SIEBERT FINANCIAL CORP - Quarter Report: 2016 June (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒      No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. :

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐      No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 3, 2016, there were 22,085,126 shares of Common Stock, par value $.01 per share, outstanding.

1 

Unless the context otherwise requires, the “Company” shall mean Siebert Financial Corp. and its wholly owned subsidiaries and “Siebert” shall mean Muriel Siebert & Co., Inc., a wholly owned subsidiary of the Company.

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and elsewhere in this report, as well as oral statements that may be made by us or by our officers, directors or employees acting on our behalf, that are not statements of historical or current fact constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve risks and uncertainties and known and unknown factors that could cause our actual results to be materially different from our historical results or from any future results expressed or implied by such forward looking statements, including, without limitation: changes in general economic and market conditions; changes and prospects for changes in interest rates; fluctuations in volume and prices of securities; demand for brokerage and investment banking services; competition within and without the discount brokerage business, including the offer of broader services; competition from electronic discount brokerage firms offering greater discounts on commissions than we do; the prevalence of a flat fee environment; decline in participation in corporate or municipal finance underwritings; limited trading opportunities; the method of placing trades by our customers; computer and telephone system failures; our level of spending on advertising and promotions; trading errors and the possibility of losses from customer non-payment of amounts due; other increases in expenses and changes in net capital or other regulatory requirements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date when such statements were made or to reflect the occurrence of unanticipated events. An investment in us involves various risks, including those mentioned above and those which are detailed from time to time in our Securities and Exchange Commission filings.

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Siebert Financial Corp. & Subsidiaries
Condensed Consolidated Statements of Financial Condition

See notes to condensed consolidated financial statements.

Siebert Financial Corp. & Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

See notes to condensed consolidated financial statements.

Siebert Financial Corp. & Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

See notes to condensed consolidated financial statements.

Siebert Financial Corp. & Subsidiaries 

Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2016 and 2015
(Unaudited)

Siebert Financial Corp. (the “Company”) is a holding company that conducts its retail discount brokerage business through its wholly-owned subsidiary, Muriel Siebert & Co., Inc. (“Siebert”), a Delaware corporation. Siebert’s principal activity is providing online and traditional discount brokerage and related services to retail investors. In addition, in 2014 the Company began business as a registered investment advisor through a wholly-owned subsidiary, Siebert Investment Advisors, Inc. (“SIA”).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Siebert, Women’s Financial Network, Inc. (“WFN”) and SIA. All material intercompany balances and transactions have been eliminated.

The condensed consolidated interim financial statements presented herein are unaudited and include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations of the interim periods pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The balance sheet at December 31, 2015 has been derived from the audited consolidated statement of financial condition at that date, but does not include all information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. Because of the nature of the Company’s business, the results of operations for the six months ended June 30, 2016 are not necessarily indicative of operating results for the full year.

On November 4, 2014, the Company, which held a 49% membership interest in, and the other members of, Siebert Brandford Shank & Co., LLC (“SBS”), contributed their SBS membership interests into a newly formed Delaware limited liability company, Siebert Brandford Shank Financial, LLC (“SBSF”), in exchange for the same percentage interests in SBSF. On the same day, the Company entered into an Asset Purchase Agreement (the “SCM Purchase Agreement”) with SBS and SBSF, pursuant to which the Company sold substantially all of the assets relating to the Company’s capital markets business to SBSF. Pursuant to the SCM Purchase Agreement, SBSF assumed post-closing liabilities relating to the transferred business.

The SCM Purchase Agreement provides for an aggregate purchase price for the disposition of $3,000,000, payable by SBSF after closing in annual installments commencing on March 1, 2016 and continuing on each of March 1, 2017, 2018, 2019 and 2020. The transferred business was contributed by SBSF to, and operated by SBS. The amount payable to the Company on each annual payment date will equal 50% of the net income attributable to the transferred business recognized by SBS in accordance with generally accepted accounting principles during the fiscal year ending immediately preceding the applicable payment date; provided that, if net income attributable to the transferred business generated prior to the fifth annual payment date is insufficient to pay the remaining balance of the purchase price in full on the fifth annual payment date, then the unpaid amount of the purchase price will be paid in full on March 1, 2021. The annual installment payable on March 1, 2016 which amounted to $493,000 and was based on the net income attributable to the capital markets business for the year ended December 31, 2015.

The fair value of the purchase obligation was based on the present value of estimated annual installments to be received during 2016 through 2020 from forecasted net income of the transferred business plus a final settlement in 2021, discounted at 11.5% (representing SBS’s weighted average cost of capital). The discount recorded for the purchase obligation is being amortized as interest income using an effective yield, initially calculated based on the original carrying amount of the obligation and estimated annual installments to be received and will be adjusted in future periods to reflect actual installments received and changes in estimates of future installments. Interest income recognized on the obligation for the three and six month period ended June 30, 2016 amounted to approximately, $51,000 and $110,000 respectively based on a yield of approximately 12%.

On November 9, 2015, the Company sold its 49% membership investment in SBSF back to SBSF for $8,000,000 of which $4,000,000 was paid in cash and the balance of which was paid in the form of a secured junior subordinated promissory note of $4,000,000 (the “SBSF Junior Note”). The sale of the investment in SBSF, which was accounted for by the equity method, represents a strategic shift for the Company based on its significance to the Company’s financial condition and results of operations and the major effect it will have on the Company’s operations and financial results and, accordingly, the Company’s share of operating results of the investment are reflected as discontinued operations in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2015. The investment was sold for approximately $448,000 less than the carrying value of the investment at November 9, 2015, after adjusting the carrying value of the investment for the Company’s equity in SBSF’s results of operations through such date.

The SBSF Junior Note ranks junior in right of payment to up to $5.0 million of subordinated indebtedness incurred by SBSF at the time of the repurchase closing (the “SBSF Senior Debt”). The SBSF Junior Note is secured by a pledge by SBSF’s post-closing members of a number of the outstanding membership interests of SBSF that at all times will equal no less than 49% of the outstanding SBSF membership interests on a fully diluted basis. The SBSF Junior Note matures on November 9, 2020 and bears interest at a rate per year equal to 8% compounding monthly and payable in full at maturity. Interest accrued on the note for the three and six months ended June 30, 2016 amounted to $83,000 and $164,000 respectively. The SBSF Junior Note does not require any principal amortization before maturity; however, SBSF has the option to prepay the interest or principal without penalty. The SBSF Junior Note contains covenants and events of defaults that are substantially equivalent to those applicable to the SBSF Senior Debt, including covenants restricting debt and lien incurrence by SBS and SBSF; provided that the SBSF Junior Note is subject to customary intercreditor arrangements with the holders of the SBSF Senior Debt. Immediately upon the dissolution, liquidation, termination or expiration of SBSF or SBS, or a change of control of SBSF or SBS, or sale of all or substantially all of their consolidated assets, SBSF is obligated to prepay all of the then outstanding balance of the SBSF Junior Note.

Securities owned are carried at fair value with realized and unrealized gains and losses reflected in trading profits. Siebert clears all its security transactions through unaffiliated clearing firms on a fully disclosed basis. Accordingly, Siebert does not hold funds or securities for, or owe funds or securities to, its customers. Those functions are performed by the clearing firms.

Authoritative accounting guidance defines fair value, establishes a framework for measuring fair value and establishes a fair value hierarchy. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices that are observable, either directly or indirectly, and reasonably available.

Level 3 – Unobservable inputs which reflect the assumptions that management develops based on available information about the assumptions market participants would use in valuing the asset or liability.

The classification of financial instruments valued at fair value as of June 30, 2016, as follows: 

Cash equivalents primarily represent investments in money market funds. Securities consist of common stock valued on the last business day of the period at the last available reported sales price on the primary securities exchange.

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average outstanding common shares during the period. Diluted earnings per share is calculated by dividing net income by the number of shares outstanding under the basic calculation and adding all dilutive securities, which consist of options. The Company incurred a net loss for the three and six months ended both June 30, 2016 and June 30, 2015. Accordingly, basic and diluted net loss per common

share are the same for each period as the effect of stock options is anti-dilutive. Shares underlying stock options not included in the diluted computation amounted to 265,000 in 2016 and 2015.

Siebert is subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1) (the “Rule”), which requires the maintenance of minimum net capital. Siebert has elected to use the alternative method, permitted by the Rule, which requires that Siebert maintain minimum net capital, as defined, equal to the greater of $250,000 or two percent of aggregate debit balances arising from customer transactions, as defined. The Net Capital Rule of the New York Stock Exchange also provides that equity capital may not be withdrawn or cash dividends paid if resulting net capital would be less than 5% of aggregate debits. As of June 30, 2016, Siebert had net capital of approximately $3,067,000 as compared with net capital requirements of $250,000. Siebert claims exemptions from the reserve requirement under section 15c3-3(k)(2)(ii).

Commission revenues and related clearing expenses are recorded on a trade-date basis. Fees, consisting principally of revenue participation with the Company’s clearing broker in distribution fees, and interest are recorded as earned.

Investment banking revenue includes advisory fees charged clients thru SIA.

Trading profits are also recorded on a trade-date basis and principally represent riskless principal transactions in which the Company, after receiving an order, buys or sells securities as principal and at the same time sells or buys the securities with a markup or markdown to satisfy the order.

Interest is recorded on an accrual basis and dividends are recorded on the ex-dividend date.

On January 22, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. Shares will be purchased from time to time, at management’s discretion, in the open market and in private transactions. The Company did not purchase any shares during the three and six months ended June 30, 2016.

There were no stock option transactions during the six months ended June 30, 2016. At June 30, 2016, there were 265,000 outstanding options at a weighted average exercise price of $3.02, all of which were fully vested and exercisable. As of June 30, 2016, there were no unrecognized compensation costs.

Summarized financial data of Siebert Brandford Shank Financial, LLC (“SBSF”) follows:

Siebert’s 49% share of SBSF’s consolidated net income for the three and six months ended June 30, 2015, respectively amounted to $987,000 and $243,000.

Siebert charged SBS $6,000 for the three months ended June 30, 2016 and $25,000 for the three months ended June 30, 2015, and $23,000 for the six months ended June 30, 2016 and $50,000 for the six months ended June 30, 2015, respectively, for general and administrative services, which Siebert believes approximates the cost of furnishing such services.

Siebert made advances, net of collections, to SBSF of $10,000 during the six months ended June 30, 2016 and collections of $4,000, net of advances to SBSF during the six months ended June 30, 2015. Siebert received a distribution from SBSF of $86,000 during the six months ended June 30, 2015.

Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customer obligations. Siebert regularly monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is exposed to the risk of loss on unsettled customer transactions if customers are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transactions for the six months ended June 30, 2016 and 2015.

In December 2015, a current employee of Siebert commenced an arbitration before FINRA against Siebert, alleging a single cause of action for employment retaliation under the Sarbanes-Oxley Act of 2002. In February 2016, the employee amended his claim to replace the Sarbanes-Oxley claim with a substantially identical claim arising under the Dodd-Frank Act of 2010. In the opinion of management, this matter is without merit, and its ultimate outcome will not have a significant effect on the financial position of the Company.

In May 2016, a current employee of Siebert filed a complaint with the New York State Division of Human Rights. In the opinion of management, this matter is without merit, and its ultimate outcome will not have a significant effect on the financial position of the Company.

No tax benefit has been recognized for the loss in the three and six month periods ended June 30, 2016 and 2015 as the Company has fully offset the related deferred tax asset for the loss carry forward by a valuation allowance due to cumulative losses incurred by the Company and its subsidiaries during the prior three years.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2015, and the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Business Environment

Our working capital is invested primarily in money market funds, so that liquidity has not been materially affected. The recent financial crisis did have the effect of reducing participation in the securities market by our retail customers, which had an adverse effect on our revenues.

On November 9, 2015, the Company sold its 49% membership investment in SBSF back to SBSF for $8,000,000 of which $4,000,000 was paid in cash and the balance of which was paid in the form of a secured junior subordinated promissory note of $4,000,000 (the “SBSF Junior Note”). The sale of the investment in SBSF, which was accounted for by the equity method, represents a strategic shift for the Company based on its significance to the Company’s financial condition and results of operations and the major effect it will have on the Company’s operations and financial results and, accordingly, the Company’s share of operating results of the investment are reflected as discontinued operations in the accompanying statement of operations. The investment was sold for approximately $448,000 less than the carrying value of the investment at November 9, 2015, after adjusting the carrying value of the investment for the Company’s equity in SBSF’s results of operations through such date.

On January 23, 2008, our Board of Directors authorized a buyback of up to 300,000 shares of common stock. Under this program, shares are purchased from time to time, at our discretion, in the open market and in private transactions. The Company did not purchase shares in the first six months of 2016.

The following table sets forth certain metrics as of and for the six months ended June 30, 2016 and 2015, respectively, which we use in evaluating our business.

Description:

Critical Accounting Policies

We generally follow accounting policies standard in the brokerage industry and believe that our policies appropriately reflect our financial position and results of operations. Our management makes significant estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities included in the financial statements. The estimates relate primarily to revenue and expense items in the normal course of business as to which we receive no confirmations, invoices, or other documentation at the time the books are closed for a period. We use our best judgment, based on our knowledge of these revenue transactions and expenses incurred, to estimate the amounts of such revenue and expense. We are not aware of any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and expenses incurred when we subsequently receive the actual confirmations, invoices or other documentation. Estimates are also used in determining the useful lives of intangible assets, and the fair market value of intangible assets and securities. Our management believes that its estimates are reasonable.

Results of Operations

We had a net loss of $728,000 and $1,229,000 for the three months and six months ended June 30, 2016, respectively.

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015

Total revenues for the three months ended June 30, 2016 were $2.5 million, an increase of $358,000 or 17% from the same period in 2015.

Commission and fee income for the three months ended June 30, 2016 was $2.2 million, an increase of $270,000 or 14.1% from the same period in 2015. Although our ticket count was down 18% for the quarter compared to 2015, our retail option commission tickets averaged $62 per trade and became 36% of our total commissions in the first three months of 2016. In 2015 our retail option commission tickets averaged $32 per trade and were 22% of our total commissions. This increased our average ticket in the 2^nd quarter to $25.57 in 2016 from $18.68 in the second quarter of 2015. In addition our largest money market fund started paying six basis points in 12b-1 fees in May of 2016. In 2015, our largest money market fund paid zero basis points in 12b-1 fees.

Trading profits were $125,000 for the three months ended June 30, 2016, an increase of $23,000 or 22.5% from the same period in 2015 due to an overall increase in trading volume primarily in the debt markets.

Interest and dividends were $138,000 for the three months ended June 30, 2016, an increase of $65,000 or 89% from the same corresponding period primarily due to accrued interest on our receivable from business sold to affiliate, the sale of our equity interest to our former affiliate, offset by and reduction of interest from the expiration of a secured demand note with our former affiliate on August 31, 2015

Total expenses for the three months ended June 30, 2016 were $3.2 million, a decrease of $308,000 or 8.8% from the same period in 2015.

Employee compensation and benefit costs for the three months ended June 30, 2016 were $1.2 million, a decrease $89,000 or 6.9% from the same period in 2015 due to a lower head count and lower benefit expenses.

Clearing and floor brokerage costs for the three months ended June 30, 2016 were $236,000, a decrease of $48,000 or 16.9% from the same period in 2015 primarily due to lower ticket volumes.

Professional fees for the three months ended June 30, 2016, were $915,000 a decrease of $114,000 or 11.1% from the same period in 2015 primarily due to a decrease in legal fees.

Advertising and promotion expenses for the three months ended June 30, 2016 were $67,000, an increase of $10,000 or 17.5% from the same period in 2015 due to an increase in social media advertising.

Communications expense for the three months ended June 30, 2016, was $132,000, a decrease of $31,000 or 19.0% from the same period in 2015 primarily due to savings in communication and line charges with our new phone vendor.

Occupancy costs for the three months ended June 30, 2016 were $197,000, a decrease of $6,000 or 3.0% from the same period in 2015 due to the closing of our Jersey City branch on June 30, 2015 offset by an increase in operating expenses.

Other general and administrative expenses for the three months ended June 30, 2016 were $443,000, a decrease of $30,000 or 6.3% from the same period in 2015 due to a decrease in computer security, registration fees, office expense and training offset by transportation, travel and entertainment, use tax and a reduction in general and administrative services billed to our former affiliate.

Discontinued Operations - Income from our equity investment in SBSF, for the three months ended June 30, 2015 was approximately $1.0 million which represents our share of income from a former affiliate. SBSF repurchased Siebert’s 49% equity interest in SBSF on November 9, 2015.

No tax benefit related to the pre-tax loss was recorded for the three months ended June 30, 2016 and June 30, 2015 due to the recording of a full valuation allowance to offset deferred tax assets based on recent losses and the likelihood of realization of such assets.

Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

We had a net loss of $1,229,000 and $1,941,000 for the six months ended June 30, 2016 and 2015, respectively.

Total revenues for the six months ended June 30, 2016 were $5.0 million, an increase of $232,000 or 4.9% from the same period in 2015.

Commission and fee income for the six months ended June 30, 2016 was $4.3 million, a decrease of $29,000 or 0.7% from the same period in 2015.This is due to our commission ticket count being down 21% from last year. This is however offset by our retail option commission tickets averaging $48 per trade and becoming 31% of our total commissions in the first six months of 2016. In 2015, our retail option commission tickets averaged $42 per trade and were 27% of our total commissions. This increased our average ticket to $23.56 in 2016 from $20.14 in 2015. In addition our largest money market fund started paying 6 basis points in 12b-1 fees in May of 2016. In 2015 our largest money market fund paid zero basis points in 12b-1 fees.

Investment banking revenues for the six months ended June 30, 2016 were $23,000, an increase of $4,000 or 21.1% from the same period in 2015. SIA advisory fees increased in 2016.

Trading profits were $390,000 for the six months ended June 30, 2016, an increase of $119,000 or 43.9% from the same period in 2015 due to an overall increase in trading volume in the debt markets.

Interest and dividends were $281,000 for the six months ended June 30, 2016, an increase of $138,000 or 96.5% from the same corresponding period in 2015 primarily due to accrued interest on our receivable from business sold to affiliate, the sale of our equity interest to our former affiliate, offset by and reduction of interest from the expiration of a secured demand note with our former affiliate on August 31, 2015

Total expenses for the six months ended June 30, 2016 were $6.2 million, a decrease of $723,000 or 10.5% from the same period in 2015.

Employee compensation and benefit costs for the six months ended June 30, 2016 were $2.5 million, a decrease of $224,000 or 8.3% from the same period in 2015 due to a lower head count and lower benefit expenses.

Clearing and floor brokerage costs for the six months ended June 30, 2016 were $474,000, a decrease of $211,000 or 30.8% from the same period in 2015 primarily due to lower retail customer trading volumes. In addition other clearing charges are down such as inactivity fees which are now picked up by the customer directly.

Professional fees for the six months ended June 30, 2016 were $1.6 million, a decrease of $203,000 or 11.4% from the same period in 2015 primarily due to a decrease in legal fees

Advertising and promotion expenses for the six months ended June 30, 2016 were $133,000, an increase of $12,000 or 9.9% from the same period in 2015 primarily due to an increase in social media advertising..

Communications expense for the six months ended June 30, 2016 were $262,000, a decrease of $60,000 or 18.6% from the same period in 2015 primarily due to savings in communication and line charges with our new phone vendor.

Occupancy costs for the six months ended June 30, 2016 were $379,000, a decrease of $27,000 or 6.7% from the same period in 2015 due to our Jersey City branch closing on June 30, 2015 offset by an increase in operating expenses.

Other general and administrative expenses for the six months ended June 30, 2016 were $869,000, a decrease of $10,000 or 1.1% from the same period in 2015 due to a decrease in computer security, registration fees, office expense and training offset by transportation, travel and entertainment, use tax and a reduction in general and administrative services billed to our former affiliate.

Discontinued Operations - Income from our equity investment in SBSF, for the six months ended June 30, 2015 was $243,000 which represents share of income from a former affiliate. SBSF repurchased Siebert’s 49% equity interest in SBSF on November 9, 2015.

No tax benefit related to the pre-tax loss was recorded for the six months ended June 30, 2016 and June 30, 2015 due to the recording of a full valuation allowance to offset deferred tax assets based on recent losses and the likelihood of realization of such assets.

Liquidity and Capital Resources

Our total assets at June 30, 2016 were $15.8 million. As of that date, we regarded $7.9 million, or 50.0%, of total assets as highly liquid.

Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At June 30, 2016, Siebert’s regulatory net capital was approximately $3.1 million, $2.8 million in excess of its minimum capital requirement of $250,000.

On January 23, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. During the six months ended June 30, 2016, no shares were purchased.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Working capital is generally invested temporarily in dollar denominated money market funds. These investments are not subject to material changes in value due to interest rate movements.

Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customers’ obligations. Siebert regularly monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is exposed to the risk of loss on unsettled customer transactions if customers and other counter-parties are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transaction as of June 30, 2016.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our 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) or Rule 15d-15(e) of the Securities Exchange of 1934, as amended. Based on that evaluation, our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to our Chief Financial Officer, to allow timely decisions regarding timely disclosure.

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

In December 2015, a current employee of Siebert commenced an arbitration before FINRA against Siebert, alleging a single cause of action for employment retaliation under the Sarbanes-Oxley Act of 2002. In February 2016, the employee amended his claim to replace the Sarbanes-Oxley claim with a substantially identical claim arising under the Dodd-Frank Act of 2010. In the opinion of management, this matter is without merit, and its ultimate outcome will not have a significant effect on the financial position of the Company.

In May 2016, a current employee of Siebert filed a complaint with the New York State Division of Human Rights. In the opinion of management, this matter is without merit, and its ultimate outcome will not have a significant effect on the financial position of the Company.

The Company is party to certain claims, suits and complaints arising in the ordinary course of business. In the opinion of management, all such matters are without merit, or involve amounts which would not have a significant effect on the financial position of the Company.

1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, which could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2015.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

On January 23, 2008, our Board of Directors authorized the repurchase of up to 300,000 shares of our common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. There is no expiration date for our stock repurchase plan.

We did not purchase shares in the second quarter of 2016.

SIGNATURES

Pursuant to the requirements 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.

Item 6. Exhibits