10-Q

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: June 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-32026

INSTITUTIONAL FINANCIAL MARKETS, INC.

(Exact name of registrant as specified in its charter)

Maryland	16-1685692
(State or other jurisdiction of Incorporation or organization)	(IRS Employer Identification Number)

Cira Centre 2929 Arch Street, 17th Floor Philadelphia, Pennsylvania	19104
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (215) 701-9555

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.    x  Yes    ¨  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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    x  Yes    ¨  No

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of August 1, 2012 there were 11,914,918 shares of common stock ($0.001 par value per share) of Institutional Financial Markets, Inc. outstanding.

INSTITUTIONAL FINANCIAL MARKETS, INC.

FORM 10-Q

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2012

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)		5
	Consolidated Balance Sheets—June 30, 2012 and December 31, 2011		5
	Consolidated Statements of Operations and Comprehensive Income (Loss)—Three and Six Months Ended June 30, 2012 and 2011		6
	Consolidated Statements of Changes in Equity—Six Months Ended June 30, 2012		7
	Consolidated Statements of Cash Flows—Six Months Ended June 30, 2012 and 2011		8
	Notes to Consolidated Financial Statements (Unaudited)		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		51
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		82
Item 4.	Controls and Procedures		83
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings		84
Item 1A.	Risk Factors		84
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		84
Item 6.	Exhibits		85
Signatures			86

2

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

While we cannot predict all of the risks and uncertainties, they include, but are not limited to, those described in “Item 1A - Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about the following subjects:

• benefits, results, cost reductions and synergies resulting from the Company’s business combinations;

• integration of operations;

• business strategies;

• growth opportunities;

• competitive position;

• market outlook;

• expected financial position;

• expected results of operations;

• future cash flows;

• financing plans;

• plans and objectives of management;

• tax treatment of business combinations;

• fair value of assets; and

• any other statements regarding future growth, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You should consider the areas of risk and uncertainty described above and discussed under “Item 1A - Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

3

Certain Terms Used in this Quarterly Report on Form 10-Q

In this Quarterly Report on Form 10-Q, unless otherwise noted or as the context otherwise requires: “IFMI” refers to Institutional Financial Markets, Inc., a Maryland corporation. The “Company,” “we,” “us,” and “our” refer to IFMI and its subsidiaries on a consolidated basis; “IFMI, LLC” (formerly Cohen Brothers, LLC), or the “Operating LLC” refer to the main operating subsidiary of the Company; “Cohen Brothers” refers to the pre-merger Cohen Brothers, LLC and its subsidiaries; “AFN” refers to the pre-merger Alesco Financial Inc. and its subsidiaries; “Merger Agreement” refers to the Agreement and Plan of Merger among AFN, Alesco Financial Holdings, LLC, a wholly owned subsidiary of AFN which we refer to as the “Merger Sub,” and Cohen Brothers, dated as of February 20, 2009 and amended on June 1, 2009, August 20, 2009 and September 30, 2009; “Merger” refers to the December 16, 2009 closing of the merger of Merger Sub with and into Cohen Brothers pursuant to the terms of the Merger Agreement, which resulted in Cohen Brothers becoming a majority owned subsidiary of the Company. When the term, “IFMI” is used, it is referring to the parent company itself, Institutional Financial Markets, Inc. “JVB” refers to JVB Financial Holdings, L.L.C.; “EDML” refers to EuroDekania, LTD; “PrinceRidge Holdings” refers to PrinceRidge Holdings LP and its subsidiaries; “PrinceRidge GP” refers to PrinceRidge Partners LLC; and “PrinceRidge” refers to PrinceRidge Holdings together with PrinceRidge GP.

“Securities Act ” refers to the Securities Act of 1933, as amended; and “Exchange Act” refers to the Securities Exchange Act of 1934, as amended.

In accordance with accounting principles generally accepted in the United States of America, or “U.S. GAAP,” the Merger was accounted for as a reverse acquisition, Cohen Brothers was deemed to be the accounting acquirer and all of AFN’s assets and liabilities were required to be revalued at fair value as of the acquisition date. Therefore, any financial information reported herein prior to the Merger is the historical financial information of Cohen Brothers. As used throughout this filing, the terms, the “Company,” “we,” “us,” and “our” refer to the operations of Cohen Brothers and its consolidated subsidiaries prior to December 17, 2009 and the combined operations of the merged company and its consolidated subsidiaries from December 17, 2009 forward. AFN refers to the historical operations of Alesco Financial Inc. through to December 16, 2009, the date of the Merger, or the “Merger Date.”

4

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INSTITUTIONAL FINANCIAL MARKETS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(unaudited)

	June 30, 2012			December 31, 2011
Assets
Cash and cash equivalents	$	12,944		$	18,221
Receivables from brokers, dealers, and clearing agencies		9,275			70,963
Due from related parties		669			679
Other receivables		5,971			5,531
Investments-trading		166,192			124,546
Other investments, at fair value		37,609			42,772
Receivables under resale agreements		247,289			129,978
Goodwill		11,113			11,206
Other assets		11,973			16,694
Total assets	$	503,035		$	420,590
Liabilities
Payables to brokers, dealers, and clearing agencies	$	35,857		$	24,633
Accounts payable and other liabilities		12,250			13,567
Accrued compensation		6,280			8,657
Trading securities sold, not yet purchased		84,119			99,613
Securities sold under agreement to repurchase		244,061			134,870
Deferred income taxes		7,964			7,500
Debt		26,731			37,167
Mandatorily redeemable equity interests		8,299			3,149
Total liabilities		425,561			329,156
Commitments and contingencies (See Note 17)
Temporary Equity:
Redeemable non-controlling interest		7,985			14,026
Permanent Equity:
Stockholders’ Equity:
Preferred Stock, $0.001 par value per share, 50,000,000 shares authorized:
Series A Voting Convertible Preferred Stock, $0.001 par value per share, 1 share authorized, no shares issued and outstanding		—			—
Series B Voting Non-Convertible Preferred Stock, $0.001 par value per share, 4,983,557 shares authorized, 4,983,557 shares issued and outstanding		5			5
Series C Junior Participating Preferred Stock, $0.001 par value per share, 10,000 shares authorized, no shares issued and outstanding		—			—
Common Stock, $0.001 par value per share, 100,000,000 shares authorized, 12,763,660 and 12,730,117 shares issued, respectively; 12,713,260 and 12,679,717 shares outstanding, respectively, including 2,207,345 and 2,597,620 unvested restricted share awards, respectively		11			10
Additional paid-in capital		64,921			63,032
Accumulated deficit		(11,487	)		(5,121	)
Accumulated other comprehensive loss		(664	)		(626	)
Treasury stock at cost (50,400 shares of Common Stock)		(328	)		(328	)
Total stockholders’ equity		52,458			56,972
Non-controlling interest		17,031			20,436
Total permanent equity		69,489			77,408
Total liabilities and equity	$	503,035		$	420,590

See accompanying notes to unaudited consolidated financial statements.

5

INSTITUTIONAL FINANCIAL MARKETS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)

(Dollars in Thousands, except share or per share information)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Revenues
Net trading	$	19,951		$	16,240		$	37,642		$	43,514
Asset management		4,608			5,255			9,545			11,225
New issue and advisory		189			1,131			1,266			1,240
Principal transactions and other income		289			831			(4,656	)		(208	)
Total revenues		25,037			23,457			43,797			55,771
Operating expenses
Compensation and benefits		17,053			21,433			33,327			43,421
Business development, occupancy, equipment		1,276			1,835			2,450			3,274
Subscriptions, clearing, and execution		2,899			2,727			5,972			5,542
Professional fees and other operating		2,636			5,137			5,687			9,152
Depreciation and amortization		343			503			734			973
Total operating expenses		24,207			31,635			48,170			62,362
Operating income / (loss)		830			(8,178	)		(4,373	)		(6,591	)
Non-operating income / (expense)
Interest expense, net		(1,104	)		(1,447	)		(2,319	)		(2,929	)
Gain on repurchase of debt		—			—			3			—
Other income / (expense)		(4,357	)		—			(4,357	)		—
Income / (loss) from equity method affiliates		1,526			4,435			2,042			4,530
Income / (loss) before income tax expense / (benefit)		(3,105	)		(5,190	)		(9,004	)		(4,990	)
Income tax expense / (benefit)		63			(133	)		54			(346	)
Net income / (loss)		(3,168	)		(5,057	)		(9,058	)		(4,644	)
Less: Net income / (loss) attributable to the non-controlling interest		(1,090	)		(1,686	)		(3,121	)		(1,648	)
Net income / (loss) attributable to IFMI	$	(2,078	)	$	(3,371	)	$	(5,937	)	$	(2,996	)
Income / (loss) per share data (see Note 16):
Income / (loss) per common share—basic:
Income / (loss) per common share	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)
Weighted average shares outstanding—basic		10,756,257			10,901,448			10,600,004			10,860,702
Income / (loss) per common share—diluted:
Income / (loss) per common share	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)
Weighted average shares outstanding—diluted		16,008,259			16,185,004			15,852,006			16,144,258
Dividends declared per common share	$	0.02		$	0.05		$	0.04		$	0.10
Comprehensive income / (loss):
Net income / (loss) (from above)	$	(3,168	)	$	(5,057	)	$	(9,058	)	$	(4,644	)
Other comprehensive income / (loss) item:
Foreign currency translation adjustments, net of tax of $0		(229	)		(8	)		(40	)		354
Other comprehensive income / (loss), net of tax of $0		(229	)		(8	)		(40	)		354
Comprehensive income		(3,397	)		(5,065	)		(9,098	)		(4,290	)
Less: comprehensive income (loss) attributable to the non-controlling interest		(1,183	)		(1,688	)		(3,151	)		(1,528	)
Comprehensive income / (loss) attributable to IFMI	$	(2,214	)	$	(3,377	)	$	(5,947	)	$	(2,762	)

See accompanying notes to unaudited consolidated financial statements.

6

INSTITUTIONAL FINANCIAL MARKETS, INC.

Consolidated Statement of Changes in Equity

(Dollars in Thousands)

(Unaudited)

	Institutional Financial Markets, Inc.
	Preferred Stock Class A $ Amount		Preferred Stock Class B $ Amount		Common Stock $ Amount		Additional Paid-In Capital			Retained Earnings/ (Accumulated Deficit)			Accumulated Other Comprehensive Income / (Loss)			Treasury Stock			Total Stockholders’ Equity			Non-controlling Interest			Total Permanent Equity			Redeemable non- controlling interest (Temporary Equity)
Balance at December 31, 2011	$	—	$	5	$	10	$	63,032		$	(5,121	)	$	(626	)	$	(328	)	$	56,972		$	20,436		$	77,408		$	14,026
Measurement period adjustment (1)		—		—		—		—			—			—			—			—			—			—			(93	)
Net loss		—		—		—		—			(5,937	)		—			—			(5,937	)		(2,883	)		(8,820	)		(238	)
Other comprehensive income / (loss) (2)		—		—		—		—			—			(10	)		—			(10	)		(30	)		(40	)		—
Acquisition / (surrender) of additional units of consolidated subsidiary, net		—		—		—		828			—			(28	)		—			800			(800	)		—			—
Equity-based compensation and vesting of shares		—		—		1		1,063			—			—			—			1,064			519			1,583			385
Shares withheld for employee taxes		—		—		—		(2	)		—			—			—			(2	)		(1	)		(3	)		—
Redemption of non-controlling interest, net		—		—		—		—			—			—			—			—			—			—			(6,095	)
Dividends/ Distributions		—		—		—		—			(429	)		—			—			(429	)		(210	)		(639	)		—
Balance at June 30, 2012	$	—	$	5	$	11	$	64,921		$	(11,487	)	$	(664	)	$	(328	)	$	52,458		$	17,031		$	69,489		$	7,985

(1) See note 2.

(2) Represents foreign currency translation adjustment.

See accompanying notes to unaudited consolidated financial statements.

7

INSTITUTIONAL FINANCIAL MARKETS, INC.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)

	Six Months Ended June  30,
	2012			2011
Operating activities
Net income / (loss)	$	(9,058	)	$	(4,644	)
Adjustments to reconcile net income / (loss) to net cash provided by (used in) operating activities:
Gain on repurchase of debt		(3	)		—
Equity-based compensation		1,968			4,206
Realized loss / (gain) on other investments, at fair value		101			1,480
Change in unrealized (gain) / loss on other investments, at fair value		5,107			(358	)
Depreciation and amortization		734			973
(Income) / loss from equity method affiliates		(2,042	)		(4,530	)
Change in operating assets and liabilities, net:
(Increase) decrease in other receivables		(206	)		699
(Increase) decrease in investments-trading		(41,646	)		96,577
(Increase) decrease in other assets		343			3,488
(Increase) decrease in receivables under resale agreement		(117,311	)		589
Change in receivables from / payables to related parties, net		(1	)		565
Increase (decrease) in accrued compensation		(2,379	)		(6,243	)
Increase (decrease) in accounts payable and other liabilities		(1,474	)		(2,693	)
Increase (decrease) in trading securities sold, not yet purchased		(15,494	)		(8,631	)
Change in receivables from / payables to brokers, dealers, and clearing agencies, net		72,917			(16,098	)
Increase (decrease) in securities sold under agreement to repurchase		109,191			(49,438	)
Increase (decrease) in deferred income taxes		464			(226	)
Change in mandatorily redeemable equity interests		(132	)		—
Net cash provided by (used in) operating activities		1,079			15,716
Investing activities
Cash paid for acquisition of JVB, net of cash acquired		—			(14,956	)
Cash acquired from acquisition of PrinceRidge Partners, LLC and PrinceRidge Holdings, LP		—			2,149
Purchase of investments-other investments, at fair value		(101	)		(1,708	)
Sales and return of principal of other investments, at fair value		38			3,965
Investment in equity method affiliates		(6	)		(432	)
Return from equity method affiliates		5,513			5,820
Purchase of furniture, equipment, and leasehold improvements		(42	)		(302	)
Net cash provided by (used in) investing activities		5,402			(5,464	)
Financing activities
Repayment and repurchase of debt		(10,257	)		(2,620	)
Cash used to net share settle equity awards		(3	)		(49	)
Redemption of redeemable non-controlling interest, net		(24	)		—
Distributions to mandatorily redeemable equity interests		(789	)		—
Distributions to non-controlling interest		(210	)		(528	)
Dividends		(429	)		(1,090	)
Net cash used in financing activities		(11,712	)		(4,287	)
Effect of exchange rate on cash		(46	)		249
Net increase (decrease) in cash and cash equivalents		(5,277	)		6,214
Cash and cash equivalents, beginning of period		18,221			43,946
Cash and cash equivalents, end of period	$	12,944		$	50,160

See accompanying notes to unaudited consolidated financial statements.

8

INSTITUTIONAL FINANCIAL MARKETS, INC.

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share or per share information)

(Unaudited)

1. ORGANIZATION AND NATURE OF OPERATIONS

The Formation Transaction

Cohen Brothers, LLC (“Cohen Brothers”) was formed on October 7, 2004 by Cohen Bros. Financial, LLC (“CBF”). Cohen Brothers was formed to acquire the net assets of CBF’s subsidiaries (the “Formation Transaction”): Cohen Bros. & Company, Inc.; Cohen Frères SAS; Dekania Investors, LLC; Emporia Capital Management, LLC; and the majority interest in Cohen Bros. & Tororian Investment Management, Inc. The Formation Transaction was accomplished through a series of transactions occurring between March 4, 2005 and May 31, 2005.

The Company

From its formation until December 16, 2009, Cohen Brothers operated as a privately owned limited liability company. On December 16, 2009, Cohen Brothers completed its merger (the “Merger”) with a subsidiary of Alesco Financial Inc. (“AFN”) a publicly traded real estate investment trust.

As a result of the Merger, AFN received 10,343,347 or 66.2% of the membership interests in Cohen Brothers. Of the 66.2% of Cohen Brothers received by AFN in connection with the Merger, 38.5% was received in the form of units issued directly by Cohen Brothers. The remaining 27.7% was acquired by AFN from Cohen Brothers members in exchange for the issuance of AFN common stock to those members. The remaining 5,283,556 membership interests or 33.8% of Cohen Brothers was held by Daniel Cohen (31.9% or 4,983,557 membership interests) and other members (1.9% or 299,999 membership interests). Each of Mr. Cohen’s membership units is redeemable at Mr. Cohen’s option, at any time on or after January 1, 2014, for (i) cash in amount equal to the average of the per share closing prices of the Company’s Common Stock for the ten consecutive trading days immediately preceding the date the Company receives Mr. Cohen’s redemption notice, or (ii) at the Company’s option, one share of the Company’s Common Stock, subject, in each case, to appropriate adjustment upon the occurrence of the issuance of additional shares of the Company’s Common Stock as a dividend or other distribution on the Company’s outstanding Common Stock, or a further subdivision or combination of the outstanding shares of the Company’s Common Stock. The membership units held by the other members have the same redemption rights as described for Mr. Cohen except that the members holding these units may elect to redeem their shares at any time.

Therefore, the members of Cohen Brothers at the time of the Merger received 61.5% of the total ownership interests in the combined entity (33.8% remained as members of Cohen Brothers and 27.7% exchanged their interest in Cohen Brothers for AFN stock). In accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the Merger was accounted for as a reverse acquisition, and Cohen Brothers was deemed to be the accounting acquirer primarily because the owners of Cohen Brothers at the time of the Merger received the majority interest in the merged entity as previously described. As a result, all of AFN’s assets and liabilities were required to be revalued at fair value as of the acquisition date. The financial statements presented herein include the operations of the merged entity.

Subsequent to the Merger, AFN was renamed Cohen & Company Inc. In January 2011, it was renamed again as Institutional Financial Markets, Inc. (“IFMI”). As used in these consolidated financial statements, the term “the Company” refers to the combined operations of the merged company and its consolidated subsidiaries subsequent to December 17, 2009. “AFN” refers to the historical operations of Alesco Financial Inc. through the December 16, 2009 Merger Date. When the term “IFMI” is used, it is referring to the parent company itself, Institutional Financial Markets, Inc. Subsequent to the Merger, Cohen Brothers changed its name to IFMI, LLC and functions as the main operating majority-owned subsidiary of the Company, and in these statements it is referred to as the “Operating LLC.”

Effective January 1, 2010, the Company ceased to qualify as a real estate investment trust, or a REIT. The Company trades on the NYSE Amex LLC under the ticker symbol “IFMI.” The Company is an investment firm specializing in credit related fixed income investments. As of June 30, 2012, the Company had $6.2 billion in assets under management (“AUM”) of which 97%, or $6.0 billion, was in collateralized debt obligations (“CDOs”).

9

The Company’s business is organized into the following three business segments:

Capital Markets: The Company’s Capital Markets segment consists of credit-related fixed income securities sales, trading, and financing, as well as new issue placements in corporate and securitized products and advisory services revenue. The Company’s fixed income sales and trading group provides trade execution to corporate and institutional investors and other broker-dealers. The Company specializes in the following products: corporate bonds and loans, asset backed securities (“ABS”), mortgage backed securities (“MBS”), collateralized loan obligations (“CLOs”), CDOs, collateralized bond obligations, collateralized mortgage obligations (“CMOs”), commercial mortgage backed securities (“CMBS”), residential mortgage backed securities (“RMBS”), Small Business Administration (“SBA”) loans, municipal bonds, U.S. government bonds, U.S. government agency securities, brokered deposits and CDs for small banks, hybrid capital of financial institutions including trust preferred securities (“TruPS”), whole loans, and other structured financial instruments. The Company also offers execution and brokerage services for cash equity and derivative products. The Company carries out its capital market activities primarily through its subsidiaries: JVB, PrinceRidge Holdings, and EDML.

Asset Management: Historically, the Company has served the needs of client investors by managing assets within investment funds, managed accounts, permanent capital vehicles, and CDOs (collectively referred to as “Investment Vehicles”). A CDO is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization which means that the lenders are actually investing in notes backed by the assets. The lender will have recourse only to the assets securing the loan. The Company’s Asset Management segment includes its fee based asset management operations which include ongoing base and incentive management fees.

Principal Investing: The Company’s Principal Investing segment is comprised primarily of its investments in certain Investment Vehicles it manages.

The Company generates its revenue by segment primarily through the following activities:

Capital Markets:

• trading activities of the Company which include execution and brokerage services, securities lending activities, riskless trading activities as well as gains and losses (unrealized and realized) and income and expense earned on securities classified as trading;

• new issue and advisory revenue comprised primarily of (i) origination fees for corporate debt issues originated by the Company; (ii) revenue from advisory services; and (iii) new issue revenue associated with arranging the issuance of newly created debt, equity, and hybrid financial instruments;

Asset Management:

• asset management fees for the Company’s on-going services as asset manager charged and earned by managing Investment Vehicles, which may include fees both senior and subordinated to the securities in the Investment Vehicle;

• incentive management fees earned based on the performance of the various Investment Vehicles;

Principal Investing:

• gains and losses (unrealized and realized) and income and expense earned on securities (primarily seed capital investments in certain Investment Vehicles which the Company manages) classified as other investments, at fair value; and

• income or loss from equity method affiliates.

2. BASIS OF PRESENTATION

The financial statements of the Company included herein were prepared in conformity with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim months’ periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and six months ended June 30, 2012 and 2011 are not necessarily indicative of the results for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Capitalized terms used herein without definition have the meanings ascribed to them in the Annual Report on Form 10-K for the year ended December 31, 2011.

Certain prior period amounts have been reclassified to conform to the current period presentation.

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In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, the Company has one year from the closing of the transaction, referred to as the measurement period, to finalize the accounting for business combinations. The measurement period for the PrinceRidge acquisition expired on May 31, 2012. During the second quarter of 2012, the Company made a measurement period adjustment to the redeemable non-controlling interest with a corresponding adjustment to goodwill related to the acquisition of PrinceRidge. The adjustment reduced goodwill and the redeemable non-controlling interest by $93. The balance sheet at December 31, 2011 was not retrospectively adjusted to reflect these adjustments since the Company believes this revision was not material based on the Company’s assessment performed in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99, Materiality.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Adoption of New Accounting Standards

In April 2011, the FASB issued ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”), which revises the criteria for assessing effective control for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The determination of whether the transfer of a financial asset subject to a repurchase agreement is a sale is based, in part, on whether the entity maintains effective control over the financial asset. ASU 2011-03 removes from the assessment of effective control: the criterion requiring the transferor to have the ability to repurchase or redeem the financial asset on substantially agreed terms, even in the event of default by the transferee, and the related requirement to demonstrate that the transferor possesses adequate control to fund substantially all the cost of purchasing replacement financial assets. The amendments in ASU 2011-03 will be effective for interim and annual reporting periods beginning on or after December 15, 2011, early adoption is prohibited, and the amendments will be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The Company’s adoption of the provisions of ASU 2011-03 effective January 1, 2012 did not have an effect on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”), which amends FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurements. The amended guidance changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additional disclosure requirements include transfers between levels 1 and 2; and for level 3 fair value measurements, a description of the Company’s valuation processes and additional information about unobservable inputs impacting level 3 measurements. Additionally, the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. The amendments result in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. The guidance provided in ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. The Company’s adoption of the provisions of ASU 2011-04 effective January 1, 2012 did not have a material effect on the Company’s consolidated financial position and results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income, (“ASU 2011-05”) which requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”). ASU 2011-12 defers the requirement that companies present reclassification adjustments and the effect of those reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. The effective dates for ASU 2011-12 are consistent with the effective dates for ASU 2011-05. Effective January 1, 2012, the Company adopted the provisions of ASU 2011-05 and ASU 2011-12, which resulted in the Company presenting the components of comprehensive income (loss) within the consolidated statements of operations and comprehensive income (loss). The Company’s adoption of the new guidance did not have an effect on the Company’s financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which permits companies to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more likely than not threshold is defined as having a likelihood of more than 50%. Under this option, a company would no longer be required to calculate the fair value of the reporting unit unless the company determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. A company has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment tests. A company may resume performing the qualitative assessment in any subsequent period. The guidance also includes examples of the types of events and circumstances to

11

consider in conducting the qualitative assessment. These examples of events and circumstances supersede (1) the previous examples included in Topic 350 of event and circumstances that a company should consider when testing goodwill for impairment between annual tests and (2) the previous examples of events and circumstances that a company having a reporting unit with a zero or negative carrying amount should consider in determining whether to perform the second step of the impairment test, used to measure the amount of the loss, if any. The guidance provided in ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s adoption of the provisions of ASU 2011-08 effective January 1, 2012 did not have an effect on the Company’s consolidated financial statements.

B. Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments. These determinations were based on available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates and, therefore, these estimates may not necessarily be indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Refer to note 6 for a discussion of the fair value hierarchy with respect to investments-trading, other investments, at fair value and the derivatives held by the Company.

Cash and cash equivalents: Cash is carried at historical cost which is assumed to approximate fair value. The estimated fair value measurements of cash and cash equivalents and restricted cash are generally classified within level 1 of the valuation hierarchy.

Investments-trading: These amounts are carried at fair value. The fair value is based on either quoted market prices of an active exchange, independent broker market quotations, market price quotations from third party pricing services, or valuation models when quotations are not available. See note 6 for disclosures about the categorization of the fair value measurements of investments-trading within the three level fair value hierarchy.

Other investments, at fair value: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent broker market quotations, or valuation models when quotations are not available. In the case of investments in alternative investment funds, fair value is generally based on the reported net asset value of the underlying fund. See note 6 for disclosures concerning the categorization of the fair value measurements of other investments, at fair value within the three level fair value hierarchy.

Receivables under resale agreements: Receivables under resale agreements are carried at their contracted resale price, have short-term maturities, and are repriced frequently or bear market interest rates and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of receivables under resale agreements are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Trading securities sold, not yet purchased: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent market quotations, market price quotations from third party pricing services, or valuation models when quotations are not available. See note 6 for disclosures concerning the categorization of the fair value measurements of trading securities sold, not yet purchased within the three level fair value hierarchy.

Securities sold under agreement to repurchase: The liability for securities sold under agreement to repurchase are carried at their contracted repurchase price, have short-term maturities and are repriced frequently with amounts normally due in one month or less and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of securities sold under agreement to repurchase are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Debt: These amounts are carried at outstanding principal less unamortized discount. However, a substantial portion of the debt was assumed in the Merger and recorded at fair value as of that date. As of June 30, 2012 and December 31, 2011, the fair value of the Company’s debt was estimated to be $32.7 million and $43.5 million, respectively. The estimated fair value measurements of the debt are generally based on discounted cash flow models prepared by the Company’s management primarily using discount rates for similar instruments issued to companies with similar credit risks to the Company and are generally classified within level 3 of the fair value hierarchy.

Derivatives: These amounts are carried at fair value. Derivatives may be included as a component of investments-trading, trading securities sold, not yet purchased, and other investments, at fair value. See notes 6 and 7. The fair value is generally based on quoted market prices on an exchange that is deemed to be active for derivative instruments such as foreign currency forward contracts and EuroDollar futures. For derivative instruments, such as “to-be-announced” securities (“TBAs”), the fair value is generally based on market price quotations from third party pricing services. See note 6 for disclosures concerning the categorization of the fair value measurements within the three level fair value hierarchy.

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C. Recent Accounting Developments

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”), which requires companies to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on a company’s financial position. The amendments require enhanced disclosures by requiring improved information about financial statements and derivative instruments that are either (1) offset in accordance with current literature, or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current literature. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures required by ASU 2011-11 will be applied retrospectively for all comparative periods presented. The Company is currently evaluating the impact of ASU 2011-11 on its disclosures about offsetting assets and liabilities.

4. RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES

Amounts receivable from brokers, dealers, and clearing agencies consist of the following at June 30, 2012 and December 31, 2011.

RECEIVABLES FROM BROKERS, DEALERS, AND CLEARING AGENCIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Receivable from clearing organizations	$	7,628	$	51,619
Unsettled regular way trades, net		—		17,232
Deposits with clearing organizations		1,647		2,112
Receivables from brokers, dealers, and clearing agencies	$	9,275	$	70,963

Receivable from clearing organizations represents un-invested cash held by the clearing organization which includes cash proceeds from short sales.

Amounts payable to brokers, dealers, and clearing agencies consists of the following at June 30, 2012 and December 31, 2011.

PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Unsettled regular way trades, net	$	830	$	—
Margin payable		35,027		24,633
Payables to brokers, dealers, and clearing agencies	$	35,857	$	24,633

Securities transactions are recorded on a trade date, as if they had settled. The related amounts receivable and payable for unsettled securities transactions are recorded net in receivables from or payables to brokers, dealers, and clearing agencies on the Company’s consolidated balance sheets. The Company incurred interest on margin payable of $831 and $983 for the six months ended June 30, 2012 and 2011, respectively, and $415 and $358 for the three months ended June 30, 2012 and 2011, respectively.

5. FINANCIAL INSTRUMENTS

Investments - Trading

The following table displays the carrying value of all investments classified as investments-trading as of the periods indicated:

INVESTMENTS - TRADING

(Dollars in Thousands)

Security Type	June 30, 2012		December 31, 2011
U.S. government agency MBS and CMOs (1)	$	30,685	$	7,563
U.S. government agency debt securities		34,452		14,600
RMBS		1,178		7,108
CMBS		—		1,587
U.S. Treasury securities		7,473		8,524

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Security Type	June 30, 2012		December 31, 2011
Interests in securitizations (2)		259		608
SBA loans		4,382		9,049
Corporate bonds and redeemable preferred stock		55,226		65,445
Foreign government bonds		99		67
Municipal bonds		18,895		9,225
Exchange traded funds		9,377		—
Certificates of deposit		4,079		710
Equity securities		87		60
Investments-trading	$	166,192	$	124,546

(1) Includes TBAs. See note 7.

(2) Primarily comprised of CDOs, CLOs, and ABS.

Trading Securities Sold, Not Yet Purchased

The following table displays the carrying value of all trading securities sold, not yet purchased as of the periods indicated:

TRADING SECURITIES SOLD, NOT YET PURCHASED

(Dollars in Thousands)

Security Type	June 30, 2012		December 31, 2011
U.S. government agency MBS (1)	$	47	$	16
U.S. Treasury securities		10,811		11,755
Corporate bonds and redeemable preferred stock		64,651		87,537
Foreign government bonds		23		158
Municipal bonds		122		143
Exchange traded funds		1,636		—
Certificates of deposit		6,829		4
Total	$	84,119	$	99,613

(1) Represents TBAs. See note 7.

The Company tries to manage its exposure to changes in interest rates for the interest rate sensitive securities it holds by entering into offsetting short positions for similar fixed rate securities.

The Company included the change in unrealized losses in the amount of $432 for the six months ended June 30, 2012 and the change in unrealized gains in the amount $1,248 for the six months ended June 30, 2011 in net trading revenue in the Company’s consolidated statements of operations.

Other Investments, at fair value

The following table provides detail of the investments included within other investments, at fair value:

OTHER INVESTMENTS, AT FAIR VALUE

(Dollars in Thousands)

	June 30, 2012
Security Type	Cost		Carrying Value		Unrealized Gain /  (Loss)
Interests in securitizations (1)	$	217	$	97	$	(120	)
Equity Securities:
EuroDekania		7,792		2,103		(5,689	)
Star Asia		23,219		32,299		9,080
Tiptree Financial Partners, L.P.		5,561		2,703		(2,858	)
Other securities		232		112		(120	)
Total equity securities		36,804		37,217		413
Residential loans		240		229		(11	)
Foreign currency forward contracts		—		66		66
Other investments, at fair value	$	37,261	$	37,609	$	348

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	December 31, 2011
Security Type	Cost		Carrying Value		Unrealized Gain /  (Loss)
Interests in securitizations (1)	$	217	$	88	$	(129	)
Equity Securities:
EuroDekania		7,792		2,370		(5,422	)
Star Asia		23,219		37,358		14,139
Tiptree Financial Partners, L.P.		5,561		2,533		(3,028	)
Other securities		232		156		(76	)
Total equity securities		36,804		42,417		5,613
Residential loans		278		267		(11	)
Other investments, at fair value	$	37,299	$	42,772	$	5,473

(1) Represents an interest in a CDO.

6. FAIR VALUE DISCLOSURES

Fair Value Option

The Company has elected to account for certain of its other financial assets at fair value under the fair value option provisions of FASB ASC 825, Financial Instruments (“FASB ASC 825”). The primary reason for electing the fair value option when it first became available in 2008, was to reduce the burden of monitoring the differences between the cost and the fair value of the Company’s investments, previously classified as available for sale securities, including the assessment as to whether the declines are temporary in nature and to further remove an element of management judgment. In addition, the election was made for certain investments that were previously required to be accounted for under the equity method because their fair value measurements were readily obtainable.

Such financial assets accounted for at fair value include:

• in general, securities that would otherwise qualify for available for sale treatment;

• in general, investments in equity method affiliates where the affiliate has all of the attributes in FASB ASC 946-10-15-2 (commonly referred to as investment companies); and

• in general, investments in residential loans.

The changes in fair value (realized and unrealized gains and losses) of these instruments for which the Company has elected the fair value option are recorded in principal transactions and other income in the consolidated statements of operations. All of the investments for which the Company has elected the fair value option are included as a component of other investments, at fair value in the consolidated balance sheets. The Company recognized net losses of $5,208 and $1,122 related to changes in fair value of investments that are included as a component of other investments, at fair value during the six months ended June 30, 2012 and 2011, respectively. The Company recognized net losses of $34 and net gains of $418 related to changes in fair value of investments that are included as a component of other investments, at fair value during the three months ended June 30, 2012 and 2011, respectively.

Fair Value Measurements

In accordance with FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”), the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the hierarchy under FASB ASC 820 are described below:

Level 1	Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2	Financial assets and liabilities whose values are based on one or more of the following:
1.	Quoted prices for similar assets or liabilities in active markets;
2.	Quoted prices for identical or similar assets or liabilities in non-active markets;
3.	Pricing models whose inputs other than quoted prices are observable for substantially the full term of the asset or liability; or
4.	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

15

Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the level 3 category presented in the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

16

A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain financial assets or liabilities. There were no transfers between level 1 and level 2 of the fair value hierarchy during the three and six months ended June 30, 2012 and 2011. Reclassifications impacting level 3 of the fair value hierarchy are reported as transfers in or transfers out of the level 3 category as of the beginning of the quarter in which reclassifications occur.

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

(Dollars in Thousands)

	June 30, 2012 Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	30,685	$	—	$	30,685	$	—
U.S. government agency debt securities		34,452		66		34,386		—
RMBS		1,178		—		1,178		—
U.S. Treasury securities		7,473		7,473		—		—
Interests in securitizations (1)		259		—		74		185
SBA loans		4,382		—		4,382		—
Corporate bonds and redeemable preferred stock		55,226		3,850		51,376		—
Foreign government bonds		99		—		99		—
Municipal bonds		18,895		—		18,895		—
Exchange traded funds		9,377		9,377		—		—
Certificates of deposit		4,079		—		4,079		—
Equity securities		87		24		—		63
Total investments-trading	$	166,192	$	20,790	$	145,154	$	248
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)		2,103		—		—		2,103
Star Asia (3)		32,299		—		—		32,299
Tiptree Financial Partners L.P. (4)		2,703		—		—		2,703
		37,105		—		—		37,105
Other		112		24		—		88
Total equity securities		37,217		24		—		37,193
Interests in securitizations (1)		97		—		—		97
Residential loans		229		—		229		—
Foreign currency forward contracts		66		66		—		—
Total other investments, at fair value	$	37,609	$	90	$	229	$	37,290
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	47	$	—	$	47	$	—
U.S. Treasury securities		10,811		10,811		—		—
Corporate bonds and redeemable preferred stock		64,651		313		64,338		—
Foreign government bonds		23		—		23		—
Municipal bonds		122		—		122		—
Exchange traded funds		1,636		1,636		—		—
Certificates of deposit		6,829		—		6,829		—
Total trading securities sold, not yet purchased	$	84,119	$	12,760	$	71,359	$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund - European.

(3) Real Estate Fund - Asian.

(4) Diversified Fund.

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FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

(Dollars in Thousands)

	December 31, 2011 Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	7,563	$	—	$	7,563	$	—
U.S. government agency debt securities		14,600		144		14,456		—
RMBS		7,108		—		2,176		4,932
CMBS		1,587		—		1,587		—
U.S. Treasury securities		8,524		8,524		—		—
Interests in securitizations (1)		608		—		387		221
SBA loans		9,049		—		9,049		—
Corporate bonds and redeemable preferred stock		65,445		779		64,666		—
Foreign government bonds		67		—		67		—
Municipal bonds		9,225		—		9,225		—
Certificates of deposit		710		—		710		—
Equity securities		60		25		—		35
Total investments-trading	$	124,546	$	9,472	$	109,886	$	5,188
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)		2,370		—		—		2,370
Star Asia (3)		37,358		—		—		37,358
Tiptree Financial Partners L.P. (4)		2,533		—		—		2,533
		42,261		—		—		42,261
Other		156		24		—		132
Total equity securities		42,417		24		—		42,393
Interests in securitizations (1)		88		—		—		88
Residential loans		267		—		—		267
Total other investments, at fair value	$	42,772	$	24	$	—	$	42,748
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	16	$	—	$	16	$	—
U.S. Treasury securities		11,755		11,755		—		—
Corporate bonds and redeemable preferred stock		87,537		1,084		86,453		—
Foreign government bonds		158		—		158		—
Municipal bonds		143		—		143		—
Certificates of deposit		4		—		4		—
Total trading securities sold, not yet purchased	$	99,613	$	12,839	$	86,774	$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund - European.

(3) Real Estate Fund - Asian.

(4) Diversified Fund.

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The following provides a brief description of the types of financial instruments the Company holds, the methodology for estimating fair value, and the level within the hierarchy of the estimate.

U.S. Government Agency MBS and CMOs: These are securities which are generally traded over-the-counter. The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. These valuations are based on a market approach. This is considered a level 2 valuation in the hierarchy.

In instances where the securities are either new issuances or experience illiquidity, such as CMOs and, more specifically, agency inverse interest-only securities, principal only, and fixed interest only among others, the Company may use its own internal valuation models which are based on an income approach. In some cases, new issuances are senior in nature or fairly liquid, however, due to the fact that it is a new issuance, it is difficult to obtain third party pricing and the Company uses internal models to determine fair value. In these cases, the Company will classify such an issuance as level 3 within the hierarchy until it is able to obtain third party pricing. Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy. In general, the fair values of U.S. government agency and MBS and CMOs which are classified as level 3 are determined primarily using discounted cash flow and option adjusted spread methodologies. Key inputs to these models are interest rates and prepayment rates. Attributes of the underlying mortgage loans, in the case of CMOs, that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value ratios; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; and historical prepayment. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. The level 3 classification of the fair value measurements of certain CMOs was applicable during the 2011 period.

U.S. Government Agency Debt Securities: Callable and non-callable U.S. government agency debt securities are measured primarily based on quoted market prices obtained from third party pricing services. Non-callable U.S. government agency debt securities are generally classified within level 1 and callable U.S. government agency debt securities are classified within level 2 of the valuation hierarchy.

RMBS and CMBS: The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. These valuations are based on a market approach. The Company generally classifies the fair value of these securities based on third party quotations within level 2 of the valuation hierarchy.

In instances where the Company is unable to obtain a reliable market price quotation from third party pricing services and there are no substantially similar securities that trade frequently as the securities held in trading inventory, the Company may determine the fair value of those securities using its own internal valuation models, which are based on an income approach. Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy. Information utilized in the Company’s internal valuation models may include the security’s credit rating, coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, estimated future interest rates, expected credit losses, credit enhancement, and recently executed transactions. The level 3 classification of the fair value measurements of certain residential mortgage-backed securities and commercial mortgage-backed securities was applicable during the 2011 period.

U.S. Treasury Securities: U.S. Treasury securities include U.S. Treasury bonds and notes and the fair values of the U.S. Treasury securities are based on quoted prices in active markets. Valuation adjustments are not applied. The Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

Interests in Securitizations: Interests in securitizations may be comprised of CDOs, CLOs and ABS, which may include, but are not limited to, securities backed by auto loans, credit card receivables or student loans. Where the Company is able to obtain independent market quotations from at least two broker-dealers and where a price within the range of at least two broker-dealers is used or market price quotations from third party pricing services is used, interests in securitizations will generally be classified as level 2 of the valuation hierarchy. These valuations are based on a market approach. The independent market quotations from broker-dealers are generally nonbinding. The Company seeks quotations from broker-dealers that historically have actively traded, monitored, issued, and been knowledgeable about interests in securitizations. The Company generally believes that to the extent that (1) it receives two quotations in a similar range from broker-dealers knowledgeable about interests in securitizations, and (2) the Company believes the broker-dealers gather and utilize observable market information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus among market participants and sources, then classification as level 2 of the valuation hierarchy is appropriate. In the absence of two broker-dealer market quotations, a single broker-dealer market quotation may be used without corroboration of the quote in which case the Company generally classifies the fair value within level 3 of the valuation hierarchy.

19

If quotations are unavailable, prices observed by the Company for recently executed market transactions may be used or valuation models prepared by the Company’s management may be used, which are based on an income approach. The models prepared by the Company’s management include estimates and the valuations derived from them could differ materially from amounts realizable in an open market exchange. Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy.

Establishing fair value is inherently subjective given the volatile and sometimes illiquid markets for certain interests in securitizations and requires management to make a number of assumptions, including assumptions about the future of interest rates, discount rates and the timing of cash flows. The assumptions the Company applies are specific to each security. Although the Company may rely on internal calculations to compute the fair value of certain interest in securitizations, the Company requests and considers indications of fair value from third party pricing services to assist in the valuation process.

SBA Loans: The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. The Company generally classifies these investments within level 2 of the valuation hierarchy. These valuations are based on a market approach.

Corporate Bonds, Redeemable Preferred Stock, and Foreign Government Bonds: The Company uses recently executed transactions, or third party quotations from independent pricing services to arrive at the fair value of its investments in corporate bonds, redeemable preferred stock and foreign government bonds. These valuations are based on a market approach. The Company generally classifies the fair value of these bonds within level 2 of the valuation hierarchy. In instances, where the fair values of securities are based on quoted prices in active markets (for example with redeemable preferred stock), the Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

Municipal Bonds: Municipal bonds which include obligations of U.S. states, municipalities and political subdivisions primarily include bonds or notes issued by U.S. municipalities. The Company generally values these securities using third party quotations such as market price quotations from third party pricing services. The Company generally classifies the fair value of these bonds within level 2 of the valuation hierarchy. The valuations are based on a market approach. In instances where the Company is unable to obtain reliable market price quotations from third party pricing services, the Company will use its own internal valuation models. In these cases, the Company will classify such securities as level 3 within the hierarchy until it is able to obtain third party pricing.

Exchange Traded Funds: Exchange traded funds are investment funds that trade in active markets, similar to public company stocks. The fair values of exchange traded funds are based on quoted prices in active markets. Valuation adjustments are not applied. The Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

Equity Securities: The fair value of equity securities that represent investments in publicly traded companies (common or preferred shares, options, warrants, and other equity investments) are determined using the closing price of the security as of the reporting date. These are securities which are traded on a recognized liquid exchange. This is considered a level 1 value in the valuation hierarchy. In some cases, the Company owns options or warrants in publicly traded companies when the option or warrant itself is not publicly traded. In those cases, the Company uses an internal valuation model and classifies the investment within level 3 of the valuation hierarchy. The non-exchange traded equity options and warrants are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Other equity securities represent investments in investment funds and other non-publicly traded entities. Substantially all of these other entities have the attributes of investment companies as described in FASB ASC 946-15-2. The Company estimates the fair value of these entities using the reported net asset value per share as of the reporting date in accordance with the “practical expedient” provisions related to investments in certain entities that calculate net asset value per share (or its equivalent) included in FASB ASC 820 for all entities except Star Asia. The Company generally classifies these estimates within either level 2 of the valuation hierarchy if its investment in the entity is currently redeemable or level 3 if its investment is not currently redeemable.

In the case of Star Asia, the Company utilizes a series of valuation models to determine fair value, which use both market and income based approaches and generally classifies its investment within level 3 of the valuation hierarchy. Star Asia accounts for itself as an investment company as described in ASC 946, Financial Services - Investment Companies. As an investment company, Star Asia carries its assets at fair value and reports NAV per share to its investors. However, Star Asia issued subordinated debt securities in 2009 at a significant discount to par. Upon issuance, Star Asia did not elect the fair value option for these liabilities and was not required to do so under ASC 946. Over time, it is the Company’s assessment that the fair value of the subordinated debt securities has diverged from its carrying value. Because Star Asia’s published NAV is calculated using the amortized cost of these subordinated debt securities, the Company has concluded it would be appropriate to adjust Star Asia’s reported NAV to recalculate it as if Star Asia’s subordinated debt were recorded at fair value as opposed to its historical amortized cost. The Company estimates the fair value of Star Asia’s subordinated debt securities by projecting the remaining debt cash outflows and discounting them at an estimated market rate as of the reporting date, for similar non-investment grade long term subordinated debt issuances.

20

The Company used discount rates of 7.50% and 7.15% as of December 31, 2011 and June 30, 2012, respectively, in determining the fair value of Star Asia’s subordinated debt securities. If the Company had used Star Asia’s unadjusted NAV, rather than the Company’s financial model described above in determining the fair value of the Company’s investment in Star Asia, the Company would have recorded its investment in Star Asia at a value of $46,031 and $41,740 as of December 31, 2011 and June 30, 2012, respectively, as compared to the fair value as determined by the Company’s internal valuation model of $37,358, and $32,299 as of December 31, 2011 and June 30, 2012, respectively.

Residential Loans: Management utilizes home price indices to value the residential loans. Previously management had considered adjustments to these indices but has elected going forward to not adjust the indices. Adjustments to the index implied a level 3 valuation. The new methodology uses an unadjusted index, which is considered an observable input and moves these investments into level 2.

Certificates of Deposit: The fair value of certificates of deposit is estimated using valuations provided by third party pricing services. Certificates of deposit are generally categorized in level 2 of the valuation hierarchy. However, in instances where the certificates of deposit are new issuances, or the payments of certificate of deposit are linked to an index, it may be difficult to obtain third party pricing and, in these cases, the Company uses internal models to determine fair value and the fair value is generally classified within level 3 of the valuation hierarchy. The level 3 classification of the fair value measurements of certain certificates of deposit was applicable during the 2011 period.

Derivatives:

Foreign Currency Forward Contracts

Foreign currency forward contracts are exchange-traded derivatives which transact on an exchange that is deemed to be active. The fair value of the foreign currency forward contracts is based on current quoted market prices. Valuation adjustments are not applied. These are considered a Level 1 value in the hierarchy. See note 7.

TBAs

The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. TBAs are generally classified within level 2 of the fair value hierarchy. If there is limited transaction activity or less transparency to observe market based inputs to valuation models, TBAs are classified in level 3 of the fair value hierarchy. U.S. government agency MBS and CMOs include TBAs. Unrealized gains on TBAs are included in investments-trading on the Company’s consolidated balance sheets and unrealized losses on TBAs are included in trading securities sold, not yet purchased on the Company’s consolidated balance sheets. See note 7.

21

Level 3 Financial Assets and Liabilities

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized level 3 inputs to determine fair value for the six and three months ended June 30, 2012 and 2011.

LEVEL 3 INPUTS

Six Months Ended June 30, 2012

(Dollars in Thousands)

	January  1, 2012		Total gains and losses included in earnings									Purchases		Sales			June  30, 2012		Change  in unrealized gains/(losses) for the  period included in earnings (1)
			Net trading			Principal transactions and other income			Transfers out of Level 3
Assets:
Investments-trading:
RMBS	$	4,932	$	17		$	—		$	—		$	171	$	(5,120	)	$	—	$	—
Interests in securitizations (2)		221		(58	)		—			—			2,225		(2,203	)		185		(37	)
Equity securities		35		(98	)		—			—			126		—			63		(98	)
Total investments-trading	$	5,188	$	(139	)	$	—			—		$	2,522	$	(7,323	)	$	248	$	(135	)
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (3)	$	2,370	$	—		$	(267	)		—		$	—	$	—		$	2,103	$	(267	)
Star Asia (4)		37,358		—			(5,059	)		—			—		—			32,299		(5,059	)
Tiptree Financial Partners, L.P. (5)		2,533		—			170			—			—		—			2,703		170
		42,261		—			(5,156	)		—			—		—			37,105		(5,156	)
Other		132		—			(44	)		—			—		—			88		(44	)
Total equity securities		42,393		—			(5,200	)		—			—		—			37,193		(5,200	)
Interests in securitizations (2)		88		—			9			—			—		—			97		9
Residential loans		267		—			—			(267	)		—		—			—		—
Total other investments, at fair value	$	42,748	$	—		$	(5,191	)	$	(267	)	$	—	$	—		$	37,290	$	(5,191	)

(1) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2) Primarily comprised of CDOs, CLOs, and ABS.

(3) Hybrid Securities Funds - European.

(4) Real Estate Funds - Asian.

(5) Diversified Fund.

22

LEVEL 3 INPUTS

Six Months Ended June 30, 2011

(Dollars in Thousands)

	January  1, 2011		Total gains and losses included in earnings					Transfers into Level 3		Purchases		Sales (1)			June  30, 2011		Change  in unrealized gains/(losses) for the  period included in earnings (2)
			Net trading		Principal transactions and other income
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	68,885	$	452	$	—		$	4,332	$	20,599	$	(85,649	)	$	8,619	$	602
RMBS		—		—		—			—		1,473		—			1,473		—
Commercial mortgage-backed securities		—		114		—			—		1,233		—			1,347		114
Interests in securitizations (3)		4,500		6,238		—			—		8,101		(11,548	)		7,291		340
Certificates of deposit		—		3		—			—		761		(763	)		1		2
Equity securities		—		30		—			—		70		(2	)		98		30
Total investments-trading	$	73,385	$	6,837	$	—		$	4,332	$	32,237	$	(97,962	)	$	18,829	$	1,088
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)	$	1,258	$	—	$	1,619		$	—	$	533	$	—		$	3,410	$	1,619
Star Asia (5)		38,025		—		(2,014	)		—		226		(476	)		35,761		(2,014	)
Tiptree Financial Partners, L.P.(6)		2,480		—		71			—		—		—			2,551		71
		41,763		—		(324	)		—		759		(476	)		41,722		(324	)
Investment Funds
Deep Value (7)		28		—		(9	)		—		—		(19	)		—		—
		28		—		(9	)		—		—		(19	)		—		—
Other		500		—		(212	)		—		36		(59	)		265		(212	)
Total equity securities		42,291		—		(545	)		—		795		(554	)		41,987		(536	)
Interests in securitizations (3)		105		—		—			—		—		—			105		—
Residential loans		303		—		5			—		—		(32	)		276		5
Total other investments, at fair value	$	42,699	$	—	$	(540	)	$	—	$	795	$	(586	)	$	42,368	$	(531	)

(1) Includes return of principal/capital of interests in U.S. government agency MBS and CMOs, securitizations, investment funds and residential loans. The sale of $476 attributable to Star Asia represents the transfer of 54,452 shares of Star Asia to an employee for services rendered during 2010. See note 19.

(2) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs and CLOs.

(4) Hybrid Securities Funds - European.

(5) Real Estate Funds - Asian.

(6) Diversified Fund.

(7) Real Estate Funds.

23

LEVEL 3 INPUTS

Three Months Ended June 30, 2012

(Dollars in Thousands)

	March  31, 2012		Total gains and losses included in earnings								Purchases		Sales			June  30, 2012		Change  in unrealized gains/(losses) for the  period included in earnings (1)
			Net trading			Principal transactions and other income			Transfers out of Level 3
Assets:
Investments-trading:
Interests in securitizations (2)	$	2,409	$	(21	)	$	—		$	—	$	—	$	(2,203	)	$	185	$	—
Equity securities		167		(104	)		—			—		—		—			63		(104	)
Total investments-trading	$	2,576	$	(125	)	$	—			—	$	—	$	(2,203	)	$	248	$	(104	)
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (3)	$	2,348	$	—		$	(245	)	$	—	$	—	$	—		$	2,103	$	(245	)
Star Asia (4)		32,118		—			181			—		—		—			32,299		181
Tiptree Financial Partners, L.P. (5)		2,650		—			53			—		—		—			2,703		53
		37,116		—			(11	)		—		—		—			37,105		(11	)
Other		82		—			6			—		—		—			88		6
Total equity securities		37,198		—			(5	)		—		—		—			37,193		(5	)
Interests in securitizations (2)		97		—			—			—		—		—			97		—
Total other investments, at fair value	$	37,295	$	—		$	(5	)	$	—	$	—	$	—		$	37,290	$	(5	)

(1) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2) Primarily comprised of CDOs, CLOs, and ABS.

(3) Hybrid Securities Funds - European.

(4) Real Estate Funds - Asian.

(5) Diversified Fund.

24

LEVEL 3 INPUTS

Three Months Ended June 30, 2011

(Dollars in Thousands)

	March  31, 2011		Total gains and losses included in earnings						Transfers into Level 3		Purchases		Sales (1)			June  30, 2011		Change  in unrealized gains/(losses) for the  period included in earnings (2)
			Net trading			Principal transactions and other income
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	12,206	$	1,024		$	—		$	—	$	7,283	$	(11,894	)	$	8,619	$	706
RMBS		—		—			—			—		1,473		—			1,473		—
Commercial mortgage-backed securities		—		114			—			—		1,233		—			1,347		114
Interests in securitizations (3)		1,857		1,000			—			—		7,016		(2,582	)		7,291		44
Certificates of deposit		393		—			—			—		—		(392	)		1		—
Equity securities		74		(46	)		—			—		70		—			98		(46	)
Total investments-trading	$	14,530	$	2,092		$	—		$	—	$	17,075	$	(14,868	)	$	18,829	$	818
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)	$	2,033	$	—		$	844		$	—	$	533	$	—		$	3,410	$	844
Star Asia (5)		35,094		—			667			—		—		—			35,761		667
Tiptree Financial Partners, L.P. (6)		2,511		—			40			—		—		—			2,551		40
		39,638		—			1,551			—		533		—			41,722		1,551
Investment Funds
Deep Value (7)		28		—			(9	)		—		—		(19	)		—		—
		28		—			(9	)		—		—		(19	)		—		—
Other		553		—			(265	)		—		36		(59	)		265		(265	)
Total equity securities		40,219		—			1,277			—		569		(78	)		41,987		1,286
Interests in securitizations (3)		105		—			—			—		—		—			105		—
Residential loans		287		—			3			—		—		(14	)		276		3
Total other investments, at fair value	$	40,611	$	—		$	1,280		$	—	$	569	$	(92	)	$	42,368	$	1,289

(1) Includes return of principal/capital of interests in U.S. government agency MBS and CMOs, securitizations, investment funds and residential loans.

(2) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs and CLOs.

(4) Hybrid Securities Funds - European.

(5) Real Estate Funds - Asian.

(6) Diversified Fund.

(7) Real Estate Funds.

The circumstances that would result in transferring certain financial instruments from level 2 to level 3 of the valuation hierarchy would typically include what the Company believes to be a decrease in the availability, utility, and reliability of observable market information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus among market participants and sources.

25

During 2009, the liquidity and transparency surrounding structured credit products, such as interests in securitizations, continued to diminish. The absence of new issue activity in the primary market led to a continually decreasing level of transparency, as seasoned secondary issuances could not be analyzed on a comparative basis relative to new issuances. In addition, diminished trading activity in the secondary market also led the Company to believe that broker-dealer quotations may not be based on observable and reliable market information. The Company has maintained this assessment during 2012 and has not transferred any of these assets out of level 3 of the valuation hierarchy.

Investments-trading: During the six and three months ended June 30, 2012, there were no transfers into or out of level 3 of the valuation hierarchy.

During the six months ended June 30, 2011, there were no transfers out of level 3 and there was one transfer of $4,332 into level 3 of the valuation hierarchy related to one security. In this case, as of December 31, 2010, the Company was able to obtain a reliable quote from a third party pricing service. During the first half of 2011, the Company was unable to obtain a reliable quote and relied upon an internal valuation model for that same security. During the three months ended June 30, 2011, there were no transfers into or out of level 3.

Other investments, at fair value: During the six months ended June 30, 2012, the Company transferred $267 in residential loans from level 3 to level 2 of the valuation hierarchy. During the three months ended June 30, 2012, there were no transfers into or out of level 3 of the valuation hierarchy.

During the six and three months ended June 30, 2011, there were no transfers into or out of level 3 of the valuation hierarchy.

The following table provides the quantitative information about level 3 fair value measurements as of June 30, 2012:

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in Thousands)

	Fair Value at June  30, 2012		Valuation Technique		Significant Unobservable Inputs	Weighted average			Range of Significant Inputs
Assets:
Investments-trading:
Equity securities	$	63		Black Scholes	Expected Life Volatility Dividend Yield		5 years 25 0	%  %		5 years 25 0	%  %
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
Star Asia	$	32,299		Adjusted NAV	Discount rate on debt		7.15	%		7.15	%
Other	$	88		Black Scholes	Expected Life Volatility Dividend Yield		5.2 years 25 0	%  %		5-10 years 25 0	%  %

26

Investments in Certain Entities That Calculate Net Asset Value Per Share (Or Its Equivalent)

The following table presents additional information about investments in certain entities that calculate net asset value per share (regardless of whether the “practical expedient” provisions of FASB ASC 820 have been applied) which are measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011.

FAIR VALUE MEASUREMENTS OF INVESTMENTS IN CERTAIN ENTITIES

THAT CALCULATE NET ASSET VALUE PER SHARE (OR ITS EQUIVALENT)

	Fair Value at June 30, 2012 (dollars in thousands)		Unfunded Commitments		Redemption Frequency (if Currently Eligible)		Redemption Notice  Period
Other Investment Vehicles:
EuroDekania (a)	$	2,103		N/A		N/A		N/A
Star Asia (b)		32,299		N/A		N/A		N/A
Tiptree Financial Partners, L.P. (c)		2,703		N/A		N/A		N/A
	$	37,105

27

	Fair Value at December 31, 2011 (dollars in thousands)		Unfunded Commitments		Redemption Frequency (if Currently Eligible)		Redemption Notice  Period
Other Investment Vehicles:
EuroDekania (a)	$	2,370		N/A		N/A		N/A
Star Asia (b)		37,358		N/A		N/A		N/A
Tiptree Financial Partners, L.P. (c)		2,533		N/A		N/A		N/A
	$	42,261

N/A - Not applicable.

(a) EuroDekania’s investment strategy is to make investments in hybrid capital securities that have attributes of debt and equity, primarily in the form of subordinated debt issued by insurance companies, banks and bank holding companies based primarily in Western Europe (“EuroTruPS”); widely syndicated leveraged loans issued by European corporations CMBS, including subordinated interests in first mortgage real estate loans (“B-Notes”); and RMBS and other ABS backed by consumer and commercial receivables. The majority of the assets are denominated in Euros and U.K. Pounds Sterling. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820.

(b) Star Asia’s investment strategy is to make investments in Asian real estate structured finance investments, including CMBS, corporate debt of REITs and real estate operating companies, whole loans, mezzanine loans and other commercial real estate fixed income investments. The fair value of the investment in this category has been estimated using a series of internal valuation models that use both the market and income approach. If the Company had used Star Asia’s unadjusted reported net asset value to determine its fair value, the carrying value of its investment in Star Asia would have been $41,740 as of June 30, 2012 and $46,031 as of December 31, 2011.

(c) The investment strategy of Tiptree Financial Partners, L.P. (“Tiptree”) is currently focused on investing in (a) specialty finance companies; (b) alternative asset management companies, and (c) diversified credit assets and related equity interests. Tiptree primarily seeks to acquire majority ownership interests in its investees. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820. The Company uses the latest reported net asset value from Tiptree. From time to time, the net asset value may be one quarter in arrears.

7. DERIVATIVE FINANCIAL INSTRUMENTS

FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”), provides for optional hedge accounting. When a derivative is deemed to be a hedge and certain documentation and effectiveness testing requirements are met, reporting entities are allowed to record all or a portion of the change in the fair value of a designated hedge as an adjustment to other comprehensive income (“OCI”) rather than as a gain or loss in the statements of operations. To date, the Company has not designated any derivatives as hedges under the provisions included in FASB ASC 815.

Derivative financial instruments are recorded at fair value in the consolidated statements of operations and are included within investments-trading; other investments, at fair value; and trading securities sold, not yet purchased.

The Company may, from time to time, enter into derivatives to manage its risk exposures (i) arising from fluctuations in foreign currency rates with respect to the Company’s investments in foreign currency denominated investments; (ii) arising from the Company’s investments in interest rate sensitive investments; and (iii) arising from the Company’s facilitation of mortgage-backed trading. Derivatives entered into by the Company, from time to time, may include (i) foreign currency forward contracts; (ii) EuroDollar futures; and (iii) purchase and sale agreements of TBAs. TBAs are forward mortgage-backed securities whose collateral remain “to be announced” until just prior to the trade settlement. TBAs are accounted for as derivatives under FASB ASC 815 when either of the following conditions exists: (i) when settlement of the TBA trade is not expected to occur at the next regular settlement date (which is typically the next month); or (ii) a mechanism exists to settle the contract on a net basis. Otherwise, TBAs are recorded as a standard security trade. The settlement of these transactions is not expected to have a material effect on the Company’s consolidated financial statements.

Derivatives involve varying degrees of off-balance sheet risk, whereby changes in the level or volatility of interest rates or market values of the underlying financial instruments may result in changes in the value of a particular financial instrument in excess of its carrying amount. Depending on the Company’s investment strategy, realized and unrealized gains and losses are recognized in principal transactions and other income or in net trading in the Company’s consolidated statements of operations on a trade date basis.

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The Company may, from time to time, enter into the following derivative instruments:

Foreign Currency Forward Contracts

The Company invests in foreign currency denominated investments that expose it to fluctuations in foreign currency rates and, therefore, the Company may, from time to time, hedge such exposure by using foreign currency forward contracts. The Company carries the foreign currency forward contracts at fair value and includes them as a component of other investments, at fair value in the Company’s consolidated balance sheets. As of June 30, 2012, the Company had 80 outstanding foreign currency forward contracts with a notional amount of 12,500 Japanese Yen per contract. As of December 31, 2011, the Company had no outstanding foreign currency forward contracts.

EuroDollar Futures

The Company invests in floating rate investments that expose it to fluctuations in interest and, therefore, the Company may, from time to time, hedge such exposure using EuroDollar futures. The Company carries the EuroDollar futures contracts at fair value and includes them as a component of investments-trading in the Company’s consolidated balance sheets. As of June 30, 2012 and December 31, 2011, the Company had no outstanding EuroDollar futures contracts.

TBAs

The Company trades U.S. Government agency obligations. In connection with these activities, the Company may be required to maintain inventory in order to facilitate customer transactions. In order to mitigate exposure to market risk, the Company enters in to the purchase and sale of TBAs. The Company carries the TBAs at fair value and includes them as a component of investments–trading or trading securities sold, not yet purchased in the Company’s consolidated balance sheets. At June 30, 2012, the Company had open TBA sale agreements in the notional amount of $13,250, and open TBA purchase agreements in the notional amount of $9,245. At December 31, 2011, the Company had open TBA sale agreements in the notional amount of $4,325.

The following table presents the Company’s derivative financial instruments and the amount and location of the fair value recognized in the consolidated balance sheets as of June 30, 2012 and December 31, 2011, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION

(Dollars in Thousands)

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Balance Sheet Classification	Unrealized Gain / (Loss)  as of June 30, 2012			Unrealized Gain / (Loss)  as of December 31, 2011
Foreign currency forward contracts	Other investments, at fair value	$	66		$	—
TBAs	Investments-trading		38			—
TBAs	Trading securities sold, not yet purchased		(47	)		(16	)
		$	57		$	(16	)

The following table presents the Company’s derivative financial instruments and the amount and location of the net gain (loss) recognized in the consolidated statement of operations for the six and three months ended June 30, 2012 and 2011:

In addition to the above activities related to TBAs, the Company also enters into TBAs in order to assist clients (generally small to middle size mortgage loan originators) in hedging the interest rate risk associated with the mortgages the clients hold. In general, the Company will enter into a TBA purchase agreement with the client. Then, the Company will immediately enter into a TBA sale agreement with the exact same terms and settlement date with a separate counter-party. The Company seeks to profit through a small mark up in the price of the transaction. The TBAs will match underlying terms and settle dates. Because the Company has purchased and sold the same security, it is no longer exposed to market movements of the underlying TBA. The gain or loss on the transaction is recorded as a component of net trading in the consolidated statement of operations and is included in due to or due from broker in the consolidated balance sheet until it settles. As of June 30, 2012, the Company had unsettled TBA purchase contracts and offsetting TBA sale agreements in the notional amount of $331,884. The net profit on these transactions is recorded as a component of net trading revenue and is included as a component of TBA revenue in the table below. Any revenue on trades that have not yet settled is included as a component of due to or due from brokers, clearings, and clearing organizations. As of June 30, 2011, unsettled TBA revenue was $458.

DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION

(Dollars in Thousands)

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Income Statement Classification	Six Months Ended June 30, 2012			Six Months Ended June 30, 2011
Foreign currency forward contracts	Revenues—principal transactions and other income	$	(35	)	$	(219	)
EuroDollar futures contracts	Revenues—net trading		—			(2	)
TBAs	Revenues—net trading		254			(7,970	)
		$	219		$	(8,191	)

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Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Income Statement Classification	Three Months Ended June 30, 2012			Three Months Ended June 30, 2011
Foreign currency forward contracts	Revenues—principal transactions and other income	$	(35	)	$	(922	)
EuroDollar futures contracts	Revenues—net trading		—			(64	)
TBAs	Revenues—net trading		156			(8,113	)
		$	121		$	(9,099	)

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8. COLLATERALIZED SECURITIES TRANSACTIONS

Securities purchased under agreements to resell (“reverse repurchase agreements” or “receivables under resale agreements”) or sales of securities under agreements to repurchase (“repurchase agreements”), principally U.S. government and federal agency obligations, SBA loans and mortgage-backed securities, are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase amounts plus accrued interest. Resulting interest income and expense are included in net trading in the consolidated statements of operations.

In the case of reverse repurchase agreements, the Company generally takes possession of securities as collateral. Likewise, in the case of repurchase agreements, the Company is required to provide the counterparty with securities.

In certain cases a repurchase agreement and a reverse repurchase agreement may be entered into with the same counterparty. If certain requirements are met, the offsetting provisions included in FASB ASC 210, Balance Sheet (“FASB ASC 210”), allow (but do not require) the reporting entity to net the asset and liability on the balance sheet. It is the Company’s policy to present the assets and liabilities on a gross basis even if the conditions described in offsetting provisions included in FASB ASC 210 are met. The Company classifies reverse repurchase agreements as a separate line item within the assets section of the Company’s consolidated balance sheets. The Company classifies repurchase agreements as a separate line item within the liabilities section of the Company’s consolidated balance sheets.

In the case of reverse repurchase agreements, if the counterparty does not meet its contractual obligation to return securities used as collateral, or does not deposit additional securities or cash for margin when required, the Company may be exposed to the risk of reacquiring the securities or selling the securities at unfavorable market prices in order to satisfy its obligations to its customers or counterparties. The Company’s policy to control this risk is monitoring the market value of securities pledged or used as collateral on a daily basis and requiring adjustments in the event of excess market exposure.

In the case of repurchase agreements, if the counterparty makes a margin call and the Company is unable or unwilling to meet the margin call, the counterparty can sell the securities to repay the obligation. The Company is at risk that the counterparty may sell the securities at unfavorable market prices and the Company may sustain significant loss. The Company controls this risk by monitoring its liquidity position to ensure it has sufficient cash or liquid securities to meet margin calls.

In the normal course of doing business, the Company enters into reverse repurchase agreements that permit it to re-pledge or resell the securities to others.

The Company enters into reverse repurchase agreements to acquire securities to cover short positions or as an investment. The Company enters into repurchase agreements to finance the Company’s securities positions held in inventory or to finance reverse repurchase agreements entered into as an investment.

At June 30, 2012 and December 31, 2011, the Company held reverse repurchase agreements of $247,289 and $129,978, respectively, and the fair value of securities received as collateral under reverse repurchase agreements was $263,414 and $137,829, respectively. Substantially all of the collateral for reverse repurchase agreements was re-pledged as collateral for repurchase agreements.

At June 30, 2012 and December 31, 2011, the Company had repurchase agreements of $244,061 and $134,870, respectively, and the fair value of securities pledged as collateral under repurchase agreements was $258,903 and $142,295, respectively. These amounts include collateral for reverse repurchase agreements that were re-pledged as collateral for repurchase agreements.

As of June 30, 2012 and December 31, 2011, the Company’s reverse repurchase agreements and repurchase agreements were predominantly collateralized securities in the following asset classes: Agency Specified Pools, Agency Hybrid Arms, and Fixed rate Agency CMO’s.

9. INVESTMENTS IN EQUITY METHOD AFFILIATES

The Company has several investments that are accounted for under the equity method. Equity method accounting requires that the Company record its investment on the consolidated balance sheets and recognize its share of the affiliate’s net income as earnings each year. Investment in equity method affiliates is included as a component of other assets on the Company’s consolidated balance sheets.

The Company has certain equity method affiliates for which it has elected the fair value option. The Company elected the fair value option for its investments in Muni Funding Company of America (“MFCA”) effective January 1, 2008 and effective with the ownership increase in Star Asia in March 2010, which qualified it for equity method treatment, the Company continued its fair value election regarding Star Asia. See notes 5 and 6. Prior to this increase, Star Asia had been treated as an available for sale security for which the fair value option had been elected.

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During the six months ended June 30, 2012, the Company had the following equity method investees (excluding equity method affiliates for which it had adopted the fair value option): (i) Star Asia Manager; (ii) Deep Value GP; (iii) Deep Value GP II; (iv) Star Asia SPV; (v) Star Asia Opportunity; (vi) Star Asia Capital Management; and (vii) Duart Capital. The following table summarizes the activity and the earnings of the Company’s equity method affiliates.

INVESTMENT IN EQUITY METHOD AFFILIATES

(Dollars in Thousands)

	Investment in																			Total
	Star Asia Manager			Deep Value GP			Deep Value GP II		Star Asia SPV			Star  Asia Opportunity			Star Asia Capital Management			Duart Capital and Other
Balance at January 1, 2012	$	1,046		$	21		$	33	$	466		$	4,460		$	50		$	—	$	6,076
Investments / advances		—			—			—		—			—			6			—		6
Distributions/repayments		(1,050	)		—			—		(526	)		(3,908	)		(250	)		—		(5,734	)
Earnings / (loss) realized		580			(14	)		3		724			619			130			—		2,042
Balance at June 30, 2012	$	576		$	7		$	36	$	664		$	1,171		$	(64	)	$	—	$	2,390

The following table summarizes the combined financial information for all equity method investees, including equity method investees for which the fair value option was elected. This aggregated summarized financial data does not represent the Company’s proportionate share of equity method investees’ assets or earnings.

SUMMARY DATA OF EQUITY METHOD INVESTEES

(unaudited)

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Total Assets	$	257,864	$	257,735
Liabilities	$	95,063	$	68,530
Equity attributable to the investees		162,044		188,170
Non-controlling interest		757		1,035
Liabilities & Equity	$	257,864	$	257,735

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012			2011
Net income / (loss)	$	5,767	$	17,783	$	(10,119	)	$	1,952
Net income / (loss) attributable to the investees	$	5,730	$	18,207	$	(9,841	)	$	2,666

See note 20 for information regarding transactions with the Company’s equity method investees.

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10. OTHER ASSETS AND ACCOUNTS PAYABLE AND OTHER LIABILITIES

Other assets include prepaid expenses; security deposits; miscellaneous other assets; cost method investments; furniture, equipment and leasehold improvements, net; intangible assets; and investments in private partnerships and limited liability companies that are valued using the equity method of accounting.

Other assets at June 30, 2012 and December 31, 2011 included:

	June 30, 2012		December 31, 2011
Prepaid expenses	$	3,052	$	3,819
Security deposits		2,506		2,541
Miscellaneous other assets		555		97
Cost method investment		250		250
Furniture, equipment and leasehold improvements, net		2,682		3,373
Intangible assets		538		538
Equity method affiliates		2,390		6,076
Other assets	$	11,973	$	16,694

Accounts payable and other liabilities include accounts payable, rent payable, payroll tax liabilities, accrued interest payable, accrued income taxes, guarantee liabilities related to Alesco XIV (see note 17), contingent settlement payable (see note 17), deferred income, and other general accrued expenses.

Accounts payable and other liabilities at June 30, 2012 and December 31, 2011 included:

	June 30, 2012		December 31, 2011
Accounts payable	$	1,104	$	1,181
Rent payable		1,116		1,289
Accrued interest payable		553		662
Income and payroll taxes payable		1,334		1,947
Guarantee liability		1,084		1,084
Contingent settlement payable		4,357		—
Deferred income		964		1,761
Other general accrued expenses		1,738		5,643
Accounts payable and other liabilities	$	12,250	$	13,567

11. VARIABLE INTEREST ENTITIES

FASB ASC 810, Consolidation (“FASB ASC 810”) contains the guidance surrounding the definition of variable interest entities (“VIEs”), the definition of variable interests, and the consolidation rules surrounding VIEs. In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company has variable interests in VIEs through its management contracts and investments in various securitization entities including CLOs and CDOs.

Once it is determined that the Company holds a variable interest in a VIE, FASB ASC 810 requires that the Company perform a qualitative analysis to determine (i) which entity has the power to direct the matters that most significantly impact the VIEs financial performance and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The entity that has both of these characteristics is deemed to be the primary beneficiary and required to consolidate the VIE. This assessment must be done on an ongoing basis.

The Company classifies the VIEs it is involved with into two groups: (i) VIEs managed by the Company and (ii) VIEs managed by third parties. In the case of the VIEs that the Company has been involved with, the Company has generally concluded that the entity that manages the VIE has the power to direct the matters that most significantly impact the VIEs financial performance. This is not a blanket conclusion as it is possible for an entity other than the manager to have the power to direct such matters. However, for all the VIEs the Company is involved with as of June 30, 2012, the Company has drawn this conclusion.

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In the case where the Company has an interest in a VIE managed by a third party, the Company has concluded that it is not the primary beneficiary because the Company does not have the power to direct its activities. In the case of an interest in a VIE managed by the Company, the Company will perform an additional qualitative analysis to determine if its interest (including any investment as well as any management fees that qualify as variable interests) could absorb losses or receive benefits that could potentially be significant to the VIE. This analysis considers the most optimistic and pessimistic scenarios of potential economic results that could reasonably be experienced by the VIE. Then, the Company compares the benefits it would receive (in the optimistic scenario) or the losses it would absorb (in the pessimistic scenario) as compared to all benefits and losses absorbed by the VIE in total. If the benefits or losses absorbed by the Company were significant as compared to total benefits and losses absorbed by all variable interest holders, then the Company would conclude it is the primary beneficiary.

As of June 30, 2012, the Company has variable interests in various securitizations but it has determined that it is not the primary beneficiary and, therefore, is not consolidating the securitization VIEs. The maximum potential financial statement loss the Company would incur if the securitization vehicles were to default on all of their obligations would be (i) the loss of value of the interests in securitizations that the Company holds in its inventory at the time and (ii) any management fee receivables in the case of managed VIEs. The Company has not provided financial support to these VIEs during the six and three months ended June 30, 2012 and 2011 and had no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at June 30, 2012 and December 31, 2011.

The following table presents the carrying amounts of the assets in the Company’s consolidated balance sheets that relate to the Company’s variable interest in identified VIEs with the exception of the two trust VIEs that hold the Company’s junior subordinated notes (see note 12) and the Company’s maximum exposure to loss associated with these identified nonconsolidated VIEs in which it holds variable interests at June 30, 2012 and December 31, 2011.

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES

(Dollars in Thousands)

	June 30, 2012
	Carrying Amount				Maximum Exposure to loss in non-
	Other Receivables		Other Investments, at Fair Value		consolidated VIEs
Managed VIEs	$	1,697	$	—	$	1,697
Third party managed VIEs		117		97		214
Total	$	1,814	$	97	$	1,911

	December 31, 2011
	Carrying Amount				Maximum Exposure to loss in non-
	Other Receivables		Other Investments, at Fair Value		consolidated VIEs
Managed VIEs	$	1,830	$	—	$	1,830
Third party managed VIEs		175		88		263
Total	$	2,005	$	88	$	2,093

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12. DEBT

The Company had the following debt outstanding as of June 30, 2012 and December 31, 2011, respectively:

DETAIL OF DEBT

(Dollars in Thousands)

Description	Current Outstanding Par			June 30, 2012		December 31, 2011		Interest Rate Terms			Weighted Average Interest Rate at 06/30/2012			Weighted Average Maturity
Contingent convertible senior notes:
7.625% contingent convertible senior notes (the “Old Notes”)	$	100		$	100	$	10,303		7.63	%		7.63	%	July 2012(1)
10.50% contingent convertible senior notes (the “New Notes”)		8,121			8,049		8,030		10.50	%		10.50	%	May 2014(2)
	$	8,221		$	8,149	$	18,333
Junior subordinated notes	$	48,125	(3)		17,068		17,343		7.47	%		7.47	%	August 2036
Subordinated notes payable	$	1,514			1,514		1,491		12.00	%(4)		12.00	%	June 2013
Total				$	26,731	$	37,167

(1) Represents the date the Company redeemed the remaining $100 aggregate principal amount of Old Notes outstanding for cash.

(2) Represents the weighted average put date maturity. The weighted average contractual maturity for the New Notes is May 2027.

The Company may redeem all or part of the $8,121 aggregate principal amount of the New Notes for cash on or after May 20, 2014, at a redemption price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes may require the Company to repurchase all or a portion of the New Notes for cash on May 15, 2014; May 15, 2017; and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes are required to provide notice to the Company of their plan to redeem the New Notes at any time during the 30 days prior to May 15, 2014; May 15, 2017; and May 15, 2022.

(3) The outstanding par represents the total par amount of the junior subordinated notes held by two separate VIE trusts. The Company does not consolidate these trusts. The Company holds $1,489 par value of these junior subordinated notes. These notes held by the Company have a carrying value of $0. Therefore, the net par value held by third parties is $48,125.

(4) Comprised of 9% paid currently and 3% paid in kind.

Refer to note 19 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of the Company’s debt.

In March 2012, the Company repurchased $150 aggregate principal amount of the Old Notes from an unrelated third party for $147 excluding accrued interest. The Company recognized a gain from repurchase of debt of $3 which was included as a separate component of non-operating income / (expense) in the Company’s consolidated statements of operations.

On May 15, 2012, the holders of $10,110 aggregate principal amount of the Old Notes exercised their option to require the Company to repurchase their Old Notes. On July 5, 2012, the Company, at its option, redeemed the remaining $100 aggregate principal amount of the Old Notes outstanding.

13. REDEEMABLE NON-CONTROLLING INTEREST (TEMPORARY EQUITY)

The redeemable non-controlling interest represents the equity interests of PrinceRidge which are not owned by the Company. The members of PrinceRidge have the right to withdraw from PrinceRidge and require PrinceRidge to redeem the interests for cash over a contractual payment period. The Company has concluded these interests should be treated as temporary equity under Accounting Series Release 268 (“ASR 268”). These interests are shown outside of the permanent equity of IFMI in its consolidated balance sheet as redeemable non-controlling interests.

In June 2011, one partner withdrew from PrinceRidge and, therefore, the Company reclassified $3,536 from redeemable non-controlling interest to mandatorily redeemable equity interests on its consolidated balance sheets. During the first half of 2012, the Company reclassified $6,071 from redeemable non-controlling interest to mandatorily redeemable equity interests in its consolidated

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balance sheets due to partnership withdrawals from PrinceRidge. In addition, the Company distributed cash of $43 during the first quarter of 2012 to a withdrawing partner and received $20 in cash related to capital contributions made to PrinceRidge during the second quarter of 2012. Per the terms of the governing documents, PrinceRidge may redeem a partner’s equity interests over a period of time of up to 2 to 5 years. The amount actually due to a withdrawing partner will fluctuate over time based on the operating results of PrinceRidge. The carrying value of the liability owed to a withdrawing partner will be recorded at the amount owed as of each balance sheet date. Any increases or decreases in the amount owed will be recorded as interest income or expense and will be included in the non operating section of the consolidated statement of operations. During the first half of 2012, the Company distributed cash of $789 to the holders of mandatorily redeemable equity interests. As of June 30, 2012 and December 31, 2011, the mandatorily redeemable equity interests totaled $8,299 and $3,149, respectively. See also note 22.

14. PERMANENT EQUITY

Stockholders’ Equity

Common Equity: The following table reflects the activity for the six months ended June 30, 2012 related to the number of shares of unrestricted common stock that the Company had issued as of June 30, 2012:

	Common Stock Shares
Balance at December 31, 2011 (1)		10,132,497
Shares issued in connection with the redemption of Operating LLC units		186,339
Vesting of shares		239,259
Shares withheld for employee taxes		(1,780	)
Balance at June 30, 2012 (1)		10,556,315

(1) Includes 50,400 shares of the Company’s common stock held as treasury stock.

In connection with the acquisition of JVB in January 2011, the Company issued 559,020 restricted units of the Operating LLC to certain of the former owners of JVB that remained employees of JVB following the acquisition. These units include a service requirement and vest over a three year period and are treated as compensation for future service rather than as part of the purchase price to acquire JVB. In January 2012, 186,339 restricted units of the Operating LLC vested, and the holders of these vested Operating LLC membership units elected to redeem these units. The Company, at its discretion, issued 186,339 shares of IFMI common stock to the JVB sellers in exchange for the 186,339 vested membership units.

Acquisition and Surrender of Additional Units of the Operating LLC, net: Effective January 1, 2011, IFMI and the Operating LLC entered into a Unit Issuance and Surrender Agreement (the “UIS Agreement”) which was approved by IFMI’s Board of Directors and the board of managers of the Operating LLC. In an effort to maintain a 1:1 ratio of IFMI’s common stock to the number of membership units IFMI holds in the Operating LLC, the UIS Agreement calls for the issuance of additional membership units of the Operating LLC to IFMI when IFMI issues its common stock to employees under existing equity compensation plans. In certain cases, the UIS Agreement calls for IFMI to surrender units to the Operating LLC when certain restricted shares are forfeited by the employee or repurchased. During the six months ended June 30, 2012, the Operating LLC issued to IFMI 464,946 units related to the UIS Agreement.

In January 2012, IFMI received 186,339 vested membership units from certain former owners of JVB in exchange for the Company’s issuance of 186,339 shares of IFMI common stock to the same former owners.

In summary, during the six months ended June 30, 2012, IFMI received (net of surrenders) 651,285 units of the Operating LLC pursuant to the UIS Agreement and as a result of the vesting and redemption of membership units of the Operating LLC by certain former owners of JVB for IFMI common stock. The Company recognized a net increase in additional paid in capital of $828 and a net increase in accumulated other comprehensive loss of $28 with an offsetting decrease in non-controlling interest of $800 in connection with the acquisition and surrender of additional units of Operating LLC.

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The following schedule presents the effects of changes in IFMI’s ownership interest in the Operating LLC on the equity attributable to IFMI:

	June 30, 2012			June 30, 2011
Net income / (loss) attributable to IFMI	$	(5,937	)	$	(2,996	)
Transfers (to) from the non-controlling interest:
Increase in IFMI’s paid in capital for the acquisition / (surrender) of additional units of consolidated subsidiary, net		828			972
Changes from net income / (loss) attributable to IFMI and transfers (to) from non-controlling interest	$	(5,109	)	$	(2,024	)

15. NET CAPITAL REQUIREMENTS

The U.S. broker-dealer subsidiaries of the Company are subject to the net capital provision of Rule 15c3-1 under the Exchange Act, which requires the maintenance of minimum net capital, as defined therein. As of June 30, 2012, the Company had the following three U.S. broker-dealers: Cohen & Company Securities, LLC (“CCS”), JVB, and the PrinceRidge Group LLC (“TPRG”). In February 2012, PrinceRidge merged its broker-dealer subsidiary, Cohen & Company Capital Markets, LLC (“CCCM”) into TPRG.

As of June 30, 2012, CCS’ adjusted net capital was $3,463 which exceeded the minimum requirement by $3,363. As of June 30, 2012, JVB’s adjusted net capital was $9,803, which exceeded the minimum requirements by $9,681. As of June 30, 2012, TPRG had net capital of $17,107, which exceeded the minimum requirements by $16,857.

EDML, a subsidiary of the Company regulated by the Financial Services Authority in the United Kingdom, is subject to the net liquid capital provision of the Financial Services and Markets Act 2000, GENPRU 2.140R to 2.1.57R, relating to financial prudence with regards to the European Investment Services Directive and the European Capital Adequacy Directive, which requires the maintenance of minimum liquid capital, as defined therein. As of June 30, 2012, the total minimum required net liquid capital was $1,708, and net liquid capital in EuroDekania Management Limited was $5,475 which exceeded the minimum requirements by $3,767 and was in compliance with the net liquid capital provisions.

16. EARNINGS / (LOSS) PER COMMON SHARE

The following table presents a reconciliation of basic and diluted earnings / (loss) per common share for the periods indicated. Membership units that may be issued in connection with the vesting of a restricted unit issued pursuant to the Amended and Restated Cohen Brothers, LLC 2009 Equity Award Plan (the “2009 Equity Award Plan”) have been excluded from the diluted weighted average shares outstanding calculations because of the obligations of Mr. Daniel G. Cohen, the Company’s Chairman and Chief Executive Officer, under the Equity Plan Funding Agreement to transfer to (1) the Operating LLC the number of Operating LLC membership units or shares of the Company’s Common Stock equal to the number of Operating LLC membership units to be issued by the Operating LLC to the participants in the 2009 Equity Award Plan in connection with vesting of an Operating LLC restricted unit, or (2) the Company the number of shares of the Company’s Common Stock equal to the number of Operating LLC membership units to be issued by the Operating LLC to the participants in the 2009 Equity Award Plan in connection with the vesting of an Operating LLC restricted unit. See note 22 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

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EARNINGS / (LOSS) PER COMMON SHARE

(Dollars in Thousands, except share or per share information)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net income / (loss) attributable to IFMI	$	(2,078	)	$	(3,371	)	$	(5,937	)	$	(2,996	)
Add / (deduct): Income / (loss) attributable to the non-controlling interest attributable to Operating LLC membership units exchangeable into IFMI shares (1)		(981	)		(1,633	)		(2,883	)		(1,595	)
Add /(deduct): Adjustment for income tax benefit / (expense) (2)		(23	)		6			(39	)		150
Net income / (loss) on a fully converted basis	$	(3,082	)	$	(4,998	)	$	(8,859	)	$	(4,441	)
Weighted average common shares outstanding—Basic		10,756,257			10,901,448			10,600,004			10,860,702
Unrestricted Operating LLC membership units exchangeable into IFMI shares (1)		5,252,002			5,283,556			5,252,002			5,283,556
Weighted average common shares outstanding—Diluted (3)		16,008,259			16,185,004			15,852,006			16,144,258
Net income / (loss) per common share—Basic	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)
Net income / (loss) per common share—Diluted	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)

(1) The Operating LLC membership units not held by IFMI (that is, those held by the non-controlling interest for the three and six months ended June 30, 2012 and 2011) may be redeemed and exchanged into shares of the Company on a one-to-one basis. These units are not included in the computation of basic earnings per share. These units enter into the computation of diluted net income / (loss) per common share when the effect is dilutive using the if-converted method.

(2) If the Operating LLC membership units had been converted at the beginning of the period, the Company would have incurred a higher income tax expense or realized a higher income tax benefit, as applicable.

(3) Due to the net loss for the three and six months ended June 30, 2012, the weighted average shares calculation excluded (i) restricted Operating LLC membership units of 0 and 11,628 for the three and six months ended June 30, 2012, respectively; (ii) restricted shares of IFMI Common Stock of 21,879 and 17,412 for the three and six months ended June 30, 2012, respectively; and (iii) restricted units of IFMI’s Common Stock of 0 and 2,554 for the three and six months ended June 30, 2012 , respectively.

Due to the net loss for the three and six months ended June 30, 2011, the weighted average shares calculation excluded (i) restricted Operating LLC membership units of 0 and 3,613 for the three and six months ended June 30, 2011, respectively; and (ii) restricted shares of IFMI Common Stock of 37,288 and 25,852 for the three and six months ended June 30, 2011, respectively.

17 . COMMITMENTS AND CONTINGENCIES

Legal and Regulatory Proceedings

One of the Company’s U.S. broker-dealer subsidiaries, CCS, is a party to litigation commenced on January 12, 2009 in the United States District Court for the Northern District of Illinois (the “Illinois Court”) under the caption Frederick J. Grede, not individually, but as Liquidation Trustee and Representative of the Estate of Sentinel Management Group, Inc. v. Delores E. Rodriguez, Barry C. Mohr, Jr., Jacques de Saint Phalle, Keefe, Bruyette & Woods, Inc., and Cohen & Company Securities, LLC. The plaintiff in this case is the Liquidation Trustee (the “Liquidation Trustee”) for the Estate of Sentinel Management Group, Inc. (“Sentinel”), which filed a bankruptcy petition in August 2007. The Liquidation Trustee alleges that CCS sold Sentinel securities, mainly CDOs that the Liquidation Trustee contends were unsuitable for Sentinel and that CCS violated Section 10(b) of the Exchange Act and Rule 10b-5. The Liquidation Trustee also seeks relief under the Illinois Blue Sky Law, the Illinois Consumer Fraud Act, the United States Bankruptcy Code, and under common law theories of negligence and unjust enrichment. The relief sought by the Liquidation Trustee under these various legal theories includes damages, rescission, disgorgement, and recovery of allegedly voidable transactions under the Bankruptcy Code, as well as costs and attorneys’ fees. By order dated July 8, 2009, the Illinois Court dismissed the Liquidation Trustee’s Illinois Consumer Fraud Act claim. Discovery is ongoing with respect to the remaining claims.

CCS is also party to litigation commenced on May 21, 2009 in the Illinois Court under the caption Frederick J. Grede, not individually, but as Liquidation Trustee of the Sentinel Liquidation Trust, Assignee of certain claims v. Keefe, Bruyette & Woods, Inc., Cohen & Company Securities, LLC., Delores E. Rodriguez, Barry C. Mohr, Jr., and Jacques de Saint Phalle. The plaintiff in this case is the Liquidation Trustee of the Sentinel Liquidation Trust, which emerged from the bankruptcy of Sentinel, filed in August

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2007. The Liquidation Trustee, purportedly as the assignee of claims of Sentinel’s customers, alleges that, by recommending that Sentinel purchase securities, mainly CDOs, that the trustee deems to have been unsuitable for Sentinel’s customer accounts, CCS aided and abetted breaches of fiduciary duties purportedly owed by Sentinel and its head trader to Sentinel’s customers, in violation of Illinois common law. The complaint also alleges claims under common law theories of negligence and unjust enrichment. The relief sought by the Liquidation Trustee under these various legal theories includes damages, disgorgement, costs, and attorneys’ fees. CCS filed a motion to dismiss the Liquidation Trustee’s complaint on July 21, 2009; that motion was dismissed “as moot” on March 29, 2011.

During the second quarter of 2012, CCS and the Liquidation Trustee reached an agreement in principle to settle both of the above actions. That agreement calls for CCS to make an initial payment of $3,000 and an additional payment of $2,250 in the future. As of the date of this report, this agreement is not final, is subject to the execution of final documentation and is subject to the Illinois Court’s approval of an order barring contribution claims against CCS. As a result of this agreement in principle, the Company accrued a contingent liability of $4,357 representing the initial payment of $3,000, the discounted present value of the future payment of $1,978, partially offset by additional estimated insurance proceeds receivable of $621. This expense was included in the statement of operations for the three and six months ended June 30, 2012 as a component of non-operating income / (expense). The discount of $272 will be amortized as a component of interest expense over the period spanning the signing through the final payment date.

The Company has been named in litigation commenced in the United States District Court for the Southern District of New York on June 29, 2012, under the caption U.S. Bank National Association v. Institutional Financial Markets, Inc. The plaintiff, U.S. Bank, alleges breach of contract respecting certain fees allegedly owing to U.S. Bank, as Trustee, in connection with the issuance of trust preferred securities, seeking damages and a declaration that the Company must make certain future fee payments. The time for the Company to respond to the Complaint has not yet arrived and no discovery or other proceedings have yet taken place. The Company intends to defend the action vigorously.

In addition to the matters set forth above, the Company is a party to various routine legal proceedings and regulatory inquiries arising out of the ordinary course of the Company’s business. Management believes that the results of these routine legal proceedings and regulatory matters will not have a material adverse effect on the Company’s financial condition, or on the Company’s operations and cash flows. However, the Company cannot estimate the legal fees and expenses to be incurred in connection with these routine matters and, therefore, is unable to determine whether these future legal fees and expenses will have a material impact on the Company’s operations and cash flows. It is the Company’s policy to expense legal and other fees as incurred.

Alesco XIV Guarantee

AFN invested in a CDO (Alesco XIV) in which Assured Guaranty (“Assured”) was providing credit support to the senior interests in securitizations. Alesco XIV made a loan (the “Guaranteed Loan”) to a particular borrower and AFN entered into an arrangement with Assured whereby AFN agreed to make payments to Assured upon the occurrence of both (i) a loss on the Guaranteed Loan; and (ii) a loss suffered by Assured on its overall credit support arrangement to Alesco XIV security holders. This arrangement is accounted for as a guarantee by the Company. At the Merger Date, the Company recorded a liability of $1,084 related to this arrangement which is included in accounts payable and other liabilities in the Company’s consolidated balance sheet. This amount does not represent the expected loss; rather it represents the Company’s estimate of the fair value of its guarantee (i.e. the amount it would have to pay a third party to assume this obligation). This arrangement is being accounted for as a guarantee. The value will be adjusted under certain limited circumstances such as: (i) when the guarantee is extinguished or (ii) if payment of amounts under the guarantee become probable and estimable. The maximum potential loss to the Company on this arrangement is $8,750. Under certain circumstances, Assured can require the Company to post liquid collateral.

Contribution to Alesco Preferred Funding X Legal Settlement

Alesco Preferred Funding X, Ltd. (“Alesco X”) is a CDO that was managed by Cohen & Company Financial Management, LLC (“CCFM”). Alesco X owned $4,000 of Trust Preferred Securities issued by Leawood Bancshares Statutory Trust I (the “Leawood TruPS”). Leawood Bancshares, Inc. (“Leawood”), and Alesco X entered into a letter agreement dated March 1, 2010 (the “Leawood/Alesco Agreement”) regarding the sale back to Leawood of the Leawood TruPS in exchange for $1,000 upon the occurrence of certain conditions related to the sale of Leawood to CrossFirst Holdings, LLC (“CrossFirst”). The proposed transaction contemplated by the Leawood/Alesco Agreement never closed as a result of the objections of investors in Alesco X, but the ultimate transaction between Leawood and CrossFirst did close.

On or about July 23, 2010, Leawood and CrossFirst Holdings, LLC filed a lawsuit against Alesco X in the United States District Court for the Southern District of New York, Civil Action No. 10-CV-5637 (JSR) alleging that there was a breach of the Leawood/Alesco Agreement. CCFM was not named in the lawsuit. ATP Management LLC, as purchaser of the management rights of Alesco X from CCFM, took over the defense of the action. In late October 2011, the Court issued a summary judgment decision against Alesco X and in favor of Leawood and CrossFirst. On or about December 6, 2011, the United States District Court for the Southern District of New York issued a judgment in favor of Leawood and against Alesco in the amount of $1,618 and in favor of CrossFirst and against Alesco X in the amount of $1,840. In exchange for a full release from Leawood, CrossFirst and Alesco X, the

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Company agreed to contribute $2,250 to Alesco X’s settlement of the judgment. This amount was included as a component of professional services and other operating expense in the consolidated statement of operations in the fourth quarter of 2011. The Company made the payment of $2,250 in April 2012.

Accumulated Dividends and Dividend Equivalents on Restricted Stock and Restricted Units

From time to time, the Company has granted restricted stock and restricted units which are entitled to receive dividends or dividend equivalents as and when such dividends or dividend equivalents are declared and paid by the Company; provided, however, that the cash dividends or dividend equivalents on such restricted stock or restricted units are held by the Company until the period of forfeiture lapses and forfeited if the underlying restricted shares or restricted units are forfeited. The Company’s potential liability, assuming the restricted stock or restricted units were to vest as of June 30, 2012, is approximately $306.

18. SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company operates within three business segments: Capital Markets, Asset Management, and Principal Investing. See note 1.

The Company’s business segment information for the six and three months ended June 30, 2012 and 2011 is prepared using the following methodologies and generally represents the information that is relied upon by management in its decision making processes:

(a) Revenues and expenses directly associated with each business segment are included in determining net income / (loss) by segment.

(b) Indirect expenses (such as general and administrative expenses including executive and indirect overhead costs) not directly associated with specific business segments are not allocated to the segments’ statements of operations. Accordingly, the Company presents segment information consistent with internal management reporting. See note (1) in the table below for more detail on unallocated items. The following tables present the financial information for the Company’s segments for the periods indicated.

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As of and for the six months ended June 30, 2012	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	37,642		$	—	$	—		$	37,642		$	—		$	37,642
Asset management		—			9,545		—			9,545			—			9,545
New issue and advisory		1,266			—		—			1,266			—			1,266
Principal transactions and other income		(34	)		393		(5,015	)		(4,656	)		—			(4,656	)
Total revenues		38,874			9,938		(5,015	)		43,797			—			43,797
Total operating expenses		37,676			2,842		156			40,674			7,496			48,170
Operating income / (loss)		1,198			7,096		(5,171	)		3,123			(7,496	)		(4,373	)
Income / (loss) from equity method affiliates		—			—		2,042			2,042			—			2,042
Other non operating income / (expense)		(4,224	)		—		—			(4,224	)		(2,449	)		(6,673	)
Income / (loss) before income taxes		(3,026	)		7,096		(3,129	)		941			(9,945	)		(9,004	)
Income tax expense / (benefit)		—			—		—			—			54			54
Net income / (loss)		(3,026	)		7,096		(3,129	)		941			(9,999	)		(9,058	)
Less: Net income / (loss) attributable to the non-controlling interest		(238	)		—		—			(238	)		(2,883	)		(3,121	)
Net income / (loss) attributable to IFMI	$	(2,788	)	$	7,096	$	(3,129	)	$	1,179		$	(7,116	)	$	(5,937	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	452		$	7	$	—		$	459		$	275		$	734
Balance sheet data:
Total assets (2) (3)	$	444,297		$	7,219	$	39,995		$	491,511		$	11,524		$	503,035
Investment in equity method affiliates (included in total assets)	$	—		$	—	$	2,390		$	2,390		$	—		$	2,390

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As of and for the six months ended June 30, 2011	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	43,514		$	—	$	—		$	43,514		$	—		$	43,514
Asset management		—			11,225		—			11,225			—			11,225
New issue and advisory		1,240			—		—			1,240			—			1,240
Principal transactions and other income		174			920		(1,302	)		(208	)		—			(208	)
Total revenues		44,928			12,145		(1,302	)		55,771			—			55,771
Total operating expenses		38,187			3,317		157			41,661			20,701			62,362
Operating income / (loss)		6,741			8,828		(1,459	)		14,110			(20,701	)		(6,591	)
Income / (loss) from equity method affiliates		—			4,359		171			4,530			—			4,530
Other non operating income / (expense)		13			—		—			13			(2,942	)		(2,929	)
Income / (loss) before income taxes		6,754			13,187		(1,288	)		18,653			(23,643	)		(4,990	)
Income tax expense / (benefit)		—			—		—			—			(346	)		(346	)
Net income / (loss)		6,754			13,187		(1,288	)		18,653			(23,297	)		(4,644	)
Less: Net income / (loss) attributable to the non-controlling interest		(53	)		—		—			(53	)		(1,595	)		(1,648	)
Net income / (loss) attributable to IFMI	$	6,807		$	13,187	$	(1,288	)	$	18,706		$	(21,702	)	$	(2,996	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	145		$	7	$	—		$	152		$	821		$	973
Balance sheet data:
Total assets (2) (3)	$	370,731		$	21,553	$	44,020		$	436,304		$	19,429		$	455,733
Investment in equity method affiliates (included in total assets)	$	—		$	—	$	1,488		$	1,488		$	—		$	1,488

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For the three months ended June 30, 2012	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	19,951		$	—	$	—		$	19,951		$	—		$	19,951
Asset management		—			4,608		—			4,608			—			4,608
New issue and advisory		189			—		—			189			—			189
Principal transactions and other income		(7	)		233		63			289			—			289
Total revenues		20,133			4,841		63			25,037			—			25,037
Total operating expenses		18,806			1,762		75			20,643			3,564			24,207
Operating income / (loss)		1,327			3,079		(12	)		4,394			(3,564	)		830
Income / (loss) from equity method affiliates		—			—		1,526			1,526			—			1,526
Other non operating income / (expense)		(4,289	)		—		—			(4,289	)		(1,172	)		(5,461	)
Income / (loss) before income taxes		(2,962	)		3,079		1,514			1,631			(4,736	)		(3,105	)
Income tax expense / (benefit)		—			—		—			—			63			63
Net income / (loss)		(2,962	)		3,079		1,514			1,631			(4,799	)		(3,168	)
Less: Net income / (loss) attributable to the non-controlling interest		(109	)		—		—			(109	)		(981	)		(1,090	)
Net income / (loss) attributable to IFMI	$	(2,853	)	$	3,079	$	1,514		$	1,740		$	(3,818	)	$	(2,078	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	223		$	3	$	—		$	226		$	117		$	343

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For the three months ended June 30, 2011	Capital Markets			Asset Management		Principal Investing		Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	16,240		$	—	$	—	$	16,240		$	—		$	16,240
Asset management		—			5,255		—		5,255			—			5,255
New issue and advisory		1,131			—		—		1,131			—			1,131
Principal transactions and other income		156			342		333		831			—			831
Total revenues		17,527			5,597		333		23,457			—			23,457
Total operating expenses		18,733			1,040		102		19,875			11,760			31,635
Operating income / (loss)		(1,206	)		4,557		231		3,582			(11,760	)		(8,178	)
Income / (loss) from equity method affiliates		—			4,359		76		4,435			—			4,435
Other non operating income / (expense)		13			—		—		13			(1,460	)		(1,447	)
Income / (loss) before income taxes		(1,193	)		8,916		307		8,030			(13,220	)		(5,190	)
Income tax expense / (benefit)		—			—		—		—			(133	)		(133	)
Net income / (loss)		(1,193	)		8,916		307		8,030			(13,087	)		(5,057	)
Less: Net income / (loss) attributable to the non-controlling interest		(53	)		—		—		(53	)		(1,633	)		(1,686	)
Net income / (loss) attributable to IFMI	$	(1,140	)	$	8,916	$	307	$	8,083		$	(11,454	)	$	(3,371	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	116		$	3	$	—	$	119		$	384		$	503

(1) Unallocated includes certain expenses incurred by indirect overhead and support departments (such as the executive, finance, legal, information technology, human resources, risk, compliance, and other similar overhead and support departments). Some of the items not allocated include: (1) operating expenses related to support departments excluding certain departments that directly support the capital markets segment; (2) interest expense on debt; and (3) income taxes. Management does not consider these items necessary for an understanding of the operating results of these segments and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.

(2) Unallocated assets primarily include (1) amounts due from related parties; (2) furniture and equipment, net; and (3) other assets that are not considered necessary for an understanding of segment assets and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.

(3) Goodwill and intangible assets as of June 30, 2012 and 2011 are allocated to the Capital Markets and Asset Management segments as indicated in the table listed below.

As of June 30, 2012:

	Capital Markets		Asset Management		Principal Investing		Segment Total		Unallocated		Total
Goodwill	$	7,937	$	3,176	$	—	$	11,113	$	—	$	11,113
Intangible assets (included in other assets)	$	538	$	—	$	—	$	538	$	—	$	538

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As of June 30, 2011:

	Capital Markets		Asset Management		Principal Investing		Segment Total		Unallocated		Total
Goodwill	$	8,000	$	3,176	$	—	$	11,176		—	$	11,176
Intangible assets (included in other assets)	$	538	$	—	$	—	$	538		—	$	538

Geographic Information

The Company conducts its business activities through offices in the following locations: (1) United States and (2) United Kingdom and other. Total revenues by geographic area are summarized as follows:

GEOGRAPHIC INFORMATION

(Dollars in Thousands)

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Total Revenues:
United States	$	20,390	$	21,057	$	37,503	$	49,246
United Kingdom & Other		4,647		2,400		6,294		6,525
Total	$	25,037	$	23,457	$	43,797	$	55,771

Long-lived assets attributable to an individual country, other than the United States, are not material.

19. SUPPLEMENTAL CASH FLOW DISCLOSURE

Interest paid by the Company on its debt was $2,721 and $2,878 for the six months ended June 30, 2012 and 2011, respectively.

The Company paid income taxes of $111 and $56 for the six months ended June 30, 2012 and 2011, respectively, and received income tax refunds of $0 and $105 for the six months ended June 30, 2012 and 2011, respectively.

In the first half of 2012, the Company had the following significant non-cash transactions which are not reflected on the statement of cash flows:

• During the first half of 2012, the Company acquired additional units of the Operating LLC pursuant to the UIS Agreement. In an effort to maintain a 1:1 ratio of the Company’s Common Stock to the number of membership units the Company holds in the Operating LLC, the UIS Agreement calls for the issuance of additional membership units of the Operating LLC to the Company when the Company issues its Common Stock to employees under existing equity compensation plans. In certain cases, the UIS Agreement calls for the Company to surrender units to the Operating LLC when certain restricted shares are forfeited by the employee or repurchased. In addition, the Company acquired additional units of the Operating LLC from certain former owners of JVB in exchange for the Company’s issuance of 186,339 shares of the Company’s Common Stock to them in January 2012. The Company recognized a net increase in additional paid-in capital of $828, a net increase of $28 in accumulated other comprehensive loss, and a decrease of $800 in non-controlling interest. See note 14.

• During the first half of 2012, the Company reclassified $6,071 from redeemable non-controlling interest to mandatorily redeemable equity interests in its consolidated balance sheets due to partnership withdrawals from PrinceRidge.

In the first half of 2011, the Company had the following significant non-cash transactions which are not reflected on the statement of cash flows:

• Effective January 1, 2011, the Company acquired additional units of the Operating LLC pursuant to the UIS Agreement. In addition, the Company acquired additional units of the Operating LLC in connection with the JVB acquisition. The Company recognized an increase in additional paid-in capital of $972, an increase of $27 in accumulated other comprehensive loss, and a decrease of $945 in non-controlling interest.

• During the first quarter of 2011, the Company transferred 54,452 shares of Star Asia in the amount of $476 to an employee for services rendered during 2010.

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• In connection with the consummation of the JVB acquisition in January 2011, the Company acquired the net assets of JVB for approximately $16,813, consisting of $14,956 in cash and 313,051 shares of the Company’s Common Stock for stock consideration of $1,531 and other liabilities of $326.

• In connection with the consummation of the PrinceRidge acquisition on May 31, 2011, the Company made a contribution of $45,000, consisting of cash, amounts payable, and all of the equity ownership interests of CCCM in exchange for an approximate 70% interest (consisting of equity and profit interests) in PrinceRidge. The remaining 30% in PrinceRidge not owned by the Company at the acquisition date represented a redeemable non-controlling interest of $18,502.

20. RELATED PARTY TRANSACTIONS

The Company has identified the following related party transactions for the six and three months ended June 30, 2012 and 2011. The transactions are listed by related party and, unless otherwise noted in the text of the description, the amounts are disclosed in the tables at the end of this section.

A. Cohen Bros. Financial, LLC (“CBF”)

CBF has been identified as a related party because (i) CBF is a non-controlling interest of the Company and (ii) CBF is wholly owned by the chairman and chief executive officer of the Company.

Beginning in October 2008, the Company began receiving a monthly advisory fee for consulting services provided by the Company to CBF. The Company stopped providing these services and stopped receiving this fee as of March 31, 2012. The fee was recognized as a component of asset management revenue in the consolidated statements of operations. This fee is disclosed as management fee revenue in the tables at the end of this section.

B. The Bancorp, Inc.

The Bancorp, Inc. (“TBBK”) is identified as a related party because TBBK’s chairman is the Company chairman and chief executive officer.

TBBK maintained deposits for the Company in the amount of $59 and $91 as of June 30, 2012 and December 31, 2011, respectively.

As part of the Company’s broker-dealer operations, the Company from time to time purchases securities from third parties and sells those securities to TBBK. The Company may purchase securities from TBBK and ultimately sell those securities to a third party. In either of the cases listed above, the Company includes the trading revenue earned (i.e. the gain or loss realized) by the Company for the entire transaction in the amounts disclosed as part of net trading in the table at the end of this section.

C. Investment Vehicles and Other

The following are identified as related parties. Amounts with respect to the transactions identified below are summarized in a table at the end of this section.

1. Star Asia invests primarily in Asian commercial real estate structured finance products, including CMBS, corporate debt of REITs and real estate operating companies, B notes, mezzanine loans and other commercial real estate fixed income investments. As of June 30, 2012 and December 31, 2011, the Company directly owned approximately 28% of Star Asia’s outstanding shares. Star Asia has been identified as a related party because in the absence of the fair value option of FASB ASC 825, Star Asia would be treated as an equity method affiliate, and because the chairman and chief executive officer of the Company is a member of Star Asia’s board of directors. The Company has an investment in Star Asia. Dividends received on that investment are disclosed as part of dividend income in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of gain / (loss) in the tables at the end of this section.

2. EuroDekania invests primarily in hybrid capital securities of European bank and insurance companies, CMBS, RMBS and widely syndicated leverage loans. As of June 30, 2012 and December 31, 2011, the Company directly owned approximately 10% of EuroDekania’s outstanding shares. EuroDekania has been identified as a related party because the chairman and chief executive officer of the Company is a member of EuroDekania’s board of directors. The Company has a management contract with and an investment in EuroDekania. Dividends received on that investment are disclosed as part of dividend income in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of the gain / (loss) in the tables at the end of this section. Amounts earned from its management contract are disclosed as part of management fee revenue in the tables at the end of this section.

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As part of the Company’s broker-dealer operations, the Company from time to time purchases securities from third parties and sell those securities to EuroDekania. Or, the Company may purchase securities from EuroDekania and ultimately sell those securities to third parties. In either case, the Company includes the trading revenue earned (i.e. the gain or loss realized) by the Company for the entire transaction in the amounts disclosed as part of net trading in the table at the end of this section.

3. Star Asia Manager serves as external manager of Star Asia and Star Asia SPV (see C-8 listed below) and the Company owns 50% of Star Asia Manager. Star Asia Manager has been identified as a related party because it is an equity method investee of the Company. The Company recognizes its share of the income or loss of Star Asia Manager as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

4. Prior to June 23, 2011 the Company owned approximately 3% of MFCA’s outstanding shares. On June 23, 2011, MFCA became a wholly owned subsidiary of Tiptree. As part of that transaction, the Company exchanged its 1,000,200 shares of MFCA for 111,133 shares of Tiptree. As of June 30, 2012 and December 31, 2011, the Company owned approximately 1% of Tiptree. Prior to MFCA’s merger with Tiptree, MFCA had been identified as a related party because: (i) in the absence of the fair value option of FASB ASC 825, MFCA would have been treated as an equity method affiliate of the Company; (ii) the chairman and chief executive officer of the Company was the former chairman of MFCA’s board and served as a member of the board until June 22, 2011; and (iii) the former president of the Company served as vice chairman of MFCA’s board until March 18, 2009. In March 2009, the board of directors of MFCA assigned the management contract to an unrelated third party. The Company had a management contract with MFCA. The Company had an investment in MFCA and had a shared services arrangement with MFCA. Dividends received on that investment are disclosed as part of dividend income in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of gain / (loss) in the tables at the end of this section. Amounts earned from its management contract are disclosed as part of management fee revenue in the tables at the end of this section. Payments received under the shared services arrangement are disclosed as part of shared services (paid) / received in the tables at the end of this section. In June 2011, MFCA was merged into Tiptree. No employees of the Company serve on the board of Tiptree and Tiptree is not an equity method investee of the Company. Therefore, Tiptree is not a related party.

5. Cohen Financial Group, Inc. (“CFG”) had been identified as a related party because it was a member of the Company prior to the Merger. CFG filed a Certificate of Dissolution with the Secretary of State of the State of Delaware on December 16, 2009, and is in process of completing the liquidation process. From time to time, the Company advanced CFG funds for normal operating purposes; these amounts were treated as due from related party in the consolidated balance sheets.

6. The Deep Value GP serves as the general partner for the feeder funds of Strategos Deep Value Funds (in the case of the first master fund) and as the general partner of the master fund itself (in the case of a second master fund). The Deep Value GP II serves as the general partner for the offshore feeder fund (in the case of a third master fund). The Deep Value GP and the Deep Value GP II are collectively referred to as the “Deep Value GPs.” The Company owns 50% of the Deep Value GP and 40% of the Deep Value GP II. The Deep Value GP and the Deep Value GP II have been identified as related parties because the Deep Value GPs are equity method affiliates of the Company. Income or loss recognized under the equity method is disclosed in the table at the end of this section. The Company previously served as the investment advisor to these funds and sold these advisory contracts in March 2011.

7. Deep Value is a series of closed-end distressed debt funds. Deep Value raises capital from investors, and earns investment returns by investing in a diversified portfolio of asset backed securities consisting primarily of RMBS and other real estate related securities, as well as other U.S. real estate related assets and related securities. As of June 30, 2011, the first Deep Value fund was completely liquidated. Deep Value (as a group) had been identified as a related party because in the absence of the fair value option of FASB ASC 825, the onshore and offshore feeders in which the Company had an investment would be treated as equity method affiliates of the Company. The Company had a management contract with and an investment in Deep Value. Amounts earned from its management contract are disclosed as part of management fee revenue in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of gain / (loss) in the tables at the end of this section. The Company previously served as the investment advisor to these funds and sold these advisory contracts in March 2011.

8. Star Asia SPV is a Delaware limited liability company formed in 2010. It was formed to create a pool of assets that would provide collateral to investors who participated in Star Asia’s 2010 rights offering. The investors in Star Asia’s rights offering also received equity interests in Star Asia SPV. Star Asia SPV purchased certain assets from Star Asia and the equity interest holders of Star Asia SPV receive investment returns on the assets held in the SPV up to an agreed upon maximum. Returns above that agreed upon maximum are remitted back to Star Asia. The Company directly owned approximately 31% of Star Asia SPV’s outstanding shares as of June 30, 2012 and December 31, 2011. Star Asia SPV has been identified as a related party because it is an equity method investee of the Company. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

9. Duart Capital is a Delaware limited liability company formed in 2010. The Company directly owned 20% of Duart Capital’s outstanding equity interests as of June 30, 2012 and December 31, 2011. Duart Capital has been identified as a related party because it is an equity method investee of the Company. Duart Capital also serves as the investment manager of the Duart Fund (see below). The Company did not elect the fair value option for its investment in Duart Capital. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

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10. The Duart Fund is a specialized deep value and special situations opportunity fund that was formed in September 2010. The Duart Fund’s investment objective is to provide superior absolute returns by investing primarily in a portfolio of long and short positions in public and private real estate equity securities, equity-linked securities, or debt securities (including, but not limited to, convertible debt, debt with warrants, warrants, and credit default swaps that related to real estate securities) and partnership or fund interests in the real estate markets. Effective December 31, 2010, the Company submitted a redemption notice to the Duart Fund to redeem 100% of its capital. The Company received its redemption in April 2011. The Duart Fund had been identified as a related party because in the absence of the fair value option of FASB ASC 825, the onshore feeder fund in which the Company had an investment was treated as an equity method affiliate of the Company. Gains or losses recognized from its investment are disclosed as part of the gain / (loss) in the tables at the end of this section.

11. Star Asia Opportunity is a Delaware limited liability company formed in July 2011 to partially finance the acquisition of seven real estate properties in Japan. As of June 30, 2012 and December 31, 2011, the Company directly owned approximately 28% of Star Asia Opportunity’s outstanding equity interests. Star Asia Opportunity has been identified as a related party because it is an equity method investee of the Company. The Company recognizes its share of the income or loss of Star Asia Opportunity as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

12. Star Asia Capital Management serves as external manager of Star Asia Opportunity (see C-11 listed above) and the Company owns 33% of Star Asia Capital Management. Star Asia Capital Management has been identified as a related party because it is an equity method investee of the Company. The Company recognizes its share of the income or loss of Star Asia Capital Management as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

The following tables display the routine intercompany transactions recognized in the statements of operations from the identified related parties during the six and three months ended June 30, 2012 and 2011, respectively, which are described above. Amounts shown as shared services (paid) / received are included as a component of operating expense in the Company’s consolidated statements of operations:

RELATED PARTY TRANSACTIONS

Six months ended June 30, 2012

(Dollars in Thousands)

					Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
CBF	$	64	$	—	$	—	$	—		$	—		$	—
TBBK		—		71		—		—			—			—
Star Asia		—		—		—		(5,059	)		—			—
Star Asia Manager		—		—		—		—			580			—
Star Asia SPV		—		—		—		—			724			—
Star Asia Opportunity		—		—		—		—			619			—
Star Asia Capital		—		—		—		—			130			—
EuroDekania		139		—		183		(267	)		—			—
Deep Value		—		—		—		—			(11	)		—
Total	$	203	$	71	$	183	$	(5,326	)	$	2,042		$	—

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RELATED PARTY TRANSACTIONS

Three months ended June 30, 2012

(Dollars in Thousands)

					Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
TBBK	$	—	$	36	$	—	$	—		$	—		$	—
Star Asia		—		—		—		181			—			—
Star Asia Manager		—		—		—		—			306			—
Star Asia SPV		—		—		—		—			245			—
Star Asia Opportunity		—		—		—		—			923			—
Star Asia Capital		—		—		—		—			64			—
EuroDekania		—		—		89		(245	)		—			—
Deep Value		—		—		—		—			(12	)		—
Total	$	—	$	36	$	89	$	(64	)	$	1,526		$	—

RELATED PARTY TRANSACTIONS

Six months ended June 30, 2011

(Dollars in Thousands)

						Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading			Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
CBF	$	138	$	—		$	—	$	—		$	—		$	—
TBBK		—		315			—		—			—			—
Star Asia		—		—			—		(2,014	)		—			—
Star Asia Manager		—		—			—		—			511			—
Star Asia SPV		—		—			—		—			313			—
EuroDekania		333		(101	)		—		1,619			—			—
MFCA A		—		—			32		71			—			9
Deep Value		452		—			—		(9	)		4,372			—
Duart Fund		—		—			—		(456	)		—			—
Duart Capital		—		—			—		—			(666	)		—
Total	$	923	$	214		$	32	$	(789	)	$	4,530		$	9

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RELATED PARTY TRANSACTIONS

Three months ended June 30, 2011

(Dollars in Thousands)

					Principal transactions and other income					Income / (loss) from equity method affiliates			Shared Services (Paid) / Received
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)
CBF	$	71	$	—	$	—	$	—		$	—		$	—
TBBK		—		315		—		—			—			—
Star Asia		—		—		—		667			—			—
Star Asia Manager		—		—		—		—			291			—
Star Asia SPV		—		—		—		—			40			—
EuroDekania		167		—		—		844			—			—
MFCA		—		—		—		40			—			4
Deep Value		—		—		—		(9	)		4,371			—
Duart Fund		—		—		—		(1	)		—			—
Duart Capital		—		—		—		—			(267	)		—
Total	$	238	$	315	$	—	$	1,541		$	4,435		$	4

The following related party transactions are non-routine and are not included in the tables above.

D. Directors and Employees

In addition to the employment agreements the Company has entered into with its chairman and its chief financial officer, the Company has entered into its standard indemnification agreement with each of its directors and executive officers.

21. DUE FROM / DUE TO RELATED PARTIES

The following table summarizes the outstanding due from / to related parties. These amounts may result from normal operating advances or from timing differences between the transactions disclosed in note 20 and final settlement of those transactions in cash. All amounts are non-interest bearing.

DUE FROM/DUE TO RELATED PARTIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Deep Value GP	$	75	$	29
Deep Value GP II		64		61
Star Asia Manager		28		50
Cohen Brothers Financial, LLC		86		306
Employees and other		416		233
Total Due from Related Parties	$	669	$	679

22. SUBSEQUENT EVENTS

Departure of Certain Officers of PrinceRidge

On July 19, 2012, PrinceRidge entered into a series of separate agreements with Michael Hutchins, the former CEO and board member of PrinceRidge, and John Costas, the former Chairman of the board of PrinceRidge, whereby (i) PrinceRidge repurchased all of the equity and profit units in PrinceRidge held by Mr. Costas and Mr. Hutchins; (ii) Mr. Costas and Mr. Hutchins resigned as employees and board members of PrinceRidge; (iii) Mr. Costas and Mr. Hutchins agreed to forfeit all of their unvested equity awards both from PrinceRidge and IFMI; and (iv) Mr. Costas and Mr. Hutchins withdrew as members of PrinceRidge GP and as partners of PrinceRidge Holdings. Daniel Cohen, the Company’s Chairman and CEO, was appointed Chairman and CEO of PrinceRidge by the board of PrinceRidge.

As of June 30, 2012, Mr. Costas’ and Mr. Hutchins’ equity and profit units had a combined capital account balance of $6,130. However, PrinceRidge repurchased these units for $8,234. PrinceRidge will record compensation expense of $2,104 and a reduction in temporary equity of $6,130 related to the repurchase of these units. The compensation expense represents the amount in excess of the combined capital account balances. In addition, PrinceRidge will record a reduction in compensation expense of $862 relating to the forfeiture of Mr. Costas’ and Mr. Hutchins’ unvested PrinceRidge equity awards and IFMI will record a reduction in compensation expense of $1,289 relating to the forfeiture of Mr. Costas’ and Mr. Hutchins’ unvested IFMI equity awards. All of these transactions will be recorded in the third quarter of 2012.

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

The following discussion and analysis of the consolidated financial condition and results of operations of Institutional Financial Markets, Inc. and its majority owned subsidiaries (collectively, “we,” “us,” “our,” or the “Company”) should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including fair value of financial instruments. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

All amounts in this disclosure are in thousands (except share and per share data) unless otherwise noted.

Overview

We are an investment firm specializing in credit-related fixed income investments. We began operations, through our predecessors, in 1999 as an investment firm focused on small and mid-cap banks, but have grown over the past years into a more diversified fixed income specialty investment firm. We are organized into three business segments: Capital Markets, Asset Management, and Principal Investing.

• Capital Markets: Our Capital Markets business segment consists of credit-related fixed income sales, trading and financing, as well as new issue placements in corporate and securitized products and advisory services revenue. Our fixed income sales and trading group provides trade execution to corporate and institutional investors. We specialize in the following products: corporate bonds and loans, ABS, MBS, CLOs, CBOs, CDOs, CMBS, RMBS, SBA loans, municipal bonds, U.S. government bonds, U.S. government agency securities, brokered deposits and CDs for small banks, and hybrid capital of financial institutions including TruPS, whole loans, and other structured financial instruments. We also offer execution and brokerage services for cash equity and derivative products. We carry out our capital market activities primarily through our subsidiaries: JVB, PrinceRidge and EDML.

• Asset Management: We manage assets within managed accounts, permanent capital vehicles, and CDOs (collectively, “investment vehicles”). A CDO is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization which means that the lenders are actually investing in notes backed by the assets. The lenders have recourse only to the assets securing the loan. Our Asset Management business segment includes our fee based asset management operations which include on-going base and incentive management fees. As of June 30, 2012, we had approximately $6.2 billion in AUM of which 97%, or $6.0 billion, was in CDOs.

• Principal Investing: Our Principal Investing business segment is comprised primarily of our seed capital investments in investment vehicles we manage.

We generate our revenue by business segment primarily through:

Capital Markets:

• our trading activities, which include execution and brokerage services, providing securities financing to customers, riskless trading activities, as well as gains and losses (unrealized and realized) and income and expense earned on securities classified as trading;

• new issue and advisory revenue comprised of (a) origination fees for corporate debt issues originated by us; (b) revenue from advisory services; and (c) new issue revenue associated with arranging the issuance of newly created debt, equity, and hybrid financial instruments;

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Asset Management:

• asset management fees for our on-going services as asset manager charged and earned by managing investment vehicles, which may include fees both senior and subordinated to the securities issued by the investment vehicle;

• incentive management fees earned based on the performance of the various investment vehicles;

Principal Investing:

• gains and losses (unrealized and realized) and income and expense earned on securities, primarily seed capital investments in vehicles we manage, classified as other investments, at fair value; and

• income or loss from equity method affiliates.

Business Environment

Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, changes in volume and price levels of securities transactions, and changes in interest rates, all of which can affect our profitability and which are unpredictable and beyond our control. These factors may affect the financial decisions made by investors, including their level of participation in the financial markets. Severe market fluctuations or weak economic conditions could continue to reduce our trading volume and revenues and adversely affect our profitability.

The markets remain uneven and vulnerable to changes in investor sentiment. We believe the general business environment will continue to be challenging for the remainder of 2012 and near term.

A portion of our revenues is generated from net trading activity. We engage in proprietary trading for our own account, provide securities financing for our customers, as well as execute “riskless” trades with a customer order in hand resulting in limited market risk to us. The inventory of securities held for our own account as well as held to facilitate customer trades and our market making activities are sensitive to market movements.

A portion of our revenues are generated from new issue and advisory engagements. The fees charged and volume of these engagements are sensitive to the overall business environment.

A portion of our revenues are generated from management fees. Our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the investment vehicles. If these types of investments do not provide attractive returns to investors, the demand for such instruments will likely fall, thereby reducing our opportunity to earn new management fees or maintain existing management fees. Ninety-seven percent of our existing assets under management are CDOs. The creation of CDOs and permanent capital vehicles has depended upon a vibrant securitization market. Since 2008, volumes within the securitization market have dropped significantly and not recovered. We have been unable to complete a new securitization since 2008.

A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the underlying operating results of these investments. As of June 30, 2012, we had $37,609 of other investments, at fair value representing our principal investment portfolio. Of this amount, $37,105 or 99% is comprised of investments in three separate investment funds and permanent capital vehicles: Star Asia, EuroDekania, and Tiptree. Furthermore, the investment in Star Asia is our largest single principal investment and, as of June 30, 2012, has a fair value of $32,299, representing 86% of the total amount of other investments, at fair value. Star Asia seeks to invest in Asian commercial real estate structured finance products, including CMBS, corporate debt of REITs and real estate operating companies, whole loans, mezzanine loans, and other commercial real estate fixed income investments. Therefore, our results of operations and financial condition will be significantly impacted by the financial results of these investments and, in the case of Star Asia, the Japanese real estate market in general. Our investment in Star Asia and our principal investing revenue was impacted by the earthquake, tsunami, and nuclear disaster in Japan that occurred during the first quarter of 2011. See “Revenues - Principal Transactions and Other Income” below.

Margin Pressures in Corporate Bond Brokerage Business

Performance in the financial services industry in which we operate is highly correlated to the overall strength of the economy and financial market activity. Overall market conditions are a product of many factors, which are beyond our control and can be unpredictable. These factors may affect the financial decisions made by investors, including the level of participation in the financial markets. In turn, these decisions may affect our business results. With respect to financial market activity, our profitability is sensitive to a variety of factors, including the volatility of the equity and fixed income markets, the level and shape of the various yield curves, and the volume and value of trading in securities.

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Since 2010, both margins and volumes in certain products and markets within the corporate bond brokerage business have decreased materially as competition has increased and general market activity has declined. Further, we expect that competition will increase over time, resulting in continued margin pressure.

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Our response to this margin compression has included: (i) building a diversified securitized product trading platform; (ii) building our European capital markets business; (iii) acquiring new product lines, including through the acquisitions of JVB and PrinceRidge in 2011; and (iv) monitoring our fixed costs. During the third quarter of 2011, the Company implemented significant cost savings initiatives. These initiatives included the elimination of duplicative costs that arose with the PrinceRidge transaction as well as net reductions in overall costs to address adverse market conditions. The initiatives included: termination of staff, reductions in compensation and benefits of remaining staff, the sublease and termination of duplicative leases, termination of or reduction in pricing of subscriptions, and other measures. More recently we have undertaken additional cost-cutting initiatives by merging support functionality among and across many of our subsidiaries and business lines. However, there can be no certainty that these efforts will be sufficient. If insufficient, we will likely see a continued decline in profitability.

Recent Legislation Affecting the Financial Services Industry

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act contains a variety of provisions designed to regulate financial markets, including credit and derivative transactions. Many aspects of the Dodd-Frank Act are subject to rulemaking that will take effect over the next several years, thus making it difficult to assess the impact on the financial industry, including us, at this time. The Dodd-Frank Act establishes new and enhanced compensation and corporate governance oversight for the financial services industry, provides a specific framework for payment, clearing and settlement regulation, and empowers the SEC to adopt regulations requiring new fiduciary duties and other more stringent regulation of broker-dealers, investment companies and investment advisers. We will continue to monitor all applicable developments in the implementation of the Dodd-Frank Act and expect to adapt successfully to any new applicable legislative and regulatory requirements.

Recent Events

Departure of Certain Officers of PrinceRidge

On July 19, 2012, PrinceRidge entered into a series of separate agreements with Michael Hutchins, the former CEO and board member of PrinceRidge, and John Costas, the former Chairman of the board of PrinceRidge, whereby (i) PrinceRidge repurchased all of the equity and profit units in PrinceRidge held by Mr. Costas and Mr. Hutchins; (ii) Mr. Costas and Mr. Hutchins resigned as employees and board members of PrinceRidge; (iii) Mr. Costas and Mr. Hutchins agreed to forfeit all of their unvested equity awards both from PrinceRidge and IFMI; and (iv) Mr. Costas and Mr. Hutchins withdrew as members of PrinceRidge GP and as partners of PrinceRidge Holdings. Daniel Cohen, our Chairman and CEO, was appointed Chairman and CEO of PrinceRidge by the board of PrinceRidge. See note 22 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

Consolidated Results of Operations

The following section provides a comparative discussion of our consolidated results of operations for the specified periods. The period-to-period comparisons of financial results are not necessarily indicative of future results.

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Six Months Ended June 30, 2012 compared to the Six Months Ended June 30, 2011

The following table sets forth information regarding our consolidated results of operations for the six months ended June 30, 2012 and 2011.

INSTITUTIONAL FINANCIAL MARKETS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Six months ended June 30,						Favorable/(Unfavorable)
	2012			2011			$ Change			% Change
Revenues
Net trading	$	37,642		$	43,514		$	(5,872	)		(13	)%
Asset management		9,545			11,225			(1,680	)		(15	)%
New issue and advisory		1,266			1,240			26			2	%
Principal transactions and other income		(4,656	)		(208	)		(4,448	)		(2,138	)%
Total revenues		43,797			55,771			(11,974	)		(21	)%
Operating expenses
Compensation and benefits		33,327			43,421			10,094			23	%
Business development, occupancy, equipment		2,450			3,274			824			25	%
Subscriptions, clearing, and execution		5,972			5,542			(430	)		(8	)%
Professional fees and other operating		5,687			9,152			3,465			38	%
Depreciation and amortization		734			973			239			25	%
Total operating expenses		48,170			62,362			14,192			23	%
Operating income / (loss)		(4,373	)		(6,591	)		2,218			34	%
Non operating income / (expense)
Interest expense, net		(2,319	)		(2,929	)		610			21	%
Other		(4,357	)		—			(4,357	)		NM
Gain on repurchase of debt		3			—			3			NM
Income / (loss) from equity method affiliates		2,042			4,530			(2,488	)		(55	)%
Income / (loss) before income tax expense / (benefit)		(9,004	)		(4,990	)		(4,014	)		(80	)%
Income tax expense / (benefit)		54			(346	)		(400	)		(116	)%
Net income / (loss)		(9,058	)		(4,644	)		(4,414	)		(95	)%
Less: Net income/ (loss) attributable to the non-controlling interest		(3,121	)		(1,648	)		1,473			89	%
Net income / (loss) attributable to IFMI	$	(5,937	)	$	(2,996	)	$	(2,941	)		(98	)%

NM = Not Meaningful

Revenues

Revenues decreased by $11,974, or 21%, to $43,797 for the six months ended June 30, 2012 from $55,771 for the six months ended June 30, 2011. As discussed in more detail below, the change was comprised of decreases of $5,872 in net trading, $4,448 in principal transactions and other income, and $1,680 in asset management revenue, partially offset by an increase of $26 in new issue and advisory revenue.

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Net Trading

Net trading revenue decreased by $5,872, or 13%, to $37,642 for the six months ended June 30, 2012 from $43,514 for the six months ended June 30, 2011.

The following table provides detail on net trading revenue by operation. JVB was acquired effective January 1, 2011 and PrinceRidge was acquired on May 31, 2011. The PrinceRidge and other capital markets line below includes the operations of PrinceRidge since its acquisition on May 31, 2011 as well as the results from the Company’s other capital markets professionals not included in the JVB or EDML lines below for 2011. In conjunction with the acquisition of PrinceRidge, we contributed substantially all of our capital markets professionals (with the exception of those within JVB and EDML) to PrinceRidge. Therefore, the revenues earned from PrinceRidge during the period we owned them include the revenues earned by the capital markets professionals contributed.

	June 30, 2012		June 30, 2011		Change
JVB	$	12,476	$	8,861	$	3,615
PrinceRidge and other capital markets		20,796		30,217		(9,421	)
EDML		4,370		4,436		(66	)
Total	$	37,642	$	43,514	$	(5,872	)

Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control that may adversely affect the ultimate value realized from our trading investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from trading positions is subject to overall market conditions. Due to volatility and uncertainty in the capital markets, the net trading revenue recognized during the six months ended June 30, 2012 may not be indicative of future results. Furthermore, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB fair value hierarchy. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 5 and 6 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. The fair value estimates made by the Company may not be indicative of the final sale price at which these assets may be sold.

Asset Management

Assets Under Management

AUM refers to our assets under management and equals the sum of: (1) the gross assets included in CDOs that we have sponsored and manage; plus (2) the NAV of the permanent capital vehicles and investment funds we manage; plus (3) the NAV of other accounts we manage.

Our calculation of AUM may differ from the calculations used by other asset managers and, as a result, this measure may not be comparable to similar measures presented by other asset managers. This definition of AUM is not necessarily identical to a definition of AUM that may be used in our management agreements.

ASSETS UNDER MANAGEMENT

(dollars in thousands)

	As of June 30,				As of December 31,
	2012		2011		2011		2010
Company sponsored CDOs	$	6,048,428	$	9,152,574	$	7,859,755	$	9,730,374
Permanent capital vehicles		153,371		157,319		169,237		171,028
Investment funds		—		—		—		129,027
Managed accounts (1)		38,948		34,989		33,644		288,608
Assets under management (2)	$	6,240,747	$	9,344,882	$	8,062,636	$	10,319,037
Average assets under management—company sponsored CDOs	$	7,088,288	$	9,417,654	$	8,835,773	$	12,199,716

(1) Represents client funds managed pursuant to separate account arrangements. Subsequent to March 28, 2011, certain separate account arrangements were excluded due to the sale of those management contracts to a new entity owned by two former Company employees, known as Strategos Capital Management, LLC.

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(2) AUM for company sponsored CDOs, permanent capital vehicles, investment funds and other managed accounts represents total AUM at the end of the period indicated.

Asset management fees decreased by $1,680, or 15%, to $9,545 for the six months ended June 30, 2012 from $11,225 for the six months ended June 30, 2011, as discussed in more detail below. The following table provides a more detailed comparison of the two periods:

ASSET MANAGEMENT

(dollars in thousands)

	June 30, 2012		June 30, 2011		Change
CDOs and related service agreements	$	8,882	$	9,595	$	(713	)
Investment funds		—		452		(452	)
Other		663		1,178		(515	)
Total	$	9,545	$	11,225	$	(1,680	)

CDOs

Asset management revenue from company-sponsored CDOs decreased by $713 to $8,882 for the six months ended June 30, 2012 from $9,595 for the six months ended June 30, 2011. The following table summarizes the periods presented by asset class:

FEES EARNED BY ASSET CLASS

(dollars in thousands)

	June 30, 2012		June 30, 2011		Change
TruPS and insurance company debt—U.S.	$	5,763	$	5,953	$	(190	)
High grade and mezzanine ABS		859		1,190		(331	)
TruPS and insurance company debt—Europe		1,402		1,581		(179	)
Broadly syndicated loans—Europe		858		871		(13	)
Total	$	8,882	$	9,595	$	(713	)

Asset management fees for TruPS and insurance company debt of United States companies decreased primarily because the average AUM in this asset class declined as a result of greater levels of deferrals, defaults, and prepayments of the underlying assets.

On July 29, 2010, we entered into a Master Transaction Agreement pursuant to which we sold to a third party collateral management rights and responsibilities arising after the sale relating to the Alesco X through XVII securitizations. In connection with the Master Transaction Agreement, we entered into a three-year Services Agreement under which we provide and will continue to provide certain services to the third party purchaser. $4,664 of the cash received up front was recognized as deferred revenue and is amortized into revenue over the life of the Services Agreement. In addition, the Master Transaction Agreement calls for additional payments to be made to us on a quarterly basis through February 23, 2017 if the management fees earned by the third party exceed certain thresholds. It should be noted that the assets of the Alesco X through XVII securitizations are not included in our AUM disclosed in the table above as we are no longer the manager. However, we continue to generate revenue through the services agreement related to these securitizations.

During the six months ended June 30, 2012 and 2011, we recognized $3,257 and $3,356, respectively, in revenue for the Alesco X through XVII securitizations which is included in the TruPS and insurance company debt - U.S. in the table above. Of these amounts, $340 and $257 represent incentive payments received from the third party under the Master Transaction Agreement during the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, we have the potential to earn additional incentive payments (through February of 2017) if certain performance hurdles are met. Not including any potential incentive fees, we expect to recognize an additional $3,889 in revenue in the remainder of 2012 and beyond from the Services Agreement over its remaining term (ending February of 2013). Of the $3,889 in revenue, $3,026 is from payments under the Services Agreement and $863 represents amortization of the initial payment of $4,664 received up front. At that point, with the exception of potential incentive payments, the Company will stop recognizing revenue from the Alesco X through XVII securitizations.

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Substantially all of our TruPS trusts (both for the U.S. and Europe) have stopped paying subordinated management fees due to diversion of cash flow to pay down the senior notes of the securitization as a result of defaults within the securitization. In this case, we do not recognize revenue for unpaid subordinated fees. We will begin accruing the subordinated asset management fees again if payments resume and, in our estimate, continued payment by the trusts is reasonably assured. If payments resume in the future, but we are unsure of continued payment, we will recognize the subordinated asset management fee as payments are received and will not accrue the fee on a monthly basis. We do not anticipate that we will receive additional subordinated asset management fees in the near future.

Asset management fees for high grade and mezzanine ABS declined primarily because the average AUM in this asset class declined due to defaults of the underlying assets and liquidations of certain CDOs.

Asset management fees for TruPS and insurance company debt of European companies decreased primarily due to the decline in the underlying collateral balances as a result of lower foreign exchange rates, as well as the occurrence of prepayments and defaults.

Investment Funds and Other

Our asset management revenue from investment funds was comprised of fees from the management of Deep Value prior to 2012.

	June 30, 2012		June 30, 2011		Change
Deep Value	$	—	$	452	$	(452	)
Separate accounts and other		663		1,178		(515	)
Total	$	663	$	1,630	$	(967	)

The decrease in Deep Value revenue was primarily because we sold our investment advisory agreements relating to the Deep Value funds to Strategos Capital Management, LLC (the “Buyer”), a newly formed entity owned by two former Company employees, on March 29, 2011. Pursuant to the terms of the sale, we will be entitled to 10% of all revenue, net of certain expenses, earned by the Buyer between March 29, 2011 and December 31, 2014. This revenue sharing arrangement is recorded as a component of principal transactions and other income going forward.

The net decrease of $515 from separate accounts and other was primarily comprised of (a) a decrease of $335 relating to certain managed accounts sold to the Buyer in 2011 as part of the transaction described above and (b) a decrease in fees earned primarily from other accounts of $179.

New Issue and Advisory Revenue

New issue and advisory revenue increased by $26 to $1,266 for the six months ended June 30, 2012 as compared to $1,240 for the same period in 2011. The increase is primarily attributable to an increased number of new issue and advisory engagements that closed during the first half of 2012 as compared to the first half of 2011.

Principal Transactions and Other Income

Principal transactions and other income decreased by $4,448 to a loss of $4,656 for the six months ended June 30, 2012, as compared to a loss of $208 for the six months ended June 30, 2011.

Principal Transactions & Other Income

(dollars in thousands)

	June 30, 2012			June 30, 2011			Change
Change in fair value of other investments, at fair value	$	(5,208	)	$	(1,122	)	$	(4,086	)
Foreign currency		(63	)		7			(70	)
Dividend, interest, and other income		615			907			(292	)
Total	$	(4,656	)	$	(208	)	$	(4,448	)

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The decrease in the change in fair value of other investments of $4,086 is comprised of the following:

	June 30, 2012			June 30, 2011			Change
EuroDekania	$	(267	)	$	1,619		$	(1,886	)
Star Asia		(5,059	)		(2,014	)		(3,045	)
Yen Hedge		(35	)		(219	)		184
Tiptree (MFCA prior to June 23, 2011)		170			71			99
Deep Value		—			(9	)		9
Duart Fund		—			(456	)		456
Other		(17	)		(114	)		97
Total	$	(5,208	)	$	(1,122	)	$	(4,086	)

For the six months ended June 30, 2012, the change in the value of our investment in EuroDekania was entirely comprised of the change in the underlying NAV of EuroDekania. During the second quarter of 2011, we acquired 353,244 additional shares of EuroDekania at an amount less than the underlying NAV of EuroDekania. Accordingly, this investment resulted in a gain. Of the total gain recorded for the six months ended June 30, 2011, $323 represented unrealized gains recognized on the newly purchased shares and $1,296 represented the change in the underlying NAV of EuroDekania.

Star Asia is an investment fund that, like any other investment fund, is exposed to changes in its value due to the performance of its underlying investments. The value of our investment in Star Asia has also been impacted by the following items: (a) during 2011, we acquired shares of Star Asia from unrelated third party investors at amounts less than the underlying NAV of Star Asia; (b) in 2011, certain of Star Asia’s investments were impacted by the earthquake, tsunami, and nuclear disaster in Japan that occurred during the first quarter; and (c) Star Asia’s investments are primarily denominated in Japanese Yen and Star Asia itself does not hedge against currency fluctuations. The following table shows the change in the value of our investment in Star Asia and how it was impacted by these items:

	June 30, 2012			June 30, 2011			Change
Purchase or receipt of shares for below NAV	$	—		$	1,020		$	(1,020	)
Foreign exchange		(1,291	)		770			(2,061	)
Earthquake, tsunami, nuclear disaster		—			(4,150	)		4,150
Underlying investment values, net		(3,768	)		346			(4,114	)
Total	$	(5,059	)	$	(2,014	)	$	(3,045	)

Purchase or receipt of shares for below NAV: During the first half of 2012, we did not purchase any shares of Star Asia. During the first half of 2011, we purchased 151,074 shares directly from unrelated third parties for $226. All of these purchases were made at amounts below Star Asia’s NAV.

Foreign exchange: These amounts represent the impact to fair value of our investment in Star Asia from currency fluctuations. This is because Star Asia’s investments are primarily denominated in Japanese Yen and Star Asia itself does not hedge against currency fluctuations. Accordingly, we are exposed to increases and decreases in the value of our investment in Star Asia that result from fluctuations of the Japanese Yen as compared to the U.S. Dollar. We may seek to minimize this risk by entering into a Yen hedge. However, our hedging activities could negatively impact our liquidity. That is, the hedge itself settles in cash on a periodic basis while our investment in Star Asia is comparatively illiquid. Therefore, we continuously consider the appropriate level for the Yen hedge, especially considering our overall corporate liquidity position. During the six months ended June 30, 2012 and 2011, we hedged a portion of our investment in Star Asia and recorded the gains or losses as a component of principal transactions. We may or may not enter into hedges in the future based on our corporate liquidity. Any un-hedged portion of our investment in Star Asia will continue to be exposed to currency fluctuations.

As of June 30, 2012, our long exposure to Japanese Yen through our investment in Star Asia was 3.6 billion Yen (representing the total net Yen based assets of Star Asia multiplied by our ownership percentage). Our hedge was 1.0 billion Yen resulting in net long exposure of 2.6 billion Yen. The spot rate of the U.S. Dollar to Japanese Yen was 79.79 as of June 30, 2012 which means the un-hedged portion of Star Asia was $33.2 million. As of June 30, 2011, our long exposure to Japanese Yen was 4.2 billion Yen. Our hedge was 2.4 billion Yen resulting in net long exposure of 1.8 billion Yen. The spot rate of U.S. Dollar to Japanese Yen was 80.43 as of June 30, 2011 which means our un-hedged portion of Star Asia was $22.2 million.

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Earthquake, tsunami, nuclear disaster: During the six months ended June 30, 2011, certain of Star Asia’s investments were impacted by the earthquake, tsunami, and nuclear disaster in Japan that occurred during the first quarter of 2011.

Underlying investment values: This represents the impact to the fair value of our investment in Star Asia from changes in the underlying net investment values of Star Asia’s investments, net of debt, exclusive of the impact of foreign currency changes.

In June 2011, MFCA became a wholly owned subsidiary of Tiptree. We exchanged our 1,000,200 shares of MFCA for 111,133 shares of Tiptree. We carry our investment in Tiptree at the NAV of the underlying fund. We carried our investment in MFCA at the NAV of the underlying fund.

As of June 30, 2011, Deep Value completed its liquidation. We carried our investment in Deep Value at the NAV of the underlying fund. The fund was substantially liquidated in the fourth quarter of 2010; the 2011 change in NAV was primarily attributable to wind down costs of the fund.

We carried our investment in the Duart Fund at the NAV of the underlying fund. Effective December 31, 2010, we submitted a redemption notice to the Duart Fund to redeem 100% of our capital. We received our redemption in April 2011.

The change in other investments of $97 was comprised of (i) an overall net increase of $124 to changes in fair value in certain warrants and options the Company held as of June 30, 2012 and December 31, 2011; (ii) a net increase of $5 to changes in fair value in other investments; partially offset by (iii) $32 related to certain investments in securitizations that were sold for a gain during the first quarter of 2011.

We earn certain revenues in Euros and U.K. Pounds Sterling; however, our functional currency is the U.S. Dollar. The foreign currency fluctuations are due to changes in the exchange rates between Euros, U.K. Pounds Sterling, and U.S. Dollars in the related periods. We have not hedged our foreign currency exposure related to management fees paid in Euros or U.K. Pounds Sterling to date.

The change in dividend, interest and other income of $292 primarily related to a decrease in other income of (i) $615 of revenue share from our revenue share arrangement related to NPPF 1; partially offset by an increase of (ii) $127 from our revenue share arrangement related to the Buyer which was not in place until March 29, 2011, and an increase in (iii) the amount of $142 in dividends and interest income received on our investments in other investments, at fair value.

Operating Expenses

Operating expenses decreased by $14,192, or 23%, to $48,170 for the six months ended June 30, 2012 from $62,362 for the six months ended June 30, 2011. The change was due to decreases of $10,094 in compensation and benefits, $3,465 in professional fees and other operating expenses, $824 in business development, occupancy, equipment, and $239 in depreciation and amortization, partially offset by an increase of $430 in subscriptions, clearing and execution.

Compensation and Benefits

Compensation and benefits decreased by $10,094, or 23%, to $33,327 for the six months ended June 30, 2012 from $43,421 for the six months ended June 30, 2011.

COMPENSATION AND BENEFITS

(dollars in thousands)

	June 30, 2012		June 30, 2011		Change
Cash compensation and benefits	$	31,359	$	34,995	$	(3,636	)
One time compensation charge to former CEO of capital markets segment		—		3,000		(3,000	)
Equity-based compensation		1,968		5,426		(3,458	)
Total	$	33,327	$	43,421	$	(10,094	)

Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, and benefits. The decrease in cash compensation and benefits is primarily a result of the decrease in incentive compensation which is tied to revenue and operating profitability.

From time to time, the Company pays employees severance when they are terminated without cause. These severance payments are included within cash compensation in the table above. In the second quarter of 2011, we incurred an expense of $3,000 for cash compensation owed to the former CEO of our capital markets segment, Mr. Christopher Ricciardi, as a result of an amendment of his employment agreement. This payment is separately broken out as one time compensation charge in the table above.

Our total headcount decreased from 264 at June 30, 2011 to 216 at June 30, 2012.

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Compensation and benefits includes equity-based compensation which decreased by $3,458 to $1,968 for the six months ended June 30, 2012 from $5,426 for the six months ended June 30, 2011. The decrease was comprised of (i) $2,586 which primarily represented IFMI stock awards granted to IFMI employees which were subsequently forfeited primarily as a result of employees leaving the Company and (ii) the 2011 period included $1,800 of expense attributable to an award of 360,000 restricted shares granted during the first half of 2011 to our former president, Mr. Christopher Ricciardi, which was fully expensed during the first half of 2011 as a result of his amended employment agreement; partially offset by the increases of (iii) $74 related to IFMI stock grants to employees of JVB; and (iv) $358 related to PrinceRidge membership unit grants and $496 related to the grant of IFMI stock to employees of PrinceRidge (who were not formerly employees of IFMI).

Business Development, Occupancy and Equipment

Business development, occupancy, and equipment decreased by $824, or 25%, to $2,450 for the six months ended June 30, 2012 from $3,274 for the six months ended June 30, 2011. The decrease was primarily due to decreases in business development expenses, such as promotion, advertising, travel and entertainment of $457, in rent expense of $191, and in other expenses associated with occupancy and equipment of $176. The decreases are primarily due to our cost saving measures instituted following the acquisition of PrinceRidge in May 2011.

Subscriptions, Clearing and Execution

Subscriptions, clearing, and execution increased by $430, or 8%, to $5,972 for the six months ended June 30, 2012 from $5,542 for the six months ended June 30, 2011. The increase included an increase of $328 in subscriptions primarily due to an increase in total subscriptions (some of which were duplicative) as a result of the acquisition of PrinceRidge. The increase in clearing and execution costs of $102 is primarily attributable to increased clearing costs primarily in PrinceRidge.

Professional Fees and Other Operating Expenses

Professional fees and other operating expenses decreased by $3,465, or 38%, to $5,687 for the six months ended June 30, 2012 from $9,152 for the six months ended June 30, 2011. The decrease included a decrease in legal and professional fees of $2,713 and an overall net decrease of $752 in other costs.

Depreciation and Amortization

Depreciation and amortization decreased by $239, or 25%, to $734 for the six months ended June 30, 2012 from $973 for the six months ended June 30, 2011. The entire decline was due to a decrease in depreciation expense related to certain property and equipment that was fully depreciated prior to January 1, 2012.

Non-Operating Income and Expense

Interest Expense, net

Interest expense decreased by $610, or 21%, to $2,319 for the six months ended June 30, 2012 from $2,929 for the six months ended June 30, 2011. This decrease of $610 was comprised of (a) a decrease of $268 of interest incurred on our bank debt which we paid off and terminated during the fourth quarter of 2011; (b) a decrease of $63 of interest incurred on the convertible senior notes (comprised of our Old Notes and our New Notes) due to repurchases of Old Notes in November 2011, March 2012, and redemptions in May 2012; (c) a decrease of $163 of interest incurred on the junior subordinated notes, a portion of which have a variable rate of interest; (d) an increase of $3 of interest incurred on subordinated notes payable; and (e) an increase of $119 of interest income related to the reduction of the amount owed to withdrawing partners of PrinceRidge which is recorded as interest income. See note 13 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

Gain on Repurchase of Debt

In March 2012, we repurchased $150 aggregate principal amount of Old Notes from an unrelated third party for $151, including accrued interest of $4. The notes had a carrying value of $150 resulting in a gain from repurchase of debt of $3 which was included as a separate component of non-operating income / (expense) in our consolidated statements of operations.

We did not repurchase any debt in the six month period ended June 30, 2011.

Other

During the second quarter of 2012, CCS and the Liquidation Trustee in the Sentinel litigation reached an agreement in principle to settle such litigation. That agreement calls for CCS to make an initial payment of $3,000 and an additional payment of $2,250 in the future. As of the date of this report, this agreement is not final, is subject to the execution of final documentation and is subject to the Illinois Court’s approval of an order barring contribution claims against CCS. As a result of this agreement in principle, the Company accrued a contingent liability of $4,357. See note 17 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

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Income / (Loss) from Equity Method Affiliates

Income from equity method affiliates decreased by $2,488 to $2,042 for the six months ended June 30, 2012 from $4,530 for the six months ended June 30, 2011. Income or loss from equity method affiliates represents our share of the related entities’ earnings. As of June 30, 2011, we had five equity method investees: (i) Star Asia Manager; (ii) Deep Value GP; (iii) Deep Value GP II; (iv) Star Asia SPV; and (v) Duart Capital. As of June 30, 2012, we had seven equity method investees: (i) Star Asia Manager; (ii) Deep Value GP; (iii) Deep Value GP II; (iv) Star Asia SPV; (v) Star Asia Opportunity; (vi) Star Asia Capital Management; and (vii) Duart Capital. See notes 9 and 20 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

During the second quarter of 2011, one of the Deep Value funds for which Deep Value GP served as the general partner was substantially liquidated. In conjunction with the liquidation and distribution of funds to investors, the Deep Value GP recognized its incentive fee earned in the amount of $8,719. We own 50% of the Deep Value GP. Therefore, our share of this incentive fee was $4,359 and was included as a component of income from equity method affiliates during the six months ended June 30, 2011.

Income Tax Expense / (Benefit)

The income tax benefit decreased by $400 to income tax expense of $54 for the six months ended June 30, 2012 from an income tax benefit of $346 for the six months ended June 30, 2011.

The tax expense realized by us during the six months ended June 30, 2012 was primarily the result of French income tax incurred in our French subsidiary.

The tax benefit realized by us during the six months ended June 30, 2011 was a result of the book loss during the first six months ended June 30, 2011 as well as a result of changes in the Company’s state apportionment as a result of our acquisition of JVB and PrinceRidge. The combined impact of these two acquisitions resulted in a reduction in the Company’s state effective tax rate. Because the Company has a net deferred tax liability, the reduction in the state effective rate reduces this liability and results in a tax benefit to us. This tax benefit was recorded as a discrete item in the first half of 2011. See note 23 to the December 31, 2011 consolidated financial statements of the Company’s Annual Report on Form 10-K for a more complete description of the Company’s tax attributes and unrecognized tax benefits.

Net Income / (Loss) Attributable to the Non-controlling Interest

Net income / (loss) attributable to the non-controlling interest for the six months ended June 30, 2012 and 2011 includes the 32.5% non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods. In addition, net income / (loss) attributable to the non-controlling interest also includes the redeemable non-controlling interest related to partnership interests in PrinceRidge other than interests held by us for the six months ended June 30, 2012 and 2011. PrinceRidge was acquired by us effective May 31, 2011.

Summary calculation of non-controlling interest - Six Months Ended June 30, 2012

	Wholly  owned subsidiaries			Majority owned subsidiaries			Total Operating LLC			IFMI		Consolidated
Net loss before tax	$	(7,972	)	$	(1,032	)	$	(9,004	)	$	—	$	(9,004	)
Income tax expense		—			—			54			—		54
Net income / (loss) after tax		(7,972	)		(1,032	)		(9,058	)		—		(9,058	)
Majority owned subsidiary non-controlling interest					(238	)		(238	)
Net loss attributable to the Operating LLC		(7,972	)		(794	)		(8,820	)
Average Effective Operating LLC non-controlling interest (1)%								32.69	%
Operating LLC non-controlling interest								(2,883	)
Majority owned subsidiary non-controlling interest								(238	)
Total non-controlling interest							$	(3,121	)

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Summary calculation of non-controlling interest - Six Months Ended June 30, 2011

	Wholly owned subsidiaries			Majority owned subsidiaries			Total Operating LLC			IFMI			Consolidated
Net loss before tax	$	(4,784	)	$	(206	)	$	(4,990	)	$	—		$	(4,990	)
Income tax benefit		—			—			(35	)		(311	)		(346	)
Net income / (loss) after tax		(4,784	)		(206	)		(4,955	)		311			(4,644	)
Majority owned subsidiary non-controlling interest					(53	)		(53	)
Net loss attributable to the Operating LLC		(4,784	)		(153	)		(4,902	)
Average effective Operating LLC non-controlling interest (1)%								32.54	%
Operating LLC non-controlling interest								(1,595	)
Majority owned subsidiary non-controlling interest								(53	)
Total non-controlling interest							$	(1,648	)

⁽¹⁾  Non-controlling interest is recorded on a monthly basis. Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages.

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Three Months Ended June 30, 2012 compared to the Three Months Ended June 30, 2011

The following table sets forth information regarding our consolidated results of operations for the three months ended June 30, 2012 and 2011.

INSTITUTIONAL FINANCIAL MARKETS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Three months ended June 30,						Favorable/(Unfavorable)
	2012			2011			$ Change			% Change
Revenues
Net trading	$	19,951		$	16,240		$	3,711			23	%
Asset management		4,608			5,255			(647	)		(12	)%
New issue and advisory		189			1,131			(942	)		(83	)%
Principal transactions and other income		289			831			(542	)		(65	)%
Total revenues		25,037			23,457			1,580			7	%
Operating expenses
Compensation and benefits		17,053			21,433			4,380			20	%
Business development, occupancy, equipment		1,276			1,835			559			30	%
Subscriptions, clearing, and execution		2,899			2,727			(172	)		(6	)%
Professional fees and other operating		2,636			5,137			2,501			49	%
Depreciation and amortization		343			503			160			32	%
Total operating expenses		24,207			31,635			7,428			23	%
Operating income / (loss)		830			(8,178	)		9,008			110	%
Non operating income / (expense)
Interest expense, net		(1,104	)		(1,447	)		343			24	%
Other		(4,357	)		—			(4,357	)		NM
Income / (loss) from equity method affiliates		1,526			4,435			(2,909	)		(66	)%
Income / (loss) before income tax expense / (benefit)		(3,105	)		(5,190	)		2,085			40	%
Income tax expense / (benefit)		63			(133	)		(196	)		(147	)%
Net income / (loss)		(3,168	)		(5,057	)		1,889			37	%
Less: Net income/ (loss) attributable to the non-controlling interest		(1,090	)		(1,686	)		(596	)		(35	)%
Net income / (loss) attributable to IFMI	$	(2,078	)	$	(3,371	)	$	1,293			38	%

NM = Not Meaningful

Revenues

Revenues increased by $1,580, or 7%, to $25,037 for the three months ended June 30, 2012 from $23,457 for the three months ended June 30, 2011. As discussed in more detail below, the change was comprised of an increase of $3,711 in net trading, partially offset by decreases of $647 in asset management revenue, $942 in new issue and advisory revenue, and $542 in principal transactions and other income.

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Net Trading

Net trading revenue increased by $3,711, or 23%, to $19,951 for the three months ended June 30, 2012 from $16,240 for the three months ended June 30, 2011.

The following table provides detail on net trading revenue by operation. JVB was acquired effective January 1, 2011 and PrinceRidge was acquired on May 31, 2011. The PrinceRidge and other capital markets line below includes the operations of PrinceRidge since its acquisition on May 31, 2011 as well as the results from the Company’s other capital markets professionals not included in the JVB or EDML lines below for 2011. In conjunction with the acquisition of PrinceRidge, we contributed substantially all of our capital markets professionals (with the exception of those within JVB and EDML) to PrinceRidge. Therefore, the revenues earned from PrinceRidge during the period we owned them include the revenues earned by the capital markets professionals contributed.

	June 30, 2012		June 30, 2011		Change
JVB	$	5,886	$	3,972	$	1,914
PrinceRidge and other capital markets		10,287		11,010		(723	)
EDML		3,778		1,258		2,520
Total	$	19,951	$	16,240	$	3,711

Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control that may adversely affect the ultimate value realized from our trading investments. During the three months ended June 30, 2012, both PrinceRidge and EDML benefited from gains generated from a small number of riskless trades. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from trading positions is subject to overall market conditions. Due to volatility and uncertainty in the capital markets, the net trading revenue recognized during the three months ended June 30, 2012 may not be indicative of future results. Furthermore, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB fair value hierarchy. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 5 and 6 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. The fair value estimates made by the Company may not be indicative of the final sale price at which these assets may be sold.

Asset Management

Asset management fees decreased by $647, or 12%, to $4,608 for the three months ended June 30, 2012 from $5,255 for the three months ended June 30, 2011, as discussed in more detail below. The following table provides a more detailed comparison of the two periods:

ASSET MANAGEMENT

(dollars in thousands)

	June 30, 2012		June 30, 2011		Change
CDOs and related service agreements	$	4,374	$	4,828	$	(454	)
Other		234		427		(193	)
Total	$	4,608	$	5,255	$	(647	)

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CDOs

Asset management revenue from company-sponsored CDOs decreased by $454 to $4,374 for the three months ended June 30, 2012 from $4,828 for the three months ended June 30, 2011. The following table summarizes the periods presented by asset class:

FEES EARNED BY ASSET CLASS

(dollars in thousands)

	June 30, 2012		June 30, 2011		Change
TruPS and insurance company debt—U.S.	$	2,880	$	2,984	$	(104	)
High grade and mezzanine ABS		371		588		(217	)
TruPS and insurance company debt—Europe		697		811		(114	)
Broadly syndicated loans—Europe		426		445		(19	)
Total	$	4,374	$	4,828	$	(454	)

Asset management fees for TruPS and insurance company debt of United States companies decreased primarily because the average AUM in this asset class declined as a result of greater levels of deferrals, defaults, and prepayments of the underlying assets.

On July 29, 2010, we entered into a Master Transaction Agreement pursuant to which we sold to a third party collateral management rights and responsibilities arising after the sale relating to the Alesco X through XVII securitizations. In connection with the Master Transaction Agreement, we entered into a three-year Services Agreement under which we provide and will continue to provide certain services to the third party purchaser. $4,664 of the cash received up front was recognized as deferred revenue and is amortized into revenue over the life of the Services Agreement. In addition, the Master Transaction Agreement calls for additional payments to be made to us on a quarterly basis through February 23, 2017 if the management fees earned by the third party exceed certain thresholds. It should be noted that the assets of the Alesco X through XVII securitizations are not included in our AUM disclosed in the table above as we are no longer the manager. However, we continue to generate revenue through the services agreement related to these securitizations.

During the three months ended June 30, 2012 and 2011, we recognized $1,631 and $1,688, respectively, in revenue for the Alesco X through XVII securitizations which is included in the TruPS and insurance company debt - U.S. in the table above. Of these amounts, $172 and $138 represent incentive payments received from the third party under the Master Transaction Agreement during the three months ended June 30, 2012 and 2011, respectively.

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Substantially all of our U.S. and European TruPS trusts have stopped paying subordinated management fees due to diversion of cash flow to pay down the senior notes of the securitization as a result of defaults within the securitization. In this case, we do not recognize revenue for unpaid subordinated fees. We will begin accruing the subordinated asset management fees again if payments resume and, in our estimate, continued payment by the trusts is reasonably assured. If payments resume in the future, but we are unsure of continued payment, we will recognize the subordinated asset management fee as payments are received and will not accrue the fee on a monthly basis. We do not anticipate that we will receive additional subordinated asset management fees in the near future.

Asset management fees for high grade and mezzanine ABS declined primarily because the average AUM in this asset class declined due to defaults of the underlying assets and liquidations of certain CDOs.

Asset management fees for TruPS and insurance company debt of European companies decreased primarily due to the decline in the underlying collateral balances as a result of lower foreign exchange rates, as well as the occurrence of prepayments and defaults.

Other

Our other revenue was comprised of fees from separate accounts and other managed accounts. The net decrease of $193 from separate accounts and other was primarily due to a decrease of $237 in other fees, partially offset by an increase of $44 related to fees earned primarily from other separate accounts.

New Issue and Advisory Revenue

New issue and advisory revenue decreased by $942, or 83%, to $189 for the three months ended June 30, 2012 as compared to $1,131 for the same period in 2011. The decrease is primarily attributable to a decreased number of new issue and advisory engagements that closed during the second quarter of 2012 as compared to the second quarter of 2011.

Principal Transactions and Other Income

Principal transactions and other income decreased by $542 to $289 for the three months ended June 30, 2012, as compared to $831 for the three months ended June 30, 2011.

Principal Transactions & Other Income

(dollars in thousands)

	June 30, 2012			June 30, 2011		Change
Change in fair value of other investments, at fair value	$	(34	)	$	418	$	(452	)
Foreign currency		(32	)		131		(163	)
Dividend, interest, and other income		355			282		73
Total	$	289		$	831	$	(542	)

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The decrease in the change in fair value of other investments of $452 is comprised of the following:

	June 30, 2012			June 30, 2011			Change
EuroDekania	$	(245	)	$	844		$	(1,089	)
Star Asia		181			667			(486	)
Yen Hedge		(35	)		(922	)		887
Tiptree (MFCA prior to June 23, 2011)		53			40			13
Deep Value		—			(9	)		9
Duart Fund		—			(1	)		1
Other		12			(201	)		213
Total	$	(34	)	$	418		$	(452	)

For the three months ended June 30, 2012, the change in the value of our investment in EuroDekania was entirely comprised of the change in the underlying NAV of EuroDekania. During the second quarter of 2011, we acquired 353,244 additional shares of EuroDekania at an amount less than the underlying NAV of EuroDekania. Accordingly, this investment resulted in a gain. Of the total gain recorded in the second quarter of 2011, $323 represented unrealized gains recognized on the newly purchased shares and $521 represented the change in the underlying NAV of EuroDekania.

Star Asia is an investment fund that, like any other investment fund, is exposed to changes in its value due to the performance of its underlying investments. The value of our investment in Star Asia has also been impacted by the following items: (a) during 2011, we acquired shares of Star Asia from unrelated third party investors at amounts less than the underlying NAV of Star Asia; (b) in 2011, certain of Star Asia’s investments were impacted by the earthquake, tsunami, and nuclear disaster in Japan that occurred during the first quarter; and (c) Star Asia’s investments are primarily denominated in Japanese Yen and Star Asia itself does not hedge against currency fluctuations. The following table shows the change in the value of our investment in Star Asia and how it was impacted by these items:

	June 30, 2012			June 30, 2011			Change
Foreign exchange	$	1,635		$	1,970		$	(335	)
Earthquake, tsunami, nuclear disaster		—			(2,250	)		2,250
Underlying investment values, net		(1,454	)		947			(2,401	)
Total	$	181		$	667		$	(486	)

Foreign exchange: These amounts represent the impact to fair value of our investment in Star Asia from currency fluctuations. This is because Star Asia’s investments are primarily denominated in Japanese Yen and Star Asia itself does not hedge against currency fluctuations. Accordingly, we are exposed to increases and decreases in the value of our investment in Star Asia that result from fluctuations of the Japanese Yen as compared to the U.S. Dollar. We may seek to minimize this risk by entering into a yen hedge. However, our hedging activities could negatively impact our liquidity. That is, the hedge itself settles in cash on a periodic basis while our investment in Star Asia is comparatively illiquid. Therefore, we continuously consider the appropriate level for the Yen hedge, especially considering our overall corporate liquidity position. During the three months ended June 30, 2011, we had hedged a portion of our investment in Star Asia and recorded the gains or losses as a component of principal transactions. We may or may not enter into hedges in the future based on our corporate liquidity. Any un-hedged portion of our investment in Star Asia will continue to be exposed to currency fluctuations.

As of June 30, 2012, our long exposure to Japanese Yen through our investment in Star Asia was 3.6 billion Yen (representing the total net Yen based assets of Star Asia multiplied by our ownership percentage). Our hedge was 1.0 billion Yen resulting in net long exposure of 2.6 billion Yen. The spot rate of the U.S. Dollar to Japanese Yen was 79.79 as of June 30, 2012 which means the un-hedged portion of Star Asia was $33.2 million. As of June 30, 2011, our long exposure to Japanese Yen was 4.2 billion Yen. Our hedge was 2.4 billion Yen resulting in net long exposure of 1.8 billion Yen. The spot rate of U.S. Dollar to Japanese Yen was 80.43 as of June 30, 2011 which means our un-hedged portion of Star Asia was $22.2 million.

Earthquake, tsunami, nuclear disaster: During the three months ended June 30, 2011, certain of Star Asia’s investments were impacted by the earthquake, tsunami, and nuclear disaster in Japan that occurred during the first quarter of 2011.

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Underlying investment values: This represents the impact to the fair value of our investment in Star Asia from changes in the underlying net investment values of Star Asia’s investments, net of debt, exclusive of the impact of foreign currency changes.

In June 2011, MFCA became a wholly owned subsidiary of Tiptree. We exchanged our 1,000,200 shares of MFCA for 111,133 shares of Tiptree. We carry our investment in Tiptree at the NAV of the underlying fund. We carried our investment in MFCA at the NAV of the underlying fund.

As of June 30, 2011, Deep Value completed its liquidation. We carried our investment in Deep Value at the NAV of the underlying fund. The fund was substantially liquidated in the fourth quarter of 2010; the 2011 change in net asset value was primarily attributable to wind down costs of the fund.

We carried our investment in the Duart Fund at the NAV of the underlying fund. Effective December 31, 2010, we submitted a redemption notice to the Duart Fund to redeem 100% of our capital. We received our redemption in April 2011.

The change in other investments of $213 related to changes in fair value of certain warrants and options the Company held as of June 30, 2012 and December 31, 2011.

We earn certain revenues in Euros and U.K. Pounds Sterling; however, our functional currency is the U.S. Dollar. The foreign currency fluctuations are due to changes in the exchange rates between Euros, U.K. Pounds Sterling, and U.S. Dollars in the related periods. We have not hedged our foreign currency exposure related to management fees paid in Euros or U.K. Pounds Sterling to date.

The change in dividend, interest and other income of $73 primarily related to a decrease in other income of (i) $114 of revenue share from our revenue share arrangement related to NPPF 1; partially offset by an increase of (ii) $32 from our revenue share arrangement related to the Buyer which was not in place until March 29, 2011, and an increase in (iii) the amount of $87 in dividends and interest income received on our investments in other investments, at fair value.

Operating Expenses

Operating expenses decreased by $7,428, or 23%, to $24,207 for the three months ended June 30, 2012 from $31,635 for the three months ended June 30, 2011. The change was due to decreases of $4,380 in compensation and benefits, $2,501 in professional fees and other operating expenses, $559 in business development, occupancy, equipment, and $160 in depreciation and amortization, partially offset by an increase of $172 in subscriptions, clearing and execution.

Compensation and Benefits

Compensation and benefits decreased by $4,380, or 20%, to $17,053 for the three months ended June 30, 2012 from $21,433 for the three months ended June 30, 2011.

COMPENSATION AND BENEFITS

(dollars in thousands)

	June 30, 2012		June 30, 2011		Change
Cash compensation and benefits	$	15,633	$	15,196	$	437
One time compensation charge to former CEO of capital markets segment		—		3,000		(3,000	)
Equity-based compensation		1,420		3,237		(1,817	)
Total	$	17,053	$	21,433	$	(4,380	)

Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, and benefits. The decrease in cash compensation and benefits is primarily a result of the decrease in incentive compensation which is tied to revenue and operating profitability. From time to time, the Company pays employees severance when they are terminated without cause. These severance payments are included within cash compensation in the table above. In the second quarter of 2011, we incurred an expense of $3,000 for cash compensation owed to our former president, Mr. Christopher Ricciardi, as a result of an amendment of his employment agreement. This payment is separately broken out as one time compensation charge in the table above.

Our total headcount decreased from 264 at June 30, 2011 to 216 at June 30, 2012.

Compensation and benefits includes equity-based compensation which decreased by $1,817 to $1,420 for the three months ended June 30, 2012 from $3,237 for the three months ended June 30, 2011. The decrease was comprised of (i) $507 which primarily represented IFMI stock awards granted to IFMI employees which were subsequently forfeited due to employees leaving the Company and (ii) the 2011 period included $1,643 of expense attributable to an award of 360,000 restricted shares granted during the first half of 2011, the former CEO of our capital markets segment, Mr. Christopher Ricciardi, which was fully expensed during the second quarter of 2011 as a result of

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his amended employment agreement; partially offset by the increases of (iii) $19 related to IFMI stock grants to employees of JVB; and (iv) $118 related to PrinceRidge membership unit grants and $198 related to the grant of IFMI stock to employees of PrinceRidge (who were not formerly employees of IFMI).

Business Development, Occupancy and Equipment

Business development, occupancy, and equipment decreased by $559, or 30%, to $1,276 for the three months ended June 30, 2012 from $1,835 for the three months ended June 30, 2011. The decrease was primarily due to decreases in business development expenses, such as promotion, advertising, travel and entertainment of $311, in rent expense of $95, and in other expenses associated with occupancy and equipment of $153. The decreases are primarily due to our cost saving measures instituted following the acquisition of PrinceRidge in May 2011.

Subscriptions, Clearing and Execution

Subscriptions, clearing, and execution increased by $172, or 6%, to $2,899 for the three months ended June 30, 2012 from $2,727 for the three months ended June 30, 2011. The increase included an increase of $186 in subscriptions primarily due to an increase in total subscriptions (some of which were duplicative) as a result of the acquisition of PrinceRidge. This increase was partially offset by the decrease in clearing and execution costs of $14 which was primarily attributable to an overall decrease in trading volume.

Professional Fees and Other Operating Expenses

Professional fees and other operating expenses decreased by $2,501, or 49%, to $2,636 for the three months ended June 30, 2012 from $5,137 for the three months ended June 30, 2011. The decrease included a decrease in legal and professional fees of $1,919 and an overall net decrease of $582 in other costs.

Depreciation and Amortization

Depreciation and amortization decreased by $160, or 32%, to $343 for the three months ended June 30, 2012 from $503 for the three months ended June 30, 2011. The entire decline was due to a decrease in depreciation expense related to certain property and equipment that was fully depreciated prior to January 1, 2012.

Non-Operating Income and Expense

Interest Expense, net

Interest expense decreased by $343, or 24%, to $1,104 for the three months ended June 30, 2012 from $1,447 for the three months ended June 30, 2011. This decrease of $343 was comprised of (a) a decrease of $122 of interest incurred on our bank debt which we paid off and terminated during the fourth quarter of 2011; (b) a decrease of $81 of interest incurred on the convertible senior notes primarily as the result of the redemption of the Old Notes in May 2012 (c) a decrease of $87 of interest incurred on the junior subordinated notes, a portion of which have a variable rate of interest; (d) an increase of $1 of interest incurred on subordinated notes payable; and (e) an increase of $54 of interest income related to the reduction in the amount owed to withdrawing partners of PrinceRidge which is recorded as interest income. See note 13 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

Other

During the second quarter of 2012, CCS and the Liquidation Trustee in the Sentinel litigation reached an agreement in principle to settle such litigation. That agreement in principle calls for CCS to make an initial payment of $3,000 and an additional payment of $2,250 in the future. As of the date of this report, this agreement is not final, is subject to the execution of final documentation and is subject to the Illinois Court’s approval of an order barring contribution claims against CCS. As a result of this agreement in principle, the Company accrued a contingent liability of $4,357. See note 17 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

Income / (Loss) from Equity Method Affiliates

Income from equity method affiliates decreased by $2,909 to $1,526 for the three months ended June 30, 2012 from $4,435 for the three months ended June 30, 2011. Income or loss from equity method affiliates represents our share of the related entities’ earnings. As of June 30, 2011, we had five equity method investees: (i) Star Asia Manager; (ii) Deep Value GP; (iii) Deep Value GP II; (iv) Star Asia SPV; and (v) Duart Capital. As of June 30, 2012, we had seven equity method investees: (i) Star Asia Manager; (ii) Deep Value GP; (iii) Deep Value GP II; (iv) Star Asia SPV; (v) Star Asia Opportunity; (vi) Star Asia Capital Management; and (vii) Duart Capital. See notes 9 and 20 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

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During the second quarter of 2011, one of the Deep Value funds for which Deep Value GP served as the general partner was substantially liquidated. In conjunction with the liquidation and distribution of funds to investors, the Deep Value GP recognized its incentive fee earned in the amount of $8,719. We own 50% of the Deep Value GP. Therefore, our share of this incentive fee was $4,359 and was included as a component of income from equity method affiliates during the three months ended June 30, 2011.

Income Tax Expense / (Benefit)

The income tax benefit decreased by $196 to income tax expense of $63 for the three months ended June 30, 2012 from an income tax benefit of $133 for the three months ended June 30, 2011.

The tax expense realized by us during the three months ended June 30, 2012 was primarily the result of French income tax incurred in our French subsidiary.

The tax benefit realized by us during the three months ended June 30, 2011 was a result of the book loss during the second quarter of 2011 as well as a result of changes in the Company’s state apportionment as a result of our acquisition of JVB and PrinceRidge. The combined impact of these two acquisitions resulted in a reduction in the Company’s state effective tax rate. Because the Company has a net deferred tax liability, the reduction in the state effective rate reduces this liability and results in a tax benefit to us. This tax benefit was recorded as a discrete item in the first half of 2011.

See note 23 to the December 31, 2011 consolidated financial statements of the Company’s Annual Report on Form 10-K for a more complete description of the Company’s tax attributes and unrecognized tax benefits.

Net Income / (Loss) Attributable to the Non-controlling Interest

Net income / (loss) attributable to the non-controlling interest for the three months ended June 30, 2012 and 2011 includes the 32.5% non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods. In addition, net income / (loss) attributable to the non-controlling interest also includes the redeemable non-controlling interest related to partnership interests in PrinceRidge other than interests held by us for the three months ended June 30, 2012 and 2011. PrinceRidge was acquired by us effective May 31, 2011.

Summary calculation of non-controlling interest - Three Months Ended June 30, 2012

	Wholly  owned subsidiaries			Majority owned subsidiaries			Total Operating LLC			IFMI		Consolidated
Net loss before tax	$	(2,653	)	$	(452	)	$	(3,105	)	$	—	$	(3,105	)
Income tax expense		—			—			63			—		63
Net income / (loss) after tax		(2,653	)		(452	)		(3,168	)		—		(3,168	)
Majority owned subsidiary non-controlling interest					(109	)		(109	)
Net loss attributable to the Operating LLC		(2,653	)		(343	)		(3,059	)
Average Effective Operating LLC non-controlling interest (1)%								32.1	%
Operating LLC non-controlling interest								(981	)
Majority owned subsidiary non-controlling interest								(109	)
Total non-controlling interest							$	(1,090	)

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Summary calculation of non-controlling interest - Three Months Ended June 30, 2011

	Wholly owned subsidiaries			Majority owned subsidiaries			Total Operating LLC			IFMI			Consolidated
Net loss before tax	$	(4,984	)	$	(206	)	$	(5,190	)	$	—		$	(5,190	)
Income tax benefit		—			—			(120	)		(13	)		(133	)
Net income / (loss) after tax		(4,984	)		(206	)		(5,070	)		13			(5,057	)
Majority owned subsidiary non-controlling interest					(53	)		(53	)
Net loss attributable to the Operating LLC		(4,984	)		(153	)		(5,017	)
Average effective Operating LLC non-controlling interest (1)%								32.5	%
Operating LLC non-controlling interest								(1,633	)
Majority owned subsidiary non-controlling interest								(53	)
Total non-controlling interest							$	(1,686	)

⁽¹⁾  Non-controlling interest is recorded on a monthly basis. Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages.

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Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay debt borrowings, make interest payments on outstanding borrowings, fund investments, and support other general business purposes. In addition, our United States and United Kingdom broker-dealer subsidiaries are subject to certain regulatory requirements to maintain minimum levels of net capital. Historically, our primary sources of funds have been our operating activities and general corporate borrowings. In addition, our trading operations have generally been financed by use of collateralized securities financing arrangements as well as margin loans. Since January 2010, we significantly expanded our trading operations leading to a greater amount of securities owned as well as greater balances of securities purchased under agreements to resell and securities sold under agreements to repurchase.

As a holding company that does not conduct business operations in its own right, substantially all of the assets of the Company are comprised of our majority ownership interest in the Operating LLC. Substantially all of our subsidiaries are subject to restrictions on paying distributions to us. In this regard, the Company’s investment in PrinceRidge of $38,800 is subject to withdrawal restrictions as a result of the Operating LLC’s investment in PrinceRidge. Distributions from PrinceRidge to the Operating LLC are governed by the PrinceRidge partnership agreement. In general, the agreement calls for annual distributions equal to one half of the net income of PrinceRidge. However, the board of PrinceRidge GP can decide to forgo these distributions or to pay distributions in excess of this amount with the approval of the board. The board of PrinceRidge GP is comprised of five members. Three members are designated by the Operating LLC and the remaining two are appointed by the individuals that were members of PrinceRidge GP prior to our investment. However, each member/partner of PrinceRidge does have the ability to borrow up to 30% of their investment from PrinceRidge. The member must provide 45 days notice of such borrowing and PrinceRidge must determine that the loan would not cause material harm to it. The borrowing member must pay 10% interest on this borrowing and the borrowing may only be outstanding for one year. Each partner may exercise this right to borrow once every two year period.

In May 2012, the Operating LLC borrowed $8,000 from PrinceRidge. The loan bears interest at 10% and will mature on May 2, 2013. Under the terms of this loan, IFMI will pay interest on the unpaid balance of the loan’s principal amount quarterly. Pursuant to the loan, in order to secure all of IFMI’s obligations thereunder, IFMI granted to PrinceRidge a first priority security interest in all of IFMI’s right, title, and interest in and to 100% of IFMI’s capital account in PrinceRidge and 100% of IFMI’s units in PrinceRidge (collectively, the “Collateral”). Upon the occurrence of an Event of Default (as defined in the loan), subject to certain rights of IFMI to cure such default, PrinceRidge may declare the principal, interest and all other amounts owing under the loan to be immediately due and payable, and may exercise all of its rights and remedies against the Collateral. The loan may be prepaid in whole or in part at any time and from time to time without premium, penalty or fee, together with interest accrued on the amount prepaid to the date of any such prepayment.

On May 15, 2012, the holders of $10,110 aggregate principal amount of the Old Notes exercised the option to require us to repurchase their Old Notes. The remaining $100 aggregate principal amount of the Old Notes were called by us and redeemed for cash on July 5, 2012. See Liquidity and Capital Resources - Debt Financing and Liquidity and Capital Resources - Contractual Obligations below.

In July 2012, PrinceRidge made certain payments to its former CEO and Chairman. See note 22 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

Our ability to pay dividends to our stockholders will be dependent on distributions we receive from the Operating LLC and subject to the Operating LLC’s operating agreement. The amount and timing of distributions by the Operating LLC will be at the discretion of the Operating LLC’s board of managers.

During the third quarter of 2010, our board of directors initiated a dividend of $0.05 per quarter which was paid regularly through December 31, 2011. The Company declared a $0.02 dividend for the first, second and third quarters of 2012. The Company’s board of directors has the power to decide to increase, reduce, or eliminate dividends in the future. The board’s decision will depend on a variety of factors, including business, financial and regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing indebtedness of the Company. There can be no assurances that such dividends will be maintained or increased and, if maintained or increased, will not subsequently be discontinued.

Each time a cash dividend was declared by our board of directors, a pro rata distribution was made to the other members of the Operating LLC upon the payment of dividends to stockholders of the Company.

We filed a Registration Statement on Form S-3 on April 29, 2010, which was declared effective by the SEC on May 24, 2010. This registration statement enables us to offer and sell, in the aggregate, up to $300,000 of debt securities, preferred stock (either separately or represented by depositary shares), or Common Stock (including, if applicable, any associated preferred stock purchase rights, subscription rights, stock purchase contracts, stock purchase units and warrants, as well as units that include any of these

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securities). The debt securities, preferred stock, subscription rights, stock purchase contracts, stock purchase units and warrants may be convertible into or exercisable or exchangeable for Common Stock or preferred stock of IFMI. We may offer and sell these securities separately or together, in any combination with other securities. The registration statement provides another source of liquidity in addition to the alternatives already in place. The net proceeds from a sale of our securities may be used for our operations and for other general corporate purposes, including, but not limited to, capital expenditures, repayment or refinancing of borrowings, working capital, investments and acquisitions.

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Cash Flows

We have four primary uses for capital:

(1) To fund the operations of our capital markets segment: Our capital markets segment utilizes capital (i) to fund securities inventory to facilitate client trading activities; (ii) for risk trading on the firm’s own account; (iii) to fund our collateralized securities lending activities; (iv) for temporary capital needs associated with underwriting activities; (v) to fund business expansion into existing or new product lines; and (vi) to fund any operating losses incurred.

(2) To fund investments: Our investments take several forms, including investments in securities and “sponsor investments” in permanent capital vehicles or investment funds. We may need to raise additional debt or equity financing in order to ensure we have the capital necessary to take advantage of attractive investment opportunities.

(3) To fund mergers or acquisitions: We may opportunistically use capital to acquire other asset managers or individual asset management contracts or financial services firms. To the extent our liquidity sources are insufficient to fund our future activities; we may need to raise additional funding through an equity or debt offering. No assurances can be given that additional financing will be available in the future, or that, if available, such financing will be on favorable terms.

(4) To fund potential dividends and distributions: During the third quarter of 2010 and for each subsequent quarter through June 30, 2012, we have declared a dividend. A pro rata distribution has been paid to the other members of the Operating LLC upon the payment of any dividends to stockholders of IFMI.

If we are unable to raise sufficient capital on economically favorable terms, we may need to reduce the amount of capital invested for the uses described above, which may adversely impact earnings and our ability to pay dividends.

As of June 30, 2012 and December 31, 2011, we maintained cash and cash equivalents of $12,944 and $18,221, respectively. We generated cash from or used cash for the following activities:

SUMMARY CASH FLOW INFORMATION

(dollars in thousands)

	Six Months Ended June 30,
	2012			2011
Cash flow from operating activities	$	1,079		$	15,716
Cash flow from investing activities		5,402			(5,464	)
Cash flow from financing activities		(11,712	)		(4,287	)
Effect of exchange rate on cash		(46	)		249
Net cash flow		(5,277	)		6,214
Cash and cash equivalents, beginning		18,221			43,946
Cash and cash equivalents, ending	$	12,944		$	50,160

See the statement of cash flows in our consolidated financial statements. We believe our available cash and cash equivalents as well as our investment in our trading portfolio will provide sufficient liquidity to meet the cash needs of our ongoing operations in the near term.

Six Months Ended June 30, 2012

As of June 30, 2012, our cash and cash equivalents were $12,944, representing a net decrease of $5,277 from December 31, 2011. The decrease was attributable to the cash provided by operating activities of $1,079, the cash provided by investing activities of $5,402, and the cash used for financing activities of $11,712 and the effect of the decrease of the exchange rate on cash of $46.

The cash provided by operating activities of $1,079 was comprised of (a) net cash outflows of $3,385 related to working capital fluctuations primarily comprised of net outflows of $2,379 related to a decrease in accrued compensation payable offset by other working capital fluctuations; (b) $7,657 of net cash inflows from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, and receivables and payables from brokers, dealers, and clearing agencies, as well as the unrealized gains and losses on the investments-trading and trading securities sold, but not yet purchased; and (c) a decrease in cash generated from other earnings items of $3,193 (which represents net income or loss adjusted for the following non-cash operating items: gain on repurchase of debt, realized and unrealized gains and losses on other investments, at fair value, income or loss from equity method affiliates, equity-based compensation, and depreciation and amortization).

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The cash provided in investing activities of $5,402 was comprised of (a) cash received of $5,513 from our equity method affiliates, Star Asia Manager, Star Asia SPV, Star Asia Opportunity, and Star Asia Capital Management (See note 9 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q); (b) cash proceeds from the return of principal of $21 from our investments in certain residential loans and $17 from the sale of a certain residential loan; partially offset by (c) the purchase of additional furniture and leasehold improvements of $42; (d) the investment of $6 in the equity method affiliate Star Asia Capital Management; and (e) the purchase of foreign currency forward contracts for $101.

The cash used in financing activities of $11,712 was comprised of (a) the repurchase of $150 notional amount of Old Notes for $147; (b) the redemption of $10,110 notional amount of the Old Notes for $10,110; (c) distributions to the non-controlling interest holders of $210; (d) dividends to the Company’s stockholders of $429; (e) the net redemption of the redeemable non-controlling interest of $24 to withdrawing partners from PrinceRidge (see note 13 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q); and (f) the payment of $3 for employees’ tax obligations to taxing authorities related to the vesting of equity based awards. In the case of (f), the total shares withheld were determined based on the value of the restricted stock award on the applicable vesting date based on the closing price of the Company’s Common Stock. These net share settlements reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.

Six Months Ended June 30, 2011

As of June 30, 2011, our cash and cash equivalents were $50,160, representing a net increase of $6,214 from December 31, 2010. The increase was attributable to the cash provided by operating activities of $15,716 and the effect of the increase in the exchange rate on cash of $249, partially offset by the cash used for investing activities of $5,464, and the cash used for financing activities of $4,287.

The cash provided by operating activities of $15,716 was comprised of (a) net outflows of $7,940 related to working capital fluctuations primarily comprised of net outflows of $6,243 related to a decrease in accrued compensation payable offset by other working capital fluctuations; (b) $26,529 of net cash inflows from investments in our overall net trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, and receivables and payables from brokers, dealers, and clearing agencies and restricted cash on deposit which is related to various trading activities as well as the unrealized gains and losses on the investments-trading and trading securities sold, but not yet purchased; and (c) a decrease in cash generated from other earnings items of $2,873 (which represents net income or loss adjusted for the following non-cash operating items: realized and unrealized gains and losses on other investments, income or loss from equity method affiliates, equity-based compensation, and depreciation and amortization).

The cash used in investing activities of $5,464 was comprised of (a) the cash consideration paid, net of cash acquired, for the acquisition of JVB of $14,956; (b) the investment of $432 in equity method affiliates related to Duart Capital and Star Asia SPV; (c) the purchase of other investments, at fair value of $1,708; (d) the purchase of additional furniture and leasehold improvements of $302 related to the New York and Philadelphia offices and the EDML office in the United Kingdom partially offset by (e) cash proceeds from the return of principal of $3,872, which was comprised of $3,821 from our investment in the Duart Fund, $19 from the final liquidation of the first Deep Value fund, and $32 from our investments in certain residential loans; (f) cash received of $93 from the sale of certain investments in securitizations that were classified as other investments, at fair value on the consolidated balance sheets; (g) cash of $5,820 we received from equity method affiliates Deep Value GP, Star Asia Manager and Star Asia SPV; and (h) the cash acquired in the acquisition of PrinceRidge of $2,149.

The cash used in financing activities of $4,287 was comprised of (a) the repayment of $2,620 of outstanding borrowings under our secured credit facility entered into on July 29, 2010 between our subsidiary, Dekania Investors, LLC and T.D. Bank, N.A. (the “2010 Credit Facility”), which was subsequently paid in full and terminated by the Company during the fourth quarter of 2011; (b) distributions to the noncontrolling interest holders of $528; (c) dividends to the Company’s stockholders of $1,090; and (d) $49 for the payment of the employees’ tax obligations to taxing authorities related to the vesting of equity based awards and the surrender of 13,453 shares of the Company’s Common Stock. In the case of (d), the total shares withheld were determined based on the value of the restricted stock award on the applicable vesting date based on the closing price of the Company’s Common Stock. These net share settlements reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.

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Regulatory Capital Requirements

Four of our majority owned subsidiaries include licensed securities dealers in the United States and the United Kingdom. As broker-dealers, our subsidiaries, CCS, JVB, and TPRG, are subject to Uniform Net Capital Rule, Rule 15c3-1 under the Exchange Act, and our London-based subsidiary, EDML, is subject to the regulatory supervision and requirements of the FSA in the United Kingdom. The amount of net assets that these subsidiaries may distribute is subject to restrictions under these applicable net capital rules. These subsidiaries have historically operated in excess of minimum net capital requirements. Our minimum capital requirements at June 30, 2012, which amounted to $2,180, were as follows:

MINIMUM NET CAPITAL REQUIREMENTS

(dollars in thousands)

United States	$	472
United Kingdom		1,708
Total	$	2,180

We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at June 30, 2012, the total net capital, or equivalent as defined by the relevant statutory regulations in our licensed broker-dealers amounted to $35,848.

In addition, our licensed broker-dealers are generally subject to capital withdrawal notification and restrictions.

Securities Financing

We maintain repurchase agreements with various third party financial institutions. There is no maximum limit as to the amount of securities that may be transferred pursuant to these agreements, and transactions are approved on a case-by-case basis. The repurchase agreements do not include substantive provisions other than those covenants and other customary provisions contained in standard master repurchase agreements. The repurchase agreements generally require us to transfer additional securities to the counterparty in the event the value of the securities then held by the counterparty in the margin account falls below specified levels and contains events of default in cases where we breach our obligations under the agreement. We receive margin calls from our repurchase agreement counterparties from time to time in the ordinary course of business. To date, we have maintained sufficient liquidity to meet margin calls, and we have never been unable to satisfy a margin call; however, no assurance can be given that we will be able to satisfy requests from our counterparties to post additional collateral in the future. See note 8 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

If there were an event of default under the repurchase agreements, we would give our counterparty the option to terminate all repurchase transactions existing with us and make any amount due from us to the counterparty payable immediately. Repurchase obligations are full recourse obligations to us. If we were to default under a repurchase obligation, the counterparty would have recourse to our other assets if the collateral was not sufficient to satisfy the obligation in full.

The Company’s clearing brokers provide securities financing arrangements including margin arrangements and securities borrowing and lending arrangements. These arrangements generally require us to transfer additional securities or cash to the clearing broker in the event the value of the securities then held by the clearing broker in the margin account falls below specified levels and contains events of default in cases where we breach our obligations under the agreements.

An event of default under the clearing agreement would give our counterparty the option to terminate our clearing arrangement. Any amounts owed to the clearing broker would be immediately due and payable. These obligations are recourse to us. Furthermore, a termination of our clearing arrangements would result in a significant disruption to our business and would have a significant negative impact on our dealings and relationship with our customers.

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The following table presents our period end balance, average monthly balance, and maximum balance at any month end during the six months ended June 30, 2012 and the twelve months ended December 31, 2011 for receivables under resale agreements and securities sold under agreements to repurchase.

	Six Months Ended June 30,		Twelve Months Ended December 31,
	2012		2011
Receivables under Resale Agreements
Period end	$	247,289	$	129,978
Monthly average		212,920		111,904
Maximum month end		262,789		158,099
Securities Sold Under Agreements to Repurchase
Period end	$	244,061	$	134,870
Monthly average		213,348		104,984
Maximum month end		260,084		178,998

Fluctuations in the balance of our repurchase agreements from period to period and intraperiod are dependent on business activity in those periods. The general growth in outstanding repurchase activity in 2012 and 2011 is reflective of supporting our overall business growth, particularly the continued expansion of our sales and trading platform. The fluctuations in the balances of our securities purchased under agreements to resell over the periods presented is impacted in any given period by our clients’ desires to execute collateralized financing arrangements through the repurchase market or other financing products.

Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider such intraperiod fluctuations as typical for the repurchase market. Month-end balances may be higher or lower than average period balances.

Debt Financing

As of June 30, 2012, we had three sources of debt financing other than securities financing arrangements: (1) contingent convertible senior notes, which is comprised of the Old Notes and the New Notes; (2) junior subordinated notes payable to the following two special purpose trusts: (a) Alesco Capital Trust I and (b) Sunset Financial Statutory Trust I; and (3) unsecured subordinated financing.

In March 2012, we repurchased $150 aggregate principal amount of the Old Notes from unrelated third parties for $147, excluding accrued interest and recognized a gain on repurchase of debt of $3. On May 15, 2012, the holders of $10,110 aggregate principal amount of the Old Notes exercised the option to require us to repurchase their Old Notes. We paid $10,110 in cash and funded the repurchase with borrowings of $8,000 under a loan from PrinceRidge and from cash on hand. The remaining $100 aggregate principal amount of the Old Notes were called by us and redeemed for cash on July 5, 2012. As of June 30, 2012, we were in compliance with the covenants in our debt financing documents. See note 12 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q for a discussion of the Company’s outstanding debt.

The following table summarizes the Company’s long-term indebtedness and other financing as of June 30, 2012 and December 31, 2011, respectively:

DETAIL OF DEBT FINANCING SOURCES

(dollars in thousands)

	As of June 30, 2012
Description	Current Outstanding Par			Carrying Value		Interest Rate Terms			Weighted Average Interest @ 06/30/2012 (5)			Weighted Average Maturity
Contingent convertible senior notes:
Old Notes	$	100		$	100		7.6	%		7.6	%		July 2012	(1)
New Notes		8,121			8,049		10.5	%		10.5	%		May 2014	(2)
	$	8,221			8,149
Junior subordinated notes	$	48,125	(3)		17,068		7.5	%		7.5	%		August 2036
Subordinated notes payable	$	1,514			1,514		12.0	%(4)		12.0	%		June 2013
Total				$	26,731

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	As of December 31, 2011
Description	Current Outstanding Par			Carrying Value		Interest Rate Terms			Weighted Average Interest @ 12/31/2011 (5)			Weighted Average Maturity
Contingent convertible senior notes:
Old Notes	$	10,360		$	10,303		7.6	%		7.6	%		May 2012
New Notes		8,121			8,030		10.5	%		10.5	%		May 2014	(2)
	$	18,481			18,333
Junior subordinated notes	$	48,125	(3)		17,343		7.5	%		7.5	%		August 2036
Subordinated notes payable	$	1,491			1,491		12.0	%(4)		12.0	%		June 2013
Total				$	37,167

(1) The remaining $100 principal amount of the Old Notes were redeemed by us for cash on July 5, 2012.

(2) Represents the holders’ earliest redemption date. The weighted average contractual maturity for the New Notes is May 2027.

We may redeem all or part of the $8,121 aggregate principal amount of the New Notes for cash on or after May 20, 2014, at a redemption price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes may require us to repurchase all or a portion of the New Notes for cash on May 15, 2014; May 15, 2017; and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes are required to provide notice to us of their plan to redeem the notes at any time during the 30 days prior to May 15, 2014; May 15, 2017; and May 15, 2022.

(3) We issued total par of junior subordinated debentures of $49,614. These junior subordinated notes are held by two separate VIE trusts. We do not consolidate these trusts. We hold $1,489 par value of common stock of these trusts. These notes held by us have a carrying value of $0. Therefore, the net par value held by third parties is $48,125.

(4) Comprised of 9% paid currently and 3% paid in kind.

(5) Weighted average interest rate is calculated as a percentage of par using the rates in effect as of the last day of the reporting period.

Off-Balance Sheet Arrangements

AFN invested in a CDO (Alesco XIV) in which Assured Guaranty (“Assured”) was providing credit support to the senior interests in securitizations. Alesco XIV made a loan (the “Guaranteed Loan”) to a particular borrower and AFN entered into an arrangement with Assured whereby AFN agreed to make payments to Assured upon the occurrence of both (i) a loss on the Guaranteed Loan; and (ii) a loss suffered by Assured on its overall credit support arrangement to Alesco XIV security holders. This arrangement is accounted for as a guarantee by us. Upon completion of the Merger, we recorded a liability of $1,084 related to this arrangement which is included in accounts payable and other liabilities in the Company’s consolidated balance sheet. This amount does not represent the expected loss; rather it represents our estimate of the fair value of our guarantee (i.e. the amount we would have to pay a third party to assume this obligation). The value will be adjusted under certain limited circumstances such as: (i) when the guarantee is extinguished or (ii) if payment of amounts under the guarantee become probable and estimable. The maximum potential loss to us on this arrangement is $8,750. Under certain circumstances, Assured can require us to post liquid collateral.

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Contractual Obligations

The table below summarizes our significant contractual obligations as of June 30, 2012 and the future periods in which such obligations are expected to be settled in cash. Our junior subordinated notes and subordinated notes payable are assumed to be repaid on their respective maturity dates. The Old Notes in the aggregate principal amount of $100 are assumed to be repaid on July 5, 2012, which represents the date that the Company actually repurchased such notes for cash. The New Notes in the aggregate principal amount of $8,121 are assumed to be repaid on May 15, 2014, which represents the earliest day that the holders of the New Notes may require us to repurchase the notes for cash. Excluded from the table are obligations that are short-term in nature, including trading liabilities and repurchase agreements. In addition, excluded from the table is an unrecognized tax benefit of $1,231 because we are unable, at this time, to make a reasonably reliable estimate of the period of cash settlement. See note 23 to our consolidated financial statements included in the 2011 Annual Report on Form 10-K for further information about the unrecognized tax benefit.

CONTRACTUAL OBLIGATIONS

As of June 30, 2012

(dollars in thousands)

	Payment Due by Period
	Total		Less than 1 year		1-3 Years		3-5 Years		More Than 5 Years
Operating lease arrangements	$	6,450	$	2,410	$	3,573	$	467	$	—
Maturity of the Old Notes (1)		100		100		—		—		—
Interest on the Old Notes (1)		2		2		—		—		—
Maturity of the New Notes (2)		8,121		—		8,121		—		—
Interest on the New Notes (2)		1,706		853		853		—		—
Maturities on junior subordinated notes		48,125		—		—		—		48,125
Interest on junior subordinated notes (3)		53,010		2,531		4,353		4,353		41,773
Maturities of subordinated notes payable (4)		1,559		1,559		—		—		—
Interest on subordinated notes payable (5)		137		137		—		—		—
Mandatorily redeemable equity interests (6)		8,299		3,409		3,903		987		—
Total	$	127,509	$	11,001	$	20,803	$	5,807	$	89,898

(1) Assumes the Old Notes are repurchased on July 5, 2012. Interest includes amounts payable during the period the Old Notes are outstanding at an annual rate of 7.625%.

(2) Assumes the New Notes are repurchased on May 15, 2014. Interest includes amounts payable during the period the New Notes are outstanding at an annual rate of 10.50%.

(3) The interest on the junior subordinated notes related to the Alesco Capital Trust is based on a fixed interest rate of 9.50% through to July 30, 2012, and an assumed variable rate of 4.46% based on a 90-day LIBOR rate as of June 30, 2012 plus 4.00% calculated from July 30, 2012 through to maturity. The interest on the junior subordinated notes related to the Sunset Financial Statutory Trust is variable. The interest rate of 4.61% (based on a 90-day LIBOR rate as of June 30, 2012 plus 4.15%) was used to compute the contractual interest payment in each period noted.

(4) The subordinated notes payable mature on June 20, 2013 and bear interest at an annual rate of 12% (9% is payable in cash and 3% is paid in-kind semiannually on May 1 and November 1). Maturities include in-kind interest of $154. All accrued in-kind interest is added to the unpaid principal balance of the subordinated notes payable on each May 1 and November 1, and thereafter the increased principal balance accrues interest at the annual rate of 12%.

(5) Represents the cash interest payable on the outstanding balance of the subordinated notes payable in each period noted.

(6) Represents the amount due to withdrawing partners of PrinceRidge. The actual amounts due to the partners may fluctuate based on the income or loss allocations to these partners. The amounts shown above are based the June 30, 2012 partner capital balances.

In July 2012, PrinceRidge made certain payments to its former CEO and Chairman. These payments are not included in the table above. See note 22 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

We believe that we will be able to continue to fund our current operations and meet our contractual obligations through a combination of existing cash resources and other sources of credit. Due to the uncertainties that exist in the economy, we cannot be certain that we will be able to replace existing financing or find sources of additional financing in the future.

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Recent Accounting Pronouncements

The following is a list of recent accounting pronouncements that we believe will have a continuing impact on our financial statements going forward.

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In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”), which requires companies to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on a company’s financial position. The amendments require enhanced disclosures by requiring improved information about financial statements and derivative instruments that are either (1) offset in accordance with current literature, or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current literature. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The disclosures required by ASU 2011-11 will be applied retrospectively for all comparative periods presented. The Company is currently evaluating the impact of ASU 2011-11 on its disclosures about offsetting assets and liabilities.

Critical Accounting Policies and Estimates

Our accounting policies are essential to understanding and interpreting the financial results reported in our condensed consolidated financial statements. The significant accounting policies used in the preparation of our condensed consolidated financial statements are summarized in note 3 to the Company’s consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2011. Certain of those policies are considered to be particularly important to the presentation of our financial results because they require us to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

During the six months ended June 30, 2012, there were no material changes to matters discussed under the heading “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

All amounts in this section are in thousands unless otherwise noted.

Market Risk

Market risk is the risk of economic loss arising from the adverse impact of market changes to the market value of our trading and investment positions. Market risk is inherent to both derivative and non-derivative financial instruments, and accordingly, the scope of our market risk management procedures extends beyond derivatives to include all market risk sensitive financial instruments. For purposes of analyzing the components of market risk, we have broken out our investment portfolio into three broad categories:

Fixed Income Securities: We hold, from time to time, the following securities: U.S. treasury securities, U.S. government agency MBS, U.S government agency debt securities, CMOs, non-government MBS, corporate bonds, non-redeemable and redeemable preferred stock, municipal bonds, certificates of deposits, SBA loans, residential loans, whole loans, unconsolidated investments in the middle and senior tiers of securitization entities and TruPS. We attempt to mitigate our exposure to market risk by entering into economic hedging transactions, which may include TBAs. The fixed income category can be broadly broken down into two subcategories: fixed rate and floating rate.

Floating rate securities are not in themselves particularly sensitive to interest rate risk. Because they generally accrue income at a variable rate, the movement in interest rates typically does not impact their fair value. Fluctuations in their current income due to variations in interest rates are generally not material to us. Floating rate fixed income securities are subject to other market risks such as: default risk of the underlying issuer, changes in issuer’s credit spreads, investor demand and supply of securities within a particular asset class or industry class of the ultimate obligor. The sensitivity to any individual market risk cannot be quantified.

The fair value of fixed rate securities is sensitive to changes in interest rates. However, fixed rate securities that have low credit ratings or represent junior interests in securitizations are not particularly interest rate sensitive. In general, when we acquire interest rate sensitive securities, we enter into an offsetting short position for a similar fixed rate security. Alternatively, we may enter into other interest rate hedging arrangements such as interest rate swaps or EuroDollar futures. We measure our net interest rate sensitivity by determining how the fair value of our net interest rate sensitive assets would change as a result of a 100 basis points (“ bps”) adverse shift across the entire yield curve. Based on this analysis, as of June 30, 2012, we would incur a loss of $2,460 if the yield curve rises 100 bps across all maturities and a gain of $2,450 if the yield curve falls 100 bps across all maturities.

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Equity Securities: We hold, from time to time, equity interests in the form of investments in investment funds, permanent capital vehicles, and equity instruments of publicly traded companies. These investments are subject to equity price risk. Equity price risk results from changes in the level or volatility of underlying equity prices, which affect the value of equity securities or instruments that in turn derive their value from a particular stock. We attempt to reduce the risk of loss inherent in our inventory of equity securities by closely monitoring those security positions. However, since we generally make investments in our investment funds and permanent capital vehicles in order to facilitate third party capital raising (and hence increase our AUM and asset management fees), we may be unwilling to sell these positions as compared to investments in unaffiliated third parties. We have one permanent capital vehicle investment which is denominated in Euros and another permanent capital vehicle for which our investment is denominated in U.S. Dollars, but for which the underlying net assets are primarily based in Japanese Yen. The fair values of these investments are subject to change as the spot foreign exchange rate between these currencies and the U.S. Dollar (our functional currency) fluctuates. We may, from time to time, enter into foreign exchange rate derivatives to hedge all or a portion of this risk. We measure our net equity price sensitivity and foreign currency sensitivity by determining how the net fair value of our equity price sensitive and foreign exchange sensitive assets would change as a result of a 10% adverse change in equity prices or foreign exchange rates. Based on this analysis, as of June 30, 2012 our equity price sensitivity was $3,722 and our foreign exchange currency sensitivity was $3,226.

Other Securities: These investments are primarily made up of residual interests in securitization entities. The fair value of these investments will fluctuate over time based on a number of factors including, but not limited to: liquidity of the investment type, the credit performance of the individual assets and issuers within the securitization entity, the asset class of the securitization entity and the relative supply of and demand for investments within that asset class, credit spreads in general, the transparency of valuation of the assets and liabilities of the securitization entity, and investors’ view of the accuracy of ratings prepared by the independent rating agencies. The sensitivity to any individual market risk cannot be quantified.

Debt: In addition to the risks noted above, we incur interest rate risk related to our debt obligations. We have debt that accrues interest at either variable rates or fixed rates. As of June 30, 2012, a 100 bps change in three month LIBOR would result in a change in our annual cash paid for interest in the amount of $200. A 100 bps adverse change in the market yield to maturity would result in an increase in the fair value of the debt in the amount of $2,493.

How we manage these risks

We will seek to manage our market risk by utilizing our underwriting and credit analysis processes that are performed in advance of acquiring any investment. In addition, we continually monitor our investments - trading and our trading securities sold, not yet purchased on a daily basis and our other investments on a monthly basis. We perform an in-depth monthly analysis on all our investments and our risk committee meets on a monthly basis to review specific issues within our portfolio and to make recommendations for dealing with these issues.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that material information relating to the Company (and its consolidated subsidiaries) required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, who certify our financial reports and to other members of senior management and the board of directors.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2012. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective at June 30, 2012.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As described in “Item 9A - Controls and Procedures” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, the Company is currently in the process of integrating controls of PrinceRidge with the controls of IFMI. The Company expects to have this integration complete by the end of 2012.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Incorporated by reference to the headings titled “Legal and Regulatory Proceedings” in Note 17 to the consolidated financial statements include in Item 1 in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should also carefully review and consider the risk factors contained in our other reports and periodic filings with the SEC, including without limitation the risk factors contained under the caption “Item 1A - Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially and adversely affect our business, financial condition and results of operations. The risk factors discussed in that Form 10-K do not identify all risks that we face because our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. Other than as set forth below, there have been no material changes in the significant factors that may affect our business and operations as described in “Item 1A - Risk Factors” of the Annual Report on 10-K for the year ended December 31, 2011.

Failure to obtain or maintain adequate capital and funding would adversely affect the growth and results of our operations and may, in turn, negatively affect the market price of our Common Stock.

Liquidity is essential to our businesses. We depend upon the availability of adequate funding and capital for our operations. In particular, we may need to raise additional capital in order to significantly grow our business. Our liquidity could be substantially affected negatively by our inability to raise funding in the long-term or short-term debt capital markets or the equity capital markets or our inability to access the secured lending markets. Factors that we cannot control, such as continued or additional disruption of the financial markets or negative views about the financial services industry generally, have limited and may continue to limit our ability to raise capital. In addition, our ability to raise capital could be impaired if lenders develop a negative perception of our long-term or short-term financial prospects. Such negative perceptions could be developed if we incur large trading losses, we suffer a decline in the level of our business activity, we suffer material litigation losses, regulatory authorities take significant action against us, or we discover significant employee misconduct or illegal activity, among other reasons. Sufficient funding or capital may not be available to us in the future on terms that are acceptable, or at all. If we are unable to raise funding using the methods described above, we would likely need to finance or liquidate unencumbered assets, such as our investment and trading portfolios, to meet maturing liabilities. We may be unable to sell some of our assets, or we may have to sell assets at a discount from market value, either of which could adversely affect our results of operations and cash flows.

The minority partners of PrinceRidge have the right to withdraw from PrinceRidge and require PrinceRidge to redeem their interests in PrinceRidge for an amount, payable over a contractual period, equal to the value of the respective partners’ capital accounts. Several of the minority partners have voluntarily withdrawn from PrinceRidge recently, and in connection with such withdrawals, as of June 30, 2012, we are required to pay $8.3 million to redeem their interests. Such redemptions must be completed by July, 2016 but we are permitted to redeem the interests at any time prior to such date. In addition, we recently redeemed 100% of the interests in PrinceRidge of two former minority partners for approximately $6.1 million in connection with the termination of their employment with PrinceRidge. Further, in May 2014, some or all of the holders of our 10.50% contingent convertible senior notes due 2027 may exercise their right to require us to repurchase up to $8.1 million aggregate principal amount of their notes. These payments have reduced and will continue to reduce the availability of capital for our operations. Our liquidity could be constrained if we are unable to obtain financing to pay for such redemptions and repurchases on acceptable terms, or at all. If we are unable to meet our funding needs on a timely basis, our business would be adversely affected and there may be a negative impact on the market price of our Common Stock.

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

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Shares that May Yet be Purchased  Under the Plans or Program (2)
April 1, 2012 to April 30, 2012		690	$	1.27		—	$	45,815,766
May 1, 2012 to May 31, 2012		—		—		—		45,815,766
June 1, 2012 to June 30, 2012		—		—		—		45,815,766
Total		690	$	1.27		—

(1) We repurchased an aggregate of 690 shares other than as part of a publicly announced plan or program. We repurchased these securities in connection with our stock compensation plans which allow participants to use shares to satisfy certain tax liabilities arising from the vesting of restricted stock.

(2) On August 3, 2007, our board of directors authorized us to repurchase up to $50,000 of our Common Stock from time to time in open market purchases or privately negotiated transactions. The repurchase plan was publicly announced on August 7, 2007.

Effective January 1, 2010, the Company ceased to qualify as a REIT and, therefore, is not required to make any dividends or other distributions to its stockholders. However, the Company’s board of directors has the power to decide to increase, reduce, or eliminate dividends in the future. The board’s decision will depend on a variety of factors, including business, financial and regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing indebtedness of the Company.

In addition, the Company’s ability to pay dividends to its stockholders will be dependent on distributions it receives from the Operating LLC and subject to the Operating LLC’s operating agreement. The amount and timing of distributions by the Operating LLC will be at the discretion of the Operating LLC’s board of managers and is subject to the provisions of the Operating LLC’s operating agreement. In this regard, the Company’s investment in PrinceRidge of $38,800 is subject to withdrawal restrictions as a result of the Operating LLC’s investment in PrinceRidge. Distributions from PrinceRidge to the Operating LLC are governed by the PrinceRidge partnership agreement. In general, the agreement calls for annual distributions equal to one half of the net income of PrinceRidge. However, the board of PrinceRidge GP can decide to forego these distributions or to pay distributions in excess of this amount with the approval vote of the board. The board of PrinceRidge GP is comprised of five members. Three members are appointed by the Operating LLC and the remaining two are designated by the individuals that were members of PrinceRidge GP prior to our investment. However, each member/partner of PrinceRidge does have the ability to borrow up to 30% of their investment from PrinceRidge. The member must provide 45 days notice of such borrowing and PrinceRidge must determine that the loan would not cause material harm to it. The borrowing member must pay 10% interest on this borrowing and the borrowing may only be outstanding for one year. Each partner may exercise this right to borrow once every two year period.

In May 2012, the Operating LLC borrowed $8,000 from PrinceRidge. The loan bears interest at 10% and will mature on May 2, 2013. Under the terms of this loan, IFMI will pay interest on the unpaid balance of the loan’s principal amount quarterly. Pursuant to the loan, in order to secure all of IFMI’s obligations thereunder, IFMI granted to PrinceRidge a first priority security

84

interest in all of IFMI’s right, title, and interest in and to 100% of IFMI’s capital account in PrinceRidge and 100% of IFMI’s units in PrinceRidge (collectively, the “Collateral”). Upon the occurrence of an Event of Default (as defined in the loan), subject to certain rights of IFMI to cure such default, PrinceRidge may declare the principal, interest and all other amounts owing under the loan to be immediately due and payable, and may exercise all of its rights and remedies against the Collateral. The loan may be prepaid in whole or in part at any time and from time to time without premium, penalty or fee, together with interest accrued on the amount prepaid to the date of any such prepayment.

Item 6. Exhibits

Exhibit No.	Description
11.1	Statement Regarding Computation of Per Share Earnings.*
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.**
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.**
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.***
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.***
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at June 30, 2012 and December 31, 2011, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2012 and 2011, (iii) the Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2012, (iv) the Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011; and (v) Notes to Consolidated Financial Statements.***

* Data required by FASB Accounting Standards Codification 260, “Earnings per Share,” is provided in note 16 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

** Filed herewith.

*** Furnished herewith.

85

SIGNATURES

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

	Institutional Financial Markets, Inc.
	By:	/s/    DANIEL G. COHEN
		Daniel G. Cohen
Date: August 9, 2012		Chairman of the Board and Chief Executive Officer
	Institutional Financial Markets, Inc.
	By:	/s/    JOSEPH W. POOLER, JR.
		Joseph W. Pooler, Jr.
Date: August 9, 2012		Executive Vice President, Chief Financial Officer and Treasurer

86

EX-31.1

Exhibit 31.1

SECTION 302 CEO CERTIFICATION

I, Daniel G. Cohen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Institutional Financial Markets, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012	Signed:	/s/ DANIEL G. COHEN
	Name:	Daniel G. Cohen
	Title:	Chief Executive Officer and Chief Investment Officer

2

EX-31.2

Exhibit 31.2

SECTION 302 CFO CERTIFICATION

I, Joseph W. Pooler, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Institutional Financial Markets, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012	Signed:	/s/ JOSEPH W. POOLER, JR.
	Name:	Joseph W. Pooler, Jr.
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

2

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Cohen & Company Inc. (the “Company”) for the three months ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel G. Cohen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2012	Signed:	/s/ DANIEL G. COHEN
	Name:	Daniel G. Cohen
	Title:	Chief Executive Officer and Chief Investment Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Institutional Financial Markets, Inc. (the “Company”) for the three months ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph W. Pooler, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2012	Signed:	/s/ JOSEPH W. POOLER, JR.
	Name:	Joseph W. Pooler, Jr.
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

XML

Permanent Equity (Tables)

6 Months Ended

Jun. 30, 2012

Permanent Equity [Abstract]

Schedule of unrestricted common stock, activity

	Common Stock Shares
Balance at December 31, 2011 (1)		10,132,497
Shares issued in connection with the redemption of Operating LLC units		186,339
Vesting of shares		239,259
Shares withheld for employee taxes		(1,780	)
Balance at June 30, 2012 (1)		10,556,315

(1) Includes 50,400 shares of the Company’s common stock held as treasury stock.

Schedule of effects of changes in ownership interest in the Operating LLC on equity

	June 30, 2012			June 30, 2011
Net income / (loss) attributable to IFMI	$	(5,937	)	$	(2,996	)
Transfers (to) from the non-controlling interest:
Increase in IFMI’s paid in capital for the acquisition / (surrender) of additional units of consolidated subsidiary, net		828			972
Changes from net income / (loss) attributable to IFMI and transfers (to) from non-controlling interest	$	(5,109	)	$	(2,024	)

XML

Fair Value Disclosures (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		$ 28
Principal transactions and other income / (loss)		(9)
Transfers in and/or (out), net of Level 3
Purchases
Sales		19
Deep Value [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		28
Principal transactions and other income / (loss)		(9)
Transfers in and/or (out), net of Level 3
Sales		19
Investment Funds [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance				28
Principal transactions and other income / (loss)				(9)
Sales				(19)
Investment Funds [Member] | Deep Value [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance				28
Principal transactions and other income / (loss)				(9)
Sales				(19)
Interests in securitizations [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		105
Transfers in and/or (out), net of Level 3
Level 3 inputs, Ending balance		105		105
Equity securities [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		40,219
Principal transactions and other income / (loss)		1,277
Transfers in and/or (out), net of Level 3
Purchases		569
Sales		78
Level 3 inputs, Ending balance		41,987		41,987
change in unrealized gains/(losses) for the period included in earnings		1,286
Residential loans [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		287
Principal transactions and other income / (loss)		3
Transfers in and/or (out), net of Level 3
Sales		14
Level 3 inputs, Ending balance		276		276
change in unrealized gains/(losses) for the period included in earnings		3
Investments-trading [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	2,576	14,530	5,188	73,385
Net trading	(125)	2,092	(139)	6,837
Transfers in and/or (out), net of Level 3				4,332
Purchases		17,075	2,522	32,237
Sales	2,203	14,868	(7,323)	(97,962)
Level 3 inputs, Ending balance	248	18,829	248	18,829
change in unrealized gains/(losses) for the period included in earnings	(104)	818	(135)	1,088
Investments-trading [Member] | U.S. government agency MBS and CMOs [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		12,206		68,885
Net trading		1,024		452
Transfers in and/or (out), net of Level 3				4,332
Purchases		7,283		20,599
Sales		11,894		(85,649)
Level 3 inputs, Ending balance		8,619		8,619
change in unrealized gains/(losses) for the period included in earnings		706		602
Investments-trading [Member] | RMBS [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance			4,932
Net trading			17
Transfers in and/or (out), net of Level 3
Purchases		1,473	171	1,473
Sales			(5,120)
Level 3 inputs, Ending balance		1,473		1,473
Investments-trading [Member] | Commercial mortgage-backed securities [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Net trading		114		114
Transfers in and/or (out), net of Level 3
Purchases		1,233		1,233
Level 3 inputs, Ending balance		1,347		1,347
change in unrealized gains/(losses) for the period included in earnings		114		114
Investments-trading [Member] | Interests in securitizations [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	2,409	1,857	221	4,500
Net trading	(21)	1,000	(58)	6,238
Transfers in and/or (out), net of Level 3
Purchases		7,016	2,225	8,101
Sales	2,203	2,582	(2,203)	(11,548)
Level 3 inputs, Ending balance	185	7,291	185	7,291
change in unrealized gains/(losses) for the period included in earnings		44	(37)	340
Investments-trading [Member] | Certificates of deposit [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		393
Net trading				3
Transfers in and/or (out), net of Level 3
Purchases				761
Sales		392		(763)
Level 3 inputs, Ending balance		1		1
change in unrealized gains/(losses) for the period included in earnings				2
Investments-trading [Member] | Equity securities [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	167	74	35
Net trading	(104)	(46)	(98)	30
Transfers in and/or (out), net of Level 3
Purchases		70	126	70
Sales				(2)
Level 3 inputs, Ending balance	63	98	63	98
change in unrealized gains/(losses) for the period included in earnings	(104)	(46)	(98)	30
Other investments, at fair value [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	37,295	40,611	42,748	42,699
Principal transactions and other income / (loss)	(5)	1,280	(5,191)	(540)
Transfers in and/or (out), net of Level 3			(267)
Purchases		569		795
Sales		92		(586)
Level 3 inputs, Ending balance	37,290	42,368	37,290	42,368
change in unrealized gains/(losses) for the period included in earnings	(5)	1,289	(5,191)	(531)
Other investments, at fair value [Member] | EuroDekania [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Transfers in and/or (out), net of Level 3
Other investments, at fair value [Member] | Star Asia [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		35,094
Principal transactions and other income / (loss)		667
Transfers in and/or (out), net of Level 3
Level 3 inputs, Ending balance		35,761		35,761
change in unrealized gains/(losses) for the period included in earnings		667
Other investments, at fair value [Member] | Tiptree Financial Partners L.P. [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Transfers in and/or (out), net of Level 3
Level 3 inputs, Ending balance		2,551		2,551
Other investments, at fair value [Member] | Interests in securitizations [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	97		88	105
Principal transactions and other income / (loss)			9	0
Transfers in and/or (out), net of Level 3
Purchases
Level 3 inputs, Ending balance	97	105	97	105
change in unrealized gains/(losses) for the period included in earnings			9
Other investments, at fair value [Member] | Equity securities [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	37,198		42,393	42,291
Principal transactions and other income / (loss)	(5)		(5,200)	(545)
Transfers in and/or (out), net of Level 3
Purchases				795
Sales				(554)
Level 3 inputs, Ending balance	37,193	41,987	37,193	41,987
change in unrealized gains/(losses) for the period included in earnings	(5)		(5,200)	(536)
Other investments, at fair value [Member] | Equity securities [Member] | EuroDekania [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Transfers in and/or (out), net of Level 3
Other investments, at fair value [Member] | Equity securities [Member] | Star Asia [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Transfers in and/or (out), net of Level 3
Other investments, at fair value [Member] | Equity securities [Member] | Tiptree Financial Partners L.P. [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Transfers in and/or (out), net of Level 3
Other investments, at fair value [Member] | Equity securities [Member] | Other securities [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	82		132	500
Principal transactions and other income / (loss)	6		(44)	(212)
Transfers in and/or (out), net of Level 3
Purchases				36
Sales				(59)
Level 3 inputs, Ending balance	88	265	88	265
change in unrealized gains/(losses) for the period included in earnings	6		(44)	(212)
Other investments, at fair value [Member] | Equity securities [Member] | Investment Funds [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance		553
Principal transactions and other income / (loss)		(265)
Transfers in and/or (out), net of Level 3
Purchases		36
Sales		59
Level 3 inputs, Ending balance		265		265
change in unrealized gains/(losses) for the period included in earnings		(265)
Other investments, at fair value [Member] | Equity securities [Member] | Other Investment Vehicles [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	37,116	39,638	42,261	41,763
Principal transactions and other income / (loss)	(11)	1,551	(5,156)	(324)
Transfers in and/or (out), net of Level 3
Purchases		533		759
Sales				(476)
Level 3 inputs, Ending balance	37,105	41,722	37,105	41,722
change in unrealized gains/(losses) for the period included in earnings	(11)	1,551	(5,156)	(324)
Other investments, at fair value [Member] | Equity securities [Member] | Other Investment Vehicles [Member] | EuroDekania [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	2,348	2,033	2,370	1,258
Principal transactions and other income / (loss)	(245)	844	(267)	1,619
Purchases		533		533
Level 3 inputs, Ending balance	2,103	3,410	2,103	3,410
change in unrealized gains/(losses) for the period included in earnings	(245)	844	(267)	1,619
Other investments, at fair value [Member] | Equity securities [Member] | Other Investment Vehicles [Member] | Star Asia [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	32,118		37,358	38,025
Principal transactions and other income / (loss)	181		(5,059)	(2,014)
Purchases				226
Sales				(476)
Level 3 inputs, Ending balance	32,299	35,761	32,299	35,761
change in unrealized gains/(losses) for the period included in earnings	181		(5,059)	(2,014)
Other investments, at fair value [Member] | Equity securities [Member] | Other Investment Vehicles [Member] | Tiptree Financial Partners L.P. [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance	2,650	2,511	2,533	2,480
Principal transactions and other income / (loss)	53	40	170	71
Purchases
Level 3 inputs, Ending balance	2,703	2,551	2,703	2,551
change in unrealized gains/(losses) for the period included in earnings	53	40	170	71
Other investments, at fair value [Member] | Residential loans [Member]
Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs
Level 3 inputs, Beginning balance			267	303
Principal transactions and other income / (loss)				5
Transfers in and/or (out), net of Level 3			(267)
Sales				(32)
Level 3 inputs, Ending balance		276		276
change in unrealized gains/(losses) for the period included in earnings				$ 5

XML

Receivables from and Payables to Brokers, Dealers, and Clearing Agencies (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Receivables from and Payables to Brokers, Dealers, and Clearing Agencies (Textual) [Abstract]
Interest on margin payable	$ 415	$ 358	$ 831	$ 983

XML

Redeemable Non-Controlling Interest (Temporary Equity) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Redeemable Non Controlling Interest (Temporary Equity) (Additional Textual) [Abstract]
Reclassification of redeemable non-controlling interest to mandatorily redeemable equity interests			$ 6,071	$ 3,536
Distributions to redeemable non-controlling interest		43	789
Contributions to redeemable non controlling interest	20
Distributions to mandatorily redeemable equity interests	$ 8,299		$ 8,299		$ 3,149
Minimum [Member]
Redeemable Non-Controlling Interest (Temporary Equity) (Textual) [Abstract]
Mandatorily redeemable equity interests duration, years			2 years
Maximum [Member]
Redeemable Non-Controlling Interest (Temporary Equity) (Textual) [Abstract]
Mandatorily redeemable equity interests duration, years			5 years

XML

Fair Value Disclosures (Details 2) (Significant Unobservable Inputs (Level 3) [Member], USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Investments-trading [Member] | Equity securities [Member]
Quantitative information about level 3 fair value measurements
Fair Value	$ 63
Weighted average, Expected Life	5 years
Weighted average, Volatility	25.00%
Weighted average, Dividend Yield	0.00%
Range of Significant Inputs, Expected Life	5 years
Range of Significant Inputs, Volatility	25.00%
Range of Significant Inputs, Dividend Yield	0.00%
Other investments, at fair value [Member] | Other securities [Member]
Quantitative information about level 3 fair value measurements
Weighted average, Volatility	25.00%
Weighted average, Dividend Yield	0.00%
Range of Significant Inputs, Volatility	25.00%
Range of Significant Inputs, Dividend Yield	0.00%
Other investments, at fair value [Member] | Equity securities [Member] | Other securities [Member]
Quantitative information about level 3 fair value measurements
Fair Value	88
Weighted average, Expected Life	5 years 2 months 12 days
Other investments, at fair value [Member] | Equity securities [Member] | Other securities [Member] | Minimum [Member]
Quantitative information about level 3 fair value measurements
Range of Significant Inputs, Expected Life	5 years
Other investments, at fair value [Member] | Equity securities [Member] | Other securities [Member] | Maximum [Member]
Quantitative information about level 3 fair value measurements
Range of Significant Inputs, Expected Life	10 years
Other investments, at fair value [Member] | Equity securities [Member] | Other Investment Vehicles [Member] | Star Asia [Member]
Quantitative information about level 3 fair value measurements
Fair Value	$ 32,299
Weighted average, Discount rate on debt	7.15%
Range of Significant Inputs, Discount rate on debt	7.15%

XML

Segment and Geographic Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Financial information for the Company's segments
Net trading	$ 19,951	$ 16,240	$ 37,642	$ 43,514
Asset management	4,608	5,255	9,545	11,225
New issue and advisory	189	1,131	1,266	1,240
Principal transactions and other income	289	831	(4,656)	(208)
Total revenues	25,037	23,457	43,797	55,771
Total operating expenses	24,207	31,635	48,170	62,362
Operating income / (loss)	830	(8,178)	(4,373)	(6,591)
Income / (loss) from equity method affiliates	1,526	4,435	2,042	4,530
Other non operating income / (expense)	(5,461)	(1,447)	(6,673)	(2,929)
Income / (loss) before income taxes	(3,105)	(5,190)	(9,004)	(4,990)
Income tax expense / (benefit)	63	(133)	54	(346)
Net income / (loss)	(3,168)	(5,057)	(9,058)	(4,644)
Less: Net income / (loss) attributable to the non-controlling interest	1,090	1,686	3,121	1,648
Net income / (loss) attributable to IFMI	(2,078)	(3,371)	(5,937)	(2,996)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	343	503	734	973
Balance sheet data:
Total assets	503,035	455,733	503,035	455,733	420,590
Investment in equity method affiliates (included in total assets)	2,390	1,488	2,390	1,488
Goodwill	11,113	11,176	11,113	11,176	11,206
Intangible assets (included in other assets)	538	538	538	538
Capital Markets [Member]
Financial information for the Company's segments
Net trading	19,951	16,240	37,642	43,514
New issue and advisory	189	1,131	1,266	1,240
Principal transactions and other income	(7)	156	(34)	174
Total revenues	20,133	17,527	38,874	44,928
Total operating expenses	18,806	18,733	37,676	38,187
Operating income / (loss)	1,327	(1,206)	1,198	6,741
Other non operating income / (expense)	(4,289)	13	(4,224)	13
Income / (loss) before income taxes	(2,962)	(1,193)	(3,026)	6,754
Net income / (loss)	(2,962)	(1,193)	(3,026)	(53)
Less: Net income / (loss) attributable to the non-controlling interest	109	53	238
Net income / (loss) attributable to IFMI	(2,853)	(1,140)	(2,788)	6,807
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	223	116	452	145
Balance sheet data:
Total assets	444,297	370,731	444,297	370,731
Goodwill	7,937	8,000	7,937	8,000
Intangible assets (included in other assets)	538	538	538	538
Asset Management [Member]
Financial information for the Company's segments
Asset management	4,608	5,255	9,545	11,225
Principal transactions and other income	233	342	393	920
Total revenues	4,841	5,597	9,938	12,145
Total operating expenses	1,762	1,040	2,842	3,317
Operating income / (loss)	3,079	4,557	7,096	8,828
Income / (loss) from equity method affiliates		4,359		4,359
Income / (loss) before income taxes	3,079	8,916	7,096	13,187
Net income / (loss)	3,079	8,916	7,096	13,187
Net income / (loss) attributable to IFMI	3,079	8,916	7,096	13,187
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	3	3	7	7
Balance sheet data:
Total assets	7,219	21,553	7,219	21,553
Goodwill	3,176	3,176	3,176	3,176
Intangible assets (included in other assets)
Principal Investing [Member]
Financial information for the Company's segments
Principal transactions and other income	63	333	(5,015)	(1,302)
Total revenues	63	333	(5,015)	(1,302)
Total operating expenses	75	102	156	157
Operating income / (loss)	(12)	231	(5,171)	(1,459)
Income / (loss) from equity method affiliates	1,526	76	2,042	171
Income / (loss) before income taxes	1,514	307	(3,129)	(1,288)
Net income / (loss)	1,514	307	(3,129)	(1,288)
Net income / (loss) attributable to IFMI	1,514	307	(3,129)	(1,288)
Balance sheet data:
Total assets	39,995	44,020	39,995	44,020
Investment in equity method affiliates (included in total assets)	2,390	1,488	2,390	1,488
Goodwill
Intangible assets (included in other assets)
Segment Total [Member]
Financial information for the Company's segments
Net trading	19,951	16,240	37,642	43,514
Asset management	4,608	5,255	9,545	11,225
New issue and advisory	189	1,131	1,266	1,240
Principal transactions and other income	289	831	(4,656)	(208)
Total revenues	25,037	23,457	43,797	55,771
Total operating expenses	20,643	19,875	40,674	41,661
Operating income / (loss)	4,394	3,582	3,123	14,110
Income / (loss) from equity method affiliates	1,526	4,435	2,042	4,530
Other non operating income / (expense)	(4,289)	13	(4,224)	13
Income / (loss) before income taxes	1,631	8,030	941	18,653
Net income / (loss)	1,631	8,030	941	18,653
Less: Net income / (loss) attributable to the non-controlling interest	109	53	238	53
Net income / (loss) attributable to IFMI	1,740	8,083	1,179	18,706
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	226	119	459	152
Balance sheet data:
Total assets	491,511	436,304	491,511	436,304
Investment in equity method affiliates (included in total assets)	2,390	1,488	2,390	1,488
Goodwill	11,113	11,176	11,113	11,176
Intangible assets (included in other assets)	538	538	538	538
Unallocated [Member]
Financial information for the Company's segments
Total operating expenses	3,564	11,760	7,496	20,701
Operating income / (loss)	(3,564)	(11,760)	(7,496)	(20,701)
Other non operating income / (expense)	(1,172)	(1,460)	(2,449)	(2,942)
Income / (loss) before income taxes	(4,736)	(13,220)	(9,945)	(23,643)
Income tax expense / (benefit)	63	(133)	54	(346)
Net income / (loss)	(4,799)	(13,087)	(9,999)	(23,297)
Less: Net income / (loss) attributable to the non-controlling interest	981	1,633	2,883	1,595
Net income / (loss) attributable to IFMI	(3,818)	(11,454)	(7,116)	(21,702)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	117	384	275	821
Balance sheet data:
Total assets	11,524	19,429	11,524	19,429
Goodwill
Intangible assets (included in other assets)

XML

Summary of Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Summary of Significant Accounting Policies (Textual) [Abstract]
Estimated debt in fair value	$ 32.7	$ 43.5
Percentage of goodwill impairment threshold limit	50.00%

XML

Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Schedule of fair value, assets and liabilities measured on recurring basis

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

(Dollars in Thousands)

	June 30, 2012 Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	30,685	$	—	$	30,685	$	—
U.S. government agency debt securities		34,452		66		34,386		—
RMBS		1,178		—		1,178		—
U.S. Treasury securities		7,473		7,473		—		—
Interests in securitizations (1)		259		—		74		185
SBA loans		4,382		—		4,382		—
Corporate bonds and redeemable preferred stock		55,226		3,850		51,376		—
Foreign government bonds		99		—		99		—
Municipal bonds		18,895		—		18,895		—
Exchange traded funds		9,377		9,377		—		—
Certificates of deposit		4,079		—		4,079		—
Equity securities		87		24		—		63
Total investments-trading	$	166,192	$	20,790	$	145,154	$	248
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)		2,103		—		—		2,103
Star Asia (3)		32,299		—		—		32,299
Tiptree Financial Partners L.P. (4)		2,703		—		—		2,703
		37,105		—		—		37,105
Other		112		24		—		88
Total equity securities		37,217		24		—		37,193
Interests in securitizations (1)		97		—		—		97
Residential loans		229		—		229		—
Foreign currency forward contracts		66		66		—		—
Total other investments, at fair value	$	37,609	$	90	$	229	$	37,290
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	47	$	—	$	47	$	—
U.S. Treasury securities		10,811		10,811		—		—
Corporate bonds and redeemable preferred stock		64,651		313		64,338		—
Foreign government bonds		23		—		23		—
Municipal bonds		122		—		122		—
Exchange traded funds		1,636		1,636		—		—
Certificates of deposit		6,829		—		6,829		—
Total trading securities sold, not yet purchased	$	84,119	$	12,760	$	71,359	$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund - European.

(3) Real Estate Fund - Asian.

(4) Diversified Fund.

	December 31, 2011 Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	7,563	$	—	$	7,563	$	—
U.S. government agency debt securities		14,600		144		14,456		—
RMBS		7,108		—		2,176		4,932
CMBS		1,587		—		1,587		—
U.S. Treasury securities		8,524		8,524		—		—
Interests in securitizations (1)		608		—		387		221
SBA loans		9,049		—		9,049		—
Corporate bonds and redeemable preferred stock		65,445		779		64,666		—
Foreign government bonds		67		—		67		—
Municipal bonds		9,225		—		9,225		—
Certificates of deposit		710		—		710		—
Equity securities		60		25		—		35
Total investments-trading	$	124,546	$	9,472	$	109,886	$	5,188
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)		2,370		—		—		2,370
Star Asia (3)		37,358		—		—		37,358
Tiptree Financial Partners L.P. (4)		2,533		—		—		2,533
		42,261		—		—		42,261
Other		156		24		—		132
Total equity securities		42,417		24		—		42,393
Interests in securitizations (1)		88		—		—		88
Residential loans		267		—		—		267
Total other investments, at fair value	$	42,772	$	24	$	—	$	42,748
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	16	$	—	$	16	$	—
U.S. Treasury securities		11,755		11,755		—		—
Corporate bonds and redeemable preferred stock		87,537		1,084		86,453		—
Foreign government bonds		158		—		158		—
Municipal bonds		143		—		143		—
Certificates of deposit		4		—		4		—
Total trading securities sold, not yet purchased	$	99,613	$	12,839	$	86,774	$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund - European.

(3) Real Estate Fund - Asian.

(4) Diversified Fund.

Schedule of additional information about assets and liabilities measured at fair value on a recurring basis level 3 inputs

	January  1, 2012		Total gains and losses included in earnings									Purchases		Sales			June  30, 2012		Change  in unrealized gains/(losses) for the  period included in earnings (1)
			Net trading			Principal transactions and other income			Transfers out of Level 3
Assets:
Investments-trading:
RMBS	$	4,932	$	17		$	—		$	—		$	171	$	(5,120	)	$	—	$	—
Interests in securitizations (2)		221		(58	)		—			—			2,225		(2,203	)		185		(37	)
Equity securities		35		(98	)		—			—			126		—			63		(98	)
Total investments-trading	$	5,188	$	(139	)	$	—			—		$	2,522	$	(7,323	)	$	248	$	(135	)
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (3)	$	2,370	$	—		$	(267	)		—		$	—	$	—		$	2,103	$	(267	)
Star Asia (4)		37,358		—			(5,059	)		—			—		—			32,299		(5,059	)
Tiptree Financial Partners, L.P. (5)		2,533		—			170			—			—		—			2,703		170
		42,261		—			(5,156	)		—			—		—			37,105		(5,156	)
Other		132		—			(44	)		—			—		—			88		(44	)
Total equity securities		42,393		—			(5,200	)		—			—		—			37,193		(5,200	)
Interests in securitizations (2)		88		—			9			—			—		—			97		9
Residential loans		267		—			—			(267	)		—		—			—		—
Total other investments, at fair value	$	42,748	$	—		$	(5,191	)	$	(267	)	$	—	$	—		$	37,290	$	(5,191	)

(1) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2) Primarily comprised of CDOs, CLOs, and ABS.

(3) Hybrid Securities Funds - European.

(4) Real Estate Funds - Asian.

(5) Diversified Fund.

	January  1, 2011		Total gains and losses included in earnings					Transfers into Level 3		Purchases		Sales (1)			June  30, 2011		Change  in unrealized gains/(losses) for the  period included in earnings (2)
			Net trading		Principal transactions and other income
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	68,885	$	452	$	—		$	4,332	$	20,599	$	(85,649	)	$	8,619	$	602
RMBS		—		—		—			—		1,473		—			1,473		—
Commercial mortgage-backed securities		—		114		—			—		1,233		—			1,347		114
Interests in securitizations (3)		4,500		6,238		—			—		8,101		(11,548	)		7,291		340
Certificates of deposit		—		3		—			—		761		(763	)		1		2
Equity securities		—		30		—			—		70		(2	)		98		30
Total investments-trading	$	73,385	$	6,837	$	—		$	4,332	$	32,237	$	(97,962	)	$	18,829	$	1,088
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)	$	1,258	$	—	$	1,619		$	—	$	533	$	—		$	3,410	$	1,619
Star Asia (5)		38,025		—		(2,014	)		—		226		(476	)		35,761		(2,014	)
Tiptree Financial Partners, L.P.(6)		2,480		—		71			—		—		—			2,551		71
		41,763		—		(324	)		—		759		(476	)		41,722		(324	)
Investment Funds
Deep Value (7)		28		—		(9	)		—		—		(19	)		—		—
		28		—		(9	)		—		—		(19	)		—		—
Other		500		—		(212	)		—		36		(59	)		265		(212	)
Total equity securities		42,291		—		(545	)		—		795		(554	)		41,987		(536	)
Interests in securitizations (3)		105		—		—			—		—		—			105		—
Residential loans		303		—		5			—		—		(32	)		276		5
Total other investments, at fair value	$	42,699	$	—	$	(540	)	$	—	$	795	$	(586	)	$	42,368	$	(531	)

(1) Includes return of principal/capital of interests in U.S. government agency MBS and CMOs, securitizations, investment funds and residential loans. The sale of $476 attributable to Star Asia represents the transfer of 54,452 shares of Star Asia to an employee for services rendered during 2010. See note 19.

(2) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs and CLOs.

(4) Hybrid Securities Funds - European.

(5) Real Estate Funds - Asian.

(6) Diversified Fund.

(7) Real Estate Funds.

LEVEL 3 INPUTS

Three Months Ended June 30, 2012

(Dollars in Thousands)

	March  31, 2012		Total gains and losses included in earnings								Purchases		Sales			June  30, 2012		Change  in unrealized gains/(losses) for the  period included in earnings (1)
			Net trading			Principal transactions and other income			Transfers out of Level 3
Assets:
Investments-trading:
Interests in securitizations (2)	$	2,409	$	(21	)	$	—		$	—	$	—	$	(2,203	)	$	185	$	—
Equity securities		167		(104	)		—			—		—		—			63		(104	)
Total investments-trading	$	2,576	$	(125	)	$	—			—	$	—	$	(2,203	)	$	248	$	(104	)
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (3)	$	2,348	$	—		$	(245	)	$	—	$	—	$	—		$	2,103	$	(245	)
Star Asia (4)		32,118		—			181			—		—		—			32,299		181
Tiptree Financial Partners, L.P. (5)		2,650		—			53			—		—		—			2,703		53
		37,116		—			(11	)		—		—		—			37,105		(11	)
Other		82		—			6			—		—		—			88		6
Total equity securities		37,198		—			(5	)		—		—		—			37,193		(5	)
Interests in securitizations (2)		97		—			—			—		—		—			97		—
Total other investments, at fair value	$	37,295	$	—		$	(5	)	$	—	$	—	$	—		$	37,290	$	(5	)

(1) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2) Primarily comprised of CDOs, CLOs, and ABS.

(3) Hybrid Securities Funds - European.

(4) Real Estate Funds - Asian.

(5) Diversified Fund.

LEVEL 3 INPUTS

Three Months Ended June 30, 2011

(Dollars in Thousands)

	March  31, 2011		Total gains and losses included in earnings						Transfers into Level 3		Purchases		Sales (1)			June  30, 2011		Change  in unrealized gains/(losses) for the  period included in earnings (2)
			Net trading			Principal transactions and other income
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	12,206	$	1,024		$	—		$	—	$	7,283	$	(11,894	)	$	8,619	$	706
RMBS		—		—			—			—		1,473		—			1,473		—
Commercial mortgage-backed securities		—		114			—			—		1,233		—			1,347		114
Interests in securitizations (3)		1,857		1,000			—			—		7,016		(2,582	)		7,291		44
Certificates of deposit		393		—			—			—		—		(392	)		1		—
Equity securities		74		(46	)		—			—		70		—			98		(46	)
Total investments-trading	$	14,530	$	2,092		$	—		$	—	$	17,075	$	(14,868	)	$	18,829	$	818
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)	$	2,033	$	—		$	844		$	—	$	533	$	—		$	3,410	$	844
Star Asia (5)		35,094		—			667			—		—		—			35,761		667
Tiptree Financial Partners, L.P. (6)		2,511		—			40			—		—		—			2,551		40
		39,638		—			1,551			—		533		—			41,722		1,551
Investment Funds
Deep Value (7)		28		—			(9	)		—		—		(19	)		—		—
		28		—			(9	)		—		—		(19	)		—		—
Other		553		—			(265	)		—		36		(59	)		265		(265	)
Total equity securities		40,219		—			1,277			—		569		(78	)		41,987		1,286
Interests in securitizations (3)		105		—			—			—		—		—			105		—
Residential loans		287		—			3			—		—		(14	)		276		3
Total other investments, at fair value	$	40,611	$	—		$	1,280		$	—	$	569	$	(92	)	$	42,368	$	1,289

(1) Includes return of principal/capital of interests in U.S. government agency MBS and CMOs, securitizations, investment funds and residential loans.

(2) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs and CLOs.

(4) Hybrid Securities Funds - European.

(5) Real Estate Funds - Asian.

(6) Diversified Fund.

(7) Real Estate Funds.

Quantitative information about level 3 fair value measurements

	Fair Value at June  30, 2012		Valuation Technique		Significant Unobservable Inputs	Weighted average			Range of Significant Inputs
Assets:
Investments-trading:
Equity securities	$	63		Black Scholes	Expected Life Volatility Dividend Yield		5 years 25 0	%  %		5 years 25 0	%  %
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
Star Asia	$	32,299		Adjusted NAV	Discount rate on debt		7.15	%		7.15	%
Other	$	88		Black Scholes	Expected Life Volatility Dividend Yield		5.2 years 25 0	%  %		5-10 years 25 0	%  %

Schedule of fair value measurements of investments in certain entities that calculate net asset value per share

	Fair Value at June 30, 2012 (dollars in thousands)		Unfunded Commitments		Redemption Frequency (if Currently Eligible)		Redemption Notice  Period
Other Investment Vehicles:
EuroDekania (a)	$	2,103		N/A		N/A		N/A
Star Asia (b)		32,299		N/A		N/A		N/A
Tiptree Financial Partners, L.P. (c)		2,703		N/A		N/A		N/A
	$	37,105

	Fair Value at December 31, 2011 (dollars in thousands)		Unfunded Commitments		Redemption Frequency (if Currently Eligible)		Redemption Notice  Period
Other Investment Vehicles:
EuroDekania (a)	$	2,370		N/A		N/A		N/A
Star Asia (b)		37,358		N/A		N/A		N/A
Tiptree Financial Partners, L.P. (c)		2,533		N/A		N/A		N/A
	$	42,261

N/A - Not applicable.

(a) EuroDekania’s investment strategy is to make investments in hybrid capital securities that have attributes of debt and equity, primarily in the form of subordinated debt issued by insurance companies, banks and bank holding companies based primarily in Western Europe (“EuroTruPS”); widely syndicated leveraged loans issued by European corporations CMBS, including subordinated interests in first mortgage real estate loans (“B-Notes”); and RMBS and other ABS backed by consumer and commercial receivables. The majority of the assets are denominated in Euros and U.K. Pounds Sterling. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820.

(b) Star Asia’s investment strategy is to make investments in Asian real estate structured finance investments, including CMBS, corporate debt of REITs and real estate operating companies, whole loans, mezzanine loans and other commercial real estate fixed income investments. The fair value of the investment in this category has been estimated using a series of internal valuation models that use both the market and income approach. If the Company had used Star Asia’s unadjusted reported net asset value to determine its fair value, the carrying value of its investment in Star Asia would have been $41,740 as of June 30, 2012 and $46,031 as of December 31, 2011.

(c) The investment strategy of Tiptree Financial Partners, L.P. (“Tiptree”) is currently focused on investing in (a) specialty finance companies; (b) alternative asset management companies, and (c) diversified credit assets and related equity interests. Tiptree primarily seeks to acquire majority ownership interests in its investees. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820. The Company uses the latest reported net asset value from Tiptree. From time to time, the net asset value may be one quarter in arrears.

XML

Segment and Geographic Information (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Total revenues summarized by geographic area
Total Revenues	$ 25,037	$ 23,457	$ 43,797	$ 55,771
United States [Member]
Total revenues summarized by geographic area
Total Revenues	20,390	21,057	37,503	49,246
United Kingdom & Other [Member]
Total revenues summarized by geographic area
Total Revenues	$ 4,647	$ 2,400	$ 6,294	$ 6,525

XML

Permanent Equity (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended			6 Months Ended									1 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2012 Total stockholder's equity [Member]	Jun. 30, 2012 Accumulated other comprehensive income (loss) [Member]	Jun. 30, 2011 Accumulated other comprehensive income (loss) [Member]	Jun. 30, 2012 Additional paid-in capital [Member]	Jun. 30, 2011 Additional paid-in capital [Member]	Jun. 30, 2012 Noncontrolling Interest [Member]	Jun. 30, 2011 Noncontrolling Interest [Member]	Jun. 30, 2012 Additional Units Surrendered (Net of Acquisitions) [Member]	Jun. 30, 2012 UIS Agreement [Member]	Jan. 31, 2012 JVB Financial Holdings LLC [Member]	Jan. 31, 2011 JVB Financial Holdings LLC [Member]	Jun. 30, 2012 JVB Financial Holdings LLC [Member]
Permanent Equity (Textual) [Abstract]
Units issued by operating LLC to IFMI											651,285	464,946
Common stock held as treasury stock	50,400		50,400
Vesting of shares	239,259												186,339
Shares issued in connection with the redemption of Operating LLC units	186,339													559,020	186,339
Acquisition / (surrender) of additional units of consolidated subsidiary, net	$ 828	$ 972		$ 800	$ (28)	$ (27)	$ 828	$ 972	$ (800)	$ (945)
Permanent Equity (Additional Textual) [Abstract]
Ratio of Common Stock to membership units	1

XML

Fair Value Disclosures (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Fair Value Disclosures (Additional Textual) [Abstract]
Fair value, option, changes in fair value, gains (losses)	$ (34)	$ 418	$ (5,208)	$ (1,122)
Carrying value of investment in Star Asia	41,740		41,740		46,031
Company's internal valuation model			32,299		37,358
Fair value of assets transfers into level 3				4,332
Star Asia [Member]
Fair Value Disclosures (Textual) [Abstract]
Discount rate used in determining fair value of star asia	7.15%		7.15%		7.50%
Residential Loan [Member]
Fair Value Disclosures (Textual) [Abstract]
Fair value of assets transfers out of level 3			$ 267

XML

Earnings / (Loss) Per Common Share (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings / (Loss) Per Common Share (Textual) [Abstract]
Restricted units of IFMI shares, antidilutive	21,879	37,288	17,412	25,852
Earnings / (Loss) Per Common Share (Additional Textual) [Abstract]
Restricted operating LLC membership units	0	0	11,628	3,613
Restricted Stock [Member]
Earnings / (Loss) Per Common Share (Textual) [Abstract]
Restricted units of IFMI shares, antidilutive	0		2,554

XML

Related Party Transactions (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Related Party Transactions
Net trading	$ 19,951	$ 16,240	$ 37,642	$ 43,514
Income / (loss) from equity method affiliates	1,526	4,435	2,042	4,530
Related Party Transactions [Member]
Related Party Transactions
Management fee revenue		238	203	923
Net trading	36	315	71	214
Principal transactions and other income, Dividend income and other	89		183	32
Principal transactions and other income, Gain/(Loss)	(64)	1,541	(5,326)	(789)
Income / (loss) from equity method affiliates	1,526	4,435	2,042	4,530
Shared Service (Paid) / Received		4		9
Related Party Transactions [Member] | CBF [Member]
Related Party Transactions
Management fee revenue		71	64	138
Related Party Transactions [Member] | TBBK [Member]
Related Party Transactions
Net trading	36	315	71	315
Related Party Transactions [Member] | Star Asia [Member]
Related Party Transactions
Principal transactions and other income, Gain/(Loss)	181	667	(5,059)	(2,014)
Related Party Transactions [Member] | Star Asia Manager [Member]
Related Party Transactions
Income / (loss) from equity method affiliates	306	291	580	511
Related Party Transactions [Member] | Star Asia SPV [Member]
Related Party Transactions
Income / (loss) from equity method affiliates	245	40	724	313
Related Party Transactions [Member] | Star Asia Opportunity [Member]
Related Party Transactions
Income / (loss) from equity method affiliates	923		619
Related Party Transactions [Member] | Star Asia Capital Management [Member]
Related Party Transactions
Income / (loss) from equity method affiliates	64		130
Related Party Transactions [Member] | EuroDekania [Member]
Related Party Transactions
Management fee revenue		167	139	333
Net trading				(101)
Principal transactions and other income, Dividend income and other	89		183
Principal transactions and other income, Gain/(Loss)	(245)	844	(267)	1,619
Related Party Transactions [Member] | MFCA [Member]
Related Party Transactions
Principal transactions and other income, Dividend income and other				32
Principal transactions and other income, Gain/(Loss)		40		71
Shared Service (Paid) / Received		4		9
Related Party Transactions [Member] | Deep Value [Member]
Related Party Transactions
Management fee revenue				452
Principal transactions and other income, Gain/(Loss)		(9)		(9)
Income / (loss) from equity method affiliates	(12)	4,371	(11)	4,372
Related Party Transactions [Member] | Duart Fund [Member]
Related Party Transactions
Principal transactions and other income, Gain/(Loss)		(1)		(456)
Related Party Transactions [Member] | Duart Capital [Member]
Related Party Transactions
Income / (loss) from equity method affiliates		$ (267)		$ (666)

XML

Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended	6 Months Ended
	Apr. 30, 2012	Dec. 31, 2011	Jun. 30, 2012	Dec. 06, 2011
Commitments and Contingencies (Textual) [Abstract]
Guarantee liability		$ 1,084	$ 1,084
Commitments and Contingencies (Additional Textual) [Abstract]
Initial payment made to the agreement			3,000
Additional payment made to agreement			2,250
Accrued contingent liability			4,357
Initial payment made to the accrued contingent liability			3,000
Discounted value for future payment			1,978
Estimated insurance receivables			621
Component of interest expense amortized			272
Owned trust preferred securities			4,000
Sales back to leawood			1,000
Judgment in favor of Leawood and against Alesco, amount				1,618
Judgment in favor of Crossfirst and against Alesco X, amount				1,840
Contribution towards Alesco X		2,250
Payment made against settlement to Alesco X	2,250
Potential liability, assuming the restricted stock or restricted units to vest			306
Alesco XIV Guarantee [Member]
Commitments and Contingencies (Textual) [Abstract]
Guarantee liability			1,084
Maximum potential loss on guarantee			$ 8,750

XML

Permanent Equity (Details)	6 Months Ended
	Jun. 30, 2012
Schedule of unrestricted common stock, activity
Balance at beginning of the period	10,132,497
Shares issued in connection with the redemption of Operating LLC units	186,339
Vesting of shares	239,259
Shares withheld for employee taxes	(1,780)
Balance at end of the period	10,556,315

XML

Segment and Geographic Information

6 Months Ended

Jun. 30, 2012

Segment and Geographic Information [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

18. SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company operates within three business segments: Capital Markets, Asset Management, and Principal Investing. See note 1.

The Company’s business segment information for the six and three months ended June 30, 2012 and 2011 is prepared using the following methodologies and generally represents the information that is relied upon by management in its decision making processes:

(a) Revenues and expenses directly associated with each business segment are included in determining net income / (loss) by segment.

(b) Indirect expenses (such as general and administrative expenses including executive and indirect overhead costs) not directly associated with specific business segments are not allocated to the segments’ statements of operations. Accordingly, the Company presents segment information consistent with internal management reporting. See note (1) in the table below for more detail on unallocated items. The following tables present the financial information for the Company’s segments for the periods indicated.

As of and for the six months ended June 30, 2012	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	37,642		$	—	$	—		$	37,642		$	—		$	37,642
Asset management		—			9,545		—			9,545			—			9,545
New issue and advisory		1,266			—		—			1,266			—			1,266
Principal transactions and other income		(34	)		393		(5,015	)		(4,656	)		—			(4,656	)
Total revenues		38,874			9,938		(5,015	)		43,797			—			43,797
Total operating expenses		37,676			2,842		156			40,674			7,496			48,170
Operating income / (loss)		1,198			7,096		(5,171	)		3,123			(7,496	)		(4,373	)
Income / (loss) from equity method affiliates		—			—		2,042			2,042			—			2,042
Other non operating income / (expense)		(4,224	)		—		—			(4,224	)		(2,449	)		(6,673	)
Income / (loss) before income taxes		(3,026	)		7,096		(3,129	)		941			(9,945	)		(9,004	)
Income tax expense / (benefit)		—			—		—			—			54			54
Net income / (loss)		(3,026	)		7,096		(3,129	)		941			(9,999	)		(9,058	)
Less: Net income / (loss) attributable to the non-controlling interest		(238	)		—		—			(238	)		(2,883	)		(3,121	)
Net income / (loss) attributable to IFMI	$	(2,788	)	$	7,096	$	(3,129	)	$	1,179		$	(7,116	)	$	(5,937	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	452		$	7	$	—		$	459		$	275		$	734
Balance sheet data:
Total assets (2) (3)	$	444,297		$	7,219	$	39,995		$	491,511		$	11,524		$	503,035
Investment in equity method affiliates (included in total assets)	$	—		$	—	$	2,390		$	2,390		$	—		$	2,390

As of and for the six months ended June 30, 2011	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	43,514		$	—	$	—		$	43,514		$	—		$	43,514
Asset management		—			11,225		—			11,225			—			11,225
New issue and advisory		1,240			—		—			1,240			—			1,240
Principal transactions and other income		174			920		(1,302	)		(208	)		—			(208	)
Total revenues		44,928			12,145		(1,302	)		55,771			—			55,771
Total operating expenses		38,187			3,317		157			41,661			20,701			62,362
Operating income / (loss)		6,741			8,828		(1,459	)		14,110			(20,701	)		(6,591	)
Income / (loss) from equity method affiliates		—			4,359		171			4,530			—			4,530
Other non operating income / (expense)		13			—		—			13			(2,942	)		(2,929	)
Income / (loss) before income taxes		6,754			13,187		(1,288	)		18,653			(23,643	)		(4,990	)
Income tax expense / (benefit)		—			—		—			—			(346	)		(346	)
Net income / (loss)		6,754			13,187		(1,288	)		18,653			(23,297	)		(4,644	)
Less: Net income / (loss) attributable to the non-controlling interest		(53	)		—		—			(53	)		(1,595	)		(1,648	)
Net income / (loss) attributable to IFMI	$	6,807		$	13,187	$	(1,288	)	$	18,706		$	(21,702	)	$	(2,996	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	145		$	7	$	—		$	152		$	821		$	973
Balance sheet data:
Total assets (2) (3)	$	370,731		$	21,553	$	44,020		$	436,304		$	19,429		$	455,733
Investment in equity method affiliates (included in total assets)	$	—		$	—	$	1,488		$	1,488		$	—		$	1,488

For the three months ended June 30, 2012	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	19,951		$	—	$	—		$	19,951		$	—		$	19,951
Asset management		—			4,608		—			4,608			—			4,608
New issue and advisory		189			—		—			189			—			189
Principal transactions and other income		(7	)		233		63			289			—			289
Total revenues		20,133			4,841		63			25,037			—			25,037
Total operating expenses		18,806			1,762		75			20,643			3,564			24,207
Operating income / (loss)		1,327			3,079		(12	)		4,394			(3,564	)		830
Income / (loss) from equity method affiliates		—			—		1,526			1,526			—			1,526
Other non operating income / (expense)		(4,289	)		—		—			(4,289	)		(1,172	)		(5,461	)
Income / (loss) before income taxes		(2,962	)		3,079		1,514			1,631			(4,736	)		(3,105	)
Income tax expense / (benefit)		—			—		—			—			63			63
Net income / (loss)		(2,962	)		3,079		1,514			1,631			(4,799	)		(3,168	)
Less: Net income / (loss) attributable to the non-controlling interest		(109	)		—		—			(109	)		(981	)		(1,090	)
Net income / (loss) attributable to IFMI	$	(2,853	)	$	3,079	$	1,514		$	1,740		$	(3,818	)	$	(2,078	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	223		$	3	$	—		$	226		$	117		$	343

For the three months ended June 30, 2011	Capital Markets			Asset Management		Principal Investing		Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	16,240		$	—	$	—	$	16,240		$	—		$	16,240
Asset management		—			5,255		—		5,255			—			5,255
New issue and advisory		1,131			—		—		1,131			—			1,131
Principal transactions and other income		156			342		333		831			—			831
Total revenues		17,527			5,597		333		23,457			—			23,457
Total operating expenses		18,733			1,040		102		19,875			11,760			31,635
Operating income / (loss)		(1,206	)		4,557		231		3,582			(11,760	)		(8,178	)
Income / (loss) from equity method affiliates		—			4,359		76		4,435			—			4,435
Other non operating income / (expense)		13			—		—		13			(1,460	)		(1,447	)
Income / (loss) before income taxes		(1,193	)		8,916		307		8,030			(13,220	)		(5,190	)
Income tax expense / (benefit)		—			—		—		—			(133	)		(133	)
Net income / (loss)		(1,193	)		8,916		307		8,030			(13,087	)		(5,057	)
Less: Net income / (loss) attributable to the non-controlling interest		(53	)		—		—		(53	)		(1,633	)		(1,686	)
Net income / (loss) attributable to IFMI	$	(1,140	)	$	8,916	$	307	$	8,083		$	(11,454	)	$	(3,371	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	116		$	3	$	—	$	119		$	384		$	503

(1) Unallocated includes certain expenses incurred by indirect overhead and support departments (such as the executive, finance, legal, information technology, human resources, risk, compliance, and other similar overhead and support departments). Some of the items not allocated include: (1) operating expenses related to support departments excluding certain departments that directly support the capital markets segment; (2) interest expense on debt; and (3) income taxes. Management does not consider these items necessary for an understanding of the operating results of these segments and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.

(2) Unallocated assets primarily include (1) amounts due from related parties; (2) furniture and equipment, net; and (3) other assets that are not considered necessary for an understanding of segment assets and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.

(3) Goodwill and intangible assets as of June 30, 2012 and 2011 are allocated to the Capital Markets and Asset Management segments as indicated in the table listed below.

As of June 30, 2012:

	Capital Markets		Asset Management		Principal Investing		Segment Total		Unallocated		Total
Goodwill	$	7,937	$	3,176	$	—	$	11,113	$	—	$	11,113
Intangible assets (included in other assets)	$	538	$	—	$	—	$	538	$	—	$	538

As of June 30, 2011:

	Capital Markets		Asset Management		Principal Investing		Segment Total		Unallocated		Total
Goodwill	$	8,000	$	3,176	$	—	$	11,176		—	$	11,176
Intangible assets (included in other assets)	$	538	$	—	$	—	$	538		—	$	538

Geographic Information

The Company conducts its business activities through offices in the following locations: (1) United States and (2) United Kingdom and other. Total revenues by geographic area are summarized as follows:

GEOGRAPHIC INFORMATION

(Dollars in Thousands)

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Total Revenues:
United States	$	20,390	$	21,057	$	37,503	$	49,246
United Kingdom & Other		4,647		2,400		6,294		6,525
Total	$	25,037	$	23,457	$	43,797	$	55,771

Long-lived assets attributable to an individual country, other than the United States, are not material.

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Financial Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	$ 84,119	$ 99,613
U.S. government agency MBS [Member]
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	47	16
U.S. Treasury securities [Member]
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	10,811	11,755
Corporate bonds and redeemable preferred stock [Member]
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	64,651	87,537
Foreign government bonds [Member]
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	23	158
Municipal bonds [Member]
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	122	143
Exchange traded funds [Member]
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	1,636
Certificates of deposit [Member]
Trading securities sold, not yet purchased
Trading securities sold, not yet purchased	$ 6,829	$ 4

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

					Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
CBF	$	64	$	—	$	—	$	—		$	—		$	—
TBBK		—		71		—		—			—			—
Star Asia		—		—		—		(5,059	)		—			—
Star Asia Manager		—		—		—		—			580			—
Star Asia SPV		—		—		—		—			724			—
Star Asia Opportunity		—		—		—		—			619			—
Star Asia Capital		—		—		—		—			130			—
EuroDekania		139		—		183		(267	)		—			—
Deep Value		—		—		—		—			(11	)		—
Total	$	203	$	71	$	183	$	(5,326	)	$	2,042		$	—

					Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
TBBK	$	—	$	36	$	—	$	—		$	—		$	—
Star Asia		—		—		—		181			—			—
Star Asia Manager		—		—		—		—			306			—
Star Asia SPV		—		—		—		—			245			—
Star Asia Opportunity		—		—		—		—			923			—
Star Asia Capital		—		—		—		—			64			—
EuroDekania		—		—		89		(245	)		—			—
Deep Value		—		—		—		—			(12	)		—
Total	$	—	$	36	$	89	$	(64	)	$	1,526		$	—

						Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading			Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
CBF	$	138	$	—		$	—	$	—		$	—		$	—
TBBK		—		315			—		—			—			—
Star Asia		—		—			—		(2,014	)		—			—
Star Asia Manager		—		—			—		—			511			—
Star Asia SPV		—		—			—		—			313			—
EuroDekania		333		(101	)		—		1,619			—			—
MFCA A		—		—			32		71			—			9
Deep Value		452		—			—		(9	)		4,372			—
Duart Fund		—		—			—		(456	)		—			—
Duart Capital		—		—			—		—			(666	)		—
Total	$	923	$	214		$	32	$	(789	)	$	4,530		$	9

					Principal transactions and other income					Income / (loss) from equity method affiliates			Shared Services (Paid) / Received
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)
CBF	$	71	$	—	$	—	$	—		$	—		$	—
TBBK		—		315		—		—			—			—
Star Asia		—		—		—		667			—			—
Star Asia Manager		—		—		—		—			291			—
Star Asia SPV		—		—		—		—			40			—
EuroDekania		167		—		—		844			—			—
MFCA		—		—		—		40			—			4
Deep Value		—		—		—		(9	)		4,371			—
Duart Fund		—		—		—		(1	)		—			—
Duart Capital		—		—		—		—			(267	)		—
Total	$	238	$	315	$	—	$	1,541		$	4,435		$	4

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Earnings / (Loss) Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Schedule of Earnings / (Loss) Per Common Share
Net income / (loss) attributable to IFMI	$ (2,078)	$ (3,371)	$ (5,937)	$ (2,996)
Add / (deduct): Income / (loss) attributable to the non-controlling interest attributable to Operating LLC membership units exchangeable into IFMI shares	(981)	(1,633)	(2,883)	(1,595)
Add / (deduct): Adjustment for income tax benefit / (expense)	(23)	6	(39)	150
Net income / (loss) on a fully converted basis	$ (3,082)	$ (4,998)	$ (8,859)	$ (4,441)
Weighted average common shares outstanding - Basic	10,756,257	10,901,448	10,600,004	10,860,702
Unrestricted Operating LLC membership units exchangeable into IFMI shares	5,252,002	5,283,556	5,252,002	5,283,556
Weighted average common shares outstanding - Diluted	16,008,259	16,185,004	15,852,006	16,144,258
Net income / (loss) per common share - Basic	$ (0.19)	$ (0.31)	$ (0.56)	$ (0.28)
Net income / (loss) per common share - Diluted	$ (0.19)	$ (0.31)	$ (0.56)	$ (0.28)

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Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2012

Variable Interest Entities [Abstract]

Non-Consolidated Variable Interest Entities

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES

(Dollars in Thousands)

	June 30, 2012
	Carrying Amount				Maximum Exposure to loss in non-
	Other Receivables		Other Investments, at Fair Value		consolidated VIEs
Managed VIEs	$	1,697	$	—	$	1,697
Third party managed VIEs		117		97		214
Total	$	1,814	$	97	$	1,911

	December 31, 2011
	Carrying Amount				Maximum Exposure to loss in non-
	Other Receivables		Other Investments, at Fair Value		consolidated VIEs
Managed VIEs	$	1,830	$	—	$	1,830
Third party managed VIEs		175		88		263
Total	$	2,005	$	88	$	2,093

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Financial Instruments (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Financial Instruments (Textual) [Abstract]
Unrealized gain (losses) in net trading revenue	$ (432)	$ 1,248

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Variable Interest Entities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Non-Consolidated Variable Interest Entities
Other Receivables	$ 1,814		$ 1,814		$ 2,005
Other Investments, at Fair Value	97		97		88
Maximum Exposure to loss in non-consolidated VIEs	1,911		1,911		2,093
Variable Interest Entities (Textual) [Abstract]
Company financial support to VIEs	Company has not provided financial support to these VIEs	Company has not provided financial support to these VIEs	Company has not provided financial support to these VIEs	Company has not provided financial support to these VIEs
Managed VIEs [Member]
Non-Consolidated Variable Interest Entities
Other Receivables	1,697		1,697		1,830
Maximum Exposure to loss in non-consolidated VIEs	1,697		1,697		1,830
Third party managed VIEs [Member]
Non-Consolidated Variable Interest Entities
Other Receivables	117		117		175
Other Investments, at Fair Value	97		97		88
Maximum Exposure to loss in non-consolidated VIEs	$ 214		$ 214		$ 263

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Collateralized Securities Transactions (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Collateralized Securities Transactions (Textual) [Abstract]
Securities reverse repurchase agreements	$ 247,289	$ 129,978
Securities received as collateral under reverse repurchase agreements	263,414	137,829
Securities sold under agreements to repurchase	244,061	134,870
Securities pledged as collateral under repurchase agreements	$ 258,903	$ 142,295

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Receivables from and Payables to Brokers, Dealers, and Clearing Agencies (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of receivables from Brokers, Dealers, and Clearing Agencies
Receivable from clearing organizations	$ 7,628	$ 51,619
Unsettled regular way trades, net		17,232
Deposits with clearing organizations	1,647	2,112
Receivables from brokers, dealers, and clearing agencies	9,275	70,963
Schedule of payables to Brokers, Dealers, and Clearing Agencies
Unsettled regular way trades, net	830
Margin payable	35,027	24,633
Payables to brokers, dealers, and clearing agencies	$ 35,857	$ 24,633

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Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation [Abstract]

BASIS OF PRESENTATION

2. BASIS OF PRESENTATION

The financial statements of the Company included herein were prepared in conformity with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim months’ periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and six months ended June 30, 2012 and 2011 are not necessarily indicative of the results for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Capitalized terms used herein without definition have the meanings ascribed to them in the Annual Report on Form 10-K for the year ended December 31, 2011.

Certain prior period amounts have been reclassified to conform to the current period presentation.

In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, the Company has one year from the closing of the transaction, referred to as the measurement period, to finalize the accounting for business combinations. The measurement period for the PrinceRidge acquisition expired on May 31, 2012. During the second quarter of 2012, the Company made a measurement period adjustment to the redeemable non-controlling interest with a corresponding adjustment to goodwill related to the acquisition of PrinceRidge. The adjustment reduced goodwill and the redeemable non-controlling interest by $93. The balance sheet at December 31, 2011 was not retrospectively adjusted to reflect these adjustments since the Company believes this revision was not material based on the Company’s assessment performed in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99, Materiality.

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Investments in Equity Method Affiliates (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012			$ 6,076
Investments / advances			6
Distributions/repayments			(5,734)
Earnings / (loss) realized	1,526	4,435	2,042	4,530
Balance at June30, 2012	2,390		2,390
Star Asia Manager [Member]
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012			1,046
Distributions/repayments			(1,050)
Earnings / (loss) realized			580
Balance at June30, 2012	576		576
Deep Value GP [Member]
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012			21
Earnings / (loss) realized			(14)
Balance at June30, 2012	7		7
Deep Value GP II [Member]
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012			33
Earnings / (loss) realized			3
Balance at June30, 2012	36		36
Star Asia SPV [Member]
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012			466
Distributions/repayments			(526)
Earnings / (loss) realized			724
Balance at June30, 2012	664		664
Star Asia Opportunity [Member]
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012			4,460
Distributions/repayments			(3,908)
Earnings / (loss) realized			619
Balance at June30, 2012	1,171		1,171
Star Asia Capital Management [Member]
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012			50
Investments / advances			6
Distributions/repayments			(250)
Earnings / (loss) realized			130
Balance at June30, 2012	(64)		(64)
Duart Capital and Other [Member]
Schedule of Investment in Equity Method Affiliates
Balance at January 1, 2012
Investments / advances
Distributions/repayments
Earnings / (loss) realized
Balance at June30, 2012

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Due from / Due to Related Parties (Tables)

6 Months Ended

Jun. 30, 2012

Due from / Due to Related Parties [Abstract]

Schedule of Due From / Due To Related Parties

	June 30, 2012		December 31, 2011
Deep Value GP	$	75	$	29
Deep Value GP II		64		61
Star Asia Manager		28		50
Cohen Brothers Financial, LLC		86		306
Employees and other		416		233
Total Due from Related Parties	$	669	$	679

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Subsequent Events

6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

22. SUBSEQUENT EVENTS

Departure of Certain Officers of PrinceRidge

On July 19, 2012, PrinceRidge entered into a series of separate agreements with Michael Hutchins, the former CEO and board member of PrinceRidge, and John Costas, the former Chairman of the board of PrinceRidge, whereby (i) PrinceRidge repurchased all of the equity and profit units in PrinceRidge held by Mr. Costas and Mr. Hutchins; (ii) Mr. Costas and Mr. Hutchins resigned as employees and board members of PrinceRidge; (iii) Mr. Costas and Mr. Hutchins agreed to forfeit all of their unvested equity awards both from PrinceRidge and IFMI; and (iv) Mr. Costas and Mr. Hutchins withdrew as members of PrinceRidge GP and as partners of PrinceRidge Holdings. Daniel Cohen, the Company’s Chairman and CEO, was appointed Chairman and CEO of PrinceRidge by the board of PrinceRidge.

As of June 30, 2012, Mr. Costas’ and Mr. Hutchins’ equity and profit units had a combined capital account balance of $6,130. However, PrinceRidge repurchased these units for $8,234. PrinceRidge will record compensation expense of $2,104 and a reduction in temporary equity of $6,130 related to the repurchase of these units. The compensation expense represents the amount in excess of the combined capital account balances. In addition, PrinceRidge will record a reduction in compensation expense of $862 relating to the forfeiture of Mr. Costas’ and Mr. Hutchins’ unvested PrinceRidge equity awards and IFMI will record a reduction in compensation expense of $1,289 relating to the forfeiture of Mr. Costas’ and Mr. Hutchins’ unvested IFMI equity awards. All of these transactions will be recorded in the third quarter of 2012.

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Due from / Due to Related Parties

6 Months Ended

Jun. 30, 2012

Due from / Due to Related Parties [Abstract]

DUE FROM / DUE TO RELATED PARTIES

21. DUE FROM / DUE TO RELATED PARTIES

The following table summarizes the outstanding due from / to related parties. These amounts may result from normal operating advances or from timing differences between the transactions disclosed in note 20 and final settlement of those transactions in cash. All amounts are non-interest bearing.

DUE FROM/DUE TO RELATED PARTIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Deep Value GP	$	75	$	29
Deep Value GP II		64		61
Star Asia Manager		28		50
Cohen Brothers Financial, LLC		86		306
Employees and other		416		233
Total Due from Related Parties	$	669	$	679

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Fair Value Disclosures (Details 3) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Schedule of fair value measurements of investments in certain entities that calculate net asset value per share
Other investments, at fair value	$ 37,609	$ 42,772
Other Investment Vehicles [Member]
Schedule of fair value measurements of investments in certain entities that calculate net asset value per share
Other investments, at fair value	37,105	42,261
EuroDekania [Member] | Other Investment Vehicles [Member]
Schedule of fair value measurements of investments in certain entities that calculate net asset value per share
Other investments, at fair value	2,103	2,370
Unfunded commitments
Redemption frequency
Redemption notice period
Star Asia [Member] | Other Investment Vehicles [Member]
Schedule of fair value measurements of investments in certain entities that calculate net asset value per share
Other investments, at fair value	32,299	37,358
Unfunded commitments
Redemption frequency
Redemption notice period
Tiptree Financial Partners L.P. [Member] | Other Investment Vehicles [Member]
Schedule of fair value measurements of investments in certain entities that calculate net asset value per share
Other investments, at fair value	2,703	2,533
Unfunded commitments
Redemption frequency
Redemption notice period

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Organization and Nature of Operations (Details) (USD $) In Billions, unless otherwise specified	Jun. 30, 2012
Organization and Nature of Operations (Textual) [Abstract]
Company had assets under management	$ 6.20
Collateralized debt obligations, amount	$ 6.0
Collateralized debt obligations, percentage	0.97

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Adoption of New Accounting Standards

A. Adoption of New Accounting Standards

In April 2011, the FASB issued ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”), which revises the criteria for assessing effective control for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The determination of whether the transfer of a financial asset subject to a repurchase agreement is a sale is based, in part, on whether the entity maintains effective control over the financial asset. ASU 2011-03 removes from the assessment of effective control: the criterion requiring the transferor to have the ability to repurchase or redeem the financial asset on substantially agreed terms, even in the event of default by the transferee, and the related requirement to demonstrate that the transferor possesses adequate control to fund substantially all the cost of purchasing replacement financial assets. The amendments in ASU 2011-03 will be effective for interim and annual reporting periods beginning on or after December 15, 2011, early adoption is prohibited, and the amendments will be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The Company’s adoption of the provisions of ASU 2011-03 effective January 1, 2012 did not have an effect on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”), which amends FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurements. The amended guidance changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additional disclosure requirements include transfers between levels 1 and 2; and for level 3 fair value measurements, a description of the Company’s valuation processes and additional information about unobservable inputs impacting level 3 measurements. Additionally, the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. The amendments result in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. The guidance provided in ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. The Company’s adoption of the provisions of ASU 2011-04 effective January 1, 2012 did not have a material effect on the Company’s consolidated financial position and results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income, (“ASU 2011-05”) which requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”). ASU 2011-12 defers the requirement that companies present reclassification adjustments and the effect of those reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. The effective dates for ASU 2011-12 are consistent with the effective dates for ASU 2011-05. Effective January 1, 2012, the Company adopted the provisions of ASU 2011-05 and ASU 2011-12, which resulted in the Company presenting the components of comprehensive income (loss) within the consolidated statements of operations and comprehensive income (loss). The Company’s adoption of the new guidance did not have an effect on the Company’s financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which permits companies to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more likely than not threshold is defined as having a likelihood of more than 50%. Under this option, a company would no longer be required to calculate the fair value of the reporting unit unless the company determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. A company has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment tests. A company may resume performing the qualitative assessment in any subsequent period. The guidance also includes examples of the types of events and circumstances to consider in conducting the qualitative assessment. These examples of events and circumstances supersede (1) the previous examples included in Topic 350 of event and circumstances that a company should consider when testing goodwill for impairment between annual tests and (2) the previous examples of events and circumstances that a company having a reporting unit with a zero or negative carrying amount should consider in determining whether to perform the second step of the impairment test, used to measure the amount of the loss, if any. The guidance provided in ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s adoption of the provisions of ASU 2011-08 effective January 1, 2012 did not have an effect on the Company’s consolidated financial statements.

Recent Accounting Developments

C. Recent Accounting Developments

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”), which requires companies to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on a company’s financial position. The amendments require enhanced disclosures by requiring improved information about financial statements and derivative instruments that are either (1) offset in accordance with current literature, or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current literature. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures required by ASU 2011-11 will be applied retrospectively for all comparative periods presented. The Company is currently evaluating the impact of ASU 2011-11 on its disclosures about offsetting assets and liabilities.

Fair Value of Financial Instruments

B. Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments. These determinations were based on available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates and, therefore, these estimates may not necessarily be indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Refer to note 6 for a discussion of the fair value hierarchy with respect to investments-trading, other investments, at fair value and the derivatives held by the Company.

Cash and cash equivalents: Cash is carried at historical cost which is assumed to approximate fair value. The estimated fair value measurements of cash and cash equivalents and restricted cash are generally classified within level 1 of the valuation hierarchy.

Investments-trading: These amounts are carried at fair value. The fair value is based on either quoted market prices of an active exchange, independent broker market quotations, market price quotations from third party pricing services, or valuation models when quotations are not available. See note 6 for disclosures about the categorization of the fair value measurements of investments-trading within the three level fair value hierarchy.

Other investments, at fair value: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent broker market quotations, or valuation models when quotations are not available. In the case of investments in alternative investment funds, fair value is generally based on the reported net asset value of the underlying fund. See note 6 for disclosures concerning the categorization of the fair value measurements of other investments, at fair value within the three level fair value hierarchy.

Receivables under resale agreements: Receivables under resale agreements are carried at their contracted resale price, have short-term maturities, and are repriced frequently or bear market interest rates and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of receivables under resale agreements are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Trading securities sold, not yet purchased: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent market quotations, market price quotations from third party pricing services, or valuation models when quotations are not available. See note 6 for disclosures concerning the categorization of the fair value measurements of trading securities sold, not yet purchased within the three level fair value hierarchy.

Securities sold under agreement to repurchase: The liability for securities sold under agreement to repurchase are carried at their contracted repurchase price, have short-term maturities and are repriced frequently with amounts normally due in one month or less and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of securities sold under agreement to repurchase are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Debt: These amounts are carried at outstanding principal less unamortized discount. However, a substantial portion of the debt was assumed in the Merger and recorded at fair value as of that date. As of June 30, 2012 and December 31, 2011, the fair value of the Company’s debt was estimated to be $32.7 million and $43.5 million, respectively. The estimated fair value measurements of the debt are generally based on discounted cash flow models prepared by the Company’s management primarily using discount rates for similar instruments issued to companies with similar credit risks to the Company and are generally classified within level 3 of the fair value hierarchy.

Derivatives: These amounts are carried at fair value. Derivatives may be included as a component of investments-trading, trading securities sold, not yet purchased, and other investments, at fair value. See notes 6 and 7. The fair value is generally based on quoted market prices on an exchange that is deemed to be active for derivative instruments such as foreign currency forward contracts and EuroDollar futures. For derivative instruments, such as “to-be-announced” securities (“TBAs”), the fair value is generally based on market price quotations from third party pricing services. See note 6 for disclosures concerning the categorization of the fair value measurements within the three level fair value hierarchy.

Financial Instruments

Foreign Currency Forward Contracts

The Company invests in foreign currency denominated investments that expose it to fluctuations in foreign currency rates and, therefore, the Company may, from time to time, hedge such exposure by using foreign currency forward contracts. The Company carries the foreign currency forward contracts at fair value and includes them as a component of other investments, at fair value in the Company’s consolidated balance sheets. As of June 30, 2012, the Company had 80 outstanding foreign currency forward contracts with a notional amount of 12,500 Japanese Yen per contract. As of December 31, 2011, the Company had no outstanding foreign currency forward contracts.

Derivatives and Hedging

EuroDollar Futures

The Company invests in floating rate investments that expose it to fluctuations in interest and, therefore, the Company may, from time to time, hedge such exposure using EuroDollar futures. The Company carries the EuroDollar futures contracts at fair value and includes them as a component of investments-trading in the Company’s consolidated balance sheets. As of June 30, 2012 and December 31, 2011, the Company had no outstanding EuroDollar futures contracts.

Balance Sheet

The Company trades U.S. Government agency obligations. In connection with these activities, the Company may be required to maintain inventory in order to facilitate customer transactions. In order to mitigate exposure to market risk, the Company enters in to the purchase and sale of TBAs. The Company carries the TBAs at fair value and includes them as a component of investments–trading or trading securities sold, not yet purchased in the Company’s consolidated balance sheets. At June 30, 2012, the Company had open TBA sale agreements in the notional amount of $13,250, and open TBA purchase agreements in the notional amount of $9,245. At December 31, 2011, the Company had open TBA sale agreements in the notional amount of $4,325.

Variable Interest Entities

FASB ASC 810, Consolidation (“FASB ASC 810”) contains the guidance surrounding the definition of variable interest entities (“VIEs”), the definition of variable interests, and the consolidation rules surrounding VIEs. In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company has variable interests in VIEs through its management contracts and investments in various securitization entities including CLOs and CDOs.

Once it is determined that the Company holds a variable interest in a VIE, FASB ASC 810 requires that the Company perform a qualitative analysis to determine (i) which entity has the power to direct the matters that most significantly impact the VIEs financial performance and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The entity that has both of these characteristics is deemed to be the primary beneficiary and required to consolidate the VIE. This assessment must be done on an ongoing basis.

The Company classifies the VIEs it is involved with into two groups: (i) VIEs managed by the Company and (ii) VIEs managed by third parties. In the case of the VIEs that the Company has been involved with, the Company has generally concluded that the entity that manages the VIE has the power to direct the matters that most significantly impact the VIEs financial performance. This is not a blanket conclusion as it is possible for an entity other than the manager to have the power to direct such matters. However, for all the VIEs the Company is involved with as of June 30, 2012, the Company has drawn this conclusion.

In the case where the Company has an interest in a VIE managed by a third party, the Company has concluded that it is not the primary beneficiary because the Company does not have the power to direct its activities. In the case of an interest in a VIE managed by the Company, the Company will perform an additional qualitative analysis to determine if its interest (including any investment as well as any management fees that qualify as variable interests) could absorb losses or receive benefits that could potentially be significant to the VIE. This analysis considers the most optimistic and pessimistic scenarios of potential economic results that could reasonably be experienced by the VIE. Then, the Company compares the benefits it would receive (in the optimistic scenario) or the losses it would absorb (in the pessimistic scenario) as compared to all benefits and losses absorbed by the VIE in total. If the benefits or losses absorbed by the Company were significant as compared to total benefits and losses absorbed by all variable interest holders, then the Company would conclude it is the primary beneficiary.

As of June 30, 2012, the Company has variable interests in various securitizations but it has determined that it is not the primary beneficiary and, therefore, is not consolidating the securitization VIEs. The maximum potential financial statement loss the Company would incur if the securitization vehicles were to default on all of their obligations would be (i) the loss of value of the interests in securitizations that the Company holds in its inventory at the time and (ii) any management fee receivables in the case of managed VIEs. The Company has not provided financial support to these VIEs during the six and three months ended June 30, 2012 and 2011 and had no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at June 30, 2012 and December 31, 2011.

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Receivables from and Payables to Brokers, Dealers, and Clearing Agencies (Tables)

6 Months Ended

Jun. 30, 2012

Receivables from and Payables to Brokers, Dealers, and Clearing Agencies [Abstract]

Schedule of Receivables from/Payables to Brokers, Dealers, and Clearing Agencies

RECEIVABLES FROM BROKERS, DEALERS, AND CLEARING AGENCIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Receivable from clearing organizations	$	7,628	$	51,619
Unsettled regular way trades, net		—		17,232
Deposits with clearing organizations		1,647		2,112
Receivables from brokers, dealers, and clearing agencies	$	9,275	$	70,963

PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Unsettled regular way trades, net	$	830	$	—
Margin payable		35,027		24,633
Payables to brokers, dealers, and clearing agencies	$	35,857	$	24,633

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Organization and Nature of Operations

6 Months Ended

Jun. 30, 2012

Organization and Nature of Operations [Abstract]

ORGANIZATION AND NATURE OF OPERATIONS

1. ORGANIZATION AND NATURE OF OPERATIONS

The Formation Transaction

Cohen Brothers, LLC (“Cohen Brothers”) was formed on October 7, 2004 by Cohen Bros. Financial, LLC (“CBF”). Cohen Brothers was formed to acquire the net assets of CBF’s subsidiaries (the “Formation Transaction”): Cohen Bros. & Company, Inc.; Cohen Frères SAS; Dekania Investors, LLC; Emporia Capital Management, LLC; and the majority interest in Cohen Bros. & Tororian Investment Management, Inc. The Formation Transaction was accomplished through a series of transactions occurring between March 4, 2005 and May 31, 2005.

The Company

From its formation until December 16, 2009, Cohen Brothers operated as a privately owned limited liability company. On December 16, 2009, Cohen Brothers completed its merger (the “Merger”) with a subsidiary of Alesco Financial Inc. (“AFN”) a publicly traded real estate investment trust.

As a result of the Merger, AFN received 10,343,347 or 66.2% of the membership interests in Cohen Brothers. Of the 66.2% of Cohen Brothers received by AFN in connection with the Merger, 38.5% was received in the form of units issued directly by Cohen Brothers. The remaining 27.7% was acquired by AFN from Cohen Brothers members in exchange for the issuance of AFN common stock to those members. The remaining 5,283,556 membership interests or 33.8% of Cohen Brothers was held by Daniel Cohen (31.9% or 4,983,557 membership interests) and other members (1.9% or 299,999 membership interests). Each of Mr. Cohen’s membership units is redeemable at Mr. Cohen’s option, at any time on or after January 1, 2014, for (i) cash in amount equal to the average of the per share closing prices of the Company’s Common Stock for the ten consecutive trading days immediately preceding the date the Company receives Mr. Cohen’s redemption notice, or (ii) at the Company’s option, one share of the Company’s Common Stock, subject, in each case, to appropriate adjustment upon the occurrence of the issuance of additional shares of the Company’s Common Stock as a dividend or other distribution on the Company’s outstanding Common Stock, or a further subdivision or combination of the outstanding shares of the Company’s Common Stock. The membership units held by the other members have the same redemption rights as described for Mr. Cohen except that the members holding these units may elect to redeem their shares at any time.

Therefore, the members of Cohen Brothers at the time of the Merger received 61.5% of the total ownership interests in the combined entity (33.8% remained as members of Cohen Brothers and 27.7% exchanged their interest in Cohen Brothers for AFN stock). In accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the Merger was accounted for as a reverse acquisition, and Cohen Brothers was deemed to be the accounting acquirer primarily because the owners of Cohen Brothers at the time of the Merger received the majority interest in the merged entity as previously described. As a result, all of AFN’s assets and liabilities were required to be revalued at fair value as of the acquisition date. The financial statements presented herein include the operations of the merged entity.

Subsequent to the Merger, AFN was renamed Cohen & Company Inc. In January 2011, it was renamed again as Institutional Financial Markets, Inc. (“IFMI”). As used in these consolidated financial statements, the term “the Company” refers to the combined operations of the merged company and its consolidated subsidiaries subsequent to December 17, 2009. “AFN” refers to the historical operations of Alesco Financial Inc. through the December 16, 2009 Merger Date. When the term “IFMI” is used, it is referring to the parent company itself, Institutional Financial Markets, Inc. Subsequent to the Merger, Cohen Brothers changed its name to IFMI, LLC and functions as the main operating majority-owned subsidiary of the Company, and in these statements it is referred to as the “Operating LLC.”

Effective January 1, 2010, the Company ceased to qualify as a real estate investment trust, or a REIT. The Company trades on the NYSE Amex LLC under the ticker symbol “IFMI.” The Company is an investment firm specializing in credit related fixed income investments. As of June 30, 2012, the Company had $6.2 billion in assets under management (“AUM”) of which 97%, or $6.0 billion, was in collateralized debt obligations (“CDOs”).

The Company’s business is organized into the following three business segments:

Capital Markets: The Company’s Capital Markets segment consists of credit-related fixed income securities sales, trading, and financing, as well as new issue placements in corporate and securitized products and advisory services revenue. The Company’s fixed income sales and trading group provides trade execution to corporate and institutional investors and other broker-dealers. The Company specializes in the following products: corporate bonds and loans, asset backed securities (“ABS”), mortgage backed securities (“MBS”), collateralized loan obligations (“CLOs”), CDOs, collateralized bond obligations, collateralized mortgage obligations (“CMOs”), commercial mortgage backed securities (“CMBS”), residential mortgage backed securities (“RMBS”), Small Business Administration (“SBA”) loans, municipal bonds, U.S. government bonds, U.S. government agency securities, brokered deposits and CDs for small banks, hybrid capital of financial institutions including trust preferred securities (“TruPS”), whole loans, and other structured financial instruments. The Company also offers execution and brokerage services for cash equity and derivative products. The Company carries out its capital market activities primarily through its subsidiaries: JVB, PrinceRidge Holdings, and EDML.

Asset Management: Historically, the Company has served the needs of client investors by managing assets within investment funds, managed accounts, permanent capital vehicles, and CDOs (collectively referred to as “Investment Vehicles”). A CDO is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization which means that the lenders are actually investing in notes backed by the assets. The lender will have recourse only to the assets securing the loan. The Company’s Asset Management segment includes its fee based asset management operations which include ongoing base and incentive management fees.

Principal Investing: The Company’s Principal Investing segment is comprised primarily of its investments in certain Investment Vehicles it manages.

The Company generates its revenue by segment primarily through the following activities:

Capital Markets:

• trading activities of the Company which include execution and brokerage services, securities lending activities, riskless trading activities as well as gains and losses (unrealized and realized) and income and expense earned on securities classified as trading;

• new issue and advisory revenue comprised primarily of (i) origination fees for corporate debt issues originated by the Company; (ii) revenue from advisory services; and (iii) new issue revenue associated with arranging the issuance of newly created debt, equity, and hybrid financial instruments;

Asset Management:

• asset management fees for the Company’s on-going services as asset manager charged and earned by managing Investment Vehicles, which may include fees both senior and subordinated to the securities in the Investment Vehicle;

• incentive management fees earned based on the performance of the various Investment Vehicles;

Principal Investing:

• gains and losses (unrealized and realized) and income and expense earned on securities (primarily seed capital investments in certain Investment Vehicles which the Company manages) classified as other investments, at fair value; and

• income or loss from equity method affiliates.

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Financial Instruments [Abstract]

Schedule of investments classified as investments-trading

INVESTMENTS - TRADING

(Dollars in Thousands)

Security Type	June 30, 2012		December 31, 2011
U.S. government agency MBS and CMOs (1)	$	30,685	$	7,563
U.S. government agency debt securities		34,452		14,600
RMBS		1,178		7,108
CMBS		—		1,587
U.S. Treasury securities		7,473		8,524
Interests in securitizations (2)		259		608
SBA loans		4,382		9,049
Corporate bonds and redeemable preferred stock		55,226		65,445
Foreign government bonds		99		67
Municipal bonds		18,895		9,225
Exchange traded funds		9,377		—
Certificates of deposit		4,079		710
Equity securities		87		60
Investments-trading	$	166,192	$	124,546

(1) Includes TBAs. See note 7.

(2) Primarily comprised of CDOs, CLOs, and ABS.

Schedule of trading securities sold, not yet purchased

TRADING SECURITIES SOLD, NOT YET PURCHASED

(Dollars in Thousands)

Security Type	June 30, 2012		December 31, 2011
U.S. government agency MBS (1)	$	47	$	16
U.S. Treasury securities		10,811		11,755
Corporate bonds and redeemable preferred stock		64,651		87,537
Foreign government bonds		23		158
Municipal bonds		122		143
Exchange traded funds		1,636		—
Certificates of deposit		6,829		4
Total	$	84,119	$	99,613

(1) Represents TBAs. See note 7.

Schedule of other investments, at fair value

OTHER INVESTMENTS, AT FAIR VALUE

(Dollars in Thousands)

	June 30, 2012
Security Type	Cost		Carrying Value		Unrealized Gain /  (Loss)
Interests in securitizations (1)	$	217	$	97	$	(120	)
Equity Securities:
EuroDekania		7,792		2,103		(5,689	)
Star Asia		23,219		32,299		9,080
Tiptree Financial Partners, L.P.		5,561		2,703		(2,858	)
Other securities		232		112		(120	)
Total equity securities		36,804		37,217		413
Residential loans		240		229		(11	)
Foreign currency forward contracts		—		66		66
Other investments, at fair value	$	37,261	$	37,609	$	348

	December 31, 2011
Security Type	Cost		Carrying Value		Unrealized Gain /  (Loss)
Interests in securitizations (1)	$	217	$	88	$	(129	)
Equity Securities:
EuroDekania		7,792		2,370		(5,422	)
Star Asia		23,219		37,358		14,139
Tiptree Financial Partners, L.P.		5,561		2,533		(3,028	)
Other securities		232		156		(76	)
Total equity securities		36,804		42,417		5,613
Residential loans		278		267		(11	)
Other investments, at fair value	$	37,299	$	42,772	$	5,473

(1) Represents an interest in a CDO.

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Due from / Due to Related Parties (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of Due From / Due To Related Parties
Total Due from Related Parties	$ 669	$ 679
Deep Value GP [Member]
Schedule of Due From / Due To Related Parties
Total Due from Related Parties	75	29
Deep Value GP II [Member]
Schedule of Due From / Due To Related Parties
Total Due from Related Parties	64	61
Star Asia Manager [Member]
Schedule of Due From / Due To Related Parties
Total Due from Related Parties	28	50
Cohen Brothers Financial, LLC [Member]
Schedule of Due From / Due To Related Parties
Total Due from Related Parties	86	306
Employees and other [Member]
Schedule of Due From / Due To Related Parties
Total Due from Related Parties	$ 416	$ 233

XML

Earnings / (Loss) Per Common Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings / (Loss) Per Common Share [Abstract]

Schedule of Earnings / (Loss) Per Common Share

EARNINGS / (LOSS) PER COMMON SHARE

(Dollars in Thousands, except share or per share information)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net income / (loss) attributable to IFMI	$	(2,078	)	$	(3,371	)	$	(5,937	)	$	(2,996	)
Add / (deduct): Income / (loss) attributable to the non-controlling interest attributable to Operating LLC membership units exchangeable into IFMI shares (1)		(981	)		(1,633	)		(2,883	)		(1,595	)
Add /(deduct): Adjustment for income tax benefit / (expense) (2)		(23	)		6			(39	)		150
Net income / (loss) on a fully converted basis	$	(3,082	)	$	(4,998	)	$	(8,859	)	$	(4,441	)
Weighted average common shares outstanding—Basic		10,756,257			10,901,448			10,600,004			10,860,702
Unrestricted Operating LLC membership units exchangeable into IFMI shares (1)		5,252,002			5,283,556			5,252,002			5,283,556
Weighted average common shares outstanding—Diluted (3)		16,008,259			16,185,004			15,852,006			16,144,258
Net income / (loss) per common share—Basic	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)
Net income / (loss) per common share—Diluted	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)

(1) The Operating LLC membership units not held by IFMI (that is, those held by the non-controlling interest for the three and six months ended June 30, 2012 and 2011) may be redeemed and exchanged into shares of the Company on a one-to-one basis. These units are not included in the computation of basic earnings per share. These units enter into the computation of diluted net income / (loss) per common share when the effect is dilutive using the if-converted method.

(2) If the Operating LLC membership units had been converted at the beginning of the period, the Company would have incurred a higher income tax expense or realized a higher income tax benefit, as applicable.

(3) Due to the net loss for the three and six months ended June 30, 2012, the weighted average shares calculation excluded (i) restricted Operating LLC membership units of 0 and 11,628 for the three and six months ended June 30, 2012, respectively; (ii) restricted shares of IFMI Common Stock of 21,879 and 17,412 for the three and six months ended June 30, 2012, respectively; and (iii) restricted units of IFMI’s Common Stock of 0 and 2,554 for the three and six months ended June 30, 2012 , respectively.

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Fair Value Disclosures (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	$ 166,192	$ 124,546
Other investments, Carrying Value	37,609	42,772
Trading securities sold, not yet purchased	84,119	99,613
Investments-trading [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	166,192	124,546
Investments-trading [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	20,790	9,472
Investments-trading [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	145,154	109,886
Investments-trading [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	248	5,188
Investments-trading [Member] | U.S. government agency MBS and CMOs [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	30,685	7,563
Investments-trading [Member] | U.S. government agency MBS and CMOs [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	30,685	7,563
Investments-trading [Member] | U.S. government agency debt securities [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	34,452	14,600
Investments-trading [Member] | U.S. government agency debt securities [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	66	144
Investments-trading [Member] | U.S. government agency debt securities [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	34,386	14,456
Investments-trading [Member] | RMBS [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	1,178	7,108
Investments-trading [Member] | RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	1,178	2,176
Investments-trading [Member] | RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading		4,932
Investments-trading [Member] | CMBS [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading		1,587
Investments-trading [Member] | CMBS [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading		1,587
Investments-trading [Member] | U.S. Treasury securities [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	7,473	8,524
Investments-trading [Member] | U.S. Treasury securities [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	7,473	8,524
Investments-trading [Member] | Interests in securitizations [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	259	608
Investments-trading [Member] | Interests in securitizations [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	74	387
Investments-trading [Member] | Interests in securitizations [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	185	221
Investments-trading [Member] | SBA loans [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	4,382	9,049
Investments-trading [Member] | SBA loans [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	4,382	9,049
Investments-trading [Member] | Corporate bonds and redeemable preferred stock [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	55,226	65,445
Investments-trading [Member] | Corporate bonds and redeemable preferred stock [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	3,850	779
Investments-trading [Member] | Corporate bonds and redeemable preferred stock [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	51,376	64,666
Investments-trading [Member] | Foreign government bonds [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	99	67
Investments-trading [Member] | Foreign government bonds [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	99	67
Investments-trading [Member] | Municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	18,895	9,225
Investments-trading [Member] | Municipal bonds [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	18,895	9,225
Investments-trading [Member] | Exchange traded funds [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	9,377
Investments-trading [Member] | Exchange traded funds [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	9,377
Investments-trading [Member] | Certificates of deposit [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	4,079	710
Investments-trading [Member] | Certificates of deposit [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	4,079	710
Investments-trading [Member] | Equity securities [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	87	60
Investments-trading [Member] | Equity securities [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	24	25
Investments-trading [Member] | Equity securities [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Total investments-trading	63	35
Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	37,609	42,772
Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	90	24
Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	229
Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	37,290	42,748
Other investments, at fair value [Member] | Interests in securitizations [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	97	88
Other investments, at fair value [Member] | Interests in securitizations [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	97	88
Other investments, at fair value [Member] | Equity securities [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	37,217	42,417
Other investments, at fair value [Member] | Equity securities [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	24	24
Other investments, at fair value [Member] | Equity securities [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	37,193	42,393
Other investments, at fair value [Member] | Residential loans [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	229	267
Other investments, at fair value [Member] | Residential loans [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	229
Other investments, at fair value [Member] | Residential loans [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value		267
Other investments, at fair value [Member] | Foreign currency forward contracts [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	66
Other investments, at fair value [Member] | Foreign currency forward contracts [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	66
Trading securities sold, not yet purchased [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	84,119	99,613
Trading securities sold, not yet purchased [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	12,760	12,839
Trading securities sold, not yet purchased [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	71,359	86,774
Trading securities sold, not yet purchased [Member] | U.S. government agency MBS [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	47	16
Trading securities sold, not yet purchased [Member] | U.S. government agency MBS [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	47	16
Trading securities sold, not yet purchased [Member] | U.S. Treasury securities [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	10,811	11,755
Trading securities sold, not yet purchased [Member] | U.S. Treasury securities [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	10,811	11,755
Trading securities sold, not yet purchased [Member] | Corporate bonds and redeemable preferred stock [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	64,651	87,537
Trading securities sold, not yet purchased [Member] | Corporate bonds and redeemable preferred stock [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	313	1,084
Trading securities sold, not yet purchased [Member] | Corporate bonds and redeemable preferred stock [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	64,338	86,453
Trading securities sold, not yet purchased [Member] | Foreign government bonds [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	23	158
Trading securities sold, not yet purchased [Member] | Foreign government bonds [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	23	158
Trading securities sold, not yet purchased [Member] | Municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	122	143
Trading securities sold, not yet purchased [Member] | Municipal bonds [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	122	143
Trading securities sold, not yet purchased [Member] | Exchange traded funds [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	1,636
Trading securities sold, not yet purchased [Member] | Exchange traded funds [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	1,636
Trading securities sold, not yet purchased [Member] | Certificates of deposit [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	6,829	4
Trading securities sold, not yet purchased [Member] | Certificates of deposit [Member] | Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Trading securities sold, not yet purchased	6,829	4
Other securities [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	112	156
Other securities [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	24	24
Other securities [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	88	132
Other Investment Vehicles [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	37,105	42,261
Other Investment Vehicles [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	37,105	42,261
Other Investment Vehicles [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	37,105	42,261
Other Investment Vehicles [Member] | EuroDekania [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	2,103	2,370
Other Investment Vehicles [Member] | EuroDekania [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	2,103	2,370
Other Investment Vehicles [Member] | EuroDekania [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	2,103	2,370
Other Investment Vehicles [Member] | Star Asia [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	32,299	37,358
Other Investment Vehicles [Member] | Star Asia [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	32,299	37,358
Other Investment Vehicles [Member] | Star Asia [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	32,299	37,358
Other Investment Vehicles [Member] | Tiptree Financial Partners L.P. [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	2,703	2,533
Other Investment Vehicles [Member] | Tiptree Financial Partners L.P. [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	2,703	2,533
Other Investment Vehicles [Member] | Tiptree Financial Partners L.P. [Member] | Other investments, at fair value [Member] | Fair Value, Measurements, Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Schedule of fair value, assets and liabilities measured on recurring basis
Other investments, Carrying Value	$ 2,703	$ 2,533

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Permanent Equity (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Schedule of effects of changes in ownership interest in the Operating LLC on equity
Net income / (loss) attributable to IFMI	$ (2,078)	$ (3,371)	$ (5,937)	$ (2,996)
Transfers (to) from the non-controlling interest:
Increase in IFMI's paid in capital for the acquisition / (surrender) of additional units of consolidated subsidiary, net			828	972
Changes from net income / (loss) attributable to IFMI and transfers (to) from non-controlling interest			$ (5,109)	$ (2,024)

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 12,944	$ 18,221
Receivables from brokers, dealers, and clearing agencies	9,275	70,963
Due from related parties	669	679
Other receivables	5,971	5,531
Investments-trading	166,192	124,546
Other investments, at fair value	37,609	42,772
Receivables under resale agreements	247,289	129,978
Goodwill	11,113	11,206
Other assets	11,973	16,694
Total assets	503,035	420,590
Liabilities
Payables to brokers, dealers, and clearing agencies	35,857	24,633
Accounts payable and other liabilities	12,250	13,567
Accrued compensation	6,280	8,657
Trading securities sold, not yet purchased	84,119	99,613
Securities sold under agreements to repurchase	244,061	134,870
Deferred income taxes	7,964	7,500
Debt	26,731	37,167
Mandatorily redeemable equity interests	8,299	3,149
Total liabilities	425,561	329,156
Commitments and contingencies
Temporary Equity:
Redeemable non-controlling interest	7,985	14,026
Stockholders' Equity:
Common Stock, $0.001 par value per share, 100,000,000 shares authorized, 12,763,660 and 12,730,117 shares issued, respectively; 12,713,260 and 12,679,717 shares outstanding, respectively, including 2,207,345 and 2,597,620 unvested restricted share awards, respectively	11	10
Additional paid-in capital	64,921	63,032
Accumulated deficit	(11,487)	(5,121)
Accumulated other comprehensive loss	(664)	(626)
Treasury stock at cost (50,400 shares of Common Stock)	(328)	(328)
Total stockholders' equity	52,458	56,972
Non-controlling interest	17,031	20,436
Total permanent equity	69,489	77,408
Total liabilities and equity	503,035	420,590
Series A Voting Convertible Preferred Stock
Stockholders' Equity:
Preferred Stock, Value, Issued
Series B Voting Non-Convertible Preferred Stock
Stockholders' Equity:
Preferred Stock, Value, Issued	5	5
Series C Junior Participating Preferred Stock
Stockholders' Equity:
Preferred Stock, Value, Issued

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Basis of Presentation (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Basis of Presentation (Textual) [Abstract]
Reduction in goodwill and redeemable non-controlling interest	$ 93

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Consolidated Statement of Changes in Equity (Unaudited) (USD $) In Thousands		Total	Common Stock	Additional Paid-In Capital	Retained Earnings/ (Accumulated Deficit)	Accumulated Other Comprehensive Income (Loss)		Treasury Stock	Total Stockholders' Equity		Non-controlling Interest [Member]		Total Permanent Equity		Redeemable Non-Controlling Interest (Temporary Equity)	Preferred Stock Class A Amount Preferred Stock	Preferred Stock Class B Amount Preferred Stock
Balance at Dec. 31, 2011		$ 77,408	$ 10	$ 63,032	$ (5,121)	$ (626)		$ (328)	$ 56,972		$ 20,436		$ 77,408		$ 14,026		$ 5
Measurement period adjustment [1]	[1]														(93)
Net loss		(9,058)			(5,937)				(5,937)		(2,883)		(8,820)		(238)
Other comprehensive income / (loss) [2]		(40)				(10)	[2]		(10)	[2]	(30)	[2]	(40)	[2]
Acquisition / (surrender) of additional units of consolidated subsidiary, net		828		828		(28)			800		(800)
Equity-based compensation and vesting of shares			1	1,063					1,064		519		1,583		385
Shares withheld for employee taxes				(2)					(2)		(1)		(3)
Redemption of non-controlling interest, net															(6,095)
Dividends/Distributions					(429)				(429)		(210)		(639)
Balance at Jun. 30, 2012		$ 69,489	$ 11	$ 64,921	$ (11,487)	$ (664)		$ (328)	$ 52,458		$ 17,031		$ 69,489		$ 7,985		$ 5

[1] See note 2.

[2] Represents foreign currency translation adjustment.

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Derivative Financial Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Not Designated as Hedging Instruments [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION
Derivative financial instruments, net gain (loss) recognized	$ 121	$ (9,099)	$ 219	$ (8,191)
Revenues - principal transactions and other income [Member] | Foreign currency forward contracts [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION
Derivative financial instruments, net gain (loss) recognized	(35)
Revenues - principal transactions and other income [Member] | Not Designated as Hedging Instruments [Member] | Foreign currency forward contracts [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION
Derivative financial instruments, net gain (loss) recognized		(922)	(35)	(219)
Revenues - net trading [Member] | Not Designated as Hedging Instruments [Member] | EuroDollar futures contracts [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION
Derivative financial instruments, net gain (loss) recognized		(64)	0	(2)
Revenues - net trading [Member] | Not Designated as Hedging Instruments [Member] | TBAs [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION
Derivative financial instruments, net gain (loss) recognized	$ 154	$ (8,113)	$ 254	$ (7,970)

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Investments in Equity Method Affiliates (Tables)

6 Months Ended

Jun. 30, 2012

Investments in Equity Method Affiliates [Abstract]

Schedule of Investment in Equity Method Affiliates

	Investment in																			Total
	Star Asia Manager			Deep Value GP			Deep Value GP II		Star Asia SPV			Star  Asia Opportunity			Star Asia Capital Management			Duart Capital and Other
Balance at January 1, 2012	$	1,046		$	21		$	33	$	466		$	4,460		$	50		$	—	$	6,076
Investments / advances		—			—			—		—			—			6			—		6
Distributions/repayments		(1,050	)		—			—		(526	)		(3,908	)		(250	)		—		(5,734	)
Earnings / (loss) realized		580			(14	)		3		724			619			130			—		2,042
Balance at June 30, 2012	$	576		$	7		$	36	$	664		$	1,171		$	(64	)	$	—	$	2,390

Schedule of Summary Data of Equity Method Investees

	June 30, 2012		December 31, 2011
Total Assets	$	257,864	$	257,735
Liabilities	$	95,063	$	68,530
Equity attributable to the investees		162,044		188,170
Non-controlling interest		757		1,035
Liabilities & Equity	$	257,864	$	257,735

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012			2011
Net income / (loss)	$	5,767	$	17,783	$	(10,119	)	$	1,952
Net income / (loss) attributable to the investees	$	5,730	$	18,207	$	(9,841	)	$	2,666

See note 20 for information regarding transactions with the Company’s equity method investees.

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Other Assets and Accounts Payable and Other Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of other assets
Prepaid expenses	$ 3,052	$ 3,819
Security deposits	2,506	2,541
Miscellaneous other assets	555	97
Cost method investment	250	250
Furniture, equipment and leasehold improvements, net	2,682	3,373
Intangible assets	538	538
Equity method affiliates	2,390	6,076
Other assets	$ 11,973	$ 16,694

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Net Capital Requirements

6 Months Ended

Jun. 30, 2012

Net Capital Requirements [Abstract]

NET CAPITAL REQUIREMENTS

15. NET CAPITAL REQUIREMENTS

The U.S. broker-dealer subsidiaries of the Company are subject to the net capital provision of Rule 15c3-1 under the Exchange Act, which requires the maintenance of minimum net capital, as defined therein. As of June 30, 2012, the Company had the following three U.S. broker-dealers: Cohen & Company Securities, LLC (“CCS”), JVB, and the PrinceRidge Group LLC (“TPRG”). In February 2012, PrinceRidge merged its broker-dealer subsidiary, Cohen & Company Capital Markets, LLC (“CCCM”) into TPRG.

As of June 30, 2012, CCS’ adjusted net capital was $3,463 which exceeded the minimum requirement by $3,363. As of June 30, 2012, JVB’s adjusted net capital was $9,803, which exceeded the minimum requirements by $9,681. As of June 30, 2012, TPRG had net capital of $17,107, which exceeded the minimum requirements by $16,857.

EDML, a subsidiary of the Company regulated by the Financial Services Authority in the United Kingdom, is subject to the net liquid capital provision of the Financial Services and Markets Act 2000, GENPRU 2.140R to 2.1.57R, relating to financial prudence with regards to the European Investment Services Directive and the European Capital Adequacy Directive, which requires the maintenance of minimum liquid capital, as defined therein. As of June 30, 2012, the total minimum required net liquid capital was $1,708, and net liquid capital in EuroDekania Management Limited was $5,475 which exceeded the minimum requirements by $3,767 and was in compliance with the net liquid capital provisions.

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Other Assets and Accounts Payable and Other Liabilities (Tables)

6 Months Ended

Jun. 30, 2012

Other Assets and Accounts Payable and Other Liabilities [Abstract]

Schedule of other assets

	June 30, 2012		December 31, 2011
Prepaid expenses	$	3,052	$	3,819
Security deposits		2,506		2,541
Miscellaneous other assets		555		97
Cost method investment		250		250
Furniture, equipment and leasehold improvements, net		2,682		3,373
Intangible assets		538		538
Equity method affiliates		2,390		6,076
Other assets	$	11,973	$	16,694

Schedule of accounts payable and other liabilities

	June 30, 2012		December 31, 2011
Accounts payable	$	1,104	$	1,181
Rent payable		1,116		1,289
Accrued interest payable		553		662
Income and payroll taxes payable		1,334		1,947
Guarantee liability		1,084		1,084
Contingent settlement payable		4,357		—
Deferred income		964		1,761
Other general accrued expenses		1,738		5,643
Accounts payable and other liabilities	$	12,250	$	13,567

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

17 . COMMITMENTS AND CONTINGENCIES

Legal and Regulatory Proceedings

One of the Company’s U.S. broker-dealer subsidiaries, CCS, is a party to litigation commenced on January 12, 2009 in the United States District Court for the Northern District of Illinois (the “Illinois Court”) under the caption Frederick J. Grede, not individually, but as Liquidation Trustee and Representative of the Estate of Sentinel Management Group, Inc. v. Delores E. Rodriguez, Barry C. Mohr, Jr., Jacques de Saint Phalle, Keefe, Bruyette & Woods, Inc., and Cohen & Company Securities, LLC. The plaintiff in this case is the Liquidation Trustee (the “Liquidation Trustee”) for the Estate of Sentinel Management Group, Inc. (“Sentinel”), which filed a bankruptcy petition in August 2007. The Liquidation Trustee alleges that CCS sold Sentinel securities, mainly CDOs that the Liquidation Trustee contends were unsuitable for Sentinel and that CCS violated Section 10(b) of the Exchange Act and Rule 10b-5. The Liquidation Trustee also seeks relief under the Illinois Blue Sky Law, the Illinois Consumer Fraud Act, the United States Bankruptcy Code, and under common law theories of negligence and unjust enrichment. The relief sought by the Liquidation Trustee under these various legal theories includes damages, rescission, disgorgement, and recovery of allegedly voidable transactions under the Bankruptcy Code, as well as costs and attorneys’ fees. By order dated July 8, 2009, the Illinois Court dismissed the Liquidation Trustee’s Illinois Consumer Fraud Act claim. Discovery is ongoing with respect to the remaining claims.

CCS is also party to litigation commenced on May 21, 2009 in the Illinois Court under the caption Frederick J. Grede, not individually, but as Liquidation Trustee of the Sentinel Liquidation Trust, Assignee of certain claims v. Keefe, Bruyette & Woods, Inc., Cohen & Company Securities, LLC., Delores E. Rodriguez, Barry C. Mohr, Jr., and Jacques de Saint Phalle. The plaintiff in this case is the Liquidation Trustee of the Sentinel Liquidation Trust, which emerged from the bankruptcy of Sentinel, filed in August 2007. The Liquidation Trustee, purportedly as the assignee of claims of Sentinel’s customers, alleges that, by recommending that Sentinel purchase securities, mainly CDOs, that the trustee deems to have been unsuitable for Sentinel’s customer accounts, CCS aided and abetted breaches of fiduciary duties purportedly owed by Sentinel and its head trader to Sentinel’s customers, in violation of Illinois common law. The complaint also alleges claims under common law theories of negligence and unjust enrichment. The relief sought by the Liquidation Trustee under these various legal theories includes damages, disgorgement, costs, and attorneys’ fees. CCS filed a motion to dismiss the Liquidation Trustee’s complaint on July 21, 2009; that motion was dismissed “as moot” on March 29, 2011.

During the second quarter of 2012, CCS and the Liquidation Trustee reached an agreement in principle to settle both of the above actions. That agreement calls for CCS to make an initial payment of $3,000 and an additional payment of $2,250 in the future. As of the date of this report, this agreement is not final, is subject to the execution of final documentation and is subject to the Illinois Court’s approval of an order barring contribution claims against CCS. As a result of this agreement in principle, the Company accrued a contingent liability of $4,357 representing the initial payment of $3,000, the discounted present value of the future payment of $1,978, partially offset by additional estimated insurance proceeds receivable of $621. This expense was included in the statement of operations for the three and six months ended June 30, 2012 as a component of non-operating income / (expense). The discount of $272 will be amortized as a component of interest expense over the period spanning the signing through the final payment date.

The Company has been named in litigation commenced in the United States District Court for the Southern District of New York on June 29, 2012, under the caption U.S. Bank National Association v. Institutional Financial Markets, Inc. The plaintiff, U.S. Bank, alleges breach of contract respecting certain fees allegedly owing to U.S. Bank, as Trustee, in connection with the issuance of trust preferred securities, seeking damages and a declaration that the Company must make certain future fee payments. The time for the Company to respond to the Complaint has not yet arrived and no discovery or other proceedings have yet taken place. The Company intends to defend the action vigorously.

In addition to the matters set forth above, the Company is a party to various routine legal proceedings and regulatory inquiries arising out of the ordinary course of the Company’s business. Management believes that the results of these routine legal proceedings and regulatory matters will not have a material adverse effect on the Company’s financial condition, or on the Company’s operations and cash flows. However, the Company cannot estimate the legal fees and expenses to be incurred in connection with these routine matters and, therefore, is unable to determine whether these future legal fees and expenses will have a material impact on the Company’s operations and cash flows. It is the Company’s policy to expense legal and other fees as incurred.

Alesco XIV Guarantee

AFN invested in a CDO (Alesco XIV) in which Assured Guaranty (“Assured”) was providing credit support to the senior interests in securitizations. Alesco XIV made a loan (the “Guaranteed Loan”) to a particular borrower and AFN entered into an arrangement with Assured whereby AFN agreed to make payments to Assured upon the occurrence of both (i) a loss on the Guaranteed Loan; and (ii) a loss suffered by Assured on its overall credit support arrangement to Alesco XIV security holders. This arrangement is accounted for as a guarantee by the Company. At the Merger Date, the Company recorded a liability of $1,084 related to this arrangement which is included in accounts payable and other liabilities in the Company’s consolidated balance sheet. This amount does not represent the expected loss; rather it represents the Company’s estimate of the fair value of its guarantee (i.e. the amount it would have to pay a third party to assume this obligation). This arrangement is being accounted for as a guarantee. The value will be adjusted under certain limited circumstances such as: (i) when the guarantee is extinguished or (ii) if payment of amounts under the guarantee become probable and estimable. The maximum potential loss to the Company on this arrangement is $8,750. Under certain circumstances, Assured can require the Company to post liquid collateral.

Contribution to Alesco Preferred Funding X Legal Settlement

Alesco Preferred Funding X, Ltd. (“Alesco X”) is a CDO that was managed by Cohen & Company Financial Management, LLC (“CCFM”). Alesco X owned $4,000 of Trust Preferred Securities issued by Leawood Bancshares Statutory Trust I (the “Leawood TruPS”). Leawood Bancshares, Inc. (“Leawood”), and Alesco X entered into a letter agreement dated March 1, 2010 (the “Leawood/Alesco Agreement”) regarding the sale back to Leawood of the Leawood TruPS in exchange for $1,000 upon the occurrence of certain conditions related to the sale of Leawood to CrossFirst Holdings, LLC (“CrossFirst”). The proposed transaction contemplated by the Leawood/Alesco Agreement never closed as a result of the objections of investors in Alesco X, but the ultimate transaction between Leawood and CrossFirst did close.

On or about July 23, 2010, Leawood and CrossFirst Holdings, LLC filed a lawsuit against Alesco X in the United States District Court for the Southern District of New York, Civil Action No. 10-CV-5637 (JSR) alleging that there was a breach of the Leawood/Alesco Agreement. CCFM was not named in the lawsuit. ATP Management LLC, as purchaser of the management rights of Alesco X from CCFM, took over the defense of the action. In late October 2011, the Court issued a summary judgment decision against Alesco X and in favor of Leawood and CrossFirst. On or about December 6, 2011, the United States District Court for the Southern District of New York issued a judgment in favor of Leawood and against Alesco in the amount of $1,618 and in favor of CrossFirst and against Alesco X in the amount of $1,840. In exchange for a full release from Leawood, CrossFirst and Alesco X, the Company agreed to contribute $2,250 to Alesco X’s settlement of the judgment. This amount was included as a component of professional services and other operating expense in the consolidated statement of operations in the fourth quarter of 2011. The Company made the payment of $2,250 in April 2012.

Accumulated Dividends and Dividend Equivalents on Restricted Stock and Restricted Units

From time to time, the Company has granted restricted stock and restricted units which are entitled to receive dividends or dividend equivalents as and when such dividends or dividend equivalents are declared and paid by the Company; provided, however, that the cash dividends or dividend equivalents on such restricted stock or restricted units are held by the Company until the period of forfeiture lapses and forfeited if the underlying restricted shares or restricted units are forfeited. The Company’s potential liability, assuming the restricted stock or restricted units were to vest as of June 30, 2012, is approximately $306.

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Debt (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Debt outstanding
Debt	$ 26,731	$ 37,167
7.625% contingent convertible senior notes (the "Old Notes") [Member]
Debt outstanding
Current Outstanding Par	100
Debt	100	10,303
Interest Rate Terms	7.63%
Weighted Average Interest Rate	7.63%
Weighted Average Contractual Maturity	July 2012
10.50% contingent convertible senior notes (the "New Notes") [Member]
Debt outstanding
Current Outstanding Par	8,121
Debt	8,049	8,030
Interest Rate Terms	10.50%
Weighted Average Interest Rate	10.50%
Weighted Average Contractual Maturity	May 2014
Contingent convertible senior notes [Member]
Debt outstanding
Current Outstanding Par	8,221
Debt	8,149	18,333
Junior subordinated debt [Member]
Debt outstanding
Current Outstanding Par	48,125
Debt	17,068	17,343
Interest Rate Terms	7.47%
Weighted Average Interest Rate	7.47%
Weighted Average Contractual Maturity	August 2036
Subordinated notes payable [Member]
Debt outstanding
Current Outstanding Par	1,514
Debt	$ 1,514	$ 1,491
Interest Rate Terms	12.00%
Weighted Average Interest Rate	12.00%
Weighted Average Contractual Maturity	June 2013

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities
Net income / (loss)	$ (9,058)	$ (4,644)
Adjustments to reconcile net income / (loss) to net cash provided by (used in) operating activities:
Gain on repurchase of debt	(3)
Equity-based compensation	1,968	4,206
Realized loss / (gain) on other investments, at fair value	101	1,480
Change in unrealized (gain) / loss on other investments, at fair value	5,107	(358)
Depreciation and amortization	734	973
(Income) / loss from equity method affiliates	(2,042)	(4,530)
Change in operating assets and liabilities, net:
(Increase) decrease in other receivables	(206)	699
(Increase) decrease in investments-trading	(41,646)	96,577
(Increase) decrease in other assets	343	3,488
(Increase) decrease in receivables under resale agreement	(117,311)	589
Change in receivables from / payables to related parties, net	(1)	565
Increase (decrease) in accrued compensation	(2,379)	(6,243)
Increase (decrease) in accounts payable and other liabilities	(1,474)	(2,693)
Increase (decrease) in trading securities sold, not yet purchased	(15,494)	(8,631)
Change in receivables from / payables to brokers, dealers, and clearing agencies, net	72,917	(16,098)
Increase (decrease) in securities sold under agreement to repurchase	109,191	(49,438)
Increase (decrease) in deferred income taxes	464	(226)
Change in mandatorily redeemable equity interests	(132)
Net cash provided by (used in) operating activities	1,079	15,716
Investing activities
Cash paid for acquisition of JVB Financial Holdings, L.L.C., net of cash acquired		(14,956)
Cash acquired from acquisition of PrinceRidge Partners, LLC and PrinceRidge Holdings, LP		2,149
Purchase of investments-other investments, at fair value	(101)	(1,708)
Sales and return of principal of other investments, at fair value	38	3,965
Investment in equity method affiliates	(6)	(432)
Return from equity method affiliates	5,513	5,820
Purchase of furniture, equipment, and leasehold improvements	(42)	(302)
Net cash provided by (used in) investing activities	5,402	(5,464)
Financing activities
Repayment and repurchase of debt	(10,257)	(2,620)
Cash used to net share settle equity awards	(3)	(49)
Redemption of redeemable non-controlling interest, net	(24)
Distributions to mandatorily redeemable equity interests	(789)
Distributions to non-controlling interest	(210)	(528)
Dividends	(429)	(1,090)
Net cash used in financing activities	(11,712)	(4,287)
Effect of exchange rate on cash	(46)	249
Net increase (decrease) in cash and cash equivalents	(5,277)	6,214
Cash and cash equivalents, beginning of period	18,221	43,946
Cash and cash equivalents, end of period	$ 12,944	$ 50,160

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Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	50,000,000	50,000,000
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	100,000,000	100,000,000
Common Stock, shares issued	12,763,660	12,730,117
Common Stock, shares outstanding	12,713,260	12,679,717
Common Stock, unvested restricted share awards	2,207,345	2,597,620
Treasury Stock, shares	50,400	50,400
Series A Voting Convertible Preferred Stock
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	1	1
Preferred Stock, shares issued	0	0
Preferred Stock, shares outstanding	0	0
Series B Voting Non-Convertible Preferred Stock
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	4,983,557	4,983,557
Preferred Stock, shares issued	4,983,557	4,983,557
Preferred Stock, shares outstanding	4,983,557	4,983,557
Series C Junior Participating Preferred Stock
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	10,000	10,000
Preferred Stock, shares issued	0	0
Preferred Stock, shares outstanding	0	0

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Other Assets and Accounts Payable and Other Liabilities

6 Months Ended

Jun. 30, 2012

Other Assets and Accounts Payable and Other Liabilities [Abstract]

OTHER ASSETS AND ACCOUNTS PAYABLE AND OTHER LIABILITIES

10. OTHER ASSETS AND ACCOUNTS PAYABLE AND OTHER LIABILITIES

Other assets include prepaid expenses; security deposits; miscellaneous other assets; cost method investments; furniture, equipment and leasehold improvements, net; intangible assets; and investments in private partnerships and limited liability companies that are valued using the equity method of accounting.

Other assets at June 30, 2012 and December 31, 2011 included:

	June 30, 2012		December 31, 2011
Prepaid expenses	$	3,052	$	3,819
Security deposits		2,506		2,541
Miscellaneous other assets		555		97
Cost method investment		250		250
Furniture, equipment and leasehold improvements, net		2,682		3,373
Intangible assets		538		538
Equity method affiliates		2,390		6,076
Other assets	$	11,973	$	16,694

Accounts payable and other liabilities include accounts payable, rent payable, payroll tax liabilities, accrued interest payable, accrued income taxes, guarantee liabilities related to Alesco XIV (see note 17), contingent settlement payable (see note 17), deferred income, and other general accrued expenses.

Accounts payable and other liabilities at June 30, 2012 and December 31, 2011 included:

	June 30, 2012		December 31, 2011
Accounts payable	$	1,104	$	1,181
Rent payable		1,116		1,289
Accrued interest payable		553		662
Income and payroll taxes payable		1,334		1,947
Guarantee liability		1,084		1,084
Contingent settlement payable		4,357		—
Deferred income		964		1,761
Other general accrued expenses		1,738		5,643
Accounts payable and other liabilities	$	12,250	$	13,567

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	INSTITUTIONAL FINANCIAL MARKETS, INC.
Entity Central Index Key	0001270436
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		11,914,918

XML

Variable Interest Entities

6 Months Ended

Jun. 30, 2012

Variable Interest Entities [Abstract]

VARIABLE INTEREST ENTITIES

11. VARIABLE INTEREST ENTITIES

FASB ASC 810, Consolidation (“FASB ASC 810”) contains the guidance surrounding the definition of variable interest entities (“VIEs”), the definition of variable interests, and the consolidation rules surrounding VIEs. In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company has variable interests in VIEs through its management contracts and investments in various securitization entities including CLOs and CDOs.

Once it is determined that the Company holds a variable interest in a VIE, FASB ASC 810 requires that the Company perform a qualitative analysis to determine (i) which entity has the power to direct the matters that most significantly impact the VIEs financial performance and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The entity that has both of these characteristics is deemed to be the primary beneficiary and required to consolidate the VIE. This assessment must be done on an ongoing basis.

The Company classifies the VIEs it is involved with into two groups: (i) VIEs managed by the Company and (ii) VIEs managed by third parties. In the case of the VIEs that the Company has been involved with, the Company has generally concluded that the entity that manages the VIE has the power to direct the matters that most significantly impact the VIEs financial performance. This is not a blanket conclusion as it is possible for an entity other than the manager to have the power to direct such matters. However, for all the VIEs the Company is involved with as of June 30, 2012, the Company has drawn this conclusion.

In the case where the Company has an interest in a VIE managed by a third party, the Company has concluded that it is not the primary beneficiary because the Company does not have the power to direct its activities. In the case of an interest in a VIE managed by the Company, the Company will perform an additional qualitative analysis to determine if its interest (including any investment as well as any management fees that qualify as variable interests) could absorb losses or receive benefits that could potentially be significant to the VIE. This analysis considers the most optimistic and pessimistic scenarios of potential economic results that could reasonably be experienced by the VIE. Then, the Company compares the benefits it would receive (in the optimistic scenario) or the losses it would absorb (in the pessimistic scenario) as compared to all benefits and losses absorbed by the VIE in total. If the benefits or losses absorbed by the Company were significant as compared to total benefits and losses absorbed by all variable interest holders, then the Company would conclude it is the primary beneficiary.

As of June 30, 2012, the Company has variable interests in various securitizations but it has determined that it is not the primary beneficiary and, therefore, is not consolidating the securitization VIEs. The maximum potential financial statement loss the Company would incur if the securitization vehicles were to default on all of their obligations would be (i) the loss of value of the interests in securitizations that the Company holds in its inventory at the time and (ii) any management fee receivables in the case of managed VIEs. The Company has not provided financial support to these VIEs during the six and three months ended June 30, 2012 and 2011 and had no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at June 30, 2012 and December 31, 2011.

The following table presents the carrying amounts of the assets in the Company’s consolidated balance sheets that relate to the Company’s variable interest in identified VIEs with the exception of the two trust VIEs that hold the Company’s junior subordinated notes (see note 12) and the Company’s maximum exposure to loss associated with these identified nonconsolidated VIEs in which it holds variable interests at June 30, 2012 and December 31, 2011.

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES

(Dollars in Thousands)

	June 30, 2012
	Carrying Amount				Maximum Exposure to loss in non-
	Other Receivables		Other Investments, at Fair Value		consolidated VIEs
Managed VIEs	$	1,697	$	—	$	1,697
Third party managed VIEs		117		97		214
Total	$	1,814	$	97	$	1,911

	December 31, 2011
	Carrying Amount				Maximum Exposure to loss in non-
	Other Receivables		Other Investments, at Fair Value		consolidated VIEs
Managed VIEs	$	1,830	$	—	$	1,830
Third party managed VIEs		175		88		263
Total	$	2,005	$	88	$	2,093

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Supplemental Cash Flow Disclosure (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	6 Months Ended				1 Months Ended	6 Months Ended
	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	May 31, 2011	Jan. 31, 2011	Jan. 31, 2011 Common Stock [Member]	Jun. 30, 2012 Common Stock [Member]	Jun. 30, 2012 Additional paid-in capital [Member]	Jun. 30, 2011 Additional paid-in capital [Member]	Jun. 30, 2012 Accumulated other comprehensive income (loss) [Member]	Jun. 30, 2011 Accumulated other comprehensive income (loss) [Member]	Jun. 30, 2012 Non-controlling Interest [Member]	Jun. 30, 2011 Non-controlling Interest [Member]	Jun. 30, 2012 Total stockholder's equity [Member]
Supplemental cash flow disclosure (Textual) [Abstract]
Interest paid		$ 2,721	$ 2,878
Paid income taxes		111	56
Received income tax refunds		0	105
Ratio of Common Stock to membership units		1
Shares of star Asia	54,452
Transferred shares							186,339
Shares transferred of Star Asia	476
Acquisition / (surrender) of additional units of consolidated subsidiary, net		828	972					828	972	(28)	(27)	(800)	(945)	800
Reclassification of redeemable non-controlling interest to mandatorily redeemable equity interests		6,071	3,536
Net assets					16,813
Cash consideration					14,956
Shares consideration						313,051
Value of stock consideration					1,531
Contingent payments					326
Acquisition contribution				45,000
Percentage of ownership interest not owned by parent				30.00%
Percentage of membership interests				70.00%
Acquisition of PrinceRidge				$ 18,502

XML

Consolidated Statements of Operations and Comprehensive Income / (Loss) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues
Net trading	$ 19,951	$ 16,240	$ 37,642	$ 43,514
Asset management	4,608	5,255	9,545	11,225
New issue and advisory	189	1,131	1,266	1,240
Principal transactions and other income	289	831	(4,656)	(208)
Total revenues	25,037	23,457	43,797	55,771
Operating expenses
Compensation and benefits	17,053	21,433	33,327	43,421
Business development, occupancy, equipment	1,276	1,835	2,450	3,274
Subscriptions, clearing, and execution	2,899	2,727	5,972	5,542
Professional fees and other operating	2,636	5,137	5,687	9,152
Depreciation and amortization	343	503	734	973
Total operating expenses	24,207	31,635	48,170	62,362
Operating income / (loss)	830	(8,178)	(4,373)	(6,591)
Non-operating income / (expense)
Interest expense, net	(1,104)	(1,447)	(2,319)	(2,929)
Gain on repurchase of debt			3
Other income / (expense)	(4,357)		(4,357)
Income / (loss) from equity method affiliates	1,526	4,435	2,042	4,530
Income/ (loss) before income tax expense / (benefit)	(3,105)	(5,190)	(9,004)	(4,990)
Income tax expense / (benefit)	63	(133)	54	(346)
Net income / (loss)	(3,168)	(5,057)	(9,058)	(4,644)
Less: Net income / (loss) attributable to the non-controlling interest	(1,090)	(1,686)	(3,121)	(1,648)
Net income / (loss) attributable to IFMI	(2,078)	(3,371)	(5,937)	(2,996)
Income / (loss) per common share-basic:
Income / (loss) per common share	$ (0.19)	$ (0.31)	$ (0.56)	$ (0.28)
Weighted average shares outstanding-basic	10,756,257	10,901,448	10,600,004	10,860,702
Income / (loss) per common share-diluted:
Income / (loss) per common share	$ (0.19)	$ (0.31)	$ (0.56)	$ (0.28)
Weighted average shares outstanding-diluted	16,008,259	16,185,004	15,852,006	16,144,258
Dividends declared per common share	$ 0.02	$ 0.05	$ 0.04	$ 0.10
Comprehensive income / (loss):
Net income / (loss)	(3,168)	(5,057)	(9,058)	(4,644)
Other comprehensive income / (loss) item:
Foreign currency translation adjustments, net of tax of $0	(229)	(8)	(40)	354
Other comprehensive income / (loss), net of tax of $0	(229)	(8)	(40)	354
Comprehensive income	(3,397)	(5,065)	(9,098)	(4,290)
Less: comprehensive income (loss) attributable to the non-controlling interest	(1,183)	(1,688)	(3,151)	(1,528)
Comprehensive income / (loss) attributable to IFMI	$ (2,214)	$ (3,377)	$ (5,947)	$ (2,762)

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Financial Instruments

6 Months Ended

Jun. 30, 2012

Financial Instruments [Abstract]

FINANCIAL INSTRUMENTS

5. FINANCIAL INSTRUMENTS

Investments - Trading

The following table displays the carrying value of all investments classified as investments-trading as of the periods indicated:

INVESTMENTS - TRADING

(Dollars in Thousands)

Security Type	June 30, 2012		December 31, 2011
U.S. government agency MBS and CMOs (1)	$	30,685	$	7,563
U.S. government agency debt securities		34,452		14,600
RMBS		1,178		7,108
CMBS		—		1,587
U.S. Treasury securities		7,473		8,524
Interests in securitizations (2)		259		608
SBA loans		4,382		9,049
Corporate bonds and redeemable preferred stock		55,226		65,445
Foreign government bonds		99		67
Municipal bonds		18,895		9,225
Exchange traded funds		9,377		—
Certificates of deposit		4,079		710
Equity securities		87		60
Investments-trading	$	166,192	$	124,546

(1) Includes TBAs. See note 7.

(2) Primarily comprised of CDOs, CLOs, and ABS.

Trading Securities Sold, Not Yet Purchased

The following table displays the carrying value of all trading securities sold, not yet purchased as of the periods indicated:

TRADING SECURITIES SOLD, NOT YET PURCHASED

(Dollars in Thousands)

Security Type	June 30, 2012		December 31, 2011
U.S. government agency MBS (1)	$	47	$	16
U.S. Treasury securities		10,811		11,755
Corporate bonds and redeemable preferred stock		64,651		87,537
Foreign government bonds		23		158
Municipal bonds		122		143
Exchange traded funds		1,636		—
Certificates of deposit		6,829		4
Total	$	84,119	$	99,613

(1) Represents TBAs. See note 7.

The Company tries to manage its exposure to changes in interest rates for the interest rate sensitive securities it holds by entering into offsetting short positions for similar fixed rate securities.

The Company included the change in unrealized losses in the amount of $432 for the six months ended June 30, 2012 and the change in unrealized gains in the amount $1,248 for the six months ended June 30, 2011 in net trading revenue in the Company’s consolidated statements of operations.

Other Investments, at fair value

The following table provides detail of the investments included within other investments, at fair value:

OTHER INVESTMENTS, AT FAIR VALUE

(Dollars in Thousands)

	June 30, 2012
Security Type	Cost		Carrying Value		Unrealized Gain /  (Loss)
Interests in securitizations (1)	$	217	$	97	$	(120	)
Equity Securities:
EuroDekania		7,792		2,103		(5,689	)
Star Asia		23,219		32,299		9,080
Tiptree Financial Partners, L.P.		5,561		2,703		(2,858	)
Other securities		232		112		(120	)
Total equity securities		36,804		37,217		413
Residential loans		240		229		(11	)
Foreign currency forward contracts		—		66		66
Other investments, at fair value	$	37,261	$	37,609	$	348

	December 31, 2011
Security Type	Cost		Carrying Value		Unrealized Gain /  (Loss)
Interests in securitizations (1)	$	217	$	88	$	(129	)
Equity Securities:
EuroDekania		7,792		2,370		(5,422	)
Star Asia		23,219		37,358		14,139
Tiptree Financial Partners, L.P.		5,561		2,533		(3,028	)
Other securities		232		156		(76	)
Total equity securities		36,804		42,417		5,613
Residential loans		278		267		(11	)
Other investments, at fair value	$	37,299	$	42,772	$	5,473

(1) Represents an interest in a CDO.

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Receivables from and Payables to Brokers, Dealers, and Clearing Agencies

6 Months Ended

Jun. 30, 2012

Receivables from and Payables to Brokers, Dealers, and Clearing Agencies [Abstract]

RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES

4. RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES

Amounts receivable from brokers, dealers, and clearing agencies consist of the following at June 30, 2012 and December 31, 2011.

RECEIVABLES FROM BROKERS, DEALERS, AND CLEARING AGENCIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Receivable from clearing organizations	$	7,628	$	51,619
Unsettled regular way trades, net		—		17,232
Deposits with clearing organizations		1,647		2,112
Receivables from brokers, dealers, and clearing agencies	$	9,275	$	70,963

Receivable from clearing organizations represents un-invested cash held by the clearing organization which includes cash proceeds from short sales.

Amounts payable to brokers, dealers, and clearing agencies consists of the following at June 30, 2012 and December 31, 2011.

PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Unsettled regular way trades, net	$	830	$	—
Margin payable		35,027		24,633
Payables to brokers, dealers, and clearing agencies	$	35,857	$	24,633

Securities transactions are recorded on a trade date, as if they had settled. The related amounts receivable and payable for unsettled securities transactions are recorded net in receivables from or payables to brokers, dealers, and clearing agencies on the Company’s consolidated balance sheets. The Company incurred interest on margin payable of $831 and $983 for the six months ended June 30, 2012 and 2011, respectively, and $415 and $358 for the three months ended June 30, 2012 and 2011, respectively.

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Earnings / (Loss) Per Common Share

6 Months Ended

Jun. 30, 2012

Earnings / (Loss) Per Common Share [Abstract]

EARNINGS / (LOSS) PER COMMON SHARE

16. EARNINGS / (LOSS) PER COMMON SHARE

The following table presents a reconciliation of basic and diluted earnings / (loss) per common share for the periods indicated. Membership units that may be issued in connection with the vesting of a restricted unit issued pursuant to the Amended and Restated Cohen Brothers, LLC 2009 Equity Award Plan (the “2009 Equity Award Plan”) have been excluded from the diluted weighted average shares outstanding calculations because of the obligations of Mr. Daniel G. Cohen, the Company’s Chairman and Chief Executive Officer, under the Equity Plan Funding Agreement to transfer to (1) the Operating LLC the number of Operating LLC membership units or shares of the Company’s Common Stock equal to the number of Operating LLC membership units to be issued by the Operating LLC to the participants in the 2009 Equity Award Plan in connection with vesting of an Operating LLC restricted unit, or (2) the Company the number of shares of the Company’s Common Stock equal to the number of Operating LLC membership units to be issued by the Operating LLC to the participants in the 2009 Equity Award Plan in connection with the vesting of an Operating LLC restricted unit. See note 22 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

EARNINGS / (LOSS) PER COMMON SHARE

(Dollars in Thousands, except share or per share information)

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net income / (loss) attributable to IFMI	$	(2,078	)	$	(3,371	)	$	(5,937	)	$	(2,996	)
Add / (deduct): Income / (loss) attributable to the non-controlling interest attributable to Operating LLC membership units exchangeable into IFMI shares (1)		(981	)		(1,633	)		(2,883	)		(1,595	)
Add /(deduct): Adjustment for income tax benefit / (expense) (2)		(23	)		6			(39	)		150
Net income / (loss) on a fully converted basis	$	(3,082	)	$	(4,998	)	$	(8,859	)	$	(4,441	)
Weighted average common shares outstanding—Basic		10,756,257			10,901,448			10,600,004			10,860,702
Unrestricted Operating LLC membership units exchangeable into IFMI shares (1)		5,252,002			5,283,556			5,252,002			5,283,556
Weighted average common shares outstanding—Diluted (3)		16,008,259			16,185,004			15,852,006			16,144,258
Net income / (loss) per common share—Basic	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)
Net income / (loss) per common share—Diluted	$	(0.19	)	$	(0.31	)	$	(0.56	)	$	(0.28	)

(1) The Operating LLC membership units not held by IFMI (that is, those held by the non-controlling interest for the three and six months ended June 30, 2012 and 2011) may be redeemed and exchanged into shares of the Company on a one-to-one basis. These units are not included in the computation of basic earnings per share. These units enter into the computation of diluted net income / (loss) per common share when the effect is dilutive using the if-converted method.

(2) If the Operating LLC membership units had been converted at the beginning of the period, the Company would have incurred a higher income tax expense or realized a higher income tax benefit, as applicable.

(3) Due to the net loss for the three and six months ended June 30, 2012, the weighted average shares calculation excluded (i) restricted Operating LLC membership units of 0 and 11,628 for the three and six months ended June 30, 2012, respectively; (ii) restricted shares of IFMI Common Stock of 21,879 and 17,412 for the three and six months ended June 30, 2012, respectively; and (iii) restricted units of IFMI’s Common Stock of 0 and 2,554 for the three and six months ended June 30, 2012 , respectively.

Due to the net loss for the three and six months ended June 30, 2011, the weighted average shares calculation excluded (i) restricted Operating LLC membership units of 0 and 3,613 for the three and six months ended June 30, 2011, respectively; and (ii) restricted shares of IFMI Common Stock of 37,288 and 25,852 for the three and six months ended June 30, 2011, respectively.

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Debt

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

DEBT

12. DEBT

The Company had the following debt outstanding as of June 30, 2012 and December 31, 2011, respectively:

DETAIL OF DEBT

(Dollars in Thousands)

Description	Current Outstanding Par			June 30, 2012		December 31, 2011		Interest Rate Terms			Weighted Average Interest Rate at 06/30/2012			Weighted Average Maturity
Contingent convertible senior notes:
7.625% contingent convertible senior notes (the “Old Notes”)	$	100		$	100	$	10,303		7.63	%		7.63	%	July 2012(1)
10.50% contingent convertible senior notes (the “New Notes”)		8,121			8,049		8,030		10.50	%		10.50	%	May 2014(2)
	$	8,221		$	8,149	$	18,333
Junior subordinated notes	$	48,125	(3)		17,068		17,343		7.47	%		7.47	%	August 2036
Subordinated notes payable	$	1,514			1,514		1,491		12.00	%(4)		12.00	%	June 2013
Total				$	26,731	$	37,167

(1) Represents the date the Company redeemed the remaining $100 aggregate principal amount of Old Notes outstanding for cash.

(2) Represents the weighted average put date maturity. The weighted average contractual maturity for the New Notes is May 2027.

The Company may redeem all or part of the $8,121 aggregate principal amount of the New Notes for cash on or after May 20, 2014, at a redemption price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes may require the Company to repurchase all or a portion of the New Notes for cash on May 15, 2014; May 15, 2017; and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes are required to provide notice to the Company of their plan to redeem the New Notes at any time during the 30 days prior to May 15, 2014; May 15, 2017; and May 15, 2022.

(3) The outstanding par represents the total par amount of the junior subordinated notes held by two separate VIE trusts. The Company does not consolidate these trusts. The Company holds $1,489 par value of these junior subordinated notes. These notes held by the Company have a carrying value of $0. Therefore, the net par value held by third parties is $48,125.

(4) Comprised of 9% paid currently and 3% paid in kind.

Refer to note 19 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of the Company’s debt.

In March 2012, the Company repurchased $150 aggregate principal amount of the Old Notes from an unrelated third party for $147 excluding accrued interest. The Company recognized a gain from repurchase of debt of $3 which was included as a separate component of non-operating income / (expense) in the Company’s consolidated statements of operations.

On May 15, 2012, the holders of $10,110 aggregate principal amount of the Old Notes exercised their option to require the Company to repurchase their Old Notes. On July 5, 2012, the Company, at its option, redeemed the remaining $100 aggregate principal amount of the Old Notes outstanding.

XML

Subsequent Events (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Subsequent Events (Additional Textual) [Abstract]
Partners' capital	$ 6,130
IFMI [Member]
Subsequent Events (Textual) [Abstract]
Reduction in compensation expense relating to the forfeiture	1,289
PrinceRidge [Member]
Subsequent Events (Textual) [Abstract]
Repurchased units	8,234
Compensation expense	2,104
Reduction in compensation expense relating to the forfeiture	$ 862

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Collateralized Securities Transactions

6 Months Ended

Jun. 30, 2012

Collateralized Securities Transactions [Abstract]

COLLATERALIZED SECURITIES TRANSACTIONS

8. COLLATERALIZED SECURITIES TRANSACTIONS

Securities purchased under agreements to resell (“reverse repurchase agreements” or “receivables under resale agreements”) or sales of securities under agreements to repurchase (“repurchase agreements”), principally U.S. government and federal agency obligations, SBA loans and mortgage-backed securities, are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase amounts plus accrued interest. Resulting interest income and expense are included in net trading in the consolidated statements of operations.

In the case of reverse repurchase agreements, the Company generally takes possession of securities as collateral. Likewise, in the case of repurchase agreements, the Company is required to provide the counterparty with securities.

In certain cases a repurchase agreement and a reverse repurchase agreement may be entered into with the same counterparty. If certain requirements are met, the offsetting provisions included in FASB ASC 210, Balance Sheet (“FASB ASC 210”), allow (but do not require) the reporting entity to net the asset and liability on the balance sheet. It is the Company’s policy to present the assets and liabilities on a gross basis even if the conditions described in offsetting provisions included in FASB ASC 210 are met. The Company classifies reverse repurchase agreements as a separate line item within the assets section of the Company’s consolidated balance sheets. The Company classifies repurchase agreements as a separate line item within the liabilities section of the Company’s consolidated balance sheets.

In the case of reverse repurchase agreements, if the counterparty does not meet its contractual obligation to return securities used as collateral, or does not deposit additional securities or cash for margin when required, the Company may be exposed to the risk of reacquiring the securities or selling the securities at unfavorable market prices in order to satisfy its obligations to its customers or counterparties. The Company’s policy to control this risk is monitoring the market value of securities pledged or used as collateral on a daily basis and requiring adjustments in the event of excess market exposure.

In the case of repurchase agreements, if the counterparty makes a margin call and the Company is unable or unwilling to meet the margin call, the counterparty can sell the securities to repay the obligation. The Company is at risk that the counterparty may sell the securities at unfavorable market prices and the Company may sustain significant loss. The Company controls this risk by monitoring its liquidity position to ensure it has sufficient cash or liquid securities to meet margin calls.

In the normal course of doing business, the Company enters into reverse repurchase agreements that permit it to re-pledge or resell the securities to others.

The Company enters into reverse repurchase agreements to acquire securities to cover short positions or as an investment. The Company enters into repurchase agreements to finance the Company’s securities positions held in inventory or to finance reverse repurchase agreements entered into as an investment.

At June 30, 2012 and December 31, 2011, the Company held reverse repurchase agreements of $247,289 and $129,978, respectively, and the fair value of securities received as collateral under reverse repurchase agreements was $263,414 and $137,829, respectively. Substantially all of the collateral for reverse repurchase agreements was re-pledged as collateral for repurchase agreements.

At June 30, 2012 and December 31, 2011, the Company had repurchase agreements of $244,061 and $134,870, respectively, and the fair value of securities pledged as collateral under repurchase agreements was $258,903 and $142,295, respectively. These amounts include collateral for reverse repurchase agreements that were re-pledged as collateral for repurchase agreements.

As of June 30, 2012 and December 31, 2011, the Company’s reverse repurchase agreements and repurchase agreements were predominantly collateralized securities in the following asset classes: Agency Specified Pools, Agency Hybrid Arms, and Fixed rate Agency CMO’s.

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Derivative Financial Instruments (Details Textual) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2011 USD ($)	Jun. 30, 2012 Foreign currency forward contracts [Member] JPY (¥) ForwardContracts	Jun. 30, 2012 TBA Sale Agreements [Member] USD ($)	Dec. 31, 2011 TBA Sale Agreements [Member] USD ($)	Jun. 30, 2012 TBA Purchase Agreements [Member] USD ($)	Jun. 30, 2012 TBA Purchase Contracts and Sale Agreements [Member] USD ($)
Derivative (Textual) [Abstract]
Derivative instruments number of contracts		80
Derivative notional amount		¥ 12,500	$ 13,250	$ 4,325	$ 9,245	$ 331,884
Unsettled TBA revenue	$ 458

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Fair Value Disclosures

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

6. FAIR VALUE DISCLOSURES

Fair Value Option

The Company has elected to account for certain of its other financial assets at fair value under the fair value option provisions of FASB ASC 825, Financial Instruments (“FASB ASC 825”). The primary reason for electing the fair value option when it first became available in 2008, was to reduce the burden of monitoring the differences between the cost and the fair value of the Company’s investments, previously classified as available for sale securities, including the assessment as to whether the declines are temporary in nature and to further remove an element of management judgment. In addition, the election was made for certain investments that were previously required to be accounted for under the equity method because their fair value measurements were readily obtainable.

Such financial assets accounted for at fair value include:

• in general, securities that would otherwise qualify for available for sale treatment;

• in general, investments in equity method affiliates where the affiliate has all of the attributes in FASB ASC 946-10-15-2 (commonly referred to as investment companies); and

• in general, investments in residential loans.

The changes in fair value (realized and unrealized gains and losses) of these instruments for which the Company has elected the fair value option are recorded in principal transactions and other income in the consolidated statements of operations. All of the investments for which the Company has elected the fair value option are included as a component of other investments, at fair value in the consolidated balance sheets. The Company recognized net losses of $5,208 and $1,122 related to changes in fair value of investments that are included as a component of other investments, at fair value during the six months ended June 30, 2012 and 2011, respectively. The Company recognized net losses of $34 and net gains of $418 related to changes in fair value of investments that are included as a component of other investments, at fair value during the three months ended June 30, 2012 and 2011, respectively.

Fair Value Measurements

In accordance with FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”), the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the hierarchy under FASB ASC 820 are described below:

Level 1	Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2	Financial assets and liabilities whose values are based on one or more of the following:
1.	Quoted prices for similar assets or liabilities in active markets;
2.	Quoted prices for identical or similar assets or liabilities in non-active markets;
3.	Pricing models whose inputs other than quoted prices are observable for substantially the full term of the asset or liability; or
4.	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the level 3 category presented in the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain financial assets or liabilities. There were no transfers between level 1 and level 2 of the fair value hierarchy during the three and six months ended June 30, 2012 and 2011. Reclassifications impacting level 3 of the fair value hierarchy are reported as transfers in or transfers out of the level 3 category as of the beginning of the quarter in which reclassifications occur.

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

(Dollars in Thousands)

	June 30, 2012 Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	30,685	$	—	$	30,685	$	—
U.S. government agency debt securities		34,452		66		34,386		—
RMBS		1,178		—		1,178		—
U.S. Treasury securities		7,473		7,473		—		—
Interests in securitizations (1)		259		—		74		185
SBA loans		4,382		—		4,382		—
Corporate bonds and redeemable preferred stock		55,226		3,850		51,376		—
Foreign government bonds		99		—		99		—
Municipal bonds		18,895		—		18,895		—
Exchange traded funds		9,377		9,377		—		—
Certificates of deposit		4,079		—		4,079		—
Equity securities		87		24		—		63
Total investments-trading	$	166,192	$	20,790	$	145,154	$	248
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)		2,103		—		—		2,103
Star Asia (3)		32,299		—		—		32,299
Tiptree Financial Partners L.P. (4)		2,703		—		—		2,703
		37,105		—		—		37,105
Other		112		24		—		88
Total equity securities		37,217		24		—		37,193
Interests in securitizations (1)		97		—		—		97
Residential loans		229		—		229		—
Foreign currency forward contracts		66		66		—		—
Total other investments, at fair value	$	37,609	$	90	$	229	$	37,290
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	47	$	—	$	47	$	—
U.S. Treasury securities		10,811		10,811		—		—
Corporate bonds and redeemable preferred stock		64,651		313		64,338		—
Foreign government bonds		23		—		23		—
Municipal bonds		122		—		122		—
Exchange traded funds		1,636		1,636		—		—
Certificates of deposit		6,829		—		6,829		—
Total trading securities sold, not yet purchased	$	84,119	$	12,760	$	71,359	$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund - European.

(3) Real Estate Fund - Asian.

(4) Diversified Fund.

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

(Dollars in Thousands)

	December 31, 2011 Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	7,563	$	—	$	7,563	$	—
U.S. government agency debt securities		14,600		144		14,456		—
RMBS		7,108		—		2,176		4,932
CMBS		1,587		—		1,587		—
U.S. Treasury securities		8,524		8,524		—		—
Interests in securitizations (1)		608		—		387		221
SBA loans		9,049		—		9,049		—
Corporate bonds and redeemable preferred stock		65,445		779		64,666		—
Foreign government bonds		67		—		67		—
Municipal bonds		9,225		—		9,225		—
Certificates of deposit		710		—		710		—
Equity securities		60		25		—		35
Total investments-trading	$	124,546	$	9,472	$	109,886	$	5,188
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)		2,370		—		—		2,370
Star Asia (3)		37,358		—		—		37,358
Tiptree Financial Partners L.P. (4)		2,533		—		—		2,533
		42,261		—		—		42,261
Other		156		24		—		132
Total equity securities		42,417		24		—		42,393
Interests in securitizations (1)		88		—		—		88
Residential loans		267		—		—		267
Total other investments, at fair value	$	42,772	$	24	$	—	$	42,748
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	16	$	—	$	16	$	—
U.S. Treasury securities		11,755		11,755		—		—
Corporate bonds and redeemable preferred stock		87,537		1,084		86,453		—
Foreign government bonds		158		—		158		—
Municipal bonds		143		—		143		—
Certificates of deposit		4		—		4		—
Total trading securities sold, not yet purchased	$	99,613	$	12,839	$	86,774	$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund - European.

(3) Real Estate Fund - Asian.

(4) Diversified Fund.

The following provides a brief description of the types of financial instruments the Company holds, the methodology for estimating fair value, and the level within the hierarchy of the estimate.

U.S. Government Agency MBS and CMOs: These are securities which are generally traded over-the-counter. The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. These valuations are based on a market approach. This is considered a level 2 valuation in the hierarchy.

In instances where the securities are either new issuances or experience illiquidity, such as CMOs and, more specifically, agency inverse interest-only securities, principal only, and fixed interest only among others, the Company may use its own internal valuation models which are based on an income approach. In some cases, new issuances are senior in nature or fairly liquid, however, due to the fact that it is a new issuance, it is difficult to obtain third party pricing and the Company uses internal models to determine fair value. In these cases, the Company will classify such an issuance as level 3 within the hierarchy until it is able to obtain third party pricing. Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy. In general, the fair values of U.S. government agency and MBS and CMOs which are classified as level 3 are determined primarily using discounted cash flow and option adjusted spread methodologies. Key inputs to these models are interest rates and prepayment rates. Attributes of the underlying mortgage loans, in the case of CMOs, that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value ratios; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; and historical prepayment. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. The level 3 classification of the fair value measurements of certain CMOs was applicable during the 2011 period.

U.S. Government Agency Debt Securities: Callable and non-callable U.S. government agency debt securities are measured primarily based on quoted market prices obtained from third party pricing services. Non-callable U.S. government agency debt securities are generally classified within level 1 and callable U.S. government agency debt securities are classified within level 2 of the valuation hierarchy.

RMBS and CMBS: The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. These valuations are based on a market approach. The Company generally classifies the fair value of these securities based on third party quotations within level 2 of the valuation hierarchy.

In instances where the Company is unable to obtain a reliable market price quotation from third party pricing services and there are no substantially similar securities that trade frequently as the securities held in trading inventory, the Company may determine the fair value of those securities using its own internal valuation models, which are based on an income approach. Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy. Information utilized in the Company’s internal valuation models may include the security’s credit rating, coupon rate, estimated prepayment speeds, expected weighted average life, collateral composition, estimated future interest rates, expected credit losses, credit enhancement, and recently executed transactions. The level 3 classification of the fair value measurements of certain residential mortgage-backed securities and commercial mortgage-backed securities was applicable during the 2011 period.

U.S. Treasury Securities: U.S. Treasury securities include U.S. Treasury bonds and notes and the fair values of the U.S. Treasury securities are based on quoted prices in active markets. Valuation adjustments are not applied. The Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

Interests in Securitizations: Interests in securitizations may be comprised of CDOs, CLOs and ABS, which may include, but are not limited to, securities backed by auto loans, credit card receivables or student loans. Where the Company is able to obtain independent market quotations from at least two broker-dealers and where a price within the range of at least two broker-dealers is used or market price quotations from third party pricing services is used, interests in securitizations will generally be classified as level 2 of the valuation hierarchy. These valuations are based on a market approach. The independent market quotations from broker-dealers are generally nonbinding. The Company seeks quotations from broker-dealers that historically have actively traded, monitored, issued, and been knowledgeable about interests in securitizations. The Company generally believes that to the extent that (1) it receives two quotations in a similar range from broker-dealers knowledgeable about interests in securitizations, and (2) the Company believes the broker-dealers gather and utilize observable market information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus among market participants and sources, then classification as level 2 of the valuation hierarchy is appropriate. In the absence of two broker-dealer market quotations, a single broker-dealer market quotation may be used without corroboration of the quote in which case the Company generally classifies the fair value within level 3 of the valuation hierarchy.

If quotations are unavailable, prices observed by the Company for recently executed market transactions may be used or valuation models prepared by the Company’s management may be used, which are based on an income approach. The models prepared by the Company’s management include estimates and the valuations derived from them could differ materially from amounts realizable in an open market exchange. Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy.

Establishing fair value is inherently subjective given the volatile and sometimes illiquid markets for certain interests in securitizations and requires management to make a number of assumptions, including assumptions about the future of interest rates, discount rates and the timing of cash flows. The assumptions the Company applies are specific to each security. Although the Company may rely on internal calculations to compute the fair value of certain interest in securitizations, the Company requests and considers indications of fair value from third party pricing services to assist in the valuation process.

SBA Loans: The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. The Company generally classifies these investments within level 2 of the valuation hierarchy. These valuations are based on a market approach.

Corporate Bonds, Redeemable Preferred Stock, and Foreign Government Bonds: The Company uses recently executed transactions, or third party quotations from independent pricing services to arrive at the fair value of its investments in corporate bonds, redeemable preferred stock and foreign government bonds. These valuations are based on a market approach. The Company generally classifies the fair value of these bonds within level 2 of the valuation hierarchy. In instances, where the fair values of securities are based on quoted prices in active markets (for example with redeemable preferred stock), the Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

Municipal Bonds: Municipal bonds which include obligations of U.S. states, municipalities and political subdivisions primarily include bonds or notes issued by U.S. municipalities. The Company generally values these securities using third party quotations such as market price quotations from third party pricing services. The Company generally classifies the fair value of these bonds within level 2 of the valuation hierarchy. The valuations are based on a market approach. In instances where the Company is unable to obtain reliable market price quotations from third party pricing services, the Company will use its own internal valuation models. In these cases, the Company will classify such securities as level 3 within the hierarchy until it is able to obtain third party pricing.

Exchange Traded Funds: Exchange traded funds are investment funds that trade in active markets, similar to public company stocks. The fair values of exchange traded funds are based on quoted prices in active markets. Valuation adjustments are not applied. The Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

Equity Securities: The fair value of equity securities that represent investments in publicly traded companies (common or preferred shares, options, warrants, and other equity investments) are determined using the closing price of the security as of the reporting date. These are securities which are traded on a recognized liquid exchange. This is considered a level 1 value in the valuation hierarchy. In some cases, the Company owns options or warrants in publicly traded companies when the option or warrant itself is not publicly traded. In those cases, the Company uses an internal valuation model and classifies the investment within level 3 of the valuation hierarchy. The non-exchange traded equity options and warrants are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Other equity securities represent investments in investment funds and other non-publicly traded entities. Substantially all of these other entities have the attributes of investment companies as described in FASB ASC 946-15-2. The Company estimates the fair value of these entities using the reported net asset value per share as of the reporting date in accordance with the “practical expedient” provisions related to investments in certain entities that calculate net asset value per share (or its equivalent) included in FASB ASC 820 for all entities except Star Asia. The Company generally classifies these estimates within either level 2 of the valuation hierarchy if its investment in the entity is currently redeemable or level 3 if its investment is not currently redeemable.

In the case of Star Asia, the Company utilizes a series of valuation models to determine fair value, which use both market and income based approaches and generally classifies its investment within level 3 of the valuation hierarchy. Star Asia accounts for itself as an investment company as described in ASC 946, Financial Services - Investment Companies. As an investment company, Star Asia carries its assets at fair value and reports NAV per share to its investors. However, Star Asia issued subordinated debt securities in 2009 at a significant discount to par. Upon issuance, Star Asia did not elect the fair value option for these liabilities and was not required to do so under ASC 946. Over time, it is the Company’s assessment that the fair value of the subordinated debt securities has diverged from its carrying value. Because Star Asia’s published NAV is calculated using the amortized cost of these subordinated debt securities, the Company has concluded it would be appropriate to adjust Star Asia’s reported NAV to recalculate it as if Star Asia’s subordinated debt were recorded at fair value as opposed to its historical amortized cost. The Company estimates the fair value of Star Asia’s subordinated debt securities by projecting the remaining debt cash outflows and discounting them at an estimated market rate as of the reporting date, for similar non-investment grade long term subordinated debt issuances.

The Company used discount rates of 7.50% and 7.15% as of December 31, 2011 and June 30, 2012, respectively, in determining the fair value of Star Asia’s subordinated debt securities. If the Company had used Star Asia’s unadjusted NAV, rather than the Company’s financial model described above in determining the fair value of the Company’s investment in Star Asia, the Company would have recorded its investment in Star Asia at a value of $46,031 and $41,740 as of December 31, 2011 and June 30, 2012, respectively, as compared to the fair value as determined by the Company’s internal valuation model of $37,358, and $32,299 as of December 31, 2011 and June 30, 2012, respectively.

Residential Loans: Management utilizes home price indices to value the residential loans. Previously management had considered adjustments to these indices but has elected going forward to not adjust the indices. Adjustments to the index implied a level 3 valuation. The new methodology uses an unadjusted index, which is considered an observable input and moves these investments into level 2.

Certificates of Deposit: The fair value of certificates of deposit is estimated using valuations provided by third party pricing services. Certificates of deposit are generally categorized in level 2 of the valuation hierarchy. However, in instances where the certificates of deposit are new issuances, or the payments of certificate of deposit are linked to an index, it may be difficult to obtain third party pricing and, in these cases, the Company uses internal models to determine fair value and the fair value is generally classified within level 3 of the valuation hierarchy. The level 3 classification of the fair value measurements of certain certificates of deposit was applicable during the 2011 period.

Derivatives:

Foreign Currency Forward Contracts

Foreign currency forward contracts are exchange-traded derivatives which transact on an exchange that is deemed to be active. The fair value of the foreign currency forward contracts is based on current quoted market prices. Valuation adjustments are not applied. These are considered a Level 1 value in the hierarchy. See note 7.

TBAs

The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. TBAs are generally classified within level 2 of the fair value hierarchy. If there is limited transaction activity or less transparency to observe market based inputs to valuation models, TBAs are classified in level 3 of the fair value hierarchy. U.S. government agency MBS and CMOs include TBAs. Unrealized gains on TBAs are included in investments-trading on the Company’s consolidated balance sheets and unrealized losses on TBAs are included in trading securities sold, not yet purchased on the Company’s consolidated balance sheets. See note 7.

Level 3 Financial Assets and Liabilities

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized level 3 inputs to determine fair value for the six and three months ended June 30, 2012 and 2011.

LEVEL 3 INPUTS

Six Months Ended June 30, 2012

(Dollars in Thousands)

	January  1, 2012		Total gains and losses included in earnings									Purchases		Sales			June  30, 2012		Change  in unrealized gains/(losses) for the  period included in earnings (1)
			Net trading			Principal transactions and other income			Transfers out of Level 3
Assets:
Investments-trading:
RMBS	$	4,932	$	17		$	—		$	—		$	171	$	(5,120	)	$	—	$	—
Interests in securitizations (2)		221		(58	)		—			—			2,225		(2,203	)		185		(37	)
Equity securities		35		(98	)		—			—			126		—			63		(98	)
Total investments-trading	$	5,188	$	(139	)	$	—			—		$	2,522	$	(7,323	)	$	248	$	(135	)
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (3)	$	2,370	$	—		$	(267	)		—		$	—	$	—		$	2,103	$	(267	)
Star Asia (4)		37,358		—			(5,059	)		—			—		—			32,299		(5,059	)
Tiptree Financial Partners, L.P. (5)		2,533		—			170			—			—		—			2,703		170
		42,261		—			(5,156	)		—			—		—			37,105		(5,156	)
Other		132		—			(44	)		—			—		—			88		(44	)
Total equity securities		42,393		—			(5,200	)		—			—		—			37,193		(5,200	)
Interests in securitizations (2)		88		—			9			—			—		—			97		9
Residential loans		267		—			—			(267	)		—		—			—		—
Total other investments, at fair value	$	42,748	$	—		$	(5,191	)	$	(267	)	$	—	$	—		$	37,290	$	(5,191	)

(1) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2) Primarily comprised of CDOs, CLOs, and ABS.

(3) Hybrid Securities Funds - European.

(4) Real Estate Funds - Asian.

(5) Diversified Fund.

LEVEL 3 INPUTS

Six Months Ended June 30, 2011

(Dollars in Thousands)

	January  1, 2011		Total gains and losses included in earnings					Transfers into Level 3		Purchases		Sales (1)			June  30, 2011		Change  in unrealized gains/(losses) for the  period included in earnings (2)
			Net trading		Principal transactions and other income
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	68,885	$	452	$	—		$	4,332	$	20,599	$	(85,649	)	$	8,619	$	602
RMBS		—		—		—			—		1,473		—			1,473		—
Commercial mortgage-backed securities		—		114		—			—		1,233		—			1,347		114
Interests in securitizations (3)		4,500		6,238		—			—		8,101		(11,548	)		7,291		340
Certificates of deposit		—		3		—			—		761		(763	)		1		2
Equity securities		—		30		—			—		70		(2	)		98		30
Total investments-trading	$	73,385	$	6,837	$	—		$	4,332	$	32,237	$	(97,962	)	$	18,829	$	1,088
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)	$	1,258	$	—	$	1,619		$	—	$	533	$	—		$	3,410	$	1,619
Star Asia (5)		38,025		—		(2,014	)		—		226		(476	)		35,761		(2,014	)
Tiptree Financial Partners, L.P.(6)		2,480		—		71			—		—		—			2,551		71
		41,763		—		(324	)		—		759		(476	)		41,722		(324	)
Investment Funds
Deep Value (7)		28		—		(9	)		—		—		(19	)		—		—
		28		—		(9	)		—		—		(19	)		—		—
Other		500		—		(212	)		—		36		(59	)		265		(212	)
Total equity securities		42,291		—		(545	)		—		795		(554	)		41,987		(536	)
Interests in securitizations (3)		105		—		—			—		—		—			105		—
Residential loans		303		—		5			—		—		(32	)		276		5
Total other investments, at fair value	$	42,699	$	—	$	(540	)	$	—	$	795	$	(586	)	$	42,368	$	(531	)

(1) Includes return of principal/capital of interests in U.S. government agency MBS and CMOs, securitizations, investment funds and residential loans. The sale of $476 attributable to Star Asia represents the transfer of 54,452 shares of Star Asia to an employee for services rendered during 2010. See note 19.

(2) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs and CLOs.

(4) Hybrid Securities Funds - European.

(5) Real Estate Funds - Asian.

(6) Diversified Fund.

(7) Real Estate Funds.

LEVEL 3 INPUTS

Three Months Ended June 30, 2012

(Dollars in Thousands)

	March  31, 2012		Total gains and losses included in earnings								Purchases		Sales			June  30, 2012		Change  in unrealized gains/(losses) for the  period included in earnings (1)
			Net trading			Principal transactions and other income			Transfers out of Level 3
Assets:
Investments-trading:
Interests in securitizations (2)	$	2,409	$	(21	)	$	—		$	—	$	—	$	(2,203	)	$	185	$	—
Equity securities		167		(104	)		—			—		—		—			63		(104	)
Total investments-trading	$	2,576	$	(125	)	$	—			—	$	—	$	(2,203	)	$	248	$	(104	)
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (3)	$	2,348	$	—		$	(245	)	$	—	$	—	$	—		$	2,103	$	(245	)
Star Asia (4)		32,118		—			181			—		—		—			32,299		181
Tiptree Financial Partners, L.P. (5)		2,650		—			53			—		—		—			2,703		53
		37,116		—			(11	)		—		—		—			37,105		(11	)
Other		82		—			6			—		—		—			88		6
Total equity securities		37,198		—			(5	)		—		—		—			37,193		(5	)
Interests in securitizations (2)		97		—			—			—		—		—			97		—
Total other investments, at fair value	$	37,295	$	—		$	(5	)	$	—	$	—	$	—		$	37,290	$	(5	)

(1) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2) Primarily comprised of CDOs, CLOs, and ABS.

(3) Hybrid Securities Funds - European.

(4) Real Estate Funds - Asian.

(5) Diversified Fund.

LEVEL 3 INPUTS

Three Months Ended June 30, 2011

(Dollars in Thousands)

	March  31, 2011		Total gains and losses included in earnings						Transfers into Level 3		Purchases		Sales (1)			June  30, 2011		Change  in unrealized gains/(losses) for the  period included in earnings (2)
			Net trading			Principal transactions and other income
Assets:
Investments-trading:
U.S. government agency MBS and CMOs	$	12,206	$	1,024		$	—		$	—	$	7,283	$	(11,894	)	$	8,619	$	706
RMBS		—		—			—			—		1,473		—			1,473		—
Commercial mortgage-backed securities		—		114			—			—		1,233		—			1,347		114
Interests in securitizations (3)		1,857		1,000			—			—		7,016		(2,582	)		7,291		44
Certificates of deposit		393		—			—			—		—		(392	)		1		—
Equity securities		74		(46	)		—			—		70		—			98		(46	)
Total investments-trading	$	14,530	$	2,092		$	—		$	—	$	17,075	$	(14,868	)	$	18,829	$	818
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)	$	2,033	$	—		$	844		$	—	$	533	$	—		$	3,410	$	844
Star Asia (5)		35,094		—			667			—		—		—			35,761		667
Tiptree Financial Partners, L.P. (6)		2,511		—			40			—		—		—			2,551		40
		39,638		—			1,551			—		533		—			41,722		1,551
Investment Funds
Deep Value (7)		28		—			(9	)		—		—		(19	)		—		—
		28		—			(9	)		—		—		(19	)		—		—
Other		553		—			(265	)		—		36		(59	)		265		(265	)
Total equity securities		40,219		—			1,277			—		569		(78	)		41,987		1,286
Interests in securitizations (3)		105		—			—			—		—		—			105		—
Residential loans		287		—			3			—		—		(14	)		276		3
Total other investments, at fair value	$	40,611	$	—		$	1,280		$	—	$	569	$	(92	)	$	42,368	$	1,289

(1) Includes return of principal/capital of interests in U.S. government agency MBS and CMOs, securitizations, investment funds and residential loans.

(2) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs and CLOs.

(4) Hybrid Securities Funds - European.

(5) Real Estate Funds - Asian.

(6) Diversified Fund.

(7) Real Estate Funds.

The circumstances that would result in transferring certain financial instruments from level 2 to level 3 of the valuation hierarchy would typically include what the Company believes to be a decrease in the availability, utility, and reliability of observable market information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus among market participants and sources.

During 2009, the liquidity and transparency surrounding structured credit products, such as interests in securitizations, continued to diminish. The absence of new issue activity in the primary market led to a continually decreasing level of transparency, as seasoned secondary issuances could not be analyzed on a comparative basis relative to new issuances. In addition, diminished trading activity in the secondary market also led the Company to believe that broker-dealer quotations may not be based on observable and reliable market information. The Company has maintained this assessment during 2012 and has not transferred any of these assets out of level 3 of the valuation hierarchy.

Investments-trading: During the six and three months ended June 30, 2012, there were no transfers into or out of level 3 of the valuation hierarchy.

During the six months ended June 30, 2011, there were no transfers out of level 3 and there was one transfer of $4,332 into level 3 of the valuation hierarchy related to one security. In this case, as of December 31, 2010, the Company was able to obtain a reliable quote from a third party pricing service. During the first half of 2011, the Company was unable to obtain a reliable quote and relied upon an internal valuation model for that same security. During the three months ended June 30, 2011, there were no transfers into or out of level 3.

Other investments, at fair value: During the six months ended June 30, 2012, the Company transferred $267 in residential loans from level 3 to level 2 of the valuation hierarchy. During the three months ended June 30, 2012, there were no transfers into or out of level 3 of the valuation hierarchy.

During the six and three months ended June 30, 2011, there were no transfers into or out of level 3 of the valuation hierarchy.

The following table provides the quantitative information about level 3 fair value measurements as of June 30, 2012:

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in Thousands)

	Fair Value at June  30, 2012		Valuation Technique		Significant Unobservable Inputs	Weighted average			Range of Significant Inputs
Assets:
Investments-trading:
Equity securities	$	63		Black Scholes	Expected Life Volatility Dividend Yield		5 years 25 0	%  %		5 years 25 0	%  %
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
Star Asia	$	32,299		Adjusted NAV	Discount rate on debt		7.15	%		7.15	%
Other	$	88		Black Scholes	Expected Life Volatility Dividend Yield		5.2 years 25 0	%  %		5-10 years 25 0	%  %

Investments in Certain Entities That Calculate Net Asset Value Per Share (Or Its Equivalent)

The following table presents additional information about investments in certain entities that calculate net asset value per share (regardless of whether the “practical expedient” provisions of FASB ASC 820 have been applied) which are measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011.

FAIR VALUE MEASUREMENTS OF INVESTMENTS IN CERTAIN ENTITIES

THAT CALCULATE NET ASSET VALUE PER SHARE (OR ITS EQUIVALENT)

	Fair Value at June 30, 2012 (dollars in thousands)		Unfunded Commitments		Redemption Frequency (if Currently Eligible)		Redemption Notice  Period
Other Investment Vehicles:
EuroDekania (a)	$	2,103		N/A		N/A		N/A
Star Asia (b)		32,299		N/A		N/A		N/A
Tiptree Financial Partners, L.P. (c)		2,703		N/A		N/A		N/A
	$	37,105

	Fair Value at December 31, 2011 (dollars in thousands)		Unfunded Commitments		Redemption Frequency (if Currently Eligible)		Redemption Notice  Period
Other Investment Vehicles:
EuroDekania (a)	$	2,370		N/A		N/A		N/A
Star Asia (b)		37,358		N/A		N/A		N/A
Tiptree Financial Partners, L.P. (c)		2,533		N/A		N/A		N/A
	$	42,261

N/A - Not applicable.

(a) EuroDekania’s investment strategy is to make investments in hybrid capital securities that have attributes of debt and equity, primarily in the form of subordinated debt issued by insurance companies, banks and bank holding companies based primarily in Western Europe (“EuroTruPS”); widely syndicated leveraged loans issued by European corporations CMBS, including subordinated interests in first mortgage real estate loans (“B-Notes”); and RMBS and other ABS backed by consumer and commercial receivables. The majority of the assets are denominated in Euros and U.K. Pounds Sterling. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820.

(b) Star Asia’s investment strategy is to make investments in Asian real estate structured finance investments, including CMBS, corporate debt of REITs and real estate operating companies, whole loans, mezzanine loans and other commercial real estate fixed income investments. The fair value of the investment in this category has been estimated using a series of internal valuation models that use both the market and income approach. If the Company had used Star Asia’s unadjusted reported net asset value to determine its fair value, the carrying value of its investment in Star Asia would have been $41,740 as of June 30, 2012 and $46,031 as of December 31, 2011.

(c) The investment strategy of Tiptree Financial Partners, L.P. (“Tiptree”) is currently focused on investing in (a) specialty finance companies; (b) alternative asset management companies, and (c) diversified credit assets and related equity interests. Tiptree primarily seeks to acquire majority ownership interests in its investees. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820. The Company uses the latest reported net asset value from Tiptree. From time to time, the net asset value may be one quarter in arrears.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2012

Derivative Financial Instruments [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

7. DERIVATIVE FINANCIAL INSTRUMENTS

FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”), provides for optional hedge accounting. When a derivative is deemed to be a hedge and certain documentation and effectiveness testing requirements are met, reporting entities are allowed to record all or a portion of the change in the fair value of a designated hedge as an adjustment to other comprehensive income (“OCI”) rather than as a gain or loss in the statements of operations. To date, the Company has not designated any derivatives as hedges under the provisions included in FASB ASC 815.

Derivative financial instruments are recorded at fair value in the consolidated statements of operations and are included within investments-trading; other investments, at fair value; and trading securities sold, not yet purchased.

The Company may, from time to time, enter into derivatives to manage its risk exposures (i) arising from fluctuations in foreign currency rates with respect to the Company’s investments in foreign currency denominated investments; (ii) arising from the Company’s investments in interest rate sensitive investments; and (iii) arising from the Company’s facilitation of mortgage-backed trading. Derivatives entered into by the Company, from time to time, may include (i) foreign currency forward contracts; (ii) EuroDollar futures; and (iii) purchase and sale agreements of TBAs. TBAs are forward mortgage-backed securities whose collateral remain “to be announced” until just prior to the trade settlement. TBAs are accounted for as derivatives under FASB ASC 815 when either of the following conditions exists: (i) when settlement of the TBA trade is not expected to occur at the next regular settlement date (which is typically the next month); or (ii) a mechanism exists to settle the contract on a net basis. Otherwise, TBAs are recorded as a standard security trade. The settlement of these transactions is not expected to have a material effect on the Company’s consolidated financial statements.

Derivatives involve varying degrees of off-balance sheet risk, whereby changes in the level or volatility of interest rates or market values of the underlying financial instruments may result in changes in the value of a particular financial instrument in excess of its carrying amount. Depending on the Company’s investment strategy, realized and unrealized gains and losses are recognized in principal transactions and other income or in net trading in the Company’s consolidated statements of operations on a trade date basis.

The Company may, from time to time, enter into the following derivative instruments:

Foreign Currency Forward Contracts

The Company invests in foreign currency denominated investments that expose it to fluctuations in foreign currency rates and, therefore, the Company may, from time to time, hedge such exposure by using foreign currency forward contracts. The Company carries the foreign currency forward contracts at fair value and includes them as a component of other investments, at fair value in the Company’s consolidated balance sheets. As of June 30, 2012, the Company had 80 outstanding foreign currency forward contracts with a notional amount of 12,500 Japanese Yen per contract. As of December 31, 2011, the Company had no outstanding foreign currency forward contracts.

EuroDollar Futures

The Company invests in floating rate investments that expose it to fluctuations in interest and, therefore, the Company may, from time to time, hedge such exposure using EuroDollar futures. The Company carries the EuroDollar futures contracts at fair value and includes them as a component of investments-trading in the Company’s consolidated balance sheets. As of June 30, 2012 and December 31, 2011, the Company had no outstanding EuroDollar futures contracts.

TBAs

The Company trades U.S. Government agency obligations. In connection with these activities, the Company may be required to maintain inventory in order to facilitate customer transactions. In order to mitigate exposure to market risk, the Company enters in to the purchase and sale of TBAs. The Company carries the TBAs at fair value and includes them as a component of investments–trading or trading securities sold, not yet purchased in the Company’s consolidated balance sheets. At June 30, 2012, the Company had open TBA sale agreements in the notional amount of $13,250, and open TBA purchase agreements in the notional amount of $9,245. At December 31, 2011, the Company had open TBA sale agreements in the notional amount of $4,325.

The following table presents the Company’s derivative financial instruments and the amount and location of the fair value recognized in the consolidated balance sheets as of June 30, 2012 and December 31, 2011, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION

(Dollars in Thousands)

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Balance Sheet Classification	Unrealized Gain / (Loss)  as of June 30, 2012			Unrealized Gain / (Loss)  as of December 31, 2011
Foreign currency forward contracts	Other investments, at fair value	$	66		$	—
TBAs	Investments-trading		38			—
TBAs	Trading securities sold, not yet purchased		(47	)		(16	)
		$	57		$	(16	)

The following table presents the Company’s derivative financial instruments and the amount and location of the net gain (loss) recognized in the consolidated statement of operations for the six and three months ended June 30, 2012 and 2011:

In addition to the above activities related to TBAs, the Company also enters into TBAs in order to assist clients (generally small to middle size mortgage loan originators) in hedging the interest rate risk associated with the mortgages the clients hold. In general, the Company will enter into a TBA purchase agreement with the client. Then, the Company will immediately enter into a TBA sale agreement with the exact same terms and settlement date with a separate counter-party. The Company seeks to profit through a small mark up in the price of the transaction. The TBAs will match underlying terms and settle dates. Because the Company has purchased and sold the same security, it is no longer exposed to market movements of the underlying TBA. The gain or loss on the transaction is recorded as a component of net trading in the consolidated statement of operations and is included in due to or due from broker in the consolidated balance sheet until it settles. As of June 30, 2012, the Company had unsettled TBA purchase contracts and offsetting TBA sale agreements in the notional amount of $331,884. The net profit on these transactions is recorded as a component of net trading revenue and is included as a component of TBA revenue in the table below. Any revenue on trades that have not yet settled is included as a component of due to or due from brokers, clearings, and clearing organizations. As of June 30, 2011, unsettled TBA revenue was $458.

DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION

(Dollars in Thousands)

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Income Statement Classification	Six Months Ended June 30, 2012			Six Months Ended June 30, 2011
Foreign currency forward contracts	Revenues—principal transactions and other income	$	(35	)	$	(219	)
EuroDollar futures contracts	Revenues—net trading		—			(2	)
TBAs	Revenues—net trading		254			(7,970	)
		$	219		$	(8,191	)

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Income Statement Classification	Three Months Ended June 30, 2012			Three Months Ended June 30, 2011
Foreign currency forward contracts	Revenues—principal transactions and other income	$	(35	)	$	(922	)
EuroDollar futures contracts	Revenues—net trading		—			(64	)
TBAs	Revenues—net trading		156			(8,113	)
		$	121		$	(9,099	)

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Investments in Equity Method Affiliates

6 Months Ended

Jun. 30, 2012

Investments in Equity Method Affiliates [Abstract]

INVESTMENTS IN EQUITY METHOD AFFILIATES

9. INVESTMENTS IN EQUITY METHOD AFFILIATES

The Company has several investments that are accounted for under the equity method. Equity method accounting requires that the Company record its investment on the consolidated balance sheets and recognize its share of the affiliate’s net income as earnings each year. Investment in equity method affiliates is included as a component of other assets on the Company’s consolidated balance sheets.

The Company has certain equity method affiliates for which it has elected the fair value option. The Company elected the fair value option for its investments in Muni Funding Company of America (“MFCA”) effective January 1, 2008 and effective with the ownership increase in Star Asia in March 2010, which qualified it for equity method treatment, the Company continued its fair value election regarding Star Asia. See notes 5 and 6. Prior to this increase, Star Asia had been treated as an available for sale security for which the fair value option had been elected.

During the six months ended June 30, 2012, the Company had the following equity method investees (excluding equity method affiliates for which it had adopted the fair value option): (i) Star Asia Manager; (ii) Deep Value GP; (iii) Deep Value GP II; (iv) Star Asia SPV; (v) Star Asia Opportunity; (vi) Star Asia Capital Management; and (vii) Duart Capital. The following table summarizes the activity and the earnings of the Company’s equity method affiliates.

INVESTMENT IN EQUITY METHOD AFFILIATES

(Dollars in Thousands)

	Investment in																			Total
	Star Asia Manager			Deep Value GP			Deep Value GP II		Star Asia SPV			Star  Asia Opportunity			Star Asia Capital Management			Duart Capital and Other
Balance at January 1, 2012	$	1,046		$	21		$	33	$	466		$	4,460		$	50		$	—	$	6,076
Investments / advances		—			—			—		—			—			6			—		6
Distributions/repayments		(1,050	)		—			—		(526	)		(3,908	)		(250	)		—		(5,734	)
Earnings / (loss) realized		580			(14	)		3		724			619			130			—		2,042
Balance at June 30, 2012	$	576		$	7		$	36	$	664		$	1,171		$	(64	)	$	—	$	2,390

The following table summarizes the combined financial information for all equity method investees, including equity method investees for which the fair value option was elected. This aggregated summarized financial data does not represent the Company’s proportionate share of equity method investees’ assets or earnings.

SUMMARY DATA OF EQUITY METHOD INVESTEES

(unaudited)

(Dollars in Thousands)

	June 30, 2012		December 31, 2011
Total Assets	$	257,864	$	257,735
Liabilities	$	95,063	$	68,530
Equity attributable to the investees		162,044		188,170
Non-controlling interest		757		1,035
Liabilities & Equity	$	257,864	$	257,735

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012			2011
Net income / (loss)	$	5,767	$	17,783	$	(10,119	)	$	1,952
Net income / (loss) attributable to the investees	$	5,730	$	18,207	$	(9,841	)	$	2,666

See note 20 for information regarding transactions with the Company’s equity method investees.

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Investments in Equity Method Affiliates (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Schedule of Equity Method Investment Net Income
Net income / (loss)	$ 5,767	$ 17,783	$ (10,119)	$ 1,952
Net income / (loss) attributable to the investees	$ 5,730	$ 18,207	$ (9,841)	$ 2,666

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Other Assets and Accounts Payable and Other Liabilities (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of accounts payable and other liabilities
Accounts payable	$ 1,104	$ 1,181
Rent payable	1,116	1,289
Accrued interest payable	553	662
Income and payroll taxes payable	1,334	1,947
Guarantee liability	1,084	1,084
Contingent settlement payable	4,357
Deferred income	964	1,761
Other general accrued expenses	1,738	5,643
Accounts payable and other liabilities	$ 12,250	$ 13,567

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Investments in Equity Method Affiliates (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of Summary Data of Equity Method Investees
Total Assets	$ 257,864	$ 257,735
Liabilities	95,063	68,530
Equity attributable to the investees	162,044	188,170
Non-controlling interest	757	1,035
Liabilities & Equity	$ 257,864	$ 257,735

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Financial Instruments [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Balance Sheet Classification	Unrealized Gain / (Loss)  as of June 30, 2012			Unrealized Gain / (Loss)  as of December 31, 2011
Foreign currency forward contracts	Other investments, at fair value	$	66		$	—
TBAs	Investments-trading		38			—
TBAs	Trading securities sold, not yet purchased		(47	)		(16	)
		$	57		$	(16	)

DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Income Statement Classification	Six Months Ended June 30, 2012			Six Months Ended June 30, 2011
Foreign currency forward contracts	Revenues—principal transactions and other income	$	(35	)	$	(219	)
EuroDollar futures contracts	Revenues—net trading		—			(2	)
TBAs	Revenues—net trading		254			(7,970	)
		$	219		$	(8,191	)

Derivative Financial Instruments Not Designated as Hedging Instruments under FASB ASC 815	Income Statement Classification	Three Months Ended June 30, 2012			Three Months Ended June 30, 2011
Foreign currency forward contracts	Revenues—principal transactions and other income	$	(35	)	$	(922	)
EuroDollar futures contracts	Revenues—net trading		—			(64	)
TBAs	Revenues—net trading		156			(8,113	)
		$	121		$	(9,099	)

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Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Schedule of other investments, at fair value
Other investments, Cost	$ 37,261	$ 37,299
Other investments, Carrying Value	37,609	42,772
Other investments, Unrealized Gain /(Loss)	348	5,473
Interests in securitizations [Member]
Schedule of other investments, at fair value
Other investments, Cost	217	217
Other investments, Carrying Value	97	88
Other investments, Unrealized Gain /(Loss)	(120)	(129)
Equity securities [Member]
Schedule of other investments, at fair value
Other investments, Cost	36,804	36,804
Other investments, Carrying Value	37,217	42,417
Other investments, Unrealized Gain /(Loss)	413	5,613
Equity securities [Member] | EuroDekania [Member]
Schedule of other investments, at fair value
Other investments, Cost	7,792	7,792
Other investments, Carrying Value	2,103	2,370
Other investments, Unrealized Gain /(Loss)	(5,689)	(5,422)
Equity securities [Member] | Star Asia [Member]
Schedule of other investments, at fair value
Other investments, Cost	23,219	23,219
Other investments, Carrying Value	32,299	37,358
Other investments, Unrealized Gain /(Loss)	9,080	14,139
Equity securities [Member] | Tiptree Financial Partners L.P. [Member]
Schedule of other investments, at fair value
Other investments, Cost	5,561	5,561
Other investments, Carrying Value	2,703	2,533
Other investments, Unrealized Gain /(Loss)	(2,858)	(3,028)
Equity securities [Member] | Other securities [Member]
Schedule of other investments, at fair value
Other investments, Cost	232	232
Other investments, Carrying Value	112	156
Other investments, Unrealized Gain /(Loss)	(120)	(76)
Residential loans [Member]
Schedule of other investments, at fair value
Other investments, Cost	240	278
Other investments, Carrying Value	229	267
Other investments, Unrealized Gain /(Loss)	(11)	(11)
Foreign currency forward contracts [Member]
Schedule of other investments, at fair value
Other investments, Carrying Value	66
Other investments, Unrealized Gain /(Loss)	$ 66

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Permanent Equity

6 Months Ended

Jun. 30, 2012

Permanent Equity [Abstract]

PERMANENT EQUITY

14. PERMANENT EQUITY

Stockholders’ Equity

Common Equity: The following table reflects the activity for the six months ended June 30, 2012 related to the number of shares of unrestricted common stock that the Company had issued as of June 30, 2012:

	Common Stock Shares
Balance at December 31, 2011 (1)		10,132,497
Shares issued in connection with the redemption of Operating LLC units		186,339
Vesting of shares		239,259
Shares withheld for employee taxes		(1,780	)
Balance at June 30, 2012 (1)		10,556,315

(1) Includes 50,400 shares of the Company’s common stock held as treasury stock.

In connection with the acquisition of JVB in January 2011, the Company issued 559,020 restricted units of the Operating LLC to certain of the former owners of JVB that remained employees of JVB following the acquisition. These units include a service requirement and vest over a three year period and are treated as compensation for future service rather than as part of the purchase price to acquire JVB. In January 2012, 186,339 restricted units of the Operating LLC vested, and the holders of these vested Operating LLC membership units elected to redeem these units. The Company, at its discretion, issued 186,339 shares of IFMI common stock to the JVB sellers in exchange for the 186,339 vested membership units.

Acquisition and Surrender of Additional Units of the Operating LLC, net: Effective January 1, 2011, IFMI and the Operating LLC entered into a Unit Issuance and Surrender Agreement (the “UIS Agreement”) which was approved by IFMI’s Board of Directors and the board of managers of the Operating LLC. In an effort to maintain a 1:1 ratio of IFMI’s common stock to the number of membership units IFMI holds in the Operating LLC, the UIS Agreement calls for the issuance of additional membership units of the Operating LLC to IFMI when IFMI issues its common stock to employees under existing equity compensation plans. In certain cases, the UIS Agreement calls for IFMI to surrender units to the Operating LLC when certain restricted shares are forfeited by the employee or repurchased. During the six months ended June 30, 2012, the Operating LLC issued to IFMI 464,946 units related to the UIS Agreement.

In January 2012, IFMI received 186,339 vested membership units from certain former owners of JVB in exchange for the Company’s issuance of 186,339 shares of IFMI common stock to the same former owners.

In summary, during the six months ended June 30, 2012, IFMI received (net of surrenders) 651,285 units of the Operating LLC pursuant to the UIS Agreement and as a result of the vesting and redemption of membership units of the Operating LLC by certain former owners of JVB for IFMI common stock. The Company recognized a net increase in additional paid in capital of $828 and a net increase in accumulated other comprehensive loss of $28 with an offsetting decrease in non-controlling interest of $800 in connection with the acquisition and surrender of additional units of Operating LLC.

The following schedule presents the effects of changes in IFMI’s ownership interest in the Operating LLC on the equity attributable to IFMI:

	June 30, 2012			June 30, 2011
Net income / (loss) attributable to IFMI	$	(5,937	)	$	(2,996	)
Transfers (to) from the non-controlling interest:
Increase in IFMI’s paid in capital for the acquisition / (surrender) of additional units of consolidated subsidiary, net		828			972
Changes from net income / (loss) attributable to IFMI and transfers (to) from non-controlling interest	$	(5,109	)	$	(2,024	)

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Supplemental Cash Flow Disclosure

6 Months Ended

Jun. 30, 2012

Supplemental Cash Flow Disclosure [Abstract]

SUPPLEMENTAL CASH FLOW DISCLOSURE

19. SUPPLEMENTAL CASH FLOW DISCLOSURE

Interest paid by the Company on its debt was $2,721 and $2,878 for the six months ended June 30, 2012 and 2011, respectively.

The Company paid income taxes of $111 and $56 for the six months ended June 30, 2012 and 2011, respectively, and received income tax refunds of $0 and $105 for the six months ended June 30, 2012 and 2011, respectively.

In the first half of 2012, the Company had the following significant non-cash transactions which are not reflected on the statement of cash flows:

• During the first half of 2012, the Company acquired additional units of the Operating LLC pursuant to the UIS Agreement. In an effort to maintain a 1:1 ratio of the Company’s Common Stock to the number of membership units the Company holds in the Operating LLC, the UIS Agreement calls for the issuance of additional membership units of the Operating LLC to the Company when the Company issues its Common Stock to employees under existing equity compensation plans. In certain cases, the UIS Agreement calls for the Company to surrender units to the Operating LLC when certain restricted shares are forfeited by the employee or repurchased. In addition, the Company acquired additional units of the Operating LLC from certain former owners of JVB in exchange for the Company’s issuance of 186,339 shares of the Company’s Common Stock to them in January 2012. The Company recognized a net increase in additional paid-in capital of $828, a net increase of $28 in accumulated other comprehensive loss, and a decrease of $800 in non-controlling interest. See note 14.

• During the first half of 2012, the Company reclassified $6,071 from redeemable non-controlling interest to mandatorily redeemable equity interests in its consolidated balance sheets due to partnership withdrawals from PrinceRidge.

In the first half of 2011, the Company had the following significant non-cash transactions which are not reflected on the statement of cash flows:

• Effective January 1, 2011, the Company acquired additional units of the Operating LLC pursuant to the UIS Agreement. In addition, the Company acquired additional units of the Operating LLC in connection with the JVB acquisition. The Company recognized an increase in additional paid-in capital of $972, an increase of $27 in accumulated other comprehensive loss, and a decrease of $945 in non-controlling interest.

• During the first quarter of 2011, the Company transferred 54,452 shares of Star Asia in the amount of $476 to an employee for services rendered during 2010.

• In connection with the consummation of the JVB acquisition in January 2011, the Company acquired the net assets of JVB for approximately $16,813, consisting of $14,956 in cash and 313,051 shares of the Company’s Common Stock for stock consideration of $1,531 and other liabilities of $326.

• In connection with the consummation of the PrinceRidge acquisition on May 31, 2011, the Company made a contribution of $45,000, consisting of cash, amounts payable, and all of the equity ownership interests of CCCM in exchange for an approximate 70% interest (consisting of equity and profit interests) in PrinceRidge. The remaining 30% in PrinceRidge not owned by the Company at the acquisition date represented a redeemable non-controlling interest of $18,502.

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Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of investments classified as investments-trading
Investments-trading	$ 166,192	$ 124,546
U.S. government agency MBS and CMOs [Member]
Schedule of investments classified as investments-trading
Investments-trading	30,685	7,563
U.S. government agency debt securities [Member]
Schedule of investments classified as investments-trading
Investments-trading	34,452	14,600
RMBS [Member]
Schedule of investments classified as investments-trading
Investments-trading	1,178	7,108
CMBS [Member]
Schedule of investments classified as investments-trading
Investments-trading		1,587
U.S. Treasury securities [Member]
Schedule of investments classified as investments-trading
Investments-trading	7,473	8,524
Interests in securitizations [Member]
Schedule of investments classified as investments-trading
Investments-trading	259	608
SBA loans [Member]
Schedule of investments classified as investments-trading
Investments-trading	4,382	9,049
Corporate bonds and redeemable preferred stock [Member]
Schedule of investments classified as investments-trading
Investments-trading	55,226	65,445
Foreign government bonds [Member]
Schedule of investments classified as investments-trading
Investments-trading	99	67
Municipal bonds [Member]
Schedule of investments classified as investments-trading
Investments-trading	18,895	9,225
Exchange traded funds [Member]
Schedule of investments classified as investments-trading
Investments-trading	9,377
Certificates of deposit [Member]
Schedule of investments classified as investments-trading
Investments-trading	4,079	710
Equity securities [Member]
Schedule of investments classified as investments-trading
Investments-trading	$ 87	$ 60

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Segment and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment and Geographic Information [Abstract]

Financial information for the Company's segments

As of and for the six months ended June 30, 2012	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	37,642		$	—	$	—		$	37,642		$	—		$	37,642
Asset management		—			9,545		—			9,545			—			9,545
New issue and advisory		1,266			—		—			1,266			—			1,266
Principal transactions and other income		(34	)		393		(5,015	)		(4,656	)		—			(4,656	)
Total revenues		38,874			9,938		(5,015	)		43,797			—			43,797
Total operating expenses		37,676			2,842		156			40,674			7,496			48,170
Operating income / (loss)		1,198			7,096		(5,171	)		3,123			(7,496	)		(4,373	)
Income / (loss) from equity method affiliates		—			—		2,042			2,042			—			2,042
Other non operating income / (expense)		(4,224	)		—		—			(4,224	)		(2,449	)		(6,673	)
Income / (loss) before income taxes		(3,026	)		7,096		(3,129	)		941			(9,945	)		(9,004	)
Income tax expense / (benefit)		—			—		—			—			54			54
Net income / (loss)		(3,026	)		7,096		(3,129	)		941			(9,999	)		(9,058	)
Less: Net income / (loss) attributable to the non-controlling interest		(238	)		—		—			(238	)		(2,883	)		(3,121	)
Net income / (loss) attributable to IFMI	$	(2,788	)	$	7,096	$	(3,129	)	$	1,179		$	(7,116	)	$	(5,937	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	452		$	7	$	—		$	459		$	275		$	734
Balance sheet data:
Total assets (2) (3)	$	444,297		$	7,219	$	39,995		$	491,511		$	11,524		$	503,035
Investment in equity method affiliates (included in total assets)	$	—		$	—	$	2,390		$	2,390		$	—		$	2,390

As of and for the six months ended June 30, 2011	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	43,514		$	—	$	—		$	43,514		$	—		$	43,514
Asset management		—			11,225		—			11,225			—			11,225
New issue and advisory		1,240			—		—			1,240			—			1,240
Principal transactions and other income		174			920		(1,302	)		(208	)		—			(208	)
Total revenues		44,928			12,145		(1,302	)		55,771			—			55,771
Total operating expenses		38,187			3,317		157			41,661			20,701			62,362
Operating income / (loss)		6,741			8,828		(1,459	)		14,110			(20,701	)		(6,591	)
Income / (loss) from equity method affiliates		—			4,359		171			4,530			—			4,530
Other non operating income / (expense)		13			—		—			13			(2,942	)		(2,929	)
Income / (loss) before income taxes		6,754			13,187		(1,288	)		18,653			(23,643	)		(4,990	)
Income tax expense / (benefit)		—			—		—			—			(346	)		(346	)
Net income / (loss)		6,754			13,187		(1,288	)		18,653			(23,297	)		(4,644	)
Less: Net income / (loss) attributable to the non-controlling interest		(53	)		—		—			(53	)		(1,595	)		(1,648	)
Net income / (loss) attributable to IFMI	$	6,807		$	13,187	$	(1,288	)	$	18,706		$	(21,702	)	$	(2,996	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	145		$	7	$	—		$	152		$	821		$	973
Balance sheet data:
Total assets (2) (3)	$	370,731		$	21,553	$	44,020		$	436,304		$	19,429		$	455,733
Investment in equity method affiliates (included in total assets)	$	—		$	—	$	1,488		$	1,488		$	—		$	1,488

For the three months ended June 30, 2012	Capital Markets			Asset Management		Principal Investing			Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	19,951		$	—	$	—		$	19,951		$	—		$	19,951
Asset management		—			4,608		—			4,608			—			4,608
New issue and advisory		189			—		—			189			—			189
Principal transactions and other income		(7	)		233		63			289			—			289
Total revenues		20,133			4,841		63			25,037			—			25,037
Total operating expenses		18,806			1,762		75			20,643			3,564			24,207
Operating income / (loss)		1,327			3,079		(12	)		4,394			(3,564	)		830
Income / (loss) from equity method affiliates		—			—		1,526			1,526			—			1,526
Other non operating income / (expense)		(4,289	)		—		—			(4,289	)		(1,172	)		(5,461	)
Income / (loss) before income taxes		(2,962	)		3,079		1,514			1,631			(4,736	)		(3,105	)
Income tax expense / (benefit)		—			—		—			—			63			63
Net income / (loss)		(2,962	)		3,079		1,514			1,631			(4,799	)		(3,168	)
Less: Net income / (loss) attributable to the non-controlling interest		(109	)		—		—			(109	)		(981	)		(1,090	)
Net income / (loss) attributable to IFMI	$	(2,853	)	$	3,079	$	1,514		$	1,740		$	(3,818	)	$	(2,078	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	223		$	3	$	—		$	226		$	117		$	343

For the three months ended June 30, 2011	Capital Markets			Asset Management		Principal Investing		Segment Total			Unallocated (1)			Total
Summary statement of operations
Net trading	$	16,240		$	—	$	—	$	16,240		$	—		$	16,240
Asset management		—			5,255		—		5,255			—			5,255
New issue and advisory		1,131			—		—		1,131			—			1,131
Principal transactions and other income		156			342		333		831			—			831
Total revenues		17,527			5,597		333		23,457			—			23,457
Total operating expenses		18,733			1,040		102		19,875			11,760			31,635
Operating income / (loss)		(1,206	)		4,557		231		3,582			(11,760	)		(8,178	)
Income / (loss) from equity method affiliates		—			4,359		76		4,435			—			4,435
Other non operating income / (expense)		13			—		—		13			(1,460	)		(1,447	)
Income / (loss) before income taxes		(1,193	)		8,916		307		8,030			(13,220	)		(5,190	)
Income tax expense / (benefit)		—			—		—		—			(133	)		(133	)
Net income / (loss)		(1,193	)		8,916		307		8,030			(13,087	)		(5,057	)
Less: Net income / (loss) attributable to the non-controlling interest		(53	)		—		—		(53	)		(1,633	)		(1,686	)
Net income / (loss) attributable to IFMI	$	(1,140	)	$	8,916	$	307	$	8,083		$	(11,454	)	$	(3,371	)
Other statement of operations data:
Depreciation and amortization (included in total operating expense)	$	116		$	3	$	—	$	119		$	384		$	503

(1) Unallocated includes certain expenses incurred by indirect overhead and support departments (such as the executive, finance, legal, information technology, human resources, risk, compliance, and other similar overhead and support departments). Some of the items not allocated include: (1) operating expenses related to support departments excluding certain departments that directly support the capital markets segment; (2) interest expense on debt; and (3) income taxes. Management does not consider these items necessary for an understanding of the operating results of these segments and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.

(2) Unallocated assets primarily include (1) amounts due from related parties; (2) furniture and equipment, net; and (3) other assets that are not considered necessary for an understanding of segment assets and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.

(3) Goodwill and intangible assets as of June 30, 2012 and 2011 are allocated to the Capital Markets and Asset Management segments as indicated in the table listed below.

	Capital Markets		Asset Management		Principal Investing		Segment Total		Unallocated		Total
Goodwill	$	7,937	$	3,176	$	—	$	11,113	$	—	$	11,113
Intangible assets (included in other assets)	$	538	$	—	$	—	$	538	$	—	$	538

	Capital Markets		Asset Management		Principal Investing		Segment Total		Unallocated		Total
Goodwill	$	8,000	$	3,176	$	—	$	11,176		—	$	11,176
Intangible assets (included in other assets)	$	538	$	—	$	—	$	538		—	$	538

Total revenues summarized by geographic area

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Total Revenues:
United States	$	20,390	$	21,057	$	37,503	$	49,246
United Kingdom & Other		4,647		2,400		6,294		6,525
Total	$	25,037	$	23,457	$	43,797	$	55,771

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Consolidated Statements of Operations and Comprehensive/ Income (Loss) (Parenthetical) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Operations [Abstract]
Foreign currency translation adjustments, tax	$ 0	$ 0	$ 0	$ 0
Other comprehensive income / (loss), tax	$ 0	$ 0	$ 0	$ 0

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Adoption of New Accounting Standards

In April 2011, the FASB issued ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”), which revises the criteria for assessing effective control for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The determination of whether the transfer of a financial asset subject to a repurchase agreement is a sale is based, in part, on whether the entity maintains effective control over the financial asset. ASU 2011-03 removes from the assessment of effective control: the criterion requiring the transferor to have the ability to repurchase or redeem the financial asset on substantially agreed terms, even in the event of default by the transferee, and the related requirement to demonstrate that the transferor possesses adequate control to fund substantially all the cost of purchasing replacement financial assets. The amendments in ASU 2011-03 will be effective for interim and annual reporting periods beginning on or after December 15, 2011, early adoption is prohibited, and the amendments will be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The Company’s adoption of the provisions of ASU 2011-03 effective January 1, 2012 did not have an effect on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”), which amends FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurements. The amended guidance changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additional disclosure requirements include transfers between levels 1 and 2; and for level 3 fair value measurements, a description of the Company’s valuation processes and additional information about unobservable inputs impacting level 3 measurements. Additionally, the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. The amendments result in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. The guidance provided in ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. The Company’s adoption of the provisions of ASU 2011-04 effective January 1, 2012 did not have a material effect on the Company’s consolidated financial position and results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income, (“ASU 2011-05”) which requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”). ASU 2011-12 defers the requirement that companies present reclassification adjustments and the effect of those reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. The effective dates for ASU 2011-12 are consistent with the effective dates for ASU 2011-05. Effective January 1, 2012, the Company adopted the provisions of ASU 2011-05 and ASU 2011-12, which resulted in the Company presenting the components of comprehensive income (loss) within the consolidated statements of operations and comprehensive income (loss). The Company’s adoption of the new guidance did not have an effect on the Company’s financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which permits companies to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more likely than not threshold is defined as having a likelihood of more than 50%. Under this option, a company would no longer be required to calculate the fair value of the reporting unit unless the company determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. A company has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment tests. A company may resume performing the qualitative assessment in any subsequent period. The guidance also includes examples of the types of events and circumstances to consider in conducting the qualitative assessment. These examples of events and circumstances supersede (1) the previous examples included in Topic 350 of event and circumstances that a company should consider when testing goodwill for impairment between annual tests and (2) the previous examples of events and circumstances that a company having a reporting unit with a zero or negative carrying amount should consider in determining whether to perform the second step of the impairment test, used to measure the amount of the loss, if any. The guidance provided in ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s adoption of the provisions of ASU 2011-08 effective January 1, 2012 did not have an effect on the Company’s consolidated financial statements.

B. Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments. These determinations were based on available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates and, therefore, these estimates may not necessarily be indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Refer to note 6 for a discussion of the fair value hierarchy with respect to investments-trading, other investments, at fair value and the derivatives held by the Company.

Cash and cash equivalents: Cash is carried at historical cost which is assumed to approximate fair value. The estimated fair value measurements of cash and cash equivalents and restricted cash are generally classified within level 1 of the valuation hierarchy.

Investments-trading: These amounts are carried at fair value. The fair value is based on either quoted market prices of an active exchange, independent broker market quotations, market price quotations from third party pricing services, or valuation models when quotations are not available. See note 6 for disclosures about the categorization of the fair value measurements of investments-trading within the three level fair value hierarchy.

Other investments, at fair value: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent broker market quotations, or valuation models when quotations are not available. In the case of investments in alternative investment funds, fair value is generally based on the reported net asset value of the underlying fund. See note 6 for disclosures concerning the categorization of the fair value measurements of other investments, at fair value within the three level fair value hierarchy.

Receivables under resale agreements: Receivables under resale agreements are carried at their contracted resale price, have short-term maturities, and are repriced frequently or bear market interest rates and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of receivables under resale agreements are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Trading securities sold, not yet purchased: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent market quotations, market price quotations from third party pricing services, or valuation models when quotations are not available. See note 6 for disclosures concerning the categorization of the fair value measurements of trading securities sold, not yet purchased within the three level fair value hierarchy.

Securities sold under agreement to repurchase: The liability for securities sold under agreement to repurchase are carried at their contracted repurchase price, have short-term maturities and are repriced frequently with amounts normally due in one month or less and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of securities sold under agreement to repurchase are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Debt: These amounts are carried at outstanding principal less unamortized discount. However, a substantial portion of the debt was assumed in the Merger and recorded at fair value as of that date. As of June 30, 2012 and December 31, 2011, the fair value of the Company’s debt was estimated to be $32.7 million and $43.5 million, respectively. The estimated fair value measurements of the debt are generally based on discounted cash flow models prepared by the Company’s management primarily using discount rates for similar instruments issued to companies with similar credit risks to the Company and are generally classified within level 3 of the fair value hierarchy.

Derivatives: These amounts are carried at fair value. Derivatives may be included as a component of investments-trading, trading securities sold, not yet purchased, and other investments, at fair value. See notes 6 and 7. The fair value is generally based on quoted market prices on an exchange that is deemed to be active for derivative instruments such as foreign currency forward contracts and EuroDollar futures. For derivative instruments, such as “to-be-announced” securities (“TBAs”), the fair value is generally based on market price quotations from third party pricing services. See note 6 for disclosures concerning the categorization of the fair value measurements within the three level fair value hierarchy.

C. Recent Accounting Developments

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”), which requires companies to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on a company’s financial position. The amendments require enhanced disclosures by requiring improved information about financial statements and derivative instruments that are either (1) offset in accordance with current literature, or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current literature. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures required by ASU 2011-11 will be applied retrospectively for all comparative periods presented. The Company is currently evaluating the impact of ASU 2011-11 on its disclosures about offsetting assets and liabilities.

XML

Derivative Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION
Derivative Financial Instruments Not Designated as Hedging Instruments, Unrealized Gain/(Loss)	$ 57	$ (16)
Other Investment at Fair Value [Member] | Foreign currency forward contracts [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION
Derivative Financial Instruments Not Designated as Hedging Instruments, Unrealized Gain/(Loss)	66
Investments-trading [Member] | TBAs [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION
Derivative Financial Instruments Not Designated as Hedging Instruments, Unrealized Gain/(Loss)	38
Trading securities sold, not yet purchased [Member] | TBAs [Member]
DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION
Derivative Financial Instruments Not Designated as Hedging Instruments, Unrealized Gain/(Loss)	$ (47)	$ (16)

XML

Related Party Transactions (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified																		6 Months Ended
	Jun. 30, 2012 TBBK [Member]	Dec. 31, 2011 TBBK [Member]	Jun. 30, 2012 Star Asia [Member]	Dec. 31, 2011 Star Asia [Member]	Jun. 30, 2012 Star Asia Manager [Member]	Jun. 30, 2012 Star Asia SPV [Member]	Dec. 31, 2011 Star Asia SPV [Member]	Jun. 30, 2012 Star Asia Opportunity [Member]	Dec. 31, 2011 Star Asia Opportunity [Member]	Jun. 30, 2012 Star Asia Capital Management [Member]	Dec. 31, 2011 Star Asia Capital Management [Member]	Jun. 30, 2012 EuroDekania [Member]	Dec. 31, 2011 EuroDekania [Member]	Jun. 30, 2012 MFCA [Member]	Jun. 23, 2011 MFCA [Member]	Jun. 30, 2012 Deep Value GP [Member]	Dec. 31, 2011 Deep Value GP II [Member]	Jun. 30, 2011 Duart Fund [Member]	Jun. 30, 2012 Duart Capital [Member]	Dec. 31, 2011 Duart Capital [Member]	Jun. 30, 2012 Tiptree Financial Partners L.P. [Member]	Dec. 31, 2011 Tiptree Financial Partners L.P. [Member]
Related Party Transactions (Textual) [Abstract]
Deposits	$ 59	$ 91
Outstanding shares % held			28.00%	28.00%	50.00%	31.00%	31.00%	28.00%	28.00%	33.00%	33.00%	10.00%	10.00%		3.00%	50.00%	40.00%		20.00%	20.00%	1.00%	1.00%
Common stock exchanged														1,000,200							111,133
Redemption																		100.00%

XML

Debt (Details Textual) (USD $) In Thousands, unless otherwise specified	1 Months Ended	6 Months Ended							6 Months Ended				6 Months Ended
	Mar. 31, 2012	Jun. 30, 2012	Jul. 05, 2012	May 15, 2012 Senior notes [Member]	Jun. 30, 2012 Contingent convertible senior notes [Member]	Jun. 30, 2012 Junior subordinated debt [Member]	Jun. 30, 2012 Junior subordinated debt [Member] VIE trusts [Member]	May 15, 2012 Junior subordinated debt [Member] VIE trusts [Member]	Jun. 30, 2012 Subordinated notes payable [Member]	Jun. 30, 2012 10.50% Contingent convertible senior notes due 2027 [Member]	Jun. 30, 2012 7.625% Contingent convertible senior notes due 2027 [Member]	Jun. 30, 2012 Third party [Member] VIE trusts [Member]	Jun. 30, 2012 May 15, 2014 [Member] 10.50% Contingent convertible senior notes due 2027 [Member]	Jun. 30, 2012 May 15, 2017 [Member] 10.50% Contingent convertible senior notes due 2027 [Member]	Jun. 30, 2012 May 15, 2022 [Member] 10.50% Contingent convertible senior notes due 2027 [Member]
Debt (Textual) [Abstract]
Current outstanding par					$ 8,221	$ 48,125	$ 1,489		$ 1,514	$ 8,121	$ 100	$ 48,125
Principal amount of debt outstanding		8,121
Principal amount of debt (before deducting unamortized discount or premiums (if any)) redeemed			100	10,110
Interest rate										10.50%	7.625%
Contingent convertible senior notes due date		2027-05
Principal amount for purpose of redemption of new notes, percentage										100.00%
Interest paid currently, percentage									9.00%
Interest paid in kind, percentage									3.00%
Notes repurchase date													May 15, 2014	May 15, 2017	May 15, 2022
Notice period to redeem New Notes										30 days
Carrying value of junior subordinated notes								0
Debt (Additional Textual) [Abstract]
Aggregate principal amount of old notes outstanding		100
Principle amount of repurchase of old notes	150
Principle amount excluding interest	147
Gain from repurchase of debt	$ 3

XML

Related Party Transactions

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

20. RELATED PARTY TRANSACTIONS

The Company has identified the following related party transactions for the six and three months ended June 30, 2012 and 2011. The transactions are listed by related party and, unless otherwise noted in the text of the description, the amounts are disclosed in the tables at the end of this section.

A. Cohen Bros. Financial, LLC (“CBF”)

CBF has been identified as a related party because (i) CBF is a non-controlling interest of the Company and (ii) CBF is wholly owned by the chairman and chief executive officer of the Company.

Beginning in October 2008, the Company began receiving a monthly advisory fee for consulting services provided by the Company to CBF. The Company stopped providing these services and stopped receiving this fee as of March 31, 2012. The fee was recognized as a component of asset management revenue in the consolidated statements of operations. This fee is disclosed as management fee revenue in the tables at the end of this section.

B. The Bancorp, Inc.

The Bancorp, Inc. (“TBBK”) is identified as a related party because TBBK’s chairman is the Company chairman and chief executive officer.

TBBK maintained deposits for the Company in the amount of $59 and $91 as of June 30, 2012 and December 31, 2011, respectively.

As part of the Company’s broker-dealer operations, the Company from time to time purchases securities from third parties and sells those securities to TBBK. The Company may purchase securities from TBBK and ultimately sell those securities to a third party. In either of the cases listed above, the Company includes the trading revenue earned (i.e. the gain or loss realized) by the Company for the entire transaction in the amounts disclosed as part of net trading in the table at the end of this section.

C. Investment Vehicles and Other

The following are identified as related parties. Amounts with respect to the transactions identified below are summarized in a table at the end of this section.

1. Star Asia invests primarily in Asian commercial real estate structured finance products, including CMBS, corporate debt of REITs and real estate operating companies, B notes, mezzanine loans and other commercial real estate fixed income investments. As of June 30, 2012 and December 31, 2011, the Company directly owned approximately 28% of Star Asia’s outstanding shares. Star Asia has been identified as a related party because in the absence of the fair value option of FASB ASC 825, Star Asia would be treated as an equity method affiliate, and because the chairman and chief executive officer of the Company is a member of Star Asia’s board of directors. The Company has an investment in Star Asia. Dividends received on that investment are disclosed as part of dividend income in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of gain / (loss) in the tables at the end of this section.

2. EuroDekania invests primarily in hybrid capital securities of European bank and insurance companies, CMBS, RMBS and widely syndicated leverage loans. As of June 30, 2012 and December 31, 2011, the Company directly owned approximately 10% of EuroDekania’s outstanding shares. EuroDekania has been identified as a related party because the chairman and chief executive officer of the Company is a member of EuroDekania’s board of directors. The Company has a management contract with and an investment in EuroDekania. Dividends received on that investment are disclosed as part of dividend income in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of the gain / (loss) in the tables at the end of this section. Amounts earned from its management contract are disclosed as part of management fee revenue in the tables at the end of this section.

As part of the Company’s broker-dealer operations, the Company from time to time purchases securities from third parties and sell those securities to EuroDekania. Or, the Company may purchase securities from EuroDekania and ultimately sell those securities to third parties. In either case, the Company includes the trading revenue earned (i.e. the gain or loss realized) by the Company for the entire transaction in the amounts disclosed as part of net trading in the table at the end of this section.

3. Star Asia Manager serves as external manager of Star Asia and Star Asia SPV (see C-8 listed below) and the Company owns 50% of Star Asia Manager. Star Asia Manager has been identified as a related party because it is an equity method investee of the Company. The Company recognizes its share of the income or loss of Star Asia Manager as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

4. Prior to June 23, 2011 the Company owned approximately 3% of MFCA’s outstanding shares. On June 23, 2011, MFCA became a wholly owned subsidiary of Tiptree. As part of that transaction, the Company exchanged its 1,000,200 shares of MFCA for 111,133 shares of Tiptree. As of June 30, 2012 and December 31, 2011, the Company owned approximately 1% of Tiptree. Prior to MFCA’s merger with Tiptree, MFCA had been identified as a related party because: (i) in the absence of the fair value option of FASB ASC 825, MFCA would have been treated as an equity method affiliate of the Company; (ii) the chairman and chief executive officer of the Company was the former chairman of MFCA’s board and served as a member of the board until June 22, 2011; and (iii) the former president of the Company served as vice chairman of MFCA’s board until March 18, 2009. In March 2009, the board of directors of MFCA assigned the management contract to an unrelated third party. The Company had a management contract with MFCA. The Company had an investment in MFCA and had a shared services arrangement with MFCA. Dividends received on that investment are disclosed as part of dividend income in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of gain / (loss) in the tables at the end of this section. Amounts earned from its management contract are disclosed as part of management fee revenue in the tables at the end of this section. Payments received under the shared services arrangement are disclosed as part of shared services (paid) / received in the tables at the end of this section. In June 2011, MFCA was merged into Tiptree. No employees of the Company serve on the board of Tiptree and Tiptree is not an equity method investee of the Company. Therefore, Tiptree is not a related party.

5. Cohen Financial Group, Inc. (“CFG”) had been identified as a related party because it was a member of the Company prior to the Merger. CFG filed a Certificate of Dissolution with the Secretary of State of the State of Delaware on December 16, 2009, and is in process of completing the liquidation process. From time to time, the Company advanced CFG funds for normal operating purposes; these amounts were treated as due from related party in the consolidated balance sheets.

6. The Deep Value GP serves as the general partner for the feeder funds of Strategos Deep Value Funds (in the case of the first master fund) and as the general partner of the master fund itself (in the case of a second master fund). The Deep Value GP II serves as the general partner for the offshore feeder fund (in the case of a third master fund). The Deep Value GP and the Deep Value GP II are collectively referred to as the “Deep Value GPs.” The Company owns 50% of the Deep Value GP and 40% of the Deep Value GP II. The Deep Value GP and the Deep Value GP II have been identified as related parties because the Deep Value GPs are equity method affiliates of the Company. Income or loss recognized under the equity method is disclosed in the table at the end of this section. The Company previously served as the investment advisor to these funds and sold these advisory contracts in March 2011.

7. Deep Value is a series of closed-end distressed debt funds. Deep Value raises capital from investors, and earns investment returns by investing in a diversified portfolio of asset backed securities consisting primarily of RMBS and other real estate related securities, as well as other U.S. real estate related assets and related securities. As of June 30, 2011, the first Deep Value fund was completely liquidated. Deep Value (as a group) had been identified as a related party because in the absence of the fair value option of FASB ASC 825, the onshore and offshore feeders in which the Company had an investment would be treated as equity method affiliates of the Company. The Company had a management contract with and an investment in Deep Value. Amounts earned from its management contract are disclosed as part of management fee revenue in the tables at the end of this section. Gains or losses recognized from its investment are disclosed as part of gain / (loss) in the tables at the end of this section. The Company previously served as the investment advisor to these funds and sold these advisory contracts in March 2011.

8. Star Asia SPV is a Delaware limited liability company formed in 2010. It was formed to create a pool of assets that would provide collateral to investors who participated in Star Asia’s 2010 rights offering. The investors in Star Asia’s rights offering also received equity interests in Star Asia SPV. Star Asia SPV purchased certain assets from Star Asia and the equity interest holders of Star Asia SPV receive investment returns on the assets held in the SPV up to an agreed upon maximum. Returns above that agreed upon maximum are remitted back to Star Asia. The Company directly owned approximately 31% of Star Asia SPV’s outstanding shares as of June 30, 2012 and December 31, 2011. Star Asia SPV has been identified as a related party because it is an equity method investee of the Company. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

9. Duart Capital is a Delaware limited liability company formed in 2010. The Company directly owned 20% of Duart Capital’s outstanding equity interests as of June 30, 2012 and December 31, 2011. Duart Capital has been identified as a related party because it is an equity method investee of the Company. Duart Capital also serves as the investment manager of the Duart Fund (see below). The Company did not elect the fair value option for its investment in Duart Capital. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

10. The Duart Fund is a specialized deep value and special situations opportunity fund that was formed in September 2010. The Duart Fund’s investment objective is to provide superior absolute returns by investing primarily in a portfolio of long and short positions in public and private real estate equity securities, equity-linked securities, or debt securities (including, but not limited to, convertible debt, debt with warrants, warrants, and credit default swaps that related to real estate securities) and partnership or fund interests in the real estate markets. Effective December 31, 2010, the Company submitted a redemption notice to the Duart Fund to redeem 100% of its capital. The Company received its redemption in April 2011. The Duart Fund had been identified as a related party because in the absence of the fair value option of FASB ASC 825, the onshore feeder fund in which the Company had an investment was treated as an equity method affiliate of the Company. Gains or losses recognized from its investment are disclosed as part of the gain / (loss) in the tables at the end of this section.

11. Star Asia Opportunity is a Delaware limited liability company formed in July 2011 to partially finance the acquisition of seven real estate properties in Japan. As of June 30, 2012 and December 31, 2011, the Company directly owned approximately 28% of Star Asia Opportunity’s outstanding equity interests. Star Asia Opportunity has been identified as a related party because it is an equity method investee of the Company. The Company recognizes its share of the income or loss of Star Asia Opportunity as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

12. Star Asia Capital Management serves as external manager of Star Asia Opportunity (see C-11 listed above) and the Company owns 33% of Star Asia Capital Management. Star Asia Capital Management has been identified as a related party because it is an equity method investee of the Company. The Company recognizes its share of the income or loss of Star Asia Capital Management as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

The following tables display the routine intercompany transactions recognized in the statements of operations from the identified related parties during the six and three months ended June 30, 2012 and 2011, respectively, which are described above. Amounts shown as shared services (paid) / received are included as a component of operating expense in the Company’s consolidated statements of operations:

RELATED PARTY TRANSACTIONS

Six months ended June 30, 2012

(Dollars in Thousands)

					Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
CBF	$	64	$	—	$	—	$	—		$	—		$	—
TBBK		—		71		—		—			—			—
Star Asia		—		—		—		(5,059	)		—			—
Star Asia Manager		—		—		—		—			580			—
Star Asia SPV		—		—		—		—			724			—
Star Asia Opportunity		—		—		—		—			619			—
Star Asia Capital		—		—		—		—			130			—
EuroDekania		139		—		183		(267	)		—			—
Deep Value		—		—		—		—			(11	)		—
Total	$	203	$	71	$	183	$	(5,326	)	$	2,042		$	—

RELATED PARTY TRANSACTIONS

Three months ended June 30, 2012

(Dollars in Thousands)

					Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
TBBK	$	—	$	36	$	—	$	—		$	—		$	—
Star Asia		—		—		—		181			—			—
Star Asia Manager		—		—		—		—			306			—
Star Asia SPV		—		—		—		—			245			—
Star Asia Opportunity		—		—		—		—			923			—
Star Asia Capital		—		—		—		—			64			—
EuroDekania		—		—		89		(245	)		—			—
Deep Value		—		—		—		—			(12	)		—
Total	$	—	$	36	$	89	$	(64	)	$	1,526		$	—

RELATED PARTY TRANSACTIONS

Six months ended June 30, 2011

(Dollars in Thousands)

						Principal transactions and other income					Income / (loss)			Shared
	Management fee revenue		Net trading			Dividend income and other		Gain/ (Loss)			from equity method affiliates			Services (Paid) / Received
CBF	$	138	$	—		$	—	$	—		$	—		$	—
TBBK		—		315			—		—			—			—
Star Asia		—		—			—		(2,014	)		—			—
Star Asia Manager		—		—			—		—			511			—
Star Asia SPV		—		—			—		—			313			—
EuroDekania		333		(101	)		—		1,619			—			—
MFCA A		—		—			32		71			—			9
Deep Value		452		—			—		(9	)		4,372			—
Duart Fund		—		—			—		(456	)		—			—
Duart Capital		—		—			—		—			(666	)		—
Total	$	923	$	214		$	32	$	(789	)	$	4,530		$	9

RELATED PARTY TRANSACTIONS

Three months ended June 30, 2011

(Dollars in Thousands)

					Principal transactions and other income					Income / (loss) from equity method affiliates			Shared Services (Paid) / Received
	Management fee revenue		Net trading		Dividend income and other		Gain/ (Loss)
CBF	$	71	$	—	$	—	$	—		$	—		$	—
TBBK		—		315		—		—			—			—
Star Asia		—		—		—		667			—			—
Star Asia Manager		—		—		—		—			291			—
Star Asia SPV		—		—		—		—			40			—
EuroDekania		167		—		—		844			—			—
MFCA		—		—		—		40			—			4
Deep Value		—		—		—		(9	)		4,371			—
Duart Fund		—		—		—		(1	)		—			—
Duart Capital		—		—		—		—			(267	)		—
Total	$	238	$	315	$	—	$	1,541		$	4,435		$	4

The following related party transactions are non-routine and are not included in the tables above.

D. Directors and Employees

In addition to the employment agreements the Company has entered into with its chairman and its chief financial officer, the Company has entered into its standard indemnification agreement with each of its directors and executive officers.

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Net Capital Requirements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Net Capital Requirements (Textual) [Abstract]
Minimum net liquid capital required	$ 1,708
Cohen & Company Securities, LLC [Member]
Net Capital Requirements (Textual) [Abstract]
Adjusted net capital	3,463
Amount in excess of minimum capital requirement	3,363
JVB's [Member]
Net Capital Requirements (Textual) [Abstract]
Adjusted net capital	9,803
Amount in excess of minimum capital requirement	9,681
PrinceRidge Group LLC [Member]
Net Capital Requirements (Textual) [Abstract]
Adjusted net capital	17,107
Amount in excess of minimum capital requirement	16,857
EuroDekania Management Limited [Member]
Net Capital Requirements (Textual) [Abstract]
Amount in excess of minimum capital	3,767
Net liquid capital	$ 5,475

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Debt (Tables)

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

Debt Outstanding

Description	Current Outstanding Par			June 30, 2012		December 31, 2011		Interest Rate Terms			Weighted Average Interest Rate at 06/30/2012			Weighted Average Maturity
Contingent convertible senior notes:
7.625% contingent convertible senior notes (the “Old Notes”)	$	100		$	100	$	10,303		7.63	%		7.63	%	July 2012(1)
10.50% contingent convertible senior notes (the “New Notes”)		8,121			8,049		8,030		10.50	%		10.50	%	May 2014(2)
	$	8,221		$	8,149	$	18,333
Junior subordinated notes	$	48,125	(3)		17,068		17,343		7.47	%		7.47	%	August 2036
Subordinated notes payable	$	1,514			1,514		1,491		12.00	%(4)		12.00	%	June 2013
Total				$	26,731	$	37,167

(1) Represents the date the Company redeemed the remaining $100 aggregate principal amount of Old Notes outstanding for cash.

(2) Represents the weighted average put date maturity. The weighted average contractual maturity for the New Notes is May 2027.

The Company may redeem all or part of the $8,121 aggregate principal amount of the New Notes for cash on or after May 20, 2014, at a redemption price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes may require the Company to repurchase all or a portion of the New Notes for cash on May 15, 2014; May 15, 2017; and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date. The holders of the New Notes are required to provide notice to the Company of their plan to redeem the New Notes at any time during the 30 days prior to May 15, 2014; May 15, 2017; and May 15, 2022.

(3) The outstanding par represents the total par amount of the junior subordinated notes held by two separate VIE trusts. The Company does not consolidate these trusts. The Company holds $1,489 par value of these junior subordinated notes. These notes held by the Company have a carrying value of $0. Therefore, the net par value held by third parties is $48,125.

(4) Comprised of 9% paid currently and 3% paid in kind.

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Redeemable Non-Controlling Interest (Temporary Equity)

6 Months Ended

Jun. 30, 2012

Redeemable Non-Controlling Interest (Temporary Equity) [Abstract]

REDEEMABLE NON-CONTROLLING INTEREST (TEMPORARY EQUITY)

13. REDEEMABLE NON-CONTROLLING INTEREST (TEMPORARY EQUITY)

The redeemable non-controlling interest represents the equity interests of PrinceRidge which are not owned by the Company. The members of PrinceRidge have the right to withdraw from PrinceRidge and require PrinceRidge to redeem the interests for cash over a contractual payment period. The Company has concluded these interests should be treated as temporary equity under Accounting Series Release 268 (“ASR 268”). These interests are shown outside of the permanent equity of IFMI in its consolidated balance sheet as redeemable non-controlling interests.

In June 2011, one partner withdrew from PrinceRidge and, therefore, the Company reclassified $3,536 from redeemable non-controlling interest to mandatorily redeemable equity interests on its consolidated balance sheets. During the first half of 2012, the Company reclassified $6,071 from redeemable non-controlling interest to mandatorily redeemable equity interests in its consolidated balance sheets due to partnership withdrawals from PrinceRidge. In addition, the Company distributed cash of $43 during the first quarter of 2012 to a withdrawing partner and received $20 in cash related to capital contributions made to PrinceRidge during the second quarter of 2012. Per the terms of the governing documents, PrinceRidge may redeem a partner’s equity interests over a period of time of up to 2 to 5 years. The amount actually due to a withdrawing partner will fluctuate over time based on the operating results of PrinceRidge. The carrying value of the liability owed to a withdrawing partner will be recorded at the amount owed as of each balance sheet date. Any increases or decreases in the amount owed will be recorded as interest income or expense and will be included in the non operating section of the consolidated statement of operations. During the first half of 2012, the Company distributed cash of $789 to the holders of mandatorily redeemable equity interests. As of June 30, 2012 and December 31, 2011, the mandatorily redeemable equity interests totaled $8,299 and $3,149, respectively. See also note 22.