FOCUS Report Suntrust Investment Services, Inc.

X-17A-5 [Paper] - FOCUS Report

Published: 2005-03-17 18:21:34
Submitted: 2005-03-01
Period Ending In: 2004-12-31
scanned.pdf Scanned paper document


                                                         aemep                                                                                50 3/ Sfos:
     &                                          SECULI
                                                                ul        0503897                                  ISSION
                                                                                                                                         OMB Number: 3235—0123
                                                                                                                                         Expires: January 31, 2007
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                                                         ANNUAL AUDITED REPORT                                                               SEC FILE NUMBER
                                                              FORM X—17A—5                                                               8—35355
                                                                             PART III

                                                                FACING PAGE
                                Information Required of Brokers and Dealers Pursuant to Section 17 of the
                                       Securities Exchange Act of 1934 and Rule 17a—5 Thereunder

      REPORT FOR THE PERIOD BEGINNING                01/01/04                                                          AND ENDING       12/31/04
                                                    MM/DDYY                                                                         MM/DD/YY


                                                        A. REGISTRANT IDENTIFICATION
     NAME OF BROKER—DEALER:
                                                                                                                                             OFFICIAL USE ONLY
_




                                                   SunTrust Securities, Inc.
                                                                                                                                                   FIRM ID NO.


     ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P. 0. Box No.)
-




                                                   303 Peachtree Center Avenue, Suite 140
-’




                                                                     (No. and Street)

                                                    Atlanta                         GA
                                                       (City)                     (State)

     NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT

                                                   J. Kelly Ardrey                                                       404—724—3389


                                                       B. ACCOUNTANT IDENTIFICATION                                                                   g R 6 SE§
                                                                                                                                                      P       wC D

     INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in the Report*                                                                              MAR 2 3 Zflfi%
                                                   PricewaterhouseCoopers LLP                                                                              gmggol:Ms;
                                                                                                                                                                   FEOEgN
                                                                (Name—if individual, state last, first, middle name)


                                                    10 Tenth Street                            Atlanta                   GA              30309
                                                   (Address)                                   (City)                    (State)         (Zip Code)

     Check One:
               (X )      Certified Public Accountant
               (  )      Public Accountant
               (    )    Accountant not resident in United States or any of its possessions.

                                                                               FOR OFFICIAL USE ONLY




     *Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant
     must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See section 240.17a—5(e)(2).


     SEC 1410 (06—02)                                                                                                                                        \)


                                                OATH OR AFFIRMATION

         I, J. Kelly Ardrey,      swear (or affirm) that, to the best of my knowledge and belief the accompanying
financial statement and supporting schedules pertaining to the firm of        SunTrust Securities, Inc. ,          as of
December 31, 2004,                 are true and correct. I further swear ( or affirm) that neither the company nor any
partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that
of a customer, except as follows:




                                                                                       Signature         /




                                                                              Chief Financial Officer
                                                                                           Title



 orarni 7.l
                         Notary Public
                 URirst1!s Y.32M1)n

      MyCommissionExpires Mer. 25, 2006
This report ** contains (check all applicable boxes):
  [( X )      (a) Facing Page.
  ( X )       (b) Statement of Financial Condition.
  ( X )       (c) —Statement of Income (Loss).
  ( X )       (d) —Statement of Changes in Financial Condition.
  [( X )      (e) Statement of Changes in Stockholders‘ Equity or Partners or Sole Proprietor‘s Capital.
  ( X )       (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
  ( X )       (g) —Computation of Net Capital.
  (  )             (h)  Computation for Determination of Reserve Requirements Pursuant to Rule 15c3—3.
  ( X )            (i)  Information Relating to the Possession or control Requirements Under Rule 15c3—3.
  ( X )            (J)  A Reconciliation, including appropriate explanation, of the Computation of Net Capital Under Rule 15c3—1
                        and the Computation for Determination of the Reserve Requirements under Exhibit A of Rule 15c3—3.
  (      )         (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to
             '          methods of consolidation.
  ( X )            (1) An Oath or Affirmation.
  (   )            (m) A copy of the SIPC Supplemental Report.
  (   )            (n]) _A report describing any material inadequacies found to exist or found to have existed since the date of
                        the previous audit.

** For conditions ofconfidential treatment ofcertain portions ofthefiling see section 240.17a—5(e)(3).


     PricemAtERHousE(CoPERS
                                                                                    PricewaterhouseCoopers LLP
                                                                                    10 Tenth Street, Suite 1400
                                                                                    Atlanta GA 30309—3851
                                                                                    Telephone (678) 419 1000
                                                                                    Facsimile (678) 419 1239




                                   Report of Independent Auditors

    To the Shareholder and Board of Directors of
    SunTrust Securities, Inc.:

    In our opinion, the accompanying statement of financial condition and the related statements
    of operations, changes in shareholder‘s equity and cash flows present fairly, in all material
    respects, the financial position of SunTrust Securities, Inc. (the "Company‘‘) at December 31,
    2004, 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. These financial
    statements are the responsibility of the Company‘s management. Our responsibility is to
    express an opinion on these financial statements based on our audit. We conducted our audit
    of these statements in accordance with auditing standards generally accepted in the United
    States of America, which require that we plan and perform the audit to obtain reasonable
    assurance about whether the financial statements are free of material misstatement. An audit
    includes examining, on a test basis, evidence supporting the amounts and disclosures in the
    financial statements, assessing the accounting principles used and significant estimates made
    by management, and evaluating the overall financial statement presentation. We believe that
    our audit provides a reasonable basis for our opinion.

    Our audit was conducted for the purpose of forming an opinion on the basic financial
    statements taken as a whole. The information contained in Supplementary Schedules I, II, and
    III is presented for purposes of additional analysis and is not a required part of the basic
    financial statements, but is supplementary information required by Rule 17a—5 under the
    Securities Exchange Act of 1934. Such information has been subjected to the auditing
    procedures applied in the audit of the basic financial statements and, in our opinion, is fairly
    stated in all material respects in relation to the basic financial statements taken as a whole.


      Terctumiarnuad C
I   February 25, 2005


SunTrust Securities, Inc.
{A wholly—owned subsidiary of SunTrust Banks, Inc.)
Statement of Financial Condition
As Of December 31, 2004


                                               ASSETS

CASH AND CASH EQUIVALENTS (Note 5)                                                 $           5,287,897

CASH SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS (Note 5)                                     18,779

SECURITIES OWNED                                                                              14,954,380

COMMISSIONS RECEIVABLE                                                                         6,997,318

PREMISES AND EQUIPMENT, net of accumulated depreciation
 of $1,852,372                                                                                  762,732

OTHER ASSETS                                                                                    811,620

TOTAL ASSETS

                              LIABILITIES AND SHAREHOLDER‘S EQUITY

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                           $            559,769

ACCRUED LIABILITIES TO AFFILIATES                                                              6,723,065

DEFERRED INCOME TAXES PAYABLE TO PARENT                                                         246,224

TOTAL LIABILITIES                                                                              7,529,058

COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREKOLDER‘S EQUITY:
  Common stock, $1 par value: 2,000,000 shares authorized;
    52,125 shared issued and outstanding                                                          52,125
  Additional paid—in capital                                                                  18,215,221
  Retained earnings                                                                            3,036,322
TOTAL SHAREKHOLDER‘S EQUITY                                                                   21,303,668

TOTAL LIABILITIES AND SHAREKHOLDER‘S EQUITY                                       m
                                                                                  3har




                 The accompanying notes are an integral part of these financial statements.

                                                    3.


SunTrust Securities, Inc.
(A wholly—owned subsidiary of SunTrust Banks, Inc.)
Statement of Operations
For the Year Ended December 31, 2004

REVENUES:
  Commissions                                              $       141,329,493
  Secondary trading gains, net of losses                            18,502,217
   Investment management income                                     40,087,213
   Interest                                                            198,343
                                                                   200,117,266

EXPENSES:
  Compensation and benefits (Note 9)                                 8,278,700
  Occupancy, furniture and equipment                                   279,050
   Legal!, consulting, and examination fees                           1,334,590
   Office expense                                                      200,188
   Computer services                                                 8,103,081
   Clearing expenses                                                 7,212,924
   Other expense                                                       256,719
   Expense to affiliates (Note 5)                                  172,950,712
                                                                   198,615,964

INCOME BEFORE TAXES                                                   1,501,302
INCOME TAX EXPENSE                                                     (566,600)
NET INCOME                                                  $           934,702




                    The accompanying notes are an integral part of these financial statements.

                                                      13.


SunTrust Securities, Inc.
(A wholly—owned subsidiary of SunTrust Banks, Inc.)
Statement of Changes in Shareholder‘s Equity
For the Year Ended December 31, 2004

                                                         Additional Paid—in       Retained
                                      Common Stock            Capital             Earnings           Total
Balance, December 31, 2003           $       52,125       $     18,215,221    $      2,101,620   $   20,368,966

Net Income                                       —                     =              934,702          934,702

Balance, December 31, 2004           $        52,125      $    18,215,221     $      3,036,322   $   21,303,668




                  The accompanying notes are an integral part of these financial statements.

                                                       — 4.


@6   SunTrust Securities, Inc.
     (A wholly—owned subsidiary of SunTrust Banks, Inc.)
     Statement of Cash Flows
6


     For the Year Ended December 31, 2004

     CASH FLOWS FROM OPERATING ACTIVITIES:
1




      Net income                                                                             $         934,702
      Adjustments to reconcile net income to net cash used in operating
       activities:
ow




         Depreciation and amortization                                                                 225,363
         Deferred tax benefit                                                                          304,000
         Changes in operating assets and liabilities:       .
a




         Cash segregated under Federal and other regulations                                            304,660
         Securities owned                                                                           (14,954,380)
         Commissions receivable                                                                        (256,198)
OR




         Other assets                                                                                   (26,756)
         Accounts payable and accrued liabilities                                                      (547,107)
         Accrued liabilities to affiliates, net of receivables from affiliates                          544,545
w




          Net cash used in operating activities                                                     (13,471,171)

     CASH FLOWS FROM INVESTING ACTIVITIES:
a




      Purchases of premises and equipment                                                             (550,182)
           Net cash used in investing activities                                                      (550,182)
a




     NET CHANGE IN CASH AND CASH EQUIVALENTS:                                                       (14,021,353)

     CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR:                                                19,309,250
     CASH AND CASH EQUIVALENTS AT END OF YEAR:                                                $      5,287,897
8




     Supplemental cash flow information:
                                                                                            _
6




      Cash paid for income taxes to Parent
9
w
#
06
1
1




                       The accompanying notes are an integral part of these financial statements.
8




                                                            15.
m


4    SunTrust Securities, Inc.
     (A wholly—owned subsidiary of SunTrust Banks, Inc.)
     Notes to Financial Statements
@6


     December 31, 2004

           1. ORGANIZATION
6




           SunTrust Securities, Inc. (the "Company" or "STS") is a registered broker—dealer with the
           Securities and Exchange Commission and the National Association of Securities Dealers. The
@6




           Company is a wholly owned subsidiary of SunTrust Bank Holding Company, which is a wholly
           owned subsidiary of SunTrust Banks, Inc. ("STI"). The Company acts as an introducing broker—
           dealer offering full—service and discount brokerage services in various equity and debt securities,
o




           mutual funds, unit investment trusts, insurance and annuity products, and individual retirement
           accounts primarily to retail customers of SunTrust Bank.

           2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6




           Revenue Recognition
6




           The Company places all trades through an unaffiliated clearing broker—dealer. The clearing
           broker—dealer collects the gross brokerage commissions from customers and remits the net
           brokerage commissions to the Company based on agreed—upon terms. Revenues are recorded on
a




           a trade—date basis.

           The Company recognizes fee income earned from the trading activity associated with STI‘s
o0




           mutual fund group, STI Classic Funds. This fee income is comprised of advisory fees, which are
           recorded as investment management income, and commissions and other fees, which are
           included in commissions in the accompanying statement of operations. The Company shares this
8




           fee and expense with affiliates of STI. The allocation of this fee income and expense is recorded
           in expense to affiliates in the accompanying statement of operations.
w




           Secondary trading transactions and related gains and losses are recorded on a trade—date basis.

           Securities Owned
m




           Securities owned primarily consist of U.S. Treasury securities, which were purchased during
           2004. These securities are carried at market value with unrealized gains and losses recognized
           currently in the statement of operations.

           Use of Estimates

           The preparation of financial statements in conformity with accounting principles generally
           accepted in the United States requires management to make estimates and assumptions that affect
           the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at
           the date of the financial statements and the reported amounts of revenues and expenses during
           the reporting period. Actual results could vary from those estimates; however, in the opinion of
           management, such variances would not be material.

           Customer Accounts

           The clearing broker maintains all customers‘ accounts, receives cash on purchases, and
           distributes cash on sales. The Company records a receivable from the clearing broker for its
           share of commissions, net of expenses associated with the commissions.

                                                       —6—


SuntTrust Securities, Inc.
(A wholly—owned subsidiary of SunTrust Banks, Inc.)
Notes to Financial Statements
December 31, 2004

      Premises and Equipment

      Premises and equipment are stated at cost less accumulated depreciation. Depreciation is
      calculated using the straight—line method over the assets‘ estimated useful lives. Maintenance
      and repairs are charged to expense as incurred and improvements are capitalized.

      Statement of Cash Flows

      For purposes of the statement of cash flows, the Company has defined cash and cash equivalents
      as highly liquid investments with original maturities of less than three months that are not held
      for sale in the ordinary course of business.

      Income Taxes

      The Company is included in the consolidated income tax return of STI. The Company provides
      for taxes as if it was filing a separate return and pays for its pro rata share of the consolidated
      current tax liability or receives a refund for any current tax benefit. Payments to tax authorities
      are made by STI.

      For the Company, the significant differences in the tax and financial statement bases of its assets
      or liabilities are primarily related to pension and benefit related items. Deferred income taxes are
      provided when income and expenses are recognized in different years for financial and tax
      reporting purposes.

      The provision for income taxes, included in the accompanying statement of operations, differs
      from the federal statutory rate of 35% primarily due to a provision for state taxes.

      3. NET CAPITAL REQUIREMENTS

      Regulatory provisions require the Company to maintain minimum net capital, as defined. At
      December 31, 2004, the Company was in compliance with the net capital requirements of Rule
      15c3—1 of the Securities Exchange Act of 1934. At December 31, 2004, the Company had net
      capital, as defined, of $14,566,074, which was $14,066,290 in excess of the required net capital
      of $499,784. The Company‘s ratio of aggregate indebtedness to net capital was 0.51:1 at
      December 31, 2004, which is below the 15:1 maximum allowed.

      4.   CUSTOMER RESERVE EXEMPTON

      At December 31, 2004, the Company qualified for exemption, as provided in Rule 15¢c3—3,
      Subparagraph (k)(2) of the Securities Exchange Act of 1934.

      5.   RELATED—PARTY TRANSACTIONS

      Cash of $5,287,897 at December 31, 2004, was held at an affiliate (SunTrust Bank). Restricted
      cash of $18,779 at December 31, 2004, was held at an affiliate (SunTrust Bank). The current tax
      receivable from the Parent was $56,813 at December 31, 2004, which is included in other assets
      in the accompanying statement of financial condition.


                                                   17 .L


SunTrust Securities, Inc.
(A wholly—owned subsidiary of SunTrust Banks, Inc.)
Notes to Financial Statements
December 31, 2004
      The Company allocates the majority of revenue net expenses to affiliates of STI, which is
      recorded as expense to affiliates in the accompanying statement of operations. At December 31,
      2004, intercompany expense to affiliates of $6,723,065 was unpaid. At December 31, 2004,
      Commission receivable of $4,363,649 was uncollected.

      6. COMMITMENTS AND CONTINGENCIES

      The Company is involved in litigation and other legal proceedings arising in the course ofits
      normal business activities. Although the ultimate outcome of these matters cannot be determined
      at this time, it is the opinion of management that none of these matters, when resolved, will have
      a significant effect on the Company‘s financial condition or results of operations.

      7. GUARANTEES TO THIRD PARTIES

      The Company uses a common third party clearing broker to clear and execute customers‘
      securities transactions and to hold customer accounts. Under the agreement with the Clearing
      Broker, the Company agrees to indemnify the Clearing Broker for losses that result from a
      customer‘s failure to fulfill its contractual obligations. As the Clearing Broker‘s rights to charge
      the Company have no maximum amount, the Company believes that the maximum potential
      obligation cannot be estimated. However, to mitigate exposure, the Company may seek recourse
      from the customer through cash or securities held in the defaulting customers‘ account. For the
      year ended December 31, 2004, the Company experienced minimal net losses as a result of the
      indemnity.

      8. FAIR VALUES OF FINANCIAL INSTRUMENTS

      The Company‘s financial instruments, which are included in the accompanying statement of
      financial condition, are either carried at quoted market prices or are short—term in nature. As a
      result, the carrying amounts reported in the accompanying statement of financial condition
      approximate the estimated fair values of all financial instruments at December 31, 2004.

      9.   EMPLOYEE BENEFITS

      The Company participates in the pension and other employee benefit plans of STI for the benefit
      of substantially all employees of the Company. In addition, certain management employees
      participate in incentive—based compensation plans of STI. Costs of the pension plan are
      computed under the projected unit credit method, and the plan is funded using the aggregate
      actuarial cost method. Benefit information is not available from the actuary for individual
      subsidiaries of STI. The Company‘s contributions to the pension and other employee benefit
      plans and incentive based compensation plans were approximately $1,163,983 and $1,214,376,
      respectively, all of which is included in compensation and benefits expense in the accompanying
      statement of operations.

      The Company also participates in the stock option plan of the Parent. Options are granted at no
      less than the fair market value of a share of stock on the grant date and may be either tax—
      qualified incentive stock options or nonqualified options. The Company accounts for stock
      options based on the fair—value recognition provision of SFAS No. 123, "Accounting For Stock—
      Based Compensation." The Company‘s stock option expense for 2004 was approximately


                                                  —§—


SunTrust Securities, Inc.
(A wholly—owned subsidiary of SunTrust Banks, Inc.)
Notes to Financia! Statements
December 31, 2004
      $102,828, which is also included in compensation and employee benefits expense in the
      accompanying statement of operations.

      10. INCOME TAXES

      The Company is included in the consolidated federal income tax return filed by the Parent.
      Federal income taxes are calculated as if the Company filed a separate federal income tax return.
      The Company files its own state tax returns. The current and deferred portions of the income tax
      expense (benefit) included in the statement of operations as determined in accordance with
      FASB Statement No. 109, "Accounting for Income Taxes," are as follows:

                                                                    (in thousands)
                                                         Current         Deferred         Total

                     Federal                         $        764    $        (274) $          490
                     State                                    107              (30)             77
                                                     $        871 $           (304) $          567


      A reconciliation of the difference between the expected income tax expense or income computed
      at the U.S. statutory income tax rate and the Company‘s income tax expense is shown in the
      following table:
                                                                                    (in thousands)

      Expected income tax expense at U.S. statutory rate                            $         525
      The effect of:
      Increase due to state taxes, net of U.S. federal income tax effects                         50
      Other, net                                                                               (8)
      Income tax expense                                                            $         567


      11. SUBSEQUENT EVENTS

      On January 3, 2005, NCF Financial Services, Inc., a subsidiary of National Commerce Financial
      Corporation, was merged with the Company. This transaction was approved by the National
      Association of Securities Dealers.


l   SunTrust Securities, Inc.                                                                Schedule 1
    (A wholly—owned subsidiary of SunTrust Banks, Inc.)
    Computation of Net Capital Under Rule 15¢3—1
    Of the Securities and Exchange Commission
    As Of December 31, 2004

    NET CAPITAL:
     Total Shareholder‘s Equity                                                                     $     21,303,663
     Deductions:
     Non—Allowable Assets:
       Premises and Equipment                                                       $     762,732
       Other Assets                                                                       798,655
       Commissions Receivable                                                           4,798,152
     Total Non—Allowable Assets                                                                     $    (6,359,539)
     Other Deductions: Bond Deductible in Excess                                                            (40,026)
     Tentative Net Capital                                                                               14,904,103
     Less: Haircuts
        U.S. Treasuries                                                             $    323,423
        Other Securities                                                                  14,606
     Total Haircuts                                                                                      (338,029)
    NET CAPITAL                                                                                     14,566,074
                                                                                                     *~$

    AGGREGATE INDEBTEDNESS:
     Accounts Payable and Accrued Liabilities                                                       $       527,465
     Accrued Liabilities to Affiliates                                                                    6,723,065
     Income Taxes Payable                                                                                   246,224
    TOTAL AGGREGATE INDEBTEDNESS                                                                    ~$    7,496,754

    PERCENTAGE OF AGGREGATE INDEBTEDNESS TO NET CAPITAL                                                         51%




    COMPUTATION OF BASIC NET CAPITAL REQUIREMENT:
     Minimum net capital requirement (6 2/3% of total aggregate indebtedness) (1)                    $      499,784

     Minimum dollar net capital required (2)                                                         $      250,000

    Net Capital Requirement (greater of (1) or (2) above)                                            $      499,784

     Excess net capital over net capital requirement                                                 $   14,066,290
I




     Excess net capital at 1,000% (net capital less 10% of aggregate indebtedness)                   $   13,816,399




    There are no material differences between this computation and the Company‘s amended, unaudited Form X—
    17A—5 as of December 31, 2004.




                                                        — 10—


     PricemilErnousE(Corers
                                                                                   PricewaterhouseCoopers LLP
                                                                                   10 Tenth Street, Suite 1400
                                                                                   Atlanta GA 30309—3851
                                                                                   Telephone (678) 419 1000
                                                                                   Facsimile (678) 419 1239




                Report of Independent Auditors on Internal Control Required
                                        by SEC Rule 17a—5

To the Shareholder and Board of Directors of
SunTrust Securities, Inc.

In planning and performing our audit of the financial statements and supplemental schedules of
SunTrust Securities, Inc. (the "Company") for the year ended December 31, 2004, we considered
its internal control, including control activities for safeguarding securities, in order to determine
our auditing procedures for the purpose of expressing our opinion on the financial statements and
not to provide assurance on the internal control.

Also, as required by Rule 17a—5(g)(1) of the Securities and Exchange Commission (the "SEC"),
we have made a study of the practices and procedures followed by the Company, including tests
of compliance with such practices and procedures, that we considered relevant to the objectives
stated in Rule 17a—5(g), in the following:

1. Making the periodic computations of aggregate indebtedness and net capital under Rule 17a—
    3(a)(11); and
2. Determining compliance with the exemptive provisions of Rule 15¢c3—3.

Because the Company does not carry securities accounts for customers or perform custodial
functions relating to customer securities, we did not review the practices and procedures
followed by the Company in any of the following:

1. Making the quarterly securities examinations, counts, verifications, and comparisons, and the
   recordation of differences required by Rule 17a—13;
2. Complying with the requirements for prompt payment for securities under Section 8 of
   Federal Reserve Regulation T of the Board of Governors of the Federal Reserve System; and
3. Obtaining and maintaining physical possession or control of all fully paid and excess margin
   securities of customers as required by Rule 15c3—3;

The management of the Company is responsible for establishing and maintaining internal control
and the practices and procedures referred to in the preceding paragraph. In fulfilling this
responsibility, estimates and judgments by management are required to assess the expected
benefits and related costs of control and of the practices and procedures referred to in the


   PriceiAlERHoUsE(CoPERS
preceding paragraph, and to assess whether those practices and procedures can be expected to
achieve the SEC‘s above—mentioned objectives. Two of the objectives of internal control and the
practices and procedures are to provide management with reasonable, but not absolute, assurance
that assets for which the Company has responsibility are safeguarded against loss from
unauthorized use or disposition, and that transactions are executed in accordance with
management‘s authorization and recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting principles. Rule 17a—5(g) lists
additional objectives of the practices and procedures listed in the preceding paragraph.

Because of inherent limitations in internal control or the practices and procedures referred to
above, errors or fraud may occur and not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risk that controls may become inadequate
because of changes in conditions or that the effectiveness of their design and operation may
deteriorate.

Our consideration of internal control would not necessarily disclose all matters in internal control
that might be material weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a condition in which the design or
operation of one or more of the specific internal control components does not reduce to a
relatively low level the risk that error or fraud in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions. However, we noted no
matters involving internal control, including procedures for safeguarding securities, that we
consider to be material weaknesses as defined above.

We understand that practices and procedures that accomplish the objectives referred to in the
second paragraph of this report are considered by the SEC to be adequate for its purposes in
accordance with the Securities Exchange Act of 1934 and related regulations, and that practices
and procedures that do not accomplish such objectives in all material respects indicate a material
inadequacy for such purposes. Based on this understanding and on our study, we believe that the
Company‘s practices and procedures were adequate at December 31, 2004 to meet the SEC‘s
objectives.

This report is intended solely for the information and use of the Board of Directors, management,
the SEC, National Association of Securities Dealers, Inc. and other regulatory agencies that rely
on Rule 17a—5(g) under the Securities Exchange Act of 1934 in their regulation of registered
brokers and dealers, and is not intended to be and should not be used by anyone other than these
specified parties.

  Lrectuntack (og
               us LAP
February 25, 2005


    SunTrust Securities, Inc.
    (A wholly—owned subsidiary of SunTrust Banks, Inc.)
    Financial Statements
    For the Year Ended
    December 31, 2004
1


    SunTrust Securities, Inc.
    (A wholly—owned subsidiary of SunTrust Banks, Inc.)
    Table of Contents to Financial Statements and Suppilementary Schedule
    For the Year Ended December 31, 2004

    Report of Independent Auditors

    Financial Statements:
        Statement of Financial Condition
        Statement of Operations
        Statement of Changes in Shareholder‘s Equity
        Statement of Cash Flows
I




    Notes to Financial Statements

    Supplemental Information:
        Schedule I:
        Computation of Net Capital Under Rule 15c3—1 of the
            Securities and Exchange Commission                               10

    Report of Independent Auditors on Internal Control Required
            by Rule 17a—5 of the Securities and Exchange Commission         11—12



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9999999997-05-011692.txt   Complete submission text file   1958

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