Quarterly report pursuant to sections 13 or 15(d)

Securities Owned and Securities Sold, But Not Yet Purchased

Securities Owned and Securities Sold, But Not Yet Purchased

6 Months Ended

Jun. 30, 2013

Securities Owned and Sold, Not yet Purchased [Abstract]

Securities Owned and Securities Sold, But Not Yet Purchased

The components of securities owned and securities sold, but not yet purchased at June 30, 2013 and December 31, 2012 were as follows:



	Securities Owned		Securities Sold, But Not Yet Purchased
June 30, 2013
Certificates of deposit	$	16	$	—
Debt securities	3,242		(2,406		)
U.S. Treasury notes	95		—
Common stock and warrants	3,202		(2,213		)
Restricted common stock and warrants	365		—
Total	$	6,920	$	(4,619	)

December 31, 2012
Certificates of deposit	$	14	$	—
Debt securities	1,098		(123		)
U.S. Treasury notes	—		(99		)
Common stock and warrants	384		(70		)
Restricted common stock and warrants	582		—
Total	$	2,078	$	(292	)

As of June 30, 2013 and December 31, 2012, approximately $2,195 and $1,787, respectively, of securities owned were deposited with the clearing brokers and may be sold or hypothecated by the clearing brokers pursuant to clearing agreements. 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:

• Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2 — Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably

available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability

and are developed based on market data obtained from sources independent of the Company.

• Level 3 — Unobservable inputs which reflect the assumptions that the Company develops based on

available information about what market participants would use in valuing the asset or liability.

Securities are carried at fair value and classified as follows:

As of June 30, 2013:



Securities owned, at fair value	Level 1		Level 2		Level 3		Total
Debt securities	$	—	$	3,242	$	—	$	3,242
Certificates of deposit	16		—		—		16
U.S. Treasury notes	—		95		—		95
Common stock and warrants	3,202		365		—		3,567
Total	$	3,218	$	3,702	$	—	$	6,920



Securities sold, but not yet purchased, at fair value	Level 1			Level 2			Level 3		Total
Debt securities	$	—		$	(2,406	)	$	—	$	(2,406	)
U.S. Treasury notes	—			—			—		—
Common stock and warrants	(2,213		)	—			—		(2,213		)
Total	$	(2,213	)	$	(2,406	)	$	—	$	(4,619	)

As of December 31, 2012:



Securities owned, at fair value	Level 1		Level 2		Level 3		Total
Debt securities	$	—	$	1,098	$	—	$	1,098
Certificates of deposit	14		—		—		14
Common stock and warrants	384		582		—		966
Total	$	398	$	1,680	$	—	$	2,078



Securities sold, but not yet purchased, at fair value	Level 1		Level 2		Level 3		Total
Debt securities	$	—	$	123	$	—	$	123
U.S. Treasury notes	—		99		—		99
Common stock and warrants	70		—		—		70
Total	$	70	$	222	$	—	$	292

Debt securities and U.S. Treasury notes are valued based on recently executed transactions, market price quotations, and pricing models that factor in, as applicable, interest rates and bond default risk spreads.

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 June 30, 2013 and December 31, 2012, the fair value of the warrants were $196 and $160, respectively, and are included in common stock and warrants (level 2) above.

Common stock may be received as compensation for investment banking services. These securities are restricted and may be freely traded only upon the effectiveness of a registration statement covering them or upon the satisfaction of the requirements of Rule 144, including the requisite holding period. Restricted common stock is classified as Level 2 securities.