SIEBERT FINANCIAL CORP.
2015
Annual
Report
SIEBERT
SIEBERT FINANCIAL CORP.
Stability, Quality and Value
For more than 45 years, the Siebert name has stood for integrity, innovation and cus-
tomer service in the financial services industry. Founded in 1969 by Muriel Siebert, who
became the first woman member of the New York Stock Exchange in 1967, our firm
became a discount broker on May 1, 1975, the first day NYSE members were allowed
to negotiate commissions. We were also an early provider of online brokerage services.
In 1977, Ms. Siebert placed the firm in a blind trust for five years to serve as New York
State’s Superintendent of Banks, with responsibility for the safety and soundness of
banks and other state chartered financial institutions, at the time the highest position in
banking supervision or regulation ever achieved by a woman in New York State. During
those years, she experienced first-hand the considerable responsibility involved in pro-
tecting other people’s money. When she returned to her firm, that experience became
the standard by which we do business at Siebert.
Our firm is characterized by conservative business principles and a policy of putting
safety first, providing our retail clients with peace of mind, exceptional personal serv-
ice, a variety of investment products and an array of online research and analytic tools.
At Siebert, our mission is the pursuit and delivery of value – both for shareholders and
clients. We pursue growth by playing to our strengths in select areas of activity, while
making continual advancements in our approach to take advantage of ever-evolving
opportunities in the brokerage and capital markets areas.
November 2016
Dear Shareholders:
Siebert Financial Corp.’s Board of Directors (“SFC”, the “Company”,
“our”, or “we”) began considering strategic alternatives for the Company
in August 2013, after the passing of Muriel Siebert. At that time, the
Company engaged a financial advisor to assist in this process and to
identify potential purchasers for of the Company’s businesses. With a
view toward maximizing shareholder value, the Board explored both
selling the Company as a whole and also selling the Company’s component businesses
separately. During this process, non-disclosure agreements were signed with more than 50
potential purchasers, each of which was granted access to a due diligence data room set up
by the Company with the assistance our financial advisor. During 2014, 2015 and the begin-
ning of 2016, we negotiated with a number of potential purchasers, but in each case the par-
ties were unable to reach agreement regarding valuation and transaction structure and nego-
tiations were terminated.
Jane H. Macon, Esq.
Chairwoman
On September 1, 2016, Siebert Financial entered into an acquisition agreement with Kennedy
Cabot Acquisition, LLC, and the Estate of Muriel F. Siebert, (“Siebert Estate”) pursuant to
which, among other things, the Siebert Estate, which currently owns beneficially and of
record approximately 87.4% of SFC’s outstanding common stock, will sell all such common
stock to Kennedy Cabot Acquisition. Kennedy Cabot Acquisition will make a tender offer
for all of the Company’s outstanding common stock not owned by the Siebert Estate. The
consummation of the sale by the Siebert Estate and the tender offer is conditioned on, among
other conditions, approval of the transaction by the Financial Industry Regulatory Authority,
(“FINRA”) which approval is still pending.
The members of our Board are pleased that, assuming the pending transaction is approved by
FINRA and is thereafter consummated, the enduring vision and legacy established by Mickie
Siebert nearly fifty years ago will continue into the future.
A Firm Legacy
In the Company’s years without Muriel Siebert, the incredible legacy she left behind remains
apparent. The Company continues to serve clients throughout the United States and the
world and our clients have remained loyal to us throughout this transition. SFC is relevant
and active, serving its clients, maintaining its position in the marketplace and proving its
ongoing value and potential.
Most recently on November 15, 2016, the NYSE Group announced the dedication of Siebert
Hall at the New York Stock Exchange in honor of the late Muriel Siebert, who became the
first woman to own a seat on the New York Stock Exchange and the first to head one of its
member firms, Muriel Siebert & Co., Inc. on December 28, 1967.
2015 Financial Performance
The Company retains a strong debt free balance sheet as 59% of the Company’s assets are highly
liquid, held in cash and cash equivalents, and our net capital is more than 32 times greater than our
required regulatory minimum.
Total revenues for 2015 were $10.1 million. The 2015 net loss was $2.87 million, or $0.13 per share,
compared with 2014’s net loss of $6.56 million, or $0.30 per share. The decrease in revenues was
primarily due to the sale of the Siebert Capital Markets Group to our former affiliate, Siebert Cisneros
Shank LLC in 2014.
We have continued to build on and realize the value of the Siebert firm and its businesses in the future
and to adhering to the principles and tenets adopted by Muriel Siebert from inception — integrity,
ethics, sound business practices, conservative management, investor security and fair play.
Finally, we offer our thanks to our steadfast clients, fellow shareholders, and loyal employees.
We appreciate your trust and confidence.
Sincerely,
Jane H. Macon
Chairwoman
dIRectORs
Jane H. Macon, esq.
Chairwoman, Siebert Financial Corp.
Partner, Bracewell & Giuliani, LLP
Robert P. Mazzarella
Vice-Chairman, Siebert Financial Corp.
Former President, Fidelity Investments
Brokerage Services LLC
Patricia L. Francy
Retired Treasurer & Controller
Columbia University
Nancy Peterson Hearn
Chairwoman
Peterson Tool Company, Inc.
OFFIceRs
Joseph M. Ramos, Jr.
Executive Vice President
Chief Operating Officer
Chief Financial Officer
Secretary
tRANsFeR AgeNt
American stock transfer & trust company
INdePeNdeNt AUdItOR
eisnerAmper LLp
Offices In:
New York Headquarters
885 Third Avenue, 31st Floor, New York, NY 10022
Telephone: 877.327.8379 Fax: 212.486.2784
Boca Raton
4400 North Federal Highway, Suite 152, Boca Raton, FL 33431
Telephone: 800.728.3352 Fax: 561.368.9750
M U R I E L S I E B E R T & C O . , I N C .
www.siebertnet.com
Member NYse/FINRA/sIPc • established 1967 • NAsdAQ symbol sIeB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
T ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2015
o TRANSITION REPORT PURSUANT TO 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, including area code
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
COMMON STOCK, PAR VALUE $.01 PER SHARE
Name of each exchange on which registered
THE NASDAQ CAPITAL MARKET
Securities registered under Section 12(g) of the Exchange Act:
NONE
(Title of class)
Indicate by check mark if the registrant is a well- known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO T
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO T
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 T NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). YES T NO
Indicate by check mark 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. T
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company T
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO T
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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 Capital Market as of the last business day of the registrant’s most recently completed
second fiscal quarter (June 30, 2015), was $3,546,760.
The number of shares of the registrant’s outstanding Common Stock, as of March 11, 2016, was 22,085,126 shares.
Documents Incorporated by Reference: Definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange
Act on or before April 30, 2016 is 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 results 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
corporate 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. We undertake no obligation to publicly release the results of any revisions to these forward-looking
statements which may be made to reflect events or circumstances after the date when such statements were made or to reflect the
occurrence of unanticipated events. An investment in us involves various risks, including those mentioned above and those which are
detailed from time to time in our Securities and Exchange Commission filings.
PART I
Item 1.
BUSINESS
General
Siebert Financial Corp. is a holding company that conducts its retail discount brokerage business through its wholly-owned
subsidiary, Muriel Siebert & Co., Inc., (“MSCO”) a Delaware corporation. In addition, in 2014 we began business as a registered
investment advisor through our wholly-owned subsidiary, Siebert Investment Advisors, Inc. (“SIA”) The estate of Muriel F. Siebert,
our former Chairwoman, Chief Executive Officer and President, owns approximately 90% of our outstanding common stock, par
value $.01 per share (the “Common Stock”). For purposes of this Annual Report, the terms “Siebert,” “Company,” “we,” “us” and
“our” refer to Siebert Financial Corp. and its consolidated subsidiaries, unless the context otherwise requires.
Our principal offices are located at 885 Third Avenue, New York, New York 10022, and our phone number is (212) 644-
2400. Our Internet address is www.siebertnet.com. Our SEC filings are available through our website at www.siebertnet.com, where
you are able to obtain copies of the Company’s public filings free of charge. Our Common Stock trades on the NASDAQ Capital
Market under the symbol “SIEB”.
Business Overview
Siebert’s principal activity is providing online and traditional discount brokerage and related services to retail investors. On
November 4, 2014, the Company sold its capital market business to an affiliate, Siebert Brandford Shank Financial, LLC (“SBSF”)
(see Note B) and on November 9, 2015, sold its 49% membership interest in SBSF (see Note C).
The Retail Division
Discount Brokerage and Related Services. Siebert became a discount broker on May 1, 1975. 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. 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.
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Eastern Time. Through its SiebertNet, Mobile Broker, inter-active voice recognition and Siebert Brokerage Express services, 24-hour
access is available to customers.
Independent Retail Execution Services. Siebert and NFS monitor order flow in an effort to ensure that we are getting the
best possible trade executions for customers. Siebert does not make markets in securities, nor does it take positions against customer
orders.
Siebert’s equity orders are routed by NFS in a manner intended to afford its customers the opportunity for price improvement
on all orders. The firm also offers customers execution services through various electronic communication networks (“ECNs”) for an
additional fee. These systems give customer’s access to numerous ECNs before and after regular market hours. Siebert believes that
its over-the counter executions consistently afford its customers the opportunity for 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 has retail offices in New York, New York; Boca Raton, 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. 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. Customer’s margin accounts are carried through NFS which lends customers a portion of the market
value of certain securities held in the customer’s account. Margin loans are collateralized by these securities. Customers also may sell
securities short in a margin account, subject to minimum equity and applicable margin requirements, and the availability of such
securities to be borrowed. In permitting customers to engage in margin, short sale or any other 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 NFS 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, Siebert monitors accounts closely until their payment obligations are completed; if the
customer does not meet the commitment, Siebert takes steps 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 relies heavily on the data technology platform provided by its clearing
agent, NFS. This platform offers an interface to NFS’ main frame computing system where all customer account records are kept and
is accessible by Siebert’s network. Siebert’s systems also utilize browser based access and other types of data communications.
Siebert’s representatives use NFS systems, by way of Siebert’s technology platform, to perform daily operational functions which
include trade entry, trade reporting, clearing related activities, risk management and account maintenance.
Siebert’s data technology platform offers services used in direct relation to customer related activities as well as support for corporate
use. Some of these services include email and messaging, market data systems and third party trading systems, business productivity
tools and customer relationship management systems. Siebert’s branch offices are connected to the main offices in New York, New
York and Jersey City, New Jersey via a virtual private network. Siebert’s data network is designed with redundancy in case a
significant business disruption occurs.
Siebert’s voice network offers a call center feature that can route and queue calls for certain departments within the organization.
Additionally, the systems call manager offers reporting and tracking features which enable staff to determine how calls are being
managed, such as time on hold, call duration and total calls by agent.
To ensure reliability and to conform to regulatory requirements related to business continuity, Siebert maintains backup systems and
backup data. However, in the event of a wide-spread disruption, such as a massive natural disaster, Siebert’s ability to satisfy the
obligations to customers and other securities firms could be significantly hampered or completely disrupted. For more information
regarding Siebert’s Business Continuity Plan, please visit our website at www.siebertnet.com or write to us at Muriel Siebert & Co.,
Inc., Compliance Department, 885 Third Avenue, Suite 3100, New York, NY 10022.
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Our website has design, navigation, and functionality features such as:
Informative trading screens: Customers can stay in touch while trading, double-check balances, positions and order
status, see real time quotes, intraday and annual charts and news headlines – automatically – as they place orders.
Multiple orders: Customers can place as many as 10 orders at one time.
Tax-lot trading: Our online equity order entry screen allows customers to specify tax lots which display with cost
basis and current gain/loss on a real-time positions page.
Trailing stop orders: Customers can enter an order that trails the market as a percentage of share price or with a flat
dollar value and the system will execute their instructions automatically.
Contingent orders: Customers can place One-Triggers-Two Bracket and One-Cancels-Other Bracket orders.
An easy-to-install desktop security program that may be installed to help protect against certain types of online fraud
such as “keylogging” and “phishing.”
The Capital Markets Division
Siebert’s Capital Markets Group (“SCM”) division served the Company as a co-manager, underwriting syndicate member, or
selling group member on a wide spectrum of securities offerings for corporations and Federal agencies. The principal activities of
SCM were investment banking and institutional equity execution services. SCM provided Muriel Siebert & Co., Inc. high-quality
brokerage service to both institutional investors and issuers of equity and fixed-income securities.
On November 4, 2014, the Company, which held a 49% membership interest in, and the other members of, Siebert Brandford
Shank & Co., LLC (“SBS”), contributed their SBS membership interests into a newly formed Delaware limited liability company,
Siebert Brandford Shank Financial, L.L.C. (“SBSF”), in exchange for the same percentage interests in SBSF. On the same day, the
Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with SBS and SBSF, pursuant to which the
Company sold substantially all of the SCM assets to SBSF. Pursuant to the Purchase Agreement, SBSF assumed post-closing
liabilities relating to the transferred business.
The Purchase Agreement provides for an aggregate purchase price for the disposition of $3,000,000, payable by SBSF after
closing in annual installments commencing on March 1, 2016 and continuing on each of March 1, 2017, 2018, 2019 and 2020. The
transferred business was contributed by SBSF to, and operated by SBS. The amount payable to the Company on each annual payment
date will equal 50% of the net income attributable to the transferred business recognized by, SBS in accordance with generally
accepted accounting principles during the fiscal year ending immediately preceding the applicable payment date; provided that, if net
income attributable to the transferred business generated prior to the fifth annual payment date is insufficient to pay the remaining
balance of the purchase price in full on the fifth annual payment date, then the unpaid amount of the purchase price will be paid in full
on March 1, 2021. The annual installment payable on March 1, 2016 is based on the net income attributable to the capital markets
business for the year ended December 31, 2015, amounted to $493,000.
Transferred assets of SCM, consisted of customer accounts and goodwill, which had no carrying value to the Company, and
the Company recorded a gain on sale of $1,820,000, which reflected the fair value of the purchase obligation. Such fair value was
based on the present value of estimated annual installments to be received during 2016 through 2020 from forecasted net income of
the transferred business plus a final settlement in 2021, discounted at 11.5% (representing SBS’s weighted average cost of capital).
The discount recorded for the purchase obligation is being amortized as interest income using an effective yield initially
calculated based on the original carrying amount of the obligation and estimated annual installments to be received and adjusted in
future periods to reflect actual installments received and changes in estimates of future installments. Interest income recognized on the
obligation for the year ended December 31, 2015 amounted to $235,000 based on a yield of approximately 12%.
Siebert Brandford Shank Financial, LLC
On November 9, 2015, the Company sold its 49% membership investment in SBSF back to SBSF for $8,000,000 of which
$4,000,000 was paid in cash and the balance of which was paid in the form of a secured junior subordinated promissory note of $4,000,000
(the “SBSF Junior Note”). The sale of the investment in SBSF, which was accounted for by the equity method, represents a strategic shift for
the Company based on its significance to the Company’s financial condition and results of operations and the major effect it will have on the
Company’s operations and financial results and, accordingly, the Company’s share of operating results of the investment are reflected as
discontinued operations in the accompanying statement of operations. The investment was sold for approximately $448,000 less than the
carrying value of the investment at November 9, 2015, after adjusting the carrying value of the investment for the Company’s equity in
SBSF’s results of operations through such date. Such loss is also included in discontinued operations.
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SBS Financial Products Company, LLC
Effective April 19, 2005, Siebert Financial Corp. (“SFC”) entered into an Operating Agreement with Suzanne Shank and
Napoleon Brandford III, the two individual principals (the “Principals”) of SBS Financial Products Company, LLC, a Delaware
limited liability company (“SBSFPC”). Pursuant to the terms of the Operating Agreement, SFC and each of the Principals made an
initial capital contribution of 33.33% initial interest in SBSFPC. SBSFPC engaged in derivatives transactions related to the municipal
underwriting business. SBSFPC closed down operations as of December 31, 2014.
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.
Siebert Investment Advisors, Inc.
Siebert Investment Advisors Inc. (“SIA”) is a registered investment adviser that began business in 2014. SIA is a wholly
owned subsidiary of Siebert Financial Corp and affiliated with Muriel Siebert & Co., a registered broker dealer. SIA is a boutique
investment management firm that greatly extends our ability to meet our customer’s investment needs.
SIA offers advice to clients regarding asset allocation and the selection of investments. Our investment management services
include the design, implementation, and continued monitoring of client accounts on a discretionary or non-discretionary basis.
Investment selections and recommendation are guided by the stated objectives of the customer, other considerations include the
customer’s risk profile and financial status.
SIA offers to its clients a number of Asset Management Programs (“Managed Programs”) consisting of asset allocation,
flexible asset management and focused or completion strategies. In these Managed Programs, SIA acts as the co-adviser to clients. IA
Representatives will assist each client in reviewing information about the programs, completing a client questionnaire to determine the
client’s risk tolerance, financial situation and investment objectives and selecting an investment strategy. SIA does not ever act as
portfolio manager directly; SIA selects other investment advisers to act as portfolio manager on behalf of its clients.
Advertising, Marketing and Promotion
Siebert develops and maintains its retail customer base through printed advertising in financial publications, internet
advertising and social media. 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. Although there has been consolidation in the industry in both the online and traditional brokerage business during recent
years, 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. 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 of these 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.
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 Financial
Industry Regulatory Authority (“FINRA”). Much of the regulation of broker-dealers has been delegated to self-regulatory
organizations, principally FINRA 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
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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. 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, its
officers or its employees.
As a registered broker-dealer and FINRA 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 $250,000 on claims for cash
balances. SIPC is funded through assessments on registered broker-dealers. In addition, Siebert, through NFS, 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 (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.
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. The Net Capital Rule specifies minimum net capital requirements for all registered
broker-dealers and is designed to measure financial integrity and liquidity. Failure to maintain the required regulatory net capital may
subject a firm to suspension or expulsion by the NYSE and FINRA, 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,
2015 and 2014, Siebert had net capital of $8.1 million and $5.1 million, respectively. Siebert claims exemption from the reserve
requirement under Section 15c3-3(k)(2)(ii).
Employees
As of March 13, 2016, we had approximately 43 full-time employees, one of whom was a corporate officer. None of our
employees are represented by a union, and we believe that relations with our employees are good.
- 6 -
Item 1A.
RISK FACTORS
Securities market volatility and other securities industry risk could adversely affect our business
Most of our revenues are derived from our securities brokerage business. 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. A reduction in our revenues or a loss
resulting from our 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.
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. 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.
There is intense competition in the 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. Over the past several years, price wars and lower commission rates in the discount brokerage business in general have
strengthened our 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.
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.
Some competitors in the discount brokerage business offer services which we may not. In addition, 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 United States, such as the SEC, the NYSE, FINRA and
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.
- 7 -
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, FINRA, 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 or 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 of 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 cannot
assure you that the policies and procedures we have established will be adequate to prevent a significant credit loss.
An increase in volume on our systems or other events could cause them to malfunction.
During 2015, we received and processed up to approximately 70% 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 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. There can be no assurance 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. Failure of our 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.
- 8 -
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 was principally dependent on our founder, Muriel F. Siebert, our former Chairwoman, Chief
Executive Officer and President, and our senior management. The loss of the services of any of these individuals could significantly
harm our business, financial condition and operating results. However the appointment of Suzanne Shank as Acting Chief Executive
Officer and Joseph Ramos as Chief Operating Officer has stabilized the Company as a result of our loss of Ms. Siebert. On March 3,
2015 Suzanne Shank completed her role as acting Chief Executive Officer of our Company to devote full time to her continuing
position as Chief Executive Officer of SBSF.
Our principal shareholder may control many key decisions.
The estate of Ms. Muriel F. Siebert currently owns approximately 90% of our outstanding common stock. The executors of
the estate, Jane Macon and Patricia Francy, who are both directors of the Company, 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 Capital Market, there can be no assurance that an active public market will
continue.
Item 1B.
UNRESOLVED STAFF COMMENTS
None.
Item 2.
PROPERTIES
Siebert currently maintains three retail discount brokerage offices. Customers can visit these 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 three leased offices:
Location
Corporate Headquarters
885 Third Avenue
New York, NY 10022 ..................................................................................................................................................................................................
2/28/17
8,585
None
Approximate
Office Area in
Square Feet
Expiration Date
of
Current Lease
Renewal
Terms
Retail Offices
9701 Wilshire Boulevard, Suite 1111
Beverly Hills, CA 90212 ..............................................................................................................................................................................................
1,189 Month to Month
None
4400 North Federal Highway
Boca Raton, FL 33431 .................................................................................................................................................................................................
2,438 Month to Month
None
- 9 -
Item 3.
LEGAL PROCEEDINGS
In December 2015, a current employee of MSCO commenced an arbitration before FINRA against MSCO, alleging a single
cause of action for employment retaliation under the Sarbanes-Oxley Act of 2002. In February 2016, the employee amended his claim
to replace the Sarbanes-Oxley claim with a substantially identical claim arising under the Dodd-Frank Act of 2010. In the opinion of
management, this matter is without merit, and its ultimate outcome will not have a significant effect on the financial position of the
Company.
In July 2014, the Company entered into a settlement agreement in regards to a dispute with a former employee, in which the
former employee sought, among other things, damages arising from his separation from the Company. The Company asserted counter
claims in the arbitration. Pursuant to the settlement, the Company paid $4,300,000 to the former employee, and the claims and
counterclaims have been dismissed and released. The accompanying statement of operations reflects a change to give effect to the
settlement.
The Company is party to certain claims, suits and complaints arising in the ordinary course of business. In the opinion of
management, all such matters are without merit, or involve amounts which would not have a significant effect on the financial position
of the Company.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable
- 10 -
PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock traded on the NASDAQ Global Market until June 29, 2011 when our common stock started trading on
the NASDAQ Capital Market, under the symbol “SIEB”. The high and low sales prices of our common stock reported by NASDAQ
during the following calendar quarters were:
Low
First Quarter – 2014 ........................................................................................................................................................................
4.45 $
$
High
Second Quarter – 2014 ....................................................................................................................................................................
3.44 $
$
Third Quarter – 2014 ......................................................................................................................................................................
2.85 $
$
Fourth Quarter – 2014 .....................................................................................................................................................................
2.90 $
$
First Quarter – 2015 ........................................................................................................................................................................
2.62 $
$
Second Quarter – 2015 ....................................................................................................................................................................
2.11 $
$
Third Quarter – 2015 ......................................................................................................................................................................
1.95 $
$
Fourth Quarter – 2015 .....................................................................................................................................................................
1.56 $
$
1.61
2.67
2.05
2.03
1.44
1.45
1.35
1.14
On March 11, 2016, the closing price of our common stock on the NASDAQ Capital Market was $1.20 per share. There were
130 holders of record of our common stock and more than 1,500 beneficial owners of our common stock on March 11, 2016.
On January 4, 2011, we received notice from The NASDAQ Stock Market stating that for more than 30 consecutive business
days, the market value of publicly held shares closed below the minimum $5 million required for continued listing on The NASDAQ
Global Market under NASDAQ Rule 5450(b) (1)(C). Market value of publicly held shares is calculated by multiplying the publicly
held shares, which is total shares outstanding less any shares held by officers, directors, or beneficial owners of more than 10%, by the
closing bid price. The estate of Muriel F. Siebert owns approximately 90% of our outstanding common stock. The value of shares by
the estate of Muriel F. Siebert’s estate, and the value of shares beneficially owned by other officers and directors of the Company, is
therefore excluded from the market value of publicly held shares of the Company.
NASDAQ Rule 5810(c)(3)(D) provided the Company a grace period of 180 calendar days, or until July 5, 2011, to regain
compliance with The NASDAQ Stock Market requirement. As the market value of publicly held shares did not reach the required
value during the grace period, our common stock was transferred to the NASDAQ Capital Market on June 29, 2011.
Dividend Policy
Our Board of Directors periodically considers whether to declare dividends. In considering whether to pay such dividends,
our Board of Directors will review our earnings capital requirements, economic forecasts and such other factors as are deemed
relevant. Some portion of our earnings will be retained to provide capital for the operation and expansion of our business.
Issuer Purchases of Equity Securities
On January 23, 2008, our Board of Directors authorized the repurchase of up to 300,000 shares of our common stock. We will
purchase shares from time to time, in our discretion, in the open market and in private transactions. No shares were purchased in 2015.
- 11 -
A summary of our repurchase activity for the three months ended December 31, 2015 is as follows:
Period
Total
Number
Of Shares
Purchased
Average Price
Paid Per
Share
Cumulative Number
of
Shares Purchased
as Part of Publicly
Announced Plans
Maximum
Number of
Shares
That May Yet Be
Purchased Under
The Plan
October 2015 ...................................................................................................................................................................................
129,137
— $
—
170,863
November 2015 ...............................................................................................................................................................................
129,137
— $
—
170,863
December 2015 ...............................................................................................................................................................................
129,137
— $
—
170,863
Total ................................................................................................................................................................................................
129,137
0 $
170,863
0
The following table sets forth information as of December 31, 2015 with respect to our equity compensation plans.
Equity Compensation Plan Information
Plan Category
Equity compensation plans approved by security
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)
holders (1) ....................................................................................................................................................................................
265,000 $
3.02
1,760,000
Total ................................................................................................................................................................................................
265,000 $
3.02
1,760,000
(1) Consists of our 1997 and 2007 compensation plans.
- 12 -
Our Performance The graph below compares our performance from December 31, 2010 through December 31, 2015 against the
performance of the NASDAQ Composite Index and a peer group. The peer group consists of Ameritrade
Holding Corporation, E*Trade Financial Corporation and the Charles Schwab Corporation.
Siebert Financial Corp. ...................................................................................................................................................................
Nasdaq Composite ..........................................................................................................................................................................
Peer Group ......................................................................................................................................................................................
127.91
188.98
190.97
93.60
166.19
161.49
97.09
116.92
86.02
83.14
100.53
70.30
75.00
199.95
206.08
2010
100.00
100.00
100.00
2011
Cumulative Total Return
2013
2012
2014
2015
- 13 -
Item 6.
SELECTED FINANCIAL DATA
(In thousands except share and per share data)
The Following Selected Financial Information Should Be Read In Conjunction with Our Consolidated Financial Statements
and the Related Notes Thereto.
2015
2014
2013
2012
2011
Income statement data:
10,096
Total Revenues ................................................................................................................................................................................
(2,869 )
Net loss ............................................................................................................................................................................................
16,401 $
(5,912 ) $
15,815 $
(6,557 ) $
20,983 $
(171 ) $
$
$
20,199
(5,379 )
Net loss per share of common stock
(.13 )
Basic ............................................................................................................................................................................................
(.13 )
Diluted .........................................................................................................................................................................................
(0.27 ) $
(0.27 ) $
(0.30 ) $
(0.30 ) $
(0.01 ) $
(0.01 ) $
$
$
(0.24 )
(0.24 )
Weighted average shares outstanding (basic) .................................................................................................................................
Weighted average shares outstanding (diluted) ..............................................................................................................................
22,087,324
22,087,324
22,085,126
22,085,126
22,100,759
22,100,759
22,085,126
22,085,126
22,114,121
22,114,121
Statement of financial condition data (at year
end):
Total assets ......................................................................................................................................................................................
Total liabilities excluding subordinated
27,970 $
20,728 $
33,456 $
17,785
$
34,823
2,102
borrowings ...................................................................................................................................................................................
15,683
Stockholders’ equity .......................................................................................................................................................................
0
Cash dividends declared on common shares ..................................................................................................................................
2,861 $
25,109 $
0 $
2,176 $
18,552 $
0 $
2,416 $
31,040 $
0 $
$
$
$
3,599
31,224
0
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion should be read in conjunction with our audited Consolidated Financial Statements and the Notes thereto
contained elsewhere in this Annual Report.
Our working capital is invested primarily in money market funds, so that liquidity has not been materially affected. The
recent financial crisis did have the effect of reducing participation in the securities market by our retail and institutional customers,
which had an adverse effect on our revenues. While the stock market improved in 2015 our revenues did not. For the period ended
November 9, 2015, in which Siebert sold its 49% equity interest to our former affiliate resulting in discontinued operations, income of
our affiliate, SBSF increased to $1.4 million as a result of an increase in the number of offerings by municipalities. A loss resulted
from the disposal of this equity investment in the amount of $52,000 for 2015 which includes equity earnings of former affiliate of
$671,000, net of $448,000 loss related to disposal of investment in 2015, net of income tax of $275,000. Siebert also earned interest
income from the receivable from the SCM sale to SBSF of $235,000 in 2015 which is included in revenue in continuing operations as
the receivable will be retained by Siebert. The Company’s professional expenses during 2014 and 2013 include the costs of an
arbitration proceeding commenced by a former employee following the termination of his employment, which was resolved in 2014
resulting in a $4,300,000 settlement payment. The action has adversely affected the Company’s results of operations. Competition in
the brokerage industry remains intense.
On November 4, 2014, the Company, which at the time held a 49% membership interest in, and the other members of,
Siebert Brandford Shank & Co., LLC (“SBS”), contributed their SBS membership interests into a newly formed Delaware limited
liability company, Siebert Brandford Shank Financial, LLC (“SBSF”), in exchange for the same percentage interests in SBSF. On the
same day, the Company entered into an Asset Purchase Agreement (the “SCM Purchase Agreement”) with SBS and SBSF, pursuant
to which the Company sold substantially all of the assets relating to the Company’s capital markets business to SBSF. Pursuant to the
SCM Purchase Agreement, SBSF assumed post-closing liabilities relating to the transferred business.
The SCM Purchase Agreement provides for an aggregate purchase price for the disposition of $3,000,000, payable by SBSF
after closing in annual installments commencing on March 1, 2016 and continuing on each of March 1, 2017, 2018, 2019 and 2020.
The transferred business was contributed by SBSF to, and operated by SBS. The amount payable to the Company on each annual
payment date will equal 50% of the net income attributable to the transferred business recognized by SBS in accordance with
generally accepted accounting principles during the fiscal year ending immediately preceding the applicable payment date; provided
- 14 -
that, if net income attributable to the transferred business generated prior to the fifth annual payment date is insufficient to pay the
remaining balance of the purchase price in full on the fifth annual payment date, then the unpaid amount of the purchase price will be
paid in full on March 1, 2021. The annual installment payable on March 1, 2016 was based on the net income attributable to the
capital markets business for the year ended December 31, 2015, which amounted to $493,000 and was paid on March 3, 2016.
Transferred assets of the Company’s capital markets business consisted of issuer relationships and goodwill, which assets had
no carrying value to the Company, and the Company recorded a gain on sale of $ 1,820,000, which reflected the fair value of the
purchase obligation. Such fair value (Level 3) was based on the present value of estimated annual installments to be received during
2016 through 2020 from forecasted net income of the transferred business plus a final settlement in 2021, discounted at 11.5%
(representing SBS’s weighted average cost of capital).
The discount recorded for the purchase obligation will be amortized as interest income using an effective yield, initially
calculated based on the original carrying amount of the obligation and estimated annual installments to be received and adjusted in
future periods to reflect actual installments received and changes in estimates of future installments. Interest income recognized on the
obligation for the period December 31, 2015, amounted to approximately $235,000 based on a yield of approximately 12%.
The following table sets forth certain metrics as of December 31, 2015, 2014 and 2013, respectively, which we use in
evaluating our business.
Retail Customer Activity:
For the Twelve Months
ended December 31,
2015
2014
2013
Total retail trades: ...........................................................................................................................................................................
Average commission per retail trade: .............................................................................................................................................
259,624
22.29
19.50 $
293,419
$
327,285
21.70
As of December 31,
2015
2014
Retail customer balances:
Retail customer net worth (in billions): ..........................................................................................................................................
Retail customer money market fund value (in billions): ................................................................................................................
Retail customer margin debit balances (in millions): .....................................................................................................................
Retail customer accounts with positions: ........................................................................................................................................
7.3
1.0
232.3
32,962
6.8
.9
254.7
30,851
$
$
$
$
$
$
Description:
•
•
•
•
•
•
Total retail trades represents retail trades that generate commissions.
Average commission per retail trade represents the average commission generated for all types of retail customer
trades.
Retail customer net worth represents the total value of securities and cash in the retail customer accounts before
deducting margin debits.
Retail customer money market fund value represents all retail customers accounts invested in money market funds.
Retail customer margin debit balances represents credit extended to our customers to finance their purchases against
current positions.
Retail customer accounts with positions represent retail customers with cash and/or securities in their accounts.
We, like other securities firms, are 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 our 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.
- 15 -
Competition continues 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 we do not
currently impose, and also direct their orders to market makers where they have a financial interest. Continued competition could limit
our growth or even lead to a decline in our customer base, which would adversely affect our results of operations. Industry-wide
changes in trading practices, such as the continued use of Electronic Communications Networks, are expected to put continuing
pressure on commissions/fees earned by brokers while increasing volatility.
We are a party to an Operating Agreement (the “Operating Agreement”), with Suzanne Shank and Napoleon Brandford III,
the two individual principals (the “Principals”) of 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 us. The Company and principals closed down the operations of SBSFPC
in 2014.
In 2014, we began business as a registered investment advisor through our wholly-owned subsidiary, Siebert Investment
Advisors, Inc. (“SIA”). SIA is a boutique investment management firm that greatly extends our ability to meet our customer’s
investment needs. SIA offers advice to clients regarding asset allocation and the selection of investments. Our investment management
services include the design, implementation, and continued monitoring of client accounts on a discretionary or non-discretionary basis.
Investment selections and recommendation are guided by the stated objectives of the customer, other considerations include the
customer’s risk profile and financial status.
SIA offers to its clients a number of Asset Management Programs (“Managed Programs”) consisting of asset allocation,
flexible asset management and focused or completion strategies. In these Managed Programs, SIA acts as the co-adviser to clients. IA
Representatives will assist each client in reviewing information about the programs, completing a client questionnaire to determine the
client’s risk tolerance, financial situation and investment objectives and selecting an investment strategy. SIA does not ever act as
portfolio manager directly, SIA selects other investment advisers to act as portfolio manager on behalf of its clients. During 2015, the
results of SIA operations are immaterial to the operations of the Company.
On January 23, 2008, our Board of Directors authorized a buy back of up to 300,000 shares of our common stock. Under this
program, shares are purchased from time to time, at our discretion, in the open market and in private transactions. No shares were
purchased during 2015.
Critical Accounting Policies
We generally follow accounting policies standard in the brokerage industry and believe that our policies appropriately reflect
our financial position and results of operations. Our management makes significant estimates that affect the reported amounts of
assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities included in the financial
statements. The estimates relate primarily to revenue and expense items in the normal course of business as to which we receive no
confirmations, invoices, or other documentation, at the time the books are closed for a period. We use our best judgment, based on our
knowledge of revenue transactions and expenses incurred, to estimate the amount of such revenue and expenses. We are not aware of
any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and
expenses incurred when we subsequently receive 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. Our management believes that its
estimates are reasonable.
Results of Operations
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Revenues. Total revenues for 2015 were $10.1 million, a decrease of $5.8 million, or 36.3%, from 2014. Commission and fee
income decreased $1.6 million, or 14.9%, from the prior year to $9.2 million primarily due to a decrease in retail trading. The Capital
Markets Division was sold to our former affiliate SBSF on November 4, 2014 resulting in reduced institutional trading commissions
and investment banking revenues. Commission recapture operations were shut down on September 30, 2014.
Investment banking revenues decreased $1.8 million or 97.8%, from the prior year to $40,000 in 2015 due to the Capital
Markets division being sold on November 4, 2014 to our former affiliate.
Trading profits decreased $776,000, or 57.4%, from the prior year to $575,000 in 2015 primarily due to an overall decrease
in trading volume primarily in the debt markets.
- 16 -
The Company recorded a gain on the sale of our Capital Markets Segment of $1,820,000, which reflected the fair value of the
purchase obligation (transferred assets of the Company’s capital markets business, consisted of customer accounts and goodwill,
which had no carrying value to the Company. Such fair value was based on the present value of estimated annual installments to be
received during 2016 through 2020 from forecasted net income of the transferred business plus a final settlement in 2021, discounted
at 11.5% (representing SBS’s weighted average cost of capital), the sale was for $3,000,000 recorded at a discount.
The discount recorded for the purchase obligation will be amortized as interest income using an effective yield initially
calculated based on the original carrying amount of the obligation and estimated annual installments to be received and adjusted in
future periods to reflect actual installments received and changes in estimates of future installments. Interest income recognized on the
obligation for the period December 31, 2015 amounted to $235,000 based on a yield of approximately 12%.
Income from interest and dividends increased $232,000, or 246.8%, from the prior year to $326,000 in 2015 primarily due to
accrued interest on our receivable from business sold to affiliate (see above paragraph) and the sale of our equity interest to our former
affiliate offset by secured demand note interest with our former affiliate which expired on August 31, 2015.
Expenses. Total expenses for 2015 were $13.2 million, a decrease of $9.3 million, or 41.3%, from the prior year.
Employee compensation and benefit costs decreased $2.9 million, or 34.9%, from the prior year to $5.4 million in 2015. This
decrease was due to a reduction in head count from the previous year, as well as the Capital Markets Division being sold to SBSF on
November 4, 2014.
Clearing and floor brokerage fees decreased $426,000, or 25.6%, from the prior year to $1.2 million in 2015 primarily due to
lower retail trading volumes, as well as shutting down our rebate recapture business on September 30, 2014.
Professional fees decreased $1.1 million, or 25.8% from the prior year to $3.2 million in 2015 primarily due to a decrease in
legal fees relating to a dispute with a former employee (see settlement of case below).
In July 2014, the Company entered into a settlement agreement in regard to a dispute with a former employee, in which the
former employee sought, among other things, damages arising from his separation from the Company. The Company asserted counter
claims in the arbitration. Pursuant to the settlement, the Company paid $4,300,000 to the former employee, and the claims and
counterclaims have been dismissed and released.
Advertising and promotion expense increased $20,000, or 8.1%, from the prior year to $268,000 in 2015 due to an increase in
social media advertising.
Communications expense decreased $270,000, or 31.2%, from the prior year to $595,000 in 2015 due to a new phone system
and phone vendor. Quote fees were down as well due to the reduction in Bloomberg terminals due to the sale of our Capital Markets
segment on November 4, 2014. Retail trading revenues were down causing quotes to go down.
Occupancy costs decreased $12,000, or 1.5%, from the prior year to $776,000 in 2015 due to our Palm Beach branch closing
on March 31, 2014 and the Jersey City branch closing down on June 30, 2015, offset by increases in rent at our Beverly Hills office
due to our month to month status. Security deposits were written off to rent for Jersey City and a former Beverly Hills location.
Other general and administrative expenses decreased $309,000, or 15.2%, from the prior year to $1.7 million in 2015 due
decreases in office expense in travel, entertainment, computer security updates, and registration expense.
Discontinued operations - Loss from our equity investment in SBSF, an entity which Siebert sold its 49% equity interest to
on November 9, 2015, for 2015 was $52,000 which includes equity earnings of former affiliate of $671,000, net of $448,000 loss
related to disposal of investment in 2015, net of income tax of $275,000, compared to income of $84,000 net of income tax of $27,000
for 2014, a decrease of $139,000, primarily due to SBSF participating in more municipal bond offerings as senior- and co-manager.
Income from our equity investment in SBSFPC, an entity in which we hold a 33% equity interest, for 2015 was $0 as compared to a
loss of $17,000 from the same period in 2014. This decrease was principally due to SBSFPC winding down and shutting down their
operations in 2014.
Income tax benefit for the year ended December 31, 2015 and 2014 was $275,000 and $27,000, respectively. The benefit for
income taxes for 2015 and 2014 represent the utilization of the loss from continuing operations against income from discontinued
operations, exclusive in 2015 of the capital loss from disposal of the investment in former affiliate. The Company has recorded a
valuation allowance to fully offset our deferred tax asset at December 31, 2015 and 2014.
Results of Operations
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Revenues. Total revenues for 2014 were $15.9 million, a decrease of $549,000, or 3.3%, from 2013. Commission and fee
income decreased $1.2 million, or 9.9%, from the prior year to $10.8 million primarily due to a decrease in retail trading and in the
average commission charged per retail trade. Capital Markets Division was sold to our former affiliate SBSF on November 4, 2014
resulting in reduced institutional trading commissions and investment banking revenues. Commission recapture operations were shut
down on September 30, 2014.
- 17 -
Investment banking revenues decreased $588,000 or 24.3%, from the prior year to $1.8 million in 2014 due to our
participation in fewer new issues in the equity and debt capital markets. The Capital Markets division was sold on November 4, 2014
to our affiliate.
Trading profits decreased $625,000, or 31.6%, from the prior year to $1.4 million in 2014 primarily due to an overall
decrease in trading volume primarily in the debt markets.
The Company recorded a gain on the sale of our Capital Markets Segment of $ 1,820,000, which reflected the fair value of
the purchase obligation (transferred assets of the Company’s capital markets business, consisted of customer accounts and goodwill,
which had no carrying value to the Company. Such fair value was based on the present value of estimated annual installments to be
received during 2016 through 2020 from forecasted net income of the transferred business plus a final settlement in 2021, discounted
at 11.5% (representing SBS’s weighted average cost of capital), the sale was for $3,000,000 recorded at a discount.
The discount recorded for the purchase obligation will be amortized as interest income using an effective yield initially
calculated based on the original carrying amount of the obligation and estimated annual installments to be received and adjusted in
future periods to reflect actual installments received and changes in estimates of future installments. Interest income recognized on the
obligation for the period from November 4, 2014 to December 31, 2014 amounted to $36,641 based on a yield of approximately 12%.
Income from interest and dividends increased $32,000, or 51.6%, from the prior year to $94,000 in 2014 primarily due to
accrued interest on our receivable from business sold to former affiliate in 2014.
Expenses. Total expenses for 2014 were $22.5 million, an increase of $247,000, or 1.1%, from the prior year.
Employee compensation and benefit costs decreased $995,000, or 10.7%, from the prior year to $8.3 million in 2014. This
decrease was due a reduction in head count from the previous year.
Clearing and floor brokerage fees decreased $717,000, or 30.1%, from the prior year to $1.7 million in 2014 primarily due to
lower retail trading volumes, lower execution charges for institutional equity trading, as well as shutting down our rebate recapture
business on September 30, 2014.
Professional fees decreased $1.0 million, or 18.6% from the prior year to $4.3 million in 2014 primarily due to a decrease in
legal fees relating to a dispute with a former employee (see settlement of case below).
In July 2014, the Company entered into a settlement agreement in regard to a dispute with a former employee, in which the
former employee sought, among other things, damages arising from his separation from the Company. The Company asserted counter
claims in the arbitration. Pursuant to the settlement, the Company paid $4,300,000 to the former employee, and the claims and
counterclaims have been dismissed and released.
Advertising and promotion expense decreased $157,000, or 38.8%, from the prior year to $248,000 in 2014 due to a decrease
in online and print advertising.
Communications expense decreased $431,000, or 33.3%, from the prior year to $865,000 in 2014 due to a new phone system
and phone vendor. Quote fees were down as well due to the reduction in Bloomberg terminals due to the sale of our Capital Markets
segment on November 4, 2014. Retail trading revenues were down causing quotes to go down.
Occupancy costs decreased $258,000, or 24.7%, from the prior year to $788,000 in 2014 due to our Palm Beach branch
closing on March 31, 2014, reduction in our Jersey City branch operating expenses, and New York rent rebates as per our lease.
Impairment of intangibles of $300,000 in 2013 was the result of the Company writing down the carrying value of its
unamortized intangible assets to zero.
Other general and administrative expenses decreased $212,000, or 9.4%, from the prior year to $2.0 million in 2014 due
decreases in office expense in travel, entertainment, computer security updates, and registration expense.
Discontinued Operations - Income from our equity investment in SBSF, an entity in which Siebert holds a 49% equity
interest, for 2014 was $84,000 compared to income of $94,000 for 2013, a decrease of $10,000, primarily due to SBSF participating in
fewer municipal bond offerings as senior- and co-manager. Losses from our equity investment in SBSFPC, an entity in which we hold
a 33% equity interest, for 2014 was a loss of $17,000 as compared to a loss of $159,000 from the same period in 2013. This decrease
was principally due to SBSFPC winding down and shutting down their operations in 2014.
Income tax (benefit) provision for the year ended December 31, 2014 and 2013 was $(27,000) and $19,000, respectively. The
benefit for income taxes for 2014 represent the utilization of the loss from continuing operations against income from discontinued
operations. The provision for income taxes for 2013 represents New York State, New York City and Internal Revenue Service
payments. The Company has recorded a valuation allowance to fully offset our deferred tax asset at December 31, 2014 and 2013.
- 18 -
Liquidity and Capital Resources
Our working capital is invested in cash and money market funds. Our total assets at December 31, 2015 were $17.8 million,
of which we regarded $9.4 million, or 53%, as highly liquid.
Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At December 31,
2015, Siebert’s regulatory net capital was $8.1 million, which was $7.9 million in excess of its minimum capital requirement of
$250,000.
The Company entered into a Secured Demand Note Collateral Agreement with SBS under which the Company is obligated to
lend SBS up to $1,200,000 on a subordinated basis collateralized by cash equivalents of approximately $1,532,000. SBS pays the
Company interest on this amount at the rate of 4% per annum, which amounted to $32,000 for the period from January 1, 2015 to
August 31, 2015, the date the facility expired and was not renewed and the collateral was released from restricted cash.
Contractual Obligations
Below is a table that presents our obligations and commitments at December 31, 2015:
Contractual Obligations
Operating lease obligations .................................
Off-Balance Sheet Arrangements
Total
Less Than
1 Year
1-3 Years
3-5 Years
More Than
Five Years
$
631,000 $
541,000 $
90,000 $
0 $
0
Payment Due By Period
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 customer 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. There were no material losses for unsettled
customer transactions in 2015.
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial Instruments Held For Trading Purposes:
Through Siebert, we maintain inventories in sexchange-listed equity securities and municipal securities on both a long and short basis.
We did not have any short positions at December 31, 2015. The Company does not directly 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. The Company
entered into a Secured Demand Note Collateral Agreement with SBS under which the Company is obligated to lend SBS up to
$1,200,000 on a subordinated basis collateralized by cash equivalents of approximately $1,532,000. SBS pays the Company interest
on this amount at the rate of 4% per annum, which amounted to $32,000 for the period from January 1, 2015 to August 31, 2015, the
date the facility expired and was not renewed and the collateral was released from restricted cash.
Financial Instruments Held For Purposes Other Than Trading:
We generally invest working capital temporarily in dollar denominated money market funds and commercial paper. These
investments are not subject to material changes in value due to interest rate movements.
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. There were no material losses for unsettled
customer transactions in 2015.
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 Annual Report
on Form 10-K.
Item 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
- 19 -
Item 9A.
CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation of management, including our former Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our 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, our management, including our former Chief Executive Officer and Chief Financial Officer, concluded that
our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or
submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be
disclosed is accumulated and communicated to our management, including our former Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding timely disclosure.
- 20 -
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as that
term is defined in Exchange Act Rule 13a-15(f)). To evaluate the effectiveness of our internal control over financial reporting, we use
the 2013 framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the “2013 COSO Framework”). Using the 2013 COSO Framework, our management, including our former
Chief Executive Officer and Chief Financial Officer, evaluated our internal control over financial reporting and concluded that our
internal control over financial reporting was effective as of December 31, 2015.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the most recently completed fiscal quarter that
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitation of the Effectiveness of Internal Controls
None
Item 9B.
OTHER INFORMATION
None
- 21 -
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Identification of Directors
The names of our directors and their ages, positions, and biographies are set forth below.
Patricia L. Francy
Age 70
Patricia Francy retired as Special Advisor for Alumni Relations and Treasurer &
Controller, Columbia University, December 31, 2005. Ms. Francy is a director of Old
Westbury Funds, Inc., the Matheson Foundation, the Guttman Foundation and the Muriel
F. Siebert Foundation. Ms. Francy became a director on March 11, 1997. Ms. Francy is
one of two executors of the Estate of Muriel F. Siebert, our former Chairwoman,
President and Chief Executive Officer, although she does not possess the power in that
capacity to control the voting of the shares of our common stock held by the Estate.
Specific experience, qualifications, attributes or skills:
Ms. Francy served as Treasurer and Controller of Columbia University from 1989 until
2003. She had been affiliated with Columbia University since 1968, and has served as a
Director of Finance and Director of Budget Operations. Ms. Francy was Governor of the
Columbia University Club of New York, and a former director for the Children’s Tumor
Foundation and the Metropolitan New York Library Council. She serves on the Outward
Bound Advisory Board. Ms. Francy participates as director emeritus of Junior
Achievement Worldwide, and is a member of the Economic Club of New York and the
International Women’s Forum. Ms. Francy provides expertise on financial matters
Nancy Peterson Hearn
Age 81
Nancy Peterson Hearn is Chairwoman of Peterson Tool Company, Inc. and was its
President/CEO from 1979 until 2012. Ms. Hearn became a director on June 4, 2001.
Specific experience, qualifications, attributes or skills:
A nationally recognized business entrepreneur, Nancy Peterson Hearn is chairman of
Peterson Tool Company, Inc. Under her leadership, the company has made exponential
gains in sales, production and reputation, and is ranked among the world’s premier
designers and manufacturers of custom insert tooling. Peterson Tool successfully
received ISO 9001 certification, and has earned numerous quality and certification
awards including General Motors’ Targets for Excellence Award and Caterpillar’s
coveted Certified Supplier of Quality Materials awards.
She was the first American to earn the prestigious Veuve Clicquot Business Woman of
the Year Award (1990). Ms. Hearn has a distinguished leadership record that includes
roles on some of the most prestigious boards in the nation. She has served as Vice Chair
of the Foundation, Southeast Region Chair and Membership Chair for Committee of 200
(“C200”), an international organization of businesswomen, which has established the
Nancy Sanders Peterson Scholars Award in her honor. She chaired the C200 Auction
from 2000 to 2008, and her efforts helped raise several millions of dollars for the C200
Foundation. She has also served on the boards of The Society of International Business
Fellows, the Aquinas College Board of Governors, the Mississippi University for
Women’s National Board of Distinguished Women, Nashville Symphony, Cheekwood
Museum and Botanical Gardens and Nashville Ballet.
Most recently, she received the Golden Micrometer Award from Precision Machine
Producers Association for 40 Years of service in the metal working industry.
Ms. Hearn has a longstanding record of community activism that includes roles in
Leadership Nashville, the Tennessee Workforce Development Board, the
- 22 -
Jane H. Macon
Age 69
Robert P. Mazzarella
Age 69
Tennessee Council on Vocational Education, and has been recognized by The National
Federation of Parents for Drug Free Youth. As a spokesperson for private industry, she
champions the advancement of sound economic policies and professional healthcare
standards.
Ms. Hearn is the mother of six adult children, two of whom are actively involved in
Peterson Tool Company, Inc.
Jane Macon is a Partner with the law firm of Bracewell & Giuliani, LLP. Prior to joining
the Bracewell firm in October 2013, she was a Partner in the law firm of Fulbright &
Jaworski L.L.P.,San Antonio, Texas for nearly 30 years. Norton Rose Fulbright US LLP
(formerly Fulbright &Jaworski L.L.P.) and Bracewell & Giuliani, LLP continue to
provide legal services to the Company.Ms. Macon became a director on November 8,
1996 and was named Chairwoman in August 2013. Ms. Macon is one of two executors
of the Estate of Muriel F. Siebert, our former Chairwoman, President and Chief
Executive Officer and, in that capacity, she possesses the power to control the voting and
disposition of the shares of our common stock held by the Estate.
Specific experience, qualifications, attributes or skills:
Ms. Macon centers her legal practice on public finance and administrative law, public
and private partnerships, real estate, zoning, platting, condemnation and municipal bonds.
Prior to joining Fulbright & Jaworski L.L.P. in 1983, Ms. Macon served as the first
female city attorney of the City of San Antonio where she served in that position from
1977 to 1983. Active in professional organizations, Ms. Macon is a past president of the
International Women’s Forum, the Women Lawyers of Texas and the San Antonio
Young Lawyers Association. She presently serves as the program chair of the San
Antonio Bar Association. She has served as a member of the Boards of Directors for the
following national boards: NOW Legal Defense Fund, Child Care Action Campaign,
Center for Democracy, National Women’s Political Caucus, National Nurses League and
National Civic League (formerly National Municipal League). Ms. Macon is also a
member of the San Antonio and American Bar Associations and the State Bar of Texas.
She has received both awards as Outstanding Young Lawyer of Texas and the
Outstanding Young Lawyer of San Antonio and is listed in Who’s Who in America. Ms.
Macon was recently awarded the Prevent Blindness Texas Person of Vision Award
signed by Gov. Rick Perry and the Hope Award by the WOW (Women’s Opportunity
Week by the Greater San Antonio Chamber of Commerce). Ms. Macon provides
expertise on legal matters.
Robert Mazzarella formerly served as a director and as a member of the audit and
compensation committees of Placemark Investments, Inc., a registered investment
adviser in Wellesley, Massachusetts, and Investors Capital Holdings Ltd., in Lynfield
Massachusetts. Mr. Mazzarella also acts as a consultant to a number of major financial
services firms and venture capital firms. Mr. Mazzarella became a director on March 1,
2004.
Specific experience, qualifications, attributes or skills:
Mr. Mazzarella retired from Fidelity Investments Brokerage Services LLC in January
2002, at which time he served as its president. The Board of Directors has determined
that Mr. Mazzarella qualifies as an “audit committee financial expert” under the
applicable rules of the Securities and Exchange Commission. Mr. Mazzarella provides
expertise on financial and brokerage matters.
- 23 -
Identification of Executive Officers
Name
Age
Position
Joseph M. Ramos, Jr.
57
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary
Mr. Ramos has been Executive Vice President, Chief Financial Officer and Assistant
Secretary of Siebert since February 10, 2003, Chief Financial Officer of Siebert, Brandford,
Shank, & Co., L.L.C. since April 20, 2009 and Chief Operating Officer Since June 10, 2013.
From May 1999 to February 2002, Mr. Ramos served as Chief Financial Officer of Internet
Financial Services, 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.
Corporate Governance
Board Meetings
The Board of Directors held 12 regular meetings during 2015. Each incumbent director attended at least 75% of his or her
Board of Directors meetings and all of his or her committee meetings.
Controlled Company
We are a “Controlled Company” as defined in Rule 5615(c)(1) of The Nasdaq Stock Market because the Estate of Muriel F.
Siebert, our former Chairwoman, President and Chief Executive Officer, holds more than 50% of our voting power for the election of
directors. As a “Controlled Company” we are not required to have a majority of our Board of Directors comprised of independent
directors, a compensation committee comprised solely of independent directors or a nominating committee comprised solely of
independent directors.
Audit Committee of the Board of Directors
The Audit Committee of our Board of Directors currently consists of Ms. Francy, Chairwoman, Ms. Hearn and Mr.
Mazzarella. The Board of Directors has determined that Ms. Francy, Ms. Hearn and Mr. Mazzarella is each an “independent director”
within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market and within the meaning of the applicable rules and regulations of
the Securities and Exchange Commission. The Audit Committee held six meetings during 2015.
The Board of Directors has determined that Mr. Mazzarella qualifies as an “audit committee financial expert” under the
applicable rules of the Securities and Exchange Commission.
The Audit Committee was established to (i) assist the Board of Directors in its oversight responsibilities regarding the
integrity of our financial statements, our compliance with legal and regulatory requirements and our auditor’s qualifications and
independence, (ii) prepare the report of the Audit Committee contained herein, (iii) retain, consider the continued retention and
terminate our independent auditors, (iv) approve audit and non-audit services performed by our independent auditors and (v) perform
any other functions from time to time delegated by the Board of Directors. The Board of Directors has adopted a written charter for
the Audit Committee, which
at
https://www.siebertnet.com/html/StartAboutAuditCommittee.aspx.
Siebert & Co.,
the website
of Muriel
available
Inc.
on
is
Compensation Committee of the Board of Directors
The Compensation Committee of our Board of Directors currently consists of Ms. Macon, Chairwoman, Ms. Francy and Mr.
Mazzarella. The Compensation Committee reviews and determines all forms of compensation provided to our executive officers and
directors. The Compensation Committee also administers our stock option and other employee benefit plans. The Compensation
Committee does not function pursuant to a formal written charter and as a “Controlled Company” we are not required to comply with
The Nasdaq Stock Market’s independence requirements. The Compensation Committee held no meetings during 2015.
The Compensation Committee evaluates the performance of the Chief Executive Officer in terms of our operating results and
financial performance and determines her compensation in connection therewith. For the 2015 fiscal year, the Company did have a
Chief Financial Officer and Chief Operating Officer who acted as our principal executive officer.
- 24 -
In accordance with general practice in the securities industry, our executive compensation includes base salaries, an annual
discretionary cash bonus, and stock options and other equity incentives that are intended to align the financial interests of our
executives with the returns to our shareholders. The Compensation Committee determines compensation of our executive officers
(other than the Chief Executive Officer) after carefully reviewing self-evaluations completed by the executive officers, each executive
officer’s business responsibilities, current compensation, the recommendation of our Chief Executive Officer and our financial
performance. We did not change the 2015 base salaries of any of our executive officer from the levels in effect at the end of 2014.
After evaluating our financial performance in 2015, our Compensation Committee did award our executive officer a 100,000 bonus
for 2015. In addition, we did not award any stock options or other equity incentives to our executive officer in 2015.
As part of its oversight of the Company’s executive compensation, the Compensation Committee considers the impact of the
Company’s executive compensation, and the incentives created by the compensation awards that it administers, on the Company’s risk
profile. In addition, the Company reviews all of its compensation policies and procedures, including the incentives that they create and
factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company.
The review found that there were no excessive risks encouraged by the Company’s rewards programs and the rewards programs do
not produce payments that have a material impact on the financial performance of the Company.
Nominating Committee of the Board of Directors
The Nominating Committee of the Board of Directors currently consists of Ms. Hearn, Chairwoman, Ms. Francy and Ms.
Macon. The Nominating Committee does not function pursuant to a formal written charter and as a “Controlled Company” we are not
required to comply with The Nasdaq Stock Market’s independence requirements. The Nominating Committee did not meet in 2015.
The purpose of the Nominating Committee is to identify individuals qualified to become members of our Board of Directors
and to recommend to the Board of Directors or the shareholders that such individuals be selected for directorship. In identifying and
evaluating nominees for director, the Nominating Committee considers each candidate’s experience, integrity, background and skills
as well as other qualities that the candidate may possess and factors that the candidate may be able to bring to the Board of Directors.
We do not have a formal policy with regard to the consideration of diversity in identifying director nominees. However, the Board of
Directors believes that it is essential that its members represent diverse viewpoints, with a broad array of experiences, professions,
skills, geographic representation and backgrounds that, when considered as a group, provide a sufficient mix of perspectives to allow
the Board of Directors to best fulfill its responsibilities to the long-term interests of our shareholders.
The Nominating Committee will consider shareholder nominees for election to our Board of Directors. In evaluating such
nominees, the Nominating Committee will use the same selection criteria the Nominating Committee uses to evaluate other potential
nominees.
Indemnification of Officers and Directors
We indemnify our executive officers and directors to the extent permitted by applicable law against liabilities incurred as a
result of their service to us and against liabilities incurred as a result of their service as directors of other corporations when serving at
our request. We have a director’s and officer’s liability insurance policy, underwritten by Illinois National Insurance Company, a
member of the American International Group, Inc., in the annual aggregate amount of $15 million. As to reimbursements by the
insurer of our indemnification expenses, the policy has a $250,000 deductible; there is no deductible for covered liabilities of
individual directors and officers.
Annual Shareholders Meeting Attendance Policy
It is the policy of our Board of Directors that all of our directors are strongly encouraged to attend each annual shareholders
meeting. All of our directors attended the 2015 annual meeting of shareholders.
Code of Ethics
We have adopted a Code of Ethics for Senior Financial Officers applicable to our chief executive officer, chief financial
officer, treasurer, controller, principal accounting officer, and any of our other employees performing similar functions. A copy of the
Code
at
for
https://www.siebertnet.com/html/StartAboutGovernance.aspx.
Financial
available
Officers
website
Senior
Ethics
our
on
of
is
Board Leadership Structure and Board of Directors
Jane Macon is the Chairwoman of our Board of directors. The Board of Directors does not have a lead independent director.
The Company believes this structure allows all of the directors to participate in the full range of the Board’s responsibilities with respect
to its oversight of the Company’s management. The Board of Directors has determined that this leadership structure is appropriate
given the size of the Company, the number of directors overseeing the Company and the Board of Directors’ oversight responsibilities.
- 25 -
The Board of Directors holds four to seven regular meetings each year to consider and address matters involving the
Company. The Board of Directors also may hold special meetings to address matters arising between regular meetings. These
meetings may take place in person or by telephone. The independent directors also regularly meet in executive sessions outside the
presence of management. The Board of Directors has access to legal counsel for consultation concerning any issues that may occur
during or between regularly scheduled Board meetings. As discussed above, the Board has established an Audit Committee, a
Compensation Committee and a Nominating Committee to assist the Board in performing its oversight responsibilities.
The Board of Directors’ Role in Risk Oversight
Consistent with its responsibility for oversight of the Company, the Board of Directors, among other things, oversees risk
management of the Company’s business affairs directly and through the committee structure that it has established. The principal risks
associated with the Company are risks related to securities market volatility and the securities industry, lower price levels in the
securities markets, intense competition in the brokerage industry, extensive government regulation, net capital requirements,
customers’ failure to pay, investment banking activities, an increase in volume on our systems or other events which could cause them
to malfunction, reliance on information processing and communications systems, continuing changes in technology, dependence on
the ability to attract and retain key personnel, the ability of our principal shareholder to control many key decisions and there may be
no public market for our common stock.
The Board of Directors’ role in the Company’s risk oversight process includes regular reports from senior management on
areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and reputational risks. The full
Board of Directors (or the appropriate committee) receives these reports from management to identify and discuss such risks.
The Board of Directors periodically reviews with management its strategies, techniques, policies and procedures designed to
manage these risks. Under the overall supervision of the Board of Directors, management has implemented a variety of processes,
procedures and controls to address these risks.
The Board of Directors requires management to report to the full Board of Directors on a variety of matters at regular
meetings of the Board of Directors and on an as-needed basis, including the performance and operations of the Company and other
matters relating to risk management. The Audit Committee also receives regular reports from the Company’s independent registered
public accounting firm on internal control and financial reporting matters. These reviews are conducted in conjunction with the Board
of Directors’ risk oversight function and enable the Board of Directors to review and assess any material risks facing the Company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who beneficially own more than
10% of our common stock to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange
Commission. These executive officers, directors and shareholders are required by the Securities and Exchange Commission to furnish
us with copies of all forms they file pursuant to Section 16(a).
No forms were filed under Section 16(a) or were furnished to us during fiscal 2015. Based solely upon this review, we
believe that during fiscal 2015 all Section 16(a) filing requirements applicable to our executive officers, directors and greater than
10% beneficial owners were complied with on a timely basis.
Item 11.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows, during the years ended December 31, 2015 and 2014, the annual compensation paid to or earned
by (1) our Acting Chief Executive Officer and (2) Executive Vice President, Chief Operating in Chief Financial Officer (collectively,
the “Named Executive Officers”).
Name and principal
position
Suzanne Shank (2) ................. 2015
Acting Chief Executive
Officer
Year
Salary
($)
41,669
2014 250,000
Bonus
($)
Stock
Awards
($)
— —
— —
Option
Awards
($)(1)
—
—
Non-Equity
Incentive Plan
Compensation
($)
—
—
Non-qualified
Deferred
Compensation
Earnings
($)
—
—
All Other
Compensation
($)
—
—
Total
($)
41,669
250,000
Joseph M. Ramos, Jr.(3) ........ 2015 385,000 100,000 —
Executive Vice President,
2014 385,000 100,000 —
Chief Operating Officer
and Chief Financial Officer
—
—
—
—
—
—
—
—
485,000
485,000
- 26 -
(1) Represents the dollar amount recognized for financial statement reporting in accordance with ASC Topic 718.
(2) Ms. Shank was named Active Chief Executive Officer effective September 16, 2013 at a salary of $250,000 annually. Ms. Shank
has resigned from her position as Acting Chief Executive Officer of Siebert Financial Corporation effective as of February 27,
2015.
(3) Mr. Ramos was named to the additional position of Chief Operating Officer effective June 17, 2013.
Grants of Plan-Based Awards
Our Compensation Committee did not approve grants of options to purchase our common stock or other equity awards under
our 2007 Long-Term Incentive Plan to any of our Named Executive Officers in 2015.
Outstanding Equity Awards at December 31, 2015
The following table sets forth the outstanding equity award holdings of our Named Executive Officers at December 31, 2015:
OPTION AWARDS
STOCK AWARDS
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Name
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
—
—
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
—
—
Option
Exercise
Price ($)
—
2.75
Suzanne Shank ................................................................................................................................
Joseph M. Ramos, Jr. ......................................................................................................................
—
25,000
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#)
—
—
Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#)
—
—
Number
of Shares
or Units of
Stock That
Have Not
Vested (#)
—
—
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
—
—
Option
Expiration
Date
—
8/11/16
Termination of Employment and Change-in-Control Arrangements
Employment Agreements.
We are not a party to an employment agreement with any Named Executive Officer. All of our Named Executive Officers are
employees at will.
Option Agreements.
The Option Agreements we entered into with our Named Executive Officers provide that in the event of a Change in Control
(as defined below) of our Company, the options shall immediately become fully exercisable. A Change in Control means the
occurrence of (i) any consolidation or merger in which we are not the continuing or surviving entity or pursuant to which shares of our
common stock are converted into cash, securities or other property, other than a consolidation or merger in which the holders of our
common stock immediately prior to such consolidation or merger own not less than 50% of the total voting power of the surviving
entity immediately after the consolidation or merger, (ii) any sale, lease, exchange or other transfer of all or substantially all of our
assets, (iii) the approval by our shareholders of any plan or proposal for our complete liquidation or dissolution or (iv) any person or
entity becoming the owner of 50% or more of our common stock. All options to purchase our common stock issued to Mr. Ramos
have vested and are fully exercisable.
- 27 -
Compensation of Directors
In September 2013, our non-employee director’s fees were increased annually to $60,000 from $40,000 for service on our
Board of Directors. We do not compensate our employees or employees of our subsidiaries for service as directors.
Fees
Earned
or Paid
in
Cash ($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Nonqualified
Incentive
Plan
Compensation
($)
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Name
Patricia L. Francy(1) ...................................................................................
Nancy Peterson Hearn(2) ............................................................................
Jane H. Macon(3) .......................................................................................
Robert P. Mazzarella(4) ..............................................................................
60,000
60,000
60,000
60,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
60,000
60,000
60,000
60,000
(1) Ms. Francy is the Chairwoman of the Audit Committee.
(2) Ms. Hearn is the Chairwoman of the Nominating Committee.
(3) Ms. Macon is the Chairwoman of the Board and Compensation Committee.
(4) Mr. Mazzarella is the Audit Committee Financial Expert.
Audit Committee Report to Shareholders
The Audit Committee has reviewed and discussed with management the audited financial statements for the fiscal year ended
December 31, 2015. The Audit Committee has also discussed with our independent registered public accounting firm the matters
required to be discussed by Auditing Standards No. 16, adopted by the Public Company Accounting Oversight Board (United States)
regarding, “Communications with Audit Committees,” including our critical accounting policies and our interests, if any, in “off
balance sheet” entities. Additionally, the Audit Committee has received the written disclosures and representations from the
independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight
Board (United States) regarding “Communication with Audit Committees concerning Independence” and has discussed with the
independent registered public accounting firm the independent registered public accounting firm’s independence.
Based on the review and discussions referred to within this report, the Audit Committee recommended to the Board of
Directors that the audited financial statements for the fiscal year ended December 31, 2015 be included in Siebert Financial Corp.’s
Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
Audit Committee,
Patricia L. Francy, Chairwoman
Nancy Peterson Hearn
Robert P. Mazzarella
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table lists share ownership of our common stock as of March 13, 2016. The information includes beneficial
ownership by each of our directors, the persons named in the Summary Compensation Table, all directors and executive officers as a
group and beneficial owners known by our management to hold at least 5% of our common stock. To our knowledge, each person
named in the table has sole voting and investment power with respect to all shares of common stock shown as beneficially owned by
such person. No persons or groups filed statements with the Securities and Exchange Commission during 2015 disclosing that they
held more than 5% of our common stock.
Name of Beneficial Owner(1)
The Estate of Muriel F. Siebert ....................................................................................
Joseph M. Ramos, Jr. ...................................................................................................
Patricia L. Francy .........................................................................................................
Nancy Peterson Hearn ..................................................................................................
Jane H. Macon .............................................................................................................
Robert P. Mazzarella ....................................................................................................
Directors and current executive officers as a group (6 persons) ..................................
25,000 (2)
61,000 (3)
60,000 (2)
61,000 (3)
60,000 (2)
267,000 (4)
Shares of Common Stock
19,878,700
Percent of Class
89.9%
*
*
*
*
*
1.2%
- 28 -
* Less than 1%
(1) The address for each person named in the table is c/o Siebert Financial Corp., 885 Third Avenue, Suite 3100, New York,
New York 10022.
(2) Represents options to purchase shares of our common stock which are currently exercisable.
(3) Includes options to purchase 60,000 shares of our common stock which are currently exercisable.
(4) Includes options to purchase an aggregate of 265,000 shares of our common stock described above which are currently
exercisable.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Review and Approval of Related Party Transactions
As set forth in our Amended and Restated Audit Committee Charter, the Audit Committee is responsible for reviewing and
approving all related party transactions.
Our Code of Ethics for Senior Financial Officers, applicable to our chief executive officer, chief financial officer, controller,
treasurer, principal accounting officer and other employees performing similar functions, provides that our Senior Financial Officers
should endeavor to avoid any actual or potential conflict of interest between their personal and professional relationships and requires
them to promptly report and disclose all material facts relating to any such relationships or financial interests which give rise, directly
or indirectly, to an actual or potential conflict of interest to the Audit Committee. The Code of Ethics also provides that no Senior
Financial Officer should knowingly become involved in any actual or potential conflict of interest without the relationship or financial
interest having been approved by the Audit Committee. Our Code of Ethics does not specify the standards that the Audit Committee
would apply to a request for a waiver of this policy.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
EisnerAmper LLP currently serves as our independent registered public accounting firm.
Audit Fees
Our Audit Committee has determined that the services described below that were rendered by EisnerAmper LLP are
compatible with the maintenance of EisnerAmper LLP’s independence from our management.
Audit Fees
The aggregate fees billed by EisnerAmper LLP for professional services rendered for the audit of our annual financial
statements and reviews of our quarterly financial statements were $214,000 for the year ended December 31, 2015 and $212,000 for
the year ended December 31, 2014.
Audit-Related Fees
EisnerAmper LLP did not perform any audit-related services during the years ended December 31, 2015 and December 31,
2014.
Tax Fees
EisnerAmper LLP billed aggregate fees of $57,000 during each the years ended December 31, 2015 and December 31, 2014
for tax compliance services, respectively.
All Other Fees. The aggregate fees billed by EisnerAmper LLP during the years ended December 31, 2015 for other
products and services totaled $11,000 related to examination of agreements. No other products or services were rendered for the year
ended December 31, 2014.
Pre-Approval Policy
The Audit Committee pre-approves all audit and non-audit services provided by our independent auditors prior to the
engagement of the independent auditors with respect to such services. With respect to audit services and permissible non-audit
services not previously approved, the Audit Committee has authorized the Chairwoman of the Audit Committee to approve such audit
services and permissible non-audit services, provided the Chairwoman informs the Audit Committee of such approval at the next
regularly scheduled meeting. All “Audit Fees”, “Tax Fees” and “All Other Fees” set forth above were pre-approved by the Audit
Committee in accordance with its pre-approval policy.
- 29 -
PART IV
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The exhibits required by Item 601 of Regulation S-K filed as part of, or incorporated by reference in, this Annual 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, 2015 commence on page F-1 of this Annual Report
on Form 10-K.
2.
Financial Statement Schedules None.
3. Exhibits
The exhibits required by Item 601 of Regulation S-K filed as part of, or incorporated by reference in, this report are listed in the
accompanying Exhibit Index. Exhibit Numbers 10.1, 10.2 and 10.6 are management contracts, compensatory plans or arrangements.
- 30 -
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIEBERT FINANCIAL CORP.
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition at December 31, 2015 and 2014
Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 2015
Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period ended
December 31, 2015
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2015
Notes to Consolidated Financial Statements
SIEBERT BRANDFORD SHANK FINANCIAL, LLC AND SUBSIDIARY AT 2015 AND 2014
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition at December 31, 2015 and 2014
Consolidated Statements of Operations for the period from January 1, 2015 to November 9, 2015 and for the years
ended December 31, 2014 and 2013
Consolidated Statements of Changes in Members’ Capital for the period from January 1, 2015 to November 9, 2015
and for the years ended December 31, 2014 and 2013
Consolidated Statements of Cash Flows for the period from January 1, 2015 to November 9, 2015 and for the years
ended December 31, 2014 and 2013
Notes to Consolidated Financial Statements
Page
F-1
F-2
F-3
F-4
F-5
F-6
F-16
F-17
F-18
F-19
F-20
F-21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
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, 2015 and 2014, and the related consolidated statements of operations, changes in stockholders’
equity and cash flows for each of the years in the three-year period ended December 31, 2015. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, 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, 2015 and 2014, and the consolidated results of their operations and their
cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with accounting principles generally
accepted in the United States of America.
/s/ EisnerAmper LLP
New York, New York
March 30, 2016
F-1
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31,
2015
2014
Cash and cash equivalents ........................................................................................................................................................................................
Cash equivalents - restricted .....................................................................................................................................................................................
Receivable from brokers ...........................................................................................................................................................................................
Receivable from business sold to former affiliate net of unamortized discount of $908,000
6,749,000
1,532,000
788,000
—
626,000
9,420,000 $
$
and $1,143,000 ......................................................................................................................................................................................................
Other receivable from former affiliate, including accrued interest of $46,000 ........................................................................................................
Securities owned, at fair value ..................................................................................................................................................................................
Furniture, equipment and leasehold improvements, net ...........................................................................................................................................
Investments in and advances to former affiliate .......................................................................................................................................................
Prepaid expenses and other assets ............................................................................................................................................................................
Intangibles, net .........................................................................................................................................................................................................
1,857,000
—
488,000
609,000
7,979,000
718,000
8,000
2,092,000
4,046,000
593,000
374,000
—
634,000
—
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities, including $171,000 payable to former affiliate
$
17,785,000 $
20,728,000
in 2015 ...............................................................................................................................................................................................................
2,102,000 $
2,176,000
$
Commitments, contingencies and other - Note J
Stockholders’ equity:
Common stock, $.01 par value; 49,000,000 shares authorized, 23,211,846 shares issued,
22,085,126 shares outstanding .................................................................................................................................................................................
Additional paid-in capital ............................................................................................................................................................................................
Retained earnings .........................................................................................................................................................................................................
Less: 1,126,720 shares of treasury stock, at cost .........................................................................................................................................................
232,000
19,490,000
3,590,000
(4,760,000 )
232,000
19,490,000
721,000
(4,760,000 )
15,683,000
18,552,000
$
17,785,000 $
20,728,000
See notes to consolidated financial statements.
F-2
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue:
2015
Year Ended December 31,
2014
2013
Commissions and fees ..............................................................................................................................................................................................
Investment banking ..................................................................................................................................................................................................
Trading gains, net .....................................................................................................................................................................................................
Gain on the disposition of business to former affiliate .............................................................................................................................................
Interest and dividends ...............................................................................................................................................................................................
$ 10,757,000
1,830,000
1,351,000
1,820,000
94,000
$ 11,945,000
2,418,000
1,976,000
—
62,000
9,155,000
40,000
575,000
—
326,000
$
Expenses:
10,096,000
15,852,000
16,401,000
Employee compensation and benefits ......................................................................................................................................................................
Clearing fees, including floor brokerage ..................................................................................................................................................................
Professional fees .......................................................................................................................................................................................................
Loss related to arbitration settlement .......................................................................................................................................................................
Advertising and promotion .......................................................................................................................................................................................
Communications .......................................................................................................................................................................................................
Occupancy ................................................................................................................................................................................................................
Impairment of intangibles .........................................................................................................................................................................................
Other general and administrative ..............................................................................................................................................................................
9,262,000
2,382,000
5,293,000
—
405,000
1,296,000
1,046,000
300,000
2,245,000
5,386,000
1,239,000
3,200,000
—
268,000
595,000
776,000
—
1,724,000
8,267,000
1,665,000
4,310,000
4,300,000
248,000
865,000
788,000
—
2,033,000
13,188,000
22,476,000
22,229,000
Loss from continuing operations before income taxes ................................................................................................................................................
(Benefit) provision for income taxes ...........................................................................................................................................................................
Loss from continuing operations .................................................................................................................................................................................
(5,828,000 )
19,000
(5,847,000 )
(6,624,000 )
(27,000 )
(6,597,000 )
(3,092,000 )
(275,000 )
(2,817,000 )
Discontinued operations:
(Loss) income from equity in earnings of former affiliate, net of
$448,000 loss related to disposal of investment in former affiliate in
2015, and income net of income taxes of $275,000 in 2015 and
$27,000 in 2014 ........................................................................................................................................................................................................
(65,000 )
(52,000 )
40,000
Net loss .........................................................................................................................................................................................................................
(5,912,000 )
(6,557,000 )
(2,869,000 )
$
$
$
Net loss per share of common stock
Continuing operation ................................................................................................................................................................................................
Discontinued operations ...........................................................................................................................................................................................
Basic and diluted ......................................................................................................................................................................................................
.27 )
—
.27 )
.30 )
—
.30 )
.13 )
—
.13 )
($
$
($
($
($
($
($
$
($
Weighted average shares outstanding ......................................................................................................................................................................
22,087,324
22,085,126
22,085,126
See notes to consolidated financial statements.
F-3
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Number
Of
Shares
Common Stock
$.01 Par
Value
Additional
Paid -In
Capital
Treasury Stock
Retained
Earnings
Number
Of
Shares
Amount
Total
Balance - January 1,
2013 ..........................................................................................................................................................................................................................
Net loss .........................................................................................................................................................................................................................
Treasury share
23,211,846 $ 232,000 $ 19,490,000 $ 16,059,000
31,040,000
(5,912,000 )
$ (4,741,000 ) $
(5,912,000 )
1,114,454
purchases ..................................................................................................................................................................................................................
Balance – 12/31/2013 ..................................................................................................................................................................................................
Net loss .........................................................................................................................................................................................................................
Balance – 12/31/2014 ..................................................................................................................................................................................................
(19,000 )
25,109,000
(6,557,000 )
18,552,000
(19,000 )
(4,760,000 )
(6,557,000 )
3,590,000
12,266
1,126,720
(4,760,000 )
23,211,846
23,211,846
19,490,000
19,490,000
10,147,000
1,126,720
232,000
232,000
Net loss .........................................................................................................................................................................................................................
Balance - December
(2,869,000 )
(2,869,000 )
31, 2015 ....................................................................................................................................................................................................................
23,211,846 $ 232,000 $ 19,490,000 $
$ (4,760,000 ) $
1,126,720
15,683,000
721,000
See notes to consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2014
2015
2013
Cash Flows From Operating Activities:
Net loss .........................................................................................................................................................................................................................
Adjustments to reconcile net loss to net cash used in operating
(2,869,000 ) $
(6,557,000 ) $
(5,912,000 )
$
activities:
Depreciation and amortization .....................................................................................................................................................................................
Gain on the disposition of business sold to former affiliate ........................................................................................................................................
Equity in (earnings) loss of former affiliate .................................................................................................................................................................
Loss on sale of investment in former affiliate .............................................................................................................................................................
Amortization of discount on receivable from former affiliate .....................................................................................................................................
Accrued interest on note receivable from former affiliate ...........................................................................................................................................
Distributions from former affiliate ...............................................................................................................................................................................
Impairment of intangibles ............................................................................................................................................................................................
Changes in:
Cash equivalent - restricted ..........................................................................................................................................................................................
Securities owned, at fair value ..................................................................................................................................................................................
Receivable from former affiliate investee equity interest ........................................................................................................................................
Receivable from clearing and other brokers .............................................................................................................................................................
Prepaid expenses and other assets ............................................................................................................................................................................
Accounts payable and accrued liabilities .................................................................................................................................................................
267,000
(1,820,000 )
(67,000 )
—
(37,000 )
—
13,000
—
130,000
—
65,000
—
—
—
1,212,000
300,000
1,532,000
(105,000 )
—
162,000
84,000
(74,000 )
284,000
—
(671,000 )
448,000
(235,000 )
(46,000 )
98,000
—
(151,000 )
—
818,000
149,000
445,000
—
(82,000 )
(76,000 )
317,000
33,000
(685,000 )
Net cash used in operating activities .....................................................................................................................................................................
(2,944,000 )
(1,392,000 )
(8,694,000 )
Cash Flows From Investing Activities:
Purchase of furniture, equipment and leasehold improvements ..................................................................................................................................
Distributions from equity investees .............................................................................................................................................................................
Proceeds from sale of investment in former affiliate ...................................................................................................................................................
Collection (payment) of advances to former affiliate ..................................................................................................................................................
(41,000 )
—
4,000,000
104,000
(520,000 )
6,000
—
(1,000 )
(154,000 )
173,000
—
—
Net cash provided by/ (used in) investing activities .............................................................................................................................................
4,063,000
(515,000 )
19,000
Cash Flows From Financing Activities:
Purchase of treasury shares ..........................................................................................................................................................................................
(19,000 )
—
—
Net increase (decrease) in cash and cash equivalents ..................................................................................................................................................
Cash and cash equivalents - beginning of year ............................................................................................................................................................
(3,478,000 )
18,902,000
(8,675,000 )
15,424,000
2,671,000
6,749,000
Cash and cash equivalents - end of year ......................................................................................................................................................................
Supplemental Cash Flow Disclosures:
Cash for:
9,420,000 $
6,749,000 $
15,424,000
$
$
Income taxes paid, net ...........................................................................................................................................................................................
19,000
— $
$
Supplemental cash flow disclosure:
Non-cash investing activity:
$
Note received on sale of investment in former affiliate ........................................................................................................................................
4,000,000
See notes to consolidated financial statements.
F-5
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BUSINESS
Siebert Financial Corp. (the “Financial”) is a holding company that conducts its retail discount brokerage business through its wholly-
owned subsidiary, Muriel Siebert & Co., Inc. (“Siebert”), a Delaware corporation. Siebert’s principal activity is providing online and
traditional brokerage and related services to retail investors. In addition, in 2014 Financial began business as a registered investment
advisor through a wholly-owned subsidiary, Siebert Investment Advisors, Inc. (“SIA”). SIA offers advice to clients regarding asset
allocation and the selection of investments. On November 4, 2014, Siebert sold its capital markets business to an affiliate Siebert
Brandford Shank Financial, LLC (“SBSF”) (see Note B). Another wholly owned subsidiary, Siebert’s Women’s Financial Network
Inc. (“WFN”), is engaged in providing products, services and information devoted to women’s financial needs. In the fourth quarter of
2013, management decided to substantially reduce the resources allocated to the WFN operation (see Note F). The accompanying
consolidated financial statements include the accounts of Financial and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Financial, Siebert, WFN and SIA collectively are referred to herein as the “Company”.
The municipal bond investment banking business was conducted by Siebert Brandford Shank & Co., LLC, a wholly-owned subsidiary
of SBSF and related derivatives transactions were conducted by SBS Financial Products Company, LLC (“SBSFP”), non - controlled
investees in which the Company held a 49% and 33% equity interest respectively. Such investees are accounted for by the equity
method of accounting (see Note E). The equity method provides that the Company records its share of the investees’ earnings or losses
in its results of operations with a corresponding adjustment to the carrying value of its investment. In addition, the investment is
adjusted for capital contributions to and distributions from the investees. Operations of SBSFP ceased in December 2014 and on
November 9, 2015, the Company sold its 49% membership investment in SBSF back to SBSF (see Note C). The Company’s share of
income (loss) from its investees is classified as discontinued operations in the accompanying statements of operations.
NOTE B – SALE OF BUSINESS
On November 4, 2014, the Company, which held a 49% membership interest in, and the other members of, Siebert Brandford Shank
& Co., LLC (“SBS”), contributed their SBS membership interest into a newly formed Delaware limited liability company, SBSF, in
exchange for the same percentage interests in SBSF. On the same day the Company entered an Asset Purchase Agreement (the
“Purchase Agreement”) with SBS and SBSF, pursuant to which the Company sold substantially all of the assets relating to the
Company’s capital markets business to SBSF. Pursuant to the Purchase Agreement, SBSF assumed post-closing liabilities relating to
the transferred business.
The Purchase Agreement provides for an aggregate purchase price for the disposition of $3,000,000, payable by SBSF after closing in
annual installments commencing on March 1, 2016 and continuing on each of March 1, 2017, 2018, 2019 and 2020. The transferred
business was contributed by SBSF to, and operated by SBS. The amount payable to the Company on each annual payment date will
equal 50% of the net income attributable to the transferred business recognized by SBS in accordance with generally accepted
accounting principles during the fiscal year ending immediately preceding the applicable payment date; provided that, if net income
attributable to the transferred business generated prior to the fifth annual payment date is insufficient to pay the remaining balance of
the purchase price in full on the fifth annual payment date, then the unpaid amount of the purchase price will be paid in full on March
1, 2021. The annual installment payable on March 1, 2016, based on the net income attributable to the capital markets business for the
year ended December 31, 2015, which amounted to $493,000 and was paid on March 3, 2016.
Transferred assets of the Company’s capital markets business, consisted of customer accounts and goodwill, which assets had no
carrying value to the Company, and the Company recorded a gain on sale of $ 1,820,000, which reflected the fair value of the
purchase obligation. Such fair value (Level 3) was based on the present value of estimated annual installments to be received during
2016 through 2020 from forecasted net income of the transferred business plus a final settlement in 2021, discounted at 11.5%
(representing SBS’s weighted average cost of capital),
The discount recorded for the purchase obligation is being amortized as interest income using an effective yield initially calculated
based on the original carrying amount of the obligation and estimated annual installments to be received and adjusted in future periods
to reflect actual installments received and changes in estimates of future installments. Interest income recognized on the obligation for
the year ended December 31, 2015 amounted to $235,000 based on a yield of approximately 12%.
As a result of the Company’s continuing involvement in the capital markets business through its then 49% ownership in SBSF, result
of operations of the capital markets business and the gain on sale were not reflected as discontinued operations in the accompanying
financial statements.
F-6
NOTE C - SALE OF INVESTMENT IN AFFILIATE
Discontinued Operations:
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) ASU No. 2014-08,
Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU No. 2014-08 changes the
definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has
(or will have) a major effect on the entity’s operations and financial results. ASU No. 2014-08 is effective prospectively to all new
disposals of components (including equity method investees) and new classification as held for sale beginning in fiscal years
beginning after December 15, 2014 with early adoption permitted. The company adopted this update in 2015.
The revised standard cannot be applied to a component that was previously disposed of that was initially precluded from discontinued
operations because of significant continuing involvement even where there are subsequent changes in the activities with a disposed
component that would no longer preclude discontinued operations (See Note B).
On November 9, 2015, the Company sold its 49% membership investment in SBSF back to SBSF for $8,000,000 of which $4,000,000
was paid in cash and the balance of which was paid in the form of a secured junior subordinated promissory note of $4,000,000 (the
“SBSF Junior Note”). The sale of the investment in SBSF, which was accounted for by the equity method, represents a strategic shift
for the Company based on its significance to the Company’s financial condition and results of operations and the major effect it will
have on the Company’s operations and financial results and, accordingly, the Company’s share of operating results of the investment
are reflected as discontinued operations in the accompanying statements of operations. The investment was sold for approximately
$448,000 less than the carrying value of the investment at November 9, 2015, after adjusting the carrying value of the investment for
the Company’s equity in SBSF’s results of operations through such date. Such loss is also included in discontinued operations.
The SBSF Junior Note ranks junior in right of payment to up to $5.0 million of subordinated indebtedness incurred by SBSF at the
time of the repurchase closing (the “SBSF Senior Debt”). The SBSF Junior Note is secured by a pledge by SBSF”s post-closing
members of a number of the outstanding membership interests of SBSF that at all times will equal no less than 49% of the outstanding
SBSF membership interests on a fully diluted basis. The SBSF Junior Note matures on November 9, 2020 and bears interest at a rate
per year equal to 8% compounding monthly and payable in full at maturity. Interest accrued on the note through December 31, 2015
amounted to $46,000. The SBSF Junior Note does not require any principal amortization before maturity; however, SBSF has the
option to prepay the interest or principal without penalty. The SBSF Junior Note contains covenants and events of defaults that are
substantially equivalent to those applicable to the SBSF Senior Debt, including covenants restricting debt and lien incurrence by SBS
and SBSF; provided that the SBSF Junior Note is subject to customary intercreditor arrangements with the holders of the SBSF Senior
Debt. Immediately upon the dissolution, liquidation, termination or expiration of SBSF or SBS, or a change of control of SBSF or
SBS, or sale of all or substantially all of their consolidated assets, SBSF is obligated to prepay all of the then outstanding balance of
the SBSF Junior Note.
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1]
Cash Equivalents:
Cash equivalents consist of highly liquid investments purchased with an original maturity of 3 months or less. Cash
equivalents are carried at fair value and amount to $9,053,000 and $6,179,000 at December 31, 2015 and 2014, respectively,
consisting of money market funds.
Cash equivalents – restricted $1,532,000 at December 31, 2014 represented cash invested in a money market fund which
served as collateral for a secured demand note payable in the amount of $1,200,000 to SBS which expired and was not
renewed and the collateral was released from restricted cash. (see Note J).
[2]
Securities:
Securities owned are carried at fair value with realized and unrealized gains and losses reflected in trading profits. Siebert
clears all its security transactions through 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.
F-7
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[3]
Fair value of financial instruments:
Authoritative accounting guidance defines fair value, establishes a framework for measuring fair value and establishes a fair
value hierarchy. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The
fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available.
Level 3 – Unobservable inputs which reflect the assumptions that management develops based on available information
about the assumptions market participants would use in valuing the asset or liability.
The classification of financial instruments valued at fair value as of December 31, 2015 is as follows:
2015
2014
Financial Instrument
Cash equivalents ...........................................................................................................................................................................................................
Securities ......................................................................................................................................................................................................................
$
$
Level 1
9,053,000
593,000
9,646,000
$
$
Level 1
7,711,000
488,000
8,199,000
Securities consist of common stock, which is valued on the last business day of the year at the last available reported sales
price on the primary securities exchange.
[4]
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 net operating loss carryforwards and temporary differences
between the basis of assets and liabilities for financial reporting purposes and tax purposes and for net operating loss and
other carryforwards. A valuation allowance is provided for deferred tax assets based on the likelihood of realization.
[5]
Furniture, Equipment and Leasehold Improvements:
Furniture, equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization.
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 of the improvements or period of the
lease.
[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.
[8]
Per Share Data:
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average outstanding common
shares during the year. 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 Company incurred a loss from
continuing operations and a net loss for each of the years ended December 31, 2015, 2014 and 2013. Accordingly, basic and
diluted per share data are the same for each year as the effect of stock options is anti-dilutive. In 2015, 2014 and 2013,
265,000, 265,000 and 350,000 common shares, respectively, issuable upon the exercise of options were not included in the
computation.
F-8
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[9]
Revenue:
Commission revenues and related clearing expenses are recorded on a trade-date basis. Fees, consisting principally of
revenue participation with the Company’s clearing broker in distribution fees and interest are recorded as earned. In 2015 and
2014, fees also include investment advisory fees, which are recorded as earned.
Investment banking revenue, which relates to the capital markets business which was sold in 2014 (See Note B), 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.
Trading gains and losses are also recorded on a trade-date basis and principally represent riskless principal transactions which
the Company, after receiving an order, buys or sells securities as principal and at the same time sells or buys the securities
with a markup or markdown to satisfy the order.
Interest is recorded on an accrual basis and dividends are recorded on the ex-dividend date.
[10]
Stock-Based Compensation:
Share-based payments to employees, including grants of employee stock options, are recognized in the statement of
operations as an operating expense, based on their fair values on the grant date. Share-based compensation costs are
recognized on a straight-line basis over the requisite service periods of awards which would normally be the vesting period of
the options.
[11]
Intangibles:
Purchased intangibles which have finite useful lives are principally being amortized using the straight-line method over
estimated useful lives of three to five years. Domain names and other intellectual property which are deemed to have an
indefinite useful life are not amortized but are tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test for indefinite-lived intangibles consists of a
comparison of their fair value with their carrying amount (see note F).
[12]
Valuation of Long-Lived Assets:
The Company evaluates the recoverability of its long-lived assets including amortizable intangibles and recognizes an
impairment loss in the event the carrying 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 events or changes in
circumstances indicate that its carrying value may not be recoverable. Should impairment exist, the impairment loss would be
measured based on the excess of the carrying value of the assets over their fair value.
F-9
NOTE E - INVESTMENT IN FORMER AFFILIATES
Investment in and advances to, equity in income / (loss) of, and distributions received from, affiliates consist of the following:
December 31, 2015
SBSF
SBSFPC
TOTAL
Income from equity investee ........................................................................................................................................................................................
Distributions .................................................................................................................................................................................................................
671,000
98,000
671,000
98,000
—
—
$
$
December 31, 2014
SBSF
SBSFPC
TOTAL
Investment and advances ..............................................................................................................................................................................................
Income (loss) from equity investees ............................................................................................................................................................................
Distributions .................................................................................................................................................................................................................
7,979,000
67,000
186,000
7,979,000
84,000
13,000
—
(17,000 )
173,000
$
$
$
December 31, 2013
SBS
SBSFPC
TOTAL
Investment and advances ..............................................................................................................................................................................................
Income (loss) from equity investees ............................................................................................................................................................................
Distributions .................................................................................................................................................................................................................
8,022,000
(65,000 )
1,218,000
7,832,000
94,000
1,212,000
190,000
(159,000 )
6,000
$
$
$
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.
Pursuant to the terms of the Operating Agreement, Financial and each of the Principals owned a 33.33% interest in SBSFPC which
engaged in derivatives transactions related to the municipal underwriting business. The Operating Agreement provided that
income/(loss) be shared 66.66% by the Principals and 33.33% by Financial. SBSFPC ceased operations in December 2014.
Balance sheet data for 2015 is as of November 9 subsequent to the redemption of the Company’s interest, Revenue and net income for
2015 is for the period from January 1 through November 9.
Summarized consolidated financial data of SBSF and SBS in 2015 and 2014 and financial data for SBS in 2013 follows:
2015
2014
2013
Total assets, including secured demand note of $1,200,000 in 2014 due
from Siebert ..............................................................................................................................................................................................................
$ 28,518,000
$ 30,903,000
Total liabilities, including obligations to Siebert of $6,051,000 to in 2015
and $3,057,000 in 2014 ............................................................................................................................................................................................
Total members’ capital .................................................................................................................................................................................................
Regulatory minimum net capital requirement ..............................................................................................................................................................
Total revenue ................................................................................................................................................................................................................
Net income ...................................................................................................................................................................................................................
12,458,000
16,060,000
250,000
24,806,000
171,000
23,254,000
7,649,000
250,000
27,774,000
$ 24,965,000
193,000
1,369,000 (a)
(a) Includes interest expense on purchase obligation payable to Siebert of $195,000.
During 2015, 2014 and 2013 Siebert charged SBS $100,000 for each year, respectively, for general and administrative services, which
Siebert believes approximates the cost of furnishing such services.
In 2015, 2014 and 2013 Siebert earned interest income of $32,000, $48,000 and $48,000, respectively, from SBS in connection with
subordinated loans available or made to SBS and Siebert paid SBS interest earned on restricted cash equivalents of $1,000, $1,028 and
$1,500 in 2015, 2014 and 2013, respectively. In addition, in 2015 and 2014, Siebert earned interest income of $235,000 and $36,000,
respectively from SBSF on the purchase obligation in connection with the sale of the capital markets business (see Note B) and in
2015, Siebert earned interest income of $46,000 from SBSF on the receivable arising from the redemption of its ownership interest
(see Note C).
F-10
NOTE E - INVESTMENT IN FORMER AFFILIATES (CONTINUED)
Summarized financial data of SBSFPC is as follows:
2014
2013
Total assets ...................................................................................................................................................................................................................
Total liabilities .............................................................................................................................................................................................................
Total members’ capital .................................................................................................................................................................................................
Total revenue ................................................................................................................................................................................................................
Net loss .........................................................................................................................................................................................................................
26,000
26,000
0
0
(51,000 )
(222,000 )*
(478,000 )
$
$
*Negative balance was attributable to loss on derivative contracts
In July 2013, as a result of the filing of a bankruptcy petition by the City of Detroit, SBSFPC unwound certain derivative contracts
with a financial institution pursuant to the terms of the contracts. The contracts were recorded as liabilities with a carrying value of
$123,063,000. In connection therewith, SBSFPC assigned certain derivative contracts with the City of Detroit to the financial
institution, which were recorded as assets with a carrying value of $123,063,000. No gain or loss was recognized by SBSFPC as a
result of the unwinding and assignment of these derivative contracts and SBSFPC has no continuing obligations or rights with respect
to the derivative contracts. During the quarter ended March 31, 2013 SBSFPC incurred a loss of $241,000 on the write down in value
of the derivative contracts with the City of Detroit to adjust their carrying value to the carrying value of the derivative contracts with
the financial institution. The Company received distributions from SBSFPC of $173,000 during 2014 which is shown on the statement
of cash flows as an investing activity as they represent a return of capital.
Effective September 16, 2013, Suzanne Shank, one of the Principals having 25.5% ownership in SBS and 33.3% interest in SBSFP
became the Company’s chief executive officer. On March 3, 2015, Ms. Shank completed her role as acting chief executive officer of
the Company to devote full time to her continuing position as chief executive officer of SBSF.
NOTE F - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Furniture, equipment and leasehold improvements consist of the following:
December 31,
2015
2014
Equipment ....................................................................................................................................................................................................................
Leasehold improvements .............................................................................................................................................................................................
Furniture and fixtures ...................................................................................................................................................................................................
$
$
375,000
549,000
44,000
968,000
(594,000 )
524,000
546,000
43,000
1,113,000
(504,000 )
Less accumulated depreciation and amortization ........................................................................................................................................................
$
374,000
$
609,000
Depreciation and amortization expense for the years ended December 31, 2015, 2014 and 2013 amounted to 276,000, $257,000 and
$120,000, respectively.
NOTE F - INTANGIBLE ASSETS
In 2000, WFN acquired the stock of Women’s Financial Network, Inc. and HerDollar.com, Inc., companies in the development stage
which had yet to commence principal operations and had no significant revenue for aggregate consideration of $2,310,000, including
costs. The transactions were 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 were reflected as an adjustment to the carrying amount of such intangibles (see Note G).
F-11
NOTE F - INTANGIBLE ASSETS (CONTINUED)
Intangible assets consist of the following:
December 31, 2015
December 31, 2014
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Amortization
Accumulated
Amortizable intangible assets:
1,850,000
Website, content and non-compete ..............................................................................................................................................................................
Retail brokerage accounts ............................................................................................................................................................................................
2,638,000
4,488,000
1,850,000
2,638,000
4,488,000
1,850,000
2,630,000
4,480,000
1,850,000
2,638,000
4,488,000
$
$
$
$
Amortization expense ...................................................................................................................................................................................................
10,000
8,000
$
$
During the fourth quarter of 2013, as a result of management’s continuing strategic review of its operations, the Company determined
to substantially reduce the amount of resources allocated to the WFN domain. Accordingly, the Company wrote off the remaining
carrying value of the intangible asset of $300,000. No significant residual value is estimated for the asset.
NOTE G - INCOME TAXES
Financial files a consolidated federal income tax return with its subsidiaries.
Income tax (benefit) expense consists of the following:
Federal income tax (benefit) expense:
Year Ended December 31,
2015
2014
2013
Current ......................................................................................................................................................................................................................
Deferred ....................................................................................................................................................................................................................
$
$
$
State and local:
Current ......................................................................................................................................................................................................................
Deferred ....................................................................................................................................................................................................................
(228,000 )
—
(228,000 )
(47,000 )
—
(47,000 )
(22,000 )
—
(22,000 )
(5,000 )
—
(5,000 )
19,000
—
19,000
—
—
—
Total:
Current ......................................................................................................................................................................................................................
Deferred ....................................................................................................................................................................................................................
(275,000 )
—
(275,000 )
$
(27,000 )
—
(27,000 )
$
$
19,000
—
19,000
Income tax benefit in 2015 and 2014 represent the utilization of the loss from continuing operations against income from discontinued
operations, exclusive in 2015 of the capital loss from disposal of the investment in the former affiliate. The provision for income taxes
in 2013 represents a federal minimum tax assessment of $19,000, including $4,000 of interest and penalties, relating to 2012.
Reconciliation between the income tax (benefit) provision and income taxes computed by applying the statutory Federal income tax
rate to loss before income taxes is as follows:
Year Ended December 31,
2015
2014
2013
Expected income tax benefit at statutory Federal tax rate (34%) ................................................................................................................................
State and local taxes, net of Federal tax effect .............................................................................................................................................................
Increase in valuation allowance ...................................................................................................................................................................................
Permanent difference ...................................................................................................................................................................................................
Other .............................................................................................................................................................................................................................
(2,004,000 )
(413,000 )
2,342,000
46,000
48,000
(1,051,000 )
(68,000 )
784,000
13,000
47,000
(2,251,000 )
(464,000 )
2,551,000
39,000
98,000
$
$
$
Income tax (benefit) expense .......................................................................................................................................................................................
(275,000 )
(27,000 )
19,000
$
$
$
F-12
NOTE G - INCOME TAXES (CONTINUED)
The principal items giving rise to deferred tax assets (liabilities) are as follows:
December 31,
2015
2014
Deferred tax assets:
Net operating loss credit carryforwards ...............................................................................................
Capital loss carryforwards ...................................................................................................................
Alternative minimum tax carryforward ...............................................................................................
Employee stock based compensation ...................................................................................................
Retail brokerage accounts (c) ...............................................................................................................
Contribution carryover .........................................................................................................................
Furniture, equipment and leasehold improvements .............................................................................
Accrued expenses .................................................................................................................................
Investment in former affiliate (a) .........................................................................................................
Other ....................................................................................................................................................
$
9,456,000
395,000
—
237,000
140,000
178,000
181,000
252,000
—
44,000
$
8,046,000
24,000
9,000
237,000
211,000
223,000
115,000
337,000
736,000
30,000
Total .....................................................................................................................................................
Valuation allowance .............................................................................................................................
10,883,000
(10,002,000 )
9,968,000
(9,218,000 )
Net deferred tax assets .........................................................................................................................
Deferred tax liability:
Receivable from affiliate (b) ................................................................................................................
881,000
750,000
(881,000 )
(750,000 )
$
0
$
0
(a)
(b)
(c)
Attributable to non-deductible bonus accrued at December 31, 2014 by an affiliate, which was deducted in 2015.
Relates to receivable from business sold to affiliate treated as an installment sale for tax purposes.
Related to acquired retail discount brokerage accounts, which are being amortized over 15 years for tax purposes
and have been fully amortized for financial reporting purposes.
Due to cumulative losses incurred by the Company during the current and prior two years, the Company is unable to conclude that it is
more likely than not that it will realize its deferred tax asset in excess of the deferred tax liability and, accordingly, has recorded a
valuation allowance to fully offset such amount at December 31, 2015 and 2014.
At December 31, 2015, the Company has state net operating loss carryforwards aggregating $15.4 million, which expires from 2029
through 2035. In addition, the Company has federal net operating loss carryforwards of $20.3 million at December 31, 2015, which
expires from 2030 through 2035. The Company also has additional federal net operating loss carryforwards of $350,000 at December
31, 2015 which is attributable to WFN and expires through 2020. Utilization of WFN’s federal net operating loss carryforwards is
subject to annual limitations under Section 382 of the Internal Revenue Code.
The Company applied the “more-likely-than not” recognition threshold to all tax positions taken or expected to be taken in a tax return
which resulted in no unrecognized tax benefits reflected in the financial statements as of December 31, 2015. The Company classifies
interest and penalties that would accrue according to the provisions of relevant tax law as income taxes.
Tax years 2012 and thereafter are subject to examination by federal and certain tax authorities. For other states the 2010 through 2013
tax years remain open to examination. The Company is currently under tax examination by New York State for the years 2012 to 2014
and by the state of Illinois for the year 2012.
NOTE H - 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, 2015 and 2014, Siebert had net capital of
approximately $8,131,000 and $5,100,000, respectively, as compared with net capital requirements of $250,000. Siebert claims
exemption from the reserve requirement under Section 15c3-3(k)(2)(ii) as it clears its customer transactions through an unaffiliated
clearing firm on a fully disclosed basis.
F-13
NOTE H - STOCKHOLDERS’ EQUITY (CONTINUED)
On January 23, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. Shares
will be purchased from time to time in the open market and in private transactions. During 2013, the Company repurchased 12,266
shares of common stock at an average price of $1.56. No shares were purchased during 2014 or 2015. As of December 31, 2015,
129,137 of common shares have been repurchased pursuant to such authorization.
NOTE I - OPTIONS
The Company’s 2007 Long-Term Incentive Plan (the “Plan”) authorizes the grant of options to purchase up to an aggregate of
2,000,000 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 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 not be less than the fair market value on the date of grant. No option may be granted under the Plan
after December 2017. Generally, employee options vest 20% per year for five years and expire ten years from the date of grant. At
December 31, 2015, options for 1,760,000 shares of common stock are available for grant under the Plan.
A summary of the Company’s stock option transactions for the three years ended December 31, 2015 is presented below:
Outstanding - beginning of the year .................
Cancelled ..........................................................
Forfeited ...........................................................
Expired .............................................................
2015
2014
2013
Weighted
Average
Exercise
Price
3.02
Shares
265,000
Weighted
Average
Exercise
Price
3.10
3.05
4.04
Shares
350,000
(60,000 )
—
(25,000 )
Shares
400,000
—
(25,000 )
(25,000 )
(a)
Outstanding - end of year .................................
265,000
3.02
265,000
3.02
350,000
Weighted
Average
Exercise
Price
3.33
—
5.06
4.75
3.10
Fully vested and exercisable at end of
(a)
year ...............................................................
265,000
3.02
265,000
3.02
350,000
3.10
(a) Weighted average remaining contractual terms of 2.51 years and no aggregate intrinsic value.
For the years ended December 31, 2015, 2014 and 2013, no stock options were granted.
As of December 31, 2015, there was no unrecognized compensation cost.
NOTE J - COMMITMENTS, CONTINGENCIES AND OTHER
(1) 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 customer 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 are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transactions in
2015, 2014 or 2013. Credit risk represents the potential loss that would occur if counterparties fail to perform pursuant to the
terms of their obligations. The Company is subject to credit risk to the extent a custodian or broker with whom it conducts
business is unable to fulfill contractual obligations.
(2) In the ordinary course of business the Company is named a party to certain claims, suits and complaints. In the opinion of
management, pending matters are without merit, and their ultimate outcome will not have a significant effect on the financial
position or results of operations of the Company.
F-14
NOTE J - COMMITMENTS, CONTINGENCIES AND OTHER (CONTINUED)
(3) In July 2014, the Company entered into a settlement agreement in regards to a dispute with a former employee, in which the
former employee sought, among other things, damages arising from his separation from the Company. The Company asserted
counter claims in the arbitration. Pursuant to the settlement, the Company paid $4,300,000 to the former employee, and the claims
and counterclaims have been dismissed and released. The accompanying 2014 statement of operations reflects a charge to give
effect to the settlement.
(4) The Company rents discount retail brokerage and other office space under long-term operating leases expiring in various periods
through 2017. 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,
Amount
2016 ...............................................................................................................................................
2017 ...............................................................................................................................................
541,000
90,000
$ 631,000
Rent expense, including escalations for operating costs, amounted to approximately $776,000, $788,000 and $1,046,000 for the years
ended December 31, 2015, 2014 and 2013, respectively. Rent is being charged to expense over the entire lease term on a straight-line
basis.
(5) 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 2015, 2014 and 2013.
(6) Siebert was party to a Secured Demand Note Collateral Agreement with SBS which obligated Siebert to lend SBS, on a
subordinated basis, up to $1,200,000. The secured demand note payable held by SBS and a related $1,200,000 receivable due
from SBS are included in investments in and advances to former affiliate in the accompanying consolidated statement of financial
condition of December 31, 2014. Amounts that Siebert was obligated to lend under this arrangement was collateralized by cash
equivalents of $1,532,000. Any amounts loaned bore interest at 4% per annum. On August 31, 2015, the facility expired and was
not renewed and the collateral was released from restricted cash.
NOTE K - SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
2015
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$ 2,624,000 2,104,000 2,536,000 2,832,000
$ (1,534,000 )
(728,000 )
(407,000 )
(200,000 )(c) $
2014
First
Quarter
$ 3,718,000
28,000
Third
Quarter
Second
Quarter
3,705,000
(6,077,000 )(a) (1,456,000 )
3,454,000 4,975,000
Fourth
Quarter
948,000 (b)
(.07 )
—
(.02 )
—
(.04 )
.01
(.00 )
(.01 )
$
$
.00
—
(.28 )
—
(.07 )
—
.04
.00
Revenue .....................................
Net income (loss) ......................
Earnings (loss) per share:
Continuing operations ...............
$
$
Discontinued operations ............
Basic and diluted
(a) Includes $4,300,000 loss (.19 per share) related to arbitration settlement (see Note J3).
(b) Includes $1,820,000 gain ($0.08 per share) related to sale of business.
(c) Includes $448,000 loss ($0.02 per share) related to disposal of investment in former affiliate.
F-15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Managers
Siebert Brandford Shank Financial, LLC
Siebert Brandford Shank & Co., L.L.C.
New York, New York
We have audited the accompanying consolidated statement of financial condition of Siebert Brandford Shank Financial, LLC and
subsidiary (the “Company”) as of December 31, 2014 and the related consolidated statements of operations, changes in members’
capital and cash flows for the period from January 1, 2015 to November 9, 2015 and for the year ended December 31, 2014. In
addition, we have audited the accompanying statement of operations, changes in members’ capital and cash flows of Siebert
Brandford Shank & Co., LLC (the “Company”) for the year ended December 31, 2013. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, 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, (i) the consolidated financial position
of Siebert Brandford Shank Financial, LLC and subsidiary as of December 31, 2014 and consolidated results of their operations and
their cash flows for the period from January 1, 2015 to November 9, 2015 and for the year ended December 31, 2014 and (ii) the
results of operations and cash flows of Siebert Brandford Shank & Co. LLC for the year ended December 31, 2013, in conformity
with accounting principles generally accepted in the United States of America.
/s/ EisnerAmper LLP
New York, New
York March 30, 2016
F-16
Siebert Brandford Shank Financial, LLC and Subsidiary
Consolidated Statement of Financial Condition
December 31, 2014
ASSETS
Cash and cash equivalents ................................................................................................................................................
Accounts receivable ..........................................................................................................................................................
Due from broker ...............................................................................................................................................................
Secured demand note ........................................................................................................................................................
Goodwill - Note B ............................................................................................................................................................
Issuer relationships, net of amortization of $41,212 - Note B ..........................................................................................
Furniture, equipment and leasehold improvements, net ...................................................................................................
Other assets .......................................................................................................................................................................
$ 20,065,062
1,593,614
2,522,557
1,200,000
1,001,000
777,788
684,736
673,276
$ 28,518,033
LIABILITIES AND MEMBERS’ CAPITAL
Liabilities:
Payable to affiliate ........................................................................................................................................................
$
Asset purchase obligation payable to affiliate, net of unamortized discount of $1,143,359 ........................................
Accounts payable and accrued expenses ......................................................................................................................
Deferred rent .................................................................................................................................................................
104,320
1,856,641
4,747,648
549,287
7,257,896
Subordinated debt .........................................................................................................................................................
5,200,000
Total liabilities ..............................................................................................................................................................
12,457,896
Commitments (Note G)
Members’ capital .................................................................................................................................................................
16,060,137
See notes to consolidated financial statements
$ 28,518,033
F-17
Statements of Operations
Years Ended December 31,
Period from
January 1, 2015
to
November 9, 2015
2014
2013
Siebert Brandford
Shank Financial, LLC
and Subsidiary
Siebert Brandford
Shank Financial, LLC
and Subsidiary
Siebert Brandford
Shank & Co. LLC
Revenues:
Investment banking ................................................................
Trading profits ........................................................................
Commissions ..........................................................................
Interest and other ....................................................................
$
$
23,786,122
3,888,139
473,117
4,116
$
20,949,508
3,670,726
182,771
3,395
20,847,546
4,114,958
—
2,817
Expenses:
Employee compensation and benefits ....................................
Clearing fees ...........................................................................
Communications .....................................................................
Occupancy ..............................................................................
Professional fees .....................................................................
Interest, including amortization of discount (including
$200,745, 84,691 and 48,000 to affiliate) ...........................
State and local income tax ......................................................
General and administrative (including $100,000,
28,151,494
24,806,400
24,965,321
19,044,368
469,014
1,015,599
898,897
1,187,892
248,637
66,818
17,819,595
383,538
929,496
1,186,967
895,951
136,936
31,901
18,619,549
122,209
889,207
1,088,755
528,313
48,000
36,326
100,000 and 100,000 to affiliate) ........................................
3,850,900
3,251,269
3,440,071
26,782,125
24,635,653
24,772,430
Net income .................................................................................
$
1,369,369
$
170,747
$
192,891
See notes to financial statements
F-18
SIEBERT BRANDFORD SHANK FINANCIAL, LLC AND SUBSIDIARY
Consolidated Statements of Changes in Members’ Capital
Balance - January 1, 2013 (a) ........................................................................................................................................
Distributions to members ...............................................................................................................................................
Net income .....................................................................................................................................................................
$
18,196,500
(2,473,529 )
192,891
Balance - December 31, 2013 (a) ..................................................................................................................................
Distributions to members ...............................................................................................................................................
Net income .....................................................................................................................................................................
Balance - December 31, 2014 ........................................................................................................................................
Distributions to members ...............................................................................................................................................
Net income .....................................................................................................................................................................
15,915,862
(26,472 )
170,747
16,060,137
(200,000 )
1,369,369
Balance - November 9, 2015 (b) ....................................................................................................................................
$
17,229,506
(a)
(b)
Represents members’ capital of Siebert, Brandford, Shank & Co., L.L.C.
Represents members’ capital prior to giving effect to redemption of interest of Muriel Siebert & Co., Inc. and other
member and related capital contributions which in part funded such redemptions.
See notes to consolidated financial statements
F-19
Statements of Cash Flows
Years Ended December 31,
Period from
January 1, 2015
to November 9, 2015
SIEBERT BRANDFORD
SHANK FINANCIAL, LLC
AND SUBSIDIARY
2014
SIEBERT BRANDFORD
SHANK FINANCIAL, LLC
AND SUBSIDIARY
2013
SIEBERT, BRANDFORD,
SHANK & CO., LLC
Cash flows from operating activities:
Net income ......................................................................
$
Adjustments to reconcile net income to net cash
(used in) /provided by operating activities:
Amortization of discount on obligation due
affiliate .....................................................................
Depreciation and amortization ....................................
Changes in:
Accounts receivable .................................................
Due to clearing broker .............................................
Securities owned, at fair value .................................
Other assets ..............................................................
Payable to (receivable from) former affiliate ..........
Accounts payable and accrued expenses .................
Bank overdraft .........................................................
Deferred rent ............................................................
Net cash (used in) /provided by operating
1,369,369 $
170,747 $
192,891
194,581
408,577
(750,051 )
9,410,526
(8,603,054 )
(28,001 )
(52,898 )
1,699,037
—
(95,936 )
36,641
267,973
(1,031,467 )
(2,514,399 )
0
(54,533 )
76,056
741,040
(1,225,779 )
(72,788 )
—
250,154
395,913
(2,328,918 )
11,264,998
139,264
36,929
(1,368,577 )
1,225,779
(9,740 )
activities ............................................................
3,552,150
(3,606,509 )
9,798,693
Cash flows from investing activities:
Purchase of leasehold improvements and equipment .....
(41,746 )
(89,364 )
(47,759 )
Cash flows from financing activities:
Distributions to members ...............................................
Subordinated borrowings ................................................
Subordinated repayments ...............................................
Net cash provided by/ (used in) financing
(200,000 )
—
(4,000,000 )
(26,472 )
9,000,000
(5,000,000 )
(2,473,529 )
—
—
activities ............................................................
(4,200,000 )
3,973,528
(2,473,529 )
Net increase/(decrease) in cash and cash equivalents ........
Cash and cash equivalents - beginning of period ...............
(689,596 )
20,065,062
277,655
19,787,407
7,277,405
12,510,002
$
Cash and cash equivalents - end of period .........................
19,375,466 $
20,065,062 $
19,787,407
Supplemental disclosures of cash flow information:
Taxes paid .......................................................................
$
$
Interest paid ....................................................................
Non-cash investing and financing activities:
39,068 $
46,176 $
24,323 $
100,295 $
28,177
48,000
Note payable for purchase of business from affiliate ........
1,820,000
Intangible assets acquired related to business acquired
from affiliate:
Issuer relationships .........................................................
Goodwill .........................................................................
Non cash investing and financing activities:
Repayment of subordinated borrowing from former
affiliate by cancellation of related secured
$
demand note receivable from former affiliate .............
(819,000 )
(1,001,000 )
1,200,000
F-20
SIEBERT BRANDFORD SHANK FINANCIAL, LLC AND SUBSIDIARY
See notes to financial statements
Notes to Financial Statements
NOTE A – BUSINESS ORGANIZATION:
Siebert Brandford Shank Financial, LLC (“SBSF” or the “Company”) was organized on November 4, 2014 and through its wholly
owned subsidiary, Siebert, Brandford, Shank & Co., L.L.C. (“SBS”), engages in the business of tax-exempt underwriting and related
trading activities and, commencing on November 4, 2014, the capital markets business (see Note B). The Company qualifies as a
Minority and Women Owned Business Enterprise in certain municipalities.
On November 9, 2015, SBSF redeemed Muriel Siebert & Co., Inc., 49% membership interest in addition to the 25.5% membership
interest of another member. The accompanying 2015 financial statements are prepared immediately prior to, and do not give effect to
such transactions or the related debt and equity financing funding such transactions.
NOTE B – BUSINESS ACQUISITION
On November 4, 2014, the members of SBS contributed their membership interest into a newly formed Delaware limited liability
company, Siebert Brandford Shank Financial, LLC (“SBSF”), in exchange for the same percentage interests in SBSF. On the same
day Muriel Siebert & Co., Inc., (“Siebert”) entered an Asset Purchase Agreement (the “Purchase Agreement”) with SBS and SBSF,
pursuant to which Siebert sold substantially all of the assets relating to Siebert’s capital markets business to SBSF. Pursuant to the
Purchase Agreement, SBSF assumed post-closing liabilities relating to the transferred business. An individual having a 25.5%
membership interest in SBS prior to the contribution of membership interests to SBSF, was Siebert’s chief executive officer.
The Purchase Agreement provides for an aggregate purchase price for the disposition of $3,000,000, payable by SBSF after closing in
annual installments commencing on March 1, 2016 and continuing on each of March 1, 2017, 2018, 2019 and 2020. The transferred
business was contributed by SBSF to, and operated by SBS. The amount payable on each annual payment date will equal 50% of the
net income attributable to the transferred business recognized by SBS in accordance with generally accepted accounting principles
during the fiscal year ending immediately preceding the applicable payment date; provided that, if net income attributable to the
transferred business generated prior to the fifth annual payment date is insufficient to pay the remaining balance of the purchase price
in full on the fifth annual payment date, then the unpaid amount of the purchase price will be paid in full on March 1, 2021. The
annual installment payable on March 1, 2016 is based on the net income attributable to the capital markets business for the year ended
December 31, 2015, and amounted to $493,000.
Transferred assets of Siebert’s capital markets business, consisted of issuer relationships and goodwill. Issuer relationships, were
recorded at $819,000 representing their fair value at the date of acquisition determined based on a discounted cash flow analysis
(Level 3). Goodwill, which includes employees of Siebert who transferred to SBS, was recorded at $1,001,000, representing the
excess of the fair value ($1,820,000) of SBSF’s purchase obligation to Siebert over the fair value of the issuer relationships.
Since the date of acquisition, revenue of $199,000 and net loss of $129,000 attributable to the capital markets business is included in
the accompanying statement of operations for the year ended December 31, 2014.
The following represents the unaudited pro forma amounts of revenue and net income of the Company for the year ended December
31, 2014, assuming the capital markets business had been acquired as of January 1, 2014:
Revenue ........................................................................................................................................................................................................................
Net Income ...................................................................................................................................................................................................................
27,729,000
672,000
$
$
The above net income reflects the additional amortization that would have been charged assuming the fair value adjustment to
customer accounts had been applied as of January 1, 2014 and amortization of discount on the purchase obligation for the entire year.
F-21
SIEBERT BRANDFORD SHANK FINANCIAL, LLC AND SUBSIDIARY
Notes to Financial Statements
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1]
Principles of Consolidation:
Commencing on November 4, 2014, the accompanying financial statements include the accounts of SBSF and its wholly-
owned subsidiary SBS after elimination of intercompany balances and transactions. Prior thereto, the financial statements
represent those of SBS. The creation of SBSF and related transfer thereto of the members’ interest in SBS did not result in
any change in the carrying value of the existing assets or liabilities of SBS in the consolidated financial statements as both
entities were under common control.
[2]
Revenues:
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 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
Security transactions are recorded on a trade-date basis. Securities owned are valued at fair value. The resulting realized and
unrealized gains and losses are reflected as trading profits.
Commission revenue which relates to the capital market business are recorded on a trade date basis.
Dividends are recorded on the ex-dividend date, and interest income is recognized on an accrual basis.
[3]
Fair value:
Authoritative accounting guidance defines fair value, establishes a framework for measuring fair value and establishes a fair
value hierarchy. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction
costs. The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels:
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2
Level 3
Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably
available.
Unobservable inputs which reflect the assumptions that the managing members develop based on available
information about the assumptions market participants would use in valuing the asset or liability.
See Note C (4) for financial instruments measured at fair value.
F-22
SIEBERT BRANDFORD SHANK FINANCIAL, LLC AND SUBSIDIARY
Notes to Financial Statements
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[4]
Cash equivalents:
Cash equivalents represent short-term, highly liquid investments which are readily convertible to cash and have maturities of
three months or less at time of purchase. Cash equivalents, which are valued at fair value, consist of money market funds
which amounted to $15,965,885 at December 31, 2014 (Level 1). The Company maintains its assets with financial
institutions which may at times exceed federally insured limits. In the event of financial institutions insolvency, recovery of
the assets may be limited.
[5]
Furniture, equipment and leasehold improvements, net:
Furniture, equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization.
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 period of the lease.
[6]
Intangible Assets
Issuer relationships, which were recorded in connection with the acquisition of the capital markets business (see Note B), are
being amortized by the straight-line method over 2.9 years.
Intangible assets with finite lives are tested for recoverability whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The Company assesses the recoverability of its intangible assets by determining
whether the unamortized balance can be recovered over the assets’ remaining useful life through undiscounted estimated
future cash flows. If undiscounted estimated future cash flows indicate that the unamortized amounts will not be recovered,
an adjustment will be made to reduce such amounts to fair value based on estimated future cash flows discounted at a rate
commensurate with the risk associated with achieving such cash flows.
[7]
Goodwill
Goodwill, which was recorded in connection with the acquisition of the capital markets business (see Note B), is not subject
to amortization and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that
the asset may be impaired. The impairment test consists of a comparison of the fair value of the reporting unit with the
carrying amount its net assets, including goodwill. Fair value is typically based upon estimated future cash flows discounted
at a rate commensurate with the risk involved or market-based comparables. If the carrying amount of the Company’s net
assets exceeds the fair value of the reporting unit, then an analysis will be performed to compare the implied fair value of
goodwill with the carrying amount of goodwill. An impairment loss will be recognized in an amount equal to the excess of
the carrying amount over its implied fair value.
[8]
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.
[9]
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 or loss. The Company is subject to tax in certain state and local jurisdictions.
Deferred taxes are not significant.
F-23
NOTE D - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE
The subordinated debt at December 31, 2014 consists of the following:
2014
Payable to affiliate (a) ..................................................................................................................................................................................................
Payable to clearing broker (b) ......................................................................................................................................................................................
1,200,000
4,000,000
$
$
5,200,000
(a)
(b)
Consists of a Secured Demand Note Collateral Agreement payable to Siebert, an indirect member of the Company,
bearing 4% interest and which expired and was repaid on August 31, 2015 through an offset against a $1,200,000
secured demand note receivable due from Siebert. Interest expense paid to Siebert in each of 2015, 2014 and 2013
amounted to $32,000, 48,000 and 48,000 respectively.
The secured demand note receivable of $1,200,000 was collateralized by cash equivalents of Siebert of
approximately $1,532,000 which expired and was repaid on August 31, 2015. Interest earned on the collateral
amounted to approximately $1,000, $1,028 and $1,500 in 2015, 2014 and 2013, respectively.
On December 9, 2014, SBS entered into a temporary subordinated loan agreement with National Financial Services,
its clearing broker, in the amount of $4,000,000 bearing interest at the federal funds rate plus 6% and maturing
January 22, 2015. The note was repaid on January 22, 2015. Interest expense accrued in 2014 amounted to
approximately $16,000.
The subordinated borrowings are available in computing net capital under the Securities and Exchange
Commission’s (“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.
On March 24, 2014, SBS entered into a temporary subordinated loan agreement with National Financial Services, its
clearing broker, in the amount of $5,000,000 bearing interest at the federal funds rate plus 6% and maturing May 5,
2014. The note was repaid on May 5, 2014. Interest expense paid was $36,542.
F-24
SIEBERT BRANDFORD SHANK FINANCIAL, LLC AND SUBSIDIARY
Notes to Financial Statements
NOTE E - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Furniture, equipment, and leasehold improvements consist of the following:
12/31/2014
Equipment ....................................................................................................................................................................................................................
Furniture and leasehold improvements ........................................................................................................................................................................
926,654
1,718,826
$
Less accumulated depreciation and amortization ........................................................................................................................................................
2,645,480
1,960,744
$
684,736
Depreciation and amortization expense for the period ended November 9, 2015 amounted to $160,046, For the periods ended
December 31,2014 and 2013 the expense amounted to $226,761 and $250,154 respectively.
NOTE F - NET CAPITAL
SBS is subject to the SEC’s Uniform Net Capital Rule 15c3-1, which requires the maintenance of minimum net capital and that the
ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. At December 31, 2014, SBS had net capital of
$22,807,796 which was $22,557,796, in excess of its required net capital and its ratio of aggregate indebtedness to net capital was 0.16
to 1. SBS claims exemption from the reserve requirements under Section 15c3-3(k)(2)(ii).
NOTE G - COMMITMENTS
SBS rents office space under long-term operating leases expiring through 2026. These leases call for base rent plus escalations for
property taxes and other operating expenses.
SBSF rents office space under long-term operating leases expiring through 2020. These leases call for base rent plus escalations for
property taxes and other operating expenses. Future minimum base rent under these operating leases as of December 31, 2014 are as
follows:
December 31, 2014
2015 ..............................................................................................................................................................................................................................
1,043,000
2016 ..............................................................................................................................................................................................................................
886,000
2017 ..............................................................................................................................................................................................................................
639,000
627,000
2018 ..............................................................................................................................................................................................................................
2019 ..............................................................................................................................................................................................................................
587,000
Thereafter .....................................................................................................................................................................................................................
185,000
3,967,000
Amount
$
$
Rent expense, including taxes and operating expenses for 2015, 2014 and 2013 amounted to $1,055,944, $1,186,967 and $1,088,755,
respectively.
In prior years, SBS purchased leasehold improvements of approximately $620,000 which were reimbursed by the landlord. SBS
recorded such reimbursement as a credit to deferred rent liability, which is being recognized as a reduction of rental expense on a
straight-line basis over the term of the lease.
Rent expense is being charged to operations on a straight-line basis resulting in a deferred rent liability which, including the
reimbursement discussed above amounted to $549,287 at December 31, 2014.
F-25
SIEBERT BRANDFORD SHANK FINANCIAL, LLC AND SUBSIDIARY
Notes to Financial Statements
NOTE H - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31,
2014
Accounts payable .........................................................................................................................................................................................................
Accrued bonus and other employee compensation .....................................................................................................................................................
Other accrued expenses ...............................................................................................................................................................................................
313,285
4,233,521
200,842
$
NOTE I - OTHER
During each of 2015, 2014, 2013 SBS was charged $100,000 by Siebert for general and administrative services.
$ 4,747,648
F-26
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SIEBERT FINANCIAL CORP.
By:
/s/ Joseph M. Ramos, Jr.
Joseph M. Ramos, Jr.
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Secretary
(principal executive, financial and accounting officer)
Date: March 30, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
Executive Vice President, Chief Operating Officer and Chief Financial Officer and
Secretary (principal financial and accounting officer)
March 30, 2016
/s/ Joseph M. Ramos, Jr.
Joseph M. Ramos, Jr.
/s/ Patricia L. Francy
Patricia L. Francy
/s/ Jane H. Macon
Jane H. Macon
Director
Director
/s/ Robert P. Mazzarella
Robert P. Mazzarella
Director
/s/ Nancy Peterson Hearn
Nancy Peterson Hearn
Director
March 30, 2016
March 30, 2016
March 30, 2016
March 30, 2016
Exhibit No.
2.1
EXHIBIT INDEX
Description Of Document
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 Annual Report on Form 10-K for the fiscal year ended December 31, 1996)
2.2
Amendment No. 1 to Merger Agreement, dated as of June 28, 1996 (incorporated by reference to Siebert Financial
Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996)
2.3
Amendment No. 2 to Merger Agreement, dated as of September 30, 1996 (incorporated by reference to Siebert
Financial Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996)
2.4
Amendment No. 3 to Merger Agreement, dated as of November 7, 1996 (incorporated by reference to Siebert
Financial Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996)
3.1
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 Annual Report on
Form 10-K for the fiscal year ended December 31, 1997)
3.2
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)
10.1**
Siebert Financial Corp. 1998 Restricted Stock Award Plan (incorporated by reference to Siebert Financial Corp.’s
Annual Report on Form 10-K for the fiscal year ended December 31, 1997)
10.2**
Siebert Financial Corp. 1997 Stock Option Plan (incorporated by reference to Siebert Financial Corp.’s Annual
Report on Form 10-K for the fiscal year ended December 31, 1996)
10.3
Siebert, Brandford, Shank & Co., LLC Operating Agreement, among Siebert, Brandford, Shank & Co., L.L.C.,
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 Annual Report on Form 10-K for the fiscal year ended
December 31, 1996)
10.4
Services Agreement, between Siebert, Brandford, Shank & Co., L.L.C. and Muriel Siebert & Co., Inc., dated as of
March 10, 1997 (incorporated by reference to Siebert Financial Corp.’s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.5
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)
10.6**
Siebert Financial Corp. 2007 Long-Term Incentive Plan (incorporated by reference to Siebert Financial Corp.’s
Registration Statement on Form S-8 (File No. 333-144680) filed with the Securities and Exchange Commission on
July 18, 2007)
10.7*
Fully Disclosed Clearing Agreement, by and between National Financial Services LLC and Muriel Siebert & Co.,
Inc. dated May 5, 2010. (incorporated by reference to Siebert Financial Corp.’s Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on August 16, 2010)
21
Subsidiaries of the registrant (incorporated by reference to Siebert Financial Corp.’s Annual Report on Form 10-K
23
31.1
for the year ended December 31, 2001)
Consent of Independent Auditors
Certification of Joseph M. Ramos, Jr. pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Joseph M. Ramos, Jr. of Periodic Financial Report under Section 906 of the Sarbanes-Oxley Act of
2002
*
Portions of the indicated document have been afforded confidential treatment and have been filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the General Rules and Regulations promulgated under the
Securities Exchange Act of 1934, as amended.
**
Management contract or compensatory plan or arrangement.
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-144680, No. 333-43837, No. 333-
43839, No. 333-72939 and No. 333-102701, and Form S-3 No. 333-81037) of Siebert Financial Corp. and in the related prospectus of
our reports dated March 30, 2016, with respect to the consolidated financial statements of Siebert Financial Corp. and subsidiaries,
Siebert Brandford Shank Financial, L.L.C. and subsidiary and Siebert, Brandford, Shank & Co., L.L.C. included in this Annual Report
on Form 10-K for the year ended December 31, 2015.
/s/ EisnerAmper LLP
New York, New York
March 30, 2016
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULE 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I of Joseph M. Ramos, Jr., certify that:
1. I have reviewed this annual 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 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 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)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
I Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation;and
(d) Disclosed in this 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 registrant’s internal control over financial reporting;and
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.
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Secretary
(principal executive, financial and accounting officer)
Date: March 30, 2016
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,
2015, as filed with the Securities and Exchange Commission (the “Report”), I, Joseph M. Ramos, Jr, in my capacity as Chief Financial
Officer, Chief Operating Officer and Secretary 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) 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
(2) 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.
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Secretary
(principal executive, financial and accounting officer)
Date: March 30, 2016
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.