FOCUS Report Lam Securities Investments

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

Published: 2009-03-10 17:50:34
Submitted: 2009-02-26
Period Ending In: 2008-12-31
scanned.pdf Scanned paper document


                                                          UNITED STATES                                                 OMB APPROVAL
                                        SECURITIES AND EXCHANGE COMMISSION                                      OMB Number:          3235—0123




     tgi@                                              "Hf es
                                                     Washington, D.C. 20549                                 i       {tagsing
                                                                                                                :@g@a_fis       October 31, 2004

                                           ANNUAL AUDITED REPORT S°firsperresporse..... 12.00
                                                                  ®                              SEC Ma“q              mated agverags burden

anounsmnnentiih
         09057143
                                                            FACING PAGE                                     110
                   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                       January 1, 2008                   AND ENDING               December 31, : 2008
                               '             '                    MM/DD/YY                                              MM/DD/YY


                                        A. REGISTRANT IDENTIFICATION

 NAME OF BROKER—DEALER: Lam Securities Investments, Inc.                                                                OFFICIAL USE ONLY

 ADDRESS$ OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)                                                          FIRM 1.D. NO.

  2099 Lake Street                               ~
                                                              '(p'o and Street)

  San Francisco                     California                        <   k                  94104
                      (City)          heme evi lencsew
                                               —       l2» & . .(State)                                         (Zip Code)

 N
     Nok 3M                                                              N5—308—6181
          ND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT.

                                                                                                                  (Arca Code — Telephone Number)

                                        B. ACCOUNTANT IDENTIFICATION

 INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
  Breard & Associates Inc., Certified Public Accountants
                                                  (Name—— if individual, state last, first, middle name)

  9221 Corbin Avenue Suite 170                           Northridge                                        CA                        91324
       (Address)                                         (City)                        PROCESgED                                 (Zip Code)

 CHECK ONE:     .                                                                                                  *
        F Certified Public Accountant
                                                                                  ,        MAR 1 1 2003
            C Public Accountant                                                       THOMSON REUTERS
            C1 Accountant not resident in United States or any of its possessions.

                                                  FOR OFFICIAL USE ONLY




 *Claims for exemption from the requirementthat the annual report be covered by the opinion ofan independent public accountant
 must be supported by a statement offacts and circumstances relied on as the basisfor the exemption. See Section 240.17a—5(e)(2)



                                   Potential persons who are to respond to the collection of
                                   information contained in this form are not required to respond
     SEC 1410 (06—02)              unless the form displays a currently valid OMB control number.


                                                              OATH OR AFFIRMATION

    1,            Dick Lam         mssos #HHisM 132                                                  , swear (or affirm) that, to the best of
     my knowledge and belief the 'ééé'b?h?)anying financial statement and supporting schedules pertaining to the firm of
                 Lam Securities Investments,Inc.                                                                                          , as
    of                  December 31 " " V :2008                                      , are true and correct. 1 further swear (or affirm) that
    neither the company norapy parme;gopnetor, principal officer or director has any proprietary interest in any account
    classified solely as that of a cus\%mer, except as follows:




State of            L
County of zzé %@ézsw
Subscnbed and sworn (or affirmed) to before me this
LC day of fauit                          , 290     by
                 C                  personallly known to me or
proved to me on the basis of satisfactory evidence to
be tgcrson(s) who aieared before me.

                             Notary Public

    This report ** contains (check all applicable boxes):
 OBESENARNIREE




        (a) Facing Page.
        (b) Statement of Financial Condition.
                  (c) Statement of Income (Loss)
                  (d)   Statement of Changes in Cash Flows
                  (e)   Statement of Changes in Stocknoiders® Equity or Partners‘ or Sole Proprietors‘ Capital.
                  (f)   Statement of Changes in Liabilities Subordinated to Claims of Creditors.
                  (g)   Computation of Net Capital.
                  (h)   Computation for Determination of Reserve Requirements Pursuant to Rule 15c3—3.
                  (i)   information Reiating to the Possession or Control Requirements Under Rule 15¢3—3.
                  (§)   A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3—3 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
 0O




                      consolidation.
                  (1) An Oath or Affirmation.
 D09




                  (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 ofthe previous audit.

     **For conditions of confidential treatment of certain portions of this filing, see section 240.17a—5(e)(3).


    «      .                     , BREARD &ASSOCIATES, INC.
                                  Certified           Public         Accountants



                                               Independent Auditor‘s Report

           Board of Directors
           Lam Securities Investments, Inc.:

           We have audited the accompanying statement of financial condition of Lam Securities
           Investments, Inc. (the Company) as of December 31, 2008, and the related statements of
           operations, changes in stockholder‘s equity, and cash flows for the year then ended that you are
           filing pursuant to rule 17a—5 under the Securities Exchange Act of 1934. 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 in accordance with auditing standards generally accepted in the United
           States of America. Those standards 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.    An audit also includes assessing the accounting principles used and
           significant estimates made by management, as well as evaluating the overall financial statement
           presentation. We believe that our audit provides a reasonable basis for our opinion.

           In our opinion, the financial statements referred to above present fairly, in all material respects, the
           financial position of Lam Securities Investments, Inc. as of December 31, 2008, 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.

           The accompanying financial statements have been prepared assuming that the Company will
           continue as a going concern. As discussed in Note 5 to the financial statements, the Company has
           suffered recurring losses from operations that raise doubt about its ability to continue as a going
           concern.     Management‘s plans in regard to these matters are also described in Note 5. The
           financial statements do not include any adjustments that might result from the outcome of this
           uncertainty.

           Our audit was conducted for the purpose of forming an opinion on the basic financial statements
           taken as a whole. The information contained in 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.


           Breard & Associates, Inc.
           Certified Public Accountants

           Oakland, California
           February 23, 2009
                                                  We Focus & Care®*"
9221 Corbin Avenue, Suite 170                                                             2101 Telegraph Avenue, Suite B
Northridge, California 91324                                                                   Oakland, California 94612
(818) 886—0940 * Fax (818) 886—1924                                                          (510) 893—8080 * baicpa.com


                                     Lam Securities Investments, Inc.
                                     Statement of Financial Condition
                                           December 31, 2008

                                                 Assets

Cash                                                                          $     64,119
Deposits with clearing organizations                                                52,814
Receivable from broker dealers                                                        448
Marketable securities, at market                                                     7413
Furniture, equipment & leaseholds, net                                              59,104

                 Total assets                                                 $    183.898




                                Liabilities and Stockholder‘s Equity

Liabilities

Accounts payable                                                              $           500
Payroll tax payable                                                                       425

                 Total liabilities                                                        925

Stockholder‘s equity

Common stock, no par value, 10,000 shares authorized,
       5,555 issued and outstanding                                               295,296
Additional paid—in capital                                                        320,837
Accumulated deficit                                                               (433,160)

                 Total stockholder‘s equity                                        182,973

                 Total liabilities and stockholder‘s equity                   $    183.898




              The accompanying notes are an integral part ofthese financial statements.
                                                —1—


                            ~ Lam Securities Investments, Inc.
                                   Statement of Operations
                           For the Year Ended December 31, 2008


Revenues

Commissions income                                                         $      9,894
Management and underwriting fees                                                 11,813
Interest and dividend income                                                      1,368
Net dealer inventory and investment gains (losses)                              (33,262)

              Total revenues                                                    (10,187)
Expenses

Employee compensation and benefits                                              19,352
Commissions, trading fees and floor brokerage                                    5,348
Communications                                                                   2,505
Taxes, other than income taxes                                                     520
Other operating expenses                                                        40,185

              Total expenses                                                     67,910

              Net income (loss) before income tax provision                    (78,097)
Income tax provision                                                                   800

              Net income (loss)                                            $    (78.897)




           The accompanying notes are an integral part ofthese financial statements.
                                                —3.


                                Lam Securities Investments, Inc.
                        Statement of Changes in Stockholder‘s Equity
                             For the Year Ended December 31, 2008



                                               Additional
                                  Common        Paid — In Accumulated
                                   Stock         Capital      Deficit            Total

Balance at December 31, 2007     $ 295,296     $ 295,837      $(354,263)      $ 236,870

Additional paid—in capital                —        25,000               —        25,000

Net income (loss)                         —             —          (78.897)     (78.897)

Balance at December 31, 2008     $ 295,296     $.320,837.     $(433.160)      $ 182.973




           The accompanying notes are an integral part ofthese financial statements.
                                             —3—


                               Lam Securities Investments, Inc.
                                   Statement of Cash Flows
                            For the Year Ended December 31, 2008

Cash flows from operating activities:

Net income (Joss)                                                          $ (78.897)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation                                               $     1,759
(Increase) decrease in:
       Deposits held at clearing organizations                   2,286
       Receivable from broker dealers                            4,637
       Marketable securities, at market                         90.263
(Decrease) increase in:
       Accounts payable                                         (2,125)
       Payroll tax payable                                         287
               Total adjustments                                                 97.107

Net cash provided by (used in) operating activities                              18,210

Cash flows from investing activities:

Cash flows from financing activities:

Proceeds from additional paid—in capital                        25,000

Net cash provided by (used in) financing activities                             25,000

       Net increase (decrease) in cash                                          43,210

       Cash at beginning of year                                                20,909

       Cash at end of year                                                 $    64.119

Supplemental disclosure of cash flow information:

Cash paid during the year for:
       Interest
                                                         s se




       Income taxes                                               800




           The accompanying notes are an integral part ofthese financial statements.
                                              .4.


                                 Lam Securities Investments, Inc.
                                  Notes to Financial Statements
                                        December 31, 2008                 *


Note 1: GENERAL & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Lam Securities Investments, Inc. (the "Company") is a California corporation incorporated on November
17, 1994 and began operations on January 1, 1995. The Company operates as a registered broker/dealer
in securities under the provision of the Securities Exchange Act of 1934. The Company is a member
of the Financial Industry Regulatory Authority ("FINRA"), the Securities Investor Protection
Corporation ("SIPC"), and the Municipal Securities Rulemaking Board ("MSRB"). The Company
conducts business on a fully disclosed basis whereby the execution and clearance of trades are handled
by another broker/dealer. The Company does not hold customer funds and/or securities.

Summary ofSignificant Accounting Policies

The presentation of financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Receivable from broker dealers are stated at face value with no allowance for doubtful accounts. An
allowance for doubtful accounts is not considered necessary because probable uncollectible accounts are
immaterial.

Securities transactions are recorded on a settlement date basis, except for proprietary transactions,
commission revenues and the related expenses which are recorded on a trade date basis.

Furniture, equipment and leaseholds are stated at cost. Repairs and maintenance to these assets are
charged to expense as incurred; major improvements enhancing the function and/or useful life are
capitalized. When items are sold orretired, the related cost and accumulated depreciation are removed
from the accounts and any gains or losses arising from such transactions are recognized. Furniture,
equipment and leaseholds are depreciated over their estimated usefullives ranging from five (5) to thirty—
nine (39) years by the straight—line method.

The Company, with the consent of its Stockholder, has elected to be an S Corporation and accordingly
has its income taxed under Section 1361—1379 of the Internal Revenue Code, which provides that in lieu
of corporate income taxes, the Stockholderis taxed on the Company‘s taxable income. Therefore, no
provision or liability for Federal Income Taxes is included in these financial statements. The State of
California has similar regulations, although there exists a provision for a minimum Franchise Tax and
a tax rate of 1.5% over the minimum Franchise Fee of $800.


                                 Lam Securities Investments, Inc.
                                  Notes to Financial Statements
                                       December 31, 2008

Note 1:   GENERAL & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)                                                                         j

The Company has elected to report the statement of changes in stockholder‘s equity without disclosing
the accumulated adjustment account and other equity accounts pertinent to an S Corporation. There is
no financial impact to these financial statements.


Note 2: DEPOSITS WITH CLEARING ORGANIZATIONS

The Company has deposited $30,009 with Southwest Securities, Inc. and $22,805 with Emmeftt Larkin
Company as security for its transactions with them. Interest paid monthly on the deposit at the average
overnight repurchase agreement rate.


Note 3: FURNITURE, EQUIPMENT & LEASEHOLDS, NET

Furniture, equipment & leaseholds are recorded at cost.
                                                                                 Depreciable
                                                                                 Life Years
Automobile                                                $    34,658                 5
Furniture & equipment                                          53,014                5—7
Leasehold improvements       _                                 63.398                   39
                                                              151,070
Less accumulated depreciation                                 (91.966)
       Furniture, equipment & leaseholds, Net             $    59104

Depreciation expense for the year ended December 31, 2008, was $ 1,759.


Note 4: INCOME TAXES

As discussed in the Summary of Significant Accounting Policies (Note 1), the Company has elected the
S Corporate tax status, therefore no federal income tax provision is provided. The tax provision
provided is the California franchise tax minimum of $800.


Note 5: GOING CONCERN

The Company had very little activity for the year ended December 31, 2008. This inactivity has resulted
in substantial operating losses which bring into question the Company‘s ability to continue as a going
concern. To provide needed liquidity, the shareholder will continue to capitalize the Company to fund
its continuing operations.


                                Lam Securities Investments, Inc.
                                 Notes to Financial Statements
                                      December 31, 2008

Note 6: CONCENTRATION OF CREDIT RISK

The Company is engaged in various trading and brokerage activities in which counterparties include
broker/dealers, banks, and other financial institutions. In the event counterparties do not fulfill their
obligations, the Company may be exposed to risk. The risk ofdefault depends upon the creditworthiness
of the counterparty or issuer of the instrument. To mitigate the risk of loss, the Company maintains its
accounts with credit worthy customers and counterparties.


Note 7: NET CAPITAL REQUIREMENT CHANGE

On December 4, 2008, the Company has received approval from FINRA to change its required net
capital from $100,000 to $5,000. The Company will be able to engage in retailing corporate securities,
be a mutual fund retailer on wire order and a municipal securities broker. This change was effective on
January 1, 2009.


Note 8: RECENTLY ISSUED ACCOUNTING STANDARDS

For the year ending December 31, 2008, various accounting pronouncements or interpretations by the
Financial Accounting Standards Board were either newly issued or had effective implementation dates
that would require their provisions to be reflected in the financial statements for the year then ended.
The Company has reviewed the following Financial Interpretation ("FIN") and Statements of Financial
Accounting Standards ("SFAS") for the year to determine relevance to the Company‘s operations:

   Statement                                 Title                                Effective Date
   Number

   FIN 48            Accounting for Uncertainty in Income Taxes —an               After 12/15/07
                     Interpretation of FASB Statement No. 109
   SFAS 141(R)      Business Combinations                                         After 12/15/08
   SFAS 157         Fair Value Measurements                                       After 12/15/07
   SFAS 160         Noncontrolling Interests in Consolidated Financial            After 12/15/07
                    Statements — an amendment of ARB No. 51
   SFAS 161         Disclosures about Derivative Instruments and                  After 12/15/08
                     Hedging Activities — an Amendment of FASB                                     |
                     Statement No. 133

The Company has either evaluated or is currently evaluating the implications, if any, of each of these
pronouncements and the possible impact they may have on the Company‘s financialstatements. In most
cases, management has determined that the pronouncement has either limited or no application to the
company and, in all cases, implementation would not have a material impact on the financial statements
taken as a whole.


                               Lam Securities Investments, Inc.
                                Notes to Financial Statements
                                     December 31, 2008

Note 9: NET CAPITAL REQUIREMENTS

The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC
rule 15¢3—1), which requires the maintenance of minimum net capital and requires that the ratio of
aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. Net capital and
aggregate indebtedness change day to day, but on December 31, 2008, the Company had net capital of
$122,309 which was $22,309 in excess ofits required net capital of $100,000; and the Company‘s ratio
of aggregate indebtedness ($925) to net capital was 0.01 to 1, which is less than the 15 to 1 maximum
ratio allowed for a broker/dealer.


Note 10: RECONCILIATION OF AUDITED NET CAPITAL TO UNAUDITED FOCUS

There is no material difference between the computation of net capital under net capital SEC rule
15c3—1 and the corresponding unaudited FOCUS part IIA.

Net capital per unaudited schedule                                           $   —122,309
Adjustments:
       Accumulated deficit                                    $    (1,759)
       Non—allowable assets                                         1,759
               Total adjustments                                                   —
               Net capital per audited statements                            122.309


                               Lam Securities Investments, Inc.
                     Schedule I — Computation of Net Capital Requirements
                                    Pursuant to Rule 15c3—1
                                    As of December 31, 2008

Computation of net capital

Stockholder‘s equity

       Common stock                                           $      295,296
       Additional paid—in capital                                    320,837
       Accumulated deficit                                          (433,160)
              Total stockholder‘s equity                                        $   182,973
Less: Non—allowable assets
       Receivable from broker dealers                                  (448)
       Furniture, equipment & leaseholds, net                        (59.104)
               Total adjustments                                                    (59,552)

               Net capital before haircuts                                          123,421

Less: Adjustments to net capital
       Haircuts on securities                                         (1,112)

               Total adjustments to net capital                                      (1,112)

               Net capital                                                          122,309

Computation of net capital requirements

Minimum net capital requirements
     6 %/s percent of net aggregate indebtedness              $          62
       Minimum dollar net capital required                    $      100,000
            Net capital required (greater of above)                                 100,000

Excess net capital                                                              $   22.309

       Ratio of aggregate indebtedness to net capital                0.01: 1

There was no material difference between net capital shown here and net capital as reported on the
Company‘s unaudited Form X—17A—5 report dated December 31, 2008. See Note 10.




                                See independent auditor‘s report.
                                                  —9.


                            ~Lam Securities Investments, Inc.
                  Schedule II — Computation for Determination of Reserve
                          Requirements Pursuant to Rule 15c3—3
                                  As of December 31, 2008

A computation of reserve requirements is not applicable to Lam Securities Investments, Inc. as the
Company qualifies for exemption under Rule 15¢3—3 (k)(2)(ii).




                               See independent auditor‘s report.
                                              —10—


                           * Lam Securities Investments, Inc.
                Schedule III — Information Relating to Possession or Control
                              Requirements Under Rule 15c3—3
                                  As of December 31, 2008

Information relating to possession or control requirements is not applicable to Lam Securities
Investments, Inc. as the Company qualifies for exemption under Rule 15¢3—3 (k)(2)(ii).




                               See independent auditor‘s report.
                                              11—


   Lam Securities Investments, Inc.

  Report Pursuant to Rule 17a—5 (d)

        Financial Statements

For the Year Ended December 31, 2008


                                ,BREARD &ASSOCIATES,;[‘I“\‘I__(3T
                                Certified            Public        Accountants
           Board of Directors
           Lam Securities Investments, Inc.:

           In planning and performing our audit ofthe financial statements of Lam Securities Investments, Inc.
           (the Company), as of and for the year ended December 31, 2008, in accordance with auditing
           standards generally accepted in the United States ofAmerica, we considered the Company‘s internal
           control over financial reporting (internal control) as a basis for designing our auditing procedures
           for the purpose of expressing our opinion on the financial statements, but not for the purpose of
           expressing an opinion on the effectiveness of the Company‘s internal control. Accordingly, we do
           not express an opinion on the effectiveness of the Company‘s internal control.

           Also, as required by rule 17a—5(g)(1) of the Securities and Exchange Commission (SEC), we have
           made a study of the practices and procedures followed by the Company including consideration of
           control activities for safeguarding securities. This study included tests of such practices and
           procedures that we considered relevant to the objectives stated in rule 17a—5(g) in making the
           periodic computations ofaggregate indebtedness (or aggregate debits) and net capital under rule 1 7a—
           3(a)(1 1) and for determining compliance with the exemptive provisions ofrule 15¢3—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 quarterly securities examinations, counts, verifications, and comparisons and
                          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

           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 andjudgements by management are required to assess the expected benefits
           and related costs of controls and of the practices and procedures referred to in the 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 conformity with generally
           accepted accounting principles. Rule 17a—5(g) lists additional objectives of the practices and
           procedures listed in the preceding paragraph.




                                                 We Focus & Care*"
9221 Corbin Avenue, Suite 170                                                           2101 Telegraph Avenue, Suite B
Northridge, California 91324                                                                  Oakland, California 94612
(818) 886—0940 * Fax (818) 886—1924                                                         (510) 893—8080 « baicpa.com


+
                       +

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

A control deficiency exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the entity‘s ability to initiate, authorize, record, process,
or report financial data reliably in accordance with generally accepted accounting principles such that
there is more than a remote likelihood that a misstatement of the entity‘s financial statements that
is more than inconsequential will not be prevented or detected by the entity‘s internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the entity‘s financial
statements will not be prevented or detected by the entity‘s internal control.

Our consideration of internal control was for the limited purpose described in the first and second
paragraphs and would not necessarily identify all deficiencies in internal control that might be
material weaknesses. We did not identify any deficiencies in internal control and control activities
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 ofthis report are considered by the SEC to be adequate forits 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, as described in the second paragraph ofthis report, were adequate at December 31,
2008, to meet the SEC‘s objectives.

This report is intended solely for the information and use of the Board of Directors, management,
the SEC, Financial Industry Regulatory Authority, 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.


MWW/                                                 ?ffpo(
Breard & Associates, Inc.
Certified Public Accountants

Oakland, California
February 23, 2009




                                                                                 END
                                                it



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