held by
the public. Although our common stock is traded in The Nasdaq National Market, their can be no assurance that an
active public market will continue.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
11
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
12/31/06
None
1,000
2,438
12/31/06
1 year option
5/31/09
None
7,768
6/30/07 and 6/30/09
5 year option on a
portion of space
1,008
770
1,150
4/30/06
12/31/06
4/30/07
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
See Part I-Item 1 “Business-Current Developments” and Part I-Item 7” Management’s Discussion and Analysis
of Financial Condition and Results of Operations” with respect to the Company’s lawsuit against Intuit Inc. which
was filed in New York State Supreme Court, County of New York on September 17, 2003 alleging among other
things, Intuit’s breach of contractual obligations, breach of fiduciary duties and misrepresentation and/or fraud, all
relating to the Joint Brokerage services conducted under the Strategic Alliance Agreement between Siebert and
Intuit.
In addition, the Company is involved in various routine lawsuits of a nature deemed by the Company customary
and incidental to its business. In the opinion of management, the ultimate disposition of such actions will not have a
material adverse effect on the financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matter was submitted to a vote of shareholders during the fourth quarter of the fiscal year ended December
31, 2005.
12
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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:
First Quarter - 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter - 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
$ 4.69
$ 5.32
Third Quarter - 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4.35
Fourth Quarter - 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter - 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter - 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter - 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter - 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2006 - March 16, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4.20
$ 3.95
$ 4.50
$ 3.85
$ 3.05
$ 2.72
Low
$ 3.41
$ 3.64
$ 2.74
$ 2.94
$ 2.96
$ 2.55
$ 2.80
$ 2.34
$ 2.39
On March 16, 2006, the closing price of the Company’s common stock on the Nasdaq Stock Market was $2.63
per share. There were 155 holders of record of the Company’s common stock and more than 2,000 beneficial owners
of common stock on March 6, 2006.
DIVIDEND POLICY
The Company paid no cash dividends to its shareholders in 2005, 2004 and 2003. Ms. Siebert, the majority
shareholder of the Company, has waived her right to receive the dividends declared by the Company to date although
she intends to participate in dividends declared in the future. 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.
ISSUER PURCHASE OF EQUITY SECURITIES
The following table sets forth information regarding the Company’s purchase of its common stock on a monthly
basis during the fourth quarter of 2005:
Period
October 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 2005 . . . . . . . . . . . . . . . . . . . . . . . . . .
December 2005 . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Number
Of Shares
Purchased
During Period
—
1,500
3,367
4,867
Average
Price
Paid Per
Share
—
$ 2.69
$ 2.79
$ 2.76
Total Number of
Shares Purchased as
Part of Publicly
Announced
Plans(1)
911,567
913,067
916,434
916,434
Maximum
Number of Shares
That May Yet Be
Purchased Under
The Plan
88,433
86,933
83,566
83,566
(1) 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.
13
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2005 with respect to our equity compensation
plans.
Plan Category
Equity compensation plans approved by security
holders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not approved by
Number of Securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding
options,
warrants and
rights
(b)
Number of Securities
remaining available for
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
1,767,610
$ 4.16
2,025,915
security holders(2) . . . . . . . . . . . . . . . . . . . . . .
41,400
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,809,010
$ 4.16
18,600
2,044,515
(1)
(2)
Represents the Company’s 1997 Stock Option Plan.
Represents the Company’s 1998 Restricted Stock Award Plan.
MATERIAL TERMS OF THE 1998 RESTRICTED STOCK AWARD PLAN
The Company’s 1998 Restricted Stock Award Plan provides for awards to key employees of not more than an
aggregate of 60,000 shares of our common stock, subject to adjustments for stock splits, stock dividends and other
changes in our capitalization, to be issued either immediately after the award or at a future date. As of December 31,
2005, 41,400 shares of the Company’s common stock under the Restricted Stock Award Plan had been awarded and
were outstanding. As provided in the 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 us for
the benefit of the recipients, subject to the same restrictions as the award. These dividends, without interest, are paid
to the recipients upon lapse of the restrictions.
14
ITEM 6. SELECTED FINANCIAL DATA
(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:
Total Revenues . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . .
Net income (loss) per share of
common stock
Basic . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . .
$
$
$
$
2005
2004
2003
2002
2001
31,172 $
1,863 $
28,104 $
533 $
24,696 $
123 $
24,104
(1,633)
0.08 $
0.08 $
0.02 $
0.02 $
0.01 $
0.01 $
(0.07)
(0.07)
$
$
$
$
32,020
2,488
0.11
0.11
Weighted average shares outstanding
(basic) . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding
(diluted) . . . . . . . . . . . . . . . . . . . .
Statement of financial condition data
(at year-end):
22,093,369
22,113,228
22,305,369
22,403,990
22,438,719
22,127,940
22,276,562
22,453,538
22,403,990
22,698,934
Total assets . . . . . . . . . . . . . . . . . . . .
Total liabilities excluding
subordinated borrowings . . . . . .
Stockholders’ equity . . . . . . . . . . . .
$
$
$
43,027 $
41,560 $
40,026 $
40,451
5,975 $
37,052 $
6,460 $
35,100 $
4,891 $
35,135 $
4,784
35,667
$
$
$
42,129
4,829
37,300
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 overall market conditions were weaker in 2005 due to rising interest rates, higher oil prices and nearly six
weeks of hurricanes in the southeast all of which have created a lack of investor interest in investing in stocks.
Consequently, customer trading activity was flat for the Company.
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 charging very low trading execution fees that are difficult for any
conventional discount firm to meet. Some of these 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 orders
to market makers where they have a financial interest. 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 New York Stock Exchange’s Hybrid Market proposal and the
increasing use of Electronic Communications Networks, are expected to put continuing pressure on commissions/
fees earned by brokers while increasing volatility.
The Company entered into an Operating Agreement, effective as of April 19, 2005 (the “Operating Agreement”),
with Suzanne Shank and Napolean Brandford III, the two individual principals of SBS ( the “Principals”) of SBS
Financial Products Company LLC, a Delaware limited liability company (“SBSFPC”). Pursuant to the terms of the
Operating Agreement, the Company and each of the Principals made an initial capital contribution of $400,000 in
exchange for a 33.33% initial interest in SBSFPC. SBSFPC engages in derivatives transactions related to the municipal
underwriting business. The Operating Agreement provides that profit and loss will be shared 66.66% by the Principals
and 33.33% by the Company.
15
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 14, 2006, 916,434 shares have been
purchased at an average price of $4.51 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.
Siebert filed a lawsuit against Intuit Inc. (“Intuit”) in New York State Supreme Court on September 17, 2003
seeking not less than $11.1 million in compensatory damages and $33.3 million in punitive damages for claims
relating to the Joint Brokerage Service (the “JBS”) conducted during the years ended December 31, 2003 and 2002
under the Strategic Alliance Agreement between Siebert and Intuit. The Court denied Intuit’s motion to dismiss
Siebert’s causes of action for breach of fiduciary duty, breach of contractual obligations to pay shared expenses,
promissory estoppel, and breach of the implied covenant of good faith and fair dealing. The Court granted Intuit’s
motion to dismiss Siebert’s causes of action for breach of the express covenant of good faith and fair dealing,
misrepresentation and/or fraud, and its request for punitive damages. Intuit has counterclaimed against Siebert,
seeking not less than $6.6 million. Siebert and Intuit have appealed from certain portions of the Court’s decision and
Siebert has also moved for reargument of that decision regarding punitive damages. In November 2005, Intuit’s
counsel was disqualified by the Court from representing Intuit in this action. Any further activity in the action is
stayed pending Intuit’s appeal from the Order of disqualification, which appeal is expected to be heard by the
Appellate Court in April 2006.
CRITICAL ACCOUNTING POLICIES
The Company generally follows accounting policies standard in the brokerage industry and believes that its
policies 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, 2005 Compared To Year Ended December 31, 2004
Revenues
Total revenues for 2005 were $31.2 million, an increase of $3.1 million, or 10.9%, from 2004. Commission and
fee income increased $1.5 million, or 6.2%, from the prior year to $25.3 million due to an increase in commissions
generated by the commission recapture, institutional direct access and institutional trading operations as well as
retail customer accounts purchased from Wall Street Discount, Inc. in the second quarter 2004 offset by a decrease
in retail customer commissions. The decrease in retail customer commissions is due a decrease in the average
commission charged per trade in 2005 from the previous year. The commission recapture, institutional direct access
and institutional trading operations began in the third quarter 2004.
Investment banking revenues increased $1 million, or 74.0%, from the prior year to $2.4 million in 2005 due to
the Company participating in more new issues as a result of the Capital Markets team that joined the Company in the
third quarter of 2004.
16
Income from the Company’s investment in Siebert, Brandford, Shank & Co., LLC (“SBS”), an entity in which
the Company holds a 49% equity interest, for 2005 and 2004 was $1.7 million. SBS serves as an underwriter for
municipal bond offerings. Income from the Company’s equity investment in SBS Financial Products Company, LLC,
an entity in which the Company holds a 33.33% equity interest (“SBSFPC”) for 2005 was $194,000. SBSFPC
operations began in the second quarter of 2005.
Trading profits decreased $59,000, or 7.8%, from the prior year to $702,000 primarily due to decreased trading
in municipal, government and corporate bonds within the Company’s riskless trading group.
Income from interest and dividends increased $508,000, or 108.1%, from the prior year to $978,000 primarily
due to higher interest rates and higher cash balances.
Expenses
Total expenses for 2005 were $28.0 million, an increase of $838,000, or 3.1%, from the prior year.
Employee compensation and benefit costs increased $289,000, or 2.6%, from the prior year to $11.4 million
primarily due to the hiring of the Company’s General Counsel, the expansion of the Company’s Capital Markets
Group and the New York Stock Exchange Floor Operation, settlement of employee related matters and health and
other employee benefits offset commissions based on production, headcount in customer service and new accounts
departments and termination of an executive officer.
Clearing and floor brokerage fees increased $1.1 million, or 24.8%, from the prior year to $5.3 million primarily
due to increased volume of trade executions and a one time commission rebate of $800,000 from the Company’s
clearing firm in the first and second quarter of 2004.
Professional fees increased $2.2 million, or 100.3% from the prior year to $4.3 million primarily due to an
increase in legal fees relating to litigation with Intuit and employee matters and consulting fees relating to the
Company entering into the commission recapture business in the third quarter of 2004, the acquisition of the customer
accounts of Wall Street Discount Corp., and Sarbanes-Oxley.
Advertising and promotion expense decreased $231,000, or 20.9%, from the prior year to $876,000 primarily
due to management’s decision to spend less for advertising and promotion.
Communications expense decreased $603,000, or 25.9%, from the prior year to $1.7 million from actively
pursuing alternative vendors and utilizing new technologies.
Occupancy costs decreased $14,000, or 1.3%, from the prior year to $1.1 million principally due to the combining
of the Company’s Boca Raton office with Your Discount Broker, Inc.’s Boca Raton office in the second quarter of
2004.
Other general and administrative expenses decreased $282,000, or 7.9%, from the prior year to $3.3 million
primarily due to a decrease in depreciation and amortization expenses, printing and postage costs offset by an increase
in placement and registration fees.
Taxes
The provision for income taxes increased by $900,000, or 200.0% from the prior year to $1.4 million due to an
increase in net income before tax to $3.2 million in 2005 from $983,000 in 2004.
Year Ended December 31, 2004 Compared To Year Ended December 31, 2003
Revenues
Total revenues for 2004 were $28.1 million, an increase of $3.4 million, or 13.8%, from 2003. Commission and
fee income increased $3.3 million, or 16.3%, from the prior year to $23.8 million due to increased trading volume and
higher margin debit balances maintained by the Company’s retail customer base in 2004.
Investment banking revenues increased $277,000, or 25.5%, from the prior year to $1.4 million in 2004 due to
an increase in activity in the new issue market and the addition of new capital markets personnel.
17
Income from the Company’s investment in Siebert, Brandford, Shank & Co., LLC (“SBS”) for 2004 was $1.7
million compared to income of $1.9 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.
Trading profits decreased $43,000, or 5.4%, from the prior year to $761,000 primarily due to decreased trading
in municipal, government and corporate bonds within the Company’s riskless trading group.
Income from interest and dividends increased $20,000, or 4.4%, from the prior year to $470,000 primarily due
to interest earned on a $25 million subordinated loan obtained from the Company’s clearing firm that was required
by an issuer to participate in its initial public offering, and higher interest rates offset by the maturing of municipal
bonds that provided higher yields.
Expenses
Total expenses for 2004 were $27.1 million, an increase of $2.6 million, or 10.7%, from the prior year.
Employee compensation and benefit costs increased $2.4 million, or 27.7%, from the prior year to $11.1 million
primarily due to the hiring of the Company’s General Counsel, the expansion of the Company’s Capital Markets
Group and the New York Stock Exchange Floor Operation and increase in bonus accruals.
Clearing and floor brokerage fees decreased $29,000, or 0.07%, from the prior year to $4.24 million primarily
due to a one time commission rebate of $ 800,000 from the Company’s clearing firm offset by the increased volume
of trade executions.
Professional fees increased $619,000, or 40.6% from the prior year to $2.1 million primarily due to the increase
in consulting fees relating to the Company entering into the commission recapture business in the third quarter of
2004 and the acquisition of the customer accounts of Wall Street Discount Corp.
Advertising and promotion expense decreased $251,000, or 18.5%, from the prior year to $1.1 million primarily
due to management’s decision to spend less for advertising and promotion.
Communications expense decreased $507,000, or 17.9%, from the prior year to $2.3 million primarily due to
management’s effort to control and maintain these costs.
Occupancy costs decreased $56,000, or 5.0%, from the prior year to $1.1 million principally due to the combining
of the Company’s Boca Raton office with Your Discount Broker, Inc.’s Boca Raton office into a larger branch.
Other general and administrative expenses decreased $1.1 million or 23.6%, from the prior year to $3.6 million
primarily due to the elimination of product development costs relating to the JBS and the decrease in depreciation and
amortization.
Taxes
The provision for income taxes increased by $380,000, or 542.9% from the prior year to $450,000 due to an
increase in net income before tax to $983,000 in 2004 from $193,000 in 2003.
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, 2005 were $43 million, of which, $33.4
million, or 78%, 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, 2005, Siebert’s regulatory net capital was $25.6 million, $25.3 million in excess of its minimum capital
requirement of $250,000. Siebert terminated the fully disclosed clearing agreement (the “Clearing Agreement”) with
Pershing LLC (formerly the Pershing division of Donaldson, Lufkin & Jenrette Securities Corporation) (“Pershing”)
in 2003. Based on consultation with counsel, Siebert believes that the $1,500,000 that it advanced to Pershing in
January 2003 should have been returned and that Pershing may be liable for damages. Pershing has expressed its
belief that it is entitled to retain the advance and receive a minimum of $3 million for its unreimbursed costs, a
termination fee of $500,000 and $5 million for lost revenues. Siebert believes the Pershing claims are without merit
and that the ultimate result of this matter will not have a material adverse effect on result of operations or financial
18
position. Siebert in 2004 decided not to commence proceedings against Pershing and charged off the $1,500,000
advance to Pershing. Siebert and Pershing in 2005 entered into a Limited Release Agreement under which Siebert
received a release from the $3 million disputed claims for unreimbursed fees and costs, and Pershing was released
from any liability to Siebert based upon the disputed fees and costs, and Siebert paid a consideration to Pershing that
had been previously accrued by Siebert.
In August 2004, Siebert participated as an underwriter in the Google, Inc. initial public offering. To participate
as an underwriter, the lead Investment Banks (the “Banks”) requested that each underwriter provide the Banks with
a $25 million Letter of Credit on behalf of each underwriter in favor of the Banks. To obtain the Letter of Credit,
Siebert entered into a Temporary Subordinated Loan Agreement with NFS. On August 6, 2004, Siebert obtained a
Letter of Credit for $25 million and terminated the Letter of Credit and paid the Temporary Subordinated Loan
Agreement with NFS on September 15, 2004.
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 8% per annum. The facility expires on August 31, 2007, at
which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder.
Below is a table that presents the Company’s obligations and commitments at December 31, 2005:
Contractual Obligations
Operating lease obligations . . . . . . . .
Total
$ 1,963,000
Payment Due By Period
Less Than
1 Year
$ 965,000
1-3 Years
$ 813,000
3-5 Years
$185,000
More Than
Five Years
$ —
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 and
municipal securities on both a long and short basis. The fair value of all long and short positions held by Siebert at
December 31, 2005 was zero. The Company does not engage in derivative transactions, has no interest in any special
purpose entity and has 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 8% per annum. Siebert earned interest of $96,000 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 commercial
paper. 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 AND SUPPLEMENTARY DATA
See financial statements and supplementary data required pursuant to this item beginning on page F-1 of this
Report on Form 10-K.
19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company carried out an evaluation, under the supervision and with the participation of management,
including the Company’s President and Chief Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule
13a-15 of Securities Exchange of 1934, as amended. Based on that evaluation, the Company’s management, including
the President and Chief Financial Officer, 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 were no changes in the Company’s internal controls over financial reporting that occurred during the
Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect the
Company’s internal controls over financial reporting.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(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 May 1, 2006.
(b)
Identification of Executive Officers
Name
Muriel F. Siebert . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ameen Esmail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Age
73
47
Joseph M. Ramos, Jr. . . . . . . . . . . . . . . . . . . . . . . . . .
47
Jeanne Rosendale . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
Chairwoman and President
Position
Executive Vice President and Director of
Business Development
Executive Vice President and Chief
Financial Officer
Executive Vice President and General
Counsel
Daniel Iesu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
Secretary
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 Woman’s Forum, a former member of the State of New York Commission on Judicial Nomination and
is on the executive committee of the Economic Club of New York.
Ameen Esmail has been Executive Vice President and Director of Business Development since July 3, 2003.
From 1984 to 1996, Mr. Esmail served as an Executive Vice President of Siebert. From 1996 to 2003, Mr. Esmail
worked as an independent consultant servicing the financial securities industry. Mr. Esmail earned a MBA from New
York University’s Stern’s Graduate School of Business in 2000.
20
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 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.
Jeanne M. Rosendale has been Executive Vice President, General Counsel of Siebert since May 3, 2004. From
February 2003 to April 2004, Ms. Rosendale served as Global Director Compliance for Knight Equity Markets. From
2001 through the end of 2002, Ms. Rosendale served as Managing Director, General Counsel and Chief Compliance
Officer for TD Securities (USA) Inc. Ms. Rosendale’s background likewise includes senior level legal positions with
Citigroup and the law firm Weil Gotshal & Manges, LLP. Ms. Rosendale received both her B.A. and J.D., with
honors, from Fordham University. She is active in various industry groups such as the SIA, the Bond Market
Association, the LSTA and ISDA.
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.
(c) Compliance with Section 16(a) of the Exchange Act
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 May 1, 2006.
(d) Code of Ethics
The Company has adopted a financial code of ethics that applies to our principal executive officer, principal
financial officer, principal accounting officer and all other employees of the Company performing similar functions.
This financial code of ethics is posted on our website. The Internet address for the Company’s website is http://www.
siebertnet.com. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding
an amendment to, or waiver from, a provision of this code of ethics by either filing a Form 8-K or posting such
information on our website, at the address and location specified above, within four business days following the date
of such amendment or waiver.
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 May 1, 2006.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
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 May 1, 2006.
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 May 1, 2006.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required in 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 May 1, 2006.
21
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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.
(a) The following documents are filed as part of this report:
1.
Financial Statements
The consolidated Financial statements for the year ended December 31, 2005 commence on page F-1 of this
report on Form 10-K.
2.
Financial Statement Schedules
None.
3.
Exhibits
The exhibits required by Item 601 of the Regulation S-K filed as part of, or incorporated by reference in, this
report are listed in the accompanying Exhibit Index.
22
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIEBERT FINANCIAL CORP.
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Financial Condition at December 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . .
Page
F-1
F-2
Consolidated Statements of Income for each of the years in the three-year period
ended December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-3
Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period
ended December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-4
Consolidated Statements of Cash Flows for each of the years in the three-year period
ended December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
F-6
SIEBERT, BRANDFORD, SHANK & CO., LLC
Report of Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-17
Statements of Financial Condition at December 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-18
Statements of Operations for each of the years in the three-year period ended December 31, 2005 . . . . . . . . .
F-19
Statements of Changes in Members’ Capital for each of the years in the three-year period
ended December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-20
Statements of Cash Flows for each of the years in the three-year period ended December 31, 2005 . . . . . . . . .
F-21
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-22
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Siebert Financial Corp.
We have audited the accompanying consolidated statements of financial condition of Siebert Financial Corp.
and subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of
income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended
December 31, 2005. 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 the standards of the Public Company Accounting Oversight Board
(United States). 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 referred to above present fairly, in all material respects, the consolidated
financial position of Siebert Financial Corp. and subsidiaries as of December 31, 2005 and 2004, and the consolidated
results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005
in conformity with U.S. generally accepted accounting principles.
Eisner LLP
New York, New York
March 20, 2006
F-1
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash equivalents - restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable from clearing broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, equipment and leasehold improvements, net . . . . . . . . . . . . . . . . . .
Investments in and advances to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2005
2004
$ 30,980,000
1,300,000
2,404,000
828,000
4,428,000
992,000
1,494,000
601,000
$ 43,027,000
$ 28,748,000
1,300,000
2,371,000
1,305,000
3,779,000
1,539,000
2,017,000
501,000
$ 41,560,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,975,000
$ 6,460,000
Commitments and contingent liabilities
Stockholders’ equity:
Common stock, $.01 par value; 49,000,000 shares authorized, 23,039,402
shares issued and 22,122,968 shares outstanding at December 31, 2005
and 22,983,917 shares issued and 22,082,301 shares outstanding at
December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: 916,434 and 901,616 shares of treasury stock at cost at December 31,
2005, and 2004, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
See notes to consolidated financial statements.
230,000
18,063,000
22,896,000
229,000
17,931,000
21,033,000
(4,137,000)
37,052,000
$ 43,027,000
(4,093,000)
35,100,000
$ 41,560,000
F-2
CONSOLIDATED STATEMENTS OF INCOME
Revenue:
Commissions and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from equity investees . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2005
2004
2003
$ 25,271,000
2,372,000
702,000
1,849,000
978,000
31,172,000
$ 23,798,000
1,363,000
761,000
1,712,000
470,000
28,104,000
$ 20,456,000
1,086,000
804,000
1,900,000
450,000
24,696,000
Expenses:
Employee compensation and benefits . . . . . . . . . . . . . . . . . . . .
Clearing fees, including floor brokerage . . . . . . . . . . . . . . . . . .
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising and promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write off of advance to clearing broker . . . . . . . . . . . . . . . . . . .
Other general and administrative . . . . . . . . . . . . . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,427,000
5,295,000
4,296,000
876,000
1,728,000
1,053,000
2,000
3,282,000
27,959,000
3,213,000
1,350,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,863,000
Net income per share of common stock - basic . . . . . . . . . . . . . . . .
Net income per share of common stock - diluted . . . . . . . . . . . . . .
$
$
0.08
0.08
11,138,000
4,242,000
2,144,000
1,107,000
2,331,000
1,067,000
28,000
1,500,000
3,564,000
27,121,000
8,722,000
4,271,000
1,525,000
1,358,000
2,838,000
1,123,000
1,000
4,665,000
24,503,000
983,000
450,000
533,000
0.02
0.02
$
$
$
193,000
70,000
123,000
0.01
0.01
$
$
$
Weighted average shares outstanding - basic . . . . . . . . . . . . . . . . .
Weighted average shares outstanding - diluted . . . . . . . . . . . . . . . .
22,093,369
22,127,940
22,113,228
22,276,562
22,305,369
22,453,538
See notes to consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Common Stock
Treasury Stock
Number
Of
Shares
$.01 Par
Value
Additional
Paid -In
Capital
Retained
Earnings
Number
Of
Shares
Amount
Total
Balance - January 1, 2003
22,968,167
$ 229,000
$ 17,880,000
$ 20,377,000
572,400
$ (2,819,000)
$ 35,667,000
Net income . . . . . . . . . . . . . . . . . . . . . .
Treasury share purchases
Issuance of shares in connection with
exercise of employee stock
options . . . . . . . . . . . . . . . . . . . . .
Tax benefit arising from exercise of
employees stock options . . . . . . .
15,750
36,000
15,000
123,000
189,503
(706,000)
123,000
(706,000)
36,000
15,000
Balance - December 31, 2003
22,983,917
229,000
17,931,000
20,500,000
761,903
(3,525,000)
35,135,000
Net income . . . . . . . . . . . . . . . . . . . . . .
Treasury share purchases . . . . . . . . . .
533,000
139,713
(568,000)
533,000
(568,000)
Balance - December 31, 2004
22,983,917
229,000
17,931,000
21,033,000
901,616
(4,093,000)
35,100,000
Net income . . . . . . . . . . . . . . . . . . . . . .
Treasury share purchases . . . . . . . . . .
Issuance of shares in connection with
exercise of employee stock
options . . . . . . . . . . . . . . . . . . . . .
1,863,000
1,863,000
14,818
(44,000)
(44,000)
55,485
1,000
132,000
133,000
Balance - December 31, 2005
23,039,402
$ 230,000
$ 18,063,000
$ 22,896,000
916,434
$ (4,137,000)
$ 37,052,000
See notes to consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2005
2004
2003
$ 1,863,000
$
533,000
$
123,000
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Income from equity investees . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution from equity investees . . . . . . . . . . . . . . . . . . . . . .
Tax benefit of exercised employee stock options . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of advance to clearing broker . . . . . . . . . . . . . . . . . .
Changes in:
1,128,000
(1,849,000)
1,573,000
(100,000)
Securities owned, at market value . . . . . . . . . . . . . . . . . . . .
Receivable from clearing broker . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . .
Securities sold, not yet purchased, at market value . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . .
(33,000)
547,000
(485,000)
1,464,000
(1,712,000)
1,231,000
52,000
1,500,000
1,226,000
(884,000)
268,000
(6,000)
1,575,000
1,778,000
(1,900,000)
1,443,000
15,000
26,000
3,999,000
(387,000)
9,000
6,000
368,000
Net cash provided by operating activities . . . . . . . . .
2,644,000
5,247,000
5,480,000
Cash Flows From Investing Activities:
Purchase of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return of deposit on equipment . . . . . . . . . . . . . . . . . . . . . . . .
Advance to clearing broker . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of furniture, equipment and
leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in and advances made to equity investees . . . . . . .
(400,000)
(1,150,000)
241,000
(1,500,000)
(128,000)
(373,000)
(177,000)
(86,000)
(160,000)
(7,000)
Net cash used in investing activities . . . . . . . . . . . . . .
(501,000)
(663,000)
(310,000)
Cash Flows From Financing Activities:
Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of options . . . . . . . . . . . . . . . . . . . . . . .
(44,000)
133,000
(568,000)
(706,000)
36,000
Net cash provided by (used in) financing activities .
89,000
(568,000)
(670,000)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . .
Cash and cash equivalents - beginning of year . . . . . . . . . . . . .
2,232,000
28,748,000
4,016,000
24,732,000
2,234,000
22,498,000
Cash and cash equivalents - end of year . . . . . . . . . . . . . . . .
Supplemental Cash Flow Disclosures:
Cash paid for:
$30,980,000
$28,748,000
$24,732,000
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1,000
812,000
$
$
28,000
741,000
$
$
1,000
61,000
Noncash Investing And Financing Activities:
Tax benefit of employee stock options . . . . . . . . . . . . . . . .
15,000
See notes to consolidated financial statements.
F-5
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Business:
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.
[2] Securities Transactions:
Securities transactions trading profit, commission revenues and related clearing expenses are recorded on a
trade date basis.
Siebert clear 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, which are highly capitalized. Marketable securities are valued at market value.
Interest is recorded on an accrual basis. Dividends are recorded on the ex-dividend date.
[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 less accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, generally five years. Leasehold improvements are
amortized over the shorter of the estimated useful life or period of the lease.
[5] Cash Equivalents:
Cash equivalents consist of highly liquid investments purchase with original maturity of three months or less
including of money market funds and commercial paper.
[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 revenues and expenses during the reporting period. Actual results could differ from those
estimates.
F-6
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
[8] Earnings Per Share:
Basic earnings per share is calculated by dividing net income by the weighted average outstanding shares
during the period. Diluted earnings per share is calculated by dividing net income 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 2005, 2004 and 2003 amounted to 34,571, 163,334
and 148,169 additional shares, respectively, added to the basic weighted average outstanding shares of 22,093,369,
22,113,228 and 22,305,369 in 2005, 2004 and 2003, respectively. Potentially dilutive securities consisting of
outstanding options at December 31, 2005, 2004 and 2003 amounted to 1,767,610, 1,888,350 and 1,802,930,
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 loaned bear interest at 8% per annum and are repayable on August 31, 2007.
[11] Stock-Based Compensation:
Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation
(“SFAS 123”) as amended by SFAS No. 148, (Accounting for Stock-Based Compensation – Transition and Disclosure
an amendment to 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 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 income and income per share for the
years ended December 31, 2005, 2004 and 2003 would have decreased to the pro forma amounts as follows:
Net income, as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based employee compensation determined under the
Year Ended December 31,
2005
$ 1,863,000
2004
533,000
$
2003
123,000
$
fair value based method, net of tax effect . . . . . . . . . . . . . . . .
(424,000)
(332,000)
(759,000)
Pro forma net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,439,000
$
201,000
$ (636,000)
Net income (loss) per share - basic:
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share - diluted:
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
.08
.07
.08
.07
$
$
$
$
.02
.01
.02
.01
$
$
$
$
.01
(.03)
.01
(.03)
F-7
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005
4.30%
5.00
0.00%
53.00%
2004
3.71%
7.78
0.00%
52.00%
2003
4.00%
10.00
0.00%
72.00%
Weighted average fair value . . . . . . . . . . . . . . . . . . .
$ 1.42
$ 3.01
$ 3.09
[12] Intangibles:
Purchased intangibles are principally being amortized using the straight-line method over an estimated useful
lives of three to five years (see Note E).
[13] 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.
[14] New Accounting Standards:
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123R. “Share-
Based Payment” (“SFAS 123R”), which requires companies to measure and recognize compensation expense for all
stock-based payments to employees, including grants of employee stock options, to be recognized in the income
statement based on their fair value. Pro forma disclosure is no longer an alternative. That cost will be recognized as
compensation expense over the service period, which would normally be the vesting period. SFAS 123R will be
effective for the Company beginning January 1, 2006. As permitted under SFAS No. 123 the Company currently
accounts for share-based payments to employees using the APB Opinion No. 25 intrinsic value method. Accordingly,
the adoption of SFAS No. 123R’s fair value method could have a significant impact on the Company’s results of
operations, although it will have no impact on the Company’s overall financial position. The impact of adoption of
SFAS No. 123R cannot be predicted at this time, because it will depend on levels of share-based payments in the
future.
In December 2004, the FASB issued SFAS No. 153, Exchange of Nonmonetary Assets, an amendment of APB
No. 29, Accounting for Nonmonetary Transactions (“FAS 153”). FAS 153 amends APB No. 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. We
have adopted FAS 153 for nonmonetary exchanges beginning after June 15, 2005. FAS No. 153 did not have an impact
on our results of operations or financial position.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of
APB Opinion No. 20 and FASB Statement No. 3”. This Statement establishes, unless impracticable, retrospective
application as the required method for reporting a change in accounting principle in the absence of explicit transition
requirements specific to the newly adopted accounting principle. The provisions of this Statement are effective for
accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption
is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this
Statement is issued. The Company does not believe that the adoption of this Statement in 2006 will have a material
impact on the Company’s financial position or results of operation.
F-8
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
[15] Reclassification – Certain previous years adjustments have been reclassified to conform with current
year presentations.
NOTE B - INTUIT LAWSUIT
Siebert filed a lawsuit against Intuit Inc. (“Intuit”) in New York State Supreme Court on September 17, 2003
seeking not less than $11.1 million in compensatory damages and $33.3 million in punitive damages for claims
relating to the Joint Brokerage Service (the “JBS”) conducted during the years ended December 31, 2003 and 2002
under the Strategic Alliance Agreement between Siebert and Intuit. The Court denied Intuit’s motion to dismiss
Siebert’s causes of action for breach of fiduciary duty, breach of contractual obligations to pay shared expenses,
promissory estoppel, and breach of the implied covenant of good faith and fair dealing. The Court granted Intuit’s
motion to dismiss Siebert’s causes of action for breach of the express covenant of good faith and fair dealing,
misrepresentation and/or fraud, and its request for punitive damages. Intuit has counterclaimed against Siebert,
seeking not less than $6.6 million. Siebert and Intuit have appealed from certain portions of the Court’s decision and
Siebert has also moved for reargument of that decision regarding punitive damages. In November 2005, Intuit’s
counsel was disqualified by the Court from representing Intuit in this action. Any further activity in the action is
stayed pending Intuit’s appeal from the Order of disqualification, which appeal is expected to be heard by the
Appellate Court in April 2006. The outcome of the litigation cannot now be predicted.
NOTE C - INVESTMENT IN AFFILIATES
Investment in and advances to, equity in income, of and distributions received from affiliates as of and for the
year ended December 31, 2005 consisting of the following:
Investment and advances . . . . . . . . . . . . . . . . . . . . . .
Income from equity investees . . . . . . . . . . . . . . . . . .
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SBS
$ 3,840,000
$ 1,656,000
$ 1,567,000
SBSFPC
$ 588,000
$ 193,000
6,000
$
TOTAL
$ 4,428,000
$ 1,849,000
$ 1,573,000
Accounts related to affiliates included in the accompanying financial statements for 2004 and 2003 are
attributable solely to SBS.
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.
Summarized financial data of SBS is as follows:
2005
2004
2003
Total assets including secured demand note of
1,200,000 in each year due from Siebert . . . . . . . .
$ 14,166,000
$ 12,326,000
$
Total liabilities including subordinated liabilities
$1,200,000 in each year due to Siebert . . . . . . . . .
Total members’ capital . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory minimum net capital requirement . . . . . .
6,547,000
7,619,000
21,086,000
3,377,000
356,000
4,882,000
7,444,000
17,222,000
3,494,000
245,000
6,463,000
14,628,000
3,878,000
F-9
NOTE C - INVESTMENT IN AFFILIATES (CONTINUED)
The amounts above are unconsolidated and recorded on a gross basis. During each of 2005, 2004 and 2003
Siebert charged SBS $240,000 for rent and general and administrative services, which Siebert believes approximates
the cost of furnishing such services. In addition, during each of the years 2005, 2004 and 2003, Siebert earned interest
income of $96,000, $110,000 and $120,000 from SBS in connection with Siebert’s obligation to make subordinate
note for up to $1,200,000 and Siebert paid SBS interest earned on the restricted cash equivalents of $52,000, $22,000
and $18,000. (See Note J)
Siebert’s share of undistributed earnings from SBS amounts to $3,341,000 and $3,256,000 at December 31,
2005 and 2004, 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.
Financial entered into an Operating Agreement, effective as of April 19, 2005 (the “Operating Agreement”),
with the two individual principals of SBS (the “Principals”) for the formation of SBS Financial Products Company,
LLC, a Delaware limited liability company (“SBSFPC”). Pursuant to the terms of the Operating Agreement, Financial
and each of the Principals made an initial capital contribution of $400,000 in exchange for a 33.33% initial interest in
SBSFPC. SBSFPC engages in derivatives transactions related to the municipal underwriting business. The Operating
Agreement provides that profit will be shared 66.66% by the Principals and 33.33% by Financial.
Summarized financial data of SBSFPC as of and for the period ended December 31, 2005 is set forth below.
Sieberts share of undistributed earnings of SBSFPC amounts to $187,000 on December 31, 2005.
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total members’ capital . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005
$ 4,870,000
3,107,000
1,763,000
1,185,000
582,000
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,
2005
$ 2,251,000
207,000
21,000
2,479,000
(1,651,000)
828,000
$
2004
$ 3,071,000
533,000
150,000
3,754,000
(2,449,000)
$ 1,305,000
Depreciation and amortization expense for the years ended December 31, 2005, 2004 and 2003 amounted to
$605,000, $741,000 and $672,000, respectively.
F-10
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).
Intangible assets consist of the following:
Amortizable assets:
Website, content and non-compete . . . . . . . . . . . . . . .
Retail brokerage accounts . . . . . . . . . . . . . . . . . . . . . .
December 31, 2005
December 31, 2004
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Amortization
Accumulated
$ 2,350,000
2,588,000
$ 4,938,000
$ 2,350,000
1,844,000
$ 4,194,000
$ 2,350,000
2,588,000
$ 4,938,000
$ 2,350,000
1,321,000
$ 3,671,000
Unamortized intangible assets:
Domain name/intellectual property . . . . . . . . . . . . . .
$
750,000
$
750,000
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . .
$
523,000
$
723,000
Estimated amortization expense is as follows:
Year Ending December 31,
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
312,000
312,000
92,000
28,000
744,000
F-11
NOTE F - INCOME TAXES
Income tax provision 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,
2005
2004
2003
$ 1,080,000
(81,000)
999,000
$
253,000
42,000
295,000
370,000
(19,000)
351,000
145,000
10,000
155,000
1,450,000
(100,000)
$ 1,350,000
398,000
52,000
450,000
$
$
$
(33,000)
(33,000)
44,000
59,000
103,000
44,000
26,000
70,000
A reconciliation between the income tax provision and income taxes computed by applying the statutory Federal
income tax rate to income (loss) before taxes is as follows:
Year Ended December 31,
2005
2004
2003
Expected income tax provision at statutory
Federal tax rate . . . . . . . . . . . . . . . . . . . . . . .
State and local taxes, net of Federal tax benefit
Other * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense
$ 1,092,000
258,000
$ 1,350,000
$
$
335,000
79,000
36,000
450,000
$
$
66,000
15,000
(11,000)
70,000
*
State tax adjustment
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities
for financial reporting purposes and their tax basis of such amounts. The principal items giving rise to deferred tax
assets (liabilities) are as follows:
Net operating losses . . . . . . . . . . . . . . . . . . . . . .
Acquired Intangible assets . . . . . . . . . . . . . . . .
Furniture, equipment and leasehold
improvements . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain - SBSFP . . . . . . . . . . . . . . . . . .
Retail brokerage accounts . . . . . . . . . . . . . . . . .
December 31,
2005
402,000
(315,000)
$
2004
479,000
(315,000)
(84,000)
(40,000)
638,000
601,000
(164,000)
501,000
501,000
$
$
$
F-12
NOTE F - INCOME TAXES (CONTINUED)
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 $958,000, are attributable to WFN, expire through 2020. Utilization of such
net operating loss carryforwards is subject to annual limitations under Section 382 of the Internal Revenue Code.
In 2003, the Company reduced current taxes payable by $15,000 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.
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, 2005 and 2004, Siebert had net capital of approximately $25,590,000 and
$16,846,000, 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 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. No awards were granted 2005, 2004 and 2003. As
of December 31, 2005, 18,600 common shares are available for future awards 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, 2005, 916,434 shares were purchased at an average price of $4.51.
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-13
NOTE H - OPTIONS (CONTINUED)
A summary of the Company’s stock option transaction for the three years ended December 31, 2004 is presented
below:
2005
2004
2003
Outstanding - beginning of
the year . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . .
Outstanding - end of year . . . . . . . .
Exercisable at end of year . . . . . . . .
Weighted average fair value of
options granted . . . . . . . . . . . . . .
Shares
1,888,350
200,000
(265,255)
(55,485)
1,767,610
1,613,410
Weighted
Average
Exercise
Price
$ 4.11
$ 2.81
$ 3.13
$ 0.00
$ 4.16
$ 4.14
$ 1.42
Weighted
Average
Exercise
Price
Shares
1,802,930
90,000
(4,580)
$ 4.08
$ 4.60
$ 3.85
— $ 0.00
$ 4.11
$ 4.06
1,888,350
1,556,950
$ 3.01
Shares
1,855,260
50,000
(86,580)
(15,750)
1,802,930
1,407,230
Weighted
Average
Exercise
Price
$ 4.39
$ 3.87
$ 11.02
$ 2.31
$ 4.08
$ 3.98
$ 3.09
The following table summarizes information related to options outstanding at December 31, 2005:
Range Exercise Prices
$0.00- 2.31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.32- 2.69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.69- 2.81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.81- 5.33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5.34-32.50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.00-32.50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Contractual
Life
6.8 Years
1.4 Years
5.5 Years
5.5 Years
3.9 Years
5.15 Years
Weighted
Average
Exercise
Price
$ 2.12
$ 2.33
$ 2.78
$ 4.58
$ 17.81
$ 4.16
Weighted
Average
Exercise
Price
$ 2.12
$ 2.33
$ 2.79
$ 4.54
$ 17.81
$ 4.14
Number
Exercisable
9,000
134,610
248,300
1,214,000
7,500
1,613,410
Number
Outstanding
15,000
134,610
280,500
1,330,000
7,500
1,767,610
At December 31, 2005, approximately 2,025,915 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. Securities transactions entered into as of December 31, 2005 settled with no adverse effect on Siebert’s
financial condition. Siebert regularly monitors the activity in its customer accounts for compliance with its margin
requirements.
F-14
NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES
Siebert terminated the fully disclosed clearing agreement (the “Clearing Agreement”) with Pershing LLC
(formerly the Pershing division of Donaldson, Lufkin & Jenrette Securities Corporation) (“Pershing”) in 2003. Based
on consultation with counsel, Siebert believes that the $1,500,000 that it advanced to Pershing in January 2003 should
have been returned and that Pershing may be liable for damages. Pershing has expressed its belief that it is entitled to
retain the advance and receive a minimum of $3 million for its unreimbursed costs, a termination fee of $500,000 and
$5 million for lost revenues. Siebert believes the Pershing claims are without merit and that the ultimate result of this
matter will not have a material adverse effect on result of operations or financial position. Siebert in 2004 decided not
to commence proceedings against Pershing and charged off the $1,500,000 advance to Pershing. Siebert and Pershing
in 2005 entered into a Limited Release Agreement under which Siebert received a release from the $3 million disputed
claims for unreimbursed fees and costs, and Pershing was released from any liability to Siebert based upon the
disputed fees and costs, and Siebert paid a consideration to Pershing that had been previously accrued by Siebert. The
outcome of this matter cannot now be predicted.
In August 2004, Siebert participated as an underwriter in the Google, Inc. initial public offering. To participate
as an underwriter, the lead Investment Banks (the “Banks”) requested that each underwriter provide the Banks with
a $25 million Letter of Credit on behalf of Siebert in favor of the Banks. To obtain the Letter of Credit, Siebert entered
into a Temporary Subordinated Loan Agreement with National Financial Services Corp (“NFS”). On August 6, 2004,
Siebert entered into a Letter of Credit for $25 million and terminated the Letter of Credit and paid the temporary
subordinated loan agreement with NFS on September 15, 2004.
The Company rents discount retail brokerage and other office space under long-term operating leases expiring
in various periods through 2009. 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,
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
965,000
424,000
389,000
185,000
$ 1,963,000
Rent expense, including escalations for operating costs, amounted to approximately $985,000, $984,000 and
$1,041,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Rent is being charged to expense
over the entire lease term on a straight-line basis.
In addition to the Pershing matter, 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
2005, 2004 and 2003.
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. As of December 31, 2005, no
amount had been loaned to SBS.
F-15
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.
NOTE L – VALUATION AND QUALIFYING ACCOUNTS
The following is a summary of accumulated depreciation and accumulated amortization for the years ended
December 31:
Accumulated depreciation:
Description
Balance at
beginning
of period
Charged
to cost
and
expenses
Deductions
Year ended December 31, 2003 . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2004 . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2005 . . . . . . . . . . . . . . . . . . .
1,584,000
2,042,000
2,449,000
672,000
741,000
605,000
214,000(a)
334,000(a)
1,403,000(a)
Accumulated amortization:
Year ended December 31, 2003 . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2004 . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2005 . . . . . . . . . . . . . . . . . . .
1,842,000
2,948,000
3,671,000
1,106,000
723,000
523,000
—
—
—
(a) Write off accumulated depreciation related to fixed asset dispositions.
NOTE M - SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
Balance at
end of
period
2,042,000
2,449,000
1,651,000
2,948,000
3,671,000
4,194,000
2005
2004
First
Quarter
$ 7,226,000
181,000
$
Second
Quarter
$ 7,996,000
594,000
$
Third
Quarter
$ 8,102,000
542,000
$
Fourth
Quarter
$ 7,848,000
546,000
$
First
Quarter
$ 7,031,000
415,000
$
Second
Quarter
$ 6,151,000
230,000
$
Third
Quarter
$ 7,167,000
422,000
$
Fourth
Quarter
$ 7,755,000
$ (534,000)
Revenue . . . . . . . . . . .
Net income (loss) . . . .
Earnings (loss) per
share:
Basic . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . .
$
$
0.01
0.01
$
$
0.03
0.03
$
$
0.02
0.02
$
$
0.02
0.02
$
$
0.02
0.02
$
$
0.01
0.01
$
$
0.02
0.02
$
$
(0.03)
(0.03)
F-16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2005 and 2004, 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, 2005. 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 the standards of the Public Company Accounting Oversight Board
(United States). 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 referred to above present fairly, in all material respects, the financial
position of Siebert, Brandford, Shank & Co., L.L.C. as of December 31, 2005 and 2004, and the results of its operations
and its cash flows for each of the years in the three-year period ended December 31, 2005 in conformity with U.S.
generally accepted accounting principles.
Eisner LLP
New York, New York
February 8, 2006
F-17
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
STATEMENTS OF FINANCIAL CONDITION
Statements of Financial Condition
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities owned, at market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable from broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable from affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured demand note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment and leasehold improvements, net . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and Contingency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES AND MEMBERS’ CAPITAL
Liabilities:
Payable to member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Members’ capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
See Notes to Financial Statements
December 31,
2005
2004
$10,512,082
580,145
1,020,294
168,047
21,997
1,200,000
248,595
414,736
$14,165,896
$ 9,053,050
10,011
1,507,986
7,478
1,200,000
203,698
343,435
$12,325,658
$
101,902
5,245,204
5,347,106
1,200,000
7,618,790
$14,165,896
$
125,888
3,555,380
3,681,268
1,200,000
7,444,390
$12,325,658
F-18
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2005
2004
2003
$18,085,786
2,597,064
403,260
21,086,110
$15,779,505
1,358,959
83,870
17,222,334
$14,254,693
312,657
60,793
14,628,143
12,890,686
370,003
539,191
640,666
633,137
96,000
2,539,257
17,708,940
$ 3,377,170
9,963,888
122,448
356,939
477,668
744,635
110,000
1,952,983
13,728,561
$ 3,493,773
7,452,723
31,847
243,327
504,524
641,219
120,000
1,756,607
10,750,247
$ 3,877,896
See Notes to Financial Statements
F-19
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
Balance - January 1, 2003
Distributions to member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Balance - December 31, 2003
Distributions to member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance - December 31, 2004
Distributions to members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,540,573
(2,955,633)
3,877,896
6,462,836
(2,512,219)
3,493,773
7,444,390
(3,202,770)
3,377,170
Balance - December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7,618,790
See Notes to Financial Statements
F-20
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
Changes in:
Securities owned, at market value . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable from broker-dealers . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable to/payable from member . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . .
Payable to broker-dealer . . . . . . . . . . . . . . . . . . . . . . . .
Payable to Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . .
Year Ended December 31,
2005
2004
2003
$ 3,377,170
$ 3,493,773
$ 3,877,896
68,824
46,498
52,078
(570,134)
487,692
(160,569)
(71,301)
(23,986)
1,689,825
(21,997)
4,775,524
5,276
(1,119,783)
(434)
(67,708)
86,152
1,085,165
763,589
155,832
(7,044)
(119,577)
6,764
545,470
(246,044)
3,528,939
5,028,964
Cash flows from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . .
(113,722)
(121,346)
(89,349)
Cash flows from financing activities:
Distributions to members . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,202,770)
(2,512,219)
(2,955,633)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . .
Cash and cash equivalents - beginning of year . . . . . . . . . . . . . . .
1,459,032
9,053,050
895,374
8,157,676
1,983,982
6,173,694
Cash and cash equivalents - end of year . . . . . . . . . . . . . . . . . .
$ 10,512,082
$ 9,053,050
$ 8,157,676
Supplemental disclosures of cash flow information:
Taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
120,000
96,000
$
$
120,000
110,000
$
$
117,000
120,000
See Notes to Financial Statements
F-21
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
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.
[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.
F-22
NOTE B - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE
The subordinated debt at December 31, 2005 and 2004 consist of a Secured Demand Note Collateral Agreement,
as amended, payable to Siebert, in the amount of $1,200,000, bearing interest at 8% and due August 31, 2007. Interest
expense paid to Siebert for each of 2005, 2004 and 2003 amounts to $96,000, $110,000 and $120,000, respectively.
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, 2005. Interest earned on the collateral amounted to approximately $52,000,
$22,000 and $18,000 in 2005, 2004 and 2003, respectively.
NOTE C - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Furniture, equipment and leasehold improvements consist of the following:
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005
$ 435,068
149,468
584,536
(335,941)
$ 248,595
2004
$ 360,214
110,600
470,814
(267,116)
$ 203,698
NOTE D - NET CAPITAL
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, 2005 and 2004, the Company had net capital of $7,841,000 and $7,916,000, respectively,
which was $7,485,000 and $7,671,000, respectively, in excess of its required net capital, and its ratio of aggregate
indebtedness to net capital was .68 to 1 and .35 to 1, respectively. The Company claims exemption from the reserve
requirements under Section 15c-3-3(k)(2)(ii).
NOTE E - COMMITMENTS AND CONTINGENCY
The Company rents office space under long-term operating leases expiring through 2013. 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
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$
445,000
407,000
390,000
363,000
200,000
429,000
$ 2,234,000
Rent expense including taxes and operating expenses for 2005, 2004 and 2003 amounted to $640,666, $477,668
and $504,524, respectively.
NOTE F - OTHER
During each of 2005, 2004 and 2003, the Company was charged $240,000 by Siebert for rent and general and
administrative services.
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 31, 2006
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
/s/ MURIEL F. SIEBERT
MURIEL F. SIEBERT
Chair, President and Director
(principal executive officer)
Date
March 31, 2006
/s/ JEANNE ROSENDALE
Executive Vice President, and General Counsel
March 31, 2006
JEANNE ROSENDALE
/s/ JOSEPH M. RAMOS, JR.
JOSEPH M. RAMOS, JR.
Chief Financial Officer and Assistant Secretary
(principal financial and accounting officer)
/s/ PATRICIA L. FRANCY
PATRICIA L. FRANCY
/s/ LEONARD M. LEIMAN
LEONARD M. LEIMAN
/s/ JANE H. MACON
JANE H. MACON
Director
Director
Director
/s/ ROBERT P. MAZZARELLA Director
ROBERT P. MAZZARELLA
/s/ NANCY S. PETERSON
NANCY S. PETERSON
Director
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
March 31, 2006
Exhibit No.
Description Of Document
EXHIBIT INDEX
2.1
2.2
2.3
2.4
3.1
3.2
10.1
10.2
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
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)
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.)
Exhibit No.
Description Of Document
10.12
10.13
21
23
31.1
31.2
32.1
32.2
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.)
Operating Agreement of SBS Financial Products Company, LLC, dated effective as of April 19, 2005,
by and among Siebert Financial Corp., Napoleon Brandford III and Suzanne Shank. (incorporated by
reference to Siebert Financial Corp.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 17, 2005)
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 Muriel F. Siebert pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Joseph M. Ramos, Jr. pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley act of 2002.
Certification of Muriel F. Siebert of Periodic Financial Report under Section 906 of the Sarbanes-
Oxley Act of 2002
Certification of Joseph M. Ramos, Jr. of Periodic Financial Report under Section 906 of the Sarbanes-
Oxley Act of 2002
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-8, File No. 333-43837,
File No. 333-43839, and File No.333-72939, and the Registration Statements on Form S-3, File No. 333-81037 and File
No. 333-102701 of Siebert Financial Corp. and in the related prospectus of our report dated March 20, 2006 with
respect to the consolidated financial statements of Siebert Financial Corp. included in this Annual Report on Form
10-K for the year ended December 31, 2005. We also consent to the incorporation by reference of our report dated
February 8, 2006 with respect to the financial statements of Siebert, Brandford, Shank & Co., L.L.C. included in this
Annual Report on Form 10-K.
Eisner LLP
New York, New York
March 29, 2006
Exhibit 31.1
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULE 13A-14 AND 15D-14,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Muriel F. Siebert certify that:
1.
I have reviewed this report on Form 10-K of Siebert Financial Corp.;
2. Based on my knowledge, this 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 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;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this annual report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this annual report based on such evaluation; and
(c) Disclosed in this annual report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
/s/ MURIEL F. SIEBERT
MURIEL F. SIEBERT
Chair and President
(principal executive officer)
Date: March 31, 2006
Exhibit 31.2
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULE 13A-14 AND 15D-14,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph M. Ramos, Jr. certify that:
1.
I have reviewed this 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;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this annual report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this annual report based on such evaluation; and
(c) Disclosed in this annual report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
/s/ JOSEPH M. RAMOS, JR.
JOSEPH M. RAMOS, JR.
Chief Financial Officer
(principal financial and accounting officer)
Date: March 31, 2006
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Siebert Financial Corp. (the “Company”) on Form 10-K for the year
ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Muriel F. Siebert,
in my capacity as Chair and President of the Company, hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
the Report filed by the Company with the Securities and Exchange Commission fully complies with the
requirements of Section 13(a) of the Securities and Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company for the period covered by the report.
/s/ MURIEL F. SIEBERT
MURIEL F. SIEBERT
Chair and President
Date: March 31, 2006
A signed original of this written statement required by Section 906, or other documents authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this
written statement required by section 906, has been provided to Siebert Financial Corp. and will be retained by
Siebert Financial Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Siebert Financial Corp. (the “Company”) on Form 10-K for the year
ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Joseph M. Ramos,
Jr., in my capacity as Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
the Report filed by the Company with the Securities and Exchange Commission fully complies with the
requirements of Section 13(a) of the Securities and Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company for the period covered by the report.
/s/ JOSEPH M. RAMOS, JR.
JOSEPH M. RAMOS, JR.
Chief Financial Officer
Date: March 31, 2006
A signed original of this written statement required by Section 906, or other documents authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this
written statement required by section 906, has been provided to Siebert Financial Corp. and will be retained by
Siebert Financial Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
(This page intentionally left blank.)
121757COV 5/3/06 2:33 PM Page 2
Siebert Financial Corp. (the “Company”) is a
holding company organized under the laws of the
State of New York conducting retail discount broker-
age and corporate investment banking throughout the
country, and a floor brokerage business on the New
York Stock Exchange.
The Company’s retail discount brokerage busi-
ness is conducted through its wholly-owned sub-
sidiary, 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 Siebert
Capital Markets, Siebert offers institutional clients
equity and fixed income 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 finan-
cial products and financial education predominantly to
women investors.
Muriel F. Siebert, the first woman member of
the New York Stock Exchange, is the Chairwoman,
President and Chief Executive Officer of the Company
and, as of April 2006, owns approximately 90% of the
outstanding Common Stock of the Company.
The Company believes that it is the most
prominent Woman-Owned Business Enterprise
(“WBE”) in the capital markets business in the coun-
try, which through Siebert, is a New York Stock
Exchange member. Moreover, the Company is also
prominent as a Minority and Women’s Business
Enterprise (“MWBE”) in the tax exempt underwriting
business through Siebert’s 49%-owned affiliate,
Siebert Brandford Shank & Co., L.L.C.
Siebert was incorporated on June 16, 1969,
under the laws of the State of Delaware. The princi-
pal executive offices of the Company and Siebert are
located at 885 Third Avenue, Suite 1720, New York,
NY 10022. The telephone number is (212) 644-2400.
The Web site is located at www.siebertnet.com.
OFFICERS
DIRECTORS
Muriel F. Siebert
Chairwoman & President
Chief Executive Officer
Ameen Esmail
Executive Vice President
Director of Business Development
Joseph M. Ramos, Jr.
Executive Vice President
Chief Financial Officer
Jeanne M. Rosendale
Executive Vice President
General Counsel
Daniel Iesu
Secretary
Transfer Agent
American Stock Transfer
& Trust Company
Independent Auditor
Eisner LLP
Muriel F. Siebert
Chairwoman & President
Chief Executive Officer
Patricia L. Francy
Special Advisor for Alumni
Relations; Retired Treasurer &
Controller, Columbia University
Leonard M. Leiman
Counsel
Fulbright & Jaworski L.L.P.
Jane H. Macon, Esq.
Partner
Fulbright & Jaworski L.L.P.
Robert P. Mazzarella
Retired President
Fidelity Investment Brokerage
Services, LLC
Nancy S. Peterson
President and Chief
Executive Officer
Peterson Tool Company, Inc.
121757COV 5/3/06 2:33 PM Page 1
Offices In:
Beverly Hills
9693 Wilshire Boulevard, Beverly Hills, CA 90212
Telephone: 800.995.7880 Fax: 310.788.7888
Boca Raton
4400 North Federal Highway, Suite 152, Boca Raton, FL 33431
Telephone: 800.728.3352 Fax: 561.368.9750
Jersey City
111 Pavonia Avenue, Jersey City, NJ 07310
Telephone: 800.872.0711 Fax: 201.239.5741
New York Headquarters
885 Third Avenue, 17th Floor, New York, NY 10022
Telephone: 877.327.8379 Fax: 212.486.2784
Naples
400 Fifth Avenue South, Suite 100, Naples, FL 34102
Telephone: 800.293.3891 Fax: 239.435.9788
Palm Beach
240A South County Road, Palm Beach, FL 33480
Telephone: 800.909.4503 Fax: 561.802.4444
Surfside
9569 Harding Avenue, Surfside, FL 33154
Telephone: 800.773.2980 Fax: 305.868.5670
Women’s Financial Network at Siebert
885 Third Avenue, 17th Floor, New York, NY 10022
Telephone: 877.936.4968 Fax: 212.486.2784
Siebert Brandford Shank & Co., L.L.C. offices located in:
Atlanta • Anchorage • Chicago • Dallas • Detroit • Fort Worth • Houston • Los Angeles
Miami • New York • Oakland • Orlando • San Antonio • Seattle • Washington D.C. • Weehawken
www.siebertnet.com
M U R I E L S I E B E R T & C O . ,
I N C .
Member NYSE/NASD/SIPC • Established 1967 • NASDAQ symbol SIEB
Siebert Financial Corp. • 2005 Annual Report