SIEBERT FINANCIAL CORP
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
SIEB$1.78-2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-22.
0001213900-24-045813
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001213900-24-068836
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 123 current paragraphs.
48 unchanged; 34 reworded; 25 added; 10 removed; 0 previous and 16 current paragraphs rearranged.
Tables are not compared: 8 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
Financial Overview
Current report
Earnings per share were $0.10 for the current quarter, compared to earnings per share of $0.07 for the prior-year quarter. For the current quarter, our net revenues were $20.9 million and operating income before taxes was $5.6 million, compared to net revenues of $17.6 million and operating income before taxes of $4.7 million in the prior-year quarter.
Current report
Financial highlights for the current quarter (compared to the prior-year quarter):
Current report
Market Risk
Current report
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 subsidiaries, 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.
Current report
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.
Current report
Interest Rate Risk
Current report
Some of these technology investments include the development of a Siebert mobile retail 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 this technology will be key in meeting the needs of our retail customers, correspondent clearing, corporate services as well as our expansion into new markets and demographics.
Current report
Data processing expenses for the three months ended June 30, 2024 were $732,000 and decreased by $9,000 from the corresponding period in the prior year.
Current report
The impairment of investments for the three months ended June 30, 2024 was $0 and decreased 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 (“Trading Technology Provider”) and the impairment of our investment in Tigress occurring in 2023.
Current report
Revenue
Current report
Commissions and fees for the six months ended June 30, 2024 were $4,903,000 and increased by $1,198,000 from the corresponding period in the prior year, primarily due to an increase in market volatility leading to increased trading volumes.
Current report
Interest, marketing and distribution fees for the six months ended June 30, 2024 were $16,598,000 and increased by $2,209,000 from the corresponding period in the prior year primarily due to an increase in interest income received on U.S. government securities and cash deposits.
Current report
Principal transactions and proprietary trading for the six months ended June 30, 2024 were $7,080,000 and increased by $1,626,000 from the corresponding period in the prior year, primarily due to the factors discussed below.
Current report
Market making for the six months ended June 30, 2024 was $1,109,000 and increased by $496,000 from the corresponding period in the prior year, primarily due to an increase in market volatility.
Current report
Stock borrow / stock loan for the six months ended June 30, 2024 was $8,794,000 and increased by $839,000 from the corresponding period in the prior year.
Current report
Advisory fees for the six months ended June 30, 2024 were $1,041,000 and increased by $126,000 from the corresponding period in the prior year, primarily due to growth in platform assets.
Current report
Operating Expenses
Current report
Clearing fees, including execution costs for the six months ended June 30, 2024 were $666,000 and decreased by $18,000 from the corresponding period in the prior year.
Current report
Rent and occupancy expenses for the six months ended June 30, 2024 were $875,000 and decreased by $94,000 from the corresponding period in the prior year, primarily due to a discontinued rent expense in the second quarter of 2023 related to the Miami office.
Current report
Depreciation and amortization expenses for the six months ended June 30, 2024 were $591,000 and increased by $140,000 from the corresponding period in the prior year, primarily due to an increase in depreciation related to technology and software.
Current report
Non-Operating Income (Loss)
Current report
The impairment of investment for the three months ended June 30, 2024 was $0 and decreased by $1,035,000 from the corresponding period in the prior year, primarily due to the impairment of our investment in a Trading Technology Provider and the impairment of our investment in Tigress occurring in 2023.
Current report
As of June 30, 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.
Current report
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. 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. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating this ASU to determine its impact on the Company’s disclosures.
Removed paragraphs (10)
Previous report
Interest Rates
Previous report
We believe these changes will be key to creating a Retail Platform and additional technology services for the next generation of retail customers, correspondent clearing, as well as the overall growth of our business.
Previous report
Transaction with Kakaopay
Previous report
RISE was an institutional brokerage for which all its revenue producing customers transitioned to other prime service providers by the first quarter of 2022. As part of this transition, Siebert had an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) whereby JonesTrading pays RISE a percentage of the income produced by certain historical clients of RISE less any related expenses. For the three months ended March 31, 2024 and 2023, this agreement resulted in pre-tax loss of $9,000 and pre-tax income of $54,000, respectively.
Previous report
(1) Pursuant to the Settlement Agreement with Kakaopay, as of March 29, 2024, we will pay Kakaopay a fee of $5 million (payable in ten quarterly installments). Refer to Note 5 – Kakaopay Transaction in the Company’s 2023 Form 10-K for further detail.
Previous report
(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.
Previous report
(3) In 2023 we entered into agreements with technology vendors for certain development projects related to our Retail Platform. As of March 31, 2024, we have incurred approximately $1.8 million out of the $3.3 million total budget for these vendors.
Previous report
(4) On July 7, 2023, we entered into a lease agreement expiring in December 2028 for office space in the World Financial Center in New York City. The estimated build out cost for this office space is approximately $800,000. As of March 31, 2024, we have incurred approximately $664,000 out of the $800,000 of the estimated build out costs. As of March 31, 2024, we have incurred approximately $99,000 out of the $144,000 estimated build out costs to build out our office space in Omaha, Nebraska.
Previous report
At the Market Offering
Previous report
On May 27, 2022, we entered into a Capital on Demand TM Sales Agreement with JonesTrading as agent, pursuant to which we could offer and sell, from time to time through JonesTrading, shares of our common stock having an aggregate offering amount of up to $9.6 million under our shelf registration statement on Form S-3. For the three months ended March 31, 2024 and 2023, we did not sell any shares pursuant to this Sales Agreement. As noted above, since Siebert filed its 2023 Form 10-K after its schedule due date, Siebert no longer satisfies the eligibility requirement for use of registration statements on Form S-3. As a result, Siebert has suspended use of the shelf registration statement and is not able to access the At the Market program as of the date of this Report. Refer to Note 18 – Commitments, Contingencies, and Other for additional detail.
Reworded paragraphs (34)
Previous wording
At the end of 2023, we reassessed our technology needs and strategic direction and hired new technology personnel, changed our primary software development vendor, and made additional investments in technology development related to our Retail Platform and additional technology services for our customers.
Current wording
At the end of 2023, we reassessed our technology needs and strategic direction and hired new technology personnel, changed our primary software development vendor, and made investments in technology development.
Previous wording
Commissions and fees for the three months ended March 31, 2024 were $2,300,000 and increased by $453,000 from the corresponding period in the prior year, primarily due to market conditions.
Current wording
Commissions and fees for the three months ended June 30, 2024 were $2,603,000 and increased by $745,000 from the corresponding period in the prior year, primarily due to an increase in market volatility leading to increased trading volumes.
Previous wording
Interest, marketing and distribution fees for the three months ended March 31, 2024 were $8,763,000 and increased by $1,790,000 from the corresponding period in the prior year primarily due to rising interest rates that resulted in increased interest income received on U.S. government securities and cash deposits.
Current wording
Interest, marketing and distribution fees for the three months ended June 30, 2024 were $7,835,000 and increased by $419,000 from the corresponding period in the prior year primarily due to an increase in interest income received on U.S. government securities and cash deposits.
Previous wording
Principal transactions and proprietary trading for the three months ended March 31, 2024 were $3,506,000 and increased by $706,000 from the corresponding period in the prior year, primarily due to the factors discussed below.
Current wording
Principal transactions and proprietary trading for the three months ended June 30, 2024 were $3,574,000 and increased by $920,000 from the corresponding period in the prior year, primarily due to the factors discussed below.
Previous wording
The increase in realized and unrealized gain on primarily riskless principal transactions was primarily due to market conditions. The increase in unrealized gain on our portfolio of U.S. government securities was due to the following. We invested in 1-year treasury bills and 2-year treasury notes in order to enhance our yield on excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on our U.S. government securities portfolio. In 2023, we began to record the reversal of the unrealized loss resulting in an unrealized gain due to the securities coming closer to maturity. We continually invest in US government securities based on market yields and cash needs.
Current wording
The increase in realized and unrealized gain on primarily riskless principal transactions was primarily due to market volatility. The increase in unrealized gain on our portfolio of U.S. government securities was due to the following. We invested in 1-year treasury bills and 2-year treasury notes in order to enhance our yield on excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on our U.S. government securities portfolio. In 2023, we began to record substantially all of the reversal of the unrealized loss resulting in an unrealized gain due to the securities coming closer to maturity. We continually invest in US government securities based on market yields and cash needs.
Previous wording
Market making for the three months ended March 31, 2024 was $672,000 and increased by $327,000 from the corresponding period in the prior year, primarily due to market conditions.
Current wording
Market making for the three months ended June 30, 2024 was $437,000 and increased by $169,000 from the corresponding period in the prior year, primarily due to an increase in market volatility.
Previous wording
Stock borrow / stock loan for the three months ended March 31, 2024 was $4,098,000 and increased by $656,000 from the corresponding period in the prior year primarily due to the growth of stock locate and securities lending businesses.
Current wording
Stock borrow / stock loan for the three months ended June 30, 2024 was $4,696,000 and increased by $183,000 from the corresponding period in the prior year.
Previous wording
Advisory fees for the three months ended March 31, 2024 were $490,000 and increased by $46,000 from the corresponding period in the prior year, primarily due to growth in platform assets.
Current wording
Advisory fees for the three months ended June 30, 2024 were $551,000 and increased by $80,000 from the corresponding period in the prior year, primarily due to growth in platform assets.
Previous wording
Other income for the three months ended March 31, 2024 was $627,000 and increased by $308,000 from the corresponding period in the prior year, primarily due to fees related to administrative services.
Current wording
Other income for the three months ended June 30, 2024 was $1,167,000 and increased by $755,000 from the corresponding period in the prior year, primarily due to fees related to administrative services.
Previous wording
Employee compensation and benefits for the three months ended March 31, 2024 were $10,376,000 and increased by $3,409,000 from the corresponding period in the prior year, primarily due to an increase in commission payouts, executive and incentive compensation, as well as additional personnel related to technology initiatives.
Current wording
Employee compensation and benefits for the three months ended June 30, 2024 were $10,307,000 and increased by $2,227,000 from the corresponding period in the prior year, primarily due to an increase in commission payouts, executive compensation, as well as additional personnel related to technology initiatives.
Previous wording
Clearing fees, including execution costs for the three months ended March 31, 2024 were $428,000 and increased by $73,000 from the corresponding period in the prior year, primarily due to the timing of fees within the periods presented.
Current wording
Clearing fees, including execution costs for the three months ended June 30, 2024 were $238,000 and decreased by $91,000 from the corresponding period in the prior year, primarily due to a reduction in volume.
Previous wording
Technology and communications expenses for the three months ended March 31, 2024 were $876,000 and increased by $87,000 from the corresponding period in the prior year, primarily due to an increase in costs related to a technology partner.
Current wording
Technology and communications expenses for the three months ended June 30, 2024 were $880,000 and increased by $87,000 from the corresponding period in the prior year, primarily due to an increase in costs related to a technology partner.
Previous wording
Other general and administrative expenses for the three months ended March 31, 2024 were $1,029,000 and decreased by $64,000 from the corresponding period in the prior year, primarily due to a decrease in office expenses and payroll processing services related to a paymaster.
Current wording
Other general and administrative expenses for the three months ended June 30, 2024 were $1,070,000 and decreased by $49,000 from the corresponding period in the prior year, primarily due to a decrease in office expenses.
Previous wording
Rent and occupancy expenses for the three months ended March 31, 2024 were $497,000 and increased by $19,000 from the corresponding period in the prior year.
Current wording
Rent and occupancy expenses for the three months ended June 30, 2024 were $378,000 and decreased by $113,000 from the corresponding period in the prior year, primarily due to a discontinued rent expense in the second quarter of 2023 related to the Miami office.
Previous wording
Professional fees for the three months ended March 31, 2024 were $1,037,000 and decreased by $37,000 from the corresponding period in the prior year primarily due to a decrease in legal fees offset by an increase in accounting and other consulting services.
Current wording
Professional fees for the three months ended June 30, 2024 were $1,240,000 and increased by $233,000 from the corresponding period in the prior year primarily due to a decrease in legal and other consulting fees offset by an increase in accounting services.
Previous wording
Depreciation and amortization expenses for the three months ended March 31, 2024 were $255,000 and increased by $65,000 from the corresponding period in the prior year, primarily due to depreciation of the Miami office building in 2024.
Current wording
Depreciation and amortization expenses for the three months ended June 30, 2024 were $336,000 and increased by $75,000 from the corresponding period in the prior year, primarily due to an increase in depreciation related to technology and software.
Previous wording
Interest expense for the three months ended March 31, 2024 was $51,000 and decreased by $37,000 from the corresponding period in the prior year, primarily due to the repayment of a loan with East West Bank in the second quarter of 2023.
Current wording
Interest expense for the three months ended June 30, 2024 was $60,000 and decreased by $34,000 from the corresponding period in the prior year, primarily due to the repayment of a loan with East West Bank in the second quarter of 2023.
Previous wording
Advertising and promotion expense for the three months ended March 31, 2024 was $54,000 and increased by $82,000 from the corresponding period in the prior year, primarily due to a reversal related to advertising expenses in 2023 as well as an increase in marketing initiatives in 2024.
Current wording
Advertising and promotion expense for the three months ended June 30, 2024 was $43,000 and increased by $25,000 from the corresponding period in the prior year, primarily due to a reversal related to advertising expenses in 2023 as well as an increase in marketing initiatives in 2024.
Previous wording
The earnings of equity method investment in related party for the three months ended March 31, 2024 was $0 and decreased by $38,000 from the corresponding period in the prior year, primarily due to the exit of our investment in Tigress in the third quarter of 2023.
Current wording
The earnings of equity method investment in related party for the three months ended June 30, 2024 was $0 and decreased by $73,000 from the corresponding period in the prior year, primarily due to the exit of our investment in Tigress in the third quarter of 2023.
Previous wording
The provision from income taxes for the three months ended March 31, 2024 was $1,415,000 and increased from the provision for income taxes by $279,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to an increase in pre-tax earnings in the first quarter of 2024. Refer to Note 15 – Income Taxes for additional detail.
Current wording
The provision from income taxes for the three months ended June 30, 2024 was $1,532,000 and increased by $563,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to an increase in pre-tax earnings in the second quarter of 2024. Refer to Note 15 – Income Taxes for additional detail.
Previous wording
As further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interests in our financial statements. The net loss attributable to noncontrolling interests for the three months ended March 31, 2024 was $1,000, and decreased by $20,000 from the corresponding period in the prior year, due to less activity in RISE in 2024.
Current wording
As further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interest in our financial statements. The net income attributable to noncontrolling interests for the three months ended June 30, 2024 was $7,000, and decreased by $18,000 from the corresponding period in the prior year, due to less activity in RISE in 2024.
Previous wording
Data processing expenses for the three months ended March 31, 2024 were $751,000 and decreased by $100,000 from the corresponding period in the prior year, primarily due a decrease in service bureau fees.
Current wording
Data processing expenses for the six months ended June 30, 2024 were $1,483,000 and decreased by $109,000 from the corresponding period in the prior year, primarily due to a decrease in service bureau fees.
Previous wording
Assets as of March 31, 2024 were $742,303,000 and decreased by $59,497,000 from December 31, 2023, primarily due to a decrease in cash and securities segregated for regulatory purposes.
Current wording
Assets as of June 30, 2024 were $609,110,000 and decreased by $192,690,000 from December 31, 2023, primarily due to a decrease in cash and securities segregated for regulatory purposes and securities borrowed.
Previous wording
Liabilities as of March 31, 2024 were $667,472,000 and decreased by $63,619,000 from December 31, 2023, primarily due to a decrease in payables to customers and securities loaned, partially offset by an increase in bank loans.
Current wording
Liabilities as of June 30, 2024 were $592,932,000 and decreased by $201,159,000 from December 31, 2023, primarily due to a decrease in payables to customers and securities loaned.
Previous wording
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.
Current wording
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.
Previous wording
Our cash and cash equivalents were $2.9 million and $5.7 million as of March 31, 2024 and December 31, 2023, respectively.
Current wording
Our cash and cash equivalents were $5.2 million and $5.7 million as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
We have a $4.3 million outstanding on our mortgage with East West Bank and have $4.8 million outstanding on our line of credit for short term overnight demand borrowing of up to $25 million with BMO Harris as of March 31, 2024. As of March 31, 2024, we were in compliance with all covenants related to our debt agreements.
Current wording
We have $4.3 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 June 30, 2024. As of June 30, 2024, we were in compliance with all covenants related to our mortgage agreement.
Previous wording
MSCO can transfer funds to Siebert as long as MSCO 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 three months ended March 31, 2024 and 2023, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory capital requirements. Refer to Note 16 – Capital Requirements for more detail about our capital requirements.
Current wording
MSCO can transfer funds to Siebert as long as MSCO 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 three and six months ended June 30, 2024 and 2023, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory capital requirements. Refer to Note 16 – Capital Requirements for more detail about our capital requirements.
Previous wording
For the three months ended March 31, 2024, cash used in operating activities increased by $23.0 million compared to the prior year period, which was primarily driven by the net change in receivables from customers, securities borrowed, and securities loaned.
Current wording
For the six months ended June 30, 2024, cash used in operating activities increased by $7.8 million compared to the prior year period, which was primarily driven by the net change in securities borrowed and securities loaned, receivables from and deposits with broker-dealers and clearing organizations, and securities owned, at fair value.
Previous wording
For the three months ended March 31, 2024, cash used in investing activities increased by $0.7 million compared to the prior year period, which was primarily driven by the build out of the New York office as well as the development of the new Retail Platform in 2024, partially offset by the build out of the Miami office building occurring in 2023.
Current wording
For the six months ended June 30, 2024, cash used in investing activities increased by $1.7 million compared to the prior year period, which was primarily driven by the build out of the New York office as well as the development of the new Retail Platform in 2024, partially offset by the build out of the Miami office building occurring in 2023.
Previous wording
For the three months ended March 31, 2024, cash flows provided by financing activities increased by $5.0 million compared to 2023, which was primarily driven by the draws on bank loans and the repayment of principal of Siebert’s line of credit in 2023.
Current wording
For the six months ended June 30, 2024, cash flows provided by financing activities decreased by $13.1 million compared to 2023, which was primarily driven by the issuance of shares related to the transaction with Kakaopay in 2023.
Previous wording
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 three months ended March 31, 2024 and 2023. Refer to Note 17 – Financial Instruments with Off-Balance Sheet Risk for additional detail.
Current wording
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 three and six months ended June 30, 2024 and 2023. Refer to Note 17 – Financial Instruments with Off-Balance Sheet Risk for additional detail.
Previous wording
As of both March 31, 2024 and December 31, 2023, we recorded an uncertain tax position of $1,405,000 related to various tax matters, which is included in the line item “Taxes payable” in the statements of financial condition.
Current wording
As of both June 30, 2024 and December 31, 2023, the Company recorded an uncertain tax position of $1,405,000 related to various tax matters, which is included in the line item “Taxes payable” in the statements of financial condition.
Previous wording
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”). The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in the ASU address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 will be effective for us for annual periods beginning after December 15, 2024, though early adoption is permitted. We are still evaluating the presentational effect that ASU 2023-09 will have on our consolidated financial statements, but we expect considerable changes to our income tax footnote.
Current wording
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 us for annual periods beginning after December 15, 2024, though early adoption is permitted. We are still evaluating the presentational effect that ASU 2023-09 will have on our consolidated financial statements, but we expect considerable changes to our income tax footnote.
Rearranged current paragraphs (16)
Current report — wording carried from elsewhere
Statements of Operations for the Six Months Ended June 30, 2024 and 2023
Current report — wording carried from elsewhere
The increase in realized and unrealized gain on primarily riskless principal transactions was primarily due to market volatility. The increase in unrealized gain on our portfolio of U.S. government securities was due to the following. We invested in 1-year treasury bills and 2-year treasury notes in order to enhance our yield on excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on our U.S. government securities portfolio. In 2023, we began to record substantially all of the reversal of the unrealized loss resulting in an unrealized gain due to the securities coming closer to maturity. We continually invest in US government securities based on market yields and cash needs.
Current report — wording carried from elsewhere
Below is a summary of the change in the principal transactions and proprietary trading line item for the periods presented.
Current report — wording carried from elsewhere
Other income for the six months ended June 30, 2024 was $1,794,000 and increased by $1,063,000 from the corresponding period in the prior year, primarily due to fees related to administrative services.
Current report — wording carried from elsewhere
Employee compensation and benefits for the six months ended June 30, 2024 were $20,683,000 and increased by $5,636,000 from the corresponding period in the prior year, primarily due to an increase in commission payouts, executive compensation, as well as additional personnel related to technology initiatives.
Current report — wording carried from elsewhere
Technology and communications expenses for the six months ended June 30, 2024 were $1,756,000 and increased by $174,000 from the corresponding period in the prior year, primarily due to an increase in costs related to a technology partner.
Current report — wording carried from elsewhere
Other general and administrative expenses for the six months ended June 30, 2024 were $2,099,000 and decreased by $113,000 from the corresponding period in the prior year, primarily due to a decrease in office expenses.
Current report — wording carried from elsewhere
Professional fees for the six months ended June 30, 2024 were $2,277,000 and increased by $196,000 from the corresponding period in the prior year primarily due to a decrease in legal fees offset by an increase in accounting and other consulting services.
Current report — wording carried from elsewhere
Interest expense for the six months ended June 30, 2024 was $111,000 and decreased by $71,000 from the corresponding period in the prior year, primarily due to the repayment of a loan with East West Bank in the second quarter of 2023.
Current report — wording carried from elsewhere
Advertising and promotion expense for the six months ended June 30, 2024 was $97,000 and increased by $107,000 from the corresponding period in the prior year, primarily due to a reversal related to advertising expenses in 2023 as well as an increase in marketing initiatives in 2024.
Current report — wording carried from elsewhere
The earnings of equity method investment in related party for the six months ended June 30, 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.
Current report — wording carried from elsewhere
Provision For (Benefit From) Income Taxes
Current report — wording carried from elsewhere
The provision from income taxes for the six months ended June 30, 2024 was $2,947,000 and increased by $842,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to increased pre-tax earnings in the six months ending June 30, 2024. Refer to Note 15 – Income Taxes for additional detail.
Current report — wording carried from elsewhere
Net Income (Loss) Attributable to Noncontrolling Interests
Current report — wording carried from elsewhere
As further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interest in our financial statements. The net income attributable to noncontrolling interests for the six months ended June 30, 2024 was $6,000, and decreased by $38,000 from the corresponding period in the prior year, due to less activity in RISE in 2024.
Current report — wording carried from elsewhere
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).