Fair Value Measurements

9 Months Ended

Sep. 30, 2022

5. Fair Value Measurements

Overview

ASC 820 defines fair value, establishes a framework for measuring fair value as well as a hierarchy of fair value inputs. Refer to the below as well as Note 6 – Fair Value Measurements in the Company’s 2021 Form 10-K for further information regarding fair value hierarchy, valuation techniques and other items related to fair value measurements.

Municipal securities: Municipal securities are valued using recently executed transactions, market price quotations (when observable), bond spreads from independent external parties such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments. The spread data used is for the same maturity as the bond. Municipal securities are generally categorized in level 2 of the fair value hierarchy.

Unit investment trusts (“UITs”): Units of UITs are carried at redemption value, which represents fair value. Units of UITs are categorized as level 2.

Fair Value Hierarchy Tables

The following tables present the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of the periods presented.

	As of September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash and securities segregated for regulatory purposes
U.S. government securities*	$	140,197,000	$	—	$	—	$	140,197,000

Securities owned, at fair value
U.S. government securities**	$	2,823,000	$	—	$	—	$	2,823,000
Certificates of deposit		—		92,000		—		92,000
Municipal securities		—		174,000		—		174,000
Corporate bonds		—		106,000		—		106,000
Equity securities		96,000		177,000		—		273,000
Total Securities owned, at fair value	$	2,919,000	$	549,000	$	—	$	3,468,000

Liabilities
Securities sold, not yet purchased, at fair value
Equity securities	$	4,000	$	—	$	—	$	4,000
Unit investment trust		—		7,000		—		7,000
Total Securities sold, not yet purchased, at fair value	$	4,000	$	7,000	$	—	$	11,000

-10-

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Securities owned, at fair value
U.S. government securities**	$	2,966,000	$	—	$	—	$	2,966,000
Certificates of deposit		—		91,000		—		91,000
Corporate bonds		—		12,000		—		12,000
Equity securities		489,000		433,000		—		922,000
Total Securities owned, at fair value	$	3,455,000	$	536,000	$	—	$	3,991,000

Liabilities
Securities sold, not yet purchased, at fair value
Equity securities	$	—	$	24,000	$	—	$	24,000
Total Securities sold, not yet purchased, at fair value	$	—	$	24,000	$	—	$	24,000

*As of September 30, 2022, the Company had U.S. government securities with market values of approximately $24.6 million, $9.8million, $9.7 million, $62.2 million, $23.9 million, and $9.7 million with corresponding maturity dates of March 23, 2023, May 18, 2023, August 31, 2023, December 31, 2023, January 31, 2024, and May 31, 2024, respectively as well as approximately $0.3 million of interest. As of December 31, 2021, the Company did not have any U.S. government securities classified as cash and securities segregated for regulatory purposes.

**As of September 30, 2022, the Company had U.S. government securities with market values of approximately $24,000, $5,000 and $2.8 million with corresponding maturity dates of June 30, 2024, September 30, 2024, and August 15, 2024, respectively. As of December 31, 2021, the U.S. government securities had a maturity date of August 15, 2024.

Refer to the below as well as Note 6 – Fair Value Measurements in the Company’s 2021 Form 10-K for further information regarding financial instruments not carried at fair value on the statements of financial condition as of September 30, 2022 and December 31, 2021.

Short-term financial instruments: The carrying value of short-term financial instruments, including cash and cash equivalents as well as cash and securities segregated for regulatory purposes, are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. The Company had no cash equivalents for regulatory purposes as of September 30, 2022 and December 31, 2021. Securities segregated for regulatory purposes consist solely of U.S. government securities and are included in the fair value hierarchy table above. Cash and cash equivalents and cash and securities segregated for regulatory purposes are classified as level 1.