12. Revenue Recognition

The primary sources of revenue for the Company are as follows:

Margin Interest, Marketing and Distribution fees

Margin interest, marketing and distribution fees consists of two components: margin interest and 12b1 fees. Margin interest is the net interest charged to customers for holding financed margin positions, and 12b1 fees are fees paid to the Company related to trailing payments from mutual funds as a result of prior sales of mutual funds to customers. Margin interest, marketing and distribution fees are recorded as earned.

Commissions and Fees

The Company earns commission revenue for executing trades for clients in individual equities, options, insurance products, futures, fixed income securities, as well as certain third-party mutual funds and ETFs. Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is recognized at a point in time on the trade date when the performance obligation is satisfied. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer.

Principal Transactions

Principal transactions primarily represent riskless transactions in which the Company, after executing a solicited order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or markdown to satisfy the order. Principal transactions are recognized at a point in time on the trade date when the performance obligation is satisfied. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer.

Advisory Fees

The Company earns advisory fees associated with managing client assets. The performance obligation related to its revenue stream is satisfied over time; however, the advisory fees are variable as they are charged as a percentage of the client’s total asset value, which is determined at the end of the quarter.

Interest and Other Income

The Company earns interest from generated in clients’ accounts and on the Company’s bank balances and is recorded as earned. The Company earns miscellaneous income from various sources which is also recorded as earned.

The following table presents the major revenue categories and when each category is recognized:

	Year Ended December 31,
Revenue Category	2019		2018		Timing of Recognition

Trading Execution and Clearing Services
Commissions and fees	$	8,302,000	$	9,504,000	Recorded on trade date
Principal transactions		8,061,000		9,020,000	Recorded on trade date
Advisory fees		801,000		478,000	Recorded as earned
Total Trading Execution and Clearing Services		17,164,000		19,002,000

Other Income
Margin interest, marketing and distribution fees
Margin interest		8,134,000		7,663,000	Recorded as earned
12b1 fees		2,987,000		3,265,000	Recorded as earned
Total Margin interest, marketing and distribution fees		11,121,000		10,928,000

Interest and other income		308,000		106,000	Recorded as earned

Total Other Income		11,429,000		11,034,000

Total Revenue	$	28,593,000	$	30,036,000

The following table presents each revenue category and its related performance obligation:

Revenue Stream	Performance Obligation
Commissions and fees, Principal transactions, Advisory fees	Provide security trading services to customer and act as agent
Margin interest, marketing and distribution fees, Interest and other income	n/a

Disaggregation of Revenue

The following table presents a breakdown of the Company’s revenue between the amounts attributed to the retail customer accounts that were originally part of Siebert (“Legacy Siebert”) vs. the retail customer accounts the Company acquired from StockCross as part of the transaction that closed in December 2017 (“StockCross Retail Assets”):

	Year Ended December 31,
	2019		2018
Revenue from Margin interest, marketing and distribution fees
Margin interest, marketing and distribution fees – Legacy Siebert	$	9,723,000	$	9,674,000
Margin interest, marketing and distribution fees – StockCross Retail Assets		1,398,000		1,254,000
Total Revenue from Margin interest, marketing and distribution fees	$	11,121,000	$	10,928,000

Revenue from Principal transactions
Principal transactions – Legacy Siebert	$	2,154,000	$	1,894,000
Principal transactions – StockCross Retail Assets		5,907,000		7,126,000
Total Revenue from Principal transactions	$	8,061,000	$	9,020,000

Revenue from Commissions and fees
Commissions and fees – Legacy Siebert	$	7,037,000	$	7,792,000
Commissions and fees – StockCross Retail Assets		1,265,000		1,712,000
Total Revenue from Commissions and fees	$	8,302,000	$	9,504,000

Additional Revenue:
Advisory fees – Legacy Siebert		801,000		478,000
Interest – Legacy Siebert		308,000		106,000
Total Revenue	$	28,593,000	$	30,036,000

Soft Dollar Arrangement

As a result of the acquisition of Weeden Prime, the Company has soft dollar and commission sharing arrangements with customers that fall both within, and outside of, the safe harbor provisions of Rule 28(e) of the Securities Exchange Act of 1934 ("Rule 28(e)"), as amended. These soft dollar arrangements were determined to be a separate performance obligation that should be allocated a portion of the transaction price.

Under these arrangements, the Company charges additional dollars on customer trades and uses these fees to pay third parties for research, brokerage services, market data, and related expenses (“research services”) on behalf of clients. The Company is an agent in this arrangement, as it does not control the research services before they are transferred to the customer. As such, the revenue from these agreements are recognized net of cost in the statement of income on the line item titled “Commissions and fees.” For every other revenue transaction, the Company is the principal and there are no agents involved in providing the services; therefore, the revenue is recognized gross.

The Company paid client expenses approximately $48,000 for December 2019 and had an outstanding receivable and payable of approximately $31,000 and $158,000, respectively, as of December 31, 2019. The receivable and payable are within the line items titled “Other receivables” and “Accounts payable and accrued liabilities,” respectively, on the statement of financial condition.

As of December 31, 2019, no allowance for uncollectible commissions was necessary as management believes all commissions receivable and prepaid research services expenses will be realized.