4. Securities Owned and Securities Sold, But Not Yet Purchased

The components of securities owned and securities sold, but not yet purchased as of December 31, 2011 and 2010 were as follows:


	Securities Owned		Securities Sold, But Not Yet Purchased
December 31, 2011
Common stock and warrants	$	191	$	(78	)
Restricted common stock and warrants		1,823		—
	$	2,014	$	(78	)
December 31, 2010
Common stock and warrants	$	577	$	(10	)
Restricted common stock and warrants		2,085		—
	$	2,662	$	(10	)

As of December 31, 2011 and 2010, approximately $542 and $666, respectively, of securities owned were deposited with the Company’s subsidiaries’ clearing brokers. Under the clearing agreements with such clearing brokers, the securities may be sold or hypothecated by the clearing brokers. Securities sold, but not yet purchased, at fair value represents obligations of the Company’s subsidiaries to purchase the specified financial instrument at the then current market price. Accordingly, these transactions result in off-balance-sheet risk as the Company’s subsidiaries’ ultimate obligation to repurchase such securities may exceed the amount recognized in the consolidated statements of financial condition.

Authoritative accounting guidance defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach are used to measure fair value.

The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

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Level 1 — Quoted prices in active markets for identical assets or liabilities.

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Level 2 — Inputs other than quoted prices in active markets, that are directly or indirectly observable for the asset or liability.

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Level 3 — Unobservable inputs for the asset or liability where there is little or no market data, which requires the reporting entity to develop its own assumptions.

Securities are recorded at fair value and classified as follows:


	December 31, 2011
Securities owned, at fair value	Level 1		Level 2		Level 3		Total
Common stock and warrants	$	191	$	1,823	$	—	$	2,014
Total	$	191	$	1,823	$	—	$	2,014


	December 31, 2011
Securities sold, but not yet purchased, at fair value	Level 1		Level 2		Level 3		Total
Common stock and warrants	$	68	$	10	$	—	$	78
Total	$	68	$	10	$	—	$	78


	December 31, 2010
Securities owned, at fair value	Level 1		Level 2		Level 3		Total
Common stock and warrants	$	577	$	2,085	$	—	$	2,662
Total	$	577	$	2,085	$	—	$	2,662


Securities sold, but not yet purchased, at fair value	Level 1		Level 2		Level 3		Total
Common stock and warrants	$	—	$	10	$	—	$	10
Total	$	—	$	10	$	—	$	10

Warrants are carried at a discount to fair value as determined by using the Black-Scholes option pricing model due to illiquidity. This model takes into account the underlying securities current market value, the underlying securities market volatility, the term of the warrants, exercise price, and risk free return rate. As of December 31, 2011 and 2010, the fair value of the warrants are $1,005 and $1,907, respectively, and are included in common stock and warrants (level 2) above.