The Company is party to certain claims, suits and complaints arising in the ordinary course of business. All of the below legal matters are related to activities related to operations of StockCross Financial Services, Inc. (“StockCross”), prior to the Company’s acquisition of StockCross on January 1, 2020.

On July 14, 2021, StockCross entered into a Letter of Acceptance, Waiver, and Consent with FINRA in connection with alleged excessive trading and suitability violations by a registered representative of StockCross in a customer’s account, supervisory failures to comply with supervisory requirements relating to certain equity and options and stock lending transactions, and certain record keeping requirements. Pursuant to the consent, the Company agreed to a censure, pay a fine of $250,000, and made an undertaking to retain an independent consultant to conduct a comprehensive review of the Company’s compliance with suitability rules in connection with solicited equity and options transactions, as well as possession-or-control requirements in connection with the firm’s stock loan business. As of December 31, 2021, this legal matter has been resolved and the Company paid $250,000 for the year ended December 31, 2021, which is within the line item “Other general and administrative” in the statements of income.

On July 9, 2021, StockCross entered into a Consent Order with the California Department of Financial Protection and Innovation in connection with alleged supervisory failures relating to the sale of Unit Investment Trusts to six customers. Pursuant to the consent order, the Company agreed to desist and refrain from violations of California law relating to supervision by broker-dealers, to make a payment of $100,000 to the California Department of Financial Protection and Innovation for administrative costs, and to offer restitution of commissions of approximately $315,000 in aggregate to the six customers. The Company paid $100,000 for the year ended December 31, 2021 related to this legal matter, which is within the line item “Other general and administrative” in the statements of income. As of December 31, 2021, this legal matter has been resolved and the six customers rejected the offer of restitutions.

For activity related to operations of StockCross prior to the Company’s acquisition of StockCross, FINRA’s Division of Enforcement is currently investigating UIT transactions that were executed by StockCross that the enforcement staff believes were terminated early. All of these transactions occurred prior to the Company’s acquisition of StockCross on January 1, 2020. Management cannot at this time assess either the duration or the likely outcome or consequences of this matter. Nevertheless, FINRA has the authority to impose sanctions on the Company or require that it make offers of restitution to other customers who FINRA believes incurred sales charges in early liquidations of UITs. No assurances can be given that a mutual settlement with FINRA regarding these matters can be reached or that any amount paid in settlement will not be material.

As of December 31, 2021, all other legal matters are without merit or involve amounts which would not have a material impact on the Company’s results of operations or financial position.

Siebert 2021 Form-10K 70

Overnight Financing

As of December 31, 2021, MSCO had an available line of credit for short term overnight demand borrowing of up to $15 million with BMO Harris Bank. As of December 31, 2021, MSCO had no outstanding loan balance with BMO Harris Bank and there were no commitment fees or other restrictions on this line of credit.

As of December 31, 2020, in addition to the $15 million line of credit with BMO Harris Bank, MSCO had a $15 million line of credit with Texas Capital Bank, which MSCO did not renew as of December 31, 2021. The removal of this line of credit was due to Texas Capital Bank exiting the business line and did not impact MSCO’s ability to meet its liquidity requirements. MSCO utilizes customer or firm securities as a pledge for short-term borrowing needs.

The interest expense for these credit lines was $17,000 and $19,000 the year ended December 31, 2021 and 2020, respectively. There were no fees associated with these credit lines for the year ended December 31, 2021 and 2020.

NFS Contract

Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of the arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025. If the Company chooses to exit this agreement before the end of the contract term, the Company is under the obligation to pay an early termination fee upon occurrence pursuant to the table below:

Date of Termination	Early Termination Fee
Prior to August 1, 2022	$	8,000,000
Prior to August 1, 2023	$	7,250,000
Prior to August 1, 2024	$	4,500,000
Prior to August 1, 2025	$	3,250,000

For the year ended December 31, 2021, there has been no expense recognized for any early termination fees. The Company believes that it is unlikely it will have to make material payments related to early termination fees and has not recorded any contingent liability in the financial statements for these fees.

General Contingencies

In the normal course of its business, the Company indemnifies and guarantees certain service providers against specified potential losses in connection with their acting as an agent of, or providing services to, the Company. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

The Company, through its affiliate, Kennedy Cabot Acquisition, LLC (“KCA”), is self-insured with respect to employee health claims. KCA maintains stop-loss insurance for certain risks and has a health claim reinsurance limit capped at approximately $65,000 per employee as of December 31, 2021. The estimated liability for self-insurance claims is initially recorded in the year in which the event of loss occurs and may be subsequently adjusted based upon new information and cost estimates. Reserves for losses represent estimates of reported losses and estimates of incurred but not reported losses based on past and current experience. Actual claims paid and settled may differ, perhaps significantly, from the provision for losses. This adds uncertainty to the estimated reserves for losses. Accordingly, it is at least possible that the ultimate settlement of losses may vary significantly from the amounts included in the financial statements.

Siebert 2021 Form-10K 71

As part of this plan, the Company recognized expenses of $1,405,000 and $1,308,000 for the year ended December 31, 2021 and 2020, respectively.

The Company had an accrual of $105,000 as of December 31, 2021, which represents the historical estimate of future claims to be recognized for claims incurred during the period.

The Company believes that its present insurance coverage and reserves are sufficient to cover currently estimated exposures, but there can be no assurance that the Company will not incur liabilities in excess of recorded reserves or in excess of its insurance limits.