UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

_____________

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

Commission File Number: 333-43664

INVESTORS CAPITAL HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

DELAWARE	04-3284631
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

230 Broadway E.

Lynnfield, Massachusetts 01940

(Address of principal executive offices)

(781) 593-8565

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 [  ]

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]      No [  ]

Indicate by check mark whether the registrant is an 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).

Large accelerated filer  [  ]	Accelerated filer  [  ]
Non-accelerated filer  [  ]	Smaller reporting company  [X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ]      No [X]

There were 7,191,296 shares outstanding of the issuer’s common stock, par value $.01 per share, as of November 7, 2011.

Table of Contents

PART I

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FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

ITEM 4. CONTROLS AND PROCEDURES

PART II

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OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 6. EXHIBITS

SIGNATURES

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PART I        FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30, 2011			March 31, 2011
Assets
Current Assets
Cash and cash equivalents	$	3,844,370		$	4,587,195
Deposit with clearing organization, restricted		175,000			175,000
Accounts receivable		4,078,923			6,798,638
Note receivable -  (current)		7,071			108,169
Loans receivable from registered representatives (current), net of allowance		715,786			721,664
Prepaid income taxes		350,988			157,880
Securities owned at fair value		18,639			17,384
Investments		50,000			50,000
Prepaid expenses		554,447			1,073,969
		9,795,224			13,689,899
Property and equipment, net		491,991			597,735
Long Term Investments
Loans receivable from registered representatives		840,981			616,583
Note receivable		495,000			495,000
Investments		196,110			214,555
Non-qualified deferred compensation investment		1,048,480			1,089,572
Cash surrender value life insurance policies		109,688			680,429
		2,690,259			3,096,139
Other Assets
Deferred tax asset, net		1,102,459			1,218,773
Capitalized software, net		159,935			132,131
Other assets		15,308			15,808
		1,277,702			1,366,712
TOTAL ASSETS	$	14,255,176		$	18,750,485
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	837,068		$	1,109,400
Accrued expenses		1,502,354			2,078,705
Commissions payable		2,533,677			3,246,898
Notes payable		587,582			1,527,969
Unearned revenues		214,557			113,486
Securities sold, not yet purchased, at fair value		21,400			0
		5,696,638			8,076,458
Long-Term Liabilities
Non-qualified deferred compensation plan		1,146,018			1,176,096
		1,146,018			1,176,096
Total liabilities		6,842,656			9,252,554
Stockholders' Equity:
Common stock, $.01 par value, 10,000,000 shares authorized;
6,617,400 ssued and 6,613,515 outstanding at September 30, 2011;
6,618,259 issued and 6,614,374 outstanding at March 31, 2011		66,174			66,183
Additional paid-in capital		12,347,317			12,279,380
Accumulated deficit		(5,007,286	)		(2,874,214	)
Less: Treasury stock, 3,885 shares at cost		(30,135	)		(30,135	)
Accumulated other comprehensive income		36,450			56,717
Total stockholders' equity		7,412,520			9,497,931
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	14,255,176		$	18,750,485

See Notes to Condensed Consolidated Financial Statements

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)

	2011			2010
Revenue:
Commissions	$	15,658,586		$	16,234,403
Advisory fees		4,083,036			3,571,621
Other fee income		108,570			143,364
Other revenue		319,721			481,177
Total revenue		20,169,913			20,430,565
Expenses:
Commissions and advisory fees		16,231,516			16,098,685
Compensation and benefits		2,659,815			2,040,010
Regulatory, legal and professional services		1,009,451			1,315,436
Brokerage, clearing and exchange fees		519,511			497,837
Technology and communications		304,917			308,038
Marketing and promotion		336,371			302,805
Occupancy and equipment		222,829			227,547
Other administrative		266,875			256,052
Interest		8,997			4,241
Total operating expenses		21,560,282			21,050,651
Operating loss		(1,390,369	)		(620,086	)
Provision (benefit) for income taxes		(513,007	)		23,595
Net loss	$	(877,362	)	$	(643,681	)
Basic and diluted net loss per share	$	(0.13	)	$	(0.10	)
Shares used in basic and diluted per share calculations		6,590,779			6,523,675

See Notes to Condensed Consolidated Financial Statements

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

SIX MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)

	2011			2010
Revenue:
Commissions	$	32,575,093		$	32,911,920
Advisory fees		8,266,088			7,303,774
Other fee income		211,963			333,548
Other revenue		559,494			823,297
Total revenue		41,612,638			41,372,539
Expenses:
Commissions and advisory fees		33,326,157			32,622,914
Compensation and benefits		4,762,840			4,049,078
Regulatory, legal and professional services		2,285,240			2,120,309
Brokerage, clearing and exchange fees		1,024,971			1,089,024
Technology and communications		673,748			603,412
Marketing and promotion		643,389			637,032
Occupancy and equipment		458,240			455,840
Other administrative		627,646			440,904
Interest		16,941			11,114
Total operating expenses		43,819,172			42,029,627
Operating loss		(2,206,534	)		(657,088	)
Provision (benefit) for income taxes		(73,460	)		(2,616	)
Net loss	$	(2,133,074	)	$	(654,472	)
Basic and diluted net loss per share	$	(0.32	)	$	(0.10	)
Shares used in basic and diluted per share calculations		6,589,013			6,518,426

See Notes to Condensed Consolidated Financial Statements

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)

	2011			2010
Cash flows from operating activities:
Net loss	$	(2,133,074	)	$	(654,472	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization		204,305			208,190
Valuation allowance income taxes		24,008			0
Deferred taxes		92,306			(473,767	)
Stock-based compensation		67,927			88,374
Transfer of beneficial interest to former Chairman		568,095			0
Unrealized loss in marketable securities		69			977
Non-qualified deferred compensation investment		17,587			21,863
Market adjustment cash surrender value life insurance policy		21,088			1,726
Charge to commission expense (forgivable loans)		91,731			70,118
Allowance for bad debt expense		73,263			0
Change in operating assets and liabilities:
Accounts receivable		2,719,716			1,303,576
Prepaid expenses and other		513,449			126,601
Loans receivable from registered representatives		(383,514	)		(481,304	)
Income taxes		(193,108	)		579,194
Accounts payable		(272,332	)		374,777
Securities, net		20,076			26,407
Accrued expenses		(576,351	)		80,629
Commissions payable		(713,221	)		(190,280	)
Unearned revenues		101,071			98,016
Net cash provided by operating activities		243,091			1,180,625
Cash flows from investing activities:
Acquisition of property and equipment		(66,113	)		(30,850	)
Cash surrender value life insurance policies		(18,442	)		(36,443	)
Payments received on note receivable		101,098			106,299
Purchase of investments		(1,822	)		(796	)
Capital software expenditures		(60,250	)		0
Net cash (used) in provided by investing activities		(45,529	)		38,210
Cash flows from financing activities:
Payments on note payable		(940,387	)		(789,296	)
Net cash used in financing activities		(940,387	)		(789,296	)
Net increase (decrease) in cash and cash equivalents		(742,825	)		429,539
Cash and cash equivalents, beginning of period		4,587,195			5,812,865
Cash and cash equivalents, end of period	$	3,844,370		$	6,242,404
Supplemental disclosures of cash flow information:
Interest paid	$	16,941		$	11,114
Income taxes paid	$	-		$	37,000

See Notes to Condensed Consolidated Financial Statements.

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011

(UNAUDITED)

NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Incorporated in 1995 under Massachusetts law and redomesticated under Delaware law in November 2007, Investors Capital Holdings, Ltd. ("ICH") is a holding company whose wholly-owned subsidiaries assist a nationwide network of independent registered representatives ("representatives") in providing a diversified line of financial services to the public including securities brokerage, investment advice, asset management, financial planning and insurance. Our subsidiaries include the following:

● Investors Capital Corporation ("ICC") is duly registered under the Securities Exchange Act of 1934 (the “Exchange Act”), the Investment Advisers Act of 1940 and applicable state law to provide broker-dealer and investment advisory services nationwide.  ICC’s national network of independent financial representatives is licensed to provide these services through ICC under the regulatory purview of the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”) and state securities regulators.  ICC executes and clears its public customer accounts on a fully disclosed basis through Pershing, LLC (“Pershing”).  ICC, doing business as Investors Capital Advisors (“ICA”), also provides investment advisory services.

● ICC Insurance Agency, Inc. facilitates the sale of insurance and annuities by our representatives.

● Investors Capital Holdings Securities Corporation ("ICH Securities") holds cash, cash equivalents, interest income and dividend income for ICH.

INTERIM FINANCIAL REPORTING:

The accompanying interim unaudited condensed consolidated financial statements of Investors Capital Holdings, Ltd. and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, these financial statements contain all of the adjustments necessary for a fair presentation of the results of the interim periods presented. Operating results for the three and six month periods ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending March 31, 2012. The balance sheet at March 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by US GAAP for complete financial statements. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended March 31, 2011 filed with the SEC.

USE OF ESTIMATES AND ASSUMPTIONS:

The preparation of the consolidated 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, if any, at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Those estimates deal with such matters as the valuation of securities and other assets, revenue recognition, legal reserves and allowance for doubtful accounts receivable and may involve a particularly high degree of judgment and complexity.  Actual results could differ from those estimates.

RECLASSIFICATIONS:

Certain amounts in 2011 were reclassified to provide comparison with 2012 classifications.  These reclassifications had no effect on previously reported results of operations.

SIGNIFICANT ACCOUNTING POLICIES:

Revenue recognition

The Company’s revenue recognition policies are summarized below.

Mutual Funds/Variable Annuities.  Revenue from the sale of mutual funds and variable annuities is recognized as of the date the check and application is accepted by the investment company.

Brokerage.  The Company earns commissions through stock purchase and sale transactions, mutual fund purchases, government and corporate bonds transactions, fee-based managed accounts and ticket charges. The Company also earns revenue in the form of 12b-1 fees and interest on account balances. The earnings process is substantially complete at trade date in accordance with the rules of FINRA and the SEC.

The Company receives credit for clearing charge adjustments that are netted against any clearing charges the Company may incur for the period. These adjustments are recognized as income in the period received unless otherwise noted by the clearing Company.

Unrealized gains and losses are recorded at the time that the Company reconciles its trading positions with the market value. The unrealized gains or losses are adjusted to market until the position is settled or the trade is cancelled.

Advisory Fees.  Our managed accounts advisory fees are based on the amount of assets managed per agreement negotiated between our independent representatives and their clients.  These revenues are recorded quarterly as and when billed based on the fair market value of assets managed during the quarter.  Any portion remaining uncollected due to account adjustments after account rebalancing is charged against earnings at quarter end.

Administration Fees.  Administration fees charged to registered representatives for services rendered to the Company’s representatives respecting annual FINRA license renewals and Error and Omissions (“E&O”) insurance are recognized as revenue upon registration of the representative with FINRA and listing of the registered representative with the E&O insurance carrier. The funds received from the registered representative are initially recorded as unearned revenue. The amounts collected in excess of the E & O insurance premium and/or fees due FINRA, if any, are recognized as revenue.  Fees collected to maintain books and records are deferred and recognized ratably throughout the year.

Other Revenue.  Revenue from marketing associated with product sales is recognized quarterly based on production levels.  Marketing event revenues are recognized at the commencement of each event offset by its costs.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limits for cash and cash equivalents not covered by the Depositors Insurance Fund of Massachusetts. Cash and cash equivalents held at our clearing broker-dealer is fully insured up to $500,000.

Accounts Receivable – Allowance for Doubtful Accounts

The Company’s policies for determining whether a receivable is considered uncollectible are as follows:

Trade Receivables.As prescribed by the SEC, trade receivables usually settle within three days. If a trade error occurs, the Company pursues remedies to collect on the trade error. The Company does not record a receivable resulting from a trade error that is in litigation or whose outcome is otherwise not reasonably determinable. In such a case, the Company applies any proceeds from settlements or insurance against any trade losses incurred.

Loans to representatives.  Management performs periodic evaluations and provides an allowance for bad debt based on the assessment of specifically identified unsecured receivables and other factors, including the representative's payment history and production levels. Once it is determined that it is both probable that a loan has been impaired, typically due to the termination of the relationship, and the amount of loss can reasonably be estimated, the portion of the loan balance estimated to be uncollectible is so classified.  See “Note 2, Loans to Registered Representatives”.

Valuation of Securities and Other Assets

Substantially all financial instruments are reflected in the consolidated financial statements at fair value or amounts that approximate fair value. These include cash; cash equivalents; securities purchased under agreements to resell; deposits with clearing organizations; securities owned; and securities sold but not yet purchased. Certain financial instruments are classified as trading, available for sale, and held to maturity. The realized gains and losses are recorded in the income statement in the period in which the transactions occurred. The related unrealized gains and losses are reflected in other comprehensive income depending on the underlying purpose of the instrument. The Company records its private equity holdings at cost as the Company does not exercise significant influence over these equity investments.

The Company has an available for sale investment for which it reports as accumulated other comprehensive income on the balance sheet. The Company had an unrealized loss of $20,267 for the six months ended September 30, 2011 and accumulated other comprehensive income of $36,450 as of September 30, 2011.  The Company had an unrealized gain of $26,884 for the fiscal year ended March 31, 2011 and accumulated other comprehensive income of $56,717 as of March 31, 2011.

Where available, the Company uses prices from independent sources such as listed market prices, or broker or dealer price quotations. Fair values for certain derivative contracts are derived from pricing models that consider current market and contractual prices for the underlying financial instruments or commodities, as well as time value and yield curve or volatility factors underlying the positions. In addition, even where the value of a security is derived from an independent market price or broker or dealer quote, certain assumptions may be required to determine the fair value. For instance, the Company generally assumes that the size of positions in securities that the Company holds would not be large enough to affect the quoted price of the securities if the Company were to sell them, and that any such sale would happen in an orderly manner. However, the actual value realized upon disposition could be different from the current carrying value.

Internal Use of Software

The costs of internally developed software that qualify for capitalization are capitalized as fixed assets and subsequently amortized over the estimated useful life of the software, which is generally three years. The costs of internally developed software are included in fixed assets at the point at which the conceptual formulation, design and testing of possible software project alternatives are complete and management authorizes and commits to funding the project. The Company does not capitalize projects where it believes that the future economic benefits are less than probable.

Income Taxes

The Company uses the asset and liability method to account for income taxes, which requires recognition of deferred tax assets, subject to valuation allowances, and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income or loss in the period that includes the enactment date.

The Company, in preparing its income tax provision, bases the calculation on its annual projection of income or loss from operations. The annual projection is reconciled on a quarterly basis to changes in estimates, and at year end the calculation is based on the reported results of operations. Certain expenses are not deductible for tax purposes, creating permanent differences that increase or decrease the income tax provision and effective income tax rate. The Company has adjusted its income tax provision calculation for permanent differences which resulted in an increase to the current tax provision and its corresponding impact on the effective tax rate.  The total amount of the permanent differences was approximately $1.39 million which consisted of non-deductible regulatory assessments, non-deductible costs associated with our registration statement filing and non-deductible executive compensation.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has recorded a valuation allowance against the deferred tax assets in the current period. Management believes it is more likely than not that the remaining deferred tax assets will be realized.

The Company reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. Reserves related to uncertain tax positions are based on a determination of whether and how much of a tax benefit taken in our tax filings or positions is more likely than not to be realized, assuming that the matter in question will be raised by the tax authorities. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense. We believe appropriate provisions for outstanding issues have been made.

Recent Accounting Pronouncements

Fair Value Measurement.  In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820).  This updated accounting guidance establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with  USGAAP and International Financial Reporting Standards (IFRS).  This guidance includes amendments that clarify the intent about the application of existing fair value measurements and disclosures, while other amendments change a principle or requirement for fair value measurements or disclosures. This guidance is effective for interim and annual periods beginning after December 15, 2011.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

Comprehensive Income. In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity. Instead, the new rule will require an entity to present net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for interim and annual periods beginning after December 15, 2011. The Company will adopt this new rule by fiscal year end March 31, 2012. While the adoption of this new guidance will change the presentation of comprehensive income, it will not have an impact on the Company’s results of operations or financial position.

Subsequent Events

The Company has evaluated subsequent events through the date the financial statements were available to be filed.  There were no material subsequent events requiring adjustment, however see Note 12” Subsequent Events” for disclosure in these financial statements.

NOTE 2 – LOANS TO REGISTERED REPRESENTATIVES

ICC has granted loans to certain registered representatives with the stipulation that the loans will be forgiven if the representatives remain licensed with the Company for an agreed upon period of time, generally one to five years, and/or meet specified performance goals.  Upon forgiveness, the loans are charged to commission expense for financial reporting purposes. Loans charged to commission expense totaled $91,731 and $70,118 for the quarters ended September 30, 2011 and 2010, respectively.

Some loans to registered representatives are not subject to a forgiveness contingency.   These loans, as well as loans that have failed the forgiveness contingency, are subject to repayment to the Company by deduction of a portion of the representatives’ commission payouts throughout the commission cycle until the loans are repaid.

Interest charged on these loans to representatives ranges from 3% to 11.25% annually.  Included in loans receivable  from registered representatives is a $417,000 loan receivable from a registered representative in connection with a regulatory matter settled with the Massachusetts Securities Division on October 27, 2010.  This representative has agreed to reimburse the Company for certain amounts paid by the Company with respect to this regulatory matter.

Loans receivable from registered representatives are as follows:

	September 30,			March 31,
	2011			2011
Forgiveable	$	1,024,174		$	682,762
Other loans		662,963			712,590
Less: allowance		(130,368	)		(57,105	)
Total loans	$	1,556,769		$	1,338,247

NOTE 3 – NOTE RECEIVABLE

On October 24, 2005, the Company entered into an agreement (the “Transition Agreement”) with Dividend Growth Advisors, LLC (“DGA”).  The Company agreed to terminate its Investment Advisory Agreement with Eastern Point Advisors Funds Trust (the “Trust”) effective October 18, 2005 and to permit the appointment by the Trust of DGA to succeed the Company as the Trust’s investment advisor. Under the terms of the Transition Agreement and an associated promissory note (the “Note”), the receivable owed by the Funds to the Company was assigned to DGA and DGA agreed to pay the Company an amount equal to the total of all fees that the Company had waived or remitted to a fund in the Trust through October 18, 2005.

The Note provided for a principal amount of $747,617, quarterly payments of interest accruing thereon at 5.5% and full repayment on October 31, 2010.  The Note was modified, effective March 3, 2010 to extend maturity by four years to October 31, 2014 and require annual principal payments of $100,000.  Total amount outstanding as of September 30, 2011 and March 31, 2011 was $502,071 and $603,169, respectively.   Prepayments are permitted without penalty. The interest accrued on this note was $7,071 and $8,169, respectively, at September 30, 2011 and March 31, 2011.

NOTE 4 – FAIR VALUE MEASUREMENTS

The Company’s assessment of the significance of a particular input to the fair value measurement of an asset or liability in its entirety requires judgment and considers factors specific to the asset or liability.  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach are used to measure fair value.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

● Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities the Company have the ability to access.

● Level 2 - Inputs are inputs (other than quoted prices included within Level 1) that are observable for the asset or liability, either directly or indirectly.

● Level 3 - Inputs include unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs should be developed based on the best information available in the circumstances and may include the Company’s own data.)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.  The following table presents the Company's fair value hierarchy for those financial assets and liabilities measured at fair value as of September 30, 2011:

	Fair Value Measurements on Recurring Basis
	Total Fair Value of Asset or Liability		Quotes Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Input (Level 2)		Significant Unobservable Inputs (Level 3)
Investments	$	196,110	$	196,110	$	-	$	-
Mutual Funds(1)		3,224		3,224		0		0
Securities owned at fair value		18,639		18,639		0		0
Total assets	$	217,973	$	217,973	$	-	$	-
Securities sold, not yet purchased at fair value	$	21,400	$	21,400	$	-	$	-
Total liabilities	$	21,400	$	21,400	$	-	$	-

The following table presents the Company's fair value hierarchy for those financial assets and liabilities measured at fair value as of March 31, 2011:

	Fair Value Measurements on Recurring Basis
	Total Fair Value of Asset or Liability		Quotes Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Input (Level 2)		Significant Unobservable Inputs (Level 3)
Investments	$	214,555	$	214,555	$	0	$	0
Mutual funds(1)		10,823		10,823		0		0
Securities owned at fair value		17,384		17,384		0		0
Total assets	$	242,762	$	242,762	$	0	$	0
Securities sold ,not yet purchased at fair value	$	-	$	-	$	-	$	-
Total liabilities	$	-	$	-	$	-	$	-
(1) Amount labeled as Mutual funds are included in Non-qualified Deferred compensation investment on the condensed consolidated balance sheet.

NOTE 5 – SHORT –TERM INVESTMENTS

As of September 30, 2011, the Company owned investments classified as held to maturity through December 31, 2011.  These investments are presented at face value as follows:

Purchase Date	Purchase Price	Description	Face Value	Interest Date
12/1/2009	$50,000	Insight Real Estate Series 2007-A Secured Debentures	$50,000	Quarterly

NOTE 6 – LITIGATION AND REGULATORY MATTERS

In the ordinary course of business, the Company and its subsidiaries are routinely defendants in or parties to pending and threatened arbitrations and other legal actions and proceedings brought on behalf of various claimants, some of which seek material and/or indeterminable amounts. Certain of these actions and proceedings are based on alleged violations of securities, consumer protection, labor and other laws and may involve claims for substantial monetary damages asserted against the Company and its subsidiaries.  Also, the Company and its subsidiaries are subject to regulatory examinations, information gathering requests, inquiries, investigations and formal administrative proceedings that may result in fines or other negative impact on the Company.  ICC, as a duly registered broker/dealer and investment advisor, is subject to regulation by the SEC, FINRA, NYSE-Amex, state securities regulators and other state securities regulators.

The Company maintains Errors and Omissions ("E&O") insurance to protect itself from potential damages and/or legal costs associated with certain litigation and arbitration proceedings and, as a result, in the majority of cases the Company’s exposure is limited to $100,000 in any one case, subject to policy limitations and exclusions.  The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company’s exposure is usually limited to a $350,000 deductible per case, subject to policy limitations and exclusions.

The Company recognizes a legal liability when management believes it is probable that a liability has been incurred and the amount can be reasonably estimated.  Conclusions on the likelihood that a liability has been incurred and estimates as to the amount of the liability are based on consultations with the General Counsel of the broker-dealer who, when situations warrant, may engage and consult external counsel to assist with the evaluation and handle certain matters.  Legal fees for defense costs are expensed as incurred and classified as professional services within the consolidated statements of income.

As of September 30, 2011 and March 31, 2011, the Company had accrued expenses of approximately $1,355,000 and $1,651,000, respectively, in legal fees and estimated probable settlement costs relating to the Company’s defense in various legal matters.  It is possible that some of the matters could require the Company to pay damages or make other payments or establish accruals in amounts that could not be estimated and/or could exceed those accrued as of September 30, 2011.  Key components of both the September 30, 2011 and March 31, 2011 accrual included (i) estimated settlements and claims arising from alleged poor performance of certain real estate investments trusts (“REITs”) and oil and gas limited partnerships that have experienced bankruptcy or other financial difficulties during or in connection with the recent global liquidity crisis and (ii) regulatory assessments.

NOTE 7 – STOCK BASED COMPENSATION

The Company periodically issues common stock to employees, directors, officers, representatives and other key individuals in accordance with the provisions of the shareholder approved equity compensation plans. The Company measures and recognizes compensation expense for all share-based awards made to representatives, officers, employees and directors based on estimated fair values.

Stock Awards

Shares of stock granted under Company’s equity incentive plans (the “Equity Plans”) as of September 30, 2011 have been either fully vested at date of grant or subject to vesting over time periods varying from one to five years after the date of grant, unvested shares being subject to forfeiture in the event of termination of the grantee’s relationship with the Company, other than for death or disability.  The compensation cost associated with these stock grants is recognized over the vesting period of the shares and is calculated as the market value of the shares on the date of grant.  Stock grants have been recorded as deferred compensation, which is a component of paid-in capital within stockholders’ equity on the Company’s Condensed Consolidated Balance Sheets.

The following activity occurred during the three months ended September 30, 2011:

	Shares			Weighted Ave Stock Price		Weighted Average Vested Life	Fair Value
Non-vested at July 1, 2011		28,332		$	3.70	1.89 years	$	104,828
Granted		0		$	0.00			0
Vested		(5,425	)	$	3.55			(19,259	)
Canceled		(215	)	$	2.65			(570	)
Non-vested at September 30, 2011		22,692		$	3.75	1.72 years	$	85,095

The following activity occurred during the six months ended September 30, 2011:

	Shares			Weighted Ave Stock Price		Weighted Average Vested Life	Fair Value
Non-vested at April 1, 2011		35,891		$	3.72	1.91 years	$	133,515
Granted		0		$	0.00			0
Vested		(12,341	)	$	3.71			(45,785	)
Canceled		(858	)	$	3.18			(2,728	)
Non-vested at September 30, 2011		22,692		$	3.75	1.72 years	$	85,095

The Company’s net loss for the three months ended September 30, 2011 includes no compensation costs related to the Company’s grants of restricted stock to executives and employees and $0.02 million for grants to independent representatives under the Plans.

The Company’s net loss for the six months ended September 30, 2011 includes $0.03 million of compensation costs related to the Company’s grants of restricted stock to executives and employees and $0.04 million for grants to independent representatives under the Plans.

The following activity occurred during the three months ended September 30, 2010:

	Shares			Weighted Ave Stock Price		Weighted Average Vested Life	Fair Value
Non-vested at July 1, 2010		49,377		$	3.47	1.47 years	$	171,338
Granted		30,000		$	4.13			123,900
Vested		(11,921	)	$	3.62			(43,154	)
Canceled		0		$	0.00			0
Non-vested at September 30, 2010		67,456		$	3.73	2.06 years	$	251,611

The following activity occurred during the six months ended September 30, 2010:

	Shares			Weighted Ave Stock Price		Weighted Average Vested Life	Fair Value
Non-vested at April 1, 2010		62,863		$	3.50	1.91 years	$	220,021
Granted		30,000		$	4.13			123,900
Vested		(24,619	)	$	3.66			(90,106	)
Canceled		(788	)	$	2.76			(2,175	)
Non-vested at September 30, 2010		67,456		$	3.73	2.06 years	$	251,611

The Company’s net loss for the three months ended September 30, 2010 includes $0.03 million of compensation costs related to the Company’s grants of restricted stock to executives and employees and $0.02 million for grants to independent representatives under the Plans.

The Company’s net loss for the six months ended September 30, 2010 includes $0.06 million of compensation costs related to the Company’s grants of restricted stock to executives and employees and $0.03 million for grants to independent representatives under the Plans.

Stock Option Grants

The following table summarizes information regarding the Company's employee and director fixed stock options as of September 30, 2011 and, 2010:

Employees, Director and Officers	2011				2010
Fixed Options			Weighted-Average				Weighted-Average
	Shares		Exercise Price		Shares		Exercise Price
Outstanding at beginning of year		150,000	$	1.00		150,000	$	1.00
Granted		0				0
Forfeited		0				0
Exercised		0				0
Reclassified(non-employee)		0				0
Outstanding at quarter end		150,000	$	1.00		150,000	$	1.00
Options exercisable at quarter-end		150,000				150,000
Weighted-average fair value of
options granted during the year		-				-

The intrinsic value of the stock options was $777,000 at September 30, 2011 and $622,500 at September 30, 2010.

The following table summarizes further information about employee and Directors' fixed stock options outstanding as of September 30, 2011:

Options Outstanding		Options Exercisable
		Weighted-Average
Range Of	Number	Remaining		Number	Weighted-Average
Exercise Prices	Outstanding	Contractual Life	Exercise Price	Exercisable	Exercise Price
$1.00	150,000	No Stated Maturity	$1.00	150,000	$1.00

NOTE 8 – NON-QUALIFIED DEFERRED COMPENSATION PLAN

Effective December 2007, the Company established the Investors Capital Holdings, Ltd. Deferred Compensation Plan (the “NQ Plan”) as well as a Rabbi Trust Agreement for this plan.  ICC is the NQ Plan’s sponsor.  The unfunded NQ Plan enables eligible ICC Representatives to elect to defer a portion of earned commissions, as defined by the NQ Plan.  The total amount of deferred compensation was $79,077 and $182,233 for the three and six months ended September 30, 2011 and $66,695 and $144,498 for the three and six months ended 2010, respectively.

NOTE 9 – LINE OF CREDIT

The Company has a line of credit (“Line”) with maximum borrowings of $1,000,000 at the Bank’s base lending rate (5.00% per year as of September 30, 2011). The Line became effective on November 22, 2010, and is subject to annual renewal and contains a customary minimum debt service covenant. The Line has not yet been used, therefore no balance is outstanding at September 30, 2011.

NOTE 10 – SEGMENT INFORMATION

Operating segments are defined as components of a business about which separate financial information is available that is regularly evaluated by management in deciding how to allocate resources and in assessing performance. The Company evaluates performance based on profit and loss from operations before income taxes not including nonrecurring gains and losses.

 The Company's reportable operating segments are (i) broker/dealer and related services offered through ICC and (ii) asset management (investment advisory) services offered through ICC, doing business as ICA. The segments are strategic business units that are managed separately. They operate under different regulatory systems, provide different services and require distinct marketing strategies and varied technological and operational support. They also have differing revenue models; ICC earns transactional commissions and various fees in connection with the brokerage of securities for its customers, whereas ICA generates recurring revenue from fees that are based on the value of assets under management.

The Company accounts for inter-segment services and transfers as if the services or transfers were to third parties, that is, at current market prices.  In presenting segment data, all corporate overhead items are allocated to the segments, and inter-segment revenue, expense, receivables and payables are eliminated. Currently it is impractical to report segment information using geographical concentration.

Assets are allocated among ICH and its subsidiaries based upon legal ownership and the services provided. Total period-end assets are presented on a stand-alone basis, i.e., without inter-company eliminations. The Company does not allocate income taxes or unusual items to segments.  Corporate items and eliminations are presented in the following table for the purpose of reconciling the stand-alone asset amounts to total consolidated assets.

Currently, management allocates all expenses separately to the parent and ICC, including allocation of costs associated with shared personnel, based upon time studies and a determination of which entities are the beneficiaries of the services rendered by the personnel.  Within ICC, expenses are further allocated between the two segments, ICC and ICA as follows:  overhead expenses pro rata to revenue, direct full-time and time-shared employee costs based on the segments being served, and other personnel-related expenses pro rata to head count.

Effective July 1, 2009, ICC reimburses ICH, in the form of a management fee, for ICH-incurred overhead expenses that are necessary for ICC to effectively conduct its operations.  This overhead primarily is in the nature of salaries and professional and legal fees incurred to obtain such services as audit engagements, legal advice, and industry expertise.

The Company periodically reviews the effect that these agreement described above may have on the Company’s net capital.

Segment reporting is as follows for the quarter ended:

	September 30,
	2011			2010
Non-interest revenues:
ICC brokerage services	$	15,933,823		$	16,752,116
ICA asset management services		4,143,816			3,608,509
ICH gain (loss) on investment		(6,870	)		(13,171	)
Total	$	20,070,769		$	20,347,454
Interest and dividend income, net:
ICC	$	97,262		$	82,250
ICH		1,878			848
ICH Securities		4			13
Total	$	99,144		$	83,111
Depreciation and amortization expenses:
ICC brokerage services	$	94,671		$	102,297
ICA asset management services		1,167			1,167
Total	$	95,838		$	103,464
Operating income (loss):
ICC brokerage services	$	(922,662	)	$	(201,916	)
ICA asset management services		398,117			(325,376	)
ICH		(865,824	)		(92,807	)
ICH Securities		0			13
Total	$	(1,390,369	)	$	(620,086	)

Segment reporting is as follows for the six months ended:

	September 30,
	2011			2010
Non-interest revenues:
ICC brokerage services	$	33,053,900		$	33,824,728
ICA asset management services		8,373,887			7,384,944
ICH gain (loss) on investment	$	(17,587	)	$	(21,863	)
Total	$	41,410,200		$	41,187,809
Interest and dividend income, net:
ICC	$	200,488		$	183,796
ICH		1,933			908
ICH Securities		17			26
Total	$	202,438		$	184,730
Depreciation and amortization expenses:
ICC brokerage services	$	203,138		$	207,024
ICA asset management services		1,167			1,167
Total	$	204,305		$	208,191
Operating income (loss):
ICC brokerage services	$	(1,915,883	)	$	(597,638	)
ICA asset management services		964,376			132,813
ICH	$	(1,255,044	)	$	(192,288	)
ICH Securities		17			26
Total	$	(2,206,534	)	$	(657,087	)
Period end total assets:
ICC brokerage services	$	12,783,835		$	15,841,692
ICA asset management services		797,807			861,110
ICH		1,559,590		$	2,481,750
ICH Securities		10,307			10,264
Corporate items and eliminations	$	(896,363	)	$	(1,113,138	)
Total	$	14,255,176		$	18,081,678
Corporate items and eliminations:
Inter-company eliminations		(1,247,351	)		(692,001	)
Income taxes	$	350,988			(421,137	)
Total	$	(896,363	)	$	(1,113,138	)

 NOTE 11 – TRANSFER OF BENEFICIAL INTEREST TO FORMER CHAIRMAN

On August 2, 2011, the Company completed its secondary stock offering at a price of $4.25 per share of 3,608,820 shares of its common stock owned by its former Chairman of the Board and founder, Theodore E. Charles, members of his family, family trusts and a controlled charitable foundation (the “selling stockholders”).   Upon the closing of the offering, (i) Mr. Charles retired as an officer and director of the Company, (ii) his employment agreement with the Company was terminated due to retirement, (iii) his consultant agreement with the Company was amended to shorten the term to one year and reduce certain employment benefits and (iv) title to an existing life insurance policy with a cash surrender value of $0.57 million was transferred by the Company to Mr. Charles, the former Chairman.

NOTE 12 – SUBSEQUENT EVENTS

The following actions were taken by the Board of Directors on October 26, 2011:

The Board of Directors adopted the ICH Amended and Restated Equity and Cash Bonus Incentive Plan (the “Amended Plan”) -- which Amended Plan is an amendment and restatement of the Company’s 2005 Equity Incentive Plan (the “2005 Plan”) that, among other things, provides for incentive programs and also increases the total number of shares of the Company’s $0.01 par value per share common stock (“Common Stock”) issued and issuable under the Plan from 1,000,000 to 2,000,000, all subject to approval of the Amended Plan by majority vote of the Company’s shareholders no later than October 26, 2012.

The Board authorized the grant, under the 1996 Stock Incentive Plan (the “1996 Plan”), the 2005 Plan and the Amended Plan of a total of 790,000 shares of Common Stock to employees of the Company and/or its subsidiaries, provided that the shares subject to each such grant shall vest in four equal installments on the first four anniversaries of the date of grant, and that grantees shall not be permitted to transfer any interest in or to one-half of the combined number of shares granted to such grantee under all such grants while such grantee continues to be employed by the Company and/or its subsidiaries.  The grants under the Amended Plan are conditioned upon approval of said plan by majority vote of the Company’s stockholders no later than October 26, 2012.

Additionally, the Board authorized the grant of 3,000 shares of the Company’s common stock to each of the four independent Board members under the 2005 Plan.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis reviews our consolidated financial condition as of September 30, 2011 and March 31, 2011, the consolidated results of operations for the three and six months ended September 30, 2011 and 2010 and, as appropriate, factors that may affect future financial performance. The discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q.  Unless context requires otherwise, as used in this Management’s Discussion and Analysis (i) the “current period” means the three and six months ended September 30, 2011, (ii) the “prior period” means the three and six months ended September 30, 2010, (iii) an increase or decrease compares the current period to the prior period, and (iv) non-comparative amounts refer to the current period.

FORWARD-LOOKING STATEMENTS

This report contains certain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts and may include words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," and other similar expressions. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. Readers are directed to discussions of risks and uncertainties that may be found in this report and other documents filed by the Company with the SEC. We specifically disclaim any obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.

OVERVIEW

We are a financial services holding company that, through our subsidiaries, provides brokerage, investment advisory, insurance and related services. We operate in a highly regulated and competitive industry that is influenced by numerous external factors such as economic conditions, marketplace liquidity and volatility, monetary policy, global and national political events, regulatory developments, competition and investor preferences. Our revenues and net earnings may be either enhanced or diminished from period to period by these and other external factors.

OUR BUSINESS

We operate primarily through our subsidiary, ICC, as a broker-dealer and, doing business as ICA, as a registered investment advisor, with a national network of independent financial representatives.

Broker-Dealer Services

We provide broker-dealer services in support of trading and investment by our representatives’ customers in securities, including, without limitation, corporate equity and debt securities, U.S. Government securities, municipal securities, mutual funds, limited partnerships and other alternative investments, variable annuities and variable life insurance.  We also provide related services such as market information, Internet brokerage, portfolio tracking facilities and records management.

Investment Advisory Services

We provide investment advisory services, including asset allocation and portfolio rebalancing, for our representative’s customers through ICA.

Recruitment and Support of Representatives

A key component of our business strategy is to recruit well-established, productive representatives who provide superior service to their clients.  Additionally, we assist our representatives in developing and expanding their business by providing a variety of support services and a diversified range of investment products for their clients.  We focus on providing substantial added value to our representatives’ practices, enabling them to be more productive, particularly in high margin lines such as advisory services and brokerage.

Support provided to assist representatives in pursuing consistent, profitable sales growth takes many forms, including automated trading systems, targeted financial assistance and a network of communication links with investment product companies.  Regional and national conventions provide forums for interaction to improve product knowledge, sales and client satisfaction.  In addition, we provide our representatives with programs and tools to grow their businesses both through new client acquisition and advancement of existing client relationships.  These programs enhance our ability to attract and retain productive representatives.

OUR PROCESS

Online Brokerage

Registered representatives have direct market access to submit security transactions for their clients through the use of an online brokerage platform for trade execution serviced by Pershing acting as our clearing firm.

Check and Application

Check and application revenue is obtained through a process where a check and a product application is delivered to us for processing that includes principal review and submission to the variable annuity, mutual fund, direct participation or other investment product company. Investments in technology are facilitating our migration over time from a paper intensive to a more paperless process. This shortens the transaction cycle, reduces errors and creates greater efficiencies.

Bond Brokerage

Our fixed-income brokerage desk uses a network of regional and primary dealers to execute trades across a broad array of fixed income asset classes. The desk also utilizes dealer-only electronic services that allow the desk to offer inventory and to execute trades. Our fixed income traders work with our representatives to develop portfolios for clients.

Asset Allocation

Asset allocation services are made available through ICA. Our services include the design, selection and rebalancing of investment portfolios on behalf of our representatives' clients. We also provide tools, services and guidance that enable our representatives to provide these investment services directly to their clients. These services, for the most part, are conducted through our online brokerage platform. Other allocation services are performed directly by fund companies.

CRITICAL ACCOUNTING POLICIES

In General

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The Company believes that of its significant accounting policies and litigation and regulatory matters to the Company’s condensed consolidated financial statements contained herein), those dealing with revenue recognition, allowance for doubtful accounts receivable, taxes and accrual of legal expenses involve a particularly high degree of complexity, uncertainty and judgment. Our accounting policies require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the condensed consolidated financial statements. By their nature, estimates involve judgment based upon available information. Actual results or amounts can and do differ from estimates and the differences can have a material effect on the condensed consolidated financial statements. Therefore, understanding these policies is important to understanding the reported results of operations and the financial position of the Company.

Off Balance Sheet Risk

We execute securities transactions on behalf of our customers on a fully-disclosed basis. If either the customer or a counter-party fails to perform, we, by agreement with our clearing broker, may be required to discharge the obligations of the non-performing party. In such circumstances, we may sustain a loss if the market value of the security is different from the contract value of the transaction. We seek to control off-balance sheet risk by monitoring the market value of securities held or given as collateral in compliance with regulatory and internal guidelines. Pursuant to such guidelines, our clearing company requires that we reduce positions when necessary.   We also complete credit evaluations where there is thought to be credit risk.

Reserves

We record reserves related to legal proceedings in “accrued expenses” in the condensed consolidated balance sheet. The determination of these reserve amounts requires significant judgment on the part of management. Management considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client’s account; the basis and validity of the claim; the possibility of wrongdoing on the part of an employee or representative of the Company; previous results in similar cases; and legal precedents. Each legal proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded in the condensed consolidated financial statements and is recognized as a charge/credit to earnings in that period. The assumptions made by management in determining the estimates of reserves may be incorrect and the actual costs upon settlement of a legal proceeding may be greater or less than the reserved amount.  See “Note 6, Litigation and Regulatory Matters”.

KEY INDICATORS OF FINANCIAL PERFORMANCE FOR MANAGEMENT

Management periodically reviews and analyzes our financial performance across a number of measurable factors considered to be particularly useful in understanding and managing our business.  Key metrics in this process include productivity and practice diversification of representatives, top line commission and advisory services revenues, operating expenses, legal costs, taxes, earnings per share and adjusted EBITDA.

PRODUCTIVITY OF REPRESENTATIVES

Management believes that improving the overall quality of our independent representatives is a key to achieving growth in revenues and earnings.  We believe that upgrading the business practices of our representatives not only grows revenue, but assists in limiting the cost of overhead functions and representative noncompliance.  We strive to continually improve the overall quality of our force of representatives by:

● assisting representatives to improve their skills and practices,

● recruiting established, high quality representatives, and

● terminating low quality representatives.

A key metric that we use to assess the average quality of our producing (non-staff) representatives is per capita rep-generated revenue based on a rolling 12-month period.  Data for the 12-month periods ended September 30, 2011 and 2010 are presented below:

	Twelve months ended				Increase/			% Increase/
	September 30, 2011		September 30, 2010		decrease			decrease
Rep-generated revenue:
Commission	$	67,774,960	$	66,838,372	$	936,588			1.4	%
Advisory		15,939,915		13,798,927		2,140,988			15.5	%
Other fee income		681,167		1,098,928		(417,761	)		-38.0	%
	$	84,396,042	$	81,736,227	$	2,659,815			3.3	%
Number of representatives(1)		499		582		(83	)		-14.3	%
Average revenue per representative	$	169,130	$	140,440	$	28,690			20.4	%
(1) Number of representatives does not include terminated representatives.

The 20.4% growth in per capita rep-generated revenue reflects organic revenue growth and market appreciation, continued paring down of the number of lower-producing registered representatives and recruitment of new representatives with higher levels of production.

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

RESULTS OF OPERATIONS

							Percentage of Revenue						Percent
	Quarter Ended September 30,						Quarter Ended September 30,						Change
	2011			2010			2011			2010			2011 vs. 2010
Revenue:
Commissions	$	15,658,586		$	16,234,403			77.6	%		79.5	%		-3.5	%
Advisory fees		4,083,036			3,571,621			20.2	%		17.5	%		14.3	%
Other fee income		108,570			143,364			0.5	%		0.7	%		-24.3	%
Other revenue		319,721			481,177			1.6	%		2.4	%		-33.6	%
Total revenue		20,169,913			20,430,565			100.0	%		100.0	%		-1.3	%
Expenses:
Commissions and advisory fees		16,231,516			16,098,685			80.4	%		78.7	%		0.8	%
Compensation and benefits		2,659,815			2,040,010			13.2	%		10.0	%		30.4	%
Regulatory, legal and professional services		1,009,451			1,315,436			5.0	%		6.4	%		-23.3	%
Brokerage, clearing and exchange fees		519,511			497,837			2.6	%		2.4	%		4.4	%
Technology and communications		304,917			308,038			1.5	%		1.5	%		-1.0	%
Marketing and promotion		336,371			302,805			1.7	%		1.5	%		11.1	%
Occupancy and equipment		222,829			227,547			1.1	%		1.1	%		-2.1	%
Other administrative		266,875			256,052			1.3	%		1.3	%		4.2	%
Interest		8,997			4,241			0.0	%		0.0	%		112.1	%
Total expenses		21,560,282			21,050,651			106.7	%		102.8	%		2.4	%
Operating loss		(1,390,369	)		(620,086	)		-6.9	%		-3.0	%		124.2	%
Provision (benefit) for income taxes		(513,007	)		23,595			-2.5	%		0.1	%		-2274.2	%
Net loss	$	(877,362	)	$	(643,681	)		-4.3	%		-3.2	%		36.3	%
Adjusted EBITDA	$	(374,883	)	$	(484,499	)		-1.9	%		-2.4	%		-22.6	%
Adjustments to conform Adjusted EBITDA to GAAP
Net loss:
Income tax benefit		(150,028	)		0			-0.7	%		0.0	%		100.0	%
Interest expense		(8,997	)		(4,241	)		0.0	%		0.0	%		112.1	%
Income tax expense		663,035			(23,594	)		3.3	%		-0.1	%		-2910.2	%
Depreciation and amortization		(97,995	)		(89,360	)		-0.5	%		-0.4	%		9.7	%
Non-recurring professional fees		(320,541	)		0			-1.6	%		0.0	%		N/A
Transfer of beneficial interest to former Chairman		(568,095	)		0			-2.8	%		0.0	%		N/A
Non-cash compensation		(19,858	)		(41,987	)		-0.1	%		-0.2	%		-52.7	%
Net loss	$	(877,362	)	$	(643,681	)		-4.3	%		-3.2	%		36.3	%

ADJUSTED EBITDA

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted by eliminating other non-cash expense such as stock-related compensation, gains or losses on sales of assets, and various non-recurring items such as expenses incurred in connection with a secondary stock offering that closed on August 2, 2011 (“adjusted EBITDA”), is a key metric we use in evaluating our financial performance.  We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across multiple time periods. We also use adjusted EBITDA as an important measure, among others, to analyze and evaluate financial and strategic planning decisions.

Adjusted EBITDA is considered a non-US GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act.  Adjusted EBITDA should be considered in conjunction with, rather than as a substitute for, important US GAAP financial measures including pre-tax income, net income and cash flows from operating activities.  Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.

REVENUE

A 1.3% decrease in revenues reflected a decrease in Commission revenue primarily resulting from a decline in sales of variable annuities and direct participation programs relating to alternative investments in REITs and oil and gas programs that was partially offset by an increase in mutual fund sales and in commissions from the trade desk.

Revenues from advisory fees increased due to growth in asset values augmented by an increase in investment contributions. Our advisor-directed managed assets program, A-MAP, where investment advisory services are provided directly by our independent representatives, continues to contribute the majority of advisory services revenue.

Other fee income, primarily comprised of licensing and annual administrative fees, as well as financial planning fees, decreased primarily as a result of a decline in administrative fees consequential to the Company waiving these fees for recently recruited representatives.

The decrease in other revenue, which consists of net marketing revenues and interest income, resulted primarily from a decrease in marketing allowances from product sponsor programs reflecting a decline in sales volumes of alternative investment products.

EXPENSES

Total expenses increased by $0.51 million, or 2.4%, principally as a result of increases in compensation and benefits and from commissions and advisors fees paid to our representatives, offset primarily from a decrease in regulatory, legal and professional fees.

The increase in compensation and benefits is attributable to a non-recurring transfer of life insurance policy in connection with the recent retirement of former Chairman Theodore Charles.

Commissions and advisory fees paid to our representatives typically are calculated as percentages of revenue generated by them; accordingly, much of the $0.13 million increase in commissions and advisor fees reflects a corresponding increase in commission and advisory fee revenue.

The 23.3% decrease in regulatory, legal and professional expenses was driven principally by a $0.30 million regulatory fine assessed in the prior period by the Massachusetts Securities Division.

We will continue to incur legal fees and settlement costs as we operate in a litigious, regulated industry. In addition, from time to time regulatory agencies and self-regulatory organizations institute investigations into industry or firm practices that also may result in the imposition of financial or other sanctions. We invest significant resources to mitigate litigation and regulatory exposure by promoting sound operational procedures and obtaining comprehensive insurance coverage.

Marketing and promotion increased as a direct result of printing costs for brochures promoting our ICA programs at our National Convention, as well as annual proxy filing documents for ICH.

INCOME TAXES

We had an income tax benefit of $0.51 million for the three months ended September 30, 2011 as compared to a $0.02 million income tax provision for the prior period. The income tax rates for the two periods do not bear a customary comparative relationship, given the operating losses incurred, primarily as a result of an increase in permanent differences, for income tax purposes, created by various accruals for each of the periods presented, particularly regulatory assessments, costs that were associated with our registration statement on Form S-3 filing and related transactions, and non-deductible compensation paid to our former Chairman.

OPERATING AND NET LOSS

Results of operations were materially impacted by professional fees and related investment banking fees incurred by the Company in connection with the registered sale by the former principal stockholder and related parties of shares of the Company’s common stock held by them, as well as litigation and regulatory actions that reflect a more demanding industry regulatory environment in the aftermath of recent significant market disruptions.  The Company reported a $1.39 million operating loss as compared to a $0.62 million operating loss for the prior period.  The Company’s net loss totaled $0.88 million, or $0.13 net loss per basic and diluted share, compared to a net loss of $0.64 million, or $0.10 net loss per basic and diluted share, for the prior period.

Significant regulatory assessments and non-recurring professional and legal expenses pertaining to the secondary public offering primarily contributed to the net loss for the current period.  Additionally, the lingering effects of the recent recession and financial services industry issues, such as credit quality and illiquidity of alternative investment products, continue to negatively impact our financial results.  The Company will continue to apply resources to sustain our recruiting and technology initiatives and to address growing costs of compliance, while further implementing cost controls to lessen exposure to operating losses.

COMPARISON OF THE SIX MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

RESULTS OF OPERATIONS

							Percentage of Revenue						Percent
	Six Months Ended September 30,						Six Months Ended September 30,						Change
	2011			2010			2011			2010			2011 vs. 2010
Revenue:
Commissions	$	32,575,093		$	32,911,920			78.3	%		79.6	%		-1.0	%
Advisory fees		8,266,088			7,303,774			19.9	%		17.7	%		13.2	%
Other fee income		211,963			333,548			0.5	%		0.8	%		-36.5	%
Other revenue		559,494			823,297			1.3	%		2.0	%		-32.0	%
Total revenue		41,612,638			41,372,539			100.0	%		100.0	%		0.6	%
Expenses:
Commissions and advisory fees		33,326,157			32,622,915			80.0	%		78.8	%		2.2	%
Compensation and benefits		4,762,840			4,049,078			11.4	%		9.8	%		17.6	%
Regulatory, legal and professional services		2,285,240			2,120,309			5.5	%		5.1	%		7.8	%
Brokerage, clearing and exchange fees		1,024,971			1,089,024			2.5	%		2.6	%		-5.9	%
Technology and communications		673,748			603,412			1.6	%		1.5	%		11.7	%
Marketing and promotion		643,389			637,032			1.5	%		1.5	%		1.0	%
Occupancy and equipment		458,240			455,840			1.1	%		1.1	%		0.5	%
Other administrative		627,646			440,904			1.5	%		1.1	%		42.4	%
Interest		16,941			11,114			0.0	%		0.0	%		52.4	%
Total expenses		43,819,172			42,029,628			105.1	%		101.4	%		4.3	%
Operating loss		(2,206,534	)		(657,087	)		-5.3	%		-1.6	%		235.8	%
Provision (benefit) for income taxes		(73,460	)		(2,616	)		-0.2	%		0.0	%		2,708.1	%
Net loss	$	(2,133,074	)	$	(654,471	)		-5.1	%		-1.6	%		225.9	%
Adjusted EBITDA	$	(729,434	)	$	(376,970	)		-1.8	%		-0.9	%		93.5	%
Adjustments to conform Adjusted EBITDA to GAAP
Net loss:
Income tax benefit		224,180			473,767			0.5	%		1.1	%		100.0	%
Interest expense		(16,941	)		(11,114	)		0.0	%		0.0	%		52.4	%
Income tax expense		(150,720	)		(471,150	)		-0.4	%		-1.1	%		-68.0	%
Depreciation and amortization		(204,305	)		(180,630	)		-0.5	%		-0.4	%		13.1	%
Non-recurring professional fees		(619,832	)		0			-1.5	%		0.0	%		N/A
Transfer of beneficial interest to former Chairman		(568,095	)		0			-1.4	%		0.0	%		N/A
Non-cash compensation		(67,927	)		(88,374	)		-0.2	%		-0.2	%		-23.1	%
Net loss	$	(2,133,074	)	$	(654,471	)		-5.1	%		-1.6	%		225.9	%

ADJUSTED EBITDA

See information, above, regarding the relevance, calculation and use of adjusted EBITDA set forth in the comparison of the three month periods ended September 30, 2011 and 2010.

REVENUE

Revenues were relatively flat for the six month comparative period; however, the advisory service segment had considerable growth of 13.2% as a result of improving asset values and new client investments.

Our advisor-directed managed assets program, A-MAP, where investment advisory services are provided directly by our independent representatives, continues to contribute the majority of advisory services revenue.

Other fee income and other revenue decreased for the same reasons stated in the comparative three month period.

EXPENSES

Total expenses increased by $1.79 million, or 4.3%, primarily due to increases in commission and advisory service fees, compensation and benefits,  regulatory, legal and professional services and other administrative expenses. For the most part the other expenses were consistent with that of the prior six month period.

The reasons for the increase in commissions and advisory fees were consistent with those explained in the three month period discussion, above.

The increase in regulatory legal and professional services was primarily the result of a $0.56 million increase in non-recurring costs incurred in connection with our secondary offering and related transactions offset by a $0.30 million decrease related to a regulatory fine in the prior period.

The increase in compensation and benefits was due primarily to $0.57 million in non-cash compensation to our former Chairman as a result of transfer of a life insurance policy in connection with his retirement upon closing of the secondary offering.  In addition, we added new staff  to our technology, compliance and marketing teams to support our service model.

The increase in other administrative expenses was the result of allowance for bad debts from loans to registered representatives and an increase in premiums for our insurance policies covering directors and officers. In addition, we experienced an increase in other taxes due to a favorable tax treatment in a prior period audit. Finally we had an expense accrual reversal in the prior period relating to an overestimate.

INCOME TAXES

We had an income tax benefit of $0.07 million for the six months ended September 30, 2011 as compared to a small income tax benefit for the prior period. The income tax rates for the 2011 and 2010 periods do not bear a customary relationship for reasons discussed in the comparative three month period discussion, above.

OPERATING AND NET LOSS

Results of operations were greatly impacted by both the costs of our secondary offering as well as litigation and regulatory actions that reflect a more demanding industry regulatory environment in the aftermath of recent significant market disruptions.  The Company reported a $2.21 million operating loss as compared to $0.66 million of operating loss for the prior period.  The Company’s net loss totaled $2.13 million, or $0.32 net loss per basic and diluted share, compared to net loss of $0.65 million, or $0.10 net loss per basic and diluted share, for the prior period.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of liquidity remains cash flows from operations, primarily from our broker-dealer and investment advisory businesses. Decisions on the allocation of capital include projected profitability and available cash flows, risk management and regulatory capital requirements. A key to this approach is ensuring that industry-standard controls are effective to support our operations and those of our representatives while ensuring sufficient liquidity.

As of September 30, 2011, cash and cash equivalents totaled $3.84 million as compared to $4.59 million as of March 31, 2011. Working capital as of September 30, 2011 was $4.10 million as compared to $5.61 million as of March 31, 2011. The ratio of current assets to current liabilities was 1.72 to 1 as of September 30, 2011, as compared to 1.70 to 1 as of March 31, 2011.

Operations provided $0.24 million in cash for the current period, as compared to $1.30 million of operating cash provided in the prior period, principally due to the net loss of $2.13 million in the current period versus a $0.65 million net loss in the prior period of which much of that loss in the current period was related to costs in our completed S-3 registration. In addition, the Company had paid for legal settlements and fines in the current period that were mostly accrued for at fiscal year end March 31, 2011.

Net cash flows used in investing activities in the current period represent purchases in equipment, collection of principal payments on a note receivable, capitalization of software for internal use, and contributions on an executive life insurance policy. Net cash flows used in the prior period were $0.08 million in the prior period compared to $0.05 million in the current period’s investing activities.

Cash flows for financing activities in the current period were similar to the prior period as we paid $0.94 million and $0.79 million in loan payments to finance E&O insurance premiums, respectively, for the periods ended September 30, 2011 and 2010.

REGULATORY NET CAPITAL

Cash disbursements can have a material impact on our registered broker dealer’s regulatory net capital. ICC is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1) which requires our broker-dealer subsidiary to maintain minimum net capital.  As of March 31, 2011 and going forward, ICC computes net capital requirements under the alternative method, which requires firms to maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit balances. Repayment or prepayment of subordinated debt, if any, and withdrawal of equity from retiring partners or officers is subject to net capital not falling below 5% of aggregate debits or 120% of minimum net capital requirement.

Prior to March 31, 2011, ICC was subject to minimum net capital of $100,000 and a ratio of aggregate indebtedness to net capital (a “net capital ratio”) not to exceed 15 to 1.  Under the rule, indebtedness generally included all money owed by ICC, and net capital included ICC cash and assets that are easily converted into cash.  SEC rules also prohibit "equity capital" (which, under the Net Capital Rule, includes subordinated loans) from being withdrawn, cash dividends from being paid and other specified actions of similar effect from being taken, if, among other specified contingencies, ICC’s net capital ratio would exceed 10 to 1 or if ICC would have less than 120% of its minimum required net capital.

As of September 30, 2011, ICC had net capital of $1.35 million (i.e., an excess of $1.09 million) as compared to net capital of approximately $2.84 million (i.e., an excess of $2.59 million) as of March 31, 2011. The decrease in net capital primarily was due to legal and professional fees incurred for our secondary offering, as well as legal defense, settlement costs, and regulatory fines that have impacted this year’s operating results and cash flow from operations.

COMMITMENTS AND CONTINGENCIES

We are obligated under various lease agreements covering offices. These agreements are considered to be operating leases. The terms of the leases expire between fiscal years ending in 2012 and 2015. Options to renew for additional terms are included under the lease agreements.   Certain leases contain provisions for escalation of minimum lease payments contingent upon increases in real estate taxes.

The total minimum rental due in future periods under these existing agreements is as follows as of September 30, 2011 for the years ending:

March 31,
2012	$	194,182
2013		283,922
2014		276,354
2015		282,214
2016		24,000
2017 and thereafter		24,000
	$	1,084,672

Total lease expense for office space approximated $0.09 and $0.08 million the three months ended and $0.17 and $0.16 million for the six months ended September 30, 2011 and 2010, respectively

ITEM 4.  CONTROLS AND PROCEDURES

Report of Management on Internal Control Over Financial Reporting

Disclosure controls are procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as the Company's are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2011, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act.  Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period, and to ensure that information required to be disclosed in such reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions required regarding required disclosure.

There have been no changes in our internal controls over financial reporting that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company operates in a highly litigious and regulated business, and the Company often is made a defendant in arbitrations and other legal proceedings that are incidental to our securities business.  The Company typically vigorously contests the allegations of the complaints and believes that there are meritorious defenses in these matters.  From time to time the Company also is the subject of regulatory investigations and proceedings.  Counsel often is unable to confidently predict the likelihood of an outcome, whether favorable or unfavorable, in such matters because of routine and inherent uncertainties.  For the majority of pending claims, the Company's current errors and omissions (E&O) policy limits the Company’s maximum exposure in any one case to $100,000.   The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company’s exposure is usually limited to $350,000, subject to policy limitations and exclusions.

ITEMS 2 – 5.

None.

ITEM 6.  EXHIBITS

Exhibit
Number	Description	Location
3.1	Certificate of Incorporation	(2)(Exh. 3.1)
3.2	By-Laws	(2)(Exh. 3.2)
4.1	Form of Stock Certificate	(2)(Exh. 4.1)
10.1	Employment Agreement with Theodore E. Charles (3)	(8)(Exh. 10.2)
10.2	Employment Agreement with Timothy B. Murphy (3)	(8)(Exh. 10.1)
10.3	The 1994 Stock Option Plan (3)	(4)(Exh. 10.3)
10.4	The 1996 Stock Incentive Plan (3)	(2)(Exh. 10.3)
10.5	The 2001 Equity Incentive Plan (3)	(5)(Exh. 4.4)
10.6	The 2005 Equity Incentive Plan (3)	(6)(Exh. 4.5)
10.7	Form of June 2006 Stock Grant Agreement (3)	(7)(Exh. 10.8)
10.8	Form of February 2009 Stock Grant Agreement (3)	(7)(Exh. 10.9)
10.9	Consulting Agreement with Theodore E. Charles (3)	(8)(Exh. 10.3)
10.10	Registration Agreement with Theodore E. Charles et. al	(9)(Exh. 10.1)
10.11	Agreement with Theodore E. Charles	(10)(Exh. 10.1)
10.12	October 26, 2011 Stock Grant Agreement with Timothy B. Murphy	(1)
10.13	October 26, 2011 Stock Grant Agreement with Kathleen L. Donnelly	(1)
31.1	Certification of Timothy B. Murphy pursuant to Rule 13a-14(a)	(1)
31.2	Certification of Kathleen L. Donnelly pursuant to Rule 13a-14(a)	(1)
32.1	Certification of Timothy B. Murphy pursuant to 18 U.S.C. Section 1350	(1)
32.2	Certification of Kathleen L. Donnelly pursuant to 18 U.S.C. Section 1350	(1)
101.INS	XBRL Instance Document	(1)
101.SCH	XBRL Schema Document	(1)
101.CAL	XBRL Calculation Linkbase Document	(1)
101.LAB	XBRL Labels Linkbase Document	(1)
101.PRE	XBRL Presentation Linkbase Document	(1)

(1)	Filed herewith.
(2)	Incorporated by reference to the indicated exhibit to the Registrant's Quarterly Report on Form 10-Q filed November 14, 2007.
(3)	A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of this report.
(4)	Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2005.
(5)	Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-117807) filed July 30, 2004.
(6)	Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-134885) filed June 9, 2006.
(7)	Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2008.
(8)	Incorporated by reference to the indicated exhibit to the Registrant’s Current Report on Form 8-K filed April 21, 2010.
(9)	Incorporation by reference to the indicated exhibit of the Registrant’s Current Report on Form 8-K filed March 7, 2011.
(10)	Incorporated by reference to the indicated exhibit to the Registrant’s Current Report on Form 8-K filed July 5, 2011.

Any exhibit not included with this Form 10-Q when furnished to any shareholder of record will be furnished to such shareholder upon written request and payment of up to $0.25 per page plus postage. Such requests should be directed to Douglas Leonard, Corporate Secretary, Investors Capital Holdings, Ltd., 230 Broadway East, Lynnfield, MA 01940-2320.

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.

INVESTORS CAPITAL HOLDINGS, LTD.

By: /s/ Kathleen L. Donnelly

Chief Accounting Officer

(Duly authorized officer)

Date: November 14, 2011