UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2023
☐ 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)
653 Collins Avenue, Miami Beach, FL
(Address of principal executive offices)
11-1796714
(I.R.S. Employer
Identification No.)
33139
(Zip Code)
(310) 385-1861
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Common Stock - $0.01 par value
Trading Symbol(s)
SIEB
Name of each exchange on which registered
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
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 ☐ NO ☒
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 ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒
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, 2023), was approximately
$34,620,000.
The number of shares of the registrant’s outstanding common stock, as of May 1, 2024, were 40,980,936 issued and 39,830,936 shares outstanding.
Documents Incorporated by Reference: None
SIEBERT FINANCIAL CORP.
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1C. CYBERSECURITY
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
SIGNATURES
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Forward-Looking Statements
For purposes of this Annual Report on Form 10-K (“Report”), the terms “Siebert,” “Company,” “we,” “us” and “our” refer to Siebert Financial
Corp., its wholly-owned and majority-owned subsidiaries collectively, unless the context otherwise requires.
The statements contained throughout this Report, that are not historical facts, including statements about our beliefs and expectations, are
“forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may appear
throughout this Report, including without limitation, the following sections: Item 1 “Business,” Item 1A “Risk Factors,” and Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include statements preceded by, followed by or
that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar
words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are
forward-looking statements.
These forward-looking statements, which reflect our beliefs, objectives, and expectations as of the date hereof, are based on the best judgment of
management. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain
risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements,
including the following: economic, social and political conditions, global economic downturns resulting from extraordinary events; securities industry
risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems
failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our
business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; failure to maintain relationships with employees,
customers, business partners or governmental entities; the inability to achieve synergies or to implement integration plans; and other consequences
associated with risks and uncertainties detailed in Part I, Item 1A – “Risk Factors” of this Report as well as in our filings with the Securities and Exchange
Commission (“SEC”).
We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that
could impact our business. The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this
Report. You should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise these statements,
whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.
Siebert 2023 Form-10K 1
ITEM 1. BUSINESS
Overview of Company
PART I
Siebert Financial Corp., together with its subsidiaries, is a diversified financial services firm and provides a full range of brokerage and financial
advisory services including securities brokerage, investment advisory and insurance offerings, and corporate stock plan administration solutions. Our firm
is characterized by building solid relationships with our clients through exceptional personal service and proven performance. We have a strong legacy and
continue to evolve in our approach to take advantage of opportunities in the financial services industry.
We conduct the following lines of business through our wholly-owned and majority-owned subsidiaries:
● Muriel Siebert & Co., LLC (“MSCO”) provides retail brokerage services. MSCO is a Delaware corporation and broker-dealer registered with
the SEC under the Securities Exchange Act of 1934 (“Exchange Act”) and the Commodity Exchange Act of 1936, and member of the
Financial Industry Regulatory Authority (“FINRA”), the New York Stock Exchange (“NYSE”), the Securities Investor Protection
Corporation (“SIPC”), Euroclear, and the National Futures Association (“NFA”), and the Commodities Futures Trading Commission
(“CFTC”).
● Siebert AdvisorNXT, LLC (“SNXT”) provides investment advisory services. SNXT is a New York corporation registered with the SEC as a
Registered Investment Advisor (“RIA”) under the Investment Advisers Act of 1940 (“Advisers Act”), and the CFTC.
● Park Wilshire Companies, Inc. (“PW”) provides insurance services. PW is a Texas corporation and licensed insurance agency.
● Siebert Technologies, LLC (“STCH”) provides technology development. STCH is a Nevada limited liability company.
● RISE Financial Services, LLC, (“RISE”) is a Delaware limited liability company and a broker-dealer registered with the SEC, CFTC, FINRA,
SIPC and NFA.
● StockCross Digital Solutions, Ltd. (“STXD”) is an inactive subsidiary headquartered in Bermuda.
For purposes of this Annual Report, the terms “Siebert,” “Company,” “we,” “us” and “our” refer to Siebert Financial Corp., MSCO, SNXT, PW,
STCH, RISE, and STXD collectively, unless the context otherwise requires.
Our headquarters is located at 653 Collins Avenue, Miami Beach, FL 33139, with primary operations in New Jersey, Florida and California. Our
phone number is (310) 385-1861 and our Internet address is www.siebert.com. Information included or available through our website does not constitute a
part of this Report. We have 11 branch offices throughout the U.S. and clients around the world.
As of May 1, 2024, we had 124 full-time employees. Our common stock is registered under Section 12 of the Exchange Act, and we file periodic
reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy and information
statements on Schedule 14. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information
regarding companies that file documents electronically with the SEC. Our SEC filings are also available through our website at www.siebert.com, where
investors are able to obtain copies of our public filings free of charge. Our common stock, par value $.01 per share trades on the Nasdaq Capital Market
under the symbol “SIEB.”
Subsidiaries and Business Offerings
Muriel Siebert & Co., LLC.
Overview
MSCO has been providing online and traditional discount brokerage services to clients for over 55 years. MSCO was founded in 1967 by Muriel
F. (“Mickie”) Siebert, a trailblazer who was the first woman to own a seat on the NYSE and the first to head one of its member firms. On May 1, 1975,
after the federal government banned fixed commissions by brokers, Mickie broke barriers and declared MSCO a discount brokerage firm.
In May 2022, MSCO received approval to expand its clearing services in the U.S. by acting as a correspondent clearing firm for institutional and
online broker-dealers, registered investment advisors and other asset managers. Achieving this milestone strengthens our core competencies, diversifies our
business, and reinforces our commitment as a strategic partner to our clients.
On January 1, 2024, MSCO changed its name to Muriel Siebert & Co., LLC and its tax status from a C-Corporation to a Limited Liability
Corporation. Refer to Note 24 – Subsequent Events for further detail. Today, MSCO offers a wide range of products and services and is the primary
subsidiary of Siebert.
Siebert 2023 Form-10K 2
Products and Services
MSCO offers a wide range of products and services, including the following:
● Self-directed trading
● Market making and fixed income investments
● Stock borrow / stock loan
● Equity compensation plans (Siebert Corporate Services)
● Wealth management / financial advice
Additional Information
Brokerage and Related Services
MSCO offers a wide selection of quality investment services, including broker assisted trades and free online self-service features such as real
time quotes, market data, and trading tools.
MSCO is a self-clearing broker-dealer and also clears with National Financial Services Corp. (“NFS”), a wholly-owned subsidiary of FMR, LLC.
Securities Finance and Market Making
We operate our Securities Finance Group, which is a division that consists primarily of our stock borrow / stock loan and related services. Our
management team brings decades of securities finance experience to this division. We have seen positive results in recent years and are committed to
continue to expand our securities finance operations.
We make markets in multiple exchanges and in over 500 equity securities and fixed income products. The client service offerings within our
Market Making division have evolved with the capital markets and different trading strategies. Our strengths include trading experience in domestic
markets, enhanced liquidity, and the search for significant price improvement. The ability of our Market Making division to execute large orders continues
to be a strategic advantage in supporting the growth of our Corporate Services division.
Corporate Services
We are dedicated to helping publicly traded companies and their employees manage their equity compensation plans. Corporate services is a key
component of our business, and we leverage our technology partnerships to create a distinct advantage through FIX connection trading and real-time
transaction reporting. Siebert Corporate Services primarily supports small and mid-cap public companies. Below are some key points of our strategic
outlook and initiatives within Siebert Corporate Services.
● Strategic Shift and Business Evolution: Throughout 2023, Siebert Corporate Services has initiated a strategy shift, transitioning from
transaction-based service delivery to focus on the overall client experience.
● Investment in Innovation and Technology: We have made a commitment to innovation and investment in technology that we believe will
provide efficiencies and accelerate our service-to-sales model. This strategic approach is critical in driving future growth in account
conversion revenue.
● Future Outlook: Industry consolidation and rising minimum plan value requirements among competitors is creating an underserved market of
public issuers looking for new service providers. Siebert Corporate Services is currently developing an enhanced equity management solution
to capture new market opportunities.
Independent Retail Execution Services
MSCO and its clearing firms monitor order flow in efforts to ensure that customers are getting the best possible trade executions. All equity orders
are routed in a manner intended to afford MSCO’s customers the most favorable terms on all orders. MSCO also offers customers execution services
through various market centers for an additional fee, providing customers access to numerous market centers before and after regular market hours.
Customers may buy or sell fixed income securities, municipal bonds, corporate bonds, mortgage-backed securities, government sponsored enterprises, unit
investment trusts, mutual funds, certificates of deposit, and other securities. These transactions are serviced by MSCO’s registered representatives.
Siebert 2023 Form-10K 3
Retail Customer Service
MSCO believes that its superior customer service enhances its ability to compete with larger brokerage firms and provides retail customers with
personal service via access to dedicated customer service personnel for all of its products and services. Customer service personnel, located in MSCO’s
branch offices, are cross trained to assist with all clients’ needs for a reliable experience. MSCO uses a variety of customer relationship management
systems that enable representatives in any location to review and respond to customers’ requests in a timely manner.
Retirement Accounts
MSCO offers customers a variety of self-directed retirement accounts. Each IRA, SEP IRA, ROTH IRA, and KEOGH account can be invested in
a variety of qualified investments in a consolidated account. MSCO acts as its own custodian for retirement accounts and also utilizes NFS for IRA
custody. MSCO offers self-directed retirement accounts and also has registered representatives dedicated to assisting clients in meeting their retirement
goals.
Customer Financing
Customer margin accounts are carried whereby money is lent to customers for a portion of the market value of marginable 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 financing,
short sale or any other transaction, MSCO assumes the risk of its customers’ failure to meet their obligations in the event adverse changes in the market
affect the value of the margined securities positions. MSCO and NFS reserve the right to set margin requirements higher than those established by the
Federal Reserve System.
MSCO has established policies with respect to maximum purchase commitments for new customers or customers with inadequate collateral to
support a requested purchase. When transactions occur outside normal guidelines, MSCO monitors accounts closely until their payment obligations are
completed. If the customer does not meet the required commitments, MSCO takes steps to close out the position and minimize any loss. In the last five
years, MSCO has not had any significant losses as a result of customers failing to meet commitments.
Information and Communications Systems
MSCO relies heavily on its data technology platform and the platform provided by its clearing agents. These platforms offer interfaces to MSCO’s
clearing service providers’ computing systems where all customer account records are kept and are accessible through MSCO’s data technology platform.
MSCO’s systems also utilize browser-based access and other types of data communications. MSCO’s representatives use NFS systems, by way of MSCO’s
data technology platform, to perform daily operational functions which include trade entry, trade reporting, clearing-related activities, risk management and
account maintenance.
MSCO’s data technology platform offers services used in direct relation to customer 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. MSCO’s data network is designed with redundancies in case a significant business disruption occurs.
To ensure reliability and to conform to regulatory requirements related to business continuity, MSCO maintains backup systems and backup data,
leverages cloud-based technology, and has a full-time offsite disaster recovery site to ensure business continuity during a potential wide-spread disruption.
However, despite the preventive and protective measures in place, in the event of a wide-spread disruption, MSCO’s ability to satisfy the obligations to
customers and other securities firms may be significantly hampered or completely disrupted. For more information regarding our business continuity plan,
refer to the Business Continuity Statement on our website.
We are consistently enhancing technology for both our customers as well as our internal operations. We are currently in the process of developing
a new retail platform (“Retail Platform”) for our customers and integrating the trading platform into our operations.
Siebert 2023 Form-10K 4
Siebert AdvisorNXT, Inc.
Overview
SNXT offers customers our proprietary robo-advisory technology that utilizes trading algorithms initially developed by STCH to create our robo-
advisor. This technology provides clients with cost-efficient, competitively priced, and automated wealth management solutions intended to maximize
portfolio returns based on specific risk tolerance. The platform utilizes Nobel Prize-winning Modern Portfolio Theory (“MPT”) to create optimal portfolios
for each client. We provide web-based tools to enable clients to monitor and interact with the robo-advisor’s automated portfolio manager application. The
robo-advisor selects low-cost, well-managed, exchange-traded funds (“ETFs”) and exchange-traded notes (“ETNs”) that represent the asset classes that
provide clients the necessary risk-adjusted exposure given current market conditions. The robo-advisor continuously monitors and periodically rebalances
portfolios to address changes in market and economic conditions.
On January 1, 2024, SNXT changed its name to Siebert AdvisorNXT, LLC and its tax status from a C-Corporation to a Limited Liability
Corporation. Refer to Note 24 – Subsequent Events for further detail.
Products and Services
The products and services offered by SNXT include:
● Managed portfolios
● Separately managed accounts
Park Wilshire Companies, Inc.
Overview
PW is a full-service insurance agency founded in 2010. Through PW, our product offerings include various insurance products such as fixed
annuities and property and casualty insurance.
Products and Services
The products and services offered by PW include:
● Fixed annuities
● Personal insurance
● Property and casualty insurance
● Natural disaster insurance
● Life and disability
Siebert Technologies, LLC
STCH is a technology company through which we are expanding our products and services and we plan to use this subsidiary for future fintech
opportunities.
RISE Financial Services, LLC
During 2022, RISE was a prime broker focused on providing institutional quality services to hedge funds and other institutional investors.
In 2022, Siebert and RISE engaged in certain transactions with Tigress Holdings, LLC (“Tigress”) and Hedge Connection, Inc. (“Hedge
Connection”) to exchange equity, cash, and respective leadership positions. In 2023, based upon the strategic direction of these ventures, management of
the respective businesses decided to unwind the original transactions with Siebert, RISE, Hedge Connection and Tigress. See Note 3 – Transactions with
Tigress and Hedge Connection for further detail on these transactions.
Competition
We encounter significant competition from full-commission, online and discount brokerage firms, including zero commission firms, as well as
from financial institutions, mutual fund sponsors, venture-backed technology and cryptocurrency firms, and other organizations. Although there has been
consolidation in the industry in both the online and traditional brokerage business during recent years, we believe that additional competitors such as banks,
insurance companies, providers of online financial and information services, and others will continue to be attracted to the brokerage industry. We compete
with a wide variety of vendors of financial services for the same customers; however, our success in the financial services industry is a result of our high-
quality customer service, responsiveness, products offered, and excellent executions.
Siebert 2023 Form-10K 5
Regulations
Overview
The securities industry in the U.S. is subject to extensive regulation under both federal and state laws. The SEC is the federal agency charged with
administration of the federal securities laws. MSCO and RISE are registered as broker-dealers with the SEC. MSCO is a member of the NYSE and FINRA,
and RISE is a member of FINRA. Much of the regulation of broker-dealers has been delegated to self-regulatory organizations (“SROs”), principally
FINRA, which is MSCO’s and RISE’s primary regulator with respect to financial and operational compliance. These SROs adopt rules (subject to approval
by the SEC) governing their members 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. MSCO is registered as a broker-dealer in 50 states, the District of Columbia, and Puerto Rico, and RISE
is registered as a broker-dealer in 7 states and territories. These regulations affect our business operations and impose capital, client protection, and market
conduct requirements, among others.
Conduct and Training
The principal purpose of regulation and discipline of broker-dealers is the protection of customers and the securities markets. The regulations to
which broker-dealers are subject cover all aspects of the securities business, including training and supervision of personnel, sales methods, trading
practices among broker-dealers, uses and safekeeping of customers’ funds and securities, capital structure of securities firms, record keeping, fee
arrangements, disclosure to clients, and the conduct of directors, officers and employees. Additional legislation, changes in rules promulgated by the SEC
and by SROs and/or changes in the interpretation or enforcement of existing laws and rules may directly affect the methods of operation and profitability of
broker-dealers. The SEC, SROs 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.
Dodd-Frank Act of 2010
As a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (“Dodd-Frank”), the adoption of
implementing regulations by the federal regulatory agencies, as well as other recent regulatory reforms, we have experienced significant changes in the
laws and regulations that apply to us, how we are regulated, and regulatory expectations in the areas of compliance, risk management, corporate
governance, operations, capital and liquidity.
Regulation Best Interest
Pursuant to the Dodd-Frank Act, the SEC was charged with considering whether broker-dealers should be subject to a standard of care similar to
the fiduciary standard applicable to registered investment advisers (“RIAs”). In June 2019, the SEC adopted a package of rules and interpretations related
to the provision of advice by broker-dealers and investment advisers, including Regulation Best Interest and Form CRS (collectively, these regulations,
rules and interpretations are referred to herein as the “Regulation Best Interest Rules”). Among other things, Regulation Best Interest requires a broker-
dealer to act in the best interest of a retail customer when making a recommendation to that customer of any securities transaction or investment strategy
involving securities. Form CRS requires that broker-dealers and investment advisers provide retail investors with a brief summary document containing
simple, easy-to-understand information about the nature of the relationship between the parties. Regulation Best Interest and Form CRS had a compliance
date of June 30, 2020.
The Regulation Best Interest Rules have impacted the conduct of our business, especially with respect to our business with our retail clients. The
need for enhanced documentation for recommendations of securities transactions to broker-dealer retail clients as well as the increased supervision of sales
practices and transactions increased the amount of record-keeping and training for our sales staff. The related new rules and procedures have and may
continue to bring increased costs associated with compliance and enhanced technology.
We operate pursuant to the Regulation Best Interest Rules and as such, we conduct thorough training of all our employees with respect to the
requirements of Regulation Best Interest. Additionally, we created the Regulation Best Interest Rule’s required documents and completed each of the
required mailings (both electronic and conventional) prior to the effective date. We believe that the changes made to our business processes resulted in
compliance with these new requirements. As business continues to be conducted under the Regulation Best Interest Rules, it is likely that additional
changes may be necessary.
SIPC
As a registered broker-dealer and FINRA member organization, MSCO and RISE are required by federal law to belong to 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 principally funded through assessments on registered broker-dealers. MSCO has
purchased $50 million additional account protection above SIPC coverage. Equities, 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 2023 Form-10K 6
MSRB
MSCO is also authorized by the Municipal Securities Rulemaking Board (“MSRB”) to affect 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
Margin lending activities are subject to limitations imposed by regulations of the Board of Governors of the Federal Reserve System and FINRA,
as well as other SROs. In general, these regulations provide that, in the event of a significant decline in the value of securities collateralizing a margin
account, we are required to obtain additional collateral from the borrower or liquidate securities positions. Margin lending arranged by MSCO through third
parties 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.
Investment Advisers Act of 1940
SNXT is registered with the SEC as an investment adviser pursuant to the Advisers Act. The Advisers Act, together with the SEC’s regulations
and interpretations thereunder, is a highly prescriptive regulatory statute. The SEC is authorized to institute proceedings and impose sanctions for violations
of the Advisers Act, ranging from fines and censures to termination of an adviser’s registration and, in the case of willful violations, can refer a matter to
the United States Department of Justice for criminal prosecution.
Under the Advisers Act, an investment adviser (whether or not registered under the Advisers Act) owes fiduciary duties to its clients. These duties
impose standards, requirements and limitations on, among other things, trading for proprietary, personal and client accounts; allocations of investment
opportunities among clients; use of “soft dollar arrangements,” a practice that involves using client brokerage commissions to purchase research or other
services that help managers make investment decisions; execution of transactions; and recommendations to clients.
As an RIA, SNXT is subject to additional requirements that cover, among other things, disclosure of information about its business to clients;
maintenance of written policies and procedures; maintenance of extensive books and records; restrictions on the types of fees SNXT may charge; custody
of client assets; client privacy; advertising; and solicitation of clients. The SEC has legal authority to examine any RIA and, depending upon the type of
exam, may review the examined RIAs to determine whether the adviser is conducting its activities in compliance with (i) applicable laws and regulations,
(ii) disclosures made to clients and (iii) adequate systems, policies and procedures reasonably designed to prevent and detect violations of the Advisers Act.
Section 28(e) of the Exchange Act provides a “safe harbor” to investment managers who use commission dollars generated by their advised
accounts to obtain investment research and brokerage services that provide lawful and appropriate assistance to the manager in the performance of
investment decision-making responsibilities. SNXT, as a matter of policy, does not use “soft dollars” and as such, it has no incentive to select or
recommend a broker or dealer based on any interest in receiving research or related services. Rather, as a fiduciary, SNXT selects brokers based on its
clients’ interests in receiving best execution.
Bank Secrecy Act of 1970
We conduct financial services activities that are subject to the Bank Secrecy Act of 1970 (“BSA”), as amended by the USA PATRIOT Act of 2001
(“PATRIOT Act”), which require financial institutions to develop and implement programs reasonably designed to achieve compliance with these
regulations. The BSA and PATRIOT Act include a variety of monitoring, recordkeeping, and reporting requirements (such as currency transaction reporting
and suspicious activity reporting) as well as identity verification and client due diligence requirements, which are intended to detect, report and/or prevent
money laundering, and the financing of terrorism. As FINRA member firms, MSCO and RISE are subject to FINRA rules requiring written anti-money
laundering programs. In addition, we are subject to U.S. sanctions programs administered by the Office of Foreign Assets Control.
Siebert 2023 Form-10K 7
Net Capital
As registered broker-dealers, MSCO and RISE are subject to the requirements of the Exchange Act and the rules thereunder relating to broker-
dealers, such as minimum net capital requirements under the SEC Uniform Net Capital Rule (Rule 15c3-1) and segregation of fully paid client funds and
securities under the SEC Customer Protection Rule (Rule 15c3-3), administered by the SEC and FINRA.
Net capital rules are designed to protect clients, counterparties and creditors by requiring a broker-dealer to have sufficient liquid resources
available to satisfy its financial obligations. Net capital is a measure of a broker-dealer’s readily available liquid assets, reduced by its total liabilities other
than approved subordinated debt. Under the SEC Uniform Net Capital Rule, a broker-dealer may not repay any subordinated borrowings, pay cash
dividends or make any unsecured advances or loans to its parent company or employees if such payment would result in a net capital amount below
required levels. Failure to maintain the required regulatory net capital may subject a firm to suspension or expulsion by the NYSE or FINRA, as well as
certain punitive actions by the SEC and other regulatory bodies, which ultimately could require a firm’s liquidation.
Best Execution
As explained in SEC guidelines and FINRA rules, brokers are required to seek the “best execution” reasonably available for their clients’ orders.
In part, this requires brokers to use reasonable diligence so that the price to the client is as favorable as possible under prevailing market conditions. MSCO
and RISE send client orders for execution to a number of market centers, including market makers and exchanges, which encourages competition and
ensures redundancy. For non-directed client orders, it is our policy to route orders to market centers based on a number of factors that are more fully
discussed in the Supplemental Materials of FINRA Rule 5310, including, where applicable, but not necessarily limited to, speed of execution, price
improvement opportunities, differences in price dis-improvement, likelihood of execution, the marketability of the order, size guarantees, service levels and
support, the reliability of order handling systems, client needs and expectations, transaction costs, and whether the firm will receive remuneration for
routing order flow to such market centers. Price improvement is available under certain market conditions and for certain order types and we regularly
monitor executions to ensure best execution standards are met.
Consumer Financial Information Privacy
In providing services to clients, we manage, utilize and store sensitive and confidential client data, including personal data. As a result, we are
subject to numerous laws and regulations designed to protect this information, such as U.S. federal and state laws and regulations governing the protection
of personally identifiable information. These laws and regulations are increasing in complexity and number, change frequently and sometimes conflict. To
the extent they are applicable to us, we must comply with federal and state information-related laws and regulations in the United States, including the
Gramm-Leach-Bliley Act of 1999, SEC Regulation S-P, the Fair Credit Reporting Act of 1970, as amended, and Regulation S-ID (the Identity Theft Red
Flags Rule), as well as the California Consumer Protection Act and further potential federal and state requirements.
Human Capital
Our success depends on our ability to attract, hire, retain and develop highly skilled professionals in a variety of specialties, including finance,
technology, compliance, business development, cybersecurity and management. Due to the complexity of our business, we compete for talent with other
companies, both inside and outside of our industry, and in multiple geographical areas in the U.S.
Our human capital efforts focus on establishing a culture of service that emphasizes taking care of our employees, so they can take care of our
clients. To that end, we seek employees who are approachable, proactive, collaborative, agile and innovative, and who share our commitment to excellence,
integrity, and service. As of May 1, 2024, we had 124 employees, two of whom were corporate officers. None of our employees are represented by a union,
and we believe that relations with our employees are good.
To maintain a high-caliber, values-driven workforce that is committed to our culture, we strive to offer total rewards, including compensation and
benefits that position our company as an employer of choice. We design our compensation to be competitive in the markets in which we compete, and
closely monitor industry trends and practices to ensure we are able to attract and retain the personnel who are critical to our success. To support our
employees’ health and well-being, we offer competitive medical, dental and vision plans as well as other health benefits.
We believe in our employees’ potential and provide training and development opportunities intended to maximize their performance and
professional growth. We require all of our employees to complete courses in key regulatory areas, such as insider trading and anti-money laundering
compliance.
We aim to provide a safe, inclusive environment for our employees where they feel engaged in our business, supported in who they are and
empowered to succeed. We are committed to providing a workplace that is free from violence, harassment and other unsafe or disruptive conditions, and
require our personnel to attend regular training sessions and workshops on those topics.
Siebert 2023 Form-10K 8
ITEM 1A. RISK FACTORS
Regulatory Risks
Legislation has and may continue to result in changes to rules and regulations applicable to our business, which may negatively impact our business
and financial results.
New laws, rules, regulations and guidance, or changes in the interpretation and enforcement of existing federal, state, foreign and SRO laws, rules,
regulations and guidance may directly affect our business and the profitability of Siebert or the operation of specific business lines. In addition, new and
changing laws, rules, regulation and guidance could result in limitations on the lines of business we conduct, modifications to our business practices, more
stringent capital and liquidity requirements or other costs and could limit our ability to return capital to stockholders.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in 2010, required many federal agencies to
adopt new rules and regulations applicable to the financial services industry and called for many studies regarding various industry practices. In particular,
the Dodd-Frank Act gave the SEC discretion to adopt rules regarding standards of conduct for broker-dealers providing investment advice to retail
customers.
The rules and interpretations adopted by the SEC in June 2019 include Regulation Best Interest and the Form CRS Relationship Summary, which
are intended to enhance the quality and transparency of retail investors’ relationships with broker-dealers and investment advisers. Regulation Best Interest
enhances the broker-dealer standard of conduct beyond existing suitability obligations, requiring compliance with disclosure, care, conflict of interest and
compliance obligations. The regulation requires that a broker-dealer or natural person who is an associated person of the broker-dealer shall act in the best
interest of the retail customer at the time it makes a recommendation of any securities transaction or investment strategy involving securities, prioritizing
the interests of the customer above any interests of the broker-dealer or its associated persons. Among other things, this requires the broker-dealer to
mitigate conflicts of interest arising from financial incentives in selling securities products.
The new rules and processes related thereto have and will most likely continue to involve increased costs, including, but not limited to,
compliance costs associated with new or enhanced technology. In addition to the foregoing laws affecting regulation of our industry, Congress is
considering various proposals to increase taxation relating to investments, which may adversely impact the volume of trading and other transactions from
which we derive our revenue.
It is not possible to determine the extent of the impact of any new laws, regulations or initiatives that may be imposed, or whether any existing
proposals will become law. Conformance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in
which we conduct business.
We are subject to extensive government regulation and to third party litigation risk and regulatory risk which could result in significant liabilities and
reputational harm which, in turn, could materially adversely affect our business, results of operations and financial condition.
Our business is subject to extensive regulation in the U.S., at both the federal and state level. We are also subject to regulation by SROs and other
regulatory bodies in the U.S., such as the SEC, the NYSE, FINRA, MSRB, the Commodity Futures Trading Commission (“CFTC”) and the NFA. MSCO is
registered as a broker-dealer in 50 states, the District of Columbia, and Puerto Rico, and RISE is registered as a broker-dealer in 7 states and territories. The
regulations to which MSCO and RISE are subject as broker-dealers 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.
SNXT is registered as an investment adviser with the SEC under the Advisers Act, and its business is highly regulated. The Advisers Act imposes
numerous obligations on RIAs, including fiduciary, record keeping, operational and disclosure obligations. Moreover, the Advisers Act grants broad
administrative powers to regulatory agencies such as the SEC to regulate investment advisory businesses. If the SEC or other government agencies believe
that SNXT has failed to comply with applicable laws or regulations, these agencies have the power to impose fines, suspensions of a registrant and
individual employees or other sanctions, which could include revocation of SNXT’s registration under the Advisers Act. SNXT is also subject to the
provisions and regulations of ERISA, to the extent that SNXT acts as a “fiduciary” under ERISA with respect to certain of its clients. ERISA and the
applicable provisions of the federal tax laws impose a number of duties on persons who are fiduciaries under ERISA and prohibit certain transactions
involving the assets of each ERISA plan which is a client, as well as certain transactions by the fiduciaries (and certain other related parties) to such plans.
Our subsidiaries, RISE and MSCO, are also regulated by the National Futures Association (“NFA”) and function as a registered introducing broker.
Siebert 2023 Form-10K 9
The laws, rules and regulations, as well as governmental policies and accounting principles, governing our business and the financial services and
banking industries generally have changed significantly over recent years and are expected to continue to do so. We cannot predict which changes in laws,
rules, regulations, governmental policies or accounting principles will be adopted. Any changes in the laws, rules, regulations, governmental policies or
accounting principles relating to our business could materially and adversely affect our business, results of operations and financial condition.
Additionally, like other participants in the financial services industry, we and our subsidiaries face the risks of lawsuits by clients and regulatory
proceedings against us. The outcome of regulatory proceedings and client lawsuits is uncertain and difficult to predict. An adverse resolution of any
regulatory proceeding or client lawsuit against us could result in substantial costs or reputational harm to us. Further, any such proceedings or lawsuits
could have an adverse effect on our ability to retain key registered representatives, investment advisers and wealth managers, and to retain existing clients
or attract new clients, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Refer to
Item 3 – Legal Proceedings for additional detail.
We are subject to net capital requirements.
The SEC, FINRA, and various other securities and commodities exchanges and other regulatory bodies in the U.S. 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.
Risks Related to Our Technology and Information Systems
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.
We rely on third-party platforms for information and communications systems.
We rely heavily on our data technology platforms and the platforms provided by our clearing agents. These platforms offer interfaces to our
clearing service providers’ computing systems where customer account records are kept and are accessible through our data technology platforms. Our
systems also utilize browser-based access and other types of data communications.
Our data technology platforms offer services used in direct relation to customer 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. Our data network is designed with redundancies in case a significant business disruption occurs.
We also rely on third parties that provide data center facilities, infrastructure, back-office systems for clearance, settlement and accounting,
customer relationship management, compliance and risk software and systems, website functionality and access, databases, data center facilities and cloud
computing, all of which are critical to our operations. To ensure reliability and to conform to regulatory requirements related to business continuity, we
maintain backup systems and backup data, leverage cloud-based technology, and have a full-time offsite disaster recovery site to ensure business continuity
during a potential wide-spread disruption. However, despite the preventive and protective measures in place, in the event of a wide-spread disruption of our
systems or those of the third-parties upon whom we rely, our ability to satisfy the obligations to customers and other securities firms may be significantly
hampered or completely disrupted.
Failure to protect client data or prevent breaches of our information systems could expose us to liability or reputational damage.
We are dependent on information technology networks and systems to securely process, transmit and store electronic information and to
communicate among our branch offices and with our clients and vendors. As the breadth and complexity of this infrastructure continues to grow, the
potential risk of security breaches and cyber-attacks increases. As a financial services company, we are continuously subject to cyber-attacks by third
parties. Any such security breach could lead to shutdowns or disruptions of our systems and potential unauthorized disclosure of confidential information.
In addition, vulnerabilities of our external service providers and other third parties could pose security risks to client information. The secure transmission
of confidential information over public networks is also a critical element of our operations.
Siebert 2023 Form-10K 10
In providing services to clients, we manage, utilize and store sensitive and confidential client data, including personal data. As a result, we are
subject to numerous laws and regulations designed to protect this information, such as U.S. federal and state laws governing the protection of personally
identifiable information. These laws and regulations are increasing in complexity and number, change frequently and sometimes conflict. If any person,
including any of our employees, negligently disregards or intentionally breaches our established controls with respect to client data, or otherwise
mismanages or misappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal
prosecution in one or more jurisdictions. Unauthorized disclosure of sensitive or confidential client data, whether through systems failure, employee
negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients. Similarly, unauthorized access to or through our
information systems, whether by our employees or third parties, including a cyber-attack by third parties who may deploy viruses, worms or other
malicious software programs, could result in negative publicity, significant remediation costs, legal liability, and damage to our reputation and could have a
material adverse effect on our results of operations. In addition, our liability insurance might not be sufficient in type or amount to cover us against claims
related to security breaches, cyber-attacks and other related breaches.
We may be exposed to damage to our business or our reputation by cybersecurity breaches.
As the world becomes more interconnected through the use of the internet and users rely more extensively on the internet and the cloud for the
transmission and storage of data, such information becomes more susceptible to incursion by hackers and other parties intent on stealing or destroying data
on which we or our customers rely. We face an evolving landscape of cybersecurity threats in which hackers use a complex array of means to perpetrate
cyber-attacks, including the use of stolen access credentials, malware, ransomware, phishing, structured query language injection attacks, and distributed
denial-of-service attacks, among other means. These cybersecurity incidents have increased in number and severity and it is expected that these trends will
continue. Should we be affected by such an incident, we may incur substantial costs and suffer other negative consequences, which may include:
● Remediation costs, such as liability for stolen assets or information, repairs of system damage, and incentives to customers or business
partners in an effort to maintain relationships after an attack;
● Increased cybersecurity protection costs, which may include the costs of making organizational changes, deploying additional personnel and
protection technologies, training employees, and engaging third party experts and consultants;
● Lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack;
● Litigation and legal risks, including regulatory actions by state and federal regulators; and
● Loss of reputation.
Increasingly, intruders attempt to steal significant amounts of data, including personally identifiable data and either hold such data for ransom or
release it onto the internet, exposing our clients to financial or other harm and thereby significantly increasing our liability in such cases. Our regulators
have introduced programs to review our protections against such incidents which, if they determined that our systems do not reasonably protect our clients’
assets and their data, could result in enforcement activity and sanctions.
We have and continue to introduce systems and software to prevent any such incidents and review and increase our defenses to such issues
through the use of various services, programs and outside vendors. We contract cybersecurity consultants and also review and revise our cybersecurity
policy to ensure that it remains up to date. It is impossible, however, for us to know when or if such incidents may arise or the business impact of any such
incident.
As a result of such risks, we have and are likely to incur significant costs in preparing our infrastructure and maintaining it to resist any such
attacks.
An increase in volume on our systems or other events could cause them to malfunction.
Most of our trade orders are received and processed 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 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.
Siebert 2023 Form-10K 11
Rapid market or technological changes may render our technology obsolete or decrease the attractiveness of our products and services to our clients.
We must continue to enhance and improve our technology and electronic services, and expect to increase investments in our own technology. The
electronic financial services industry is characterized by significant structural changes, increasingly complex systems and infrastructures, changes in
clients’ needs and preferences, and new business models. If new industry standards and practices emerge and our competitors release new technology
before us, our existing technology, systems and electronic trading services may become obsolete or our existing business may be harmed.
Our future success will depend on our ability to:
● Enhance our existing products and services;
● Develop and/or license new products and technologies that address the increasingly sophisticated and varied needs of our clients and
prospective clients;
● Continue to attract highly-skilled technology personnel; and
● Respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.
Developing our electronic services, our implementation and utilization of our robo-advisor and other technology entails significant technical and
business risks. We may use new technologies ineffectively or we may fail to adapt our electronic trading platform, information databases and network
infrastructure to client requirements or emerging industry standards. If we face material delays in introducing new services, products and enhancements,
our clients may forego the use of our products and use those of our competitors.
Further, the adoption of new internet, networking or telecommunications technologies may require us to devote substantial resources to modify
and adapt our services. We cannot assure that we will be able to successfully implement new technologies or adapt our proprietary technology and
transaction-processing systems to client requirements or emerging industry standards. We cannot assure that we will be able to respond in a timely manner
to changing market conditions or client requirements.
Risks Related to Our Business Operations
Our management identified a material weakness in our internal control over financial reporting which could, if not remediated, result in material
misstatements in our consolidated financial statements.
Our management is responsible for establishing and maintaining adequate internal controls over our financial reporting, as such term is defined in
Rule 13a-15(f) under the Exchange Act. As disclosed in this report, we evaluated the effectiveness of our internal control over financial reporting and
identified a material weakness as of December 31, 2023. The material weakness is that we did not design and maintain effective controls over certain
information technology (“IT”) or general computer controls for information systems that are relevant to the preparation of the consolidated financial
statements. Specifically, we did not design and maintain user access controls to ensure appropriate segregation of duties and adequate restricted user and
privileged access to financial applications, data and programs to the appropriate personnel. The IT deficiencies did not result in adjustments to the
consolidated financial statements.
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If not
remediated, the material weakness identified above could result in material misstatements in our consolidated financial statements. In addition, if we are
unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report
financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to
litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial
statements and adversely impact our stock price.
Potential strategic acquisitions and other business growth could increase costs and regulatory and integration risks.
Acquisitions involve risks that could adversely affect our business. We may pursue acquisitions of businesses and technologies. Acquisitions and
other transactions entail numerous risks, including:
● Difficulties in the integration of acquired operations, services and products;
Siebert 2023 Form-10K 12
● Failure to achieve expected synergies;
● Diversion of management’s attention from other business concerns;
● Assumption of unknown material liabilities of acquired companies;
● Amortization of acquired intangible assets, which could reduce future reported earnings;
● Potential loss of clients or key employees of acquired companies; and
● Dilution to existing stockholders.
As part of our growth strategy, we regularly consider and from time to time engage in discussions and negotiations regarding transactions such as
acquisitions, mergers, combinations and partnerships within our industry. The purchase price for possible acquisitions could be paid in cash, through the
issuance of our common stock or other securities, borrowings or a combination of these methods.
Our transactions are typically subject to closing conditions including regulatory approvals and the absence of material adverse changes in the
business, operations or financial condition of the entity or part of an entity being acquired or sold. To the extent we enter into an agreement to buy or sell an
entity or part of an entity, there can be no guarantee that the transaction will close when expected or at all. If a material transaction does not close our stock
price could decline.
We cannot be certain that we will be able to identify, consummate and successfully integrate acquisitions, and no assurance can be given with
respect to the timing, likelihood or business effect of any possible transaction. For example, we could begin negotiations that we subsequently decide to
suspend or terminate for a variety of reasons. However, opportunities may arise that we will evaluate and any transactions that we consummate would
involve risks and uncertainties to us. These risks could cause the failure of any anticipated benefits of an acquisition to be realized, which could have a
material adverse effect on our business, financial condition, results of operations and prospects.
We depend on our ability to attract and retain key personnel.
We are dependent upon our key personnel for our success and the loss of the services of any of these individuals could significantly harm our
business, financial condition and operating results.
We do not own the Muriel Siebert and Siebert names, but we may use them as part of our corporate name pursuant to a license agreement. Use of the
names by other parties or the expiration or termination of our license agreement may harm our business.
We have entered into a license agreement with the Muriel Siebert Estate / Foundation under which we have a license to use the “Muriel Siebert”
and “Siebert” name until 2025. In the event that the license agreement is terminated, or if the license agreement is not renewed or extended beyond 2025,
we may be required to change our name and cease using the name. Any of these events could disrupt our recognition in the marketplace and otherwise
harm our business.
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 that our practices and/or the policies
and procedures we have established will be adequate to prevent a significant credit loss.
Our advisory services subject us to additional risks.
We provide investment advisory services to investors. Through our RIA, SNXT, we offer robo-advisory and investment services. The risks
associated with these investment advisory activities include those arising from possible conflicts of interest, unsuitable investment recommendations,
inadequate due diligence, inadequate disclosure and fraud. Realization of these risks could lead to liability for client losses, regulatory fines, civil penalties
and harm to our reputation and business.
Certain employees, directors and affiliates of RISE and Siebert own equity in RISE Financial Services, LLC
During the first quarter of 2022, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE
and Siebert ranging from 1% to 2% individually. This amount represented, as of the date of this Report, an aggregate of 7% of the total issued and
outstanding membership interests in RISE. As of the date of this Report, Gloria E. Gebbia owns approximately 24% of RISE. As a result, the interests of
the employees, directors, and affiliates of RISE and Siebert who own equity in RISE may differ from the interests of shareholders of Siebert.
Siebert 2023 Form-10K 13
Risks Related to Our Common Stock
There may be a limited public market for our common stock; Volatility.
13,255,556 shares of our common stock, or approximately 33.3% of our shares of our common stock outstanding, are currently held by non-
affiliates as of May 1, 2024. A stock with a small number of shares held by non-affiliates, known as the “float,” will generally be more volatile than a stock
with a large float. Although our common stock is traded on the Nasdaq Capital Market, there can be no assurance that an active public market will
continue.
Our principal shareholder has significant influence over us.
Gloria E. Gebbia, who is a director of Siebert, the managing member of Kennedy Cabot Acquisition, LLC (“KCA”) and the spouse of Siebert’s
Chief Executive Officer, has, along with other family members, the power to nominate six directors to the Board of Directors and owns approximately 43%
of our common stock. As a result, they have significant influence on matters submitted to a vote of shareholders.
Future sales of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is
doing well.
Sales of a substantial number of shares of our common stock in the public market by new issuances or through sales by existing shareholders, or
the perception in the market that we or the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock and
make it more difficult for investors to sell common stock at a time and price that investors deem appropriate.
On April 27, 2023, Siebert entered into a Stock Purchase Agreement (the “First Tranche Stock Purchase Agreement”) with Kakaopay Corporation
(“Kakaopay”), a company established under the Laws of the Republic of Korea, pursuant to which Siebert issued to Kakaopay 8,075,607 shares of
Siebert’s common stock, which represented at the time of issuance 19.9% of the outstanding equity securities of Siebert on a fully diluted basis. The First
Tranche closed on May 18, 2023 and, in connection therewith, we entered into a Registration Rights and Lock-Up Agreement, dated as of May 19, 2023
(the “Registration Rights Agreement”), with Kakaopay. In accordance with the Registration Rights Agreement and the Settlement Agreement (as defined
below), in January 2024 we filed a Form S-3 registration statement with the SEC registering these shares for resale. However, since we filed this Report
after its scheduled due date, we no longer satisfy the eligibility requirements for use of registration statements on Form S-3, which requires that we file in a
timely manner all reports required to be filed during the prior twelve calendar months. As a result, we have suspended use of the registration statement on
Form S-3. Kakaopay may still sell shares pursuant to Rule 144 under the Securities Act of 1933, as amended, prior to the filing of any future registration
statement. The number of shares of common stock could be significant in relation to our currently outstanding common stock and the historical trading
volume of our common stock. The sale by Kakaopay of all or a significant portion of the shares of common stock could have a material adverse effect on
the market price of our common stock. In addition, the perception in the public markets that Kakaopay might sell all or a portion of the shares of common
stock could also, in and of itself, have a material adverse effect on the market price of our common stock.
The price of our common stock in the public markets has experienced, and may in the future experience, extreme volatility due to a variety of factors,
many of which are beyond our control.
Since our common stock started trading on the Nasdaq Capital Market, our common stock has been relatively thinly traded and at times been
subject to price volatility. The average daily trading volume from January 1, 2023 to December 31, 2023 was approximately 77,052 shares.
We believe that the trading price of our common stock has at times been influenced by trading factors other than industry or Company-specific
fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media
sites), speculation in the press, in the investment community, or on the internet, including on online forums and social media, about Siebert, our industry or
our security’s access to margin debt, trading in options and other derivatives on our common stock, and the amount and status of short interest in our
securities (including a “short squeeze”). A “short squeeze” is a technical market condition that occurs when the price of a stock increases substantially,
forcing market participants who had taken a position that its price would fall (i.e., who had sold the stock “short”), to buy it, which in turn may create
significant, short-term demand for the stock not for fundamental reasons, but rather due to the need for such market participants to acquire the stock in
order to forestall the risk of even greater losses. A “short squeeze” condition in the market for a stock can lead to short-term conditions involving very high
volatility and trading that may or may not track fundamental valuation models.
Siebert 2023 Form-10K 14
As a result of the foregoing, investors in our common stock may be subject to the risk of significant, short-term price volatility of our common
stock and the trading price of our common stock could decline for reasons unrelated to our business, financial condition, or results of operations. Further, in
the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has
often been instituted against these companies. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even
if unsuccessful, could be costly to defend and a distraction to management.
Our future ability to pay dividends to holders of our common stock is subject to the discretion of our Board of Directors and will be limited by our
ability to generate sufficient earnings and cash flows.
We did not pay any dividends in 2023 or 2022. Payment of future cash dividends on our common stock will depend on our ability to generate
earnings and cash flows. However, sufficient cash may not be available to pay such dividends. Payment of future dividends, if any, will be at the discretion
of our Board of Directors and will depend upon a number of factors that the Board of Directors deems relevant, including future earnings, the success of
our business activities, capital requirements, the general financial condition and future prospects of our business and general business conditions. If we are
unable to generate sufficient earnings and cash flows from our business, we may not be able to pay dividends on our common stock.
Our ability to pay cash dividends on our common stock is also dependent on the ability of our subsidiaries to pay dividends or capital distributions
to Siebert. MSCO and RISE are subject to various regulatory requirements relating to liquidity, capital standards and the use of client funds and securities,
which may limit funds available for payments to Siebert. The ability of our subsidiaries to pay dividends or capital distributions to Siebert may also be
subject to regulatory approval.
Risks Related to Our Industry and Market
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 losses resulting from the ownership 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.
Interest rate changes could affect our profitability.
The direction and level of interest rates are important factors in our earnings. Our earnings are affected by the difference between the interest rates
earned on interest-earning assets such as loans and investment securities and interest rates paid on interest-bearing liabilities such as deposits and
borrowings. Increases in interest rates positively impact our revenue from margin and other interest income, and distribution fees received from money
market securities.
As the U.S. economy remains in a strong recovery, aided by fiscal and monetary policies, inflation has been rising at historically high rates, and
the Federal Reserve may raise, maintain or lower rates in the future. Although we believe we may benefit from the current interest rate environment, higher
interest rates may cause our funding costs to increase if market conditions or the competitive environment induces us to raise our interest rates to avoid
losing deposits, or replace deposits with higher cost funding sources without offsetting increases in yields on interest-earning assets which can reduce our
interest revenue.
A prolonged economic slowdown, volatility in the markets, a recession, and uncertainty in the markets could impair our business and harm our
operating results.
Our businesses are, and will continue to be, susceptible to economic slowdowns, recessions and volatility in the markets, which may lead to
financial losses for our customers, and a decrease in revenues and operating results. In addition, global macroeconomic conditions and U.S. financial
markets remain vulnerable to the potential risks posed by exogenous shocks, which could include, among other things, political and financial uncertainty in
the U.S. and the European Union, renewed concern about China’s economy, conflict with Russia and Ukraine, the conflict in Israel and the Gaza Strip,
complications involving terrorism and armed conflicts around the world, or other challenges to global trade or travel. More generally, because our business
is closely correlated to the macroeconomic outlook, a significant deterioration in that outlook or an exogenous shock would likely have an immediate
negative impact on our overall results of operations.
Siebert 2023 Form-10K 15
There is intense competition in the brokerage industry.
We encounter significant competition from full-commission, no commission, online and other discount brokerage firms, as well as from financial
institutions, mutual fund sponsors, venture-backed technology and cryptocurrency firms, and other organizations. Over the past several years, price wars
and lower or no commission rates in the discount brokerage business in general have strengthened our competitors. In addition, while the decline of
commissions has been ongoing for decades, some of our competitors charging zero commissions on trades could potentially have an adverse effect on our
commission revenue.
The securities brokerage industry has experienced significant consolidation, which may continue in the future, likely increasing competitive
pressures in the industry. Consolidation could enable other firms to offer a broader range of products and services than we do, or offer them on better terms,
such as higher interest rates paid on cash held in client accounts. We believe 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 we
do. We compete with a wide variety of vendors of financial services for the same customers. Many of these competitors conduct extensive marketing
campaigns and may have or achieve exceptional market name recognition. We may not be able to compete effectively with current or future competitors
with stronger capital position, greater name recognition or who partner or combine with other larger firms.
Some competitors in the discount brokerage business offer services which we may not offer. In addition, some competitors have continued to offer
flat rate execution fees that are lower than some of our published rates. Industry-wide changes in trading practices are expected to cause continuing
pressure on fees earned by discount brokers for the sale of order flow. 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 our customer base which would adversely affect our business,
results of operations and financial condition. Further, if we are not able to update or adapt our products and services to take advantage of the latest
technologies and standards, or are otherwise unable to offer services to mobile and desktop computing platforms to a growing self-directed investor market,
it could have a material adverse effect on our ability to compete.
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 hold 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 us having difficulty selling
securities. Such negative market conditions, if prolonged, may lower our revenues. A reduction in our revenues could have a material adverse effect on our
business, results of operations and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Cybersecurity presents significant challenges to the business community in general, as well as to the financial services industry. Increasingly, bad
actors, both domestically and internationally, attempt to steal personal data and/or interrupt the normal functioning of businesses through accessing
individuals’ and companies’ files and equipment connected to the internet. Recently, intruders have become increasingly sophisticated and use deceptive
methods to steal funds and personally identifiable information which they either take for their own purposes, release to the internet, or hold for ransom.
Regulators are increasingly requiring companies to provide more advanced levels of cybersecurity measures.
Our cybersecurity program aims to identify, manage, and mitigate cybersecurity risks – both internal and client-facing. We continue to maintain
systems and ongoing planning measures to minimize the disruption of our services to clients as well as to prevent the loss of data concerning our clients,
their financial affairs, and company-privileged information from cybersecurity incidents.
Cybersecurity Risk Management & Strategy
We utilize the widely recognized National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (“CSF”) as the foundation
of our cybersecurity program, with strategic direction aligned to the following core functions:
● Identify: We continuously assess our systems, data, and vulnerabilities to understand our cybersecurity risk profile. We enlist third-party
cybersecurity consultants and vendors to support our cybersecurity efforts, tapping into their specialized knowledge and insights to assess and
test the effectiveness of our cybersecurity program and to inform decision-making on detection and the deployment of defense measures,
commensurate with our risk profile. As part of our Vendor Risk Management program, we periodically examine our third-party providers’ and
vendors’ risks by reviewing the content and enforcement of their cybersecurity standards, policies, and procedures. We also employ real-time
monitoring to detect suspicious activity in order to minimize risks associated with data breaches or other security incidents that may arise
from third-party sources or insider threats.
Siebert 2023 Form-10K 16
● Protect: We implement technical safeguards, including access controls, data encryption, network security, endpoint protection, and regular
vulnerability patching. Our employee training and awareness programs are designed to improve cybersecurity awareness throughout the
organization, and we are committed to educating our employees on security best practices coupled with industry-relevant context such as anti-
money laundering, social engineering, and fraud.
● Detect: We employ automated monitoring tools and operational procedures for timely detection of anomalies, cybersecurity events, and
potential cybersecurity incidents.
● Respond: We have a Security Incident Response Plan, supported by operational procedures, to help guide response teams to prioritize and
execute containment, investigation, eradication, and communication for confirmed cybersecurity incidents or breaches.
● Recover: Our Business Continuity & Disaster Recovery Plan is in place to enable response to significant business disruptions and timely
restoration of systems, data, and business operations following confirmed cybersecurity incidents or disaster scenarios.
We also incorporate industry-relevant context and emphasize security considerations beyond the core NIST CSF functions:
● Regulatory Compliance: We integrate cybersecurity controls that address requirements of FINRA, SEC, and other relevant regulatory bodies.
● Financial Transaction Security: We employ specific fraud detection and prevention measures to protect client funds and trading operations.
● Market Integrity: We strive to safeguard systems and data that contribute to fair and efficient markets.
However, this does not mean that we meet any particular technical standards, specifications, or requirements, but only that we use the NIST CSF
as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Our cybersecurity program is integrated into our overall risk management process by providing periodic updates to certain members of the
management team which in turn regularly provide updates to our Board of Directors.
As of the filing of this Report, we are not aware of any cybersecurity incidents that have occurred since the beginning of 2023 that have materially
affected, or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. We acknowledge that
we cannot eliminate all security risks within our organization, and we cannot guarantee that any undetected cybersecurity incidents have occurred. For
additional information about these risks, see Part I, Item 1A, - Risk Factors of this Report.
Cybersecurity Governance
The management and assessment of cybersecurity risks and related risk management processes are handled primarily by our Chief Information
Security Officer (“CISO”), whose experience includes approximately 25 years of cybersecurity experience leading and building cybersecurity programs for
global Fortune 500 companies. Our CISO’s extensive cybersecurity background is supplemented with industry-leading certifications and credentials such
as Cisco’s CCIE Security, Palo Alto Networks (PNCSE, PCDRA, PSE), Juniper Networks (JNCIS), and Checkpoint (CCSE) specializations on Endpoint
Detection and Security Architecture. Our Chief Technology Officer (“CTO”), whose experience includes approximately 25 years of managing technology
strategy and programs at public financial services organizations, also has key responsibilities and input into the management of our cybersecurity risks from
a technology perspective. In order to monitor the prevention, detection, mitigation and remediation of cybersecurity incidents, our CISO, CTO, and
respective technology and operations teams monitor the cybersecurity threat landscape, plan and implement security controls, and detect and respond to
cybersecurity threats and incidents using a combination of security tooling, automated systems, and manual processes.
Our Board of Directors, through its Audit Committee, oversees the cybersecurity risk management program. The Board of Directors and the Audit
Committee are informed about risks from cybersecurity threats through periodic updates and reports provided by management. The periodic updates
include briefing materials on our security posture, emerging cybersecurity threats and risks, cybersecurity incident response planning, significant
cybersecurity incidents and breaches, and cybersecurity-related matters involving third parties or vendors.
Siebert 2023 Form-10K 17
ITEM 2. PROPERTIES
We currently maintain 11 branch offices and customers can visit our branch 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 our activities are conducted on the internet
or by telephone and mail. We operate our business out of the following branch offices:
Corporate Headquarters
Miami Beach, FL – 653 Collins Avenue
Branch Offices
Beverly Hills, CA – 190 N Canon
Beverly Hills, CA – 9378 Wilshire
Boca Raton, FL
Boston, MA
Calabasas, CA
Horsham, PA
Jersey City, NJ
Omaha, NE
Seal Beach, CA
Tampa, FL
New York, NY
ITEM 3. LEGAL PROCEEDINGS
Approximate
Square Feet
12,000
900
3,500
1,600
1,700
3,200
2,000
11,000
2,900
800
1,000
8,000
We are party to certain claims, suits and complaints arising in the ordinary course of business.
As of the date of this Report, we do not expect that these claims, suits and complaints will have a material impact on our results of operations or
financial position.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Siebert 2023 Form-10K 18
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
PART II
Market Information
Our common stock trades on the Nasdaq Capital Market, under the symbol “SIEB.”
Holders
As of April 2, 2024, there were 73 holders of record of our common stock based on information provided by our transfer agent. The number of
stockholders of record does not reflect the number of individual or institutional stockholders that beneficially own our stock because most stock is held in
the name of nominees. Based on information available to us, we believe there are approximately 3,782 beneficial holders of our common stock as of
February 9, 2024.
Dividend Policy
No dividends were paid to shareholders during 2023 and 2022. Our Board of Directors periodically considers whether to declare dividends, and
any future decision to pay dividends is at the discretion of the Board of Directors. 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.
For information on securities authorized for issuance under our equity compensation plans, see “Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.”
Unregistered Sales of Equity Securities and Use of Proceeds
On May 18, 2023, we issued 8,075,607 shares of our common stock to Kakaopay as part of a transaction with Kakaopay. The common stock was
issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. Refer to Note 5 – Kakaopay Transaction for more detail.
ITEM 6. [RESERVED]
Siebert 2023 Form-10K 19
ITEM 7. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the related notes included in Part II, Item 8 - Financial Statements and Supplementary Data of this Report. In addition to our historical
consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual
results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include
those discussed below and elsewhere in this Report, particularly in Part I, Item 1A - Risk Factors.
Overview
We are a financial services company and provide a wide variety of financial services to our clients. We operate in business lines such as retail
brokerage, investment advisory, insurance, and technology development through our wholly-owned and majority-owned subsidiaries.
Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the
U.S. equity and fixed-income markets. Market volatility, overall market conditions, interest rates, economic, political, and regulatory trends, and industry
competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions
made by market participants who include investors and competitors, impacting their level of participation in the financial markets. 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, as well as 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.
Trends and Key Factors Affecting our Operations
Interest Rates
We are exposed to market risk from changes in interest rates. Such changes in interest rates primarily impact revenue from interest, marketing, and
distribution fees. We primarily earn interest, marketing and distribution fees from margin interest charged on clients’ margin balances, interest on cash and
securities segregated for regulatory purposes, and distribution fees from money market mutual funds in clients’ accounts. Securities segregated for
regulatory purposes consist solely of U.S. government securities. If prices of U.S. government securities within our portfolio decline, we anticipate the
impact to be temporary as we intend to hold these securities to maturity. We seek to mitigate this risk by managing the average maturities of our U.S.
government securities portfolio and setting risk parameters for securities owned, at fair value.
Technology Initiatives
During 2022 and 2023 we terminated agreements with prior technology vendors that were primarily developing our Retail Platform, refer to Note
7 - Prepaid Service Contract and Note 10 – Software, Net for further detail. During 2023, we reassessed our technology needs and strategic direction and
hired new technology personnel, changed our primary software development vendor, and made additional investments in technology development related
to our Retail Platform and additional technology services for our customers.
We believe these changes will be key to creating a Retail Platform and additional technology services for the next generation of retail customers,
correspondent clearing, as well as the overall growth of our business. The termination of agreements with our prior technology vendors had minimal impact
on our current operations.
Recent Developments
Transaction with Kakaopay
On April 27, 2023, we entered into the First Tranche Stock Purchase Agreement with Kakaopay, a company established under the Laws of the
Republic of Korea, pursuant to which we issued to Kakaopay 8,075,607 shares of our common stock at a per share price of Two Dollars Fifteen Cents
($2.15), which represented at the time of issuance 19.9% of our outstanding equity securities on a fully diluted basis (the “First Tranche”). Concurrent with
the execution of the First Tranche Stock Purchase Agreement, Siebert and Kakaopay entered into a Stock Purchase Agreement (the “Second Tranche Stock
Purchase Agreement”), pursuant to which we agreed to issue to Kakaopay additional shares at a per share price of Two Dollars Thirty Five Cents ($2.35),
that would have resulted in Kakaopay owning 51% of the outstanding equity securities of Siebert on a fully diluted basis.
Siebert 2023 Form-10K 20
The First Tranche closed on May 18, 2023 and, in connection therewith, we entered into the Registration Rights Agreement and a Stockholders’
Agreement (the “Original Stockholders’ Agreement”) with Kakaopay.
On December 19, 2023, we entered into a Termination and Settlement Agreement (the “Settlement Agreement”) with Kakaopay, Kakaopay
Securities Corp. (“Kakaopay Securities”), MSCO and certain Gebbia parties named therein. Under the Settlement Agreement, the parties mutually agreed
to terminate the Second Tranche Stock Purchase Agreement. The parties terminated the Second Tranche Stock Purchase Agreement after reaching a
compromise regarding their disagreement over, among other things, the occurrence of a “Purchaser Material Adverse Effect” in the Second Tranche Stock
Purchase Agreement, and the ability of the closing conditions in the Second Tranche Stock Purchase Agreement to be satisfied. Certain related agreements
were also terminated, including the Foreign Broker-Dealer Fee Sharing Agreement, dated April 27, 2023, between MSCO and Kakaopay Securities, and
the Support and Restrictive Covenant Agreements by certain Gebbia stockholders, each dated April 27, 2023. The parties also agreed (i) to amend and
restate the Original Stockholders’ Agreement as described below, (ii) that Siebert will pay Kakaopay a fee of $5 million (payable in ten quarterly
installments beginning on March 29, 2024) and (iii) to customary releases. Kakaopay continues to own the 8,075,607 shares of our common stock that it
purchased from Siebert in May 2023, and Kakaopay agreed to certain standstill restrictions with respect to its ownership of our common stock, subject to
certain conditions.
In connection with the foregoing, on December 19, 2023, we entered into an Amended and Restated Stockholders’ Agreement (the “A&R
Stockholders’ Agreement”) with Kakaopay, certain stockholders listed on Schedule I thereto and John J. Gebbia (in his individual capacity and as
representative of the Gebbia Stockholders (as defined therein)) to amend and restate the Original Stockholders’ Agreement.
Under the A&R Stockholders’ Agreement, Kakaopay is entitled to nominate one director to our board of directors (the “Board”) and the Gebbia
Stockholders are entitled to designate six directors to the Board, in each case, subject to certain conditions. Kakaopay and each Gebbia Stockholder agreed
to vote all shares of common stock held by such stockholder to elect directors nominated by Kakaopay and Gebbia Stockholders.
The A&R Stockholders’ Agreement also, among other things, provides that certain specified events, including certain significant merger and
acquisition transactions and related party transactions, stock exchange delistings, amendments to organizational documents that materially and
disproportionally prejudice Kakaopay and certain equity issuances, will require the prior written consent of two-thirds of the Board, including at least one
Kakaopay director and one Gebbia director. The A&R Stockholders’ Agreement also provides Siebert and the non-transferring party a right of first refusal
if Kakaopay or any of the Gebbia Stockholders desires to accept a bona fide offer to transfer all or any portion of its or their shares, subject to certain
exceptions, and includes tag-along rights in favor of Kakaopay and the Gebbia Stockholders. The A&R Stockholders’ Agreement will terminate at such
time as either the Gebbia Stockholders, in the aggregate, or Kakaopay, hold less than five percent of the issued and outstanding Common Stock on a fully-
diluted basis.
We incurred $5,943,000 associated with the termination of the transaction with Kakaopay which is recorded in the line item “Transaction
termination costs” in the consolidated statements of operations. This amount consisted of the $5,000,000 fee to Kakaopay (payable in ten quarterly
installments beginning on March 29, 2024) adjusted for the present value of the payments, as well as legal and other consulting costs associated with the
transaction of approximately $1,481,000.
RISE
RISE was an institutional brokerage for which all its revenue producing customers transitioned to other prime service providers by the first quarter
of 2022. Net revenue from customers that have transitioned to other prime service providers was approximately $0.3 million for the year ended December
31, 2022. During 2022, there were various transactions involving the ownership of RISE. Refer to Note 3 – Transactions with Tigress and Hedge
Connection and Note 4 – RISE for additional detail.
As part of this transition, Siebert had an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) whereby JonesTrading pays
RISE a percentage of the net revenue produced by certain historical clients of RISE less any related expenses. For the years ended December 31, 2023 and
2022, this agreement resulted in income of $265,000 and $137,000, respectively, which is recorded in the line item “Other income” in the consolidated
statements of operations.
As a result of the transactions described in Note 3 – Transactions with Tigress and Hedge Connection, Siebert’s ownership in RISE increased to
68% and, therefore, Siebert continued to consolidate RISE from October 18, 2022 through December 31, 2022. There have been no further transactions
completed by Siebert related to RISE’s membership interests for the year ended December 31, 2023.
Siebert 2023 Form-10K 21
Transactions with Tigress and Hedge Connection
On November 16, 2021, we purchased 24% of the outstanding membership interests in Tigress, a disabled and woman-owned financial services
firm, in exchange for 24% of RISE and shares of Siebert common stock. On January 21, 2022, we purchased 20% of Hedge Connection, a woman-owned
fintech company, and an option to acquire the remaining interest in Hedge Connection in exchange for consideration of $600,000 and 3.33% of RISE.
As part of these transactions, Tigress’ founder, Cynthia DiBartolo, continued as CEO of Tigress, and assumed the position as CEO of RISE. Gloria
E. Gebbia, one of Siebert’s and RISE’s directors, assumed the position of Chief Impact Officer at RISE. Ms. DiBartolo was appointed to Siebert’s and
RISE’s Board of Directors and Ms. Gebbia was appointed to Tigress’ Board of Directors. In addition, Lisa Vioni, founder of Hedge Connection, provided
RISE with the right to appoint one director to the Board of Directors of Hedge Connection, and Ms. Vioni was appointed to the Board of Directors of RISE
as well as to the position of President of RISE Prime – Capital Introduction, a division of RISE.
Based upon the strategic direction of these ventures, management of the respective businesses decided to unwind the original transactions with
Siebert, RISE, Hedge Connection and Tigress. As a result, we exchanged our 7% ownership of Tigress for all of Tigress’ ownership of RISE. We also
entered into an agreement with Hedge Connection whereby we re-conveyed 20% of the common stock of Hedge Connection and the related option to
acquire 100% of Hedge Connection in exchange for 3.17% of RISE and the cancellation of Siebert’s note payable to Hedge Connection.
As part of these agreements, Ms. DiBartolo and Ms. Vioni resigned from their respective positions within Siebert and RISE. Gloria E. Gebbia also
resigned from her position within Tigress.
The financial impact of the transaction with Hedge Connection was a one-time loss of $719,000 for the year ended December 31, 2022, which is
in the line item “Loss on sale of equity method investment in related party” on the consolidated statements of operations. The Company recognized
impairment charges of its investment in Tigress of approximately $185,000 and $4,015,000 during the years ended December 31, 2023 and 2022,
respectively, which are in the line item “Impairment of investments” on the consolidated statements of operations. Refer to Note 3 – Transactions with
Tigress and Hedge Connection for further detail on the terms and accounting treatment of these transactions.
Client Account and Activity Metrics
The following tables set forth metrics we use in analyzing our client account and activity trends for the periods indicated.
Client Account Metrics – Retail Customers
Retail customer net worth (in billions)
Retail customer margin debit balances (in billions)
Retail customer credit balances (in billions)
Retail customer money market fund value (in billions)
Retail customer accounts
As of December 31,
2023
2022
15.9 $
0.3 $
0.5 $
0.7 $
153,727
13.5
0.4
0.6
0.6
122,394
$
$
$
$
● Retail customer net worth represents the total value of securities and cash in the retail customer accounts after deducting margin debits
● Retail customer margin debit balances represents credit extended to our customers to finance their purchases against current positions
● Retail customer credit balances represents client cash held in brokerage accounts
● Retail customer money market fund value represents all retail customers accounts invested in money market funds
● Retail customer accounts represents the number of retail customers
Account Growth Initiatives
During 2023, our management team engaged in several account growth initiatives that led to significant growth in our retail customer accounts
from 2022. The primary drivers of this growth were related to a partnership with NFS as well as new retail accounts from corporate services.
Siebert 2023 Form-10K 22
Consolidated Statements of Operations and Financial Condition
Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022
Revenue
Commissions and fees for the year ended December 31, 2023 were $7,541,000 and increased by $201,000 from the corresponding period in the
prior year, primarily due to market conditions.
Interest, marketing and distribution fees for the year ended December 31, 2023 were $29,577,000 and increased by $12,343,000 from the
corresponding period in the prior year primarily due to rising interest rates that resulted in an increase in margin interest income and interest income
received on U.S. government securities and bank deposits.
Principal transactions and proprietary trading for the year ended December 31, 2023 were $13,094,000 and increased by $9,351,000 from the
corresponding period in the prior year, primarily due to the factors discussed below.
The increase in realized and unrealized gain on primarily riskless principal transactions was primarily due to market conditions. The increase in
unrealized gain on our portfolio of U.S. government securities was due to the following. We invested in 1-year treasury bills and 2-year treasury notes in
order to enhance our yield on excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized
loss on our U.S. government securities portfolio. In 2023, we recorded the reversal of the unrealized loss resulting in a realized and unrealized gain due to
the securities coming closer to maturity, the latest maturity being April 2025. We continually invest in U.S. government securities based on market yields
and cash needs.
Below is a summary of the change in the principal transactions and proprietary trading line item for the periods presented.
Principal transactions and proprietary trading
Realized and unrealized gain on primarily riskless principal transactions
Realized and unrealized gain (loss) on portfolio of U.S. government securities
Total Principal transactions and proprietary trading
Year Ended December 31
2023
2022
Year over
Year Increase
$
$
9,275,000 $
3,819,000
13,094,000 $
7,643,000 $
(3,900,000)
3,743,000 $
1,632,000
7,719,000
9,351,000
Market making for the year ended December 31, 2023 was $1,304,000 and decreased by $1,139,000 from the corresponding period in the prior
year, primarily due to market conditions.
Stock borrow / stock loan for the year ended December 31, 2023 was $16,172,000 and increased by $1,654,000 from the corresponding period in
the prior year, primarily due to the growth of stock locate and securities lending businesses.
Advisory fees for the year ended December 31, 2023 were $1,928,000 and increased by $66,000 from the corresponding period in the prior year.
Other income for the year ended December 31, 2023 was $1,898,000 and decreased by $1,064,000 from the corresponding period in the prior
year, primarily due to the termination of consulting fee income from a technology vendor.
Operating Expenses
Employee compensation and benefits for the year ended December 31, 2023 were $31,936,000 and increased by $3,202,000 from the
corresponding period in the prior year, primarily due to an increase in commission payouts and incentive compensation.
Clearing fees, including execution costs for the year ended December 31, 2023 were $1,672,000 and decreased by $471,000 from the
corresponding period in the prior year, primarily due to the elimination of RISE clearing and execution charges.
Technology and communications expenses for the year ended December 31, 2023 were $3,364,000 and decreased by $1,107,000 from the
corresponding period in the prior year, primarily due to a decrease in technology costs related to RISE as well as a decrease in costs related to an agreement
with a technology vendor that was terminated in 2022.
Other general and administrative expenses for the year ended December 31, 2023 were $4,410,000 and increased by $400,000 from the
corresponding period in the prior year, primarily due to an increase in travel expenses as well as expense primarily related to the Miami office building.
Siebert 2023 Form-10K 23
Data processing expenses for the year ended December 31, 2023 were $3,236,000 and increased by $67,000 from the corresponding period in the
prior year.
Rent and occupancy expenses for the year ended December 31, 2023 were $1,873,000 and decreased by $82,000 from the corresponding period in
the prior year, primarily due to the elimination of certain leases in 2023.
Professional fees for the year ended December 31, 2023 were $4,459,000 and increased by $1,257,000 from the corresponding period in the prior
year, primarily due to an increase in board of director compensation, executive officer compensation, as well as other consulting costs.
Depreciation and amortization expenses for the year ended December 31, 2023 were $2,020,000 and increased by $1,025,000 from the
corresponding period in the prior year, primarily due to the write-off of certain technology assets in 2023.
Interest expense for the year ended December 31, 2023 was $263,000 and decreased by $177,000 from the corresponding period in the prior year,
primarily due to the elimination in interest related to notes payable at the end of 2022.
Advertising and promotion expenses for the year ended December 31, 2023 were $155,000 and decreased by $388,000 from the corresponding
period in the prior year, primarily due to a decrease in promotional costs for various marketing initiatives.
Non-Operating Income (Loss)
The earnings of equity method investment in related party for the year ended December 31, 2023 was $111,000 and increased by $107,000 from
the corresponding period in the prior year, primarily due to an increase in our proportional income from our investment in Tigress.
The impairment of investments for the year ended December 31, 2023 was a loss of $1,035,000 and decreased by $2,980,000 from the
corresponding period in the prior year, primarily due to the impairment of our investment in Tigress occurring in 2022, partially offset by the impairment in
2023 of our investment in a technology provider of a trading platform (“Trading Technology Provider”).
Loss on sale of equity method investment in related party for the year ended December 31, 2023 was $0 and decreased by $719,000 from the
corresponding period in the prior year due to our loss on the transactions between Siebert, RISE, Hedge Connection and Tigress in 2022.
Transaction termination costs for the year ended December 31, 2023 was $5,943,000 and increased by $5,943,000 from the corresponding period
in the prior year due to costs associated with the termination of the Kakaopay transaction.
Provision For (Benefit From) Income Taxes
The provision for income taxes for the year ended December 31, 2023 was $3,415,000 and increased from the benefit for income taxes by
$4,715,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to substantial
increase in pre-tax earnings for the year ended December 31, 2023. Refer to Note 18 – Income Taxes for additional detail.
Net Income (Loss) Attributable to Noncontrolling Interests
As further discussed in Note 2 – Summary of Significant Accounting Policies, we consolidate RISE’s financial results into our consolidated
financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interests in our consolidated financial statements. The net
income attributable to noncontrolling interests for the year ended December 31, 2023 was $18,000, and increased by $1,018,000 from the corresponding
period in the prior year, primarily due to expenses in RISE in 2022 associated with the exiting of the prime brokerage business.
Siebert 2023 Form-10K 24
Consolidated Statements of Financial Condition as of December 31, 2023 and 2022
Assets
Assets as of December 31, 2023 were $801,800,000 and increased by $73,752,000 from December 31, 2022, primarily due to an increase in
securities borrowed, receivables from customers, and securities owned, at fair value, partially offset by a decrease in cash and cash equivalents.
Liabilities
Liabilities as of December 31, 2023 were $731,091,000 and increased by $52,963,000 from December 31, 2022, primarily due to an increase in
securities loaned partially offset by a decrease in payables to customers and payables to non-customers.
Liquidity and Capital Resources
Overview
We expect to use our available cash, cash equivalents, and potential future borrowings under our debt agreements and potential issuance of new
debt or equity, to support and invest in our core business, including investing in new ways to serve our customers, potentially seeking strategic acquisitions
to leverage existing capabilities, and for general capital needs (including capital, deposit, and collateral requirements imposed by regulators and SROs).
Based on our current level of operations, we believe our available cash, available lines of credit, overall access to capital markets, and cash provided by
operations will be adequate to meet our current liquidity needs for the foreseeable future. As of the date of this Report, there are no known or material
events that would require us to use large amounts of our liquid assets to cover expenses.
Kakaopay
The net capital infusion from Kakaopay to Siebert from the First Tranche was approximately $14.8 million after the issuance cost. This capital is
currently being used to enhance our regulatory capital, and is primarily invested in U.S. government securities and is in the line item “Securities owned, at
fair value” on the consolidated statements of financial condition.
Cash and Cash Equivalents
Our cash and cash equivalents were $5.7 million and $23.7 million as of December 31, 2023 and 2022, respectively.
Debt Agreements
We have a $4.3 million mortgage with East West Bank and an unutilized line of credit for short term overnight demand borrowing of up to $25
million with BMO Harris as of December 31, 2023. For the year ended December 31, 2023, we paid off our $2.7 million loan outstanding with East West
Bank. As of December 31, 2023, we were in compliance with all covenants related to our debt agreements.
Cash Requirements
The following table summarizes our short- and long-term material cash requirements as of December 31, 2023.
2024
2025
Payments Due By Period
2027
2026
2028
Operating lease commitments
Kakaopay fee (1)
Mortgage with East West Bank (2)
Technology vendors (3)
Leasehold improvements (4)
Total
$
$
938,000 $
2,000,000
84,000
2,097,000
671,000
5,790,000 $
861,000 $
2,000,000
88,000
—
—
2,949,000 $
694,000 $
1,000,000
91,000
—
—
1,785,000 $
520,000 $
—
95,000
—
—
615,000 $
443,000 $
—
98,000
—
—
541,000 $
Thereafter
— $
—
3,857,000
—
—
Total
3,456,000
5,000,000
4,313,000
2,097,000
671,000
3,857,000 $ 15,537,000
(1) Pursuant to the Settlement Agreement with Kakaopay, Siebert will pay Kakaopay a fee of $5 million (payable in ten quarterly installments beginning
on March 29, 2024.) See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Transaction with Kakaopay for
further detail.
(2) On December 30, 2021, we purchased the Miami office building and financed part of the purchase price with a mortgage with East West Bank.
(3)
In 2023 we entered into agreements with technology vendors for certain development projects related to our Retail Platform and equity management
solutions. As of December 31, 2023, we have incurred approximately $0.5 million out of the $2.6 million total budget for these projects.
(4) On July 7, 2023, we entered into a lease agreement expiring in December 2028 for office space in the World Financial Center in New York City. The
estimated build out cost for this office space is approximately $800,000. As of December 31, 2023, we have incurred approximately $129,000 out of
the $800,000 of the estimated build out costs.
Siebert 2023 Form-10K 25
Shelf Registration Statement
On February 18, 2022, we filed a shelf registration statement on Form S-3 that was declared effective on March 2, 2022 by the SEC for the
potential offering, issuance and sale by us of up to $100.0 million of our common stock, preferred stock, warrants to purchase our common stock and/or
preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some of these securities. However, since we
filed this Report after its scheduled due date, we no longer satisfy the eligibility requirements for use of registration statements on Form S-3, which requires
that we file in a timely manner all reports required to be filed during the prior twelve calendar months. As a result, we have suspended use of the shelf
registration statement.
At the Market Offering
On May 27, 2022, we entered into a Capital on DemandTM Sales Agreement with JonesTrading as agent, pursuant to which we may offer and sell,
from time to time through JonesTrading, shares of our common stock having an aggregate offering amount of up to $9.6 million under our shelf registration
statement on Form S-3. For the years ended December 31, 2023 and 2022, we did not sell any shares pursuant to this Sales Agreement. Refer to Note 21 –
Commitments, Contingencies and Other for additional detail. As noted above, since we filed this Report after its scheduled due date, we no longer satisfy
the eligibility requirements for use of registration statements on Form S-3. As a result, we have suspended use of the shelf registration statement and we are
not able to access the At the Market program as of the date of this Report.
Net Capital, Reserve Accounts, Segregation of Funds, and Other Regulatory Requirements
MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) and the Customer Protection Rule (15c3-3) of the Exchange Act and
maintains capital and segregated cash reserves in excess of regulatory requirements. Requirements under these regulations may vary; however, MSCO has
adequate reserves and contingency funding plans in place to sufficiently meet any regulatory requirements. In addition to net capital requirements, as a self-
clearing broker-dealer, MSCO is subject to cash deposit and collateral requirements with clearing houses, such as the DTCC and OCC, which may fluctuate
significantly from time to time based upon the nature and size of clients’ trading activity and market volatility. RISE, as a member of FINRA, is subject to
the SEC Uniform Net Capital Rule 15c3-1 and the corresponding regulatory capital requirements.
MSCO can transfer funds to Siebert as long as it maintains its liquidity and regulatory capital requirements. RISE can transfer funds to its
shareholders, of which Siebert is entitled to its proportional ownership interest, as long as RISE maintains its liquidity and regulatory capital requirements.
For the years ended December 31, 2023 and 2022, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory capital
requirements. Refer to Note 19 – Capital Requirements for more detail on our capital requirements.
Cash Flows
Cash provided by and used in operating activities consisted of net income (loss) adjusted for certain non-cash items. Net operating assets and
liabilities at any specific point in time are subject to many variables, including variability in customer activity, the timing of cash receipts and payments,
and vendor payment terms. The total changes in our consolidated statements of cash flows, especially our operating cash flow, are not necessarily
indicative of the ongoing results of our business as we have customer assets and liabilities on our consolidated statements of financial condition.
For the year ended December 31, 2023, cash used in operating activities increased by $5.7 million compared to 2022, which was primarily driven
by an increase in working capital partially offset by an increase in net income. The net change of receivables and payables from / to customers, receivables
and payables from / to non-customers, and securities borrowed and securities loaned between the periods offset each other.
For the year ended December 31, 2023, cash used in investing activities increased by $0.7 million compared to 2022, which was primarily driven
by the build out of the Miami office building as well as investment in our Retail Platform and other technology initiatives in 2023.
For the year ended December 31, 2023, cash flows provided by financing activities increased by $17.3 million compared to 2022, which was
primarily driven by the issuance of the Company’s common stock related to the transaction with Kakaopay. Refer to Note 5 – Kakaopay Transaction for
additional detail.
Siebert 2023 Form-10K 26
Long Term Contracts
Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of
their arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025. As part of this agreement, we received a
one-time business development credit of $3 million, and NFS will pay us four annual credits of $100,000 over the term of the agreement. The amendment
also provides for an early termination fee; however, as of December 31, 2023, we do not expect to terminate the contract with NFS before the end of the
contract term. Refer to Note 16 – Deferred Contract Incentive and Note 21 – Commitments, Contingencies and Other for additional detail.
Effective June 2023, MSCO entered into an amendment to its service agreement with Broadridge Securities Processing Solutions, LLC that,
among other things, extends the term of their arrangement for a five-year period ending June 2028, with an option to terminate after three years. The total
minimum expense for this arrangement is estimated at approximately $1.2 million over the duration of the contract.
Off-Balance Sheet Arrangements
We enter into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and are, therefore, subject
to varying degrees of market and credit risk. In the normal course of business, our customer activities involve the execution, settlement, and financing of
various customer securities transactions. These activities may expose us to off-balance sheet risk in the event the customer or other broker is unable to
fulfill their contracted obligations and we are forced to purchase or sell the financial instrument underlying the contract at a loss. There were no material
losses for unsettled customer transactions for the years ended December 31, 2023 and 2022. Refer to Note 20 – Financial Instruments with Off-Balance
Sheet Risk for additional detail.
Transaction with J2 Financial Technology
On January 18, 2024, Siebert Technologies, LLC (“STCH”) entered into a Purchase Agreement (the “Purchase Agreement”) with J2 Financial
Technology, Inc., d/b/a “Guild”, a Delaware corporation.
Under the Purchase Agreement, STCH purchased a mobile self-directed trading app for the total purchase price of $385,000. The purchase price
consisted of 200,000 restricted shares of our common stock (priced at the historical 30-day moving average as of January 18, 2024) worth approximately
$350,000 and $35,000 cash.
Critical Accounting Policies and Estimates
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 team makes significant estimates that affect the reported amounts of assets, liabilities, and expenses, and the
related disclosure of contingent assets and liabilities included in the consolidated financial statements. The estimates relate primarily to 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 expenses incurred, to estimate the amount of such expenses. We are not aware of any material differences
between the estimates used in closing our books for the periods presented and the actual amounts of expenses incurred when we subsequently receive the
actual confirmations, invoices or other documentation.
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“U.S. GAAP”). The preparation of our consolidated financial statements requires us to make judgments and estimates that may have a significant
impact on our financial results. We believe that the critical accounting policies listed below are particularly subject to management’s judgments and
estimates and could materially affect our results of operations and financial position. Refer to Note 2 – Summary of Significant Accounting Policies for
additional detail on our significant accounting policies.
Estimates of effective income tax rates, uncertain tax positions, deferred income taxes and related valuation allowances
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, we determine deferred tax
assets and liabilities on the basis of the differences between the consolidated financial statements and tax bases of assets and liabilities by using enacted tax
rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period that includes the enactment date.
Siebert 2023 Form-10K 27
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a
determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected
future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize deferred taxes in the future
in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for
income taxes.
We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more
likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-
likely-than-not recognition threshold we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate
settlement with the related tax authority.
We recognize interest and penalties related to unrecognized tax benefits on the provision for income taxes line on the consolidated statements of
operations. Accrued interest and penalties would be included on the related tax liability line on the consolidated statements of financial condition.
Goodwill and other intangible assets
Goodwill is recognized as a result of business combinations and represents the excess of the purchase price over the fair value of net tangible
assets and identifiable intangible assets acquired.
The valuation of goodwill and acquired intangible assets requires significant judgment and estimates by management. For example, the valuation
of certain intangible assets required management’s estimates of future earnings and cash flows as well as judgment in determining market approaches. The
useful life of the finite lived intangible assets was determined based on management’s estimate of the period over which those intangible assets were
expected to provide economic benefit. Management applies judgment in conducting impairment testing for goodwill and intangible assets, including
estimates of fair value based on the income or market approach and estimates required to determine the useful lives of finite lived intangible assets.
We test goodwill and all intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable, or at least annually. If our estimates of fair value change due to future events differing significantly from the forecasts used to determine fair
value or there are changes in our business or other factors, we will assess the amount of impairment and recognize it in our consolidated financial
statements during that reporting period.
We also evaluate the useful life of finite lived intangible assets on an annual basis to determine if events or trends warrant a change in estimate of
the useful life. Changes in the estimated useful lives of finite lived intangible assets could result in the recognition of an impairment or a change in the
remaining life of these assets.
We have concluded that as of December 31, 2023 and 2022, there has been no impairment to the carrying value of Siebert’s goodwill; however,
there has been an impairment to the carrying value of our investment in the Trading Technology Provider and our equity method investment in Tigress for
the years ended December 31, 2023 and 2022, which is included in line item “Impairment of investments” on the consolidated statements of operations.
Refer to Note 2 – Summary of Significant Accounting Policies, Note 3 – Transactions with Tigress and Hedge Connection, and Note 13 –
Investments, Cost for additional detail.
Siebert 2023 Form-10K 28
Accruals for contingent liabilities
Accruals for contingent liabilities related to legal and regulatory claims as well as employee healthcare expenses under our self-insured plan
reflect an estimate of probable losses. In making such estimates for legal and regulatory claims, we consider many factors, including the progress of the
matter, prior experience and the experience of others in similar matters, available defenses, insurance coverage, indemnification provisions and the advice
of legal counsel and other experts. In making such estimates for employee healthcare expenses, we consider many factors, including trends of our health
insurance expenses and our insurance reserve limits. We believe that our present insurance coverage and reserves are sufficient to cover currently estimated
exposures, but there can be no assurance that we will not incur liabilities in excess of recorded reserves or in excess of our insurance limits. Significant
judgment is required in making these estimates, and the actual cost may be materially different than the estimated costs. Refer to Note 21 – Commitments,
Contingencies and Other for additional detail.
New Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Improvements to Income Tax Disclosures”
(“ASU 2023-09”). The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in the ASU
address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.
ASU 2023-09 will be effective for us for annual periods beginning after December 15, 2024, though early adoption is permitted. We are still evaluating the
presentational effect that ASU 2023-09 will have on our consolidated financial statements, but we expect considerable changes to our income tax footnote.
Refer to Note 2 – Summary of Significant Accounting Policies for additional information regarding new Accounting Standards Updates (“ASU”s)
issued by the Financial Accounting Standards Board (“FASB”).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial Instruments Held For Trading Purposes
We do not directly engage in derivative transactions, have no interest in any special purpose entity and have no liabilities, contingent or otherwise,
for the debt of another entity.
Financial Instruments Held For Purposes Other Than Trading
We generally invest our cash and cash equivalents temporarily in dollar denominated bank account(s). These investments are not subject to
material changes in value due to interest rate movements.
We invest cash and securities segregated for regulatory purposes in dollar denominated bank accounts which are not subject to material changes in
value due to interest rate movements. We also invest cash and securities segregated for regulatory purposes and securities owned, at fair value in U.S.
government securities which may be subject to material changes in value due to interest rate movements. Securities owned, at fair value invested in U.S.
government securities are generally purchased to enhance yields on required regulatory deposits. While the value of the U.S. government securities may be
subject to material changes in value, we believe any reduction in value would be temporary since the securities would mature at par value.
Customer transactions are cleared through clearing brokers on a fully disclosed basis and are also self-cleared by MSCO. If customers do not
fulfill their contractual obligations, any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy customer
obligations may be incurred by Siebert. We regularly monitor the activity in customer accounts for compliance with margin requirements. We are 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 the last five years.
Siebert 2023 Form-10K 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIEBERT FINANCIAL CORP.
Report of Independent Registered Public Accounting Firm (PCAOB ID 23)
Consolidated Statements of Financial Condition as of December 31, 2023 and 2022
Consolidated Statements of Operations for each of the years in the two-year period ended December 31, 2023
Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the two-year period ended December 31, 2023
Consolidated Statements of Cash Flows for each of the years in the two-year period ended December 31, 2023
Notes to Consolidated Financial Statements
Page
31
32
33
34
35
36
Siebert 2023 Form-10K 30
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Siebert Financial Corp.:
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of Siebert Financial Corp. (the Company) as of December 31, 2023 and
2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes
(collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As described in Note 2 and Note 17 to the consolidated financial statements, the Company recognizes revenue from the following types of services:
commissions and fees; principal transactions and proprietary trading; market making; stock borrow and stock loan; advisory fees; interest, marketing, and
distribution fees; and other income.
The principal considerations for our determination that revenue recognition is a critical audit matter are (i) the significant number of revenue streams and
(ii) the volume of information used in the calculation of each revenue stream. This required an increased extent of audit effort when performing audit
procedures.
How We Addressed the Matter in Our Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included:
● Reviewed management’s revenue recognition policies and related contracts.
● Performed substantive tests of details for a sample of transactions for each material revenue stream.
● As a result of the Company’s material weakness related to Information Technology General Controls (ITGCs), we increased the extent of
substantive tests of details we would have otherwise made if the Company’s controls were designed and operating effectively. In addition, we
utilized original source documents for audit evidence, rather than system reports or other information generated by the Company’s information
technology (IT) systems. For any reports obtained from the IT systems, the engagement team designed specific audit procedures to substantively
test the completeness and accuracy of such reports.
/s/ Baker Tilly US, LLP
We have served as the Company’s auditor since 2017.
New York, New York
May 10, 2024
Siebert 2023 Form-10K 31
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
Current assets
Cash and cash equivalents
Cash and securities segregated for regulatory purposes; (Cash of $158.8 million, securities with a fair value of
$115.5 million as of December 31, 2023; Cash of $135.2 million, securities with a fair value of $141.0 million as
of December 31, 2022)
Receivables from customers
Receivables from broker-dealers and clearing organizations
Receivables from non-customers
Other receivables
Prepaid expenses and other assets
Securities borrowed
Securities owned, at fair value
Total Current assets
Deposits with broker-dealers and clearing organizations
Property, office facilities, and equipment, net
Software, net
Lease right-of-use assets
Equity method investment in related party
Investments, cost
Deferred tax assets
Goodwill
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current liabilities
Payables to customers
Payables to non-customers
Drafts payable
Payables to broker-dealers and clearing organizations
Accounts payable and accrued liabilities
Taxes payable
Securities loaned
Securities sold, not yet purchased, at fair value
Current portion of lease liabilities
Current portion of long-term debt
Current portion of deferred contract incentive
Current portion of contract termination liability
Total Current liabilities
Lease liabilities, less current portion
Long-term debt, less current portion
Deferred contract incentive, less current portion
Contract termination liability, less current portion
Total Liabilities
Commitments and Contingencies
Equity
Stockholders’ equity
Common stock, $.01 par value; 100,000,000 shares authorized; 40,580,936 shares issued and 39,580,936 shares
outstanding as of December 31, 2023, respectively. 32,505,329 shares issued and outstanding as of December 31,
2022.
Treasury stock, at cost; 1,000,000 and 0 shares held as of December 31, 2023 and
2022, respectively.
Additional paid-in capital
Retained earnings
Total Stockholders’ equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
December 31,
2023
December 31,
2022
$
5,735,000 $
23,672,000
72,823,000
3,863,000
241,000
2,424,000
1,700,000
274,317,000 276,166,000
52,057,000
9,094,000
100,000
2,119,000
2,055,000
394,709,000 336,909,000
3,204,000
18,038,000
773,850,000 705,376,000
7,885,000
9,404,000
1,432,000
2,736,000
—
—
4,504,000
1,989,000
1,311,000
8,328,000
991,000
2,222,000
2,584,000
850,000
4,397,000
1,989,000
$ 801,800,000 $ 728,048,000
713,000
1,726,000
481,000
3,639,000
2,313,000
$ 289,777,000 $ 321,391,000
11,506,000
2,384,000
660,000
2,507,000
1,052,000
419,433,000 327,180,000
2,000
1,158,000
1,073,000
808,000
—
721,633,000 669,721,000
2,000
759,000
84,000
808,000
1,898,000
2,227,000
4,229,000
438,000
2,564,000
1,245,000
5,974,000
1,188,000
—
731,091,000 678,128,000
406,000
325,000
(2,510,000)
45,016,000
26,808,000
69,720,000
989,000
70,709,000
—
29,642,000
18,982,000
48,949,000
971,000
49,920,000
$ 801,800,000 $ 728,048,000
Numbers are rounded for presentation purposes. See notes to consolidated financial statements.
Siebert 2023 Form-10K 32
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue
Commissions and fees
Interest, marketing and distribution fees
Principal transactions and proprietary trading
Market making
Stock borrow / stock loan
Advisory fees
Other income
Total Revenue
Expenses
Employee compensation and benefits
Clearing fees, including execution costs
Technology and communications
Other general and administrative
Data processing
Rent and occupancy
Professional fees
Depreciation and amortization
Interest expense
Advertising and promotion
Total Expenses
Operating income
Earnings of equity method investment in related party
Impairment of investments
Loss on sale of equity method investment in related party
Transaction termination costs
Non-operating loss
Income (loss) before provision for (benefit from) income taxes
Provision for (benefit from) income taxes
Net income (loss)
Less net income (loss) attributable to noncontrolling interests
Net income (loss) available to common stockholders
Net income (loss) available to common stockholders per share of common stock
Basic and diluted
Weighted average shares outstanding
Basic and diluted
Year Ended December 31,
2023
2022
$
7,541,000 $
29,577,000
13,094,000
1,304,000
16,172,000
1,928,000
1,898,000
71,514,000
7,340,000
17,234,000
3,743,000
2,443,000
14,518,000
1,862,000
2,962,000
50,102,000
31,936,000
1,672,000
3,364,000
4,410,000
3,236,000
1,873,000
4,459,000
2,020,000
263,000
155,000
53,388,000
28,734,000
2,143,000
4,471,000
4,010,000
3,169,000
1,955,000
3,202,000
995,000
440,000
543,000
49,662,000
18,126,000
440,000
111,000
(1,035,000)
—
(5,943,000)
(6,867,000)
11,259,000
3,415,000
7,844,000
18,000
7,826,000 $
4,000
(4,015,000)
(719,000)
—
(4,730,000)
(4,290,000)
(1,300,000)
(2,990,000)
(1,000,000)
(1,990,000)
0.21 $
(0.06)
37,070,366
32,408,449
$
$
Numbers are rounded for presentation purposes. See notes to consolidated financial statements.
Siebert 2023 Form-10K 33
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Common Stock
Treasury Stock
Number of
Shares
Issued
$.01 Par
Value
Number of
Shares
Amount
Additional
Paid-In
Capital
Retained
Earnings
Total
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
32,403,235 $ 324,000
— $
— $ 27,967,000 $ 20,972,000 $ 49,263,000 $
1,243,000 $ 50,506,000
—
—
—
— 1,573,000
—
1,573,000
1,841,000 3,414,000
Balance – January 1,
2022
Issuance and
transfers of RISE
membership
interests
Termination of
agreement with
technology vendor
—
—
193,906
(293,000)
—
—
(293,000)
—
(293,000)
Cancellation of
treasury stock
Sales of equity
method
investments in
related parties
Share-based
compensation
Net (loss)
Balance – December
31, 2022
Kakaopay
transaction, net of
issuance cost
Non-cash
consideration due
to Kakaopay
transaction
Reacquisition of
shares outstanding
Net income
Balance – December
31, 2023
(193,906)
(2,000)
(193,906)
293,000
(291,000)
—
—
—
—
—
—
296,000
—
3,000
—
32,505,329 $ 325,000
—
—
—
— $
—
(65,000)
—
(65,000)
(1,113,000) (1,178,000)
—
—
458,000
—
— (1,990,000)
461,000
(1,990,000)
—
461,000
(1,000,000) (2,990,000)
— $ 29,642,000 $ 18,982,000 $ 48,949,000 $
971,000 $ 49,920,000
8,075,607 81,000
—
— 14,814,000
—
14,895,000
— 14,895,000
—
—
—
—
560,000
—
560,000
—
560,000
—
—
— 1,000,000 (2,510,000)
—
—
—
—
—
— 7,826,000
(2,510,000)
7,826,000
— (2,510,000)
18,000 7,844,000
40,580,936 $ 406,000 1,000,000 $ (2,510,000) $ 45,016,000 $ 26,808,000 $ 69,720,000 $
989,000 $ 70,709,000
Numbers are rounded for presentation purposes. See notes to consolidated financial statements.
Siebert 2023 Form-10K 34
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Deferred income tax benefit
Depreciation and amortization
Earnings of equity method investment in related party
Impairment of investments
Transaction termination costs - Kakaopay fee
Loss on sale of equity method investment in related party
Share-based compensation
Changes in
Receivables from customers
Receivables from non-customers
Receivables from and deposits with broker-dealers and clearing organizations
Securities borrowed
Securities owned, at fair value
Prepaid expenses and other assets
Prepaid service contract
Payables to customers
Payables to non-customers
Drafts payable
Payables to broker-dealers and clearing organizations
Accounts payable and accrued liabilities
Securities loaned
Securities sold, not yet purchased, at fair value
Net lease liabilities
Taxes payable
Deferred contract incentive
Retail Platform implementation
Net cash used in operating activities
Cash Flows From Investing Activities
Distribution from equity method investment in related party
Purchase of office facilities and equipment
Build out of property
Purchase of software
Net cash used in investing activities
Cash Flows From Financing Activities
Issuance of RISE membership interests
Transfers of RISE membership interests
Kakaopay issuance cost
Shares issued for Kakaopay transaction
Repayments of notes payable – related party
Repayments of long-term debt
Net cash provided by (used in) financing activities
Year Ended December 31,
2023
2022
$
7,844,000 $
(2,990,000)
(107,000)
2,020,000
(111,000)
1,035,000
4,462,000
—
—
(655,000)
995,000
(4,000)
4,015,000
—
719,000
461,000
33,270,000
(20,766,000)
(19,000)
(141,000)
(1,343,000)
3,321,000
(57,800,000) 602,609,000
787,000
(14,834,000)
(335,000)
(269,000)
711,000
—
(55,279,000)
(31,614,000)
(5,924,000)
(10,793,000)
580,000
(658,000)
406,000
(179,000)
1,132,000
(1,170,000)
92,253,000 (604,555,000)
(22,000)
(90,000)
(696,000)
(750,000)
—
(24,615,000)
—
69,000
1,261,000
(750,000)
(978,000)
(30,267,000)
—
(352,000)
(1,313,000)
(894,000)
(2,559,000)
259,000
(284,000)
(985,000)
(830,000)
(1,840,000)
—
—
(1,589,000)
17,363,000
—
(2,734,000)
13,040,000
600,000
240,000
—
—
(4,470,000)
(661,000)
(4,291,000)
Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of year
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of year
(30,746,000)
(19,786,000)
299,838,000 330,584,000
$ 280,052,000 $ 299,838,000
Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes
Cash and cash equivalents - end of year
Cash and securities segregated for regulatory purposes - end of year
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of year
Supplemental cash flow information
Cash paid during the year for income taxes
Cash paid during the year for interest
Non-cash investing and financing activities
Treasury stock (1)
Kakaopay issuance cost (2)
Non-cash consideration due to Kakaopay transaction (2)
Non-cash consideration due to Kakaopay transaction (2)
$
5,735,000 $
23,672,000
274,317,000 276,166,000
$ 280,052,000 $ 299,838,000
$
$
$
$
$
$
2,260,000 $
263,000 $
59,000
440,000
(2,510,000) $
(318,000) $
(560,000) $
560,000 $
—
—
—
—
Transfers of RISE membership interests (3)
Termination of agreement with technology vendor (4)
Net membership interests of RISE from transactions with Hedge Connection (1)
Net membership interests exchange between Tigress and RISE (1)
Forgiveness of notes payable from Hedge Connection (1)
$
$
$
$
$
— $
— $
— $
— $
— $
2,880,000
(293,000)
256,000
(93,000)
250,000
(1) Refer to Note 3 – Transactions with Tigress and Hedge Connection and Note 12 – Equity Method Investment in Related Party for further detail.
(2) Refer to Note 5 – Kakaopay Transaction for further detail.
(3) Refer to Note 4 – RISE for further detail.
(4) Refer to Note 7 – Prepaid Service Contract for further detail.
Numbers are rounded for presentation purposes. See notes to consolidated financial statements.
Siebert 2023 Form-10K 35
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Overview
Siebert Financial Corp., a New York corporation, incorporated in 1934, is a holding company that conducts the following lines of business through
its wholly-owned and majority-owned subsidiaries:
● Muriel Siebert & Co., Inc. (“MSCO”) provides retail brokerage services. MSCO is a Delaware corporation and broker-dealer registered with
the SEC under the Exchange Act and the Commodity Exchange Act of 1936, and member of FINRA, NYSE, SIPC, Euroclear, NFA, and
CFTC.
● Siebert AdvisorNXT, Inc. (“SNXT”) provides investment advisory services. SNXT is a New York corporation registered with the SEC as an
RIA under the Investment Advisers Act of 1940.
● Park Wilshire Companies, Inc. (“PW”) provides insurance services. PW is a Texas corporation and licensed insurance agency.
● Siebert Technologies, LLC (“STCH”) provides technology development. STCH is a Nevada limited liability company.
● RISE Financial Services, LLC (“RISE”) is a Delaware limited liability company and a broker-dealer registered with the SEC, CFTC, FINRA,
SIPC, and NFA.
● StockCross Digital Solutions, Ltd. (“STXD”) is an inactive subsidiary headquartered in Bermuda.
For purposes of this Annual Report on Form 10-K, the terms “Siebert,” “Company,” “we,” “us,” and “our” refer to Siebert Financial Corp.,
MSCO, SNXT, PW, STCH, RISE, and STXD collectively, unless the context otherwise requires.
On January 1, 2024, MSCO changed its name to Muriel Siebert & Co., LLC and SNXT changed its name to Siebert AdvisorNXT, LLC with its
tax status changing from a C-Corporation to a Limited Liability Corporation. Refer to Note 24 – Subsequent Events for further detail.
The Company is headquartered in Miami Beach, FL, with primary operations in New Jersey and California. The Company has 11 branch offices
throughout the U.S. and clients around the world. The Company’s SEC filings are available through the Company’s website at www.siebert.com, where
investors can obtain copies of the Company’s public filings free of charge. The Company’s common stock, par value $.01 per share, trades on the Nasdaq
Capital Market under the symbol “SIEB.”
The Company primarily operates in the securities brokerage and asset management industry and has no other reportable segments. All of the
Company’s revenues for the years ended December 31, 2023 and 2022 were derived from its operations in the U.S.
As of December 31, 2023, the Company is comprised of a single operating segment based on the factors related to management’s decision-making
framework as well as management evaluating performance and allocating resources based on assessments of the Company from a consolidated perspective.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are prepared on the accrual basis of accounting in conformity with U.S. GAAP as established
by the FASB to ensure consistent reporting of financial condition. The consolidated financial statements include the accounts of Siebert and its wholly-
owned and majority-owned subsidiaries. Upon consolidation, all intercompany balances and transactions are eliminated. The U.S. dollar is the functional
currency of the Company and numbers are rounded for presentation purposes.
Siebert 2023 Form-10K 36
Reclassification
Certain prior year amounts have been reclassified to conform to the presentation of the current period. The Company reclassified $137,000 related
to a certain revenue stream from the line item “Commissions and fees” to “Other income” on the consolidated statements of operations for the year ended
December 31, 2022 to conform to the presentation of the current period. The reclassification has not materially impacted the Company’s financial
statements, and did not result in a change in total revenue, net income or cash flows from operations for the periods presented.
Principles of Consolidation
The consolidated financial statements include the accounts of Siebert and its wholly-owned and majority-owned consolidated subsidiaries. Upon
consolidation, all intercompany balances and transactions are eliminated. For the period of March 31, 2022 to October 18, 2022, the Company determined
that RISE was a VIE for which the Company was the primary beneficiary. As discussed in more detail in Note 4 – RISE, as of October 18, 2022, the
Company’s ownership in RISE increased to 68% and has not changed through December 31, 2023; therefore, the Company continues to consolidate RISE
under the voting interest model (“VOE model”).
For consolidated subsidiaries that are not wholly-owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The
net income or loss attributable to noncontrolling interests for such subsidiaries is presented as net income or loss attributable to noncontrolling interests on
the consolidated statements of operations. The portion of total equity that is attributable to noncontrolling interests for such subsidiaries is presented as
noncontrolling interests on the consolidated statements of financial condition.
For investments in entities in which the Company does not have a controlling financial interest but has significant influence over its operating and
financial decisions, the Company applies the equity method of accounting with net income and losses recorded in earnings of equity method investment in
related party.
Variable Interest Entities
The Company evaluates whether an entity is a VIE and determines if the primary beneficiary status is appropriate on a quarterly basis. The
Company consolidates a VIE for which it is the primary beneficiary. When assessing the determination of the primary beneficiary, the Company considers
all relevant facts and circumstances, including factors such as the power to direct the activities of the VIE that most significantly impact its economic
performance, the obligation to absorb the losses and/or the right to receive the expected returns of the VIE. If the Company determines that it is the primary
beneficiary, the Company will consolidate the entity under the VIE model.
Segment Information
The Company operates and reports financial information in one operating segment. Operating segments are defined as components of an
enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and
assess performance. All the Company’s revenues and substantially all of the Company’s assets are attributed to or located in the United States.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
These estimates relate primarily to expenses in the normal course of business as to which the Company receives no confirmations, invoices, or
other documentation at the time the books are closed. The Company uses its best judgment, based on knowledge of these expenses incurred, to estimate the
amount of such expenses. Actual results could differ from those estimates. The Company is not aware of any material differences between the estimates
used in closing the Company’s books for the periods presented and the actual amounts of expenses incurred when the Company subsequently receives the
actual confirmations, invoices, or other documentation.
Estimates are used in the allowance for credit losses, valuation of certain investments, depreciation, income taxes, and the contingent liabilities
related to legal and healthcare expenses. The Company also estimates the valuation allowance for its deferred tax assets based on the more likely than not
criteria. The Company believes that its estimates are reasonable.
Siebert 2023 Form-10K 37
Fair Value
ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs. 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. A
fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income, or cost approach, as
specified by ASC 820, are used to measure fair value.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:
Level 1 - Quoted prices (unadjusted) in active markets for an identical asset or liability that the Company can assess at the measurement date.
Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs for the asset or liability.
The availability of observable inputs can vary from security to security and is affected by a variety of factors, such as the type of security, the
liquidity of markets, and other characteristics particular to the security. To the extent that the valuation is based on models or inputs that are less observable
or unobservable in the market, the determination of fair value requires more judgment. As such, the degree of judgment exercised in determining fair value
is greatest for instruments categorized in level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in
the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the
fair value measurement.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore,
even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that the Company believes market
participants would use in pricing the asset or liability at the measurement date.
A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring
basis is as follows:
U.S. government securities: U.S. government securities are valued using quoted market prices and as such, valuation adjustments are not applied.
Accordingly, U.S. government securities are generally categorized in level 1 of the fair value hierarchy.
Certificates of deposit: Certificates of deposit are included in investments which are recorded at fair value, which approximates cost. When
certificates of deposits are held directly with banking institutions and issued directly to the Company, these are categorized within cash equivalents in level
2 of the fair value hierarchy. When certificates of deposits are available for trading, they are categorized within securities owned, at fair value in level 2 of
the fair value hierarchy.
Corporate bonds: The fair value of corporate bonds is determined using recently executed transactions, market price quotations (when observable),
bond spreads, or credit default swap spreads obtained from independent external parties such as vendors and brokers, adjusted for any basis difference
between cash and derivative instruments. The spread data used is for the same maturity as the bond. If the spread data does not reference the issuer, then
data that references a comparable issuer is used. When position-specific external price data is not observable, fair value is determined based on either
benchmarking to similar instruments or cash flow models with yield curves, bond, or single-name credit default swap spreads and recovery rates as
significant inputs. Corporate bonds are generally categorized in level 2 of the fair value hierarchy.
Equity securities: Equity securities are valued based on quoted prices from the exchange. To the extent these securities are actively traded,
valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy. Securities quoted in inactive markets or with
observable inputs are categorized into level 2. If there are no observable inputs or quoted prices, securities are categorized as level 3 assets in the fair value
hierarchy. Level 3 assets are not actively traded and subjective estimates based on managements’ assumptions are utilized for valuation.
Siebert 2023 Form-10K 38
Municipal securities: Municipal securities are valued using recently executed transactions, market price quotations (when observable), bond
spreads from independent external parties such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments. The
spread data used is for the same maturity as the bond. Municipal securities are generally categorized in level 2 of the fair value hierarchy.
Unit investment trusts (“UITs”): Units of UITs are carried at redemption value, which is the price at which the issuing company may choose to
repurchase a security before its maturity date, which represents fair value. Units of UITs are categorized as level 2.
Options: Options are valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are
not applied, and they are categorized in level 1 of the fair value hierarchy. Securities quoted in inactive markets or with observable inputs are categorized
into level 2. If there are no observable inputs or quoted prices, securities are categorized as level 3 assets in the fair value hierarchy. Level 3 assets are not
actively traded and subjective estimates based on managements’ assumptions are utilized for valuation.
Cash and Cash Equivalents
Cash and cash equivalents are all cash balances that are unrestricted. The Company has defined cash equivalents as highly liquid investments with
original maturities of less than 90 days that are not held for sale in the ordinary course of business. As of December 31, 2023 and 2022, the Company did
not hold any cash equivalents.
As of December 31, 2023 and 2022, the Company maintained its cash balances at various financial institutions. These balances are insured by the
Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per institution. The Company is subject to credit risk to the extent that the financial
institution with which it conducts business is unable to fulfill its contractual obligations and deposits exceed FDIC limits. At certain times, cash balances
may exceed FDIC insured limits.
Cash and Securities Segregated For Regulatory Purposes
MSCO is subject to Exchange Act Rule 15c3-3, referred to as the “Customer Protection Rule,” which requires segregation of funds in a special
reserve account for the exclusive benefit of customers.
As of December 31, 2023, the Company had approximately $158.8 million in cash deposits in special reserve accounts and $115.5 million in
securities segregated for regulatory purposes. As of December 31, 2022, the Company had approximately $135.2 million in cash deposits in special reserve
accounts and $141.0 million in securities segregated for regulatory purposes.
Receivables From and Payables To Customers
Receivables from and payables to customers include amounts due and owed on cash and margin transactions. Receivables from customers include
margin loans to securities brokerage clients and other trading receivables. Margin loans are collateralized by customer securities and are carried at the
amount receivable, net of an allowance for credit losses. Collateral is required to be maintained at specified minimum levels at all times. The Company
monitors margin levels and requires customers to provide additional collateral, or reduce margin positions, to meet minimum collateral requirements if the
fair value of the collateral changes. The Company expects the borrowers will continually replenish the collateral as necessary because the Company
subjects the borrowers to an internal qualification process to align investing objectives and risk tolerance in addition to monitoring customer activity.
Receivables from and payables to customers amounts include any amounts received from interest on credit balances or paid on margin debit balances.
The Company elected the practical expedient for FASB ASC Topic 326 – “Financial Instruments – Credit Losses” (“Topic 326”) which permits it
to compare the amortized cost basis of the loaned amount with the fair value of collateral received at the reporting date to measure the estimate of expected
credit losses. The Company had no expectation of credit losses for its receivables from customers as of December 31, 2023 and 2022. Securities
beneficially owned by customers, including those that collateralize margin or other similar transactions, are not reflected on the consolidated statements of
financial condition.
Siebert 2023 Form-10K 39
Receivables From and Payables to Non-Customers
Receivables from and payables to non-customers include amounts due and owed on cash and margin transactions on non-customer accounts
owned and controlled by principal officers and directors of MSCO. Receivables from non-customers include margin loans to securities brokerage clients
and other trading receivables. Margin loans are collateralized by non-customer securities and are carried at the amount receivable, net of an allowance for
credit losses. Collateral is required to be maintained at specified minimum levels at all times. The Company monitors margin levels and requires non-
customers to provide additional collateral, or reduce margin positions, to meet minimum collateral requirements if the fair value of the collateral changes.
The Company expects the borrowers will continually replenish the collateral as necessary because the Company subjects the borrowers to an internal
qualification process to align investing objectives and risk tolerance in addition to monitoring non-customer activity. Receivables from and payables to
non-customers amounts include any amounts received from interest on credit balances or paid on margin debit balances.
The Company elected the practical expedient for Topic 326 which permits it to compare the amortized cost basis of the loaned amount with the
fair value of collateral received at the reporting date to measure the estimate of expected credit losses. The Company has no expectation of credit losses for
its receivables from non-customers as of December 31, 2023 and 2022. Securities beneficially owned by non-customers, including those that collateralize
margin or other similar transactions, are not reflected in the consolidated statements of financial condition.
Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations
Receivables from and payables to broker-dealers and clearing organizations includes amounts receivables from or payables to MSCO and RISE
clearing broker-dealers, fail-to-deliver and fail-to-receive items, and amounts receivable for unsettled regular-way transactions. Deposits with broker-
dealers and clearing organizations include amounts held on deposit with broker-dealers and clearing organizations.
Amounts payables to broker-dealers and clearing organizations are offset against corresponding amounts receivables from broker-dealers and
clearing organizations. Receivables from these broker-dealers and clearing organizations are subject to clearing agreements and include the net receivable
from net monthly revenues as well as cash on deposit.
MSCO customer transactions for the years ended December 31, 2023 and 2022 were both self-cleared and cleared on a fully disclosed basis
through NFS. RISE customer transactions for the year ended December 31, 2023 were cleared on fully disclosed basis through MSCO. For the year ended
December 31, 2022 were cleared on fully disclosed basis through GSCO and Pershing. RISE did not have any customer transactions through MSCO for the
years ended December 31, 2023 and 2022.
The Company signed a four-year renewal with NFS commencing August 1, 2021 and ending on July 31, 2025, and NFS’s fees are offset against
the Company’s revenues on a monthly basis. In June 2023, the Company entered into an amendment to its service agreement with Broadridge Securities
Processing Solutions, LLC that, among other things, extends the term of their arrangement for a five-year period ending June 2028. All other broker-dealer
and clearing organization relationships operate on a month-to-month basis.
Siebert 2023 Form-10K 40
Receivables from and deposits with broker-dealers and clearing organizations are in scope of the amended guidance for Topic 326. The Company
continually reviews the credit quality of its counterparties and historically has not experienced a default. Further, management reassessed the risk
characteristics of its receivables and applied the collateral maintenance practical expedient for the secured receivables in line with the CECL guidance. As a
result, the Company had no expectation of credit losses for these arrangements as of December 31, 2023 and 2022.
Current Expected Credit Losses
The Company follows Topic 326 which applies to financial assets measured at amortized cost, held-to-maturity debt securities and off-balance
sheet credit exposures. For on-balance sheet assets, an allowance must be recognized at the origination or purchase of in-scope assets and represents the
expected credit losses over the contractual life of those assets. Expected credit losses on off-balance sheet credit exposures must be estimated over the
contractual period the Company is exposed to credit risk as a result of a present obligation to extend credit. The impact to the periods presented is not
material since the Company’s in-scope assets are primarily subject to collateral maintenance provisions for which the Company elected to apply the
practical expedient of reporting the difference between the fair value of the collateral and the amortized cost for the in-scope assets as the allowance for
current expected credit losses.
Securities Borrowed and Securities Loaned
Securities borrowed transactions are recorded at the amount of cash collateral delivered to the counterparty. Securities loaned transactions are
recorded at the amount of cash collateral received. For securities borrowed and loaned, the Company monitors the market value of the securities and
obtains or refunds collateral as necessary.
The Company can elect to use an approach to measure the allowance for credit losses using the fair value of collateral where the borrower is
required to, and reasonably expected to, continually adjust and replenish the amount of collateral securing the instrument to reflect changes in the fair value
of such collateral. The Company has elected to use this approach for its allowance for credit losses on securities borrowed. As a result of this election, and
the fully collateralized nature of these arrangements, the Company had no expectation of credit losses on its securities borrowed balances as of December
31, 2023 and 2022.
Netting of Financial Assets and Financial Liabilities
Substantially all of the Company’s securities borrowing and securities lending activity is transacted under master agreements that may allow for
net settlement in the ordinary course of business, as well as offsetting of all contracts with a given counterparty in the event of default by one of the parties.
However, for financial statement purposes, the Company does not net balances related to these financial instruments. These financial instruments are
presented on a gross basis in the consolidated statements of financial condition.
Siebert 2023 Form-10K 41
The potential effect of rights of setoff associated with the Company’s recognized assets and liabilities is as follows:
As of December 31, 2023
Net Amounts
Presented
in the
Consolidated
Statements
of Financial
Condition
Gross Amounts
Offset in the
Consolidated
Statements of
Financial
Condition1
Collateral
Received or
Pledged2
Gross Amounts
of Recognized
Assets and
Liabilities
Net Amount3
Assets
Securities borrowed
Liabilities
Securities loaned
Assets
Securities borrowed
Liabilities
Securities loaned
$
394,709,000
— 394,709,000 $ 371,076,000 $
23,633,000
$
419,433,000
— 419,433,000 $ 404,312,000 $
15,121,000
As of December 31, 2022
Net Amounts
Presented
in the
Consolidated
Statements
of Financial
Condition
Gross Amounts
Offset in the
Consolidated
Statements of
Financial
Condition1
Collateral
Received or
Pledged2
Gross Amounts
of Recognized
Assets and
Liabilities
Net Amount3
$
336,909,000
— 336,909,000 $ 326,618,000 $
10,291,000
$
327,180,000
— 327,180,000 $ 316,648,000 $
10,532,000
1) Amounts represent recognized assets and liabilities that are subject to enforceable master agreements with rights of setoff.
2) Represents the fair value of collateral the Company had received or pledged under enforceable master agreements.
3) Represents the amount for which, in the case of net recognized assets, the Company had not received collateral, and in the case of net recognized
liabilities, the Company had not pledged collateral.
Securities Owned and Securities Sold, Not Yet Purchased at Fair Value
Securities owned, at fair value represent marketable securities owned by the Company at trade-date valuation. Securities sold, not yet purchased,
at fair value represent marketable securities sold by the Company prior to purchase at trade-date valuation. These securities are classified as trading
securities and in accordance with ASC 940, these securities are measured initially at fair value and any realized or unrealized gains or losses to fair value
are included in profit or loss. Below is a table with further detail on the Company’s securities.
Type of Security
Certificates of deposit, Corporate
bonds, municipal securities, options
Classification
Trading
Consolidated Statements of
Financial Condition
Recording of Realized and
Unrealized Gain or Loss
Securities owned, at fair value
Principal transactions and proprietary trading
Equities
Trading
Securities owned, at fair value; Securities
Market making, Principal
transactions and
U.S. government securities
U.S. government securities
Trading
Trading
Securities owned, at fair value
Cash and securities segregated for regulatory
Principal transactions and proprietary trading
Principal transactions and proprietary trading
sold, not yet purchased at fair value
proprietary trading
Property, Office Facilities, and Equipment, Net
purposes
Property, office facilities, and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation for equipment is
calculated using the straight-line method over the estimated useful lives of the assets, generally not exceeding four years. Office facilities are amortized
over the shorter of their estimated useful life, generally between four and ten years, or the remaining life of the lease term unless the lease transfers
ownership of the underlying asset to the lessee, or the lessee is reasonably certain to exercise an option to purchase the underlying asset, in which case the
lessee will amortize over the estimated useful life of the office facilities. Depreciation for property is calculated using the straight-line-method over the
estimated useful life of the property, not exceeding forty years.
Siebert 2023 Form-10K 42
Software, Net
The Company capitalizes certain costs for certain software and amortizes them over their useful life, generally not exceeding three years.
Depending on the terms of the contract, the Company either records costs from software hosting arrangements as prepaid assets and amortizes them over
the contract term, or the costs are expensed as incurred.
The Company enters into certain software hosting arrangements where the associated professional development services work is capitalized and
then amortized over the term of the contract.
Other software costs such as routine maintenance and various data services are expensed as incurred.
Leases
The Company reviews all relevant contracts to determine if the contract contains a lease at its inception date. A contract contains a lease if the
contract conveys the right to control the use of an underlying asset for a period of time in exchange for consideration. If the Company determines that a
contract contains a lease, it recognizes, on the consolidated statements of financial condition, a lease liability and a corresponding right-of-use asset on the
commencement date of the lease. The lease liability is initially measured at the present value of the future lease payments over the lease term using the rate
implicit in the lease or, if not readily determinable, the Company’s secured incremental borrowing rate. An operating lease right-of-use asset is initially
measured at the value of the lease liability minus any lease incentives and initial direct costs incurred plus any prepaid rent.
The Company’s leases are classified as operating leases and consist of real estate leases for office space, data centers and other facilities. Each
lease liability is measured using the Company’s secured incremental borrowing rate, which is based on an internally developed rate based on the
Company’s size, growth, risk profile and a duration similar to the lease term. The Company’s leases have remaining terms of approximately 1 to 5 years as
of December 31, 2023. The Company does not include renewal options as the renewal options are not reasonably certain to be exercised; however, the
Company continues to monitor the lease renewal options. The Company’s operating leases contain both lease components and non-lease components. Non-
lease components are distinct elements of a contract that are not related to securing the use of the underlying assets, such as common area maintenance and
other management costs. The Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease
cost primarily represents variable payments such as common area maintenance and utilities which are usually determined by the leased square footage in
proportion to the overall office building.
Operating lease expense is recognized on a straight-line basis over the lease term and is included in line item “Rent and occupancy” on the
consolidated statements of operations.
Equity Method Investments
Investments in which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity
method of accounting and are included in the line item “Equity method investment in related party” on the consolidated statements of financial condition.
Under this method of accounting, the Company’s share of the net income or loss of the investee is presented before the income before provision for income
taxes on the consolidated statements of operations.
The Company evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such
investments may be impaired. If the impairment is determined to be other-than-temporary, the Company will recognize an impairment loss equal to the
difference between the expected realizable value and the carrying value of the investment.
Investments, Cost
Investments in equity shares without a readily determinable fair value and for which the Company does not have the ability to
exercise significant influence are accounted for at cost adjusted for observable price changes in orderly transactions for the identical or a similar investment
of the same issuer, and impairments. Those investments are classified within Investments, cost on the consolidated statements of financial condition. As of
December 31, 2023 and 2022, the Company had investments, cost of $0 and $850,000, respectively.
Siebert 2023 Form-10K 43
Goodwill
Goodwill represents the excess purchase price of businesses acquired over the fair value of the identifiable net assets acquired. Goodwill is not
subject to amortization but rather is evaluated for impairment annually, or more frequently if events occur or circumstances change indicating it would
more likely than not result in a reduction of the fair value of the reporting unit below its carrying value, including goodwill. Goodwill may be evaluated for
impairment by performing a qualitative assessment. This qualitative assessment considers various financial, macroeconomic, industry, and reporting unit
specific qualitative factors. If the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its
carrying amount, including goodwill, or, if for any other reason the Company determines to it be appropriate, then a quantitative assessment will be
performed. The quantitative assessment process utilizes an income and market approach to arrive at an indicated fair value range for the reporting unit. The
fair value calculated for the reporting unit is compared to its carrying amount, including goodwill, to ascertain if goodwill impairment exists. If the fair
value exceeds the carrying amount, including goodwill for the reporting unit, it is not considered impaired. If the fair value is below the carrying amount,
including goodwill for the reporting unit, then an impairment charge is recognized for the amount by which the carrying amount exceeds the calculated fair
value, up to but not exceeding the amount of goodwill allocated to the reporting unit.
The Company’s annual impairment test date is December 31. The Company completed a qualitative assessment for its reporting unit during its
most recent annual impairment review. The Company concluded that it has one reportable segment and tests goodwill on a consolidated basis. Based on
this qualitative assessment, the Company determined that there was no evidence of impairment to the balance of its goodwill as of both December 31, 2023
and 2022.
Drafts Payable
Drafts payable represent checks drawn by the Company against customer accounts which remained outstanding and had not cleared the bank as of
the end of the period.
Deferred Contract Incentive
The Company entered into an amendment with its agreement with NFS whereby the Company received a one-time business development credit of
$3 million, and NFS will pay the Company four annual credits of $100,000, which are both recorded in the line item “Deferred contract incentive” on the
consolidated statements of financial condition. Annual credits shall be paid on the anniversary of the date on which the first credit was paid. The business
development credit and annual credits will be recognized as contra expense over four years and one year, respectively, in the line item “Clearing fees,
including execution costs” on the consolidated statements of operations.
Contract Termination Liability
The Company entered into a settlement agreement with Kakaopay whereby it will pay Kakaopay $5 million, payable in quarterly installments.
The Company accounted for this transaction as an exit or disposal cost obligation in accordance with ASC 420, “Exit or Disposal Cost
Obligations.” Accordingly, the Company recognized the liability at fair value by using a present value technique that used a discount rate equivalent to the
bank prime rate as of the date of the agreement. The liability is recorded on the line item “Contract termination liability” on the consolidated statements of
financial condition. The expense was recorded in the line item “Transaction termination costs” on the consolidated statements of operations. Refer to Note
5 – Transaction with Kakaopay for further detail.
Revenue Recognition
The primary sources of revenue for the Company are as follows:
Commissions and Fees
The Company earns commission revenue for executing trades for clients in individual equities, options, insurance products, futures, fixed income
securities, as well as certain third-party mutual funds and ETFs.
Siebert 2023 Form-10K 44
Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is
recognized at a point in time on the trade date when the performance obligation is satisfied. The performance obligation is satisfied on the trade date
because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have
been transferred to / from the customer.
The Company enters into arrangements with managed accounts of other pooled investment vehicles (funds) to distribute shares to investors
(“distribution fees”). The Company may receive distribution fees paid by the fund up front, over time, upon the investor’s exit from the fund (that is, a
contingent deferred sales charge), or as a combination thereof. The Company believes that its performance obligation is the sale of securities to investors
and as such this is fulfilled on the trade date. Any fixed amounts are recognized on the trade date and variable amounts are recognized to the extent it is
probable that a significant revenue reversal will not occur until the uncertainty is resolved. For variable amounts, as the uncertainty is dependent on the
value of the shares at future points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible to factors
outside the Company’s influence, the Company does not believe that it can overcome this constraint until the market value of the fund and the investor
activities are known, which are usually monthly or quarterly. Distribution fees recognized in the current period are primarily related to performance
obligations that have been satisfied in prior periods.
Principal Transactions and Proprietary Trading
Principal transactions and proprietary trading primarily represent two revenue streams. The first revenue stream is riskless transactions in which
the Company, after executing a solicited order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or
markdown to satisfy the order. The second revenue stream is entering into transactions where U.S. government securities and other securities are traded by
the Company.
Principal transactions and proprietary trading are recognized at a point in time on the trade date when the performance obligation is satisfied. The
performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed
upon, and the risks and rewards of ownership have been transferred to / from the customer or trading counterparty.
Market Making
Market making revenue is generated from the buying and selling of securities. Market making transactions are recorded on a trade-date basis as
the securities transactions occur. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or
purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty.
Stock Borrow / Stock Loan
The Company borrows securities on behalf of retail clients to facilitate short trading, loans excess margin and fully-paid securities from client
accounts, facilitates borrow and loan contracts for broker-dealer counterparties, and provides stock locate services to broker-dealer counterparties. The
Company recognizes self-clearing revenues net of operating expenses related to stock borrow / stock loan. Stock borrow / stock loan also includes any
revenues generated from the Company’s fully paid lending programs on a self-clearing or introducing basis. The Company does not utilize stock borrow /
stock loan activities for the purpose of financing transactions.
Securities borrowed and securities loaned transactions are recorded at the amount of cash collateral advanced or received, respectively, with all
related securities, collateral, and cash both held at and moving through DTC or OCC as appropriate for each counterparty. Securities borrowed transactions
require the Company to deposit cash or other collateral with the lender. Securities loaned transactions require the receipt of collateral by the Company in
the form of cash in an amount generally in excess of the fair value of securities loaned. The Company monitors the fair value of securities borrowed and
loaned daily, with additional collateral obtained or returned as necessary. Securities borrow and loan fees represent interest or (rebate) on the cash received
or paid as collateral on the securities borrowed or loaned.
The Company applies a practical expedient to ASC 326 regarding its securities borrowed and loaned balances and their underlying collateral.
Inherent in this activity, the Company and its counterparties to securities borrowed and loaned transactions, mark to market the collateral, securing these
transactions on a daily basis through DTC or OCC. The counterparty continually replenishes the collateral securing the asset in accordance with standard
industry practice. Based on the above factors, there is no material current expected credit loss under ASC 326 for securities borrowed and loaned
transactions is not needed as of December 31, 2023.
Siebert 2023 Form-10K 45
The performance obligation is satisfied on the contract date because that is when the underlying financial instrument or purchaser is identified, the
pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty.
Advisory Fees
The Company earns advisory fees associated with managing client assets. The performance obligation related to this revenue stream is satisfied
over time; however, the advisory fees are variable as they are charged as a percentage of the client’s total asset value, which is determined at the end of the
quarter.
Interest, Marketing and Distribution Fees
The Company earns interest from clients’ accounts, net of payments to clients’ accounts, and on the Company’s bank balances and securities.
Interest income also includes interest payouts from introducing relationships related to short interest, net of charges.
The Company also earns margin interest which is the net interest charged to customers for holding financed margin positions. Marketing and
distribution fees consist of 12b-1 fees which are trailing payments from money market funds. Interest, marketing and distribution fees are recorded as
earned.
The Company enters into arrangements with managed accounts of other pooled investment vehicles (funds) to distribute shares to investors. The
Company may receive distribution fees paid by the fund up front, over time, upon the investor’s exit from the fund (that is, a contingent deferred sales
charge), or as a combination thereof. The Company believes that its performance obligation is the sale of securities to investors and as such this is fulfilled
on the trade date. Any fixed amounts are recognized on the trade date and variable amounts are recognized to the extent it is probable that a significant
revenue reversal will not occur until the uncertainty is resolved. For variable amounts, as the uncertainty is dependent on the value of the shares at future
points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible to factors outside the Company’s
influence, the Company does not believe that it can overcome this constraint until the market value of the fund and the investor activities are known, which
are usually monthly or quarterly. Distribution fees recognized in the current period are primarily related to performance obligations that have been satisfied
in prior periods.
Other Income
Other income represents fees generated from consulting services to a technology provider, payment for order flow, and transactional fees
generated from client accounts. The performance obligation for consulting services to a technology provider is providing consulting services and is
satisfied over time in line with the duration of the consulting contract. The performance obligation related to payment for order flow is providing financial
services and is satisfied at a point in time. The performance obligation related to transactional fees generated from client accounts is providing financial
services to clients and is satisfied over time.
The Company also earns revenue from an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) whereby JonesTrading pays
the Company a percentage of the net revenue produced by certain historical institutional customers less any related expenses. Revenue from JonesTrading
is determined based on the factors outside of the Company’s control and the Company records the income amount on a monthly basis when the actual
amount of income is known.
Costs to Obtain or Fulfill a Contract; Other
For the periods presented, there were no costs capitalized related to obtaining or fulfilling a contract with a customer, and thus the Company has
no balances for contract assets or contract liabilities. The Company concludes that its revenue streams have the same underlying economic factors, and as
such, no disaggregation of revenue is required.
Siebert 2023 Form-10K 46
Performance Obligation
The following table presents each revenue category and its related performance obligation:
Revenue Stream
Commission and fees
Principal transactions and proprietary trading
Market making
Stock borrow / stock loan
Advisory fees
Interest, marketing and distribution fees
Interest
Marketing fees
Distribution fees
Other income
Performance Obligation
Provide financial services to customers and counterparties
Provide financial services to customers and counterparties
Provide financial services to customers and counterparties
Provide financial services to customers and counterparties
Provide financial services to customers and counterparties
Recognition
Point in time recognition
Point in time recognition
Point in time recognition
Point in time recognition
Over time recognition
NA
Provide financial services to customers and counterparties
Over time recognition
Point in time recognition
Fixed: provide financial services to customers and
counterparties; Variable: NA
Fixed: Point in time
recognition; Variable: Over
time recognition
Over time recognition
Point in time recognition
Point in time recognition
Point in time recognition
Consulting services to a technology provider
Payment for order flow
Transactional fees generated from client accounts
Revenue from agreement with JonesTrading
Provide consulting services
Provide financial services to customers
Provide financial services to customers
NA
Share-Based Compensation
The Company grants share-based compensation and accounts for share-based compensation in accordance with ASC Topic 718, “Compensation-
Stock Compensation,” which establishes accounting for share-based compensation to employees for services. Under the provisions of ASC 718-10-35,
share-based compensation cost is measured at the grant date, based on the fair value of the award on that date and is expensed at the grant date (for the
portion that vests immediately) or ratably over the related vesting periods. Refer to Note 22 – Employee Benefit Plans for further detail.
Advertising and Promotion
Advertising and promotion costs are expensed as incurred and were $155,000 and $543,000 for the years ended December 31, 2023, and 2022,
respectively.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the Company
determines deferred tax assets and liabilities on the basis of the differences between the consolidated financial statements and tax bases of assets and
liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In
making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary
differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to
realize deferred taxes in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation
allowance, which would reduce the provision for income taxes.
Siebert 2023 Form-10K 47
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company
determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax
positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent
likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits on the provision for income taxes line on the consolidated
statements of operations. Accrued interest and penalties would be included on the related tax liability line on the consolidated statements of financial
condition.
Capital Stock
The authorized capital stock of the Company consists of a single class of common stock. Shares authorized were 100 million as of both December
31, 2023 and 2022.
Per Share Data
Basic earnings per share is calculated by dividing net income available to the Company’s common stockholders by the weighted average number
of outstanding common shares during the year. Diluted earnings per share is calculated by dividing net income available to the Company’s common
stockholders by the number of shares outstanding under the basic calculation and adding all dilutive securities, which consist of options. The Company has
no dilutive securities as of both December 31, 2023 and 2022.
New Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Improvements to Income Tax Disclosures”
(“ASU 2023-09”). The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in the ASU
address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.
ASU 2023-09 will be effective for the Company for annual periods beginning after December 15, 2024, though early adoption is permitted. The Company
is still evaluating the presentational effect that ASU 2023-09 will have on its consolidated financial statements, but the Company expects considerable
changes to its income tax footnote.
Accounting Standards Adopted in Fiscal 2023
The Company did not adopt any new accounting standards during the year ended December 31, 2023. The Company has evaluated other recently
issued accounting standards and does not believe that any of these standards will have a material impact on the Company’s consolidated financial
statements and related disclosures as of December 31, 2023.
3. Transactions with Tigress and Hedge Connection
Tigress
Initial Transaction
On November 16, 2021, the Company entered into an agreement with Tigress, a Delaware limited liability company, and a disabled and woman-
owned financial services firm. As part of the agreement, (i) Tigress transferred to the Company limited liability company membership interests representing
24% of the outstanding membership interests in Tigress; and (ii) the Company transferred to Tigress limited liability company membership interests
representing 24% of the outstanding membership interests of RISE and 1,449,525 shares of the Company’s common stock. The Company’s common stock
was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
Siebert 2023 Form-10K 48
Reorganization Agreement
On October 18, 2022, the Company entered into a Reorganization Agreement (“Reorganization Agreement”) with Tigress whereby the Company
exchanged 7% of the outstanding membership interests in Tigress for all of Tigress’ ownership interest in RISE. As a result of the Reorganization
Agreement, the Company’s ownership interest of Tigress decreased from 24% to 17%. Based on the level of the Company’s ownership of Tigress, the
Company concluded that it was still able to exercise significant influence over Tigress following the Reorganization Agreement. Therefore, the Company
continued to account for this investment under the equity method of accounting through the Company’s sale of its interest in Tigress on July 10, 2023.
During the years ended December 31, 2023 and 2022, the net loss as a result of this transaction was $0 and $719,000, respectively, which is in the
line item “Loss on sale of equity method investment in related party” on the consolidated statements of operations.
Share Redemption Agreement
On July 10, 2023, the Company entered into a Share Redemption Agreement with Cynthia DiBartolo, CEO of Tigress, pursuant to which the
Company repurchased from Ms. DiBartolo one million shares of its common stock held by Ms. DiBartolo in exchange for conveying to Ms. DiBartolo the
Company’s 17% interest in Tigress. The Company accounted for the Share Redemption Agreement as a sale of a financial asset in accordance with ASC
860. The one million shares of Company common stock that the Company received from Ms. DiBartolo had a fair value of $2,510,000 which was equal to
the fair value of the Company’s 17% interest in Tigress sold to Ms. DiBartolo. As such, no gain or loss was recognized as a result of the transaction.
Following the transaction, the Company had no remaining interest in Tigress. Refer to Note 12 – Equity Method Investment in Related Party in this Report
for more detail on these transactions and information that impacted the periods presented.
Impairment
As a result of the Reorganization Agreement described above as well as the fact that Tigress had been impacted by adverse market conditions
resulting in a decline in Tigress’ performance and future projections, management concluded that a triggering event had occurred and evaluated if the
investment in Tigress was other than temporarily impaired. Thus, the Company performed an impairment test as of October 18, 2022, and estimated the fair
value of Tigress using the income and market approach. For the income approach, the Company utilized estimated discounted future cash flow expected to
be generated by Tigress. For the market approach, the Company utilized market multiples of revenue and earnings derived from comparable publicly-
traded companies. Based upon the updated valuation, the Company recognized an impairment of $4,015,000 for the year ended December 31, 2022, which
is included in line item “Impairment of investments” on the consolidated statements of operations.
As a result of the Share Redemption Agreement described above, the Company recognized an impairment charge for its investment in Tigress of
approximately $185,000 for the year ended December 31, 2023, which is included in “Impairment of investments” in the consolidated statements of
operations. The fair value of the Company’s investment in Tigress was determined using observed current market prices of Tigress’ membership interests
that were below the Company’s carrying value of its equity investment in Tigress. Following the Share Redemption Agreement, the Company had no
remaining interest in Tigress.
Siebert 2023 Form-10K 49
Hedge Connection
Initial Transaction
On January 21, 2022, RISE entered into an agreement with Hedge Connection, a Florida corporation and a woman-owned fintech company
founded by Ms. Vioni that provides capital introduction software solutions for the prime brokerage industry.
Pursuant to the agreement, (i) Hedge Connection transferred to the Company common stock representing 20% of the outstanding post-closing
issued and outstanding capitalization in Hedge Connection for a consideration of $600,000, to be paid in three installments over 180 days, as well as
approximately 3.33% of the issued and outstanding membership interests of RISE; (ii) the Company acquired an option from Ms. Vioni to acquire 100% of
the remaining interest in Hedge Connection at fair value market at the time of the option exercise, provided such valuation of Hedge Connection is not less
than $5 million; (iii) the Company acquired a technology license agreement from Hedge Connection to use its capital introduction software, Fintroz, for an
annual license fee of $250,000; (iv) Ms. Vioni provided the Company with the right to appoint one director to the Board of Directors of Hedge Connection;
and (v) Ms. Vioni was appointed to the Board of Directors of RISE as well as to the position of President of RISE Prime – Capital Introduction, a division
of RISE.
Termination Agreement
On October 18, 2022, the Company entered into a Termination Agreement (“Termination Agreement”) with Hedge Connection and Ms. Vioni.
Pursuant to the Termination Agreement, the parties terminated the Purchase Agreement, dated January 21, 2022. Under the terms of the Termination
Agreement, the Company re-conveyed to Hedge Connection, Hedge Connection common stock representing 20% of Hedge Connection and the related
option from Ms. Vioni to acquire 100% of Ms. Vioni’s remaining interest in Hedge Connection in exchange for 3.17% of RISE and the cancellation of the
Company’s obligation to repay the remaining $250,000 of its note payable to Hedge Connection. The Termination Agreement also terminates the Hedge
Connection technology license agreement.
The net loss as a result of this transaction was $627,000, which is in the line item “Loss on sale of equity method investment in related party” on
the consolidated statements of operations. The components that resulted in the net loss of $627,000 were the writing off of the carrying value of the
Company’s investment in Hedge Connection of $1,020,000, offset by the forgiveness of the notes payable to Hedge Connection of $250,000 as well as the
net return of RISE treasury stock of $143,000.
4. RISE
During the first quarter of 2022, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE
and Siebert.
From January 1, 2022 through March 30, 2022, RISE issued 8.3% of RISE’s total issued and outstanding membership interests in exchange for a
net increase in assets of $1,000,000. Siebert sold membership interests representing 2% of RISE’s total issued and outstanding membership interests to
Siebert employees and affiliates. Through March 30, 2022, Siebert continued to hold a majority ownership interest in RISE.
On March 31, 2022, Siebert exchanged $2,880,000 in aggregate of notes payable to Gloria E. Gebbia for 24% ownership interest in RISE. As a
result of the aforementioned transactions, Siebert’s direct ownership percentage in RISE declined from 76% as of December 31, 2021 to
approximately 44% as of March 31, 2022. As of March 31, 2022, Siebert determined that RISE was a VIE and that Siebert was the primary beneficiary,
requiring RISE to be consolidated in accordance with Accounting Standards Codification (“ASC”) Topic 810 – Consolidation.
As a result of the transactions described in Note 3 – Transactions with Tigress and Hedge Connection, Siebert’s ownership in RISE increased to
68%, and therefore Siebert continued to consolidate RISE from October 18, 2022 through December 31, 2022 under the VOE model. There have been no
further transactions related to RISE’s membership interests for the year ended December 31, 2023.
As of December 31, 2023, RISE reported assets of $1.3 million and liabilities of $0. As of December 31, 2022, RISE reported assets of
$1.3 million and liabilities of $0.1 million. There are no restrictions on RISE’s assets.
Siebert 2023 Form-10K 50
5. Kakaopay Transaction
On April 27, 2023, Siebert entered into a Stock Purchase Agreement with Kakaopay (the “First Tranche Stock Purchase Agreement”), pursuant to
which Siebert agreed to issue to Kakaopay Corporation (“Kakaopay”), a company established under the Laws of the Republic of Korea and a fintech
subsidiary of Korean-based conglomerate Kakao Corp., 8,075,607 shares of Siebert’s common stock (the “First Tranche Shares” and, such transaction, the
“First Tranche”) at a per share price of Two Dollars Fifteen Cents ($2.15), which represented 19.9% of the outstanding equity securities of Siebert on a
fully diluted basis (taking into account the issuance of the First Tranche Shares). The First Tranche closed on May 18, 2023 and, in connection therewith,
Siebert entered into a Registration Rights and Lock-Up Agreement (the “Registration Rights Agreement”) and a Stockholders’ Agreement (the “Original
Stockholders’ Agreement”) with Kakaopay.
Concurrent with the execution of the First Tranche Stock Purchase Agreement, Siebert and Kakaopay entered into a second Stock Purchase
Agreement (the “Second Tranche Stock Purchase Agreement” and, together with the First Tranche Stock Purchase Agreement, the “Stock Purchase
Agreements”), pursuant to which Siebert agreed to issue to Kakaopay an additional 25,756,470 shares of Siebert’s common stock (the “Second Tranche
Shares” and, such transaction, the “Second Tranche”) at a per share price of Two Dollars Thirty Five Cents ($2.35), so that Kakaopay would own 51% of
the outstanding equity securities of Siebert on a fully diluted basis (taking into account the issuance of the First Tranche Shares and the Second Tranche
Shares).
On December 19, 2023, Siebert entered into a Termination and Settlement Agreement (the “Settlement Agreement”) with Kakaopay, Kakaopay
Securities Corp. (“Kakaopay Securities”), MSCO and certain Gebbia parties named therein. Under the Settlement Agreement, the parties mutually agreed
to terminate the Second Tranche Stock Purchase Agreement. The parties terminated the Second Tranche Stock Purchase Agreement after reaching a
compromise regarding their disagreement over, among other things, the occurrence of a “Purchaser Material Adverse Effect” in the Second Tranche Stock
Purchase Agreement, and the ability of the closing conditions in the Second Tranche Stock Purchase Agreement to be satisfied. Certain related agreements
were also terminated, including the Foreign Broker-Dealer Fee Sharing Agreement, dated April 27, 2023, between MSCO and Kakaopay Securities, and
the Support and Restrictive Covenant Agreements by certain Gebbia stockholders, each dated April 27, 2023. The parties also agreed (i) to amend and
restate the Original Stockholders’ Agreement as described below, (ii) that the Company will pay Kakaopay a fee of $5,000,000 (payable in ten quarterly
installments beginning on March 29, 2024) and (iii) to customary releases. Kakaopay continues to own the 8,075,607 shares of the Company’s common
stock that it purchased from the Company in May 2023, and Kakaopay agreed to certain standstill restrictions with respect to its ownership of the
Company’s common stock, subject to certain conditions.
In connection with the foregoing, on December 19, 2023, Siebert entered into an Amended and Restated Stockholders’ Agreement (the “A&R
Stockholders’ Agreement”) with Kakaopay, certain stockholders listed on Schedule I thereto and John J. Gebbia (in his individual capacity and as
representative of the Gebbia Stockholders (as defined therein)) to amend and restate the Original Stockholders’ Agreement. Under the A&R Stockholders’
Agreement, Kakaopay retains its right to designate one director to the Company’s board of directors, subject to certain conditions, but the additional board
designation rights in the Original Stockholders’ Agreement that would have applied following the closing of the Second Tranche have been removed. The
A&R Stockholders’ Agreement also, among other things, modifies various specified events requiring the prior written consent of Kakaopay, which
provided the Company’s management with additional flexibility to grow the Company with reduced restrictions. The A&R Stockholders’ Agreement also
adds tag-along rights in favor of Kakaopay and the Gebbia Stockholders.
At the time of the issuance, the total deferred issuance cost of $2,467,000 related to the First Tranche was reclassified as a reduction to “Additional
paid-in capital” in stockholders’ equity on the consolidated statements of financial condition. This amount consisted of $318,000 which was recorded
within the line item “Prepaid expenses and other assets” on the consolidated statements of financial condition as of December 31, 2022, and
$2,149,000 which was incurred during the year ended December 31, 2023. Of the amount incurred during the year ended December 31, 2023, $560,000
was part of non-cash consideration.
The Company incurred $5,943,000 for the year ended December 31, 2023 associated with the termination of the transaction with Kakaopay which
is recorded in the line item “Transaction termination cost” on the consolidated statements of operations. This amount consisted of the $5,000,000 fee to
Kakaopay (payable in ten quarterly installments beginning on March 29, 2024) adjusted for the present value of the payments as of the date of the
agreement, as well as legal and other consulting costs associated with the transaction of approximately $1,481,000. The discount rate used for the
calculation of the present value of the cash flows was 8.5%.
On May 22, 2023, Gloria E. Gebbia issued a warrant to BCW Securities LLC, a Delaware limited liability company (“BCW”), to
purchase 403,780 shares of common stock of the Company held by Ms. Gebbia at an exercise price of $2.15 per share. Ms. Gebbia issued the warrant
pursuant to that certain agreement, dated March 27, 2023, by and among Ms. Gebbia, the Company and BCW relating to the investment by Kakaopay in
the Company. The fair value of the warrant of $560,000 was recorded as non-cash consideration on the consolidated statements of changes in stockholders’
equity and the consolidated statements of cash flows, as well as for the deferred issuance cost related to the First Tranche as described above.
Siebert 2023 Form-10K 51
6. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations
Amounts receivable from, payables to, and deposits with broker-dealers and clearing organizations consisted of the following as of the periods
indicated:
Receivables from and deposits with broker-dealers and clearing organizations
DTCC / OCC / NSCC (1)
Goldman Sachs & Co. LLC (“GSCO”)
Pershing
National Financial Services, LLC (“NFS”)
Securities fail-to-deliver
Globalshares
Total Receivables from and deposits with broker-dealers and clearing organizations
Payables to broker-dealers and clearing organizations
Securities fail-to-receive
Payables to broker-dealers
Total Payables to broker-dealers and clearing organizations
As of
December 31,
2023
As of
December 31,
2022
$
$
$
$
9,332,000 $
38,000
—
2,212,000
119,000
47,000
11,748,000 $
8,187,000
31,000
96,000
2,006,000
3,000
82,000
10,405,000
399,000 $
82,000
481,000 $
396,000
264,000
660,000
(1) Depository Trust and Clearing Corporation is referred to as (“DTCC”), Options Clearing Corporation is referred to as (“OCC”), and National
Securities Clearing Corporation is referred to as (“NSCC”).
Under the DTCC shareholders’ agreement, MSCO is required to participate in the DTCC common stock mandatory purchase. As of December 31,
2023 and 2022, MSCO had shares of DTCC common stock valued at approximately $1,236,000 and $1,054,000, respectively, which are included in the
line item “Deposits with broker-dealers and clearing organizations” on the consolidated statements of financial condition.
In September 2022, MSCO and RISE entered into a clearing agreement whereby RISE would introduce clients to MSCO. As part of the
agreement, RISE deposited a clearing fund escrow deposit of $50,000 to MSCO, and had excess cash of approximately $1.0 million in its brokerage
account at MSCO as of December 31, 2023. RISE did not have any balances at MSCO as of December 31, 2022. The resulting asset of RISE and liability
of MSCO is eliminated in consolidation. The Company terminated its clearing relationships with GSCO and Pershing in 2022.
7. Prepaid Service Contract
In April 2020, the Company entered into an agreement with a technology vendor in which the Company paid the technology vendor $1.0 million
and 193,906 shares of the Company’s restricted common stock for a total of $2.1 million in exchange for services to develop a new client and back end
interface as well as related functionalities for the Company’s key operations. In addition, the Company agreed to pay an annual license fee of $600,000 for
this software.
In February 2022, the Company entered into a Consulting Services Agreement (“CSA”) with the technology vendor, whereby the Company would
provide certain consulting services over an 18-month period. The consulting fee income was recognized on a straight-line basis over the service period. The
Company recorded a total of $1.7 million for the year ended December 31, 2022 from the technology vendor which is included in the line item “Other
income” on the consolidated statements of operations.
In September 2022, the Company and the technology vendor mutually agreed to terminate the services being provided under both the original
agreement as well as the CSA. Per the terms of the respective termination agreements, neither the Company nor the technology vendor will have any
further obligations to provide future services. As part of the termination, the technology vendor returned 193,906 shares of the Company’s common stock
previously issued. As of December 31, 2022, the Company wrote off the remaining balance of the prepaid service contract of $532,000 and the Company
received $950,000 which is included in the line item “Other income” on the consolidated statements of operations.
Siebert 2023 Form-10K 52
The expense related to share-based payments to the technology vendor for professional services was $0 and $239,000 for the years ended
December 31, 2023 and 2022, respectively. The total expense related to the technology vendor was $0 and $711,000 for the years ended December 31,
2023 and 2022, respectively, which is included in “Technology and communications” on the consolidated statements of operations.
8. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The tables below present, by level within the fair value hierarchy, financial assets and liabilities measured at fair value on a recurring basis for the
periods indicated. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input
that is significant to the respective fair value measurement.
Assets
Cash and securities segregated for regulatory purposes
U.S. government securities
Securities owned, at fair value
U.S. government securities
Certificates of deposit
Corporate bonds
Options
Equity securities
Total Securities owned, at fair value
Liabilities
Securities sold, not yet purchased, at fair value
Equity securities
Total Securities sold, not yet purchased, at fair value
Assets
Cash and securities segregated for regulatory purposes
U.S. government securities
Securities owned, at fair value
U.S. government securities
Certificates of deposit
Municipal securities
Corporate bonds
Equity securities
Total Securities owned, at fair value
Liabilities
Securities sold, not yet purchased, at fair value
Equity securities
Total Securities sold, not yet purchased, at fair value
Level 1
As of December 31, 2023
Level 3
Level 2
Total
$ 115,515,000 $
— $
— $ 115,515,000
$
$
$
$
17,636,000 $
—
—
2,000
146,000
17,784,000 $
— $
114,000
3,000
—
137,000
254,000 $
— $
—
—
—
—
— $
17,636,000
114,000
3,000
2,000
283,000
18,038,000
2,000 $
2,000 $
— $
— $
— $
— $
2,000
2,000
Level 1
As of December 31, 2022
Level 3
Level 2
Total
$ 140,978,000 $
— $
— $ 140,978,000
$
$
$
$
2,808,000 $
—
—
—
63,000
2,871,000 $
— $
92,000
52,000
7,000
182,000
333,000 $
— $
—
—
—
—
— $
2,808,000
92,000
52,000
7,000
245,000
3,204,000
2,000 $
2,000 $
— $
— $
— $
— $
2,000
2,000
Siebert 2023 Form-10K 53
The Company had U.S. government securities, certificates of deposit, municipal securities, and corporate bonds with the market values and
maturity dates for the periods indicated below:
Maturing in 2023
Maturing in 2024
Maturing in 2025
Maturing after 2025
Accrued interest
Total Market value
Maturing in 2023
Maturing in 2024
Maturing after 2024
Accrued interest
Total Market value
$
As of
December 31,
2023
30,000,000
98,931,000
3,965,000
115,000
257,000
$ 133,268,000
As of
December 31,
2022
$ 106,873,000
36,506,000
150,000
409,000
$ 143,938,000
Financial Assets Measured at Fair Value on a Non-Recurring Basis
The following table represents information for assets measured at fair value on a nonrecurring basis and displays the carrying value after
measurement as of the periods indicated. The fair value measurement is nonrecurring as these assets are measured at fair value only when there is a
triggering event (e.g., an evidence of impairment). Assets included in the table are those that were impaired during the respective reporting periods and that
are still held as of the reporting date. The estimated fair values for these amounts were determined using significant unobservable inputs (Level 3).
Equity method investment in related party
As of December 31
2023
$
— $
2022
2,584,000
As a result of the 2023 transaction discussed in Note 3 – Transactions with Tigress and Hedge Connection, the Company recognized an
impairment charge for its investment in Tigress of approximately $185,000 during the year ended December 31, 2023, which is included in “Impairment of
investments” on the consolidated statements of operations. The fair value of the Company’s investment in Tigress was determined using observed current
market prices of Tigress’ membership interests that were below the Company’s carrying value of its equity investment in Tigress. Following the
transaction, the Company had no remaining interest in Tigress.
As a result of the 2022 transaction discussed Note 3 – Transactions with Tigress and Hedge Connection, the Company recognized an impairment
charge for its investment in Tigress of approximately $4,015,000 for the year ended December 31, 2022. The fair value of the Company’s investment in
Tigress was determined using the income and market approach. For the income approach, the Company utilized estimated discounted future cash flow
expected to be generated by Tigress. For the market approach, the Company utilized market multiples of revenue and earnings derived from comparable
publicly-traded companies.
Financial Assets and Liabilities Not Carried at Fair Value
The following represents financial instruments in which the ending balances as of December 31, 2023 and 2022 that are not carried at fair value in
the consolidated statements of financial condition:
Short-term financial instruments: The carrying value of short-term financial instruments, including cash and cash equivalents as well as cash and
securities segregated for regulatory purposes, are recorded at amounts that approximate the fair value of these instruments. These financial instruments
generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate
market rates. The Company had no cash equivalents for regulatory purposes as of December 31, 2023 and 2022. Securities segregated for regulatory
purposes consist solely of U.S. government securities and are included in the fair value hierarchy table above. Cash and cash equivalents and cash and
securities segregated for regulatory purposes are classified as level 1.
Siebert 2023 Form-10K 54
Receivables and other assets: Receivables from customers, receivables from non-customers, receivables from and deposits with broker-dealers and
clearing organizations, other receivables, and prepaid expenses and other assets are recorded at amounts that approximate fair value and are classified as
level 2 under the fair value hierarchy. The Company may hold cash equivalents related to rent deposits in prepaid expenses and other assets that are
categorized as level 2 under the fair value hierarchy.
Securities borrowed and securities loaned: Securities borrowed and securities loaned are recorded at amounts which approximate fair value and
are primarily classified as level 2 under the fair value hierarchy. The Company’s securities borrowed and securities loaned balances represent amounts of
equity securities borrow and loan contracts and are marked-to-market daily in accordance with standard industry practices which approximate fair value.
Investments, cost: The Company’s non-marketable equity securities are investments in privately held companies without readily determinable
market values due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable
and require management’s judgment. As there is no readily determinable fair value, the carrying amount of these investments minus impairment
approximates the fair value. The cost will be adjusted upwards or downwards in accordance with observable market transactions. Under the fair value
hierarchy, investments, cost is classified as level 3.
Payables: Payables to customers, payables to non-customers, drafts payable, payables to broker-dealers and clearing organizations, accounts
payable and accrued liabilities, and taxes payable are recorded at amounts that approximate fair value due to their short-term nature and are classified as
level 2 under the fair value hierarchy.
Deferred contract incentive: The carrying amount of the deferred contract incentive approximates fair value due to the relative short-term nature of
the liability. Under the fair value hierarchy, the deferred contract incentive is classified as level 2.
Long-term debt: The carrying amount of the mortgage with East West Bank approximates the fair value at the time of issuance as it reflected terms
that approximated market terms for similar arrangements. During the periods presented, the interest rate has increased to reflect current market terms,
which would favorably reduce the fair value of long-term debt. Under the fair value hierarchy, the mortgage is classified as level 2.
Contract settlement liability: The carrying amount of the contract settlement liability approximates fair value which is the present value of the
payments at a discount rate as of the date of the agreement. Under the fair value hierarchy, the contract settlement liability is classified as level 2.
9. Property, Office Facilities, and Equipment, Net
Property, office facilities, and equipment consisted of the following as of the periods indicated:
Property
Office facilities
Equipment
Total Property, office facilities, and equipment
Less accumulated depreciation
Total Property, office facilities, and equipment, net
As of December 31
2023
6,815,000 $
2,475,000
726,000
10,016,000
(612,000)
9,404,000 $
2022
6,815,000
2,616,000
674,000
10,105,000
(1,777,000)
8,328,000
$
$
Total depreciation expense for property, office facilities, and equipment was $589,000 and $404,000 for the years ended December 31, 2023 and
2022, respectively.
Miami Office Building
On December 30, 2021, the Company purchased the Miami office building located at 653 Collins Ave, Miami Beach, FL (“Miami office
building”). The Miami office building contains approximately 12,000 square feet of office space and serves as the headquarters of the Company.
Siebert 2023 Form-10K 55
Depreciation expense commenced in April 2023 when the Miami office building was completed and placed in service. The Company invested
$1,313,000 and $985,000 in the years ended December 31, 2023 and 2022, respectively, to build out the Miami office building.
10. Software, Net
Software consisted of the following as of the periods indicated:
Robo-advisor
Other software
Total Software
Less accumulated amortization – robo-advisor
Less accumulated amortization – other software
Total Software, net
As of December 31
2023
— $
1,716,000
1,716,000
—
(284,000)
1,432,000 $
2022
763,000
3,342,000
4,105,000
(763,000)
(2,351,000)
991,000
$
$
In the fourth quarter of 2022, the Company partnered with a technology vendor to develop a new Retail Platform. The total software development
expense related to this project was $978,000 as of December 31, 2023, all of which was capitalized.
During the year ended December 31, 2023, the Company decided to terminate the agreement with the technology vendor and reassess its
technology needs. The Company decided to change the strategic direction of its technology development for its Retail Platform and determined that an
other than temporary impairment of the Retail Platform existed. The Company recognized an impairment loss of $990,000 for the year ended December 31,
2023, which is included in “Depreciation and amortization” on the consolidated statements of operations.
Total amortization of software was $442,000 and $590,000 for the years ended December 31, 2023 and 2022, respectively. As of December 31,
2023, the Company estimates future amortization of current software assets of $560,000, $492,000, $317,000, and $63,000, in the years ended December
31, 2024, 2025, 2026, and 2027, respectively.
11. Leases
As of December 31, 2023, all of the Company’s leases are classified as operating and primarily consist of office space leases expiring in 2024
through 2028. The Company elected not to include short-term leases (i.e., leases with initial terms of less than twelve months), or equipment leases
(deemed immaterial) on the consolidated statements of financial condition. The Company leases some miscellaneous office equipment, but they are
immaterial and therefore the Company records the costs associated with this office equipment on the consolidated statements of operations rather than
capitalizing them as lease right-of-use assets. The balance of the lease right-of-use assets and lease liabilities are displayed on the consolidated statements
of financial condition and the below tables display further detail on the Company’s leases.
On July 7, 2023, the Company entered into a new lease agreement expiring in December 2028 for office space in the World Financial Center in
New York City. This office will replace the New Jersey office as one of the Company’s key operating centers and the total commitment of the lease is
approximately $2.1 million. The estimated build out cost for this office space is approximately $800,000.
Lease Term and Discount Rate
Weighted average remaining lease term – operating leases (in years)
Weighted average discount rate – operating leases
Operating lease cost
Short-term lease cost
Variable lease cost
Total Rent and occupancy
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Lease right-of-use assets obtained in exchange for new lease liabilities
Operating leases
As of
December 31,
2023
As of
December 31,
2022
3.9
6.9%
2.7
5.0%
Year Ended December 31
2023
1,326,000 $
392,000
155,000
1,873,000 $
2022
1,299,000
366,000
290,000
1,955,000
$
$
$
1,256,000 $
1,380,000
$
1,693,000 $
888,000
Siebert 2023 Form-10K 56
Lease Commitments
Future annual minimum payments for operating leases with initial terms of greater than one year as of December 31, 2023 were as follows:
Year
2024
2025
2026
2027
2028
Remaining balance of lease payments
Less: difference between undiscounted cash flows
and discounted cash flows
Lease liabilities
12. Equity Method Investment in Related Party
Transaction with Tigress
Amount
938,000
861,000
694,000
520,000
443,000
3,456,000
470,000
2,986,000
$
$
The Company’s investment in Tigress was accounted for under the equity method of accounting. In determining whether the investment in Tigress
should be accounted for under the equity method of accounting, the Company considered the guidance under ASC 323, Investments – Equity Method and
Joint Ventures. Prior to the Reorganization Agreement, the Company maintained 24% ownership interest in Tigress, which represented a significant
ownership level, the Company and Tigress had common representation on their respective Board of Directors, and certain employees of Tigress were also
employees of RISE. Based on these criteria, the Company determined that it was able to exercise significant influence over Tigress, and therefore the
equity method of accounting applied for this investment.
After the Reorganization Agreement, the Company owned 17% of Tigress. The Company concluded that it still had significant influence over
Tigress due to the representation of Gloria E. Gebbia on the Board of Directors of Tigress. Therefore, the Company continued to account for this
investment under the equity method of accounting through the Company’s sale of its interest in Tigress on July 10, 2023.
Under the equity method, the Company recognized its share of Tigress’ income or loss in the line item “Earnings of equity method investment in
related party” on the consolidated statements of operations. The Company has elected to classify distributions received from equity method investees using
the cumulative earnings approach. The earnings recognized from the Company’s investment in Tigress was $111,000 and a loss of $16,000 for the years
ended December 31, 2023 and 2022, respectively, which is in the line item “Earnings of equity method investment in related party” on the consolidated
statements of operations.
The Company received cash distributions from Tigress of $0 and $259,000 for the years ended December 31, 2023 and 2022, respectively. As of
December 31, 2023 and 2022, the carrying amount of the investment in Tigress was $0 and $2,584,000, respectively. There were no events or
circumstances suggesting the carrying amount of the investment was impaired as of December 31, 2022.
Below is a table showing the summary from the consolidated statements of operations and financial condition for Tigress based on the most recent
financials prior to the transaction on July 10, 2023 (unaudited):
Revenue
Operating income (loss)
Net income (loss)
Assets
Liabilities
Stockholders’ Equity
Transaction with Hedge Connection
Six Months
Ended
June 30,
2023
4,039,000 $
721,000 $
721,000 $
Year Ended
December 31,
2022
8,432,000
(132,000)
(132,000)
As of
June 30,
2023
8,824,000 $
5,853,000 $
2,971,000 $
December 31,
2022
8,169,000
5,301,000
2,868,000
$
$
$
$
$
$
Prior to the Termination Agreement with Hedge Connection, the Company determined that it was able to exercise significant influence over
Hedge Connection as the Company had a significant level of ownership and had the right to appoint a director to Hedge Connection’s Board of Directors.
As such, the equity method of accounting applied for this investment, and the Company recognized $0 and $20,000 from its investment in Hedge
Connection during the years ended December 31, 2023 and 2022, respectively, which is in the line item “Earnings of equity method investment in related
party” on the consolidated statements of operations.
Siebert 2023 Form-10K 57
13. Investments, Cost
As of both December 31, 2023 and 2022, the Company maintained a 2% ownership interest in the Trading Technology Provider.
In June 2023, in view of the Trading Technology Provider’s business performance and near-term business outlook that were below the Company’s
previous expectations, as well as observed market transactions of the Trading Technology Provider’s equity that were below the carrying value of the
Company’s investment of the Trading Technology Provider, the Company determined that an other than temporary impairment existed. For the year ended
December 31, 2023, the Company recognized an impairment charge for its investment in the Trading Technology Provider of $850,000, which is included
in “Impairment of investments” on the consolidated statements of operations. As of December 31 2023 and 2022, this ownership interest in the Trading
Technology Provider was $0 and $850,000, respectively, which is in the line item “Investments, cost” on the consolidated statements of financial condition.
14. Long-Term Debt
Mortgage with East West Bank
Overview
On December 30, 2021, the Company purchased the Miami office building for approximately $6.8 million, which was partially financed through a
mortgage with East West Bancorp, Inc. (“East West Bank”). The mortgage was for approximately $4 million with a commitment for another $338,000 to
finance part of the build out of the Miami office building. The Company has utilized its commitment of $338,000 as of December 31, 2022.
The Company’s obligations under the mortgage are secured by a lien on the Miami office building and the term of the loan is ten years. The
repayment schedule will utilize a 30-year amortization period, with a balloon on the remaining amount due at the end of ten years. The interest rate is 3.6%
for the first 7 years, and thereafter the interest rate shall be at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate
on any term loan will not be less than 3.6%. As part of the agreement, the Company must maintain a debt service coverage ratio of 1.4 to 1. The loan is
subject to a prepayment penalty over the first five years which is calculated as a percentage of the principal amount outstanding at the time of
prepayment. This percentage is 5% in the first year and decreases by 1% each year thereafter, with the prepayment penalty ending after 5 years. As of
December 31, 2023, the Company was in compliance with all of its covenants related to this agreement.
Remaining Payments
Future remaining annual minimum principal payments for the mortgage with East West Bank as of December 31, 2023 were as follows:
2024
2025
2026
2027
2028
Thereafter
Total
Amount
84,000
88,000
91,000
95,000
98,000
3,857,000
4,313,000
$
$
The interest expense related to this mortgage was $159,000 and $143,000 for the years ended December 31, 2023, and 2022, respectively. As of
December 31, 2023, the interest rate for this mortgage was 3.6%.
Loan with East West Bank
Overview
On July 22, 2020, the Company entered into a loan and security agreement with East West Bank. In accordance with the terms of this agreement,
the Company had the ability to borrow term loans in an aggregate principal amount not to exceed $10 million during the two-year period following July 22,
2020. The Company originally borrowed approximately $5.0 million and paid off the full remaining balance of the loan of approximately $2.7 million for
the year ended December 31, 2023.
Siebert 2023 Form-10K 58
The Company’s obligations under the agreement were secured by a lien on all of the Company’s cash, dividends, stocks and other monies and
property from time to time received or receivable in exchange for the Company’s equity interests in and any other rights to payment from the Company’s
subsidiaries; any deposit accounts into which the foregoing was deposited and all substitutions, products, proceeds (cash and non-cash) arising out of any
of the foregoing. Each term loan had a term of four years, beginning when the draw was made. The repayment schedule utilized a five-year (60 month)
amortization period, with a balloon on the remaining amount due at the end of four years.
Term loans made pursuant to the agreement bore interest at the prime rate as reported by the Wall Street Journal, provided that the minimum
interest rate on any term loan was not less than 3.25%. In addition to the foregoing, on the date that each term loan was made, the Company paid to the
lender an origination fee equal to 0.25% of the principal amount of such term loan. Pursuant to the loan agreement, the Company paid all lender expenses
in connection with the loan agreement.
This agreement contained certain financial and non-financial covenants. The financial covenants were that the Company must maintain a debt
service coverage ratio of 1.35 to 1, an effective tangible net worth of a minimum of $25 million, and MSCO must maintain a net capital ratio that is not less
than 10% of aggregate debit items. Certain other non-financial covenants included that the Company must promptly notify East West Bank of the creation
or acquisition of any subsidiary that at any time owns assets with a value of $100,000 or greater. As of June 30, 2023 and December 31, 2022, the interest
rate for this loan was 8.0% and 7.5%, respectively.
The interest expense related to the loan was $103,000 and $144,000 for the years ended December 31, 2023 and 2022, respectively.
15. Notes Payable - Related Party
During 2022 the Company had notes payable to Gloria E. Gebbia and Hedge Connection of $3 million and $600,000, respectively; however, as of
December 31, 2022, the Company had no outstanding balance on these notes payables. During the year ended December 31, 2023, the Company did not
have notes payable to Gloria E. Gebbia. The Company’s interest expense for these notes payable for the year ended December 31, 2022 was $151,000.
16. Deferred Contract Incentive
Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of
their arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025.
As part of this agreement, the Company received a one-time business development credit of $3 million from NFS, and NFS will pay the Company
four annual credits of $100,000, which are recorded in the line item “Deferred contract incentive” on the consolidated statements of financial condition.
Annual credits shall be paid on the anniversary of the date on which the first credit was paid. The business development credit and annual credits will be
recognized as contra expense over four years and one year, respectively, in the line item “Clearing fees, including execution costs” on the consolidated
statements of operations. The amendment also provides for an early termination fee if the Company chooses to end its agreement before the end of the
contract term.
In relation to this agreement, the Company recognized $850,000 in contra expense for both the years ended December 31, 2023, and 2022. The
balance of the deferred contract incentive was approximately $1.2 million and $2.0 million as of December 31, 2023 and 2022, respectively.
17. Revenue Recognition
Refer to Note 2 – Summary of Significant Accounting Policies for detail on the Company’s primary sources of revenue and the corresponding
accounting treatment. Information related to items that impact certain revenue streams within the periods presented is shown below.
Principal Transactions and Proprietary Trading
The Company regularly invests in treasury bill and treasury notes, which are primarily in the line item “Cash and securities segregated for
regulatory purposes” on the consolidated statements of financial condition, in order to enhance its yield on its excess 15c3-3 deposits. During 2022, there
was an increase in U.S. government securities yields, which created an unrealized loss on the Company’s U.S. government securities portfolio. In 2023, the
Company recorded the reversal of the unrealized loss resulting in a realized and unrealized gain due to the securities coming closer to maturity, the latest
maturity being April 2025. Refer to Note 8 – Fair Value Measurements for additional detail.
Siebert 2023 Form-10K 59
The following table represents detail related to principal transactions and proprietary trading.
Principal transactions and proprietary trading
Realized and unrealized gain on primarily riskless principal transactions
Realized and unrealized gain (loss) on portfolio of U.S. government securities
Total Principal transactions and proprietary trading
Stock Borrow / Stock Loan
Year Ended December 31
2023
2022
Year over Year
Increase
$
$
9,275,000 $
3,819,000
13,094,000 $
7,643,000 $
(3,900,000)
3,743,000 $
1,632,000
7,719,000
9,351,000
For the years ended December 31, 2023 and 2022, stock borrow / stock loan revenue was $16,172,000 ($47,166,000 gross revenue less
$30,994,000 expenses) and $14,518,000 ($33,883,000 gross revenue less $19,365,000 expenses), respectively.
Interest, Marketing and Distribution Fees
For the years ended December 31, 2023 and 2022, interest, marketing and distribution fees was $29,577,000 ($30,036,000 gross revenue less
$459,000 expenses) and $17,234,000 ($17,908,000 gross revenue less $674,000 expenses), respectively.
Other Income
The Company earned $265,000 and $137,000 in income for the years ended December 31, 2023 and 2022, respectively, in relation to its
agreement with Jones Trading.
18. Income Taxes
The Company’s provision for (benefit from) income taxes is comprised of the following:
Current
Federal
State and local
Total Current
Deferred
Federal
State and local
Total Deferred
Total Provision for (benefit from) income taxes
Year Ended December 31
2023
2022
3,023,000 $
499,000
3,522,000
(749,000)
104,000
(645,000)
(366,000) $
259,000
(107,000)
(305,000)
(350,000)
(655,000)
$
$
$
3,415,000 $
(1,300,000)
The Company’s effective tax rate differs from the U.S. federal statutory income tax rate of 21% for the periods indicated are as follows:
Federal statutory income tax rate
Goodwill amortization
Non-deductible fines and penalties
Share based compensation
Permanent differences
State and local taxes, net of federal benefit
Change in valuation allowance
Other
Effective tax rate
Year Ended December 31
2022
2023
21.0%
(2.5)%
—%
—%
2.7%
5.7%
2.4%
1.1%
30.4%
21.0%
6.5%
—%
—%
(6.1)%
9.4%
2.0%
(2.5)%
30.3%
Siebert 2023 Form-10K 60
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as
follows:
Deferred tax assets:
Net operating losses
Lease liabilities
Share-based compensation
Investment in Tigress
Investment in RISE
Investment in OpenHand
R&D costs capitalization
Settlement liability related to Kakaopay termination
Capital loss carryover
Other
Subtotal
Less: valuation allowance
Total Deferred tax assets
Deferred tax liabilities:
Fixed assets
Total Deferred tax liabilities
Net Deferred tax assets
As of December 31
2023
2022
3,393,000 $
840,000
—
—
123,000
239,000
142,000
1,253,000
803,000
79,000
6,872,000
(1,243,000)
5,629,000 $
5,023,000
648,000
—
775,000
10,000
—
—
—
—
45,000
6,501,000
(978,000)
5,523,000
(1,125,000) $
(1,125,000)
4,504,000 $
(1,126,000)
(1,126,000)
4,397,000
$
$
$
$
In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or
the entire deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in
those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company considered all positive and
negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not
limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income.
Based on historical operating profitability, positive trend of earnings and projected future taxable income, the Company concluded as of December
31, 2023 that its U.S. deferred tax assets are realizable on a more-likely-than-not basis with the exception of certain investments that will result in future
capital losses and certain state net operating losses. The amount of the Company’s valuation allowance increased $265,000 during 2023. The Company will
continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is
determined in future periods that portions of the Company’s deferred income tax assets satisfy the realization standards, the valuation allowance will be
reduced accordingly.
As of December 31, 2023, the Company had U.S. federal net operating loss carryforwards of approximately $4.6 million which expire in varying
amounts starting in 2035 to 2036 if not utilized but available to offset 100% of future taxable income. The U.S. federal net operating loss carryforwards are
subject to annual limitation under Section 382.
Siebert 2023 Form-10K 61
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
Balance as of December 31, 2021
Additions for tax positions taken during current year
Additions for tax positions taken during prior year
Reductions for tax positions taken during prior years
Settlements
Expirations of statutes of limitations
Balance as of December 31, 2022
Additions for tax positions taken during current year
Additions for tax positions taken during prior year
Reductions for tax positions taken during prior years
Settlements
Expirations of statutes of limitations
Balance as of December 31, 2023
Amount
2,418,000
—
12,000
(834,000)
—
—
1,596,000
15,000
—
(2,000)
—
(204,000)
1,405,000
$
$
$
The unrecognized tax benefit of $1,405,000 and $1,596,000 as of December 31, 2023 and 2022, respectively, are recorded in the line item “Taxes
payable” on the consolidated statements of financial condition. Of the amounts reflected above as of December 31, 2023 and 2022, the entire amount would
reduce the Company’s effective tax rate if recognized. The Company records accrued interest and penalties related to income tax matters as part of the
provision for income taxes. For the years ended December 31, 2023 and 2022, the Company recognized expense related to interest and penalties on
unrecognized tax benefits of $118,000 and $100,000, respectively. For the years ended December 31, 2023 and 2022, the accrued balance of interest and
penalties on unrecognized tax benefits was $245,000 and $127,000, respectively. The Company does not believe that the amount of unrecognized tax
benefits will significantly increase or decrease within the next 12 months.
The Company files a federal income tax return and income tax returns in various state tax jurisdictions. The Company is not currently under
examination by the IRS or any state or local taxing authority for any tax year. The open tax years for the federal and state income tax filings is generally
2020 through 2023.
On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on
Base Erosion and Profit Shifting which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy. On December
20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of a minimum rate of 15% for
multinational companies with consolidated revenue above €750 million. Various foreign jurisdictions are in the process of enacting legislation to adopt a
minimum effective tax rate. The OECD continues to release additional guidance on the two-pillar solution with an implementation anticipated by 2024.
Based on the fact that the Company’s operations are all located within the United State and is below current revenue thresholds contained in the Pillar Two
Model Rules, the Company expects to be outside the scope of the implementation of the reporting requirements for 2024.
19. Capital Requirements
MSCO
Net Capital
MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) of the Exchange Act. Under the alternate method permitted by this
rule, net capital, as defined, shall not be less than the lower of $1 million or 2% of aggregate debit items arising from customer transactions. As of
December 31, 2023, MSCO’s net capital was $56.1 million, which was approximately $54.3 million in excess of its required net capital of $1.8 million, and
its percentage of aggregate debit balances to net capital was 63.42%.
As of December 31, 2022, MSCO’s net capital was $30.6 million, which was approximately $29.2 million in excess of its required net capital of
$1.4 million, and its percentage of aggregate debit balances to net capital was 44.49%.
Special Reserve Account
MSCO is subject to Customer Protection Rule 15c3-3 which requires segregation of funds in a special reserve account for the exclusive benefit of
customers. As of December 31, 2023, MSCO had cash and securities deposits of $273.1 million (cash of $157.6 million, securities with a fair value of
$115.5 million) in the special reserve accounts which was $26.2 million in excess of the deposit requirement of $246.9 million. After adjustments for
deposit(s) and / or withdrawal(s) made on January 2, 2024, MSCO had $3.2 million in excess of the deposit requirement.
Siebert 2023 Form-10K 62
As of December 31, 2022, MSCO had cash and securities deposits of $276.2 million (cash of $135.2 million, securities with a fair value of $141.0
million) in the special reserve accounts which was $11.9 million in excess of the deposit requirement of $264.3 million. The Company made no subsequent
deposits or withdrawals on January 3, 2023.
As of December 31, 2023, the Company was subject to the PAB Account Rule 15c3-3 of the SEC which requires segregation of funds in a special
reserve account for the exclusive benefit of proprietary accounts of introducing broker-dealers. As of December 31, 2023, the Company had $1.2 million in
the special reserve account which was approximately $0.2 million in excess of the deposit requirement of approximately $1.0 million. The Company made
no subsequent deposits or withdrawals on January 2, 2024. As of December 31, 2022, the Company did not hold any proprietary accounts of introducing
broker-dealers.
RISE
Net Capital
RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This rule 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 and that equity capital may not be withdrawn, or cash
dividends paid if the resulting net capital ratio would exceed 10 to 1. RISE is also subject to the CFTC’s minimum financial requirements which require
that RISE maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under the Commodity Exchange Act or Rule 15c3-
1.
As of December 31, 2023, RISE’s net capital was approximately $1.3 million which was $1.0 million in excess of its minimum requirement of
$250,000 under 15c3-1. As of December 31, 2022, RISE’s net capital was approximately $1.2 million which was $0.9 million in excess of its minimum
requirement of $250,000 under 15c3-1.
20. Financial Instruments With Off-Balance Sheet Risk
Credit Risk
The Company is engaged in various trading and brokerage activities whose counterparties include broker-dealers, banks and other financial
institutions.
In the event the counterparties do not fulfill their obligations, the Company may sustain a loss if the market value of the instrument is different
from the contract value of the transaction. The risk of default primarily depends upon the credit worthiness of the counterparties involved in the
transactions. It is the Company’s policy to review, as necessary, the credit standing of each counterparty with which it conducts business. The Company
experienced no material historical losses in relation to its counterparties for the years ended December 31, 2023 and 2022.
Off-Balance Sheet Risks
The Company enters into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and is,
therefore, subject to varying degrees of market and credit risk.
In the normal course of business, the Company’s customer activities involve the execution, settlement, and financing of various customer
securities transactions. These activities may expose the Company to off-balance sheet risk in the event the customer or other broker is unable to fulfill their
contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss.
The Company’s customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit
to its customers, subject to various regulatory and internal margin requirements, and is collateralized by cash and securities in the customers’ accounts. In
connection with these activities, the Company executes and clears customer transactions involving the sale of securities not yet purchased, substantially all
of which are transacted on a margin basis subject to individual exchange regulations.
Such transactions may expose the Company to off-balance sheet risk in the event margin requirements are not sufficient to fully cover losses that
customers may incur. In the event the customer fails to satisfy obligations, the Company may be required to purchase or sell financial instruments at
prevailing market prices to fulfill the customer’s obligations.
The Company seeks to control the risks associated with its customer activities by requiring customers to maintain margin collateral in compliance
with various regulatory requirements and internal guidelines which meet or exceed regulatory requirements. The Company monitors required margin levels
daily and pursuant to such guidelines, requires customers to deposit additional collateral or to reduce positions when necessary.
The Company’s customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in
support of various secured financing sources such as bank loans and securities loaned. In the event the counterparty is unable to meet its contractual
obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market
prices in order to satisfy its customer obligations. The Company seeks to mitigate this risk by monitoring the market value of securities pledged on a daily
basis and by requiring adjustments of collateral levels in the event of excess market exposure. In addition, the Company establishes credit limits for such
activities and continuously monitors compliance.
Siebert 2023 Form-10K 63
The Company’s securities lending transactions are subject to master netting agreements with other broker-dealers; however, amounts are presented
gross on the consolidated statements of financial condition and as net on the consolidated statements of operations for both of the periods presented. The
Company further mitigates risk by using a program with a clearing organization which guarantees the return of cash to the Company as well as using
industry standard software to ensure daily changes to market value are continuously updated and any changes to collateralization are immediately covered.
As of December 31, 2023, the Company had margin loans extended to its customers of approximately $338.1 million, of which $72.8 million is in
the line item “Receivables from customers” on the consolidated statements of financial condition. As of December 31, 2022, the Company had margin
loans extended to its customers of approximately $365.4 million, of which $52.1 million is in the line item “Receivables from customers” on the
consolidated statements of financial condition. There were no material losses for unsettled customer transactions for the years ended December 31, 2023
and 2022.
21. Commitments, Contingencies and Other
Legal and Regulatory Matters
The Company is party to certain claims, suits and complaints arising in the ordinary course of business.
As of December 31, 2023, the Company does not expect that these claims, suits and complaints will have a material impact on its results of
operations or financial position.
Overnight Financing
As of December 31, 2023 and 2022, MSCO had an available line of credit for short term overnight demand borrowing with BMO Harris Bank
(“BMO Harris”) of up to $25 million. As of those dates, MSCO had no outstanding loan balance and there were no commitment fees or other restrictions
on the line of credit. On May 23, 2022, MSCO increased its principal amount for this line of credit from $15 million to $25 million. The Company utilizes
customer or firm securities as a pledge for short-term borrowing needs.
The interest expense for this credit line was $1,000 and $2,000 for the years ended December 31, 2023 and 2022, respectively. There were no fees
associated with the utilization of this credit line for the years ended December 31, 2023 and 2022.
At the Market Offering
On May 27, 2022, the Company entered into a Capital on DemandTM Sales Agreement (the “Sales Agreement”) with JonesTrading as agent,
pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock having an aggregate
offering amount of up to $9.6 million under the Company’s shelf registration statement on Form S-3. The Company is not obligated to make any sales of
shares under the Sales Agreement. The Company agreed to pay JonesTrading a commission rate equal to 3.0% of the aggregate gross proceeds from each
sale of shares. The Company or JonesTrading may suspend or terminate the offering upon notice to the other party and subject to other conditions. Whether
the Company sells securities under the Sales Agreement will depend on a number of factors, including the market conditions at that time, the Company’s
cash position at that time and the availability and terms of alternative sources of capital.
For the years ended December 31, 2023 and 2022, the Company did not sell any shares pursuant to this Sales Agreement. For the years ended
December 31, 2023 and 2022, the Company incurred approximately $0 and $98,000, respectively, in legal and audit fees related to this Sales Agreement,
which are in the line item “Professional fees” on the consolidated statements of operations, and were expensed as incurred.
Since the Company filed this Report after its scheduled due date, the Company no longer satisfies the eligibility requirements for use of
registration statements on Form S-3, which requires that the Company files in a timely manner all reports required to be filed during the prior twelve
calendar months. As a result, the Company has suspended use of the shelf registration statement and the Company is not able to access the At the Market
program as of the date of this Report.
Siebert 2023 Form-10K 64
NFS Contract
Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of the
arrangement through July 31, 2025. If the Company chooses to exit this agreement before the end of the contract term, the Company is under the obligation
to pay an early termination fee upon occurrence pursuant to the table below:
Date of Termination
Prior to August 1, 2024
Prior to August 1, 2025
Early
Termination
Fee
$
$
4,500,000
3,250,000
For the years ended December 31, 2023 and 2022, there has been no expense recognized for any early termination fees. The Company believes
that it is unlikely it will have to make material payments related to early termination fees and has not recorded any contingent liability in the consolidated
financial statements related to this arrangement.
Technology Vendors
In 2023 the Company entered into agreements with technology vendors for certain development projects related to our Retail Platform. As of
December 31, 2023, the Company has incurred approximately $0.5 million out of the $2.6 million total budget for these projects.
General Contingencies
In the normal course of its business, the Company indemnifies and guarantees certain service providers against specified potential losses in
connection with their acting as an agent of, or providing services to, the Company. The maximum potential amount of future payments that the Company
could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make
material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for these
indemnifications.
The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally
indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard
indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or
adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal course of
business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be
estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any
contingent liability in the consolidated financial statements for these indemnifications.
The Company, through its affiliate, KCA is self-insured with respect to employee health claims. KCA maintains stop-loss insurance for certain
risks and has a health claim reinsurance limit capped at approximately $65,000 per employee as of December 31, 2023.
The estimated liability for self-insurance claims is initially recorded in the year in which the event of loss occurs and may be subsequently
adjusted based upon new information and cost estimates. Reserves for losses represent estimates of reported losses and estimates of incurred but not
reported losses based on past and current experience. Actual claims paid and settled may differ, perhaps significantly, from the provision for losses. This
adds uncertainty to the estimated reserves for losses. Accordingly, it is at least possible that the ultimate settlement of losses may vary significantly from
the amounts included in the consolidated financial statements.
As part of this plan, the Company recognized expenses of $971,000 and $1,529,000 for the years ended December 31, 2023 and 2022,
respectively.
The Company had an accrual of $64,000 as of December 31, 2023, which represents the historical estimate of future claims to be recognized for
claims incurred during the period.
The Company believes that its present insurance coverage and reserves are sufficient to cover currently estimated exposures, but there can be no
assurance that the Company will not incur liabilities in excess of recorded reserves or in excess of its insurance limits.
22. Employee Benefit Plans
The Company, through KCA, sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers
substantially all employees of the Company. Participant contributions to the plan are voluntary and are subject to certain limitations. The Company may
also make discretionary contributions to the plan. For 401(k) employee contribution matching, the Company incurred $173,000 of expense for the year
ended December 31, 2023. The Company did not incur any expense for 401(k) employee contribution matching in 2022.
Siebert 2023 Form-10K 65
On September 17, 2021, the Company’s shareholders approved the Siebert Financial Corp. 2021 Equity Incentive Plan (the “Plan”). The Plan
provides for the grant of stock options, restricted stock, and other equity awards of the Company’s common stock to employees, officers, consultants,
directors, affiliates and other service providers of the Company. There were 3 million shares reserved under the Plan and 2,704,000 shares remained as of
December 31, 2023.
For the year ended December 31, 2022, the Company granted 296,000 restricted stock units at a weighted average price of $1.56 to employees and
consultants of the Company. These units were fully vested upon grant date and the Company recognized equity stock compensation expense of $461,000 in
the line item “Employee compensation and benefits” on the consolidated statements of operations for the year ended December 31, 2022. The Company did
not issue any shares for the year ended December 31, 2023.
23. Related Party Disclosures
KCA
Gloria E. Gebbia, who is a director of Siebert, is the managing member of Kennedy Cabot Acquisition, LLC (“KCA”). As a result, KCA is an
affiliate of the Company and is under common ownership with the Company. To gain efficiencies and economies of scale with billing and administrative
functions, KCA serves as a paymaster for the Company for payroll and related functions, the entirety of which KCA passes through to the subsidiaries of
the Company proportionally. In addition, KCA sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that
covers substantially all employees of the Company. In the first quarter of 2023, KCA entered into an agreement with the Company for payroll processing
services. The Company incurred $40,000 of expenses related to these services for the year ended December 31, 2023.
KCA owns a license from the Muriel Siebert Estate / Foundation to use the names “Muriel Siebert & Co., LLC” and “Siebert” within business
activities, which expires in 2025. KCA passed through to the Company its cost of $60,000 for both the years ended December 31, 2023 and 2022 for the
use of these names.
Other than the above arrangements, KCA has earned no profit for providing any services to the Company for the years ended December 31, 2023
and 2022 as KCA passes through any revenue or expenses to the Company’s subsidiaries. As of December 31, 2023 and 2022, the Company had a payable
to KCA for miscellaneous expenses of $0 and $4,000, respectively, which are in the line item “Accounts payable and accrued liabilities” on the
consolidated statements of financial condition.
PW
PW is a subsidiary of the Company and PW brokers the insurance policies for related parties. Revenue for PW from related parties was $124,000
and $129,000 for the years ended December 31, 2023 and 2022, respectively.
Gloria E. Gebbia, John J. Gebbia, and Gebbia Family Members
The Company has entered into various notes payable with Gloria E. Gebbia. On March 31, 2022, Gloria E. Gebbia exchanged approximately $2.9
million of her notes payable to the Company for 24% of the outstanding and issued membership interests in RISE. The Company paid off these notes
payable in 2022 and as such, the Company had no interest expense related to these notes payable in 2023. The Company had interest expense related to
these notes payable of $151,000 for the year ended December 31, 2022.
Gloria E. Gebbia had extended loans to certain Company employees for the purchase of the Company’s shares. These transactions have not
materially impacted the Company’s consolidated financial statements.
The three sons of Gloria E. Gebbia and John J. Gebbia hold executive positions within the Company’s subsidiaries and their compensation was in
aggregate $2,776,000 and $2,427,000 for the years ended December 31, 2023 and 2022, respectively. Part of their compensation includes performance-
based payments related to key revenue streams.
On May 22, 2023, Gloria E. Gebbia issued a warrant to BCW to purchase 403,780 shares of common stock of the Company held by Ms. Gebbia at
an exercise price of $2.15 per share. Ms. Gebbia issued the warrant pursuant to that certain agreement, dated March 27, 2023, by and among Ms. Gebbia,
the Company and BCW relating to the investment by Kakaopay in the Company. The fair value of the warrant of $560,000 was recorded as non-cash
consideration on the consolidated statements of changes in stockholders’ equity and the consolidated statements of cash flows, as well as for the deferred
issuance cost related to the First Tranche.
In 2023, Gloria E. Gebbia entered into a consulting agreement with the Company for consulting services. The compensation for the consulting
agreement for Gloria E. Gebbia was $90,000 for the year ended December 31, 2023.
Siebert 2023 Form-10K 66
Gebbia Sullivan County Land Trust
The Company operates on a month-to-month lease agreement for its branch office in Omaha, Nebraska with the Gebbia Sullivan County Land
Trust, the trustee of which is a member of the Gebbia Family. For both the years ended December 31, 2023 and 2022, rent expense was $60,000 for this
branch office.
Kakaopay and Affiliates
On April 27, 2023, the Company entered into the First Tranche Stock Purchase Agreement, pursuant to which the Company agreed to issue to
Kakaopay the First Tranche Shares at a per share price of Two Dollars Fifteen Cents ($2.15). MSCO entered into an agreement whereby it would provide
an omnibus trading account for Kakaopay’s subsidiary, Kakao Pay Securities Corp., and provide trade execution services to Kakao Pay Securities Corp,
subject to compliance with applicable U.S. laws, rules and regulations.
Tigress and Hedge Connection
The Company has entered into various agreements and subsequent terminations with Tigress and Hedge Connection. Refer to Note 3 –
Transactions with Tigress and Hedge Connection and Note 12– Equity Method Investment in Related Party for further detail.
RISE
During the year ended December 31, 2022, RISE issued and Siebert sold membership interests of RISE to Siebert employees, directors and
affiliates. Refer to Note 4 – RISE for further detail.
In September 2022, MSCO and RISE entered into a clearing agreement whereby RISE would introduce clients to MSCO. As part of the
agreement, RISE deposited a clearing fund escrow deposit of $50,000 to MSCO, and had excess cash of approximately $1.0 million in its brokerage
account at MSCO as of December 31, 2023. RISE did not have any balances at MSCO as of December 31, 2022. The resulting asset of RISE and liability
of MSCO is eliminated in consolidation.
24. Subsequent Events
The Company has evaluated events that have occurred subsequent to December 31, 2023 and through May 10, 2024, the date of the filing of this
report.
Effective January 1, 2024, MSCO changed its name from Muriel Siebert & Co., Inc. to Muriel Siebert & Co., LLC, and SNXT changed its name
to from Siebert AdvisorNXT, Inc. to Siebert AdvisorNXT, LLC with their tax status changing from C-Corporations to LLCs under state law. Starting in
2024, both MSCO and SNXT are single member limited liability companies that will be treated as disregarded entities for tax purposes. As such, both
MSCO and SNXT will no longer be subject to direct taxation and will be disregarded by the relevant tax authorities. The guidance in Accounting Standards
Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes specifies that an entity is not required to allocate income tax
provision to a legal entity that is both not subject to tax and disregarded by the taxing authority, but an entity may elect to do so. MSCO and SNXT are not
making the available election to allocate income taxes. Accordingly, on a prospective basis, MSCO and SNXT will no longer record current or deferred
income taxes.
On January 18, 2024, STCH entered into a Purchase Agreement (the “Purchase Agreement”) with J2 Financial Technology, Inc., d/b/a “Guild”, a
Delaware corporation.
Under the Purchase Agreement, STCH purchased a mobile self-directed trading app for the total purchase price of $385,000. The purchase price
consisted of 200,000 restricted shares of the Company’s common stock (priced at the historical 30-day moving average as of January 18, 2024) worth
approximately $350,000 and $35,000 cash.
On April 18, 2024, the Company received a notification from Nasdaq Regulation that the Company no longer complies with Nasdaq’s Listing
Rules (the “Nasdaq Rules”) for continued listing, as a result of the Company’s failure to file this Report. The Company expects to regain compliance with
the Nasdaq Rules in connection with the filing of this Report on May 10, 2024. However, since this Report was filed after its scheduled due date, the
Company will no longer satisfy the eligibility requirement for use of registration statements on Form S-3, which requires that the Company file in a timely
manner all reports required to be filed during the prior twelve calendar months. As a result, the Company has suspended use of its registration statements
on Form S-3 (333-276585 and 333-262895), and will no longer be able to use its registration statements or access its At the Market program. Refer to
Siebert’s Current Report on Form 8-K filed on April 24, 2024 for more information.
Based on the Company’s assessment, other than the events described above, there have been no material subsequent events that occurred during
such period that would require disclosure in this report or would be required to be recognized in the consolidated financial statements as of December 31,
2023.
Siebert 2023 Form-10K 67
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and our
Executive Vice President/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(e) of Securities Exchange of 1934, as amended.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our periodic and current reports that we
file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired
control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;
over time, control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Based on its evaluation, our management, including our Chief Executive Officer and our Executive Vice President/Chief Financial Officer,
concluded that as of the end of the period covered by this annual report, our disclosure controls and procedures were ineffective, based on the material
weaknesses in internal control over financial reporting described below. As explained further below, the material weakness did not result in adjustments to
the consolidated financial statements.
Management’s Report on Internal Control Over Financial Reporting
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, is responsible for establishing and
maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over
financial reporting is designed 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.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, based on criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013) (“COSO Framework”).
Based on that assessment, management has concluded that, as of December 31, 2023, due to a material weakness in internal control over financial reporting
discussed below, our internal control over financial reporting was not effective.
Siebert 2023 Form-10K 68
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We
have identified the following material weakness in our internal control over financial reporting, which remains outstanding as of December 31, 2023:
Siebert did not design and maintain effective controls over certain information technology (“IT”) or general computer controls for information
systems that are relevant to the preparation of the consolidated financial statements. Specifically, Siebert did not design and maintain user access controls to
ensure appropriate segregation of duties and adequate restricted user and privileged access to financial applications, data and programs to the appropriate
personnel. The IT deficiencies did not result in adjustments to the consolidated financial statements.
Management has commenced implementing the following measures to ensure that the control deficiencies contributing to the material weakness
are remediated: (i) designing and implementing controls related to provisioning, privileged access, and user access reviews, (ii) developing an enhanced
risk assessment process to evaluate logical access, and (iii) improving the existing training program associated with control design and implementation. The
material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded,
through testing, that these controls are operating effectively. We expect that the remediation will be completed prior to the end of 2024.
Changes in Internal Control over Financial Reporting
Except for the material weakness in internal control described above, 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.
ITEM 9B. OTHER INFORMATION
None of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading
arrangement during the three months ended December 31, 2023, as such terms are defined under Item 408(a) of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
Siebert 2023 Form-10K 69
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.
PART III
Gloria E. Gebbia
Age 81
Gloria E. Gebbia has served as a member of our Board of Directors since December 16, 2016.
Gloria E. Gebbia is the managing manager of KCA. Ms. Gebbia was an owner and a director of StockCross. Additionally, Ms. Gebbia also serves
as the President of Associates for Breast and Prostate Cancer Research, a non-profit organization that raises funds for the John Wayne Cancer Institute,
which, under Ms. Gebbia’s leadership, has raised over $16 million for breast and prostate cancer research.
Ms. Gebbia brings valuable experience to our Board of Directors from her roles at StockCross and in KCA.
John J. Gebbia
Age 85
John J. Gebbia has served as a member of our Board of Directors since June 1, 2020, and as our Chief Executive Officer and Chairman since May
24, 2023.
From February 2017 to May 2020, Mr. Gebbia served as a Special Advisor to the Board of Directors. Mr. Gebbia commenced his employment in
the brokerage industry in 1959. In 1962, Mr. Gebbia became Executive Vice President of Walston & Company. After becoming CEO of Jesup & Lamont,
an institutional brokerage firm, Mr. Gebbia purchased the company in 1983. Thereafter, Mr. Gebbia owned and/or controlled various brokerage firms
including Kennedy Cabot & Co., which was sold in 1997 to Toronto Dominion Bank for $160 million.
We believe Mr. Gebbia’s valuable experience to our Board of Directors from his role as our Chief Executive Officer, involvement with Siebert as
well as his extensive brokerage and executive experience in the brokerage industry qualifies him to serve on our Board.
Charles A. Zabatta
Age 81
Charles A. Zabatta has served as a member of our Board of Directors since December 16, 2016.
Charles A. Zabatta served as a consultant to StockCross from 2011 until 2016, acting as its head of Corporate Development. Mr. Zabatta has and
continues to have a distinguished and successful career, predominately in the financial services industry, including holding various positions with the New
York Stock Exchange, Paine Webber, Securities Settlement Corp., Josephthal Lyon & Ross, Kennedy Cabot & Co. and TD Waterhouse. Mr. Zabatta’s
creative business skills have been instrumental in several acquisitions of small to midsize companies in various industries. Mr. Zabatta currently advises on
capital raising, general business structure and management. Previously, Mr. Zabatta has served as a member of the board of Knight Capital and Kennedy
Cabot & Co. Currently, Mr. Zabatta serves on the board of Paraco Gas Corporation, a large privately held independent energy company in the Northeast.
Mr. Zabatta holds a B.A. in Industrial Psychology from Iona College.
We believe Mr. Zabatta’s extensive experience in the financial services industry, vast industry network, as well as his Board of Director expertise
qualifies him to serve on our Board.
Siebert 2023 Form-10K 70
Francis V. Cuttita
Age 55
Francis V. Cuttita has served as a member of our Board of Directors since December 16, 2016.
Francis V. Cuttita is a Senior Partner of Cuttita, LLP, a New York based law firm. Mr. Cuttita has over 27 years of practicing law in the areas of
real estate and business transactions, media, sports and entertainment. Mr. Cuttita’s list of clients include Fortune 100 corporations, CEOs, hedge fund
managers, legendary professional athletes, entertainment icons and Grammy award winning musicians. Mr. Cuttita also serves as an advisor to several
national financial, insurance and sports businesses and is an active supporter and member of various nonprofit organizations. Mr. Cuttita graduated from
Swarthmore College and received his law degree from Fordham University School of Law.
We believe Mr. Cuttita’s legal experience qualifies him to serve on our Board.
Andrew H. Reich
Age 68
Andrew H. Reich has served on our Board of Directors since December 16, 2016.
Andrew H. Reich has served as Executive Vice President, Chief Financial Officer, Assistant Secretary of the Company since December 16, 2016.
Prior thereto, Andrew H. Reich served in a variety of executive positions with StockCross from 2002 until 2016. Mr. Reich has more than 30 years of
experience in the financial industry, including more than 14 years as senior management of StockCross. Mr. Reich holds an M.B.A. from the University of
Southern California and a B.B.A. from the Bernard Baruch College.
Mr. Reich brings valuable experience to our Board of Directors from his role as our Executive Vice President, Chief Financial Officer, Assistant
Secretary as well as his extensive experience in the financial industry.
Jerry M. Schneider, CPA
Age 79
Jerry M. Schneider has served as a member of our Board of Directors and Chairman of the Audit Committee since December 29, 2016.
Jerry M. Schneider is a certified public accountant and has over 40 years of relevant accounting experience. Mr. Schneider is licensed to practice
public accounting in New York and Florida and is a member of the American Institute of Certified Public Accountants, the New York State Society of
Certified Public Accountants and the Florida Institute of Certified Public Accountants. Mr. Schneider was the Managing Partner of Schneider & Associates
LLP, a CPA firm with approximately 20 professional staff and was the driving force in that firm’s growth and development until it merged with Marks
Paneth LLP in 2008. From January 2011 to December 31, 2017, Mr. Schneider was a Partner Emeritus and Senior Consultant at Marks Paneth LLP. Mr.
Schneider is also a member of the Board of Directors of Prometheum, Inc., a company that is authorized by FINRA to run an AST for the general public
for digital asset securities. In 2018, Mr. Schneider was appointed to the Board of Directors and the Audit Committee of Fiduciary Trust International South
(a subsidiary of Fiduciary Trust International, which is owned by Franklin Templeton). In December 2019, Mr. Schneider was elected to be the chairman of
the Audit Committee and was appointed to the Board of Directors of the Trust Committee of Fiduciary Trust International South. Mr. Schneider’s practice
was concentrated in the areas of business planning, high net worth individuals, manufacturing, retailing, securities broker-dealers, the hospitality industry,
private educational institutions and estate planning.
We believe Mr. Schneider’s significant accounting experience qualifies him to serve on our Board.
Hocheol Shin
Age 46
Hocheol Shin has served on our Board of Directors since May 24, 2023.
Mr. Shin has over 15 years of experience working in global technology companies across various functions including strategy, investment, and
engineering. He has served as head of Kakao Pay’s Payment Business Group and Corporate Development Office. Before Kakao Pay, Mr. Shin was a Vice
President of Kakao Corp., a Director and Head of Open Innovation at Samsung Electronics, and an Engagement Manager at McKinsey & Company. Mr.
Shin received a B.S. in Electrical Engineering from Seoul National University and a Ph.D. in Electrical Engineering from Stanford University.
We believe Hocheol Shin’s significant experience within technology and international business qualifies him to serve on our Board.
Siebert 2023 Form-10K 71
Identification of Executive Officers
Name
John J. Gebbia
Age
85
Name
Andrew H. Reich
Age
68
Corporate Governance
Board Meetings
Position
Chief Executive Officer, Chairman and Director
John J. Gebbia is the Chief Executive Officer and Chairman of the Company since May 2023. From February 2017
to May 2020, Mr. Gebbia served as a Special Advisor to the Board of Directors. Mr. Gebbia commenced his
employment in the brokerage industry in 1959. In 1962, Mr. Gebbia became Executive Vice President of Walston &
Company. After becoming CEO of Jesup & Lamont, an institutional brokerage firm, Mr. Gebbia purchased the
company in 1983. Thereafter, Mr. Gebbia owned and/or controlled various brokerage firms including Kennedy
Cabot & Co., which was sold in 1997 to Toronto Dominion Bank for $160,000,000.
Position
Executive Vice President, Chief Operating Officer, Chief Financial Officer, Director and Secretary
Andrew H. Reich has served as Executive Vice President, Chief Financial Officer, Assistant Secretary of the
Company since December 16, 2016. Prior thereto, Andrew H. Reich served in a variety of executive positions with
StockCross from 2002 until 2016. Mr. Reich has more than 30 years of experience in the financial industry,
including more than 14 years as senior management of StockCross. Mr. Reich holds a M.B.A. from the University of
Southern California and a B.B.A. from the Bernard Baruch College.
The Board of Directors held 17 special meetings during 2023. Each incumbent director attended at least 75% of his or her Board of Directors
meetings and all of his or her committee meetings. The Board of Directors held 8 regular meetings and 4 special meetings during 2022.
Controlled Company
As of May 18, 2023, the Company ceased to be a “Controlled Company.” As a result, the Company will be subject to Nasdaq’s Corporate
Governance Rules described below, which will be phased-in over the 12-month period following May 18, 2023.
Director Independence
Our common stock is listed on Nasdaq under the symbol “SIEB.” Nasdaq Listing Rules require that a majority of the members of a listed
company’s board of directors be independent, except for “Controlled Companies,” which, as of May 18, 2023, we no longer are, as described above. In
addition, the Nasdaq Listing Rules generally require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and
nominating committees be independent subject to the controlled company exemptions described above, as applicable to the compensation and governance
committees. Audit Committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company
may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: accept, directly or
indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed
company or any of its subsidiaries. Our Board of Directors undertook a review of its composition, the composition of its committees and the independence
of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent
judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each non-employee director concerning his or
her background, employment and affiliations, including family relationships, our Board of Directors has determined that none of our directors have
relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors
is “independent” as that term is defined under the rules of Nasdaq and Rule 10A-3 and Rule 10C-1 under the Exchange Act, except for Mrs. Gebbia, Mr.
Gebbia and Mr. Reich, whom are not independent under Nasdaq’s independence standards.
Siebert 2023 Form-10K 72
Audit Committee of the Board of Directors
The Audit Committee of our Board of Directors currently consists of Mr. Schneider, Chairman, Mr. Zabatta and Mr. Cuttita. The Board of
Directors has determined that Mr. Schneider, Mr. Zabatta and Mr. Cuttita 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 SEC.
The Audit Committee held 4 meetings during 2023. The Audit Committee held 6 meetings during 2022.
The Board of Directors has determined that Mr. Schneider qualifies as an “audit committee financial expert” under the applicable rules of the SEC.
Mr. Schneider is a certified public accountant and has over 40 years of relevant accounting experience.
The Audit Committee was established to (i) assist the Board of Directors in its oversight responsibilities regarding the integrity of our consolidated
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 termination of 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 is available on our website at www.siebert.com/company/investor-
relations/shareholder-information.
Compensation Committee of the Board of Directors
The Compensation Committee of our Board of Directors currently consists of Mr. Zabatta and Mr. Cuttita. The Compensation Committee reviews
and determines all forms of compensation provided to our executive officers and directors. The Compensation Committee will administer a stock option
and other employee benefit plans. As a “controlled company” under Nasdaq rules, the Compensation Committee has not functioned pursuant to a formal
written charter. As part of the Company’s transition to a non-controlled company, the Compensation Committee will act pursuant to a written charter. The
Compensation Committee held no meetings during 2023 or 2022.
The Compensation Committee will evaluate the performance of our executive officers in terms of our operating results and financial performance
and will determine their compensation in connection therewith.
In accordance with general practice in the securities industry, our executive compensation includes base salaries, an annual discretionary cash
bonus, and equity incentives that are intended to align the financial interests of our executives with the returns to our shareholders.
As part of its oversight of the Company’s executive compensation, the Compensation Committee will consider 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
Compensation Committee will review the Company’s 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.
Nominating Committee of the Board of Directors
The Nominating Committee of the Board of Directors currently consists of Mr. Zabatta and Mr. Cuttita. The Nominating Committee has not
functioned pursuant to a formal written charter. As part of the Company’s transition to a non-controlled company, the Nominating Committee will act
pursuant to a written charter. The Nominating Committee did not meet in 2023 or 2022.
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.
Siebert 2023 Form-10K 73
Special Committee of the Board of Directors
In 2022, the Board of Directors also established a special committee of the three independent directors to conduct a strategic review of the
Company and assess strategic transactions, including the transaction with Kakaopay. Following the Kakaopay transaction resolution, the special committee
was disbanded on December 19, 2023.
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 American International Group, Inc. 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 our directors are strongly encouraged to attend each annual shareholder meeting. All directors
attended the last held annual meeting of shareholders of the Company.
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 of Ethics for Senior Financial
Officers is available on our website at www.siebert.com/company/investor-relations/shareholder-information.
Board Leadership Structure and Board of Directors
On May 24, 2023, the Board of Directors appointed John J. Gebbia as Chairman of the Board and Chief Executive Officer. The Board of Directors
believes that all of the directors will continue to participate in the full range of the Board of Director’s responsibilities with respect to its oversight of the
Company’s management.
The Board of Directors intends to hold at least four 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.
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, 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 a limited public market for our
common stock, among other risks and uncertainties detailed in under Part I, Item 1A - Risk Factors of this Report as well as in our filings with the SEC.
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 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.
Siebert 2023 Form-10K 74
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee during 2023 had a relationship that requires disclosure as a Compensation Committee interlock.
Family Relationships
Mrs. Gebbia, our director, is the spouse of Mr. Gebbia, our Chief Executive Officer and Chairman of the Board of Directors. Except as disclosed,
there are no family relationships between or among any of our directors, executive officers and incoming directors or executive officers.
10b5-1 Plans
In June 2023, Gloria E. Gebbia, Charles A. Zabatta, Francis V. Cuttita, and Andrew H. Reich of the Company adopted Rule 10b5-1 trading
arrangements for the potential sale of up to 920,000 shares of our common stock, in the aggregate, subject to certain conditions. The expiration date of
these 10b5-1 trading arrangements is May 16, 2025. The trading arrangement is intended to satisfy the affirmative defense of Rule 10b5–1(c).
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 SEC. These executive officers, directors and shareholders are
required by the SEC to furnish us with copies of all forms they file pursuant to Section 16(a).
Based upon a review of Section 16(a) forms furnished to the Company, except as disclosed below, the Company believes that all applicable
Section 16(a) filing requirements were met during the year ended December 31, 2023, except as set forth below:
Delinquent Section 16(a) Reports
On June 28, 2023, Richard Gebbia, a member of a group that beneficially owns over 10% of the Company’s outstanding shares of common stock,
reported on Form 4 certain acquisitions and dispositions of shares. Mr. Gebbia’s Form 4 was filed two days late due to an inadvertent mistake.
On June 16, 2023, Hocheol Simon Shin, our director, filed a Form 3 in connection with his appointment to the Board of Directors on May 24,
2023. Mr. Shin’s Form 3 was filed eleven days late due to an inadvertent mistake.
Advisors to the Company
Senior Advisors
John M. Gebbia and Richard Gebbia, sons of Gloria E. Gebbia and John J. Gebbia, are Co-CEO’s of MSCO and serve as Registered Principals
and associated persons of MSCO. Before the close of the acquisition of StockCross, they were also serving as executive officers and directors of
StockCross. Both Richard Gebbia and John M. Gebbia have extensive experience in the securities industry and work with MSCO and senior management
of the Company to identify cost saving opportunities and improvements to the Company’s business.
John M. Gebbia has been in the brokerage industry in various capacities since 1990. Mr. Gebbia was the President and CEO of Kennedy Cabot &
Co., from 1992 to 1997 when it was acquired by Toronto Dominion Bank. Thereafter he was active with various Gebbia family businesses. From 2007 to
2020, Mr. Gebbia was associated with StockCross, most recently as a Director and its Executive Vice President.
Richard S. Gebbia has been in the brokerage industry since 1993. From 2007 to 2020, Mr. Gebbia was associated with StockCross in various
capacities. Mr. Gebbia was the CEO and a Director of StockCross.
David J. Gebbia has been in the brokerage industry since 1993. Mr. Gebbia is currently the President of the Company’s insurance subsidiary, PW.
Siebert 2023 Form-10K 75
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents the annual compensation paid to or earned by our current named executive officers during the years ended December
31, 2023 and 2022.
Name and Principal Position
John J. Gebbia(1)
Chief Executive Officer, Director
and Chairman
Andrew H. Reich(2)
Executive Vice President, Chief
Operating Officer, Chief Financial
Officer, Director and Secretary
Year
Salary
($)
Bonus ($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Non-Qualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($) (3)
Totals ($)
2023 $ 292,000 $ 200,000
2023 $ 250,000 $ 181,000
—
—
—
—
2022 $ 225,000 $ 25,000 $ 32,000
—
—
—
—
— $
— $
120,000 $ 612,000
120,000 $ 551,000
—
— $ 282,000
(1) Represents the dollar amount recognized for consolidated financial statement reporting in accordance with ASC Topic 718. Mr. Gebbia was named to
the position of Chief Executive Officer effective May 24, 2023.
(2) Represents the dollar amount recognized for consolidated financial statement reporting in accordance with ASC Topic 718. Mr. Reich was named to
the positions of Executive Vice President, Chief Operating Officer and Chief Financial Officer effective December 16, 2016.
(3) “All other compensation” for Mr. Gebbia and Mr. Reich is other compensation for services as a member of our Board of Directors for the years ended
December 31, 2023 and 2022, respectively.
2021 Equity Incentive Plan
The purpose of the Siebert Financial Corp. 2021 Equity Incentive Plan (the “2021 Plan”) is to (a) enable the Company to attract and retain the
types of employees, directors and other service providers who will contribute to the Company’s long term success; (b) provide incentives that align the
interests of the participants with those of the shareholders of the Company; and (c) promote the success of the Company’s business.
One or more committees (each, a “Committee”) appointed by the Board of Directors (or its Compensation Committee) will administer the 2021
Plan. Unless the Board of Directors provides otherwise, the Compensation Committee will be the Committee. The Board of Directors may also at any time
terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee. Except as otherwise determined by
the Board of Directors, the Committee shall consist solely of two or more directors who qualify as “non-employee directors” under Rule 16b-3 of the
Exchange Act.
Subject to the terms of the 2021 Plan, the Committee has the sole discretion to select the employees, directors and other service providers who will
receive awards, determine the terms and conditions of awards and interpret the provisions of the 2021 Plan and outstanding awards. The Committee may
delegate any part of its authority and powers under the 2021 Plan to one or more directors or executive officers of the Company; provided, however, that
the Committee may not delegate its authority and powers with respect to awards granted to our executive officers and directors.
The 2021 Plan permits the grant of the following types of incentive awards: (1) stock options (which can be either “incentive stock options,” as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) or nonqualified stock options); (2) stock appreciation rights
(“SARs”); (3) restricted stock; (4) restricted stock units; (5) performance shares or units; (6) other equity-based awards; and (7) cash awards. The vesting of
equity awards can be based on “continuous service” (as defined in the 2021 Plan), achievement of one or more performance criteria, or a combination of
continuous service and achievement of performance criteria.
The 2021 Plan has key features which reflect a broad range of compensation and commonly viewed governance best practices, including the
following provisions:
● Prohibition against granting discounted options or SARs;
● Requiring shareholder approval before repricing underwater options or SARs;
● Prohibition against dividends or dividend equivalents on unearned restricted stock, restricted stock units, performance shares or units; and
● No authority to allow dividend equivalents for options or SARs.
Siebert 2023 Form-10K 76
Outstanding Equity Awards as of December 31, 2023 and 2022
As of December 31, 2023, the Company had no outstanding equity awards. As of December 31, 2022, the Company had 296,000 shares of
common stock outstanding and fully vested as part of equity compensation. As of December 31, 2023 and 2022, there were no unexercised options nor
shares of stock that have not vested under any equity incentive plan.
Option Agreements
As of December 31, 2023 and 2022, we had no option agreements with our named executive officers.
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.
DIRECTOR COMPENSATION
The table below discloses the cash, equity awards, and other compensation earned, paid, or awarded, as the case may be, to each of our directors
during the year ended December 31, 2023 which is payable quarterly, plus reimbursements for reasonable travel expenses and out-of-pocket costs incurred
on behalf of the Company.
Mr. Gebbia and Mr. Reich each received a total of $120,000 for their service as a member of our Board of Directors during the year ended
December 31, 2023. Mr. Gebbia and Mr. Reich’s total compensation for service as an employee and as a member of our Board of Directors is presented
under the heading “Summary Compensation Table” above.
Name
Gloria E. Gebbia
John J. Gebbia
Andrew H. Reich
Francis V. Cuttita
Charles Zabatta
Jerry M. Schneider
Hocheol Shin
Fees
Earned or
Paid in
Cash
120,000
120,000
120,000
145,000
245,000
145,000
—
$
$
$
$
$
$
$
Stock
Awards
Option
Awards
Non-Equity
Incentive Plan
Compensation
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
90,000(1) $
$
—
$
—
$
—
$
—
$
—
$
—
Total
210,000
120,000
120,000
145,000
245,000
145,000
—
The table below discloses the cash, equity awards, and other compensation earned, paid, or awarded, as the case may be, to each of our directors
during the year ended December 31, 2022 which is payable quarterly, plus reimbursements for reasonable travel expenses and out-of-pocket costs incurred
on behalf of the Company.
Name
Gloria E. Gebbia
John J. Gebbia
Andrew H. Reich
Francis V. Cuttita
Charles Zabatta
Jerry M. Schneider
Cynthia DiBartolo (2)
Fees
Earned or
Paid in
Cash
$
$
$
$
$
$
$
—
—
—
106,000
106,000
106,000
—
Stock
Awards
Option
Awards
Non-Equity
Incentive Plan
Compensation
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
— $
— $
— $
— $
Total
—
—
—
106,000
106,000
106,000
—
(1) Represents compensation paid to Ms. Gebbia for services rendered to the Company as a consultant.
(2) Ms. DiBartolo resigned from our Board of Directors effective October 18, 2022.
Siebert 2023 Form-10K 77
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 May 1, 2024. The information includes beneficial ownership by each of our
directors and the named executive officers, all directors and executive officers as a group and beneficial owners known by our management to hold at least
5% of our common stock. Except as indicated in footnotes to this table, we believe that the shareholders named in this table have sole voting and
investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these
shareholders. Percentage of ownership is based on 39,830,936 shares of common stock outstanding as of May 1, 2024.
Name and Address of Beneficial Owner (1)
Named Executive Officers and Directors
Gloria E. Gebbia / John J. Gebbia (2) (6)
Andrew H. Reich (8)
Charles Zabatta (3)
Francis V. Cuttita
Jerry M. Schneider
Hocheol Shin (7)
Directors and executive officers as a group (7 persons)
Other Shareholders with 5% or More
Kakaopay (9)
15F, Tower B, 166 Pangyoyeok-ro,
Bundang-gu, Seongnam-si,
Gyeonggi-do, Republic of Korea 13529
Kimberly Gebbia (4) (6)
653 Collins Ave
Miami, FL 33139
John M. Gebbia (5) (6)
300 Vesey Street
New York, NY 10282
Shares of
Common
Stock
Percent of
Class
16,960,323
758,238
590,439
187,773
3,000
—
18,499,773
43%
2%
1%
*
*
*
46%
8,075,607
20%
3,314,400
2,097,891
8%
5%
*
Less than 1% of outstanding shares as of May 1, 2024.
(1) Unless otherwise indicated, the business address of each individual is c/o Siebert Financial Corp., 653 Collins Avenue, Miami Beach, FL 33139.
(2) Gloria E. Gebbia and John J. Gebbia are husband and wife. Includes 10,076,714 shares of our common stock owned by Gloria E. Gebbia, 3,314,400
shares owned by Kimberly Gebbia, Richard Gebbia, and the children of Richard and Kimberly Gebbia, 2,097,891 shares owned by John M. Gebbia
and the children of John M. Gebbia, and 1,471,318 shares owned by David J. Gebbia and the children of David J. Gebbia.
(3)
Includes 490,439 shares owned by Charles Zabatta’s wife.
(4)
Includes 463,535 shares owned by the husband of Kimberly Gebbia, Richard S. Gebbia, and 261,273 shares owned by the children of Richard and
Kimberly Gebbia.
(5)
Includes 190,000 shares owned by the children of John M. Gebbia.
(6) Gloria E. Gebbia, John M. Gebbia, Richard Gebbia, David Gebbia, and Kimberly Gebbia are parties to that certain Amended and Restated Joint Filing
and Group Agreement, dated as of January 10, 2022 (the “Group Agreement”), pursuant to which the foregoing Gebbia family members agreed to
form a group for the purpose of taking joint actions and such actions relating to their voting rights regarding securities of the Company necessary or
advisable to achieve the foregoing. The Group Agreement is attached to the amended Schedule 13D, filed on January 13, 2022, as Exhibit 99.1.
Siebert 2023 Form-10K 78
(7) Hocheol Shin was designated by Kakaopay as a director-nominee pursuant to that certain Amended and Restated Stockholders’ Agreement dated
December 19, 2023, among Kakaopay, the Company, the Gebbia Stockholders (as defined therein), and John J. Gebbia (in his individual capacity and
as representative of the Gebbia Stockholders). The Stockholders’ Agreement is attached to the Company’s Current Report on Form 8-K, filed on
December 20, 2023, as Exhibit 10.42.
(8)
Includes 28,000 shares owned by the children of Andrew H. Reich.
(9) Based solely on a Schedule 13D filed with the SEC on May 30, 2023, by Kakaopay and Kakao Corporation (“Kakao”). In the filing, Kakaopay and
Kakao reported having shared voting power over all 8,075,607 shares.
Equity Compensation Plan Information
The below table presents information related to equity compensation as of December 31, 2023.
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)
—
—
—
NA
NA
NA
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
2,704,000
NA
2,704,000
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
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.
Refer to Note 23 – Related Party Disclosures for further detail on our related party transactions. See “Corporate Governance” under Item 10 in this
Report for information on director independence.
Siebert 2023 Form-10K 79
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Baker Tilly US, LLP (“Baker Tilly”) currently serves as our independent registered public accounting firm.
Audit and Tax Fees
Our Audit Committee has determined that the services described below that were rendered by Baker Tilly are compatible with the maintenance of
Baker Tilly’s independence from our management.
Audit Fees
The aggregate fees billed by Baker Tilly for professional services rendered for the 2023 and 2022 audit of our annual consolidated financial
statements and reviews of our quarterly consolidated financial statements were $407,000 and $296,000, respectively.
Audit-Related Fees
We had no fees billed by Baker Tilly for assurance and related services reasonably related to the performance of the audit or review of
consolidated financial statements for the years ended December 31, 2023 and 2022.
Tax Fees
We had no tax fees billed by Baker Tilly for tax compliance, tax advice, and tax planning for the years ended December 31, 2023 and 2022.
All Other Fees
We had no other fees billed by Baker Tilly for tax compliance, tax advice, and tax planning for the years ended December 31, 2023 and 2022.
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 Chairman of the Audit Committee to approve such audit services and permissible non-audit services, provided the Chairman
informs the Audit Committee of such approval at the next regularly scheduled meeting. All “Audit-Related Fees,” “Tax Fees” and “All Other Fees” set
forth above were pre-approved by the Audit Committee in accordance with its pre-approval policy.
Audit Committee Report to Shareholders
The Audit Committee has reviewed and discussed with management the audited consolidated financial statements for the fiscal years ended
December 31, 2023 and 2022. 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 PCAOB (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 PCAOB (United States) regarding
“Communication with Audit Committees Concerning Independence.”
Based on the review and discussions referred to within this report, the Audit Committee recommended to the Board of Directors that the audited
consolidated financial statements for the fiscal years ended December 31, 2023 and 2022 be included in Siebert Financial Corp.’s Annual Report on Form
10-K for filing with the SEC.
Audit Committee,
Jerry M. Schneider, CPA, Chairman
Charles Zabatta
Francis V. Cuttita
Siebert 2023 Form-10K 80
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
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. Consolidated Financial Statements
The consolidated financial statements for the years ended December 31, 2023 and 2022 commence on page 30 of this Annual Report on Form 10-
K.
2. Consolidated Financial Statement Schedules
None.
3. Exhibits
The exhibits listed in the following Exhibit Index are filed or incorporated by reference as part of this Annual Report on Form 10-K.
Exhibit No. Description Of Document
EXHIBIT INDEX
3.1
3.1(a)
3.2
4.1
4.2*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
1997).
Certificate of Amendment to Certificate of Incorporation of Siebert Financial Corp., as amended and restated, filed February 2, 2020
(incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019).
By-laws of Siebert Financial Corp. (incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-49843)
filed on April 10, 1998).
Description of Registrant’s Securities (incorporated by reference to Exhibit 4.0 to the Company’s Annual Report on Form 10-K filed on
March 30, 2022).
Siebert Financial Corp. 2021 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-
K filed on March 30, 2022).
Consent and Waiver dated as of December 16, 2016 by and among Siebert Cisneros Shank Financial, LLC, Siebert Cisneros Shank & Co.
L.L.C. and Siebert Financial Corp. (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed on April
6, 2017).
Fully Disclosed Clearing Agreement, by and between NFS LLC and Muriel Siebert & Co., Inc. dated May 5, 2010 (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 16, 2010).
Promissory Note, dated as of December 2, 2019, made by Siebert Financial Corp. in favor of Gloria E. Gebbia. (incorporated by reference
to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on December 4, 2019).
Common Stock Purchase Agreement, dated as of January 31, 2021, between Siebert Financial Corp. and OpenHand Holdings, Inc.
(incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on May 17, 2021).
Amendment to Fully Disclosed Clearing Agreement, dated as of August 1, 2021, by and between Muriel Siebert & Co., Inc. and National
Financial Services LLC. (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed on November
15, 2021).
Guaranty Agreement, dated as of August 1, 2021, between Siebert Financial Corp. and National Financial Services LLC (incorporated by
reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed on November 15, 2021).
Amendment No. 1 to Common Stock Purchase Agreement, dated as of August 18, 2021, between Siebert Financial Corp. and OpenHand
Holdings, Inc. (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q filed on November 15, 2021).
Siebert 2023 Form-10K 81
10.8
10.9
10.10
10.11
10. 12
10.13
10.14
10.15
10.16
21.1**
23.1**
31.1**
31.2**
32.1#
32.2#
97**
101.INS
Purchase Agreement dated as of December 30, 2021, for 653 Collins Ave, Miami Beach, FL, between Siebert Financial Corp. and City
National Bank of Florida, a national banking association, as trustee under the provisions of a certain Trust Agreement, dated 22nd day of
March, 1993 (incorporated by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K filed on January 5, 2022).
Promissory Note and Loan and Security Agreement, dated as of December 30, 2021, between East West Bank and Siebert Financial Corp.
(incorporated by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K filed on January 5, 2022).
Debt Exchange Agreement between Siebert Financial Corp. and Gloria E. Gebbia, dated March 31, 2022 (incorporated by reference to
Exhibit 10.24 to the Company’s Current Report on Form 8-K filed on April 6, 2022).
Capital on DemandTM Sales Agreement, dated May 27, 2022, by and between Siebert Financial Corp. and JonesTrading Institutional
Services LLC. (incorporated by reference to Exhibit 10.25 to the Company’s Current Report on Form 8-K filed on May 27, 2022).
Registration Rights and Lock-Up Agreement (incorporated by reference to Exhibit 10.39 to the Company’s Current Report on Form 8-K
dated May 3, 2023).
Share Redemption Agreement, dated July 10, 2023, by and among Cynthia DiBartolo, Siebert Financial Corp, and Tigress Holdings, LLC
(incorporated by reference to Exhibit 10.40 to the Company’s Current Report on Form 8-K dated July 14, 2023).
Termination and Settlement Agreement, dated December 19, 2023 (incorporated by reference to Exhibit 10.41 to the Company’s Current
Report on Form 8-K dated December 20, 2023).
Amended and Restated Stockholders’ Agreement, dated December 19, 2023 (incorporated by reference to Exhibit 10.42 to the Company’s
Current Report on Form 8-K dated December 20, 2023).
Purchase Agreement, dated January 18, 2024 (incorporated by reference to Exhibit 10.43 to the Company’s Current Report on Form 8-K
dated January 24, 2024).
Subsidiaries of the registrant
Consent of Baker Tilly US, LLP
Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant of Section 906 of the Sarbanes-Oxley
Act of 2002.
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant of Section 906 of the Sarbanes-Oxley
Act of 2002.
Clawback Policy
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document).
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (embedded with Inline XBRL document).
* Management contract or compensatory plan or arrangement.
** Filed herewith
#
This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise
subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or
the Exchange Act.
ITEM 16. FORM 10-K SUMMARY
None.
Siebert 2023 Form-10K 82
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/ John J. Gebbia
John J. Gebbia
Chief Executive Officer and Chairman
(Principal executive officer)
Date: May 10, 2024
By:
/s/ Andrew H. Reich
Andrew H. Reich
Executive Vice President, Chief Operating Officer,
Chief Financial Officer, Secretary and Director
(Principal financial and accounting officer)
Date: May 10, 2024
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
/s/ John J. Gebbia
John J. Gebbia
/s/ Andrew H. Reich
Andrew H. Reich
/s/ Gloria E. Gebbia
Gloria E. Gebbia
/s/ Charles Zabatta
Charles Zabatta
/s/ Francis V. Cuttita
Francis V. Cuttita
/s/ Jerry M. Schneider
Jerry M. Schneider
/s/ Hocheol Shin
Hocheol Shin
Chief Executive Officer and Chairman (Principal executive officer)
Title
Executive Vice President, Chief Operating Officer and Chief Financial
Officer, Secretary and Director (Principal financial and accounting officer)
Director
Director
Director
Director
Director
Date
May 10, 2024
May 10, 2024
May 10, 2024
May 10, 2024
May 10, 2024
May 10, 2024
May 10, 2024
Siebert 2022 Form-10K 83
Company
1. Muriel Siebert & Co., Inc.
Siebert AdvisorNXT, Inc.
2.
Park Wilshire Companies, Inc.
3.
4.
Siebert Technologies, LLC
5. RISE Financial Services, LLC
6.
StockCross Digital Solutions, Ltd.**
* Ownership percentage as of the date of this Report
** Inactive subsidiary
SUBSIDIARIES
Jurisdiction
Delaware
New York
Texas
Nevada
Delaware
Bermuda
Exhibit 21.1
% Owned*
100.0%
100.0%
100.0%
100.0%
68.0%
100.0%
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (File Nos. 333-276585 and 333-262895) and Form S-8
(File No. 333-269058) of Siebert Financial Corp. (the Company) of our report dated May 10, 2024, relating to the consolidated financial statements, which
appears in this annual report on Form 10-K for the year ended December 31, 2023.
Exhibit 23.1
/s/ BAKER TILLY US, LLP
New York, New York
May 10, 2024
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, John J. Gebbia, 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(s) 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;
(c) 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/ John J. Gebbia
John J. Gebbia
Chief Executive Officer
(Principal executive officer)
Date: May 10, 2024
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 31.2
I, Andrew H. Reich, 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(s) 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;
(c) 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/ Andrew H. Reich
Andrew H. Reich
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Secretary
(Principal financial and accounting officer)
Date: May 10, 2024
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, 2023, as filed with the
SEC (the “Report”), I, John J. Gebbia, in my capacity as Chief Executive Officer 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 SEC 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/ John J. Gebbia
John J. Gebbia
Chief Executive Officer
(Principal executive officer)
Date: May 10, 2024
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 SEC or its staff upon request.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Siebert Financial Corp. (the “Company”) on Form 10-K for the year ended December 31, 2023, as filed with the
SEC (the “Report”), I, Andrew H. Reich, in my capacity as Executive Vice President, Chief Operating Officer, Chief Financial 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 SEC 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/ Andrew H. Reich
Andrew H. Reich
Executive Vice President, Chief Operating Officer,
Chief Financial Officer, and Secretary
(Principal financial and accounting officer)
Date: May 10, 2024
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 SEC or its staff upon request.
SIEBERT FINANCIAL CORP.
CLAWBACK POLICY
Exhibit 97
1.
Introduction
The Board of Directors (the “Board”) of Siebert Financial Corp. (the “Company ”) believes that it is in the best interests of the Company and its
stockholders to adopt this Clawback Policy (this “Policy”), which provides for the recoupment of certain executive compensation in the event of an
accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws. This Policy is
designed to comply with, and shall be interpreted to be consistent with, Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), Rule 10D-1 promulgated under the Exchange Act, and The Nasdaq Stock Market LLC (“Nasdaq”) Listing Rule 5608 (the “Listing Standards”).
2. Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee (the Board or such committee
charged with administration of this Policy, the “Administrator”). The Administrator is authorized to interpret and construe this Policy and to make all
determinations necessary, appropriate or advisable for the administration of this Policy. Any determinations made by the Administrator shall be final and
binding on all affected individuals and need not be uniform with respect to each individual covered by the Policy. In the administration of this Policy, the
Administrator is authorized and directed to consult with the full Board, or such other committees of the Board, such as the Compensation Committee, if not
the Administrator, the Audit Committee or the Nominating & Corporate Governance Committee, as may be necessary or appropriate as to matters within
the scope of such other committee’s responsibility and authority. Subject to any limitation at applicable law, the Administrator may authorize and empower
any officer or employee of the Company to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (other than
with respect to any recovery under this Policy involving such officer or employee).
3. Application of this Policy; Covered Executives
This Policy applies to Incentive Compensation (as defined below) received by the Company’s current and former executive officers (as determined
by the Board in accordance with the definition of “executive officer” set forth in Section 10D of the Exchange Act and the Listing Standards) (“Covered
Executives”) (a) after beginning services as a Covered Executive, (b) who served as a Covered Executive at any time during the performance period for
such Incentive Compensation, (c) while the Company had a listed class of securities on a national securities exchange and (d) during the Applicable Period
(as defined below).
4. Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material
noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in
previously issued financial statements that is material to the previously issued financial statements or that would result in a material misstatement if the
error were corrected in the current period or left uncorrected in the current period (“Accounting Restatement”), the Company shall promptly recoup the
amount of any Erroneously Awarded Compensation (as defined below) received by any Covered Executive, as calculated pursuant to Section 6 hereof,
during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an Accounting Restatement, as well as
any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years (except
that a transition period that comprises a period of at least nine months shall count as a completed fiscal year) (the “Applicable Period”).
5.
Incentive Compensation
For purposes of this Policy, “Incentive Compensation” means any compensation that is granted, earned or vested based wholly or in part upon
the attainment of a financial reporting measure. Incentive Compensation is “received” for purposes of this Policy in the Company’s fiscal period during
which the financial reporting measure specified in the Incentive Compensation award is attained, even if the payment or grant of such Incentive
Compensation occurs after the end of that period.
Financial reporting measures include but are not limited to the following (and any measures derived from the following):
● Company stock price.
● Total stockholder return.
● Revenues.
● Net income.
● Earnings before interest, taxes, depreciation, and amortization (EBITDA).
● Liquidity measures, such as working capital or operating cash flow.
● Return measures, such as return on invested capital or return on assets.
● Earnings measures, such as earnings per share.
6. Erroneously Awarded Compensation; Amount Subject to Recovery
The amount of “Erroneously Awarded Compensation” subject to recovery under this Policy, as determined by the Administrator, is the amount
of Incentive Compensation received by a Covered Executive that exceeds the amount of Incentive Compensation that otherwise would have been received
by such Covered Executive had it been determined based on the restated amounts in the Accounting Restatement, without regard to any taxes paid by such
Covered Executive in respect of the Erroneously Awarded Compensation.
For Incentive Compensation based on stock price or total stockholder return: (a) the Administrator shall determine the amount of Erroneously
Awarded Compensation based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total stockholder return upon
which the Incentive Compensation was received, and (b) the Company shall maintain documentation of the determination of that reasonable estimate and
provide such documentation to Nasdaq.
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7. Method of Recoupment
The Administrator shall determine, in its sole discretion, the timing and method for promptly recouping Erroneously Awarded Compensation
hereunder, which may include, without limitation: (a) seeking reimbursement of all or part of any cash or equity-based award, (b) cancelling prior cash or
equity-based awards, whether vested or unvested or paid or unpaid, (c) cancelling or offsetting against any planned future cash or equity-based awards, (d)
forfeiture of deferred compensation, subject to compliance with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder
and (e) any other method authorized by applicable law or contract. Subject to compliance with any applicable law, the Administrator may affect recovery
under this Policy from any amount otherwise payable to the Covered Executive, including amounts payable to such individual under any otherwise
applicable Company plan or program, including base salary, bonuses or commissions and compensation previously deferred by the Covered Executive.
8. No Indemnification of Covered Executives
Notwithstanding the terms of any indemnification or insurance policy or any contractual arrangement with any Covered Executive that may be
interpreted to the contrary, the Company shall not indemnify any Covered Executives against the loss of any Erroneously Awarded Compensation,
including any payment or reimbursement for the cost of third-party insurance purchased by any Covered Executives to fund potential clawback obligations
under this Policy.
9. Administrator Indemnification
Any members of the Administrator, and any other members of the Board who assist in the administration of this Policy, shall not be personally
liable for any action, determination or interpretation made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent
under applicable law and Company policy with respect to any such action, determination or interpretation. The foregoing sentence shall not limit any other
rights to indemnification of the members of the Board under applicable law or Company policy.
10. Effective Date
This Policy shall be effective as of (the “Effective Date”) and shall apply to any Incentive Compensation that is received by Covered Executives
on or after December 1, 2023, even if such Incentive Compensation was approved, awarded, granted or paid to Covered Executives prior to the Effective
Date.
11. Amendment; Termination
The Administrator may amend, modify, supplement, rescind or replace all or any portion of this Policy at any time and from time to time in its
discretion, and shall amend this Policy as it deems necessary to comply with applicable law, the Listing Standards and any other rules or standards adopted
by a national securities exchange on which the Company’s securities are listed. The Board may terminate this Policy at any time, provided that such
termination would not cause the Company to violate any federal securities laws, or rules promulgated by the U.S. Securities and Exchange Commission or
the Listing Standards.
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12. Other Recoupment Rights
Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to
the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal
remedies available to the Company.
13. Relationship to Other Plans and Agreements
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity
award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a
Covered Executive to agree to abide by the terms of this Policy. In the event of any inconsistency between the terms of this Policy and the terms of any
employment agreement, equity award agreement, or similar agreement under which Incentive Compensation has been granted, awarded, earned or paid to a
Covered Executive, whether or not deferred, the terms of this Policy shall govern.
14. Impracticability
The Company is authorized and directed pursuant to this Policy to recoup Erroneously Awarded Compensation in compliance with this Policy
unless the Administrator has determined that recovery would be impracticable solely for the following limited reasons, and subject to the following
procedural and disclosure requirements:
● The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered. Before concluding that it
would be impracticable to recover any amount of Erroneously Awarded Compensation based on expense of enforcement, the Administrator
must make a reasonable attempt to recover such erroneously awarded compensation, document such reasonable attempt(s) to recover and
provide that documentation to Nasdaq; or
● Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the
Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
15. Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal
representatives.
16. Exhibit Filing Requirement
A copy of this Policy and any amendments thereto shall be posted on the Company’s website and filed as an exhibit to the Company’s annual
report on Form 10-K.
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