SIEBERT FINANCIAL CORP — Interim / Quarterly Report 2011

Aug 15, 2011

10-Q 1 n12013_10-q.htm QUARTERLY REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
(Mark One)

| x | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| --- | --- |
| | For the
quarterly period ended June 30, 2011 |
| or | |
| o | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the
transition period from ___
to
___ |
| | Commission
file number 0-5703 |
| Siebert
Financial Corp. | |
| (Exact Name of Registrant as Specified in its Charter) | |

New York
(State or
Other Jurisdiction of Incorporation or	(I.R.S. Employer Identification No.)
Organization)

885 Third Avenue, New York, NY 10022
(Address of Principal Executive Offices) (Zip Code)
(212) 644-2400
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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

Yes o No o

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

| Large
Accelerated Filer o | Accelerated
Filer o |
| --- | --- |
| Non-Accelerated
Filer o | Smaller
Reporting Company x |

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

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 2, 2011, there were 22,114,139 shares of Common Stock, par value $.01 per share, outstanding.

1

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

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

2

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Siebert Financial Corp. & Subsidiaries Consolidated Statements of Financial Condition

	June 30, 2011 (Unaudited)
ASSETS
Cash and
cash equivalents	$ 22,774,000	$	22,646,000
Cash
equivalents – restricted	1,532,000		1,532,000
Receivable
from brokers	1,094,000		1,563,000
Securities
owned, at fair value	1,119,000		1,116,000
Furniture,
equipment and leasehold improvements, net	998,000		1,246,000
Investment
in and advances to affiliates	7,252,000		9,816,000
Income tax
refund receivable	288,000		795,000
Prepaid
expenses and other assets	686,000		741,000
Intangibles,
net	643,000		648,000
	$ 36,386,000	$	40,103,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts
payable and accrued liabilities	3,563,000		3,477,000
Contingencies
Stockholders’ equity:
Common stock, $.01 par value; 49,000,000
shares authorized, 23,211,846 shares issued, and 22,115,523 and 22,122,678 shares outstanding
at June 30, 2011 and December 31, 2010, respectively	232,000		232,000
Additional paid-in capital	19,488,000		19,484,000
Retained earnings	17,815,000		21,609,000
Less: 1,096,323 and 1,089,168 shares of
treasury stock, at cost at June 30, 2011 and December 31, 2010, respectively	(4,712,000	)	(4,699,000	)
	32,823,000		36,626,000
	$ 36,386,000	$	40,103,000

See notes to condensed consolidated financial statements.

3

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

	Three Months Ended June 30, — 2011		2010	Six Months Ended June 30, — 2011		2010
Revenues:
Commissions and fees	$ 3,539,000		$ 6,624,000	$ 7,484,000		$ 10,332,000
Investment banking	406,000		413,000	1,578,000		760,000
Trading profits	526,000		323,000	903,000		557,000
Interest and dividends	27,000		36,000	36,000		60,000
	4,498,000		7,396,000	10,001,000		11,709,000
Expenses:
Employee compensation and benefits	2,380,000		2,396,000	4,842,000		4,852,000
Clearing fees, including floor brokerage	690,000		693,000	1,614,000		1,945,000
Professional fees	1,400,000		1,679,000	2,813,000		3,809,000
Advertising and promotion	93,000		110,000	193,000		253,000
Communications	527,000		620,000	1,084,000		1,269,000
Occupancy	272,000		338,000	543,000		649,000
Other general and administrative	633,000		716,000	1,318,000		1,400,000
	5,995,000		6,552,000	12,407,000		14,177,000
(Loss) income from equity investees	(292,000	)	501,000	(1,376,000	)	1,824,000
(Loss)
income before income taxes	(1,789,000	)	1,345,000	(3,782,000	)	(644,000	)
Income tax expense (benefit)	1,000		563,000	12,000		(232,000	)
Net (loss)
income	$ (1,790,000	)	$ 782,000	$ (3,794,000	)	$ (412,000	)
Net (loss)
income per share of common stock -
Basic and Diluted	$ (.08	)	$ .04	$ (.17	)	$ (.02	)
Weighted
average shares outstanding -
Basic	22,118,162		22,177,524	22,119,667		22,179,801
Diluted	22,118,162		22,178,328	22,119,667		22,179,801

See notes to condensed consolidated financial statements.

4

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

	Six Months Ended June 30, — 2011		2010
Cash flows from operating activities:
Net loss	$ (3,794,000	)	$ (412,000	)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization	264,000		258,000
Loss (income) from equity investees	1,376,000		(1,824,000	)
Deferred taxes	—		87,000
Distribution from equity investees	1,185,000		2,513,000
Stock based compensation	4,000		5,000
Changes in:
Securities owned, at fair value	(3,000	)	41,000
Receivable from brokers	469,000		790,000
Prepaid expenses and other assets	55,000		231,000
Income tax refund receivable	507,000		(327,000	)
Accounts payable and accrued liabilities	86,000		1,718,000
Net cash provided by operating activities	149,000		3,080,000
Cash flows from investing activities:
Purchase of furniture, equipment and
leasehold improvements	(11,000	)	(108,000	)
Collection (payment) of advances made to
equity investees	3,000		(6,000	)
Net cash used in investing activities	(8,000	)	(114,000	)
Cash flows from financing activities:
Purchase of treasury shares	(13,000	)	(21,000	)
Net cash used in financing activities	(13,000	)	(21,000	)
Net increase in cash and cash equivalents	128,000		2,945,000
Cash and
cash equivalents - beginning of period	22,646,000		24,184,000
Cash and
cash equivalents - end of period	$ 22,774,000		$ 27,129,000
Supplemental cash flow disclosures:
Cash (received) paid for:
Income taxes, net	$ (138,000	)	$ 9,000
See notes to condensed consolidated financial statements.

5

Siebert Financial Corp. & Subsidiaries Notes to Condensed Consolidated Financial Statements Six Months Ended June 30, 2011 and 2010 (Unaudited)

1.	Organization and Basis of Presentation:
	The consolidated financial statements include the accounts of Siebert
Financial Corp. (the “Company”) and its wholly owned subsidiaries Muriel
Siebert & Co., Inc. (“Siebert”) and Siebert Women’s Financial Network,
Inc. (“WFN”). All material intercompany balances and transactions have been
eliminated. Investment in two entities in which the Company has ownership
interests of 49% and 33.33%, respectively, are accounted for by the equity
method and included in investment in and advances to affiliates in the consolidated statements of financial condition.
	The
condensed consolidated financial statements presented herein are unaudited
and include all adjustments (consisting of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation of
the financial position and results of operations of the interim periods
pursuant to the rules and regulations of the Securities and Exchange
Commission (the “SEC”). Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles (“GAAP”) in the United States of America
(“U.S.”) have been condensed or omitted pursuant to the SEC rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information not misleading. The balance sheet at
December 31, 2010 has been derived from the audited consolidated statements of
financial condition at that date, but does not include all information and
footnotes required by U.S. GAAP for
complete financial statements. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in the Company’s Form 10-K for the year ended December
31, 2010. Because of the nature of the Company’s business, the results of
operations for the three and six months ended June 30, 2011 are not
necessarily indicative of operating results for the full year.
2.	Securities:
	Securities owned are carried at fair value with realized and
unrealized gains and losses reflected in trading profits. Siebert clears all
its security transactions through unaffiliated clearing firms on a fully
disclosed basis. Accordingly, Siebert does not hold funds or securities for,
or owe funds or securities to, its customers. Those functions are performed
by the clearing firms.
3.	Fair Value of Financial Instruments:
	Authoritative accounting guidance defines fair value, establishes a
framework for measuring fair value and establishes a fair value hierarchy.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between participants at the
measurement date. Fair value measurements are not adjusted for transaction
costs. The fair value hierarchy prioritizes inputs to valuation techniques
used to measure fair value into three levels:
	Level 1 – Unadjusted quoted prices in active markets for identical
assets or liabilities.
	Level 2 – Inputs other than quoted prices that are observable, either
directly or indirectly, and reasonably available.
	Level 3 – Unobservable inputs which reflect the assumptions that
management develops based on available information about the assumptions
market participants would use in valuing the asset or liability.

6

The classification of financial instruments valued at fair value at June 30, 2011 is as follows:

Financial Instruments	Level 1	Level 2	Total
Cash equivalents	$ 20,559,000	—	$ 20,559,000
Securities	258,000	$ 861,000	1,119,000
	$ 20,817,000	$ 861,000	$ 21,678,000

| | Securities include common stock of $258,000, valued
on the last business day of the period at the last available reported sales
price on the primary securities exchange (Level 1) and municipal bonds of
$861,000, valued based on prices obtained from pricing
sources, which derive values from observable inputs (Level 2). |
| --- | --- |
| 4. | Per Share Data: |
| | Basic
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average outstanding common shares during the period. Diluted
earnings per share is calculated by dividing net income by the number of
shares outstanding under the basic calculation and adding all dilutive
securities, which consist of options. The Company incurred a net loss for the
three months ended June 30, 2011 and six months ended June 30, 2011 and 2010.
Accordingly, basic and diluted net loss per common share are the same for
each period as the effect of stock options is anti-dilutive. Shares of
underlying stock options not included in the diluted computation amounted to
1,228,200 at June 30, 2011 and 1,689,700 at June 30, 2010. |
| 5. | Net Capital: |
| | Siebert is subject to the Securities and Exchange Commission’s
Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of
minimum net capital. Siebert has elected to use the alternative method,
permitted by the Rule, which requires that Siebert maintain minimum net
capital, as defined, equal to the greater of $250,000 or two percent of
aggregate debit balances arising from customer transactions, pursuant to the
Rule. As of June 30, 2011, Siebert had net capital of approximately
$20,403,000 as compared with net capital requirements of $250,000. |
| 6. | Revenue: |
| | Commissions
and fees earned on customer trades together with related clearing expenses
are recorded on a trade-date basis. |
| | Trading
profits are also recorded on a trade-date basis. |
| | Investment
banking revenue includes gains and fees, net of syndicate expenses, arising
from underwriting syndicates in which the Company participates. Investment
banking management fees are recorded on the offering date, sales concessions
on the settlement date and underwriting fees at the time the underwriting is
completed and the income is reasonably determinable. |
| | Interest
is recorded on an accrual basis and dividends are recorded on the ex-dividend
date. |

7

7.	Capital Transactions:
	On
January 22, 2008, the Board of Directors of the Company authorized a buy back
of up to 300,000 shares of common stock. Shares will be purchased from
time to time, at management’s discretion, in the open market and in private
transactions. During the six months ended June 30, 2011, the Company purchased
7,155 shares at an average price of $1.85.
8.	Investment in and advances to affiliates:
	Siebert,
Brandford, Shank & Co., L.L.C. (“SBS”)
	Siebert
holds a 49% ownership interest in SBS which is engaged in municipal bond
underwritings. Income or loss from SBS is considered to be integral to
Siebert’s operations and material to the results of operations.

	June 30,
	2011
Total assets
including secured demand note of $1,200,000 due from Siebert	$ 21,332,000
Total
liabilities including subordinated liabilities of $1,200,000 due to Siebert	7,322,000
Total
members’ capital	14,010,000
Regulatory
minimum net capital requirement	250,000

	June 30 — 2011	2010
Six months
ended:
Total revenues	$ 8,749,000		22,371,000
Net (loss)
income	(2,784,000	)	3,737,000
Three months
ended:
Total revenues	4,804,000		9,205,000
Net (loss)
income	(614,000	)	1,053,000

| Siebert charged SBS $38,000 for each of the six months ended June 30, 2011
and 2010, and $19,000 for each of the three months ended June 30, 2011
and 2010, for general and administrative services, which
Siebert believes approximates the cost of furnishing such services. |
| --- |
| Siebert’s share of net (loss) income for the three months ended June
30, 2011 and 2010 amounted to $(301,000) and $516,000, respectively, and
for the six months ended June 30, 2011 and 2010 amounted to $(1.4) million
and $1.8 million, respectively. |
| Siebert received distributions from SBS of $1.2 million during the six months ended June 30, 2011, and
Siebert’s share of undistributed earnings from SBS amounted to $6.5
million at June 30, 2011. Such amount may not be immediately available
for distribution to Siebert for various reasons including the amount of SBS’s
available cash, the provisions of the agreement among Siebert and the
principals of SBS and SBS’s continued compliance with its regulatory and net
capital requirements. |

8

| SBS Financial Products Company, LLC
(“SBSFPC”) |
| --- |
| The Company has a 33.33% ownership interest in, and the two
individual principals of SBS have an aggregate 66.66% ownership interest in SBSFPC which engages in derivatives
transactions related to the municipal underwriting business. Income/(loss)
from SBSFPC is considered to be integral to the Company’s operations and
material to the results of operations. |
| Summarized financial data of SBSFPC is set forth below. |

	June 30, — 2011	2010
Total assets	$ 171,733,000
Total liabilities	170,854,000
Total members’ capital	879,000
Six months ended:
Total revenues	62,000		74,000
Net (loss)	(34,000	)	(22,000	)
Three months ended:
Total revenues	74,000		(3,000	)*
Net income	29,000		4,000

	*Attributable to unrealized loss on derivative contracts.
	The results of operations for the six months ended June 30, 2010 reflects a
reduction of SBSFPC’s previously reported net income of $25,000 for the quarter ended March 31, 2010 to a
net loss of $26,000 resulting from a $51,000 correction of unrealized gain on derivative contracts.
	The Company’s share of net income of SBSFPC for the
three months ended June 30, 2011 amounted to $10,000. For the three months ended June 30, 2010, the
Company reflected its share of SBSFPC’s operations as a net loss of $(15,700) which includes a loss of $(17,000)
attributable to the correction of SBSFPC’s results for the quarter ended March 31, 2010 referred to above.
Such correction was not material to the Company’s results of operations for the quarter ended June 30, 2010 or March 31, 2010.
The Company’s share of net (loss)
for the six months ended June 30, 2011 and 2010 amounted to $(11,000) and $(7,000), respectively.
	At June 30, 2011, SBSFPC had an accumulated loss of $321,000 of which
the Company’s share was $107,000.
9.	Income Taxes Due to cumulative losses incurred by the Company and its
subsidiaries during the current six month period and prior three years, the Company has concluded
that it is not more likely than not that it will realize its net deferred tax asset and, accordingly,
has recorded a valuation allowance to fully offset its net deferred tax asset at June 30, 2011
(amounting to approximately $3,567,000), resulting in no tax benefit during the period ended June 30, 2011.

| 10. |
| --- |
| Retail customer transactions are cleared through clearing brokers on
a fully disclosed basis. If customers do not fulfill their contractual
obligations, the clearing broker may charge Siebert for any loss incurred in
connection with the purchase or sale of securities at prevailing market
prices to satisfy the customer obligations. Siebert regularly monitors the
activity in its customer accounts for compliance with its margin
requirements. Siebert is exposed to the risk of loss on unsettled customer
transactions if customers are unable to fulfill their contractual
obligations. There were no material losses for unsettled customer
transactions for the six months ended June 30, 2011 and 2010. |
| Siebert is party to certain claims, suits and complaints arising in
the ordinary course of business. In the opinion of management all such
claims, suits and complaints are without merit, or involved amounts which
would not have a significant effect on the financial position or results of
operations of the Company. |
| Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations |
| This
discussion should be read in conjunction with our audited consolidated
financial statements as of and for the year ended December 31, 2010, and the
unaudited consolidated financial statements and the notes thereto contained
elsewhere in this Quarterly Report. |

Business Environment

The financial crisis affecting the global economy has created historic volatility in the marketplace. Our working capital is invested primarily in money market funds, so that liquidity has not been materially affected. The crisis did have the effect of reducing participation in the securities market by our retail and institutional

9

customers, which had an adverse effect on our 2010 revenues and a lesser effect in 2011. Our affiliate, Siebert, Brandford, Shank & Co., L.L.C. (“SBS”), had a loss for the current six month period of approximately $2.8 million as a result of industry volumes dramatically declining in the current period this year as compared to the same period last year due to municipalities struggling with the fiscal crisis, concerns about defaults at the state and local level and the expiration of the Build America Bonds program. This resulted in a loss to the Company of $1.4 million for the current six month period. Our expenses include the costs of an arbitration proceeding commenced by a former employee following the termination of his employment, which remains unresolved. The Company believes that the action is without merit, but the costs of defense, which are included as professional expenses, have adversely affected the Company’s results of operation and may continue to affect the results of operations until the action is completed. Competition in the brokerage industry remains intense.

The following table sets forth certain metrics as of June 30, 2011 and 2010 and for the three and six months ended June 30, 2011 and 2010, respectively, which we use in evaluating our business.

| Retail Customer Activity: | For
the Three Months ended June 30, — 2011 | 2010 | For
the Six Months ended June 30, — 2011 | 2010 |
| --- | --- | --- | --- | --- |
| Total retail trades: | 102,202 | 112,917 | 216,231 | 210,873 |
| Average commission per retail trade: | $ 20.72 | $ 21.46 | $ 21.25 | $ 21.45 |

| Retail
Customer Balances: | As
of June 30, — 2011 | 2010 |
| --- | --- | --- |
| Retail customer net worth
(in billions): | $ 6.8 | $ 5.8 |
| Retail customer money
market fund value (in billions): | $ 1.0 | $ 1.0 |
| Retail customer margin
debit balances (in millions): | $ 232.0 | $ 176.5 |
| Retail customer accounts
with positions: | 45,994 | 50,331 |

Description:

| • | Total
retail trades represent retail trades that generate commissions. |
| --- | --- |
| • | Average
commission per retail trade represents the average commission generated for
all types of retail customer trades. |
| • | Retail
customer net worth represents the total value of securities and cash in the
retail customer accounts before deducting margin debits. |
| • | Retail
customer money market fund value represents all retail customers accounts
invested in money market funds. |
| • | Retail
customer margin debit balances represent credit extended to our customers
to finance their purchases against current positions. |
| • | Retail
customer accounts with positions represent retail customers with cash and/or securities in their accounts. |

10

Like other securities firms, we are directly affected by general economic and market conditions including fluctuations in volume and prices of securities, changes and prospects for changes in interest rates and demand for brokerage and investment banking services, all of which can affect our relative profitability. In periods of reduced market activity, profitability is likely to be adversely affected because certain expenses, including salaries and related costs, portions of communications costs and occupancy expenses remain relatively fixed. Earnings, or loss, for any period should not be considered representative of any other period.

Recent Developments

On January 23, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. Shares will be purchased from time to time in our discretion, in the open market and in private transations. During the six months ended June 30, 2011, the Company purchased 7,155 shares at an average price of $1.85.

Critical Accounting Policies

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

Results of Operations

We had net loss of $1,790,000 and $3,794,000 for the three months and six months ended June 30, 2011, respectively.

Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010

Total revenues for the three months ended June 30, 2011 were $4.5 million, a decrease of $2.9 million or 39.2% from the same period in 2010.

Commission and fee income for the three months ended June 30, 2011 was $3.5 million, a decrease of $3.1 million or 46.6% from the same period in 2010 primarily due to recording $3 million as commission and fee income as part of our negotiations with our primary clearing firm for a three year Fully Disclosed Clearing Agreement in the second quarter of 2010 as well as decreases in commissions generated by retail customers due to a decrease in retail trading volumes and average commission per retail trade offset by an increase in margin debits due to higher margin debit balances and an increase in institutional trading.

Investment banking revenues for the three months ended June 30, 2011 were $406,000, a decrease of $7,000 or 1.7% from the same period in 2010 due to our participation in fewer new issues in the debt capital markets.

Trading profits were $526,000 for the three months ended June 30, 2011, an increase of $203,000 or 62.8% from the same period in 2010 due to an overall increase in trading volume primarily in the debt markets and the addition of debt sales-traders in the first quarter of 2011.

11

Interest and dividends for the three months ended June 30, 2011 were $27,000, a decrease of $9,000 or 25.0% from the same period in 2010 primarily due to lower cash balances and lower yields.

Total expenses for the three months ended June 30, 2011 were $6.0 million, a decrease of $557,000 or 8.5% from the same period in 2010.

Employee compensation and benefit costs for the three months ended June 30, 2011 and 2010 were $2.4 million. There was a decrease due to a reduction in headcount for registered representatives offset by increases in commissions paid based on production in the capital markets and retail operations as well as an increase in health benefits.

Clearing and floor brokerage costs for the three months ended June 30, 2011 were $690,000, a decrease of $3,000 or 0.4% from the same period in 2010 primarily due to the execution of a Fully Disclosed Clearing Agreement with our primary clearing firm in the second quarter of 2010 which reduced our fees for clearing costs and also due to a decrease in volume of trade executions for retail customers and a decrease in execution charges for institutional debt and equity customers.

Professional fees for the three months ended June 30, 2011, were $1.4 million, a decrease of $279,000 or 16.6% from the same period in 2010 primarily due to a decrease in legal fees relating to a dispute with a former employee.

Advertising and promotion expenses for the three months ended June 30, 2011 were $93,000, a decrease of $17,000 or 15.5% from the same period in 2010 due to a decrease in public relation costs.

Communications expense for the three months ended June 30, 2011 was $527,000, a decrease of $93,000 or 15.0% from the same period in 2010 primarily due to a decrease in hosting and communication costs associated with our website.

Occupancy costs for the three months ended June 30, 2011 were $272,000, a decrease of $66,000 or 19.5% from the same period in 2010 due to a decrease in rents in our New York office and a Florida branch.

Other general and administrative expenses for the three months ended June 30, 2011 were $633,000, a decrease of $83,000 or 11.6% from the same period in 2010 due to a decrease in office expense, training, printing, postage, subscriptions, registration fees and transportation costs.

Loss from Siebert’s equity investment in SBS, an entity in which Siebert holds a 49% equity interest, for the three months ended June 30, 2011, was $301,000, compared to income of $516,000 from the same period in 2010 due to SBS participating in fewer senior managed or co-managed transactions. Income from our equity investment in SBS Financial Products Company, LLC, an entity in which we hold a 33.33% equity interest (“SBSFPC”), for the three months ended June 30, 2011, was $10,000 as compared to a loss of $16,000 for the same period in 2010. This income in 2011 was due to the mark to market gain in positions. Income and loss from equity investees is considered to be integral to our operations and material to the results of operations.

The tax provision for the three months ended June 30, 2011 and 2010 was $1,000 and $563,000, respectively. No tax benefit related to the pre-tax loss was recorded for the three months ended June 30, 2011 due to the recording of a full valuation allowance to offset deferred tax assets based on recent losses and the likelihood of realization of such assets. The tax provision for the three months ended June 30, 2010 was due to income before taxes of $1.3 million.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

Total revenues for the six months ended June 30, 2011 were $10.0 million, a decrease of $1.7 million or 14.6% from the same period in 2010.

12

Commission and fee income for the six months ended June 30, 2011 was $7.5 million, a decrease of $2.8 million or 27.6% from the same period in 2010 primarily due to recording $3 million as commission and fee income as part of our negotiations with our primary clearing firm for a three year Fully Disclosed Clearing Agreement in the second quarter of 2010.

Investment banking revenues for the six months ended June 30, 2011 were $1.6 million, an increase of $818,000 or 107.6% from the same period in 2010 due to our participation in more new issues in the equity and debt capital markets.

Trading profits were $903,000 for the six months ended June 30, 2011, an increase of $346,000 or 62.1% from the same period in 2010 due to an increase in trading volume primarily in the debt markets and the addition of debt sales-traders in the first quarter of 2011.

Interest and dividends for the six months ended June 30, 2011 were $36,000, a decrease of $24,000 or 40.0% from the same period in 2010 primarily due to lower cash balances.

Total expenses for the six months ended June 30, 2011 were $12.4 million, a decrease of $1.8 million or 12.5% from the same period in 2010.

Employee compensation and benefit costs for the six months ended June 30, 2011 were $4.8 million, a decrease of $10,000 from the same period in 2010. This decrease was due to decreases and a reduction in headcount for registered representatives offset by an increase in commissions paid based on production in the capital markets and retail operations as well as an increase in health benefits.

Clearing and floor brokerage costs for the six months ended June 30, 2011 were $1.6 million, a decrease of $331,000 or 17.0% from the same period in 2010, primarily due to the execution of a Fully Disclosed Clearing Agreement with our primary clearing firm in the second quarter of 2010 which reduced our fees for clearing costs.

Professional fees for the six months ended June 30, 2011 were $2.8 million, a decrease of $996,000 or 26.1% from the same period in 2010 primarily due to a decrease in legal fees relating to a dispute with a former employee and consulting fees relating to the commission recapture business.

Advertising and promotion expenses for the six months ended June 30, 2011 were $193,000, a decrease of $60,000 or 23.7% from the same period in 2010 primarily due to decreases in production and airing of television commercials and print advertising, brochures and direct mailings to our retail customer base and public relations costs.

Communications expense for the six months ended June 30, 2011, was $1.1 million, a decrease of $185,000 or 14.6% from the same period in 2010 primarily due to a decrease in hosting and communication costs associated with our website.

Occupancy costs for the six months ended June 30, 2011 were $543,000, a decrease of $106,000 or 16.3% from the same period in 2010 due to a decrease in rents in the New York office and a Florida branch.

Other general and administrative expenses for the six months ended June 30, 2011 were $1.3 million, a decrease of $82,000 or 5.9% from the same period in 2010. This decrease was a result of decreases in office expenses, training, insurance, travel and entertainment, transportation and postage costs offset by increases in printing and computer updates.

Loss from Siebert’s equity investment in SBS, an entity in which Siebert holds a 49% equity interest, for the six months ended June 30, 2011, was $1.4 million, compared to income of $1.8 million from the same period in 2010 due to SBS participating in fewer senior managed or co-managed transactions. Loss from our equity investment in SBSFPC, an entity in which we hold a 33.33% equity interest, for the six months ended June 30, 2011, was $11,000 as compared to a loss of

13

$7,000 from the same period in 2010. The losses in 2011 and 2010 were due to the mark to market loss in positions. Income and loss from equity investees is considered to be integral to our operations and material to the results of operations.

The tax provision for the six months ended June 30, 2011 was $12,000 and a tax benefit for the six months ended June 30, 2011 was $232,000. No tax benefit related to the pre-tax loss was recorded for the six months ended June 30, 2011 due to the recording of a full valuation allowance to offset deferred tax assets based on recent losses and the likelihood of realization of such assets. The tax benefit for the six months ended June 30, 2010 was due to our loss before taxes of $644,000.

Liquidity and Capital Resources

Our assets are highly liquid, consisting generally of cash in money market funds. Our total assets at June 30, 2011 were $36.4 million. As of that date, we regarded $23.9 million, or 66%, of total assets as highly liquid.

Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At June 30, 2011, Siebert’s regulatory net capital was $20.4 million, $20.2 million in excess of its minimum capital requirement of $250,000.

On January 22, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. During the six months ended June 30, 2011, 7,155 shares were purchased at an average price of $1.85 per share.

Siebert has entered into a Secured Demand Note Collateral Agreement with SBS under which Siebert is obligated to lend to SBS up to $1.2 million on a subordinated basis Collateralized by cash equivalents of approximately $1.5 million as of June 30, 2011. Amounts pledged by Siebert under the facility are reflected on our balance sheet as “cash equivalents – restricted”. SBS pays Siebert interest on this amount at the rate of 4% per annum. The facility expires on August 31, 2012, at which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customers’ obligations. Siebert regularly monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is exposed to the risk of loss on unsettled customer transactions if customers and other counter parties are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transations as of June 30, 2011.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange of 1934, as amended. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is

14

accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding timely disclosure.

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

15

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various routine lawsuits of a nature deemed to be customary and incidental to our business. In the opinion of management, the ultimate disposition of such actions will not have a material adverse effect on the Company’s financial position or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2010.

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

On January 23, 2008, our Board of Directors authorized the repurchase of up to 300,000 shares of our common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. We purchased 3,228 shares at an average price of $1.81 in the second quarter of 2011.

A summary of our repurchase activity for the three months ended June 30, 2011 is as follows:

Issuer Purchases of Equity Securities

Period	Total Number Of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares That May Yet Be Purchased Under The Plans
April 2011	83	$ 1.97	95,595	204,405
May 2011	233	$ 1.95	95,828	204,172
June 2011	2,912	$ 1.79	98,740	201,260
Total	3,228	$ 1.81	98,740	201,260

All of the purchases were made in open market transactions.

16

ITEM 6. Exhibits

| 31.1 | Certification of Muriel F. Siebert pursuant to Exchange Act Rules
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
| --- | --- |
| 31.2 | Certification of Joseph M. Ramos, Jr. pursuant to Exchange Act Rule
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
| 32.1 | Certification of Muriel F. Siebert of Periodic Financial Report under
Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of Joseph M. Ramos, Jr. of Periodic Financial Report
under Section 906 of the Sarbanes-Oxley Act of 2002. |

17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| SIEBERT
FINANCIAL CORP. | |
| --- | --- |
| By: | /s/ Muriel
F. Siebert |
| | Muriel F.
Siebert |
| | Chairwoman
and President |
| | (principal
executive officer) |
| Dated:
August 15, 2011 | |
| By: | /s/ Joseph
M. Ramos, Jr. |
| | Joseph M.
Ramos, Jr. |
| | Executive
Vice President and Chief Financial Officer |
| | (principal
financial and accounting officer) |
| Dated:
August 15, 2011 | |

18