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, 2024
☐ 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
11-1796714
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
653 Collins Avenue, Miami Beach, FL
33139
(Address of principal executive offices)
(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
Trading Symbol(s)
Name of each exchange on which registered
Common Stock - $0.01 par value
SIEB
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 ☐
Accelerated filer ☐
Non-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, 2024), was approximately
$23,291,000.
The number of shares of the registrant’s outstanding
common stock, as of March 28, 2025, were 41,432,936 issued and 40,432,936 shares outstanding.
Documents Incorporated by Reference: None
SIEBERT FINANCIAL CORP.
TABLE OF CONTENTS
PART I
1
ITEM 1. BUSINESS
1
ITEM 1A. RISK FACTORS
10
ITEM 1B. UNRESOLVED STAFF COMMENTS
19
ITEM 1C. CYBERSECURITY
19
ITEM 2. PROPERTIES
21
ITEM 3. LEGAL PROCEEDINGS
21
ITEM 4. MINE SAFETY DISCLOSURES
21
PART II
22
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
22
ITEM 6. [REVERVED]
22
ITEM 7. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
F-1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
32
ITEM 9A. CONTROLS AND PROCEDURES
32
ITEM 9B. OTHER INFORMATION
33
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
33
PART III
34
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
34
ITEM 11. EXECUTIVE COMPENSATION
40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
46
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
46
PART IV
48
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
48
ITEM 16. FORM 10-K SUMMARY
50
SIGNATURES
51
i
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., and 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.
ii
PART I
ITEM 1. BUSINESS
Overview of Company
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. As part of our strategic initiatives to diversify and
create synergies between our enterprises, we acquired a media and entertainment
company. Additionally we created an investment advisory committee with
several veterans in the entertainment 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.
●
Gebbia Entertainment, LLC (“GE”) is a Florida
limited liability company and provides media entertainment services.
For purposes of this Annual
Report, the terms “Siebert,” “Company,” “we,” “us” and “our” refer to Siebert
Financial Corp., MSCO, SNXT, PW,
STCH, RISE, STXD, and GE, collectively, unless the context otherwise requires.
Our
headquarters is located at 653 Collins Avenue, Miami Beach, FL 33139, with primary operations in New York, 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 10 branch offices throughout the U.S. and clients
around the world.
As of March 11, 2025, we had
146 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.
Today,
MSCO offers a wide range of products and services and is the primary subsidiary of Siebert.
1
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
(“Fidelity Investments”).
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 are 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.
2
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.
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.
3
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 it into our operations.
Investment Banking
and Capital Markets
During the first quarter of
2025, the Company established an Investment Banking and Capital Markets division as part of its strategic expansion
designed to serve
middle-market clients often overlooked by larger financial institutions. The Company has hired several experienced professionals
with
extensive experience in capital markets, M&A, and financial advisory services to lead and develop this growth initiative. These
hires represent a significant
investment in the Company’s future operations.
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.
Products and Services
The products and services offered by SNXT include:
●
Managed portfolios
●
Separately managed accounts
4
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
Overview
STCH
is an innovative technology subsidiary dedicated to advancing new technology for our clients as well as our business operations. By
leveraging
cutting-edge technology, STCH is positioned to drive the evolution of our products and services, delivering greater efficiency, accessibility,
and
value to our clients. With a focus on future fintech opportunities, STCH aims to be at the forefront of developing transformative
solutions that will cater to
both retail and corporate service clients.
During 2024, we hired a new
President of STCH with over 25 years of experience in technology leadership and innovation, changed our primary
software development vendor,
and made investments in technology development.
Some of these technology investments
include the development of a Siebert mobile trading application, online platform for our retail customer
base and corporate services clients,
as well as upgrades to our technological and operational infrastructure to support these platforms and future growth. We
believe that
these ongoing investments in technology will be key to meeting the needs of our retail customers, correspondent clearing, corporate services
as
well as expand into new markets and demographics. We look to continue to expand this business line and additional product offerings
through technology
development.
RISE Financial Services, LLC
Overview
RISE,
a registered broker-dealer with the SEC and a member of FINRA, is currently conducting a comprehensive review of its strategic initiatives
to evaluate potential opportunities and determine the most effective course of action for future operations.
5
Gebbia Entertainment, LLC
Overview
GE is a media entertainment
company with reach into the realms of music, entertainment and media. GE has a business partnership with GAMMA
Media and L.A Reid LLC
for the rights to SIMIEN, a talented group of three sisters from Los Angeles, California who are managed by the globally
renowned singer,
songwriter and producer, Akon, who also serves as a member of the Company’s advisory committee.
Other Business Developments
Advisory Committee
In 2024, we established a
new advisory committee composed of prominent leaders from the finance, technology, sports, and entertainment
industries. This committee
provides strategic guidance to us as we pursue an ambitious growth strategy. The advisory committee includes globally
recognized artist
and entrepreneur Akon, former NFL athlete and media entrepreneur Brandon Marshall, Wall Street professional Mick Solimene
(Managing Director,
Monroe Capital), Steven Geskos (Operating Partner, Fifth Down), entertainment entrepreneur Nick Jarjour (CEO, JarjourCo and
former Global
Head of Song Management at Hipgnosis Songs Fund), and Laura J. Richardson (retired United States Army general).
Each advisory committee member
brings unique expertise and an extensive network to support Siebert’s innovation and expansion. Notably,
Akon, known for his entrepreneurial
ventures and philanthropic initiatives, has partnered with GE in co-managing SIMIEN, a rising female recording artist
group. The advisory
committee meets regularly to discuss key opportunities, leveraging their collective experience in an effort to drive our growth and
enhance
shareholder value.
Strategic Initiatives
In 2024, we began undertaking
a strategic rebranding initiative designed to enhance our digital presence and expand our evolving services. As part
of this rebranding,
we have shifted our focus to provide innovative financial management solutions tailored to a diverse range of clients such as athletes
and
artists, bridging the gap between traditional finance and creative industries. By integrating cutting-edge technologies, we aim to
position ourselves as a
forward-thinking leader, delivering relevant and insightful content to our audience. This revitalized approach
reflects our commitment to staying ahead of
industry trends and offering a more personalized, impactful experience to our clients.
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.
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.
6
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, and 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 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 additional protection. Neither SIPC protection nor the additional protection
insures against fluctuations in the
market value of securities.
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 uncovered
options in writing.
7
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’ interest 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.
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.
8
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, changing 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 March 11, 2025, we had 146 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.
9
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 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.
10
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 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 NFA and function as a registered introducing broker.
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 from 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.
11
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.
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, changing 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.
We have purchased liability
insurance and cybersecurity insurance with a coverage limit of $15 million and a deductible of $250,000 to mitigate
the financial impact
of potential cyber-attacks. However, our insurance may not be sufficient in type or amount to fully cover claims arising from security
breaches, cyber-attacks, and other related incidents.
12
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.
13
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 forgo 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
We previously identified material weaknesses
in our internal control over financial reporting and if we fail to maintain an effective system of internal
control in the future, this
could result in loss of investor confidence and adversely impact our stock price.
We reported in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2023, a material weakness because 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. During 2024, we also
identified material weaknesses relating to (1) our failure to design adequate internal controls
surrounding security market values within our back-office
stock record system, including the accuracy and completeness of pricing of firm
and customers’ fully paid and excess margin securities, and (2) our internal
controls surrounding the quarterly securities count
lacking sufficient documented review and precision of review to demonstrate the completeness and
accuracy of the count performed in accordance
with Rule 17a-13 of the Exchange Act. As of December 31, 2024, we completed the remediation measures
related to the material weaknesses
and concluded that our internal control over financial reporting was effective as of December 31, 2024. Completion of
remediation does
not provide assurance that our remediation or other controls will continue to operate properly. 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.
14
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;
●
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 2026. In the event that the license agreement is terminated, or if the license agreement is not renewed or extended beyond
2026,
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.
15
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.
Risks Related to Our Common Stock
There may be a limited public market for
our common stock; Volatility.
13,908,556 shares of our common
stock, or approximately 34.4% of our shares of our common stock outstanding, are currently held by non-
affiliates as of March 5, 2025.
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
42%
of our common stock as of December 31, 2024. 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.
16
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), we filed a registration statement with the SEC registering these shares for resale. 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, 2024 to December 31, 2024 was approximately 24,327 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.
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 2024 or 2023. 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.
17
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. Decreases in interest rates negatively impact our revenue by reducing the margin and other interest income,
as well as distribution fees
received from money market securities. Lower rates can compress net interest margins, impacting the profitability
of our interest-earning assets and
affecting overall revenue.
As
the U.S. economy navigates a period of stabilization, inflation remains elevated, and the Federal Reserve may raise, maintain or lower
rates in
the future in response to evolving economic conditions. While we believe the current interest rate environment may present challenges,
a decrease in rates
could reduce our interest revenue if yields on interest-earning assets decline without a corresponding decrease in
our funding costs, compress net interest
margins if competitive pressures prevent us from lowering deposit rates, and impact market conditions
by reducing trading volumes, spreads, and demand
for certain brokerage products.
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, geopolitical conflicts, 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.
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 positions, 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 costs, 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.
18
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.
The soundness of other financial institutions
and intermediaries affects us.
We face the risk of operational
failure, termination or capacity constraints of any of the clearing agents, exchanges, clearing houses or other
financial intermediaries
that we use to facilitate our securities transactions. As a result of the consolidation over the years of clearing agents, exchanges and
clearing houses, our exposure to certain financial intermediaries has increased and could affect our ability to find adequate and cost-effective
alternatives
should the need arise. Any failure, termination or constraint of these intermediaries could adversely affect our ability
to execute transactions, service our
clients and manage our exposure to risk.
Our ability to engage in routine
trading and funding transactions could be adversely affected by the actions and commercial soundness of other
financial institutions.
Financial services institutions are interrelated as a result of trading, clearing, funding, and counterparties or other relationships.
We
have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial
industry, including
brokers and dealers, commercial banks, investment banks, mortgage originators and other institutional clients. As
a result, defaults by, or even rumors or
questions about the financial condition of, one or more financial services institutions, or the
financial services industry generally, have historically led to
market-wide liquidity problems and could lead to losses or defaults by
us or by other institutions. Many of these transactions expose us to credit risk in the
event of default of our counterparty or client.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is
liquidated at prices insufficient
to recover the full amount of the loan or derivative exposure due us. Although we have not suffered any material or
significant losses
as a result of the failure of any financial counterparty, any such losses in the future may materially adversely affect our results of
operations.
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.
19
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.
●
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 in an industry-relevant context, relating to topics
such as anti-money laundering, social engineering, and
fraud prevention.
●
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, which
is 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.
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 occurred during the fiscal year ended December 31, 2024 that
have materially affected,
or are reasonably likely to materially affect us, including with respect to our business strategy, results of operations or financial
condition. We acknowledge that we cannot eliminate all cybersecurity 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.
20
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. The CTO also has key responsibilities
and provides 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.
ITEM 2. PROPERTIES
We currently maintain our
headquarters and 10 branch offices that customers can visit 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 offices:
Approximate
Square Feet
Corporate Headquarters
Miami Beach, FL – 653 Collins Avenue
12,000
Branch Offices
Beverly Hills, CA – 190 N Canon
900
Beverly Hills, CA – 9378 Wilshire
3,500
Boca Raton, FL
1,600
Boston, MA
1,700
Calabasas, CA
3,200
Horsham, PA
2,000
Omaha, NE
2,900
Seal Beach, CA
800
Tampa, FL
1,000
New York, NY
8,000
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business,
we may be subject to various proceedings and claims arising from our business activities, including lawsuits,
arbitration claims and regulatory
matters. We are also involved in other reviews, investigations and proceedings by governmental and self-regulatory
organizations regarding
the business, which may result in adverse judgments, settlements, fines, penalties, injunctions and other relief. In many cases,
however,
it is inherently difficult to determine whether any loss is probable or reasonably possible or to estimate the amount or range of any
potential loss,
particularly where proceedings may be in relatively early stages. In our opinion, based on currently available information,
the ultimate resolution of current
matters will not have a material adverse impact on our financial position and results of operations.
However, resolution of one or more of these matters may
have a material effect on the results of operations in any future period, depending
upon the ultimate resolution of those matters and depending upon the
level of income for such period.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
21
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market Information
Our common stock trades on
the Nasdaq Capital Market, under the symbol “SIEB.” The number of common stockholders of record as of March
11, 2025, was
79. The closing market price per share on that date was $2.22. Based on information available to us, we believe there are approximately
3,328 beneficial holders of our common stock as of March 13, 2025.
Dividend Policy
No dividends were paid to
shareholders during 2024 and 2023. 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 February 22, 2024, the Company granted 150,000 shares
of restricted common stock, subject to vesting over the vesting period, as
compensation to consultants of the Company. The common stock
was issued pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities
Act”). Refer to Note 23 – Employee
Benefit Plans for more detail.
On May 28, 2024, the Company granted 70,000 shares
of restricted common stock that were fully vested upon grant date as compensation to a
consultant of the Company. The common stock was
issued pursuant to Section 4(a)(2) of the Securities Act. Refer to Note 23 – Employee Benefit Plans for
more detail.
ITEM 6.
[RESERVED]
None.
22
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.
Financial Overview
In
2024, earnings per share were $0.33, compared to earnings per share of $0.21 in 2023. In 2024, our net revenues were $83.9 million and
net
income was $13.3 million, compared to net revenues of $71.5 million and net income of $7.8 million in 2023.
Financial
highlights as of December 31, 2024:
●
Retail customer net worth increased by 13% to $18.0 billion compared to 2023
●
Revenue related to stock borrow / stock loan increased by 19% to 19.2 million compared to 2023
●
Revenue related to commissions and fees increased by 32% to $9.6 million compared to 2023
Trends and Key Factors
Affecting our Operations
Market Risk
Market
risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory and investment positions. We have
exposure to market risk primarily through our broker-dealer trading operations. Through our broker-dealer subsidiary, we trade debt obligations
and equity
securities and maintain trading inventories to ensure availability of securities to facilitate client transactions. Inventory
levels may fluctuate daily as a result
of client demand. Our primary market risks relate to interest rates and equity prices. Equity risk
results from changes in prices of equity securities, affecting
the value of the equity securities and other instruments that derive their
value from a particular stock.
We
may enter into underwriting commitments and, as a result, we may be subject to market risk on any unsold securities issued in the offerings
to
which we are committed. Risk exposure is controlled by limiting our participation, the transaction size, or through the syndication
process.
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.
23
The following table presents
simulated changes to net interest revenue over the next 12 months beginning December 31, 2024 and 2023 of a
gradual increase or decrease
in market interest rates relative to prevailing market rates at the end of each reporting period:
As of December 31,
2024
2023
Increase of 200 basis points
32%
36%
Increase of 100 basis points
18%
20%
Increase of 50 basis points
11%
5%
Decrease of 50 basis points
(4)%
(3)%
Decrease of 100 basis points
(11)%
(10)%
Decrease of 200 basis points
(26)%
(25)%
The difference in our simulated
incremental increases and decreases in the market interest rates as of December 31, 2024 compared to 2023 is
primarily due to an increase
in the proportion of segregated cash to segregated securities and a decrease in the proportion of margin debit balances to cash
credit
balances.
Technology Initiatives
At the end of 2023, we hired
new technology personnel, changed our primary software development vendor, and made investments in technology
development.
Some of these technology investments
include the development of a Siebert mobile trading application, online platform for our retail customer
base and corporate services clients,
as well as upgrades to our technological and operational infrastructure to support these platforms and future growth. We
believe that
these ongoing investments in technology will be key to meeting the needs of our retail customers, correspondent clearing, corporate services
as
well as expand into new markets and demographics.
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
As of December 31,
2024
2023
Retail customer net worth (in billions)
$
18.0 $
15.9
Retail customer margin debit balances (in billions)
$
0.4 $
0.3
Retail customer credit balances (in billions)
$
0.4 $
0.5
Retail customer money market fund value (in billions)
$
0.8 $
0.7
Retail customer accounts
160,054
153,727
●
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 represent credit extended
to our customers to finance their purchases against current positions
●
Retail customer credit balances represent 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 represent the number of retail customers
24
Consolidated Statements of Operations and Financial
Condition
Consolidated Statements of Operations for
the Years Ended December 31, 2024 and 2023
Revenue
Commissions and fees for the
year ended December 31, 2024 were $9,615,000 and increased by $2,339,000 from the corresponding
period in the
prior year, primarily due to strong market conditions.
Interest, marketing and distribution
fees for the year ended December 31, 2024 were $32,407,000 and increased by $2,830,000 from the
corresponding period in the prior year primarily due to an increase in interest income received on U.S. government securities and
bank deposits.
Principal transactions and
proprietary trading for the year ended December 31, 2024 were $14,616,000 and increased by $1,522,000
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 decrease
in
unrealized gain on our portfolio of U.S. government securities was due to the maturity of certain U.S. government securities and a
decrease in investment 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.
Year Ended December 31,
2024
2023
Year over
Year Increase
Principal transactions and proprietary trading
Realized and unrealized gain on primarily riskless principal transactions
$
14,251,000 $
9,275,000 $
4,976,000
Realized and unrealized gain (loss) on portfolio of U.S. government securities
365,000
3,819,000
(3,454,000)
Total Principal transactions and proprietary trading
$
14,616,000 $
13,094,000 $
1,522,000
Market making for the year
ended December 31, 2024 was $2,255,000 and increased by $951,000 from the corresponding period in
the prior year,
primarily due to strong equity markets.
Stock borrow / stock loan
for the year ended December 31, 2024 was $19,249,000 and increased by $3,077,000 from the corresponding
period in
the prior year, primarily due to a growth in stock locate services.
Advisory fees for the year
ended December 31, 2024 were $2,369,000 and increased by $441,000 from the corresponding period
in the prior year,
primarily due to growth in platform assets.
Other income for the year
ended December 31, 2024 was $3,390,000 and increased by $1,227,000 from the corresponding period
in the prior year,
primarily due to fees related to an increase in maintenance fees during the current year.
Operating Expenses
Employee compensation and
benefits for the year ended December 31, 2024 were $43,999,000 and increased by $12,063,000 from
the
corresponding period in the prior year, primarily due to an increase in commission payouts
and executive compensation.
Clearing
fees, including execution costs for the year ended December 31, 2024 were $1,607,000 and decreased by $65,000 from the corresponding
period
in the prior year.
Technology and communications
expenses for the year ended December 31, 2024 were $3,940,000 and increased by $576,000 from the
corresponding period in the prior year, primarily due to an expansion of technological infrastructure.
25
Other general and administrative
expenses for the year ended December 31, 2024 were $4,488,000 and increased by $78,000 from the
corresponding period in the prior year.
Data processing expenses for
the year ended December 31, 2024 were $3,200,000 and decreased by $36,000 from the corresponding
period in the
prior year.
Rent and occupancy expenses
for the year ended December 31, 2024 were $1,631,000 and decreased by $242,000 from the corresponding
period
in the prior year, primarily due to a discontinued rent expense related to the temporary Miami office.
Professional fees for the
year ended December 31, 2024 were $5,578,000 and increased by $1,119,000 from the corresponding
period in the prior
year, primarily due to an increase in legal and accounting fees offset by a decrease in consulting services.
Depreciation and amortization
expenses for the year ended December 31, 2024 were $1,380,000 and decreased by $640,000 from the
corresponding period in the prior year, primarily due to the write off of development related
to integration of a technology platform that occurred in the
prior year.
Interest expense for the year
ended December 31, 2024 was $262,000 and decreased by $1,000 from the corresponding period in the
prior year.
Advertising
and promotion expenses for the year ended December 31, 2024 were $348,000 and increased by $193,000 from the corresponding
period in the
prior year, primarily due to an increase in marketing initiatives in 2024.
Non-Operating
Income (Loss)
The earnings of equity method
investment in related party for the year ended December 31, 2024 was $0 and decreased by $111,000
from the
corresponding period in the prior year, primarily due to the exit of our investment in Tigress in the third quarter of 2023.
The
impairment of investments for the year ended December 31, 2024 was $0 and decrease by $1,035,000 from the corresponding period in the
prior year, primarily due to the impairment of our investment in a technology provider of a trading platform and the impairment of our
investment in
Tigress occurring in 2023.
Transaction termination costs
for the year ended December 31, 2024 was $0 and decreased by $5,943,000 from the corresponding period in the
prior year due to costs associated
with the termination of the Kakaopay transaction in 2023.
Provision For (Benefit From) Income Taxes
The provision for income taxes
for the year ended December 31, 2024 was $4,165,000 and increased by $750,000 from the corresponding period
in the prior year. The change
from the corresponding period in the prior year is primarily due to increased profitability year over year. Refer to Note 17 –
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, 2024 was $17,000, and decreased by $1,000 from the
corresponding period
in the prior year.
26
Consolidated Statements of Financial Condition
as of December 31, 2024 and 2023
Assets
Assets as of December 31,
2024 were $519,668,000 and decreased by $282,132,000 from December 31, 2023, primarily due to a
decrease in
securities borrowed and cash and securities segregated, partially offset by an increase in cash and cash equivalents.
Liabilities
Liabilities as of December
31, 2024 were $434,576,000 and decreased by $296,515,000 from December 31, 2023, primarily due to
a decrease in
securities loaned and payables to customers.
Liquidity and Capital Resources
Overview
As
of December 31, 2024, a significant portion of our assets were liquid in nature, providing us with flexibility in financing our business.
A
significant portion of our assets not held by customers or used for stock borrow / stock loan consisted primarily of cash and cash equivalents,
securities
owned, at fair value, which are marked-to-market daily, and receivables from and deposits with broker-dealers and clearing
organizations.
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,
other than the items
detailed in the section below, 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” in the consolidated statements of financial condition. Refer to Note 6 – Kakaopay
Transaction for further detail.
Cash and Cash Equivalents
Our
cash and cash equivalents were $32.6 million and $5.7 million as of December 31, 2024 and 2023, respectively.
Credit Agreement
On
August 15, 2024, we entered into the Credit Agreement with East West Bank providing a $20 million revolving credit facility, which offers
substantial financial flexibility to support our strategic initiatives. This credit facility allows the Company to fund acquisitions,
execute stock buybacks, and
meet general corporate needs up to $10 million, ensuring access to capital for both growth and operational
purposes. The two-year term of the Credit
Agreement, combined with a competitive interest rate structure that is tied to either the one-month
Term SOFR plus 3.15% or a minimum of 7.50%,
provides a stable and predictable financing source. The personal guarantees provided by key
executives, John J. Gebbia and Gloria E. Gebbia, and their
trust, further strengthen the Company’s borrowing position and help secure
favorable terms.
27
BMO Credit Agreement
On
November 22, 2024, MSCO entered into a Credit Agreement (the “BMO Credit Agreement”) with BMO Harris Bank (“BMO Harris”).
The
BMO Credit Agreement provides for a revolving credit facility of up to $20,000,000. We may use any borrowings under the BMO Credit
Agreement to
finance NSCC Deposit Requirements (other than an Adequate Assurance Deposit) and withdrawals from a Reserve Account. As part
of the agreement, we
entered into a Parent Guaranty agreement guaranteeing repayment of any debt issued to MSCO.
Borrowings under the BMO Credit Agreement will
bear interest on the outstanding daily balance at a rate of interest per annum equal 2.5% plus
the greater of: (a) Term SOFR for such
day plus 0.11448% and (b) Federal Funds Target Range – Upper Limit and (c) 0.25%. The annual commitment fee
is equal to one half
of one percent (0.50%) of the average daily unused portion of the commitment of $20,000,000. The BMO Credit Agreement contains
customary
affirmative covenants and negative covenants and requires MSCO maintain minimum total regulatory capital of $45,000,000, excess net capital
of 20,000,000, assets to total regulatory capital ratio of not more than 5.0 to 1.0, and a minimum liquidity ratio of not less than 1.0.
We satisfied its condition precedent to deliver
a legal option to BMO Harris on December 18, 2024.
Debt Agreements
We
have $4.2 million outstanding on our 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, 2024. As of December 31, 2024, 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, 2024.
Payments Due by Period
2025
2026
2027
2028
2029
Thereafter
Total
Operating lease commitments
$ 1,048,000 $
836,000 $
594,000 $
503,000 $
45,000 $
— $ 3,026,000
Kakaopay fee (1)
2,000,000 1,000,000
—
—
—
—
3,000,000
Mortgage with East West Bank (2)
88,000
91,000
95,000
98,000
112,000 3,744,000
4,228,000
Technology vendors (3)
872,000
—
—
—
—
—
872,000
Broadridge contract (4)
407,000
170,000
—
—
—
—
577,000
Total
$ 4,415,000 $ 2,097,000 $
689,000 $
601,000 $
157,000 $ 3,744,000 $11,703,000
(1)
Pursuant to the Settlement Agreement with Kakaopay, we are
obligated to pay Kakaopay a fee of $5 million payable in ten quarterly installments that
began in the first quarter of 2024. Refer to
Note 6 – Kakaopay Transaction for further detail.
28
(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)
We have entered into agreements with technology vendors for
certain development projects related to our Retail Platform. As of December 31, 2024,
we have incurred approximately $3.4 million out
of the $4.3 million total budget for these vendors.
(4)
In June 2023, we entered into an amendment to its service
agreement with Broadridge Securities Processing Solutions, LLC with a total minimum
expense of approximately $1.2 million for this arrangement.
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, 2024 and 2023, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory
capital
requirements. Refer to Note 18 – 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, 2024, cash used in operating activities increased by $14.9 million compared to 2023, which was primarily driven
by the inclusion of
cash and securities segregated for regulatory purposes, which were previously not presented in the operating section. The increase was
further impacted by the outflows related to the Kakao settlement and contract termination payments, as well as a decrease in payables
to customers and
securities loaned. These outflows were partially offset by inflows from securities borrowed, receivables from customers,
and other working capital
adjustments.
For the year ended December
31, 2024, cash used in investing activities increased by $3.5 million compared to 2023, which was primarily driven
by the acquisition
of GE as well as certain development projects related to our Retail Platform in 2024.
For the year ended December
31, 2024, we had a cash outflow of $0.1 million from financing activities, compared to a net cash inflow of $13.0
million in 2023, which
was primarily driven by the issuance of the Company’s common stock related to the transaction with Kakaopay in 2023. Refer to
Note
6 – Kakaopay Transaction for additional detail.
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, 2024, 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.
29
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, 2024 and 2023. Refer to Note 19 – Financial Instruments with Off-Balance
Sheet Risk for additional detail.
Uncertain Tax Positions
We account for uncertain tax positions in accordance with the authoritative
guidance issued under FASB ASC Subtopic 740-10, which addresses
the determination of whether tax benefits claimed or expected to be claimed
on a tax return should be recorded in the consolidated financial statements. We
may recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities based on the technical
merits of the position. The tax benefits recognized in the consolidated financial statements from such position
should be measured based
on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FASB ASC
Subtopic
740-10 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements
We recognize interest and
penalties related to unrecognized tax benefits on the provision for income taxes line in the statements of operations.
Accrued interest
and penalties would be included on the related tax liability line in the statements of financial condition.
As of both December 31, 2024
and 2023, the Company recorded an uncertain tax position of $1,354,000 and $1,405,000, respectively, related to
various tax matters, which
is included in the line item “Taxes payable” in the statements of financial condition.
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.
30
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 FASB ASC Topic 740 – “Improvements to Income Tax Disclosures” (“Topic 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 in the consolidated statements of
operations. Accrued
interest and penalties would be included on the related tax liability line in the consolidated statements of financial condition.
Disregarded entities and income tax treatment
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.
Recent Accounting Pronouncements
Refer
to Note 2 – Summary of Significant Accounting Policies for information regarding new Accounting
Standards Updates (“ASU”s) issued by
the 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.
See
“Item 7 – Management’s Discussions and Analysis of Financial Condition and Results of Operations - Trends and Key Factors
Affecting our
Operations” of this Report for our quantitative and qualitative disclosures about market risk.
31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIEBERT FINANCIAL CORP.
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 173)
F-2
Consolidated Statements of Financial Condition as of December 31, 2024 and 2023
F-4
Consolidated Statements of Operations for each of the years in the two-year period ended December 31, 2024
F-5
Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the two-year period ended December 31, 2024
F-6
Consolidated Statements of Cash Flows for each of the years in the two-year period ended December 31, 2024
F-7
Notes to Consolidated Financial Statements
F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM (PCAOB ID 173)
Shareholders and the Board of Directors of
Siebert Financial Corp. and Subsidiaries
Miami, Florida
Opinion on the Financial Statements
We have audited the accompanying consolidated
statement of financial condition of Siebert Financial Corp. and Subsidiaries (the "Company") as of
December 31, 2024, the related
consolidated statements of operations, changes in stockholders’ equity, and cash flows for the period then ended, and the
related
notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in
all material respects, the
financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows
for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's 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 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 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 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 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 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 financial statements and (2)
involved our especially
challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on
the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the
critical audit matter or on the accounts or disclosures to which it relates.
F-2
Revenue Recognition
As described in Note 2 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 Services; Interest, Marketing and
Distribution Fees; and Other Income. Some
of the revenue streams are related to revenues from contracts with customers, which falls under the scope of the
accounting standard for
revenue from contracts with customers (ASC 606) while certain revenue streams are generated from financial instruments and are
not in
the scope of ASC 606.
The principal considerations for our determination
that revenue recognition is a critical audit matter are the complexities and challenges related to auditing
the significant number of
revenue streams with different applications of revenue recognition, the automated processes to record revenue involving multiple
information
systems, and the significant volume of information used in the calculation of each revenue stream supported by automated systems to process
and record these transactions. As previously disclosed by management, there was a material weakness identified over the Company's Information
Technology General Controls (ITGCs) that are used to process the high volume of revenue transactions that existed during the year. These
factors resulted
in a high level of audit effort required and involvement of professionals with expertise in information technology (IT)
necessary for us to identify, test, and
evaluate the Company’s systems and automated controls.
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:
Performing substantive test of details over all
relevant assertions for revenue streams which included:
o
Evaluating management’s revenue recognition policies
for compliance with ASC 606 for contracts with customers.
o
Evaluating management's revenue recognition policies for compliance with relevant accounting standards
for revenue from financial instruments.
o
Performing transaction testing by agreeing amounts recognized to contractual agreements and testing the
mathematical accuracy of the recorded
revenue.
o
Confirming related accounts receivable balances directly with counterparties and vouched cash collection.
o
Testing the fair values for applicable revenue lines including the fair value of underlying instruments
utilized in the recognition of revenue.
o
Testing the completeness of revenue recognized within the period through performing cut-off procedures
around period-end.
o
Testing completeness and accuracy of reports utilized in our audit procedures.
/s/ Crowe LLP
We have served as the Company's auditor since
2024.
New York, New York
March 28, 2025
F-3
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
2024
2023
ASSETS
Current assets
Cash and cash equivalents
$
32,629,000 $
5,735,000
Cash and securities segregated for regulatory purposes; (Cash of $135.8 million, securities with a fair value of $68.8
million as of December 31, 2024; Cash of $158.8 million, securities with a fair value of $115.5 million as of
December 31, 2023)
204,587,000
274,317,000
Receivables from customers
84,367,000
72,823,000
Receivables from broker-dealers and clearing organizations
3,920,000
3,863,000
Receivables from non-customers
607,000
241,000
Other receivables
2,744,000
2,424,000
Prepaid expenses and other assets
2,257,000
1,700,000
Securities borrowed
139,040,000
394,709,000
Securities owned, at fair value
21,385,000
18,038,000
Total Current assets
491,536,000
773,850,000
Deposits with broker-dealers and clearing organizations
4,227,000
7,885,000
Property, office facilities, and equipment, net
10,245,000
9,404,000
Software, net
4,836,000
1,432,000
Intangible assets, net
697,000
—
Lease right-of-use assets
2,390,000
2,736,000
Deferred tax assets
3,418,000
4,504,000
Goodwill
2,319,000
1,989,000
Total Assets
$
519,668,000 $ 801,800,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current liabilities
Payables to customers
$
227,129,000 $ 289,777,000
Payables to non-customers
3,297,000
713,000
Drafts payable
1,331,000
1,726,000
Payables to broker-dealers and clearing organizations
444,000
481,000
Accounts payable and accrued liabilities
5,240,000
3,639,000
Taxes payable
2,183,000
2,313,000
Securities loaned
184,962,000
419,433,000
Securities sold, not yet purchased, at fair value
26,000
2,000
Current portion of lease liabilities
886,000
759,000
Current portion of long-term debt
88,000
84,000
Current portion of deferred contract incentive
496,000
808,000
Current portion of contract termination liability
1,748,000
1,898,000
Total Current liabilities
427,830,000
721,633,000
Lease liabilities, less current portion
1,787,000
2,227,000
Long-term debt, less current portion
4,140,000
4,229,000
Deferred contract incentive, less current portion
—
438,000
Contract termination liability, less current portion
819,000
2,564,000
Total Liabilities
434,576,000
731,091,000
Commitments and Contingencies
Equity
Stockholders’ equity
Common stock, $.01 par value; 100,000,000 shares authorized; 41,120,936 shares issued and 40,120,936 shares
outstanding as of December 31, 2024, respectively. 40,580,936 shares issued and 39,580,936 shares outstanding
as of December 31, 2023.
412,000
406,000
Treasury stock, at cost; 1,000,000 and 1,000,000 shares held as of
December 31, 2024 and 2023, respectively.
(2,510,000)
(2,510,000)
Additional paid-in capital
46,090,000
45,016,000
Retained earnings
40,094,000
26,808,000
Total Stockholders’ equity
84,086,000
69,720,000
Noncontrolling interests
1,006,000
989,000
Total Equity
85,092,000
70,709,000
Total Liabilities and Equity
$
519,668,000 $ 801,800,000
Numbers are rounded for
presentation purposes. See notes to consolidated financial statements.
F-4
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
2024
2023
Revenue
Commissions and fees
$
9,615,000 $
7,276,000
Interest, marketing and distribution fees
32,407,000
29,577,000
Principal transactions and proprietary trading
14,616,000
13,094,000
Market making
2,255,000
1,304,000
Stock borrow / stock loan
19,249,000
16,172,000
Advisory fees
2,369,000
1,928,000
Other income
3,390,000
2,163,000
Total Revenue
83,901,000
71,514,000
Expenses
Employee compensation and benefits
43,999,000
31,936,000
Clearing fees, including execution costs
1,607,000
1,672,000
Technology and communications
3,940,000
3,364,000
Other general and administrative
4,488,000
4,410,000
Data processing
3,200,000
3,236,000
Rent and occupancy
1,631,000
1,873,000
Professional fees
5,578,000
4,459,000
Depreciation and amortization
1,380,000
2,020,000
Interest expense
262,000
263,000
Advertising and promotion
348,000
155,000
Total Expenses
66,433,000
53,388,000
Operating income
17,468,000
18,126,000
Earnings of equity method investment in related party
—
111,000
Impairment of investments
—
(1,035,000)
Transaction termination costs
—
(5,943,000)
Non-operating loss
—
(6,867,000)
Income (loss) before provision for (benefit from) income taxes
17,468,000
11,259,000
Provision for (benefit from) income taxes
4,165,000
3,415,000
Net income (loss)
13,303,000
7,844,000
Less net income (loss) attributable to noncontrolling interests
17,000
18,000
Net income (loss) available to common stockholders
$
13,286,000 $
7,826,000
Net income (loss) available to common stockholders per share of common stock
Basic and diluted
$
0.33 $
0.21
Weighted average shares outstanding
Basic and diluted
39,951,510
37,070,366
Numbers are rounded for presentation purposes.
See notes to consolidated financial statements.
F-5
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
Interest
Total
Equity
Balance – January 1, 2023 32,505,329 $ 325,000
— $
— $29,642,000 $18,982,000 $
48,949,000 $
971,000 $49,920,000
Kakaopay transaction, net
of issuance cost
8,075,607
81,000
—
— 14,814,000
—
14,895,000
— 14,895,000
Non-cash consideration
due
to Kakaopay
transaction
—
—
—
—
560,000
—
560,000
—
560,000
Reacquisition of shares
outstanding
—
— 1,000,000 (2,510,000)
—
—
(2,510,000)
— (2,510,000)
Net
income
—
—
—
—
— 7,826,000
7,826,000
18,000 7,844,000
Balance – December
31,
2023
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
Transaction with J2
Financial
200,000
2,000
—
—
348,000
—
350,000
—
350,000
Share-based
compensation
340,000
4,000
—
—
726,000
—
730,000
—
730,000
Net
income
—
—
—
—
— 13,286,000
13,286,000
17,000 13,303,000
Balance – December
31,
2024
41,120,936 $ 412,000 1,000,000 $(2,510,000) $46,090,000 $40,094,000 $
84,086,000 $
1,006,000 $85,092,000
Numbers are rounded for presentation purposes.
See notes to consolidated financial statements.
F-6
SIEBERT FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2024
2023
Cash Flows from Operating Activities
Net income (loss)
$
13,303,000 $
7,844,000
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Deferred income tax expense
1,086,000
(107,000)
Depreciation and amortization
1,380,000
2,020,000
Share-based compensation
460,000
—
Interest related to contract termination liability payment
102,000
—
Earnings of equity method investment in related party
—
(111,000)
Impairment of investments
—
1,035,000
Transaction termination costs - Kakaopay fee
—
4,462,000
Changes in
Securities segregated for regulatory purposes
46,757,000
25,463,000
Receivables from customers
(11,544,000)
(20,766,000)
Receivables from non-customers
(366,000)
(141,000)
Receivables from and deposits with broker-dealers and clearing organizations
3,601,000
(1,343,000)
Securities borrowed
255,669,000
(57,800,000)
Securities owned, at fair value
(3,347,000)
(14,834,000)
Prepaid expenses and other assets
(862,000)
(269,000)
Payables to customers
(62,648,000)
(31,614,000)
Payables to non-customers
2,584,000
(10,793,000)
Drafts payable
(395,000)
(658,000)
Payables to broker-dealers and clearing organizations
(37,000)
(179,000)
Accounts payable and accrued liabilities
1,601,000
1,132,000
Securities loaned
(234,471,000)
92,253,000
Securities sold, not yet purchased, at fair value
24,000
—
Net lease liabilities
33,000
69,000
Taxes payable
(130,000)
1,261,000
Deferred contract incentive
(750,000)
(750,000)
Contract termination payment
(1,997,000)
—
Technology platform integration
—
(978,000)
Net cash used in operating activities
10,053,000
(4,804,000)
Cash Flows from Investing Activities
Purchase of office facilities and equipment
(223,000)
(223,000)
Purchase of software
(3,234,000)
(894,000)
Additions to property, office facilities, and equipment
(1,432,000)
(1,442,000)
Transaction with J2 Financial
(35,000)
—
Cash paid for GE acquisition, net of cash acquired
(1,123,000)
—
Net cash used in investing activities
(6,047,000)
(2,559,000)
Cash Flows from Financing Activities
Kakaopay issuance cost
—
(1,589,000)
Shares issued for Kakaopay transaction
—
17,363,000
Repayments of long-term debt
(85,000)
(2,734,000)
Net cash provided by (used in) financing activities
(85,000)
13,040,000
Net change in cash and cash equivalents, and cash segregated for regulatory purposes
3,921,000
5,677,000
Cash and cash equivalents, and cash segregated for regulatory purposes - beginning of year
164,537,000
158,860,000
Cash and cash equivalents, and cash segregated for regulatory purposes - end of year
$
168,458,000 $ 164,537,000
Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes
Cash and cash equivalents - end of year
$
32,629,000 $
5,735,000
Cash segregated for regulatory purposes - end of year
135,829,000
158,802,000
Cash and cash equivalents, and cash segregated for regulatory purposes - end of year
$
168,458,000 $ 164,537,000
Supplemental cash flow information
Cash paid during the year for income taxes
$
3,210,000 $
2,260,000
Cash paid during the year for interest
$
160,000 $
263,000
Non-cash investing and financing activities
Kakaopay issuance cost (1)
$
— $
(318,000)
Transaction with J2 Financial (2)
$
350,000 $
—
Share-based compensation (3)
$
270,000 $
—
Treasury stock (4)
$
— $
(2,510,000)
$
— $
(560,000)
Non-cash consideration due to Kakaopay transaction(1)
Non-cash consideration due to Kakaopay transaction(1)
$
— $
560,000
Numbers are rounded for presentation purposes.
See notes to consolidated financial statements.
(1)
Refer to Note 6 – Kakaopay Transaction for further detail
(2)
Refer to Note 10 – Software, net for further detail
(3)
Refer to Note 23 – Employee Benefit Plans for further
detail
(4)
Refer to Note 4 – Transaction with Tigress for further
detail
F-7
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 Advisers Act.
●
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.
●
Gebbia Entertainment, LLC (“GE”) is a Florida
limited liability company and provides media entertainment services.
For
purposes of this Report, the terms “Siebert,” “Company,” “we,” “us,” and “our”
refer to Siebert Financial Corp., MSCO, SNXT, PW, STCH,
RISE, STXD, and GE, collectively, unless the context otherwise requires.
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.
The Company is headquartered
in Miami Beach, FL, with primary operations in Florida, New York and California. The Company has 10 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 engages in a single
line of business as a securities broker-dealer, providing comprehensive brokerage services including custody
and clearing of retail accounts,
insurance and advisory services, principal transaction and proprietary trading, market making, and securities lending. The
Company currently
has no other reportable segments. All of the Company’s revenues for the years ended December 31, 2024 and 2023 were derived from
its operations
in the U.S.
The
Company has evaluated the impact of its recent acquisition of GE on its consolidated financial statements and has determined that the
acquisition is immaterial. As of December 31, 2024, the Company operates as a single reportable 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. Management will continue to monitor the financial significance of the GE acquisition and
may report additional segments in
accordance with FASB ASC Topic 280 – “Improvements to Reportable Segment Disclosures”
(“Topic 280”).
F-8
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.
Reclassification
Certain amounts for the year
ended December 31, 2024 and 2023, and certain cash flows within the Investing Activities section have been
reclassified to conform to
the presentation of the current period. The reclassification has not materially impacted the Company’s consolidated financial
statements,
and did not result in a change in total revenue, net income or cash flows from operations or investing activities for the periods presented.
Principles of Consolidation
The consolidated financial
statements include the accounts of Siebert and all other entities in which we have a controlling financial interest. The
Company determines
whether it has controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”)
or a
variable interest entity (“VIE”). Upon consolidation, all intercompany balances and transactions are eliminated. The
Company’s ownership in RISE was
68% as of both December 31, 2024 and 2023. Refer to Note 5 – RISE for more information.
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 in
the consolidated statements of operations. The portion of total equity that is attributable to noncontrolling interests for
such subsidiaries is presented as
noncontrolling interests in 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.
Voting Interest Entities
The Company
evaluates whether an entity qualifies as a VOE and determines the appropriateness of consolidation on a quarterly basis. The
Company consolidates
a VOE when it holds a majority voting interest, directly or indirectly, and has the power to direct the activities of the entity that
most
significantly impact its economic performance. When assessing consolidation under the voting interest model, the Company considers
all relevant facts and
circumstances, including its ability to exercise control through voting rights and the extent of its ownership
interest. If the Company determines it holds a
controlling financial interest in the VOE, the entity is consolidated in the Company’s
financial statements.
F-9
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, consistent with the way the Chief Operating Decision Maker
(CODM) allocates resources
and evaluates performance. Operating segments are determined based on how management organizes the business for
decision-making, and the
CODM regularly reviews the Company’s financial information as a whole. The Company is engaged in a single line of business
as a
securities broker-dealer, providing various brokerage services, including custody and clearing of retail accounts, insurance and advisory
services,
principal transaction and proprietary trading, market making, and securities lending.
In accordance with Topic 280,
the Company discloses significant expense categories that are regularly reviewed by the CODM. The CODM
evaluates performance primarily
based on net income and considers excess net capital as an operational metric in maintaining capital adequacy. Since the
Company has identified
a single reportable segment, segment disclosures align with the consolidated financial statements, and duplicative information has
been
referenced where applicable. All of the Company’s revenues and substantially all of its 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.
Accounting for Acquisitions
FASB ASC Topic 805 – “Accounting
for Contract Assets and Contract Liabilities from Contracts with Customers” (“Topic 805”) is used for
accounting in
business acquisitions. Topic 805 requires that goodwill be recognized separately from assets acquired and liabilities assumed at their
acquisition date fair values. Goodwill, as of the date of acquisition, is determined as the excess of the consideration transferred net
of the acquisition date
fair values of assets acquired and liabilities assumed. Fair value estimates at acquisition date may be assessed
internally or externally using third parties. As
part of the valuation and appraisal process, the third-party appraiser prepares a report
assigning estimated acquisition date fair values to assets and
liabilities. These fair values estimations are subjective and require careful
consideration and sound judgement. Management reviews the third-party reports
for fairness of the assigned values.
F-10
Fair Value
FASB
ASC Topic 820 – “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”
(“Topic 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 Topic 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:
Certificates
of deposit: Certificates of deposit are included in investments which are recorded at fair value, which is determined based on estimates
using observable market inputs like current market rates for similar deposits with comparable maturities. When certificates of deposit
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 deposit 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.
F-11
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.
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.
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.
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.
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, 2024 and 2023, the Company did
not hold any cash equivalents.
As of December 31, 2024 and
2023, 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.
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, 2024, the Company had approximately $135.8 million in cash segregated for regulatory purposes and $68.8 million in
qualified
securities segregated for regulatory purposes. As of December 31, 2023, the Company had approximately $158.8 million in cash segregated
for
regulatory purposes and $115.5 million in qualified securities segregated for regulatory purposes. Cash and securities segregated
for regulatory purposes
are held in special reserve accounts for the benefit of customers for regulatory purposes.
Current Expected Credit Losses
The Company accounts for estimated credit losses on financial assets
measured at an amortized cost basis and certain off-balance sheet credit
exposures in accordance with FASB ASC Subtopic 326-20 –
“Financial Instruments – Credit Losses” (“Subtopic 326-20”). Subtopic 326-20 requires the
Company to estimate
expected credit losses over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on
relevant information about past events, current conditions, and reasonable and supportable forecasts.
The Company records the estimate of expected credit
losses as an allowance for credit losses. For financial assets measured at an amortized cost
basis the allowance for credit losses is
reported as a valuation account in the statement of financial condition that adjusts the asset’s amortized cost basis.
Changes in
the allowance for credit losses if any are reported in credit loss expense.
F-12
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, 2024 and 2023. Management actively
monitors its exposure to credit risk through daily reviews of customer receivables and all transactions
are either fully collateralized or subject to credit risk
management protocols, ensuring that no material unsecured or uncollateralized
balances exist. Additionally, the Company has no historical material credit
losses and has not incurred any material credit losses as
of December 31, 2024 and 2023. Securities beneficially owned by customers, including those that
collateralize margin or other similar
transactions, are not reflected in the consolidated statements of financial condition.
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, 2024 and 2023. 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, 2024 and 2023 were both self-cleared and cleared on a fully disclosed basis
through
NFS. RISE maintained a fully disclosed clearing agreement with MSCO for customer transactions for the years ended December 31, 2024 and
2023; however, there were no customer transactions related to this clearing agreement during those years.
F-13
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. A portion of the Company’s trades and contracts
are cleared through a clearing organization and settled daily between the clearing organization and the Company. Because of
this daily settlement, the
amount of unsettled credit exposures is limited to the amount owed to the Company for a very short period of
time. The Company continually reviews the
credit quality of its counterparties. 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, 2024 and 2023.
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, 2024 and 2023.
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 securities borrowed and securities loaned and
these items are presented on a gross
basis in the consolidated statements of financial condition. The Company accounts for securities
lending transactions in accordance with FASB ASC
Subtopic 210-20 – “Disclosures about Offsetting Assets and Liabilities”
(“Subtopic 210-20”). Refer to Note 19 – Financial Instruments with Off-Balance
Sheet Risk for further detail.
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 FASB ASC Topic 940 – “Financial Services – Brokers and Dealers”
(“Topic 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
Classification
Consolidated Statements of
Financial Condition
Recording of Realized and
Unrealized Gain or Loss
Certificates of deposit, Corporate bonds,
municipal securities, options
Trading
Securities owned, at fair value
Principal transactions and proprietary trading
Equities
Trading
Securities owned, at fair value; Securities
sold, not yet purchased at fair value
Market making, Principal transactions and
proprietary trading
U.S. government securities
Trading
Securities owned, at fair value
Principal transactions and proprietary trading
U.S. government securities
Trading
Cash and securities segregated for regulatory
purposes
Principal transactions and proprietary trading
F-14
Property, Office Facilities, and Equipment,
Net
Property,
office facilities, and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation for property, office
facilities, and equipment are calculated using the straight-line method over the estimated useful lives of the assets. Estimated useful
lives are as follows:
Type
Useful Life
Property
40 years
Property improvements
10 years
Leasehold improvements
Lesser of useful life or lease term
Office facilities and equipment
4 to 5 years
Software, Net
The
Company capitalizes certain costs for certain software and amortizes them over their useful life, generally not exceeding five 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, in 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, 2024. 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.
F-15
Operating lease expense is
recognized on a straight-line basis over the lease term and is included in line item “Rent and occupancy” in 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” in 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 in 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. As of December 31, 2024 and 2023, the Company had no investments.
Other Intangible Assets, Net
The Company accounts for
intangible assets acquired in business combinations or asset acquisitions in accordance with FASB ASC Topic 350 –
“Intangibles
– Goodwill and Other” (“Topic 350”). Certain identifiable intangible assets acquired by the Company, including
artist contracts, are
recognized at fair value at the acquisition date and are amortized over their estimated useful lives on a straight-line
basis. The estimated useful lives of
these intangible assets are determined based on contractual terms. The Company assesses intangible
assets for impairment at least annually or whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable.
Additionally, the Company reviews the estimated useful lives
of intangible assets annually or whenever circumstances suggest that the
remaining amortization period should be revised. If a change in useful life is
necessary, the asset’s remaining carrying amount
is amortized prospectively over the revised useful life.
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, 2024
and 2023.
F-16
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” in
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” in 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 ten quarterly installments
that began in the first
quarter of 2024.
The Company accounted for
this transaction as an exit or disposal cost obligation in accordance with FASB ASC Topic 420 – “Exit or Disposal
Cost
Obligations” (“Topic 420”). 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” in the
consolidated statements of financial condition. The expense was recorded
in the line item “Transaction termination costs” in the consolidated statements of
operations. Refer to Note 6 – Transaction
with Kakaopay for further detail.
Revenue Recognition
The Company generated a significant
portion of its revenue from financial instruments comprising of margin revenue, securities lending, principal
transactions and proprietary
trading, and interest revenue. These net interest and other revenues are not within the scope of FASB ASC Topic 606 –
“Revenue
from Contracts with Customers” (“Topic 606”), because they are generated from financial instruments covered by various
other areas of GAAP.
Market making activities are not within the scope of Topic 606, as they do not meet the definition of a contract
with a customer under the standard.
Consequently, revenue and expenses related to market making activity are accounted for separately
and not included in the revenue figures presented in
accordance with Topic 606.
The Company also has fee revenue
and transaction revenue which are within the scope of Topic 606. Revenue from contracts with customers
includes commission income charged
to retail clients for executing transactions, markups on riskless principal transactions charged to retail clients for
executing transactions,
distribution income received from mutual funds for client transactions, stock locate fees charged to counterparties for providing
locate
services, payment for order flow received for executing transactions, and administrative fees to retail clients including for maintenance
and other
ancillary services. Under Topic 606, Revenue from Contracts with Customers, requires that an entity recognize revenue to depict
the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or
services. The guidance requires an entity to follow a five-step model to (a) identify the contract(s)
with a customer, (b) identify the performance obligations
in the contract, (c) determine the transaction price, (d) allocate the transaction
price to the performance obligations in the contract, and (e) recognize
revenue when (or as) the entity satisfies a performance obligation.
In determining the transaction price, an entity may include variable consideration only to
the extent that it is probable that a significant
reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated
with the variable consideration
is resolved.
F-17
The
table below presents detailed information on the Company’s recognition of revenue from contracts with customers as well as revenues
from
financial instruments, which are outside the scope of Topic 606, by major types of services for the periods indicated.
Year Ended December 31,
2024
2023
Revenues from Contracts with Customers
Principal transactions and proprietary trading
Riskless principal transactions with customers
$
14,130,000 $
9,096,000
Commissions and fees
Brokerage commissions
7,629,000
5,927,000
Distribution fees
1,365,000
1,167,000
Insurance commissions
621,000
447,000
Stock borrow / stock loan
Retail fees (rebates)
(5,000)
(78,000)
Stock locate services
16,892,000
12,901,000
Other income
Administrative fees
1,888,000
519,000
Payment for order flow
1,454,000
1,114,000
Other commissions
48,000
265,000
Advisory fees
2,369,000
1,928,000
Total revenues from contracts with customers
$
46,391,000 $
33,286,000
Revenue outside the scope of Topic 606
Principal transactions and proprietary trading
Proprietary trading
486,000
3,997,000
Interest, marketing and distribution fees
Margin interest
15,440,000
16,236,000
Interest income
14,933,000
11,618,000
Marketing and distribution fees
2,034,000
1,724,000
Stock borrow / stock loan
Stock rebate revenue
2,362,000
3,349,000
Market making
2,255,000
1,304,000
Total revenue outside the scope of Topic 606
37,510,000
38,228,000
Total revenue
$
83,901,000 $
71,514,000
F-18
The primary sources of revenue
for the Company are as follows:
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.
Principal
transactions and proprietary trading related to riskless principal transactions 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.
The second revenue stream
is proprietary trading whereby the company enters into transactions where securities are traded by the Company as
investments and for
use as collateral for depositories or customer reserve requirements. Proprietary trading consists of trading in securities classified
as
trading securities and in accordance with Topic 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.
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.
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 recognizes
revenue once 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.
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. The Company records 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. The Company also pays
rebates and charges fees to/from retail clients for borrowing securities
based on the daily balance of the securities borrowed. Revenue from fees charged to
clients and rebates paid to clients are recognized
over the term as services are provided.
F-19
For the year ended December
31, 2024, stock borrow / stock loan revenue was $19,249,000 ($40,714,000 gross revenue less $21,465,000
expenses). For the year ended
December 31, 2023, stock borrow / stock loan revenue was $16,172,000 ($47,166,000 gross revenue less $30,994,000
expenses).
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 Topic 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. Rates on securities lending programs are based on the current market demand for each
security borrow or loan contract and are set on a
per-contract basis. Based on the above factors, there is no material current expected
credit loss under Topic 326 for securities borrowed and loaned
transactions is not needed as of December 31, 2024.
The
Company also provides securities locate services to broker dealer counterparties. The Company charges a fee to their counterparties each
time
a locate is placed and the inventory is decremented by such locate quantity. The Company believes that the performance obligation
is satisfied on the day
that the security is located for the customer as that is when the underlying financial instrument or purchaser
is identified, the pricing is agreed upon and the
risks and rewards of locate identification have been transferred to the counterparty.
Revenue is recognized at that point in time.
Other Income
Other
income primarily 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.
F-20
Advisory Fees
The
Company earns advisory fees associated with managing client assets. The performance obligation related to this revenue stream is satisfied
over time, as clients receive and consume the benefits as the services are provided. The advisory fees are variable and calculated as
a percentage of the
client’s total asset value, determined as of the last business day of each quarter. These fees are primarily
billed in advance, based on the average daily
balance of the previous quarter and recognized ratably over the period in which services
are provided. For new accounts or terminated accounts, fees may
be prorated based on the number of days the account was active during
the quarter, in accordance with the advisory agreement.
Interest, Marketing
and Distribution Fees
The
Company earns interest from clients’ accounts, net of interest expense which consists 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.
The Company enters into arrangements
with money market mutual funds to distribute shares to investors (“Marketing and Distribution Fees”).
The Company may receive
distribution fees paid by the fund over time. The Company receives Marketing and Distribution Fees based upon the total
amount deposited
with the money market mutual fund based on a published interest rate. Interest, marketing and distribution fees are recorded as earned.
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.
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.
Share-based Compensation
The
Company grants share-based compensation and accounts for share-based compensation in accordance with FASB ASC Topic 718 –
“Compensation – Stock Compensation”
(“Topic 718”), which establishes accounting for share-based compensation to employees for services. Under the
provisions of
FASB ASC Subtopic 718-10-35 – “Compensation – Stock
Compensation” (“Subtopic 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 on a
straight-line basis
over the requisite service period, aligning with vesting conditions. The Company accounts for forfeitures based on actual experience
rather
than estimating them at grant date, recognizing adjustments as they occur. Changes in estimates or modifications to share-based awards,
if any, are
accounted for in accordance with Topic 718. Refer to Note 23 – Employee Benefit Plans for further detail.
Advertising and Promotion
Advertising and promotion
costs are expensed as incurred and were $348,000 and $155,000 for the years ended December 31, 2024, and 2023,
respectively.
F-21
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.
The Company records uncertain
tax positions in accordance with Topic 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 in the consolidated
statements of operations.
Accrued interest and penalties would be included on the related tax liability line in 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, 2024 and 2023.
Per Share Data
Basic
earnings per share (“EPS”) is calculated by dividing net income available to the Company’s common stockholders by the
weighted average
number of common shares outstanding during the period. The Company’s Restricted Stock Awards (“RSA”s)
and Restricted Stock Units (“RSU”s) do not
receive dividends or dividend equivalents prior to vesting and are therefore not
considered participating securities under FASB ASC Topic 260 – “Earnings
Per Share” (“Topic 260”).
Diluted
EPS is calculated using the treasury stock method by dividing net income available to the Company’s common stockholders by the
weighted
average number of common shares outstanding, adjusted for the potential dilutive effect of unvested RSAs and RSUs, if applicable.
New Accounting Standards
In
December 2023, the 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.
In November 2024, the FASB
issued ASU “2024-03”, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation
Disclosures”
(“ASU 2024-03”). The ASU is intended to enhance the transparency and decision usefulness of income statement expense disclosures
by
requiring greater disaggregation of certain expense categories. ASU 2024-03 will be effective for us for annual periods beginning after
December 15, 2025,
though early adoption is permitted. We are currently evaluating the impact that ASU 2024-03 will have on our consolidated
financial statements and we
anticipate the amendments will require significant changes to our expense disclosures.
F-22
Accounting Standards Adopted in Fiscal 2024
In November 2023, the FASB
issued ASU 2023-07, Topic 280, which requires all public entities, including those with a single reportable segment,
to disclose
additional information about a reportable segment’s significant expense categories in interim and annual periods, as identified
in the information
regularly provided to the CODM, among other requirements. The new guidance does not change how a public entity identifies
its operating segments,
aggregates those operating segments or applies the quantitative thresholds to determine its reportable segments.
The guidance also clarifies that when a
single operating segment is identified, entities may reference primary financial statements for
overlapping disclosures. This ASU is effective for all entities
for fiscal years beginning after December 15, 2023, and for interim periods
within fiscal years beginning after December 15, 2024. The Company adopted
this guidance effective for the year ended December 31, 2024.
The adoption of this guidance did not have a material impact on our financial condition or
financial performance. Refer to Note 22 –
Segment Reporting for further detail.
3. Business Combinations
Overview of Acquisition
On August 12, 2024, the Company entered into a
Membership Interest Purchase Agreement by and among the Company, GE and members of the
Gebbia family, the (“Gebbia Entertainment
Purchase Agreement”), pursuant to which the Company acquired all of the outstanding equity of GE for a
purchase price of $1,250,000.
The acquisition will be accounted for under the acquisition method of accounting for business combinations pursuant to
Topic 805 which
requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the proposed
acquisition
date.
Allocation of Purchase Price
The Company was required to
allocate the GE purchase price to tangible and identifiable intangible assets acquired based on their fair values as of
August 12, 2024.
The excess of the purchase price over those fair values is recorded as goodwill. The Company acquired intangible assets consisting of
GE
artist contracts, the fair value of which was $778,000 as of the acquisition date.
The fair value of identifiable
intangible assets and goodwill was determined primarily through a Discounted Cash Flow (“DCF”) analysis, which
falls under
the income approach. The valuation included the projection of future cash flows from the intangible asset, discounted at a rate that reflected
the
company’s weighted average cost of capital and accounting for a company-specific risk premium. Additionally, a perpetuity growth
rate was applied
beyond the forecast period. Goodwill was calculated as the excess of the acquisition price over the fair value of separable
assets, capturing anticipated
synergies from the business combination.
The following table summarizes
the Company’s allocation of the purchase price as of the date of acquisition:
Estimated
Fair Value
Cash and cash equivalents
$
127,000
Accounts receivable
5,000
Security deposits
10,000
Other Intangible assets, net
778,000
Total Assets acquired
920,000
Goodwill
330,000
Purchase price
$
1,250,000
Since the date of acquisition, there has been
no material impact on the Company’s consolidated financial statements for the year ended December
31, 2024. Additionally, on a pro
forma basis, the acquisition would not have had a material impact on the Company’s consolidated revenues or net income
for the year ended
December 31, 2024.
F-23
4. Transaction with Tigress
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.
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.
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 FASB
ASC
Topic 860 – “Transfers and Servicing” (“Topic 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 for more detail on
these transactions and information that impacted the periods presented.
Impairment
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. Refer to Note 8 – Fair Value Measurements for more detail.
5. RISE
As of both December 31, 2024
and 2023, the Company’s ownership in RISE was 68% and Siebert consolidated RISE under the voting interest
model (“VOE model”).
As of both December 31, 2024 and 2023, RISE reported assets of $1.3 million and liabilities
of $0. There are no restrictions on
RISE’s assets.
6. Kakaopay Transaction
On
April 27, 2023, the Company entered into a Stock Purchase Agreement with Kakaopay (the “First Tranche Stock Purchase Agreement”),
pursuant to which Siebert agreed to issue to 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).
F-24
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 that
began 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 in the consolidated statements of financial condition. This
amount consisted of $2,149,000 which was recorded
within the line item “Prepaid expenses and other assets” in the consolidated
statements of financial condition as of 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
was recorded in the line item “Transaction termination cost” in the consolidated statements of operations. This amount consisted
of the $5,000,000 fee to
Kakaopay (payable in ten quarterly installments that began 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 in 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.
7. 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:
As
of
December 31,
2024
As
of
December 31,
2023
Receivables from and deposits with broker-dealers and clearing organizations
DTCC / OCC / NSCC (1)
$
5,777,000 $
9,332,000
Goldman Sachs & Co. LLC (“GSCO”)
50,000
38,000
National Financial Services, LLC (“NFS”)
2,102,000
2,212,000
Securities fail-to-deliver
90,000
119,000
Globalshares
68,000
47,000
Other receivables
60,000
—
Total Receivables from and deposits with broker-dealers and clearing organizations
$
8,147,000 $
11,748,000
Payables to broker-dealers and clearing organizations
Securities fail-to-receive
$
439,000 $
399,000
Payables to broker-dealers
5,000
82,000
Total Payables to broker-dealers and clearing organizations
$
444,000 $
481,000
(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”).
F-25
Under the DTCC shareholders’
agreement, MSCO is required to participate in the DTCC common stock mandatory purchase. As of December 31,
2024 and 2023, MSCO had shares
of DTCC common stock valued at approximately $1,145,000 and $1,236,000, respectively, which are included in the
line item “Deposits
with broker-dealers and clearing organizations” in the consolidated statements of financial condition. The share value is updated
annually, as of March 20, 2024 and for the year ended December 31, 2024, based on the release of DTCC’s annual amended and restated
shareholder
agreement.
In September 2022, MSCO and
RISE entered into a clearing agreement whereby RISE would introduce clients to MSCO. Refer to Note 24 –
Related Party Disclosures
for more detail.
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 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.
As of December 31, 2024
Level 1
Level 2
Level 3
Total
Assets
Cash and securities segregated for regulatory purposes
U.S. government securities
$
68,758,000 $
— $
— $
68,758,000
Securities owned, at fair value
U.S. government securities
$
20,086,000 $
— $
— $
20,086,000
Certificates of deposit
—
112,000
—
112,000
Corporate bonds
—
2,000
—
2,000
Options
58,000
—
—
58,000
Equity securities
1,055,000
72,000
—
1,127,000
Total Securities owned, at fair value
$
21,199,000 $
186,000 $
— $
21,385,000
Liabilities
Securities sold, not yet purchased, at fair value
Equity securities
$
1,000 $
— $
— $
1,000
Options
25,000
25,000
Total Securities sold, not yet purchased, at fair value
$
26,000 $
— $
— $
26,000
As of December 31, 2023
Level 1
Level 2
Level 3
Total
Assets
Cash and securities segregated for regulatory purposes
U.S. government securities
$
115,515,000 $
— $
— $ 115,515,000
Securities owned, at fair value
U.S. government securities
$
17,636,000 $
— $
— $
17,636,000
Certificates of deposit
—
114,000
—
114,000
Corporate bonds
—
3,000
—
3,000
Options
2,000
—
—
2,000
Equity securities
146,000
137,000
—
283,000
Total Securities owned, at fair value
$
17,784,000 $
254,000 $
— $
18,038,000
Liabilities
Securities sold, not yet purchased, at fair value
Equity securities
$
2,000 $
— $
— $
2,000
Total Securities sold, not yet purchased, at fair value
$
2,000 $
— $
— $
2,000
F-26
The
Company had U.S. government securities with the market values and maturity dates for the periods indicated below:
As of
December 31,
2024
Maturing in 2025
$
80,739,000
Maturing in 2026
8,019,000
Accrued interest
86,000
Total Market value
$
88,844,000
As of
December 31,
2023
Maturing in 2023
$
30,000,000
Maturing in 2024
98,931,000
Maturing in 2025
3,965,000
Accrued interest
255,000
Total Market value
$ 133,151,000
Financial Assets Measured
at Fair Value on a Non-Recurring Basis
As a result of the 2023 transaction
discussed in Note 3 – Transactions with Tigress, 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” 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 transaction, the Company
had no remaining interest in Tigress as of December 31, 2024.
Financial Assets and
Liabilities Not Carried at Fair Value
Financial assets and liabilities
not measured at fair value are recorded at carrying value, which approximates fair value either due to their short-
term nature, or in
the case of long-term assets or liabilities, management has determined the difference in the carrying value and fair value is immaterial.
The tables below represents financial instruments in which the ending balances as of December 31, 2024 and 2023 are not carried at fair
value in the
statements of financial condition:
As of December 31, 2024
Carrying
Value
Fair Value
Level 1
Level 2
Level 3
Financial assets, not measured at fair value
Cash and cash equivalents
$
32,629,000 $
32,629,000 $
32,629,000 $
— $
—
Cash – segregated for regulatory purposes
135,829,000
135,829,000
135,829,000
—
—
Securities borrowed
139,040,000
139,040,000
—
139,040,000
—
Receivables from customers
84,367,000
84,367,000
—
84,367,000
—
Receivables from non-customers
607,000
607,000
—
607,000
—
Receivables from broker-dealers and clearing organizations
3,920,000
3,920,000
—
3,920,000
—
Other receivables
2,744,000
2,744,000
—
2,744,000
—
Deposits with broker-dealers and clearing organizations
4,227,000
4,227,000
—
4,227,000
—
Total financial assets, not measured at fair value
$
403,363,000 $
403,363,000 $ 168,458,000 $ 234,905,000 $
—
Financial liabilities, not measured at fair value
Securities loaned
$
184,962,000 $
184,962,000 $
— $ 184,962,000 $
—
Payables to customers
227,129,000
227,129,000
—
227,129,000
—
Payables to non-customers
3,297,000
3,297,000
—
3,297,000
—
Drafts payable
1,331,000
1,331,000
—
1,331,000
—
Payables to broker-dealers and clearing organizations
444,000
444,000
—
444,000
—
Deferred contract incentive
496,000
496,000
—
496,000
—
Long-term debt
4,228,000
4,228,000
—
4,228,000
—
Contract termination liability
2,567,000
2,567,000
—
2,567,000
—
Total financial liabilities, not measured at fair value
$
424,454,000 $
424,454,000 $
— $ 424,454,000 $
—
F-27
As of December 31, 2023
Carrying
Value
Fair Value
Level 1
Level 2
Level 3
Financial assets, not measured at fair value
Cash and cash equivalents
$
5,735,000 $
5,735,000 $
5,735,000 $
— $
—
Cash – segregated for regulatory purposes
158,802,000
158,802,000
158,802,000
—
—
Securities borrowed
394,709,000
394,709,000
—
394,709,000
—
Receivables from customers
72,823,000
72,823,000
—
72,823,000
—
Receivables from non-customers
241,000
241,000
—
241,000
—
Receivables from broker-dealers and clearing
organizations
3,863,000
3,863,000
—
3,863,000
—
Other receivables
2,424,000
2,424,000
—
2,424,000
—
Deposits with broker-dealers and clearing
organizations
7,885,000
7,885,000
—
7,885,000
—
Total financial assets, not measured at fair value
$
646,482,000 $
646,482,000 $ 164,537,000 $ 481,945,000 $
—
Financial liabilities, not measured at fair value
Securities loaned
$
419,433,000 $
419,433,000 $
— $ 419,433,000 $
—
Payables to customers
289,777,000
289,777,000
—
289,777,000
—
Payables to non-customers
713,000
713,000
—
713,000
—
Drafts payable
1,726,000
1,726,000
—
1,726,000
—
Payables to broker-dealers and clearing
organizations
481,000
481,000
—
481,000
—
Deferred contract incentive
1,246,000
1,246,000
—
1,246,000
—
Long-term debt
4,313,000
4,313,000
—
4,313,000
—
Contract termination liability
4,462,000
4,462,000
—
4,462,000
—
Total financial liabilities, not measured at fair value
$
722,151,000 $
722,151,000 $
— $ 722,151,000 $
—
9. Property, Office Facilities, and Equipment, Net
Property, office facilities,
and equipment consisted of the following as of the periods indicated:
As of December 31,
2024
2023
Property
$
6,815,000 $
6,815,000
Office facilities
4,165,000
2,475,000
Equipment
945,000
726,000
Total Property, office facilities, and equipment
11,925,000
10,016,000
Less accumulated depreciation
(1,680,000)
(612,000)
Total Property, office facilities, and equipment, net
$
10,245,000 $
9,404,000
Total depreciation expense
for property, office facilities, and equipment was $814,000 and $589,000 for the years ended December 31, 2024 and
2023, respectively.
On
July 7, 2023, the Company entered into a new lease agreement for office space in the World Financial Center in New York City. For the
years
ended December 31, 2024 and 2023, the Company invested $828,000 and $129,000 to build out the New York office space, respectively.
Depreciation
expense commenced in March 2024, when the New York office space was placed into service.
In
the second quarter of 2024, the Company completed the construction of its office in Omaha, Nebraska, investing $211,000 during the year
ended December 31, 2024.
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.
Depreciation
expense commenced in April 2023 when the Miami office building was completed and placed in service. The Company invested
$393,000 and
$1,313,000 in the years ended December 31, 2024 and 2023, respectively, to build out the Miami office building.
F-28
10. Software, Net
Software consisted of the
following as of the periods indicated:
As of December 31,
2024
2023
Software
$
1,774,000 $
1,081,000
Retail Platform
4,093,000
635,000
Total Software
5,867,000
1,716,000
Less accumulated amortization – Software
(1,031,000)
(284,000)
Less impairment – Technology Platform
—
(990,000)
Total Software, net
$
4,836,000 $
442,000
The Company capitalized $978,000
in software development costs for a technology platform integration as of December 31, 2023. In the fourth
quarter of 2023, the
Company reassessed the strategic direction of the technology platform and determined that an other than temporary impairment had
occurred.
The Company recognized an impairment loss of $990,000 for the year ended December 31, 2023,
which is included in “Depreciation and
amortization” in the consolidated statements of operations.
The Company contracted with
a technology vendor in the fourth quarter of 2023 to support the development of the Retail Platform, supplementing
its internal technology
resources. The total software development expense related to the Retail Platform was $4,093,000 as of December 31, 2024, all of
which
was capitalized. Amortization for the Retail Platform will commence once it is placed in service, which is expected to be in the second
quarter of
2025.
Total amortization of software
was $485,000 and $442,000 for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2024, the
Company estimates the following future amortization of software assets:
Year
Amount
2025
$
1,036,000
2026
1,077,000
2027
881,000
2028
819,000
2029 and after
1,023,000
Total
$
4,836,000
Transaction with J2
Financial Technology
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 (“J2 Financial”). The transaction was accounted for as an asset acquisition in
accordance with Topic 805.
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 $35,000 of cash and 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. This purchase is part of the software related to the Retail Platform and
recorded in the line item “Software, net”
in the statements of financial condition.
11. Leases
As
of December 31, 2024, all of the Company’s leases are classified as operating and primarily consist of office space leases expiring
in 2025
through 2029. 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) in 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 in 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 in 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 replaced 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.
F-29
In
October 2024, the Company transitioned its branch office in Omaha, Nebraska from a month-to-month agreement to a fixed-term commitment
of five years expiring in September 2029. In November 2024, the Company entered into a new lease agreement expiring in February 2027 for
office space
in Chicago. This office is intended to support the expansion of our retail business and will be utilized upon commencement
of operations. The total
commitment of both leases is approximately 0.5 million.
Lease Term and Discount Rate
As of
December 31,
2024
As of
December 31,
2023
Weighted average remaining lease term – operating leases (in years)
3.3
3.9
Weighted average discount rate – operating leases
7.3%
6.9%
Year Ended December 31,
2024
2023
Operating lease cost
$
1,019,000 $
1,326,000
Short-term lease cost
369,000
392,000
Variable lease cost
243,000
155,000
Total Rent and occupancy
$
1,631,000 $
1,873,000
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
$
985,000 $
1,256,000
Lease right-of-use assets obtained in exchange for new lease liabilities
Operating leases
$
493,000 $
1,693,000
Lease Commitments
Future annual minimum payments
for operating leases with initial terms of greater than one year as of December 31, 2024 were as follows:
Year
Amount
2025
$
1,048,000
2026
836,000
2027
594,000
2028
503,000
2029
45,000
Remaining balance of lease payments
3,026,000
Less: difference between undiscounted cash flows and discounted cash flows
353,000
Lease liabilities
$
2,673,000
12. Equity Method Investment in Related Party
Transaction with Tigress
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 FASB ASC 323 – “Investments – Equity
Method and
Joint Ventures” (“Topic 323”). 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” in 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 $0 and $111,000 for the years ended December
31, 2024 and 2023, respectively, which
is in the line item “Earnings of equity method investment in related party” in the consolidated statements of
operations.
F-30
The
Company did not receive cash distributions from Tigress for the years ended December 31, 2024 and 2023. As of both December 31, 2024
and
2023, the carrying amount of the investment in Tigress was $0.
13. Goodwill and Other Intangible Assets, Net
Goodwill
As of December 31, 2024 and
2023, the Company’s carrying amount of goodwill was $2,319,000 and $1,989,000, respectively. As of December
31, 2024, $1,989,000
of the Company’s carrying amount of goodwill came from the Company’s acquisition of RISE and $330,000 came from the
Company’s
acquisition of GE. As of December 31, 2024 and 2023, management concluded that there have been no impairments to the carrying value of
the
Company’s goodwill and no impairment charges related to goodwill were recognized during the years ended December 31, 2024 and
2023. Refer to Note 2
– Summary of Significant Accounting Policies for further information.
Other Intangible Assets, Net
As a result of the Company’s
acquisition of GE, the Company acquired intangible assets consisting of GE artist contracts, the fair value of which
were $778,000 as
of the acquisition date. Amortization commenced upon acquisition and is recognized over its estimated useful life of 4 years.
Amortization
expense for the intangible asset totaled $81,000 for the year ended December 31, 2024.
As of December 31, 2024, the
Company estimates the following future amortization of other intangible assets:
Year
Amount
2025
$
194,000
2026
194,000
2027
194,000
2028
115,000
Total
$
697,000
14. Investments, Cost
As of both December 31, 2024
and 2023, 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, 2024, the Company did not recognize any impairment charges related
to its investment in the Trading Technology Provider. 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” in the consolidated statements of operations. As of December 31, 2024 and 2023, the Company had no investment
basis
in the Trading Technology Provider.
15. 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. As of December 31, 2024 and 2023, the Company’s
outstanding balance of the mortgage was
$4,228,000 and $4,313,000, respectively.
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, 2024, the Company was in compliance with
all of its covenants related to this agreement.
F-31
Remaining Payments
Future
remaining annual minimum principal payments for the mortgage with East West Bank as of December 31, 2024 were as follows:
Year
Amount
2025
$
88,000
2026
91,000
2027
95,000
2028
98,000
2029
112,000
Thereafter
3,744,000
Total
$
4,228,000
The
interest expense related to this mortgage was $155,000 and $159,000 for the years ended December 31, 2024, and 2023, respectively. As
of
December 31, 2024, the interest rate for this mortgage was 3.6%.
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” in 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” in 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, 2024, and 2023. The
balance of the deferred contract
incentive was approximately $0.5 million and $1.2 million as of December 31, 2024 and 2023, respectively.
17. Income Taxes
The
Company’s provision for (benefit from) income taxes is comprised of the following:
Year Ended December 31,
2024
2023
Current
Federal
$
2,607,000 $
3,023,000
State and local
472,000
499,000
Total Current
3,079,000
3,522,000
Deferred
Federal
$
520,000 $
(366,000)
State and local
566,000
259,000
Total Deferred
1,086,000
(107,000)
Total Provision for (benefit from) income taxes
$
4,165,000 $
3,415,000
F-32
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:
Year Ended December 31,
2024
2023
Federal statutory income tax rate
21.0%
21.0%
Goodwill amortization
(1.6)%
(2.5)%
Permanent differences
0.4%
2.7%
State and local taxes, net of federal benefit
5.4%
5.7%
Change in valuation allowance
(0.8)%
2.4%
Other
(0.5)%
1.1%
Effective tax rate
23.9%
30.4%
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:
As of December 31,
2024
2023
Deferred tax assets:
Net operating losses
$
2,971,000 $
3,393,000
Lease liabilities
676,000
840,000
Share-based compensation
31,000
—
Intangible assets
25,000
—
Investment in RISE
122,000
123,000
Investment in Trading Technology Provider
215,000
239,000
R&D costs capitalization
187,000
142,000
Settlement liability related to Kakaopay
termination
649,000
1,253,000
Capital loss carryover
719,000
803,000
Other
113,000
79,000
Subtotal
5,708,000
6,872,000
Less: valuation allowance
(1,104,000)
(1,243,000)
Total Deferred tax assets
$
4,604,000 $
5,629,000
Deferred tax liabilities:
Fixed assets
$
(1,186,000) $
(1,125,000)
Total Deferred tax liabilities
(1,186,000)
(1,125,000)
Net Deferred tax assets
$
3,418,000 $
4,504,000
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, 2024 that its U.S. deferred tax assets are realizable on a more-likely-than-not basis with the exception of capital loss carryforward
and certain
investments that will result in future capital losses. The amount of the Company’s valuation allowance decreased by
$139,000 during 2024. 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.
F-33
As
of December 31, 2024, the Company had U.S. federal net operating loss carryforwards of approximately $3.7 million which expire in varying
amounts starting in 2035 to 2036 if not utilized. These net operating losses are available to offset 100% of future taxable
income. However, these U.S.
federal net operating loss carryforwards are subject to annual limitation under Section 382.
A reconciliation of the beginning
and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
Amount
Balance as of December 31, 2022
$
1,596,000
Additions for tax positions taken during current year
15,000
Additions for tax positions taken during prior year
—
Reductions for tax positions taken during prior years
(2,000)
Settlements
—
Expirations of statutes of limitations
(204,000)
Balance as of December 31, 2023
$
1,405,000
Additions for tax positions taken during current year
19,000
Additions for tax positions taken during prior year
—
Reductions for tax positions taken during prior years
—
Settlements
—
Expirations of statutes of limitations
(70,000)
Balance as of December 31, 2024
$
1,354,000
The
unrecognized tax benefit of $1,354,000 and $1,405,000 as of December 31, 2024 and 2023, respectively, are recorded in the line item “Taxes
payable” in the consolidated statements of financial condition. Of the amounts reflected above as of December 31, 2024 and 2023,
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, 2024 and 2023, the Company recognized
expense related to interest and penalties on
unrecognized tax benefits of $153,000 and $118,000, respectively. For the years ended December
31, 2024 and 2023, the accrued balance of interest and
penalties on unrecognized tax benefits was $397,000 and $245,000, respectively.
In the next 12 months, the amount of unrecognized tax benefits is
expected to decrease by $1,292,000 due to lapse in statute of limitations
in 2025.
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 are generally
2021 through 2024.
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. The Company continues to evaluate the Pillar
Two Framework and its potential
impact on future periods, however based on the fact that the Company’s operations are all located
within the United States 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.
F-34
18. 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, 2024,
MSCO’s net capital was $63.9 million, which was approximately $62.0 million in excess of its required net capital of $1.9 million,
and
its percentage of aggregate debit balances to net capital was 65.84%.
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%.
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, 2024, MSCO had cash and securities deposits of $203.3 million (cash of $134.5 million, securities with a fair value of
$68.8
million) in the special reserve accounts which was $9.5 million in excess of the deposit requirement of $193.8 million. After adjustments
for
deposit(s) and / or withdrawal(s) made on January 2, 2025, MSCO had $1.7 million in excess of the deposit requirement.
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.
As of December 31, 2024, 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, 2024, the Company had $1.3 million in
the
special reserve account which was approximately $0.1 million in excess of the deposit requirement of approximately $1.2 million. The Company
made
no subsequent deposits or withdrawals on January 2, 2025.
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.
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 both December 31, 2024
and 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.
F-35
19. 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, 2024 and 2023.
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.
The Company’s securities
lending transactions are subject to master netting agreements with other broker-dealers; however, amounts are presented
gross in the consolidated
statements of financial condition and as net in 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.
The Company accounts for securities lending transactions in accordance with Subtopic 210-20.
F-36
As
of December 31, 2024, the Company had margin loans extended to its customers of approximately
$403.8 million, of which $84.4 million is in
the line item “Receivables from customers” in the consolidated statements of
financial condition. 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” in the consolidated
statements of financial condition.
There were no material losses for unsettled customer transactions for the years ended December 31, 2024 and 2023.
The
following table presents information about the Company’s securities borrowing and lending activity depicting the potential effect
of rights of
setoff between these recognized assets and liabilities.
As of December 31, 2024
Gross
Amounts
of Recognized
Assets and
Liabilities
Gross
Amounts
Offset
in the
Consolidated
Statements of
Financial
Condition1
Net Amounts
Presented in
the
Consolidated
Statements of
Financial
Condition
Collateral
Received or
Pledged2
Net Amount3
Assets
Securities borrowed
$
139,040,000
— $ 139,040,000 $ 126,484,000 $
12,556,000
Liabilities
Securities loaned
$
184,962,000
— $ 184,962,000 $ 170,780,000 $
14,182,000
As of December 31, 2023
Gross
Amounts of
Recognized
Assets and
Liabilities
Gross
Amounts
Offset in the
Consolidated
Statements of
Financial
Condition1
Net Amounts
Presented in
the
Consolidated
Statements of
Financial
Condition
Collateral
Received or
Pledged2
Net Amount3
Assets
Securities borrowed
$
394,709,000
— $ 394,709,000 $ 371,076,000 $
23,633,000
Liabilities
Securities loaned
$
419,433,000
— $ 419,433,000 $ 404,312,000 $
15,121,000
(1)
Amounts represent recognized assets and liabilities that
are subject to enforceable master agreements with rights of setoff. The Company did not net
any securities borrowed or securities loaned
as of December 31, 2024 or 2023.
(2)
Represents the fair value of collateral the Company had received
or pledged under enforceable master agreements.
(3)
Represents the total contract value as presented in the consolidated
financial statements less the fair market value of the collateral received or pledged.
F-37
20. Earnings Per Common Share
The following table sets forth
the computation of basic and diluted earnings per common share for the years ended December 31, 2024 and 2023.
Year Ended December 31,
2024
2023
Net income
$
13,303,000 $
7,844,000
Less net income attributable to noncontrolling interests
17,000
18,000
Net income available to common stockholders
$
13,286,000 $
7,826,000
Weighted-average common shares outstanding - basic
39,951,510
37,070,366
Dilutive effect of unvested shares
223,170
—
Weighted-average common shares used to compute diluted loss per share
40,174,680
37,070,366
Net income per share attributable to common stockholders:
Basic
$
0.33 $
0.21
Diluted
$
0.33 $
0.21
Basic earnings per common
share is calculated by dividing net income attributable to common shareholders by the weighted-average number of
common shares outstanding
during the period. Diluted earnings per common share is calculated by adjusting the weighted-average number of common
shares outstanding
for the potential dilutive effect of securities, including the effect of unvested shares, if applicable. For the years ended December
31,
2024 and 2023, the Company had no antidilutive shares outstanding.
21. Commitments, Contingencies and Other
Legal and Regulatory Matters
In the normal course of business, the Company may
be subject to various proceedings and claims arising from its business activities, including
lawsuits, arbitration claims and regulatory
matters. The Company is also involved in other reviews, investigations and proceedings by governmental and
self-regulatory organizations
regarding the business, which may result in adverse judgments, settlements, fines, penalties, injunctions and other relief. In
many cases,
however, it is inherently difficult to determine whether any loss is probable or reasonably possible or to estimate the amount or range
of any
potential loss, particularly where proceedings may be in relatively early stages. In the Company’s opinion, based on currently
available information, the
ultimate resolution of current matters will not have a material adverse impact on the Company’s financial
position and results of operations as of December
31, 2024. However, resolution of one or more of these matters may have a material effect
on the results of operations in any future period, depending upon
the ultimate resolution of those matters and depending upon the level
of income for such period.
Overnight Financing
As
of both December 31, 2024 and 2023, MSCO had an available line of credit for short term overnight demand borrowings with BMO Harris of
up to $25 million. As of those dates, MSCO had no outstanding loan balances with BMO Harris and there were no commitment fees or other
restrictions on
the line of credit. The Company utilizes customer or firm securities as a pledge for short-term borrowing needs.
The
interest expense for this credit line was $5,000 and $1,000 for the years ended December 31, 2024 and 2023, respectively. There were no
fees
associated with the utilization of this credit line for the years ended December 31, 2024 and 2023.
Additionally, on November 22, 2024, MSCO entered
into a Credit Agreement (the “BMO Credit Agreement”) with BMO Bank N.A. (the
“Lender”), a national banking association.
The BMO Credit Agreement provides for a revolving credit facility of up to $20,000,000. The Company may
use any borrowings under the BMO
Credit Agreement to finance NSCC Deposit Requirements (other than an Adequate Assurance Deposit) and
withdrawals from a Reserve Account.
As part of the agreement, the Company entered into a Parent Guaranty agreement guaranteeing repayment of any
debt issued to MSCO.
F-38
Borrowings under the BMO Credit Agreement will
bear interest on the outstanding daily balance at a rate of interest per annum equal 2.5% plus
the greater of: (a) Term SOFR for such
day plus 0.11448% and (b) Federal Funds Target Range – Upper Limit and (c) 0.25%. The annual commitment fee
is equal to one half
of one percent (0.50%) of the average daily unused portion of the commitment of $20,000,000. The BMO Credit Agreement contains
customary
affirmative covenants and negative covenants and requires MSCO maintain minimum total regulatory capital of $45,000,000, excess net capital
of 20,000,000, assets to total regulatory capital ratio of not more than 5.0 to 1.0, and a minimum liquidity ratio of not less than 1.0.
The Company satisfied
its condition precedent to deliver a legal option to the Lender on December 18, 2024.
There was no interest expense for the BMO Credit
Agreement for the year ended December 31, 2024. There was a commitment fee of $3,000 for
the year ended December 31, 2024.
Credit Agreement
On August 15, 2024, the Company
entered into a Loan and Security Agreement (the “Credit Agreement”) with East West Bank (the “Lender”), a
California
banking corporation, dated as of July 29, 2024. The Credit Agreement provides for a revolving credit facility of up to $20,000,000. The
initial
term of the Credit Agreement is two years. The Company may use any borrowings under the Credit Agreement for acquisitions, stock
buybacks, and for
general corporate purposes in an amount not to exceed $10,000,000. Obligations under the Credit Agreement shall be guaranteed
by John J. Gebbia, the
Company’s Chief Executive Officer, Gloria E. Gebbia, a Director of the Company, and John J. Gebbia and Gloria
E. Gebbia, as co-trustees of the John and
Gloria Living Trust.
Borrowings under the Credit
Agreement will bear interest on the outstanding daily balance at a rate of interest per annum equal to the greater of:
(a) the one-month
Term Secured Overnight Financing Rate (“Term SOFR”), as administered by CME Group Benchmark Administration plus 3.15% and
(b) 7.50%. The origination fee is equal to one half of one percent (0.50%) of the $20,000,000 revolver cap. The Credit Agreement contains
customary
affirmative covenants and negative covenants and requires the Company to maintain a minimum debt service coverage ratio of not
less than 1.35:1.00 and
minimum net capital of $43,000,000.
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
both the years ended December 31, 2024 and 2023, the Company did not sell any shares pursuant to this Sales Agreement. For both the years
ended December 31, 2024 and 2023, the Company did not incur any legal or audit fees related to this Sales Agreement.
Since
the Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 after its scheduled due date, the Company
no longer satisfied 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.
F-39
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, and NFS’s fees are offset against MSCO’s revenues on a monthly basis. If the MSCO chooses to exit this
agreement
before the end of the contract term, MSCO is under the obligation to pay an early termination fee upon occurrence pursuant to
the table below:
Date of Termination
Early
Termination
Fee
Prior to August 1, 2025
$
3,250,000
For the years ended December
31, 2024 and 2023, there has been no expense recognized for any early termination fees. MSCO 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
The
Company has entered into agreements with technology vendors for software development related to its Retail Platform. As of December 31,
2024, the Company incurred costs of approximately $3.4 million for these vendors.
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 is self-insured with respect to employee health claims. The Company 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,
2024.
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 $1,086,000 and $971,000 for the years ended December
31, 2024 and 2023,
respectively.
The
Company had an accrual of $76,000 and $64,000 as of December 31, 2024 and 2023, respectively,
which represents the estimate of future
expenses 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.
F-40
22. Segment Reporting
The Company operates as a
wholly-owned subsidiary of the Parent and is engaged in a single line of business as a securities broker-dealer
providing comprehensive
brokerage services including custody and clearance of retail accounts, principal transaction and proprietary trading, market
making, and
securities lending. The Company’s CODM, its Chief Financial Officer, reviews operating and financial information using net income
as the
key measure to evaluate the results of the business, predominately in the forecasting process, to manage the Company. The CODM
has determined that all
activities contribute to the core brokerage business and the Company operates as a single reportable segment.
The Company’s operations constitute a single
operating segment and therefore, a single reportable segment, because the CODM manages
the business activities using information of the Company as a
whole. The accounting policies used to measure the profit and loss of the
segment are the same as those described in the summary of significant accounting
policies.
Year Ended December 31,
2024
2023
Revenue
Retail
$
62,388,000 $
54,019,000
Stock loan
19,249,000
16,172,000
Market making
2,255,000
1,304,000
Consolidated overhead
9,000
19,000
Total Revenue
83,901,000
71,514,000
Expenses
Retail
21,649,000
18,063,000
Stock loan
9,776,000
8,281,000
Market making
1,403,000
1,582,000
Consolidated overhead
33,605,000
25,462,000
Total Expenses
66,433,000
53,388,000
Operating income
$
17,468,000 $
18,126,000
23. Employee Benefit Plans
The Company sponsors a defined-contribution
retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all
employees of the Company (“401(k)
plan”). Participant contributions to the 401(k) plan are voluntary and are subject to certain limitations. The Company
may also
make discretionary contributions to the 401(k) plan. For 401(k) employee contribution matching, the Company incurred an expense of $196,000
and $173,000 the years ended December 31, 2024 and 2023, respectively.
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 2,214,000 and 2,704,000 shares
remained as of December 31, 2024 and 2023, respectively.
The
table below presents the Plan restricted stock awards granted and the related fair values for the year ended December 31, 2024.
Shares
Weighted-
Average
Grant Date
Fair Value
Nonvested as of December 31, 2023(1)
— $
—
Granted
490,000
1.74
Vested
(340,000)
1.78
Nonvested as of December 31, 2024
150,000 $
1.65
(1)
The Company did not issue any share-based compensation for
the year ended December 31, 2023.
As
of December 31, 2024, there was $124,000 of total unrecognized compensation cost related to nonvested shares granted. The cost is expected
to be recognized over a weighted average period of 0.6 years.
The
Company recognized stock-based compensation expense of $730,000 for the year ended December 31, 2024, which included $460,000 within
the
line item “Employee compensation and benefits” and $270,000 fully capitalized within the line item “Software, net”
in the consolidated statements of
financial condition.
F-41
24. Related Party Disclosures
KCA
Gloria
E. Gebbia, who is a director of Siebert, is the managing member of 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, during 2023 KCA had
an
agreement with the Company to serve as a paymaster for the Company for payroll and related functions including serving as the sponsor
for the Company’s
401(k) plan. KCA passed through any expense or revenue related to this function to the subsidiaries of the Company
proportionally. The Company incurred
$40,000 of expenses related to these services for the year ended December 31, 2023. This agreement
was terminated as of January 1, 2024.
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 2026. For the use of these names, KCA passed through to the Company its cost of $60,000 for
both the years ended December
31, 2024 and 2023.
Other
than the above arrangements, KCA has earned no profit for providing any services to the Company for the years ended December 31, 2024
and 2023 as KCA passes through any revenue or expenses to the Company’s subsidiaries.
PW
PW
brokers the insurance policies for related parties. Revenue for PW from related parties was $98,000 and $124,000 for the years ended
December
31, 2024 and 2023, respectively.
Gloria E. Gebbia,
John J. Gebbia, and Gebbia Family Members
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 $3,742,000 and $2,776,000 for the years ended December 31, 2024 and 2023, respectively. Part of their compensation includes
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. Refer to Note 6 – Kakaopay Transaction for more detail.
Gebbia Sullivan County Land Trust
The Company operates on a
five-year 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, 2024 and 2023, rent expense was $60,000 for this branch
office.
The Company has completed
construction of its branch office in Omaha, Nebraska. Refer to Note 9 – Property, Office Facilities, and Equipment,
net for further
detail.
Credit Agreement
On August 15, 2024, the Company entered into the
Credit Agreement with the Lender whereby John J. Gebbia and Gloria E. Gebbia, along with
the John and Gloria Living Trust, are guaranteeing
the Company’s obligations under the Credit Agreement with the Lender. Refer to Note 21 -
Commitments, Contingencies, and Other for
more information.
Gebbia Entertainment, LLC
On August 12, 2024, the Company acquired 100% of
GE, a music and entertainment company owned by John J. Gebbia, Gloria E. Gebbia, and
David Gebbia. Refer to Note 3 – Business Combinations
for further detail.
F-42
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). Refer to Note 6 – Kakaopay Transaction
for more detail.
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
The
Company has entered into various agreements and subsequent terminations with Tigress. Refer to Note 4 – Transaction with Tigress
for
further detail.
RISE
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 $1.2 and $1.0 million in its
brokerage account at MSCO as
of December 31, 2024 and 2023, respectively. The resulting asset of RISE and liability of MSCO is eliminated in
consolidation. There was
an interest expense of $33,000 and $25,000 related to this clearing agreement for the years ended December 31, 2024 and 2023,
respectively.
25. Subsequent Events
The Company has evaluated
events that have occurred subsequent to December 31, 2024 and through March 28, 2025, the date of the filing of this
Report.
During the first quarter of
2025, the Company established an Investment Banking and Capital Markets division as part of its strategic
expansion. The Company
has hired several experienced professionals to lead and develop this growth initiative. In connection with these hires, the
Company granted
an aggregate of 117,000 shares of RSUs and 950,000 RSAs under the Plan. These shares vest in accordance with the terms of the grant
agreements,
and the related compensation expense will be recognized over the respective vesting periods in accordance with Topic 718. These hires
represent a significant investment in the Company’s future operations, however, as these employment decisions and grants occurred
after the balance sheet
date, they do not impact the financial position or results of operations presented in these consolidated financial
statements.
The Company has concluded
that apart from the 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 financial statements as of December 31, 2024.
F-43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of 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) and 15d-15(e) of Securities Exchange of 1934, as amended (the “Exchange Act”).
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 Report, our disclosure controls and procedures were effective.
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, 2024, 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 concluded that, as of December 31, 2024, our internal control over financial reporting was effective.
As disclosed in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2023, we identified a material weakness in our internal
control over financial
reporting related to the fact that we did not design and maintain effective controls over certain 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. During 2024, management
also identified material weaknesses relating to (i) our failure to design adequate internal
controls surrounding security market values within our back-office
stock record system, including the accuracy and completeness of pricing
of firm and customers’ fully paid and excess margin securities, and (ii) our
internal controls surrounding the quarterly securities
count lacking sufficient documented review and precision of review to demonstrate the completeness
and accuracy of the count performed
in accordance with Rule 17a-13 of the Exchange Act.
32
Remediation Activities
During 2024, management designed
and implemented the following previously disclosed measures to ensure that the control deficiencies
contributing to the material weaknesses
were 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. We also designed and implemented a review of security market values and conducted a detailed review of our
quarterly securities count. During the fourth quarter of 2024, we completed our testing of the operating effectiveness of the implemented
controls and found
them to be effective. As a result, we have concluded the material weaknesses have been remediated as of December 31,
2024.
Changes in Internal Control over Financial
Reporting
Except for the changes in
connection with our identifying the material weaknesses identified above and our implementation of the remediation
plans described above,
there were no other 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, 2024, as such terms are defined under Item 408(a) of Regulation S-K.
ITEM
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
33
PART
III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
Identification of Directors
The names of our Directors
and their ages, positions, and biographies are set forth below.
Gloria E. Gebbia
Age 82
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 Financial Services, Inc.
(“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 86
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 brings
valuable experience to our Board of Directors from his role as our Chief Executive Officer, as well as his extensive
brokerage and executive
experience in the brokerage industry.
Charles A. Zabatta
Age 82
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, Kennedy Cabot
& Co. and Paraco Gas Corporation. 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.
Francis V. Cuttita
Age 56
Francis V. Cuttita has served
as a member of our Board of Directors since December 16, 2016.
34
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 69
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, Secretary of the Company and Chief Executive Officer of
MSCO. 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, Secretary
as well as his
extensive experience in the financial industry.
Jerry M. Schneider, CPA
Age 80
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 47
Hocheol Shin has served on
our Board of Directors since May 24, 2023.
Hocheol
Shin has over 15 years of experience working in global technology companies across various functions including strategy, investment,
and
engineering. He is currently the President of Kakaopay Securities Corporation (“Kakaopay Securities”). Before Kakaopay Securities,
Mr. Shin was
head of Kakaopay’s Payment Business Group and Corporate Developments Office, 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 Mr. Shin’s
significant experience within technology and international business qualifies him to serve on our Board.
35
Identification of Executive Officers
Name
Age
Position
John J. Gebbia
86
Chief Executive Officer,
Chairman and Director
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.
Name
Age
Position
Andrew H. Reich
69
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.
Corporate Governance
Board Meetings
The Board of Directors held
14 special meetings during 2024. Each incumbent director attended at least 75% of Board of Directors meetings and
all of his or her respective
committee meetings.
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. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions, each member of
a listed
company’s audit, compensation, and nominating committees be independent. Audit Committee members must also satisfy the
independence criteria set
forth in Rule 10A-3 under 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.
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 are 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 nine
meetings during 2024.
The Board of Directors has
determined that Mr. Schneider qualifies as an “audit committee financial expert” under the applicable rules of the SEC.
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/investor-
relation/shareholder-information.
36
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 administers an equity
compensation benefit plan. The Board of Directors has adopted a written charter for the Compensation Committee, which is available on
our website at
www.siebert.com/investor-relation/shareholder-information. The Compensation Committee
held one meeting during 2024.
The Compensation Committee
evaluates the performance of our executive officers in terms of our operating results and financial performance and
determines their compensation
in connection therewith.
In accordance with general
practice in the securities industry, our executive compensation includes base salaries and an annual discretionary cash
bonus 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 considers the impact of the Company’s executive
compensation,
and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Compensation
Committee reviews 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 will consist of Mr. Zabatta and Mr. Cuttita. The Nominating Committee will be responsible
for identifying, reviewing
and evaluating individuals to serve as our directors, advising our Board of Directors with respect to its composition, procedures
and
committees, evaluating incumbent directors, and assessing the performance of management. The Board of Directors intends to adopt a written
charter
for the Nominating Committee, which will be available on our website at www.siebert.com/investor-relation/shareholder-information.
The Nominating
Committee did not meet in 2024.
The Nominating Committee will
evaluate nominees to our Board of Directors, which evaluation will apply to both new director candidates as well
as incumbent directors,
in the context of the current composition of our Board of Directors, the operating requirements of the Company and the long-term
interests
of shareholders. In conducting this assessment, the Nominating Committee will consider the criteria for director qualifications set by
our Board of
Directors, as well as diversity, age, skills, and such other factors as it deems appropriate to maintain a balance of knowledge,
experience, effectiveness and
capability. In the case of new director candidates, our Nominating Committee will also determine whether
the nominee must be independent for Nasdaq
purposes, which determination is based upon applicable Nasdaq listing standards, applicable
SEC rules and regulations and the advice of counsel, if
necessary.
In
addition, our Nominating Committee believes that a candidate for director should have certain minimum qualifications. Our Nominating
Committee will generally consider such factors as:
●
possessing relevant expertise upon which to be able to offer
advice and guidance to management, including public company board experience;
●
having sufficient time to devote to our affairs;
●
a reputation for personal integrity and ethics;
●
demonstrated excellence in his or her field;
●
the ability to work effectively with the other members of
our Board of Directors;
●
having the ability to exercise sound business judgment; and
●
the
commitment to rigorously represent the long-term interests of shareholders.
37
Notwithstanding the foregoing,
our Nominating Committee will reserve the right to modify these factors from time to time, taking into account the
then current needs
of our Board of Directors in an effort to maintain a balance of knowledge, experience and capability.
Our Nominating Committee will
consider and evaluate any candidate who is properly recommended by shareholders, identified by members of
our Board of Directors or our
executive officers, or, at the discretion of our Nominating Committee, an independent search firm. The Nominating
Committee will also
consider the requirements of our Amended and Restated Stockholders’ Agreement, which entitled Kakaopay to designate one director
and entitled the Gebbia Stockholders (as defined therein) to designate six directors (three of which must be independent), in each case
subject to certain
conditions. Stockholders may recommend director candidates for consideration by the Nominating Committee by writing
to our Corporate Secretary at
Siebert Financial Corp., 653 Collins Avenue, Miami Beach, FL 33139. A recommendation must be accompanied
by a statement from the candidate that he
or she would give favorable consideration to serving on our Board of Directors and should include
sufficient biographical and other information concerning
the candidate and his or her qualifications to permit the committee to make an
informed decision as to whether further consideration of the candidate would
be warranted.
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 of our directors are strongly encouraged to attend each annual shareholder meeting. Six 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/investor-relation/shareholder-information.
Board Leadership Structure and Board of
Directors
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.
38
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.
Compensation Committee
Interlocks and Insider Participation
No
member of the Compensation Committee during 2024 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.
Insider Trading Policy; Employee, Officer and
Director Hedging and 10b5-1 Plans
We
have adopted an insider trading policy governing the purchase, sale and/or other dispositions of the Company’s securities by its
directors,
officers and employees, or by the Company itself, that we believe is reasonably designed to promote compliance with insider
trading laws, rules and
regulations and the listing rules of Nasdaq. The Company’s Insider Trading Policy is filed as Exhibit 19.1
to this Report.
Our
insider trading policy strongly discourages our employees (including officers) or directors, or any of their designees, to purchase financial
instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in transactions,
that hedge or
offset, or are designed to hedge or offset, any decrease in the market value of the Company’s equity securities.
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).
Clawback Policy
We
have a compensation recovery policy designed to comply with the mandatory compensation “clawback” requirements under Nasdaq
rules.
Under the policy, in the event of certain accounting restatements, we will be required to recover erroneously received incentive-based
compensation from
our executive officers representing the excess of the amount actually received over the amount that would have been
received had the financial statements
been correct in the first instance. The Compensation Committee has discretion to make certain exceptions
to the clawback requirements (when permitted by
Nasdaq rules) and ultimately determine whether any adjustment will be made.
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, the Company believes that all applicable Section 16(a) filing requirements
were met during the year
ended December 31, 2024, except as set forth below:
Delinquent Section 16(a) Reports
On March 5, 2025, John M.
Gebbia, a member of a group that beneficially owns over 10% of the Company’s outstanding shares of common stock,
reported on Form
4 the disposition of 1,000 shares. Mr. Gebbia’s Form 4 was filed late due to an inadvertent mistake.
39
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 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 Gebbia has been in the
brokerage industry since 1993. Mr. Gebbia is currently the President of the Company’s insurance subsidiary, PW.
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, 2024 and 2023, respectively.
Name and Principal
Position
Year
Salary
($)
Bonus ($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Non-Qualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($) (3)
Totals ($)
John J. Gebbia(1)
2024 $ 840,000 $ 350,000
—
—
—
— $
120,000 $1,310,000
Chief Executive Officer,
Director and Chairman
2023 $ 292,000 $ 200,000
—
—
—
— $
120,000 $
612,000
Andrew H. Reich(2)
2024 $ 272,000 $ 190,000
—
—
—
— $
120,000 $
582,000
Executive Vice President,
Chief Operating Officer,
Chief Financial Officer,
Director and Secretary
2023 $ 250,000 $ 181,000
—
—
—
— $
120,000 $
551,000
(1)
Represents the dollar amount recognized for consolidated
financial statement reporting in accordance with 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 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, 2024 and 2023, respectively.
40
Equity Incentive Plan
The purpose of the Siebert
Financial Corp. 2021 Equity Incentive Plan (the “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 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
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 Plan and outstanding awards. The Committee may
delegate any part
of its authority and powers under the 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 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 Plan), achievement
of one or more performance criteria, or a combination of continuous service and
achievement of performance criteria.
The 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.
Outstanding Equity Awards as of December 31,
2024
As of December 31, 2024, the
Company had no outstanding equity awards to named executive officers.
Option Agreements
As of December 31, 2024 and
2023, 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.
41
Pay Versus Performance
As required by Section 953(a) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and Item 402(v) of Regulation S-K,
which was adopted by the SEC in 2022, the Company is providing the following information regarding the relationship between “compensation
actually
paid” (“CAP”) to our principal executive officer (“PEO”), former principal executive officer (“Former
PEO”) and non-PEO named executive officer
(“NEO”) and certain financial performance of the Company for the fiscal years
listed below.
John J. Gebbia - PEO
Andrew H. Reich – Former
PEO
Non-PEO NEO
Value of
Initial Fixed
$100
Year
Summary
Compensation
Table Total for
PEO (1)
Compensation
Actually Paid
to PEO (3)
Summary
Compensation
Table Total for
Former PEO
(1)
Compensation
Actually Paid
to Former
PEO (3)
Average
Summary
Compensation
Table Total for
Non-PEO
NEO (1)
Average
Compensation
Actually Paid
to Non-PEO
NEO (4)
Investment
Based On
Total
Shareholder
Return
(“TSR”) (5)
Net Income /
(Loss)
thousands
(6)
2024
$
1,310,000 $
1,310,000 $
$
- $
582,000 $
582,000 $
37.93 $
13,286
2023
$
612,000 $
612,000 $
230,000 $
230,000 $
321,000 $
321,000 $
(27.59) $
7,826
2022
$
282,000 $
250,000 $
- $
- $
(2) $
(2) $
(41.38) $
(1,990)
(1)
Represents the amounts of total compensation reported for our PEO, Former PEO and Non-PEO NEO during each corresponding year in the “Total”
column of the Summary Compensation Table above.
(2)
Andrew H. Reich was our PEO for the fiscal year ended December 31, 2022, and until May 24, 2023, upon appointment of Mr. Gebbia as PEO. There
were no other NEOs for the year ended December 31, 2022, and only Andrew H. Reich during the year ended December 31, 2024 and 2023.
(3) Represents the amount of “compensation actually paid”
to our PEO and Former PEO, respectively, as computed in accordance with Item 402(v) of
Regulation S-K, with the following adjustments:
Year
Reported
Summary
Compensation
Table
Total
for John J.
Gebbia
Equity
Award
Adjustments(b)
Compensation
Actually
Paid to John J.
Gebbia
2024
$
1,310,000 $
— $
1,310,000
2023
$
612,000 $
— $
612,000
2022
$
— $
— $
—
Year
Reported
Summary
Compensation
Table
Total
for
Andrew H.
Reich
Equity
Award
Adjustments(b)
Compensation
Actually Paid
to Andrew H.
Reich
2024
$
582,000 $
— $
582,000
2023
$
551,000 $
— $
551,000
2022
$
282,000 $
(32,000) $
250,000
(b)
The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value
of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end
of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of
the end of the applicable year; (iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date; (iv) for awards
granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in
fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a
deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on
stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any
other component of total compensation for the applicable year. The valuation assumptions used to calculate fair values did not materially differ from
those disclosed at the time of grant.
42
(4)
Represents the average amount of “compensation actually paid” to the Non-PEO NEO, as computed in accordance with Item 402(v) of Regulation S-
K. The dollar amounts do not reflect the actual average compensation earned or paid to the Non-PEO NEOs during the applicable year. In accordance
with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the Non-PEO NEO
for each applicable year:
Year
Reported
Summary
Compensation
Tale Total
for
Andrew H.
Reich
Equity
Award
Adjustments(b)
Compensation
Actually Paid
to Andrew H.
Reich
2024
$
551,000 $
— $
551,000
2023
$
551,000 $
— $
551,000
2022
$
— $
— $
—
(5)
TSR is cumulative
for the measurement periods beginning on December 31, 2021 and ending on December 31 of each of 2024, 2023 and 2022,
respectively, calculated
as the yearly percentage change in cumulative total shareholder return based on a deemed fixed investment of $100 at market
close on
December 31, 2021. No dividends were paid in 2024, 2023 or 2022.
(6)
The dollar amounts reported represent the amount of net income/ (loss) reflected in our consolidated audited financial statements for the applicable
years.
The objectives of our executive compensation program
are (1) to enhance our long-term value by driving growth and profitability consistent with
our board-approved annual financial and long-term
strategic plans, (2) to assist us in attracting and retaining high quality talent, (3) to reward past
performance and motivate future
performance, and (4) to align executive officers’ long-term interests with those of our shareholders. While we do not
utilize a
set formula for allocating compensation among the elements of total compensation, our compensation program is designed to reward performance
by tying a substantial portion of each executive officer’s total potential compensation to individual performance and our overall
performance. Key factors
include the executive officer’s performance; the nature, scope and level of the executive officer’s
responsibilities; and the executive officer’s contribution to
our overall financial results. Our approach to compensation complements
our practices of real-time risk assessment and daily measurement of financial
performance in the various parts of our businesses, which
also act as disincentives to excessive risk-taking. The compensation actually paid to our PEO and
Former PEO and the average amount of
compensation actually paid to or non-PEO NEOs during the periods presented are not directly correlated with TSR
as they are influenced
by numerous factors including, but not limited to, the timing of new grant issuances and award vesting, NEO mix, share price
volatility
during the fiscal year, our mix of performance metrics and other factors.
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, 2024 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, 2024. 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
Fees Earned
or Paid in
Cash
Stock
Awards
Option
Awards
Non-Equity
Incentive Plan
Compensation
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
Total
Gloria E. Gebbia
$
120,000
—
—
—
—
— $
120,000
John J. Gebbia
$
120,000
—
—
—
—
— $
120,000
Andrew H. Reich
$
120,000
—
—
—
—
— $
120,000
Francis V. Cuttita
$
130,000
—
—
—
—
— $
130,000
Charles Zabatta
$
150,000
—
—
—
—
— $
150,000
Jerry M. Schneider
$
130,000
—
—
—
—
— $
130,000
Hocheol Shin
$
—
—
—
—
—
— $
—
43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The following table lists
share ownership of our common stock as of March 5, 2025. 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 40,432,936 shares of common stock outstanding as of March 5, 2025.
Name and Address of Beneficial Owner (1)
Shares of
Common
Stock
Percent of
Class
(Rounded)
Named Executive Officers and Directors
Gloria E. Gebbia / John J. Gebbia (2) (6)
16,959,323
42%
Andrew H. Reich (8)
748,238
2%
Charles Zabatta (3)
550,439
1%
Francis V. Cuttita
187,773
1%
Jerry M. Schneider
3,000
*
Hocheol Shin (7)
—
*
Directors and executive officers as a group (7 persons)
18,448,773
46%
Other Shareholders with 5% or More
Kakaopay (9)
8,075,607
20%
15F, Tower B, 166 Pangyoyeok-ro,
Bundang-gu, Seongnam-si,
Gyeonggi-do, Republic of Korea 13529
Kimberly Gebbia (4) (6)
3,439,400
9%
653 Collins Ave
Miami, FL 33139
John M. Gebbia (5) (6)
2,214,891
5%
300 Vesey Street
New York, NY 10282
*
Less than 1% of outstanding shares as of March 5, 2025.
(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 9,715,714 shares of our common stock owned by Gloria E. Gebbia, 3,439,400
shares owned by Kimberly Gebbia, Richard Gebbia, and
the children of Richard and Kimberly Gebbia, 2,214,891 shares owned by John M. Gebbia
and the children of John M. Gebbia, and 1,589,318
shares owned by David J. Gebbia and the children of David J. Gebbia.
(3)
Includes 450,439 shares owned by Charles Zabatta’s
wife.
(4)
Includes 588,535 shares owned by the husband of Kimberly
Gebbia, Richard 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.
44
(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.
(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).
(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 our equity compensation plan under which our securities are authorized for issuance as of
December 31, 2024.
Plan Category
Number of
securities
to be
issued
upon
exercise of
outstanding
options,
warrants
and
rights
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and
rights
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
—
NA
2,214,000
Equity compensation plans not approved by security holders
—
NA
NA
Total
—
NA
2,214,000
45
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.
Related Party Transactions
Refer to Note 24 – Related
Party Disclosures for further detail on our related party transactions.
Director Independence
See “Corporate Governance”
under Item 10 in this Report for information on director independence.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Since the second quarter of
2024, Crowe LLP (“Crowe”) has served as our independent registered public accounting firm. Prior to the second
quarter of
2024, Baker Tilly US, LLP (“Baker Tilly”) served 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 Crowe and Baker Tilly are compatible with the
maintenance of Crowe and Baker Tilly’s
independence from our management.
Audit Fees
The aggregate fees billed
by Crowe for professional services rendered for the 2024 audit of our annual consolidated
financial statements and
reviews of our quarterly consolidated financial statements were
$825,000. The aggregate fees billed by Baker Tilly for professional services rendered for
the 2024 reviews of our quarterly consolidated
financial statements were $67,000. The aggregate fees billed by Baker Tilly for professional services
rendered for the 2023 audit of our
annual consolidated financial statements and reviews of our quarterly consolidated
financial statements were $407,000.
Audit-Related Fees
We had no fees billed by Crowe
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, 2024. 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, 2024 and 2023.
Tax Fees
We had no tax fees billed
by Crowe for tax compliance, tax advice, and tax planning for the years ended December 31, 2024. We had no tax fees
billed by Baker Tilly
for tax compliance, tax advice, and tax planning for the years ended December 31, 2024 and 2023.
46
All Other Fees
We had no other fees billed
by Crowe for tax compliance, tax advice, and tax planning for the years ended December 31, 2024. We had no other
fees billed by Baker
Tilly for tax compliance, tax advice, and tax planning for the years ended December 31, 2024 and 2023.
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, 2024 and 2023. 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, 2024 and 2023 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
47
PART
IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits required by Item 601 of Regulation
S-K filed as part of, or incorporated by reference in, this Annual Report are listed in the
accompanying Exhibit Index.
(a) The following documents are filed as part of this report:
1.
Consolidated Financial Statements
The consolidated financial statements for the years
ended December 31, 2024 and 2023 commence on page 31 of this Report.
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 Report.
48
EXHIBIT INDEX
Exhibit No.
Description Of Document
3.1
Certificate of Incorporation of Siebert Financial Corp. (formerly known as J. Michaels, Inc..) originally filed on April 9, 1934, as amended
and restated to date (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
1997).
3.1(a)
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
3.2
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).
4.1
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).
4.2*
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).
10.1
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).
10.2
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).
10.3
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).
10.4
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).
10.5
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).
10.6
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).
10.7
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).
10.8
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).
10.9
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).
10. 10
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).
10.11
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).
49
10.12
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).
10.13
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).
10.14
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).
10.15
East West Loan and Security Agreement, dated July 29, 2024 (incorporated by reference to Exhibit 10.44 to the Company’s Current Report
on Form 8-K (File No. 000-05703) filed on August 20, 2024).
10.16
East West Revolver Note Agreement, dated July 29, 2024 (incorporated by reference to Exhibit 10.45 to the Company’s Current Report on
Form 8-K (File No. 000-05703) filed on August 20, 2024).
10.17
Continuing Guaranty, dated July 29, 2024 (incorporated by reference to Exhibit 10.46 to the Company’s Current Report on Form 8-K (File
No. 000-05703) filed on August 20, 2024).
10.18
Credit Agreement, dated November 22, 2024 (incorporated by reference to Exhibit 10.47 to the Company’s Current Report on Form 8-K
(File No. 000-05703) filed on December 19, 2024).
10.19
BMO Bank Revolver Note Agreement, dated November 22, 2024 (incorporated by reference to Exhibit 10.48 to the Company’s Current
Report on Form 8-K (File No. 000-05703) filed on December 19, 2024).
10.20
Parent Guaranty, dated November 22, 2024 (incorporated by reference to Exhibit 10.49 to the Company’s Current Report on Form 8-K (File
No. 000-05703) filed on December 19, 2024).
16.1
Letter from Baker Tilly US, LLP to the Securities and Exchange Commission, dated May 16, 2024 (incorporated by reference to Exhibit
16.1 to the Company’s Current Report on Form 8-K (File No. 000-05703) filed on May 16, 2024).
19.1**
Insider Trading Policy
21.1**
Subsidiaries of the registrant
23.1**
Consent of Crowe LLP
23.2**
Consent of Baker Tilly US, LLP
31.1**
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.
31.2**
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.
32.1**#
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.
32.2**#
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.
97.1
Clawback Policy (incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K (File No. 000-05703) filed on
May 10, 2024).
101.INS
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.
50
SIGNATURES
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.
SIEBERT FINANCIAL CORP.
By:
/s/ John J. Gebbia
John J. Gebbia
Chief Executive Officer and Chairman
(Principal executive officer)
Date:
March 28, 2025
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:
March 28, 2025
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and
on the dates indicated.
Name
Title
Date
/s/ John J. Gebbia
Chief Executive Officer and Chairman (Principal executive
March 28, 2025
John J. Gebbia
officer)
/s/ Andrew H. Reich
Executive Vice President, Chief Operating Officer and Chief
March 28, 2025
Andrew H. Reich
Financial Officer, Secretary and Director (Principal financial and
accounting officer)
/s/ Gloria E. Gebbia
Director
March 28, 2025
Gloria E. Gebbia
/s/ Charles Zabatta
Director
March 28, 2025
Charles Zabatta
/s/ Francis V. Cuttita
Director
March 28, 2025
Francis V. Cuttita
/s/ Jerry M. Schneider
Director
March 28, 2025
Jerry M. Schneider
/s/ Hocheol Shin
Director
March 28, 2025
Hocheol Shin
51
Exhibit
19.1
Siebert
Financial Corp.
Insider
Trading Policy and Guidelines
Purpose
This Insider Trading Policy (the “Policy”)
provides guidelines with respect to transactions in the securities of Siebert Financial Corp. (the “Company”) and
the handling
of confidential information about the Company and the companies with which the Company does business. The Company’s Board of
Directors
(“Board of Directors”) has adopted this Policy to promote compliance with federal, state and foreign securities laws that
prohibit certain persons
who are aware of material nonpublic information from: (i) trading in securities of that company; or (ii) providing
material nonpublic information to other
persons who may trade on the basis of that information.
Persons
Subject to the Policy
This Policy applies to all officers of the Company
and its subsidiaries, all members of the Company’s Board of Directors and all employees of the
Company and its subsidiaries. The
Company may also determine that other persons should be subject to this Policy, such as contractors or consultants who
have access to
material nonpublic information. This Policy also applies to family members, other members of a person’s household and entities controlled
by a person covered by this Policy.
FINRA Rule 3210 provides, among other things,
that no person associated with a member ("employer member") shall, without the prior written consent of
the member, open or
otherwise establish at a member other than the employer member ("executing member"), or at any other financial institution,
any
account in which securities transactions can be effected and in which the associated person has a beneficial interest. (Please see
FINRA Rule 3210 for
further detail).
Transactions
Subject to the Policy
This Policy applies to transactions in all of
the Company’s securities, including the Company’s common stock, options to purchase common stock, or any
other type of securities
that the Company may issue, including (but not limited to) preferred stock, convertible debentures and warrants, as well as
derivative
securities that are not issued by the Company, such as exchange-traded put or call options or swaps relating to the Company’s Securities
(collectively, the “Company Securities”).
Individual
Responsibility
Persons subject to this Policy have ethical
and legal obligations to maintain the confidentiality of information about the Company and to not engage in
transactions in Company
Securities while in possession of material nonpublic information. Persons subject to this policy must not engage in illegal trading
and must avoid the appearance of improper trading. Each individual is responsible for making sure that he or she complies with this
Policy, and that any
family member, household member or entity whose transactions are subject to this Policy, as discussed below,
also comply with this Policy. In all cases, the
responsibility for determining whether an individual is in possession of material
nonpublic information rests with that individual, and any action on the part
of the Company, the Compliance Officer (defined below)
or any other employee or director pursuant to this Policy (or otherwise) does not in any way
constitute legal advice or insulate an
individual from liability under applicable securities laws. You could be subject to severe legal penalties and
disciplinary action
by the Company for any conduct prohibited by this Policy or applicable securities laws, as
described below in more detail under the
heading “Consequences of Violations.”
Administration
of the Policy
The Board of Directors has appointed the Muriel
Siebert & Co., Inc. Chief Compliance Officer to be the Compliance Officer for the purposes of this Policy
(“Compliance Officer”),
and in his or her absence, another employee designated by this Compliance Officer shall be responsible for administration of this
Policy.
Should the Compliance Officer be unable to serve in his/her role, the Board of Directors will appoint a replacement Compliance Officer.
All
determinations and interpretations by the Compliance Officer shall be final and not subject to further review.
Statement
of Policy
It is the policy of the Company that no director,
officer or other employee of the Company (or any other person designated by this Policy or by the
Compliance Officer as subject to this
Policy) who is aware of material nonpublic information relating to the Company may, directly, or indirectly through
family members or
other persons or entities:
●
Engage in transactions in Company Securities,
except as otherwise specified in this Policy under the headings “Transactions Under Company
Plans,” “Transactions Not
Involving a Purchase or Sale” and “Rule 10b5-1 Plans;”
●
Recommend the purchase or sale of any Company
Securities;
●
Disclose material nonpublic information to persons
within the Company whose jobs do not require them to have that information, or outside
of the Company to other persons, including, but
not limited to, family, friends, business associates, investors and expert consulting firms,
unless any such disclosure is made in accordance
with the Company’s policies regarding the protection or authorized external disclosure of
information regarding the Company; or
●
Assist anyone engaged in the above activities.
In addition, it is the policy of the Company that
no director, officer or other employee of the Company (or any other person designated as subject to this
Policy) who, in the course of
working for the Company, learns of material nonpublic information about a company with which the Company does business,
including a customer
or supplier of the Company, may trade in that company’s securities until the information becomes public or is no longer material.
There are no exceptions to this Policy, except
as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such
as the need to raise money
for an emergency expenditure), or small transactions, are not excepted from this Policy. The securities laws do not recognize any
mitigating
circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation
for
adhering to the highest standards of conduct.
2
Definition
of Material Nonpublic Information
Material
Information. Information is considered “material” if a reasonable investor would consider that information
important in making a decision to buy,
hold or sell securities. Any information that could be expected to affect a company’s
stock price, whether it is positive or negative, should be considered
material. There is no bright-line standard for assessing
materiality; rather, materiality is based on an assessment of all of the facts and circumstances, and is
often evaluated by
enforcement authorities with the benefit of hindsight. While it is not possible to define all categories of material information,
some
examples of information that ordinarily would be regarded as material are:
●
Projections of future earnings or losses, or
other earnings guidance;
●
Changes to previously announced earnings guidance,
or the decision to suspend earnings guidance;
●
A pending or proposed merger, acquisition or
tender offer;
●
A pending or proposed acquisition or disposition
of a significant asset;
●
A pending or proposed joint venture;
●
A Company restructuring;
●
Significant related party transactions;
●
A change in dividend policy, the declaration
of a stock split, or an offering of additional securities;
●
Bank borrowings or other financing transactions
out of the ordinary course;
●
The establishment of a repurchase program for
Company Securities;
●
A change in the Company’s pricing or cost
structure;
●
Major marketing changes;
●
A change in management;
●
A change in auditors or notification that the
auditor’s reports may no longer be relied upon;
●
Development of a significant new product, process,
or service;
●
Pending or threatened significant litigation,
or the resolution of such litigation;
●
Impending bankruptcy or the existence of severe
liquidity problems;
●
The gain or loss of a significant customer or
supplier;
●
A significant cybersecurity incident, such as
a data breach, or any other significant disruption in the company’s operations or loss, potential loss,
breach or unauthorized access
of its property or assets, whether at its facilities or through its information technology infrastructure; or
●
The imposition of an event-specific restriction
on trading in Company Securities or the securities of another company or the extension or
termination of such restriction.
When
Information is Considered Public
Information that has not been disclosed to the
public is generally considered to be nonpublic information. In order to establish that the information has been
disclosed to the public,
it may be necessary to demonstrate that the information has been widely disseminated. Information generally would be considered
widely
disseminated if it has been disclosed through the Dow Jones “broad tape,” newswire services, a broadcast on widely-available
radio or television
programs, publication in a widely-available newspaper, magazine or news website, or public disclosure documents filed
with the SEC that are available on
the SEC’s website. By contrast, information would likely not be considered widely disseminated
if it is available only to the Company’s employees, or if it
is only available to a select group of analysts, brokers and institutional
investors.
Once information is widely disseminated, it is
still necessary to provide the investing public with sufficient time to absorb the information. As a general
rule, information should
not be considered fully absorbed by the marketplace until after the first full business day after the day on which the information is
released. If, for example, the Company were to make an announcement on a Monday, you should not trade in Company Securities until Wednesday.
Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply to the release of specific
material
nonpublic information.
3
Procedures
if You Learn Inside Information
Generally, a person violates the insider trading
prohibition when that person violates a duty owed either to the person on the other side of the transaction or
to a third party (such
as a customer or employer) by trading on or disclosing the information.
Virtually anyone can become subject to the insider
trading prohibition merely by obtaining material non–public information by unlawful means or by
lawfully obtaining such information
and improperly using it. This is known as misappropriation. If you receive material, non–public information as part of
your legitimate
business dealings on behalf of the Company or its customers, and you use that information to trade in securities, or if you transmit that
information to another person for purposes of trading in securities (so–called “tipping”), you would be guilty of insider
trading. Insider trading liability may
also be derivative. A person who has obtained inside information (so–called “tippee”)
from a person who has breached a duty or who has misappropriated
information may also be held liable.
It is not illegal to learn inside information.
It is, however, illegal for you to trade on such information or to pass it on to others who have no legitimate
business reason for receiving
such information.
If you believe you have learned inside information,
contact the Compliance Officer immediately so that the Compliance Officer may address the insider
trading issues and preserve the integrity
of the Company’s activities. Do not trade on the information or discuss the possible inside information with any
other person at
the Company. If you become aware of a breach of these policies or of a leak of inside information, advise Compliance immediately.
Transactions
by Family Members, Others, and Controlled Entities
This Policy applies to your family members, other
members of a person’s household and entities controlled by a person covered by this Policy. FINRA
Rule 3210 provides, among other
things, that no person associated with a member ("employer member") shall, without the prior written consent of the
member,
open or otherwise establish at a member other than the employer member ("executing member"), or at any other financial institution,
any account
in which securities transactions can be effected and in which the associated person has a beneficial interest.(Please see
FINRA Rule 3210 for further detail).
You are responsible for the transactions of these
other persons and entities and therefore should make them aware of the need to confer with you before
they trade in Company Securities,
and you should treat all such transactions for the purposes of this Policy and applicable securities laws as if the
transactions were
for your own account.
Transactions
by Entities that You Influence or Control
This Policy applies to any entities that you influence
or control, including any corporations, partnerships or trusts (collectively referred to as “Controlled
Entities”), and transactions
by these Controlled Entities should be treated for the purposes of this Policy and applicable securities laws as if they were for
your
own account.
4
Transactions
Under Company Plans
This Policy does not apply in the case of the
following transactions, except as specifically noted:
Stock
Option Exercises. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s
plans, or to
the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold shares subject
to an option to satisfy
tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a broker-assisted
cashless exercise of an option, or
any other market sale for the purpose of generating the cash needed to pay the exercise price of an
option.
Restricted
Stock Awards. This Policy does not apply to the vesting of restricted stock, or the exercise of a tax withholding right pursuant
to which
you elect to have the Company withhold shares of stock to satisfy tax withholding requirements upon the vesting of any restricted
stock. The
Policy does apply, however, to any market sale of restricted stock.
Employee
Stock Purchase Plan. This Policy does not apply to purchases of Company Securities in the employee stock purchase plan resulting
from your periodic contribution of money to the plan pursuant to the election you made at the time of your enrollment in the plan. This
Policy also
does not apply to purchases of Company Securities resulting from lump sum contributions to the plan, provided that you elected
to participate by
lump sum payment at the beginning of the applicable enrollment period. This Policy does apply, however, to your election
to participate in the
plan for any enrollment period, and to your sales of Company Securities purchased pursuant to the plan.
Other
Similar Transactions. Any other purchase of Company Securities from the Company or sales of Company Securities to the Company are
not
subject to this Policy.
Transactions
Not Involving a Purchase or Sale
Bona fide gifts are not transactions subject
to this Policy. Any Siebert insider giving these gifts must understand that they will be unable to give any advice
or direction for any
transactions related to these gifts.
Special
and Prohibited Transactions
The Company has determined that there is a heightened
legal risk and/or the appearance of improper or inappropriate conduct if the persons subject to this
Policy engage in certain types of
transactions. It therefore is the Company’s policy that any persons as indicated by each of the sections below may not
engage in
any of the following transactions, or should otherwise consider the Company’s preferences as described below:
Short-Term
Trading. Short-term trading of Company Securities may be distracting to the person and may unduly focus the person on the
Company’s
short-term stock market performance instead of the Company’s long-term business objectives. For these reasons, the Company
discourages
any person subject to this Policy from entering into any purchase and sale, or any sale and purchase of any Company Securities within
a 30-day window starting at the settlement date of the first transaction.
Please note that Section 16(b) of the
Exchange Act already removes the incentive for profits derived from short-term trading of the Company’s
stock for officers, directors
and shareholders owning 10% or more of the Company’s common stock as they will be liable to the Company for
these profits.
5
Short
Sales. Short sales of Company Securities (i.e., the sale of a security that the seller does not own) may evidence an expectation
on the part of
the seller that the securities will decline in value, and therefore have the potential to signal to the market that the
seller lacks confidence in the
Company’s prospects. In addition, short sales may reduce a seller’s incentive to seek to improve
the Company’s performance. For these reasons,
short sales of Company Securities are prohibited. In addition, Section 16(c) of the
Exchange Act prohibits officers and directors from engaging in
short sales. (Short sales arising from certain types of hedging transactions
are governed by the paragraph below captioned “Hedging
Transactions.”)
Publicly-Traded
Options. Given the relatively short life of publicly-traded options, transactions in options may create the appearance that a
director,
officer or employee is trading based on material nonpublic information and focus a director’s, officer’s or other employee’s
attention on
short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in put options,
call options or other
derivative securities, on an exchange or in any other organized market, are prohibited by this Policy. (Option positions
arising from certain types
of hedging transactions are governed by the next paragraph below.)
Hedging
Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through
the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such transactions may permit
a
director, officer or employee to continue to own Company Securities obtained through employee benefit plans or otherwise, but without
the full
risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as
the Company’s
other shareholders. Therefore, the Company strongly discourages you from engaging in such transactions. Any person
wishing to enter into such
an arrangement must first submit the proposed transaction for approval by the Compliance Officer. Any request
for pre-clearance of a hedging or
similar arrangement must be submitted to the Compliance Officer of documents evidencing the proposed
transaction and must set forth a
justification for the proposed transaction.
Given that some hedging transactions
may have legitimate tax or other objectives, the Company may conclude that the transaction is preferable to
the outright sale of the stock
by a director, officer or other employee. Counsel must also take into account the application of Section 16, Rule 144,
and proxy statement
disclosure requirements (including Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
which added a
disclosure requirement regarding hedging policies to Section 14 of the Exchange Act).
Post
Trade Approval
All trading of the Company Securities by persons
subject to this Policy will be subject to review. The review of trading in Company Securities and any
issues that arise will be presented
to the Board of Directors.
Additional
Procedures for Siebert Insiders
The Company has established additional procedures
in order to assist the Company in the administration of this Policy, to facilitate compliance with laws
prohibiting insider trading while
in possession of material nonpublic information, and to avoid the appearance of any impropriety. These additional
procedures are applicable
only to those individuals designated by the Company as well as other members of their households and entities controlled by
such persons,
(collectively “Siebert Insiders”) (Please see FINRA Rule 3210 for further detail). These additional
procedures will be communicated to the
Siebert Insiders separately.
6
Review
of Insider List. The list will be reviewed on a quarterly basis and updated as necessary (i.e. removal after termination, addition
due to promotion,
etc.).
Although the Company has established additional
procedures for the individuals, at any time the Board of Directors or their delegees may determine that it
is in the best interest of
the Company to restrict trading for all employees, including any subsidiaries.
Pre-Clearance
Procedures. The Siebert Insiders may not engage in any transaction in Company Securities without first obtaining pre-clearance
of the
transaction from the Compliance Officer. The Company is under no obligation to approve a transaction submitted for pre-clearance,
and may determine not
to permit the transaction. If a person seeks pre-clearance and permission to engage in the transaction is denied,
then he or she should refrain from initiating
any transaction in Company Securities, and should not inform any other person of the restriction.
When a request for pre-clearance is made, the
requestor should carefully consider whether he or she may be aware of any material nonpublic information
about the Company, and should
describe fully those circumstances to the Company. The requestor should be prepared to comply with SEC Rule 144 and
file Form 144, if
necessary, at the time of any sale.
Blackout
Period Restriction. The Siebert Insiders may not conduct any transactions involving the Company’s Securities (other than
as specified by this
Policy), during a “Blackout Period.” The routine Blackout Periods begin 2 weeks prior to the end of each
fiscal quarter and end on the second business day
following the date of the public release of the Company’s earnings results for
that quarter. In other words, these persons may only conduct transactions in
Company Securities during the “Window Period”
beginning on the first business day following the public release of the Company’s quarterly earnings and
ending 2 weeks prior to
the close of the next fiscal quarter. The Compliance Officer will prepare and distribute an annual calendar setting forth the Blackout
and Window Periods for the current fiscal year.
Event-Specific
Trading Restriction Periods. From time to time, an event may occur that is material to the Company and is known by only a few directors,
officers and/or employees. So long as the event remains material and nonpublic, the persons designated by the Company may not trade Company
Securities. In addition, the Company’s financial results may be sufficiently material in a particular fiscal quarter that, in the
judgment of the Company,
designated persons should refrain from trading in Company Securities even sooner than the typical Blackout Period
described above. In that situation, the
Company may notify these persons that they should not trade in the Company’s Securities,
without disclosing the reason for the restriction. The existence
of an event-specific trading restriction period or extension of a Blackout
Period will not be announced to the Company as a whole, and should not be
communicated to any other person. Even if the Company has not
designated you as a person who should not trade due to an event-specific restriction, you
should not trade while aware of material nonpublic
information. Exceptions will not be granted during an event-specific trading restriction period.
Exceptions.
The blackout period restriction and event-specific trading restrictions do not apply to those transactions to which this Policy does not
apply, as
described above under the headings “Transactions Under Company Plans” and “Transactions Not Involving a Purchase
or Sale.” Further, the requirement
for pre-clearance, the blackout period restriction trading restrictions and event-specific trading
restrictions do not apply to transactions conducted pursuant
to approved Rule 10b5-1 plans, described under the heading “Rule 10b5-1 Plans.”
7
Rule
10b5-1 Plans
Rule 10b5-1 under the Exchange Act provides a
defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this defense, a
person subject to this Policy
must enter into a Rule 10b5-1 plan for transactions in Company Securities that meets certain conditions specified in the Rule
(a “Rule
10b5-1 Plan”). If the plan meets the requirements of Rule 10b5-1, Company Securities may be purchased or sold without regard to
certain insider
trading restrictions. To comply with the Policy, a Rule 10b5-1 Plan must be approved by the Company and meet the requirements
of Rule 10b5-1.
To comply with the Policy, the Rule 10b5-1 Plan
may not be adopted by a person subject to this Policy when he or she is in possession of material
nonpublic information or within a Blackout
Period.
Post-Termination
Transactions
This Policy continues to apply to transactions
in Company Securities even after termination of service to the Company. If an individual is in possession of
material nonpublic information
when his or her service terminates, that individual may not trade in Company Securities until that information has become
public or is
no longer material. The pre-clearance procedures specified under the heading “Additional Procedures” above, however, will
cease to apply to
transactions in Company Securities upon the expiration of any Blackout Period or other Company-imposed trading restrictions
applicable at the time of the
termination of service.
Consequences
of Violations
The purchase or sale of securities while aware
of material nonpublic information, or the disclosure of material nonpublic information to others who then
trade in the Company’s
Securities, is prohibited by the federal and state laws. Insider trading violations are pursued vigorously by the SEC, U.S. Attorneys
and state enforcement authorities as well as the laws of foreign jurisdictions. Punishment for insider trading violations is severe, and
could include
significant fines and imprisonment. While the regulatory authorities concentrate their efforts on the individuals who trade,
or who tip inside information to
others who trade, the federal securities laws also impose potential liability on companies and other
“controlling persons” if they fail to take reasonable steps
to prevent insider trading by company personnel.
In addition, an individual’s failure to
comply with this Policy may subject the individual to Company-imposed sanctions, including dismissal for cause,
whether or not the employee’s
failure to comply results in a violation of law.
Treatment Of Customer Information
The Company considers confidential all information
concerning its customers including, for example, their financial condition, prospects, plans and
proposals. The misuse of customer information
can damage their reputation as well as customer relationships.
8
Investigations Of Trading Activities
From time to time the Exchanges, FINRA, and the
SEC request information from the Company concerning trading in specific securities. Requests for
information should be referred directly
to Compliance. You may be asked to sign a sworn affidavit that, at the time of such trading, you did not have any
inside information about
the securities in question. Your employment may be terminated if you refuse to sign such an affidavit. The Company may submit
these affidavits
to the Exchanges, FINRA, or the SEC.
Company
Assistance
Any person who has a question about this Policy
or its application to any proposed transaction may obtain additional guidance from the Compliance
Officer or the Company.
Certification
All Company employees are required to annually
certify their understanding of, and intent to comply with this Policy. If you do not understand any part of
the policy, please ask your
supervisor or the Compliance Department for clarification. If, for any reason, you are unwilling or unable to abide by these
policies,
contact the Compliance Department immediately.
9
Exhibit 21.1
SUBSIDIARIES
Company
Jurisdiction
% Owned*
1.
Muriel
Siebert & Co., Inc.
Delaware
100.0%
2.
Siebert AdvisorNXT,
Inc.
New York
100.0%
3.
Park Wilshire Companies, Inc.
Texas
100.0%
4.
Siebert Technologies, LLC
Nevada
100.0%
5.
RISE Financial
Services, LLC
Delaware
68.0%
6.
StockCross
Digital Solutions, Ltd.**
Bermuda
100.0%
7.
Gebbia
Entertainment, LLC
Florida
100.0%
*
Ownership percentage as of the date of this Report
**
Inactive subsidiary
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements
on Forms S-3 (File Numbers: 333-276585 and 333-262895) and Form S-8 (File
Number 333-269058) of Siebert Financial Corp. of our report
dated March 28, 2025 relating to the consolidated financial statements, appearing in this
Annual Report on Form 10-K of Siebert Financial
Corp. for the year ended December 31, 2024.
/s/ CROWE LLP
New York, New York
March 28, 2025
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-1 (File No. 333-276585) 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 for the year ended
December 31, 2023, which appears in this annual
report on Form 10-K for the year ended December 31, 2024.
/s/ BAKER TILLY US, LLP
New York, New York
March 28, 2025
Exhibit 31.1
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
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
Date: March 28, 2025
John J. Gebbia
Chief Executive Officer
(Principal executive officer)
Exhibit 31.2
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
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
Date: March 28, 2025
Andrew H. Reich
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Secretary
(Principal financial and accounting officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Siebert
Financial Corp. (the “Company”) on Form 10-K for the year ended December 31, 2024, 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
Date: March 28, 2025
John J. Gebbia
Chief Executive Officer
(Principal executive officer)
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.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Siebert
Financial Corp. (the “Company”) on Form 10-K for the year ended December 31, 2024, 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
Date: March 28, 2025
Andrew H. Reich
Executive Vice President, Chief Operating Officer,
Chief Financial Officer, and Secretary
(Principal financial and accounting officer)
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.