FOCUS Report Msec, Llc

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

Published: 2017-03-22 17:30:24
Submitted: 2017-03-01
Period Ending In: 2016-12-31
scanned.pdf Scanned paper document


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                                               SECUR]                   I II~,~IIII   II~I~~III                       OMB Number:       3235-0123
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                                                        -FORM X-1 7A-5       SEC
                                                                                                                                   SEC FILE NUMBER
                                                           PART III`   Mail Processing
V
                                                                           Section                                                 e-06Z7
                                                             FACING PAGE
                                                                                                    MAR 01 2017
n                      Information Required of Brokers and Dealers Pursuant to Section 17 of the
~W                            Securities Exchange Act of 1934 and Rule 1JY11-c 1 V0WeuiQer
                                                       /                         415
     REPORT FOR THE PERIOD BEGINNING                    0                                         AND ENDING            17—Z31
                                                                   MM/DD/YY                                                 MM/DD(YY

                                              A. REGISTRANT IDENTIFICATION
n
L    NAME OF BROKER-DEALER:
                                               i' i t
                                                     ~~ ~Q Lu1`~,-`-,Qom`                         L~-~.                    OFFICIAL USE ONLY

     ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)                                                             FIRM I.D. N0.
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       gzoa
n                                                               (No. and Street)

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                                                                       KS
                          (City)                                        (State)                                       (Zip Code)

     NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
       Arno 1eZ4,rk                                                   q1 -2,—fo47-Ci%
           1j                                                                                                          (Area Code — Telephone Number)

I~                                            B. ACCOUNTANT IDENTIFICATION

     INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*


                                                    (Name — if individual, state last,first, middle name)

       5-S6,              I -7 ~lti     -~,     i    ~,t ~-~e, 1000               'De.)Ver, 64                                 o Zo 2-
                                                r
           (Address)                                      (City)                                            (State)                    (Zip Code)
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LW   CHECK ONE:

              O    certified Public Accountant
                   Public Accountant

                   Accountant not resident in United State's or any of its possessions.

C                                                   FOR OFFICIAL USE ONLY


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     *Claimsfor exemptionfrom the requirement that 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)
E
                                      Potential persons who are to respond to the collection of
F0      SEC 1410(06-02)
                                      information contained In thisform are not required to respond
                                      unless the form displays a currently valid OMB control number.



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7                                                    OATH OR AFFIRMATION
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       I,      1 errt t& Ze-t           Pr                                         ,swear (or affirm) that, to the best of
       my knowledge4d belief the accomp~ying financial statement and supporting schedules pertaining to the firm of
F      of
            rn011      ~~   .JE.LI~c.fi~~2.~        L L G.

                                                                ,20 Vy
                                                                                                                                  as

            !.L~       ¢{       r                                             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:


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                                                                                                    0>~ons brit
                                                                                                 Title'
i_j                 --                                                      NOTARY PUBLIC — State of Kansas
                     Notary Public                                            CHRISTINA HANCOCK
                                                                          ai My Appt.
                                                                                       Exp.45l
      T s report ** contains (check all applicable boxes):
        (a) Facing Page.
        (b) Statement of Financial Condition,
~-    ❑ (c) Statement of Income (Loss).
      ❑ (d) Statement of Changes in Financial Condition,
      ❑ (e), Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
      ❑ (f) Statement of Changes in Liahilities Subordinated to Claims of Creditors.
      ❑ (g) Computation of Net Capital.
r,    ❑ (b) Computation for Determination of Reserve Requirements Pursuant to Rule 1503-3.
      ❑ (i) Information Relating to the Possession or Control Requirements Under Rule 1503-3.
      ❑ 6) A Reconciliation, including appropriate explanation ofthe Computation of Net Capital Under Rule 1503-1 and the
             Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 1503-3.
      ❑ (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of
L            consolidation.
      4 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 ofthe previous audit.

7     "For conditions ofconfidential treatment ofcertain portions ofthisfiling, see section 240.17a-5(e)(3),
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        Montage Securities, LLC

L       Statement of Financial Condition
        December 31, 2016
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        Filed as PUBLIC information pursuant to Rule 15-a-5(d) under the
        Securities Exchange Act of 1934
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                                  CONTENTS
    t
    I                                                             Page

'       REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     3

        FINANCIAL STATEMENTS
'         STATEMENT OF FINANCIAL CONDITION                          5
          NOTES TO STATEMENT OF FINANCIAL CONDITION                 6


                                                                                                                                                              0




                                             Report of Independent Registered Public Accounting Firm                                                                        RSM US LLP


               To the Managing Member
               Montage Securities, LLC


               We have audited the accompanying statement of financial condition of Montage Securities, LLC (the
               Company)as of December 31, 2016, and the related notes (the financial statement). This financial
               statement is the responsibility of the Company's management. Our responsibility is to express an opinion
    F          on this financial statement based on our audit.

               We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
               Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
               assurance about whether the financial statement is free of material misstatement. Our audit included
               consideration of internal control over financial reporting as a basis for designing audit procedures that are
L              appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
               the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit
               also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
               financial statement, 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 statement referred to above presents fairly, in all material respects, the
               financial position of Montage Securities, LLC as of December 31, 2016, in conformity with accounting
               principles generally accepted in the United States.
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                                US 44P
               Denver, Colorado
L              February 27, 2017
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        THE POWER OF 13EING UNDERSTOOD
        AUDIT I TAX I CONSULTING

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C.      FINANCIAL STATEMENT


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                                 Montage Securities, LLC
                    STATEMENT OF FINANCIAL CONDITION
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f-                                  December 31,2016




                 ASSETS

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         Cash and cash equivalents
         Receivables from non-customers 12b-1
                                                                       $ 1,413,249
                                                                            32,567




                                          -
         Receivables from non-customers other                               14,988




                                          -
         Receivables from affiliates                                     1,078,944
         Other assets                                                      124,942
         Due from parent                                                     9,797
    --   Equipment, net of accumulated depreciation of $16,740               5,898
                 Total assets                                          $ 2,680,385

                   LIABILITIES AND MEMBER'S EQUITY
         Liabilities
            Accounts payable and accrued expenses                      $      89,678
            Commissions payable                                              826,281
            Payables to affiliates                                           158,992
                   Total liabilities                                       1,074,951

         Commitments and contingencies (Note 1-1)

         Members Equity                                                  1,605,434
               Total liabilities and member's equity                   $ 2,680,385




           The accompanying notes are an integral part of this financial statement.
                                            5


                                                  Montage Securities, LLC
L
                  NOTES TO STATEMENT OF FINANCIAL CONDITION - CONTINUED
                                                      December 31, 2016


        NOTE A - ORGANIZATION AND NATURE OF BUSINESS

          Montage g Securities LLC("the Company')is a whollyY owned subsidiary     rY of Mariner Holdings,g~ LLC("the
          Parent'). The Company is a U.S. Securities and Exchange Commission(SEC)registered broker-dealer and
          FINRA member firm. The Company is registered with the SEC, and operates under the provisions of
          Rule 156-3(k)(2)(i) and, accordingly, is exempt from the remaining provisions of Rule 156-3. The
          requirements of Paragraph (k)(2)(i) provide that the Company carries no margin accounts, promptly
          transmits all customer funds and delivers all securities received in connection with its activities as a broker
          or dealer, does not otherwise hold funds or securities for, or owe money or securities to, customers and
          effectuates all financial transactions between the broker or dealer and its customers through one or more
          bank accounts, each to be designated as "Special Account for the Exclusive Benefit of Customers of
          Montage Securities, LLC". The Company did not have a "Special Account for the Exclusive Benefit of
          Customers of Montage Securities,LLC"in 2016 as it did not have any financial transactions requiring such
          an account. From January 1, 2016 through May 31, 2016, the Company operated under Rule 15c3-
          3(k)(2)(ii) and, accordingly, was exempt from the remaining provisions of Rule 15c3-3 as well. The
          requirements of Paragraph (k)(2)(ii) provide that the Company clear all transactions on behalf ofcustomers
          on a fully disclosed basis with a clearing broker-dealer. The Company is incorporated in the state of
          Delaware. The Company's customers are located throughout the United States. The primary purpose of
          the Company is to support transactions for the affiliates which are subsidiaries of the Parent that are
          required to run through a broker dealer as described in Note E. The services provided by the affiliates
          include insurance, M&A support, private equity investment and asset management.
    1
        NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          The accounting policies set out below have been applied consistently to the period presented in the financial
          statements.
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          1.   Use ofEstimates in Preparation ofFinaneial.Statements
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          The preparation of financial statements in conformity with accounting principles generally accepted in the
          United States of America ("U.S. GAAP") requires management to make estimates and assumptions that
( _j      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 revenues and expenses during the reporting
          period. Actual results could differ from those estimates.

          2. Cash and Cash Equivalents

          Cash and cash equivalents include cash and short-term investments. The Company considers all demand
          deposits and highly liquid investments with original or remaining maturities of 90 days or less to be cash
          equivalents.

          3. Accounts .Receivable

r-        The Company's accounts receivable are balances due from non-customers and affiliates for products,
          services, and solutions provided. Accounts receivable arc generally due upon receipt. Account balances


                          The accompanying notes are an integral part of this financial statement.
                                                           6


                                                     Montage Securities, LLC
                       NOTES TO STATEMENT OF FINANCIAL CONDITION - CONTINUED
                                                        December 31,2016

             NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

               3. Accounts Receivable (continued)

    t          outstanding longer than the contractual payment terms are considered past due. The Company reviews its
               aged receivables by considering several factors,including the aging of the past due balance. The Company
               records an allowance for any balances that are deemed to be uncollectible. As ofDecember 31,2016 there
               was no allowance recorded in the financial statements.

               4. OtberAssets

               At December 31, 2016, other assets are primarily composed of prepaid FINRA expenses of $62,648 and
               prepaid insurance of $52,053. The remaining balance in other assets is comprised of various other prepaid
    L          expenses.

               5. Equipment
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               Equipment is stated at cost less accumulated depreciation. Depreciation is provided using the straight-line
               method over the estimated useful lives of the assets, generally three to seven years. Depreciation expense
               for the year ended December 31, 2016 totaled $5,100, which includes $1,488 of loss on disposal of asset.

               6. Income Taxes

               The Company is a single member limited liability company owned by a sole member that is taxed as a
               partnership and thus is considered a disregarded entity for Federal income tax purposes. As such, the
               results of operations of the Company are included in the Federal income tax returns of the individual
               member and, accordingly, no provision or credit for Federal income taxes is recorded in the accompanying
               financial statements. The Company's tax returns and the amount of allocable income or loss are subject
               to examination by taxing authorities. If such examinations result in changes to income or loss, the tax
               liability of the member could be changed accordingly.

               As required by the uncertain tax position guidance in Accounting Standard Codification (ASC) 740, the
               Company recognizes the financial statement benefit of a tax position only after determining that the
         -     relevant tax authority would more likely than not sustain the position following an audit. For tax positions
               meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the benefit
               that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant
               tax authority. All interest and penalties related to income tax are charged to general and administrative
               expense. All tax positions taken related to the Company,for the current and any open tax years, have been
               reviewed and management is of the opinion that material positions taken by the Company would more
    C          likely than not be sustained by examination. Accordingly, the Company has not recorded an income tax
               liability for uncertain tax positions.

               7. Subsequent Events

               The Company evaluated the financial statements for subsequent events through February 27, 2017, the
               date the financial statements were issued. The Company is not aware of any subsequent events which
    C          would require recognition or disclosure in the financial statements.

    F"
:                             The accompanying notes are an integral part of this financial statement.
                                                               7


                                                 Montage Securities, LLC
                   NOTES TO STATEMENT OF FINANCIAL CONDITION - CONTINUED
                                                    December 31, 2016

         NOTE C — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


L          Throughout 2016, FASB issued ASUs 2016-20, 2016-12, 2016-10 and 2016-08 related to various
           amendments associated with Topic 606,Revenue from Contracts with Customers,wlvch was created upon
           issuance of ASU 2014-09. These amendments do not change the core principle of the guidance in Topic
           606, rather, the amendments affect only narrow aspects of Topic 606. The effective date of these
F          amendments are the same as the effective date and transition requirements for Topic 606. In August 2015,
           FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) to defer the effective
           date by one year of the FASB issued ASU 2014-09. ASU 2014-09 supersedes the revenue recognition
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           requirements in Topic 605,Revenue Recognition. The amendments affect any entity that either enters into
           contracts with customers to transfer goods or services or enters into contracts for the transfer of
           nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts
           or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict
           the transfer of promised goods or services to customers in an amount that reflects the consideration to
           which the entity expects to be entitled in exchange for those goods or services. The amendments are
           effective for annual reporting periods beginning after December 15, 2017, but may be adopted early.
           Management is currently assessing the impact this ASU will have on its financial statements.

           In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and
           comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and
           disclosing key information about leasing arrangements. This amends the FASB ASC and creates Topic
           842, Leases, and affects any entity that enters into a lease, with some specified scope exemptions. The
           main difference between previous U.S. GAAP and Topic 842 is the recognition of lease assets and lease
LL l       liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The
           amendment is effective for fiscal years beginning after December 15, 2018, but may be adopted early.
           Management is currently assessing the impact this ASU will have on its financial statements.


         NOTE D - NET CAPITAL REQUIREMENTS

           Pursuant to the net capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934, the Company
           is required to maintain a minimum net capital, as defined under such provisions. Net capital and the related
           net capital ratio may fluctuate on a daily basis. At December 31, 2016, the Company had net capital of
~-         $346,871 which was $275,208 in excess ofits basic net capital required of $71,663, and the Company's ratio
           of aggregate indebtedness to net capital was 3.10 to 1. The SEC permits a ratio of aggregate indebtedness
r~         to net capital no greater than 15 to 1. Net capital rules may restrict distributions to the member.
I

r-       NOTE E - RELATED PARTY TRANSACTIONS
L          The Company is a member of a group of affiliated companies under common control and has extensive
           transactions and relationships with members of the group. The existence of that control could create
           operating results and financial position significantly different than if the companies were autonomous.



D

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                          The accompanying notes are an integral part of this financial statement.
1. --1                                                     8
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                                                Montage Securities, LLC
                NOTES TO STATEMENT OF FINANCIAL CONDITION - CONTINUED
                                                  December 31,2016

      NOTE E - RELATED PARTY TRANSACTIONS - continued

        Operating costs and expenses as outlined in various shared services agreements are incurred by the Parent
        and/or two affiliates. The Company paid the Parent and affiliates $3,860,745 and $947,085, respectively,
        during the year ended December 31, 2016. As of December 31, 2016, the Company accrued $158,992
        owed to the two affiliates for these costs and the Parent owed the Company $9,797 associated with these
        operating costs and expenses.

        Marketing service revenue is paid by an affiliate for a Marketing Services Agreement in which the Company
C       is to provide aftermarket support services for the registered fund of the affiliate. The Marketing Service fee
        is paid quarterly. As of September 30, 2016,, this Marketing Services Agreement was terminated. The
        Company outsourced the aftermarket support services to another affiliated company, from the time they
        are registered with the Company. As ofDecember 31,2016,$1,007,818 is included in the affiliate receivable
~I      for these fees.

        As of December 31, 2016, $19,149 is included in receivables from affiliates related to commission income
        that is due from an affiliated insurance broker. The commission income is being paid in accordance with
        the Networking Services Agreement for insurance contracts which are considered securities and must run
        through a broker dealer registered with the SEC.

        As of December 31, 2016, $32,567 is included in the receivables from non-customers — 12b-1 associated
        with three mutual funds managed by an affiliate. The 12b-1 fees are being received as a part of a collective
        agreement between the Company and its affiliate to accommodate the payment of transaction based
        12b-1 fees for C class shares which are considered securities related and must run through a broker dealer
        registered with the SEC.

        The Company has three affiliated major customers that accounted for greater than 10% of total revenue
        for the year ended December 31, 2016. Transactions for each major customer as of December 31, 2016
        are as follows:

                                                          Receivables   Yg of Receivables
                                  Affiliate 1                   724,294              64%
                                  Affiliate 2                       -                   0°/a
                                  Affiliate 3                   203,757                18%
                                  Other less than 10%           198,448                180/0
                                  Total                  $     1,126,499              1000/0


      NOTE F - LICENSE AGREEMENT

        A License Agreement is in place for the usage of the Company's Cumberland office location. The
        cancelable agreement is effective through September 30, 2017 and includes the use of office space, parking,
        furniture rental and kitchen services.
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I."                    The accompanying notes are an integral part of this financial statement.
                                                        9


                                              Montage Securities, LLC
               NOTES TO STATEMENT OF FINANCIAL CONDITION - CONTINUED
r--                                              December 31,2016

      NOTE G - CONCENTRATION RISK

        As of December 31, 2016, and at various other times during the year, cash balances held at financial
`       institutions may be in excess offederally insured limits of$250,000. The Company has not experienced any
r       losses in such accounts and does not believe it is exposed to any significant credit risk. The Company is
        engaged in various trading and brokerage activities in which counterparties primarily include broker-dealers,
Lj      banks, mutual fund companies and other financial institutions. In the event counterparties do not fulfill
        their obligations, the Company may be exposed to risk. It is the Company's policy to review, as necessary,
        the credit standing of its counterparties. The Company does not believe it is exposed to any significant
,Li     counterparty credit risk.


      NOTE H - COMMITMENTS AND CONTINGENCIES

        In the normal course of business, the Company enters into contracts that contain a variety of
        representations and warranties that provide indemnifications under certain circumstances. The Company's
        maximum exposure under these arrangements is unknown,as this would involve future claims that may be
        made against the Company that have not yet occurred. The Company expects the risk offuture obligation
        under these indemnifications to be remote.



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F_                     The accompanying notes are an integral part of this financial statement.
                                                       10



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Document Modified: 2017-05-15 10:33:55
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