Brokerage Services
The Broker-Dealer Subsidiaries are each registered as a broker-dealer with the
SEC and are licensed in all 50 states, the District of Columbia and Puerto Rico.
The Broker-Dealer Subsidiaries are also members of the FINRA, the SIPC, the
Municipal Securities Rulemaking Board (“MSRB”) and the NFA.
Investment executives are given broad discretion to structure their own practices
and to specialize in different areas of the securities market subject to supervisory
procedures and applicable rules and regulations. In addition, investment executives
have direct access to research materials, management, traders, and all levels
of support personnel.
The brokerage services provided by our registered representatives and investment
advisors include execution of purchases and sales of stocks, options, bonds,
mutual funds, annuities and various other securities for individual and institutional
customers. In fiscal year 2015, stocks and options represented approximately
47% of our business, bonds represented approximately 3% of our business, and
mutual funds, annuities and various other securities made up approximately 19%
of our business. The percentage of each type of business varies over time as
the investment preferences of our customers change based on market conditions.
Typically, our Broker-Dealer Subsidiaries do not recommend particular securities
to customers. Rather, recommendations to customers are determined by individual
investment executives based upon their own research and analysis, subject to
applicable FINRA customer suitability standards. Most investment executives
perform fundamental (as opposed to technical) analysis. Solicitations are made
by telephone, email, seminars or newsletters.
Our Broker-Dealer Subsidiaries generally act as an agent in executing customer
orders to buy or sell listed and over-the-counter securities in which we do
not make a market, and charge commissions based on the services we provide to
our customers. In executing customer orders to buy or sell a security in which
we make a market, we may sell to, or purchase from, customers at a price that
is substantially equal to the current inter-dealer market price plus or minus
a mark-up or mark-down. We may also act as agent and execute a customer's purchase
or sale order with another broker-dealer market-maker at the best inter-dealer
market price available and charge a commission. We believe our mark-ups, mark-downs
and commissions are competitive based on the services we provide to our customers.
The commission charges and mark-ups or mark-downs must be in compliance with
guidelines established by FINRA. In order to increase revenues generated from
these activities, we continuously seek to hire additional registered representatives
and work with our current registered representatives to increase their productivity.
Broker Dealer Trading
Our Broker-Dealer Subsidiaries buy and may maintain inventories in equity securities
as “market-makers” for sale of those securities to other dealers
and to our customers. We may also maintain inventories in corporate, government
and municipal debt securities for sale to customers. The level of our market-making
trading activities will increase or decrease depending on the relative strength
or weakness of the broader markets. As of September 30, 2015, we made markets
in approximately 3,800 micro and small-cap NASDAQ and other exchange-listed
and over the counter quoted stocks. We anticipate that we will continue market-making
trading activity in the future, which may include securities of companies for
which we managed or co-managed a public offering.
Our trading departments require a commitment of capital. Most principal transactions
place our capital at risk. Profits and losses are dependent upon the skill of
the traders, price movements, trading activity and the size of inventories.
Since our trading activities occasionally may involve speculative and thinly
capitalized stocks, including stabilizing the market for securities which we
have underwritten, we impose position limits to reduce our potential for loss.
In executing customer orders to buy or sell a security in which we make a market,
we may sell to, or purchase from, customers at a price that is substantially
equal to the current inter-dealer market price plus or minus a mark-up or mark-down.
We may also act as agent and execute a customer's purchase or sale order with
another broker-dealer market-maker at the best inter-dealer market price available
and charge a commission. We believe our mark-ups, mark-downs and commissions
are competitive based on various factors including the services we provide to
our customers.
Investment Banking
We provide corporate finance and investment banking services, including underwriting
the sale of securities to the public in both initial and follow-on offering
and arranging for the private placement of securities with investors. Our corporate
finance operations provide a broad range of financial and corporate advisory
services, including mergers and acquisitions, project financing, capital structure
and specific financing opportunities. Corporate finance revenues are generated
from capital raising transactions of equity and debt securities and fees for
strategic advisory services.
Investment Advisory Services
NAM, a wholly-owned subsidiary of the Company and an SEC-registered investment
advisor, offers advisory services described below to clients in various programs.
Under such customized engagements, clients authorize NAM to purchase and sell
securities on a discretionary or non-discretionary basis (depending on the program)
pursuant to investment objectives chosen by the client. The client’s Investment
Advisory Representative (“IAR”) obtains the essential facts from
the client, and assists in determining the appropriate program. The IAR provides
ongoing investment advice and management that is tailored to the individual
needs of the client through a review of the investment profile and objectives
of the client. Depending on the program selected and the client’s profile
and objectives, the types of securities that may be purchased or sold include
mutual funds, ETFs, equities, options, fixed income securities, structured notes,
interests in partnerships such as real estate, oil and gas, as well as management
of variable annuity sub-accounts. Clients generally may impose reasonable restrictions
on investing in certain securities or groups of securities.