SIEBERT FINANCIAL CORP. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in Part II, Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Part I, Item 1A - Risk Factors.
Overview
We are a financial services company and provide a wide variety of financial services to our clients. We operate in business lines such as retail brokerage, investment advisory, insurance, and technology development through our wholly-owned and majority-owned subsidiaries.
Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of theU.S. equity and fixed-income markets. Market volatility, overall market conditions, interest rates, economic, political, and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants who include investors and competitors, impacting their level of participation in the financial markets. In addition, in periods of reduced financial market activity, profitability is likely to be adversely affected because certain expenses remain relatively fixed, including salaries and related costs, as well as portions of communications costs and occupancy expenses. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other period.
Transactions with Tigress and Hedge Connection
OnNovember 16, 2021 , we purchased 24% of the outstanding membership interests in Tigress, a disabled and woman-owned financial services firm, in exchange for 24% of RISE and shares of Siebert common stock. OnJanuary 21, 2022 , we purchased 20% of Hedge Connection, a woman-owned fintech company, and an option to acquire the remaining interest in Hedge Connection in exchange for consideration of$600,000 and 3.33% of RISE.As of the date of this Report, Siebert is currently evaluating the terms upon which it will transfer its remaining ownership of Tigress toGloria E. Gebbia pursuant to the Reorganization Agreement. Refer to Note 3 - Transactions with Tigress and Hedge Connection for further detail on the terms and accounting treatment of these transactions. Siebert 2022 Form-10K 23
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As part of these transactions, Tigress' founder,Cynthia DiBartolo , continued as CEO of Tigress, and assumed the position as CEO of RISE.Gloria E. Gebbia , one of Siebert's and RISE's directors, assumed the position of Chief Impact Officer at RISE.Ms. DiBartolo was appointed to Siebert's and RISE's Board of Directors andMs. Gebbia was appointed to Tigress' Board of Directors. In addition,Lisa Vioni , founder of Hedge Connection, provided RISE with the right to appoint one director to the Board of Directors of Hedge Connection, andMs. Vioni was appointed to the Board of Directors of RISE as well as to the position of President of RISE Prime - Capital Introduction, a division of RISE. Based upon the strategic direction of these ventures, management of the respective businesses decided to unwind the original transactions with Siebert, RISE, Hedge Connection and Tigress. As a result, we exchanged our 7% ownership of Tigress for all of Tigress' ownership of RISE. We also entered into an agreement with Hedge Connection whereby we re-conveyed 20% of the common stock of Hedge Connection and the related option to acquire 100% of Hedge Connection in exchange for 3.17% of RISE and the cancellation of Siebert's note payable to Hedge Connection.
As part of these agreements,
The financial impact of these transactions with Tigress and Hedge Connection was a one-time loss of approximately$4.7M for the year endedDecember 31, 2022 , of which$4.0M was due to an impairment of our investment in Tigress. These expenses are recorded in the line items "Impairment of equity method investment in related party" and "Loss on sale of equity method investment in related parties" in the statements of operations.
Management is assessing the future strategic direction of RISE, taking into consideration current market conditions, demand trends, and resources.
Termination of Clearing Arrangements with GSCO and Pershing
OnAugust 30, 2021 ,Goldman Sachs & Co. LLC ("GSCO") notified RISE that its clearing arrangement with RISE will be terminated. Due to the termination of RISE's clearing arrangement with GSCO, substantially all the revenue producing customers of RISE have transitioned to other prime service providers. Revenue and pre-tax income from customers that have transitioned to other prime service providers was approximately$12.6 million and$1.8 million , respectively, for the year endedDecember 31, 2021 . As ofDecember 31, 2022 , we were in the process of terminating our clearing relationships withGSCO andPershing LLC ("Pershing"). As of the date of this Report, we are no longer doing active business with these clearing vendors, and anticipate the full termination of these relationships by the end of the first quarter of 2023. Interest Rates We are exposed to market risk from changes in interest rates. Such changes in interest rates primarily impact revenue from interest, marketing, and distribution fees. We primarily earn interest, marketing and distribution fees from margin interest charged on clients' margin balances, interest on cash and securities segregated for regulatory purposes, and distribution fees from money market mutual funds in clients' accounts. Securities segregated for regulatory purposes consist solely ofU.S. government securities. If prices ofU.S. government securities within our portfolio decline, we anticipate the impact to be temporary as we intend to hold these securities to maturity. We seek to mitigate this risk by managing the average maturities of ourU.S. government securities portfolio and setting risk parameters for securities owned, at fair value. Technology Partner In third quarter of 2022, we reassessed our technology needs and entered into a software license agreement with a different technology provider for the development of a new retail trading platform which will replace our current platforms and resulted in the termination of our original technology relationship. We believe this new technology provider will be key to creating a platform for the next generation of retail customers and the termination of our original technology relationship had minimal impact on our current operations. Refer to Note 6 - Prepaid Service Contract for further detail on the accounting and financial impact of the termination of our original technology relationship. Siebert 2022 Form-10K 24
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Client Account and Activity Metrics
The following tables set forth metrics we use in analyzing our client account and activity trends for the periods indicated.
Client Account Metrics - Retail and Institutional Customer
As of
2022 2021
Retail and institutional customer net worth (in billions)
Client Account Metrics - Retail Customers
As of December 31,
2022 2021
Retail customer net worth (in billions) $ 13.5 $ 16.8
Retail customer margin debit balances (in billions)$ 0.4 $ 0.5 Retail customer credit balances (in billions)$ 0.6 $ 0.8 Retail customer money market fund value (in billions)$ 0.6 $ 0.8 Retail customer accounts 122,394 115,380 •
Retail customer net worth represents the total value of securities and cash in the retail customer accounts after deducting margin debits •
Retail customer margin debit balances represents credit extended to our customers to finance their purchases against current positions •
Retail customer credit balances represents client cash held in brokerage accounts •
Retail customer money market fund value represents all retail customers accounts invested in money market funds •
Retail customer accounts represents the number of retail customers
Client Account Metrics - Institutional Customers
As of December 31,
2022 2021
Institutional customer net worth (in billions) $ - $ 0.5 •
Institutional customer net worth represents the total value of securities and
cash in the institutional customer accounts after deducting margin debits and
short positions.
Siebert 2022 Form-10K 25
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Client Activity Metrics - Retail Customers
Year Ended December 31,
2022 2021
Total retail trades 374,996 472,540
•
Total retail trades represents retail trades that generate commissions
Statements of Operations and Financial Condition
Statements of Operations for the Year Ended
Revenue
Commissions and fees for the year endedDecember 31, 2022 were$7,477,000 and decreased by$10,775,000 from the corresponding period in the prior year primarily due to the loss of institutional customers of RISE as well as market conditions during 2022. Interest, marketing and distribution fees for the year endedDecember 31, 2022 were$17,234,000 and increased by$4,337,000 from the corresponding period in the prior year, primarily due to a rising interest rate environment which increased margin interest, 12b-1 money market fees, as well as interest onU.S. treasuries and cash deposits within MSCO of an aggregate of$7.5 million , partially offset by the loss of interest income from institutional customers in RISE of$3.2 million . Principal transactions and proprietary trading for the year endedDecember 31, 2022 were$3,743,000 and decreased by$11,904,000 from the corresponding period in the prior year primarily due to the factors discussed below. The decrease in realized and unrealized gain on primarily riskless principal transactions was primarily due to weaker market conditions in 2022 within this business line. The increase in unrealized loss on our portfolio ofU.S. government securities was due to the following. Siebert 2022
Form-10K 26
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In 2022 Siebert invested in treasury bill and treasury notes which are primarily in the line item "Cash and securities segregated for regulatory purposes" on the statements of financial condition, in order to enhance its yield on its excess 15c3-3 deposits. During 2022, there was an increase inU.S. government securities yields, which created an unrealized loss of approximately$3.9 million on our government securities portfolio for the year endedDecember 31, 2022 . The aggregate unrealized loss of on the portfolio will be returned over the duration of the government securities, at a point no later than the maturity of the securities, the latest maturity beingAugust 2024 . We intend to hold these securities to maturity and as such, the aggregate unrealized loss of approximately$3.9 million on the portfolio as ofDecember 31, 2022 will be returned over the duration of the government securities, at a point no later than the maturity of the securities. The maturities of the government securities are primarily in 2023 and the latest maturity isAugust 2024 . If the value of our portfolio of government securities declines further, we will incur further unrealized losses; however, we anticipate this loss to be temporary as we intend to hold these securities to maturity. The portfolio ofU.S. government securities represents less than half of the total value of our cash and securities segregated for regulatory purposes, and we believe that the level invested reduces the risk of having to liquidate the securities prior to maturity.
Below is a summary of the change in the principal transactions and proprietary trading line item for the periods presented.
Year Ended December 31,
(Year
over
Year
2022 2021 Decrease)
Principal transactions and proprietary trading
Realized and unrealized gain on primarily
riskless principal transactions $ 7,643,000 $ 15,675,000 $ (8,032,000 )
Unrealized loss on portfolio of U.S. government
securities (3,900,000 ) (28,000 ) (3,872,000 )
Total Principal transactions and proprietary
trading $ 3,743,000 $ 15,647,000 $ (11,904,000 )
Market making for the year endedDecember 31, 2022 was$2,443,000 and decreased by$3,454,000 from the corresponding period in the prior year primarily due to market conditions.
Stock borrow / stock loan for the year ended
Advisory fees for the year endedDecember 31, 2022 were$1,862,000 and increased by$194,000 from the corresponding period in the prior year primarily due to the expansion of the advisory business. Other income for the year endedDecember 31, 2022 was$2,825,000 and increased by$1,543,000 from the corresponding period in the prior year primarily due to an increase in income from consulting services and termination payment from a technology partner. Operating Expenses Employee compensation and benefits for the year endedDecember 31, 2022 were$28,734,000 and decreased by$7,690,000 from the corresponding period in the prior year primarily due to a decrease in commissions payouts from RISE related to the loss of our institutional customers and a decrease in payouts related to fixed income, market making, and commission revenue, partially offset by an increase in payouts related to stock borrow / stock loan as well as an increase in executive compensation. Clearing fees, including execution costs for the year endedDecember 31, 2022 were$2,143,000 and decreased by$2,674,000 from the corresponding period in the prior year primarily due to a decrease in our institutional clearing costs related to RISE as well as the recognition of our business development credit from our agreement with NFS. Technology and communications expenses for the year endedDecember 31, 2022 were$4,471,000 and decreased by$291,000 from the corresponding period in the prior year primarily due to a decrease in technology costs related to RISE, partially offset by an increase in software licenses and other technology expenses. Other general and administrative expenses for the year endedDecember 31, 2022 were$4,010,000 and increased by$324,000 from the corresponding period in the prior year primarily due to an increase in travel and entertainment related to marketing initiatives for our corporate services and securities finance business lines, an increase in insurance costs, partially offset by a legal settlement occurring in 2021. Siebert 2022 Form-10K 27
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Data processing expenses for the year ended
Rent and occupancy expenses for the year ended
Professional fees for the year endedDecember 31, 2022 were$3,202,000 and increased by$507,000 from the corresponding period in the prior year primarily due to an increase in legal and consulting fees related to certain transactions such as the unwinding of Tigress and Hedge Connection. Depreciation and amortization expenses for the year endedDecember 31, 2022 were$995,000 and decreased by$450,000 from the corresponding period in the prior year primarily due to the completion of useful lives of assets within STCH and write-offs of intangible assets related to RISE occurring in 2021.
Referral fees for the year ended
Interest expense for the year endedDecember 31, 2022 was$440,000 and increased by$79,000 from the corresponding period in the prior year primarily due to additional interest incurred from the mortgage withEast West Bank established in 2022. Loss on impairment for the year endedDecember 31, 2022 was$0 and decreased by$699,000 from the corresponding period in the prior year primarily due to the impairment of our RISE customer relationships intangible asset due to the termination of our clearing arrangement with GSCO occurring in the third quarter of 2021. Advertising and promotion expense for the year endedDecember 31, 2022 was$543,000 and increased by$499,000 from the corresponding period in the prior year primarily due to an increase in promotional costs for various marketing initiatives.
Earnings of
The earnings of equity method investment in related parties for the year endedDecember 31, 2022 was$4,000 and decreased by$168,000 from the corresponding period in the prior year primarily due to a decrease in the earnings of Tigress and our proportional income.
Impairment of
Impairment of equity method investment in related party for the year ended
Loss on Sale of
Loss on sale of equity method investment in related parties for the year endedDecember 31, 2022 was$719,000 and increased by$719,000 from the corresponding period in the prior year due to our loss on the transactions between Siebert, RISE, Hedge Connection and Tigress. Siebert 2022
Form-10K 28
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Provision For (Benefit From) Income Taxes
The benefit from income taxes for the year endedDecember 31, 2022 was$1,300,000 and decreased from the provision for income taxes by$3,021,000 from the corresponding period in the prior year. Refer to Note 19 - Income Taxes for further detail.
Net Loss Attributable to Noncontrolling Interests
As further discussed in Note 1 - Organization and Basis of Presentation, we consolidate RISE's financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interests in our financial statements. The net loss attributable to noncontrolling interests for the year endedDecember 31, 2022 was$1,000,000 , and increased by$970,000 from the corresponding period in the prior year due to an increase in RISE's net loss for 2022 and Siebert's ownership of RISE.
Statements of Financial Condition as of
Assets
Assets as ofDecember 31, 2022 were$728,048,000 and decreased by$676,187,000 fromDecember 31, 2021 , primarily due to a decrease in securities borrowed, receivables from customers, and cash and securities segregated for regulatory purposes, partially offset by an increase in cash and cash equivalents.
Liabilities
Liabilities as of
Liquidity and Capital Resources
Overview
We expect to use our available cash, cash equivalents, and potential future
borrowings under our debt agreements and potential issuance of new debt or
equity, to support and invest in our core business, including investing in new
ways to serve our customers, potentially seeking strategic acquisitions to
leverage existing capabilities, and for general capital needs (including
capital, deposit, and collateral requirements imposed by regulators and SROs).
Based on our current level of operations, we believe our available cash,
available lines of credit, overall access to capital markets, and cash provided
by operations will be adequate to meet our current liquidity needs for the
foreseeable future. As of the date of this Report, there are no known or
material events that would require us to use large amounts of our liquid assets
to cover expenses.
Siebert 2022 Form-10K 29
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Cash and Cash Equivalents
Our cash and cash equivalents were
Debt Agreements
We have a$4.4 million mortgage and a$2.7 million loan outstanding withEast West Bank , and an unutilized line of credit for short term overnight demand borrowing of up to$25 million with BMO Harris as ofDecember 31, 2022 . The ability to borrow an additional$5.0 million on our loan withEast West Bank expired onJuly 22, 2022 ; however, we do not believe this will impact our ability to fund our operations. As ofDecember 31, 2022 , we were in compliance with all covenants related to our debt agreements.
Cash Requirements
The following table summarizes our short- and long-term material cash
requirements as of
Payments Due By Period
2023 2024 2025 2026 Thereafter Total
Operating lease
commitments $ 1,246,000 $ 588,000 $ 450,000 $ 234,000 $ 48,000 $ 2,566,000
Mortgage with East
West Bank 75,000 84,000 88,000 91,000 4,048,000 4,386,000
Loan with East West
Bank 998,000 1,661,000 - - - 2,659,000
Total $ 2,319,000 $ 2,333,000 $ 538,000 $ 325,000 OnDecember 30, 2021 , we purchased theMiami office building and are building out this space to be one of our primary operating centers. The total estimated cost for the build out is$1.5 million , with$338,000 financed through a commitment withEast West Bank and the remainder being cash. As ofDecember 31, 2022 , we have incurred approximately$1.0 million out of the$1.5 million of the build out costs. Siebert 2022 Form-10K 30
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Shelf Registration Statement
OnFebruary 18, 2022 , we filed a shelf registration statement on Form S-3 that was declared effective onMarch 2, 2022 by theSEC for the potential offering, issuance and sale by us of up to$100.0 million of our common stock, preferred stock, warrants to purchase our common stock and/or preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some of these securities. The registration statement was filed in reliance on General Instruction I.B.6 of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period. Assuming we remain subject to General Instruction I.B.6, at the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6 may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6. Whether we sell securities under the registration statement will depend on a number of factors, including the market conditions at that time, our cash position at that time and the availability and terms of alternative sources of capital. At the Market Offering OnMay 27, 2022 , we entered into a Capital on DemandTM Sales Agreement with JonesTrading as agent, pursuant to which we may offer and sell, from time to time through JonesTrading, shares of our common stock having an aggregate offering amount of up to$9.6 million under our shelf registration statement on Form S-3. For the year endedDecember 31, 2022 , we did not sell any shares pursuant to this Sales Agreement. Refer to Note 22 - Commitments, Contingencies, and Other for additional detail.
MSCO is subject to the Uniform Net Capital Rules of theSEC (Rule 15c3-1) and the Customer Protection Rule (15c3-3) of the Exchange Act and maintains capital and segregated cash reserves in excess of regulatory requirements. Requirements under these regulations may vary; however, MSCO has adequate reserves and contingency funding plans in place to sufficiently meet any regulatory requirements. In addition to net capital requirements, as a self-clearing broker-dealer, MSCO is subject to cash deposit and collateral requirements with clearing houses, such as the DTCC and OCC, which may fluctuate significantly from time to time based upon the nature and size of clients' trading activity and market volatility. RISE, as a member ofFINRA , is subject to the SEC Uniform Net Capital Rule 15c3-1 and the corresponding regulatory capital requirements. MSCO can transfer funds to Siebert as long as it maintains its liquidity and regulatory capital requirements. RISE can transfer funds to its shareholders, of which Siebert is entitled to its proportional ownership interest, as long as RISE maintains its liquidity and regulatory capital requirements. For the years endedDecember 31, 2022 and 2021, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory capital requirements. Refer to Note 20 - Capital Requirements for more detail on our capital requirements. Siebert 2022
Form-10K 31
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Cash Flows
Cash provided by and used in operating activities consisted of net income (loss) adjusted for certain non-cash items. Net operating assets and liabilities at any specific point in time are subject to many variables, including variability in customer activity, the timing of cash receipts and payments, and vendor payment terms. The total changes in our statements of cash flows, especially our operating cash flow, are not necessarily indicative of the ongoing results of our business as we have customer assets and liabilities on our statements of financial condition. For the year endedDecember 31, 2022 , we had negative operating cash flow due to the net effect of the change in payables to customers and receivables from customers. Other items within operating cash flow mostly offset each other, most notably our net loss and the adjustment from the impairment of equity method investment in related party. We had investing cash outflows primarily from the build out of theMiami office building and development work related to our new retail trading platform and other technology initiatives. We had financing cash outflows due to the repayment of the notes payable - related party toGloria E. Gebbia and Hedge Connection, as well as the repayment of our loan withEast West Bank . For the year endedDecember 31, 2021 , we had positive operating cash flow. We had investing cash outflows related to the purchase of theMiami office building, equity of OpenHand, software assets and miscellaneous office facilities. We had financing cash inflow related to the mortgage fromEast West Bank to finance part of the purchase of theMiami office building as well as an incremental note payable fromGloria E. Gebbia .
Long Term Contracts
Contract with NFS
EffectiveAugust 1, 2021 , MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of their arrangement for an additional four-year period commencing onAugust 1, 2021 and endingJuly 31, 2025 . As part of this agreement, we received a one-time business development credit of$3 million , and NFS will pay us four annual credits of$100,000 over the term of the agreement. The amendment also provides for an early termination fee; however, as ofDecember 31, 2022 , we do not expect to terminate the contract with NFS before the end of the contract term. Refer to Note 15 - Deferred Contract Incentive and Note 22 - Commitments, Contingencies and Other for additional detail.
Off-Balance Sheet Arrangements
We enter into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and are, therefore, subject to varying degrees of market and credit risk. In the normal course of business, our customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose us to off-balance sheet risk in the event the customer or other broker is unable to fulfill their contracted obligations and we are forced to purchase or sell the financial instrument underlying the contract at a loss. There were no material losses for unsettled customer transactions for the years endedDecember 31, 2022 and 2021. Refer to Note 21 - Financial Instruments with Off-Balance Sheet Risk for additional detail. Siebert 2022 Form-10K 32
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Critical Accounting Policies and Estimates
We generally follow accounting policies standard in the brokerage industry and believe that our policies appropriately reflect our financial position and results of operations. Our management team makes significant estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities included in the consolidated financial statements. The estimates relate primarily to revenue and expense items in the normal course of business as to which we receive no confirmations, invoices, or other documentation, at the time the books are closed for a period. We use our best judgment, based on our knowledge of revenue transactions and expenses incurred, to estimate the amount of such revenue and expenses. We are not aware of any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and expenses incurred when we subsequently receive the actual confirmations, invoices or other documentation. Our financial statements have been prepared in accordance with accounting principles generally accepted inthe United States of America ("U.S. GAAP"). The preparation of our consolidated financial statements requires us to make judgments and estimates that may have a significant impact on our financial results. We believe that the critical accounting policies listed below are particularly subject to management's judgments and estimates and could materially affect our results of operations and financial position. Refer to Note 2 - Summary of Significant Accounting Policies for additional detail on our significant accounting policies.
Estimates of effective income tax rates, uncertain tax positions, deferred income taxes and related valuation allowances
We account for income taxes under the asset and liability method, which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements.
Under this method, we determine deferred tax assets and liabilities on the basis
of the differences between the financial statement and tax bases of assets and
liabilities by using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in the period that
includes the enactment date.
We recognize deferred tax assets to the extent that we believe that these assets
are more likely than not to be realized. In making such a determination, we
consider all available positive and negative evidence, including future
reversals of existing taxable temporary differences, projected future taxable
income, tax-planning strategies, and results of recent operations. If we
determine that we would be able to realize deferred taxes in the future in
excess of their net recorded amount, we would make an adjustment to the deferred
tax asset valuation allowance, which would reduce the provision for income
taxes.
We record uncertain tax positions in accordance with ASC 740 on the basis of a
two-step process in which (1) we determine whether it is more likely than not
that the tax positions will be sustained on the basis of the technical merits of
the position and (2) for those tax positions that meet the more-likely-than-not
recognition threshold we recognize the largest amount of tax benefit that is
more than 50 percent likely to be realized upon ultimate settlement with the
related tax authority.
We recognize interest and penalties related to unrecognized tax benefits on the
provision for income taxes line in the statements of operations. Accrued
interest and penalties would be included on the related tax liability line in
the statements of financial condition.
Siebert 2022 Form-10K 33
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The valuation of goodwill and acquired intangible assets requires significant judgment and estimates by management. For example, the valuation of certain intangible assets required management's estimates of future earnings and cash flows as well as judgment in determining market approaches. The useful life of the finite lived intangible assets was determined based on management's estimate of the period over which those intangible assets were expected to provide economic benefit. Management applies judgment in conducting impairment testing for goodwill and intangible assets, including estimates of fair value based on the income or market approach and estimates required to determine the useful lives of finite lived intangible assets. We test goodwill and all intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, or at least annually. If our estimates of fair value change due to future events differing significantly from the forecasts used to determine fair value or there are changes in our business or other factors, we will assess the amount of impairment and recognize it in our financial statements during that reporting period. We also evaluate the useful life of finite lived intangible assets on an annual basis to determine if events or trends warrant a change in estimate of the useful life. Changes in the estimated useful lives of finite lived intangible assets could result in the recognition of an impairment or a change in the remaining life of these assets. We have concluded that as ofDecember 31, 2022 and 2021, there has been no impairment to the carrying value of Siebert's goodwill; however, there has been an impairment of$4,015,000 to the carrying value of our equity method investment in Tigress for the year endedDecember 31, 2022 , and an impairment of$699,000 to the RISE customer relationships intangible asset for the year endedDecember 31, 2021 due to the termination of GSCO's clearing arrangement with RISE.
Refer to Note 2 - Summary of Significant Accounting Policies and Note 3 - Transactions with Tigress and Hedge Connection for additional detail.
Accruals for contingent liabilities
Accruals for contingent liabilities related to legal and regulatory claims as well as employee healthcare expenses under our self-insured plan reflect an estimate of probable losses. In making such estimates for legal and regulatory claims, we consider many factors, including the progress of the matter, prior experience and the experience of others in similar matters, available defenses, insurance coverage, indemnification provisions and the advice of legal counsel and other experts. In making such estimates for employee healthcare expenses, we consider many factors, including trends of our health insurance expenses and our insurance reserve limits. We believe that our present insurance coverage and reserves are sufficient to cover currently estimated exposures, but there can be no assurance that we will not incur liabilities in excess of recorded reserves or in excess of our insurance limits. Significant judgment is required in making these estimates, and the actual cost may be materially different than the estimated costs. Refer to Note 22 - Commitments, Contingencies and Other for additional detail. Variable Interest Entities We evaluate whether an entity is a VIE and determine if the primary beneficiary status is appropriate on a quarterly basis. We consolidate a VIE for which we are the primary beneficiary. When assessing the determination of the primary beneficiary, we consider all relevant facts and circumstances, including factors such as the power to direct the activities of the VIE that most significantly impact its economic performance, the obligation to absorb the losses and/or the right to receive the expected returns of the VIE. Through this evaluation, as ofDecember 31, 2022 , we determined that RISE is a VIE and we are the primary beneficiary, primarily due to Siebert's power to direct the activities of RISE that most significantly impact its economic performance. Additionally, Siebert may be obligated to fund RISE's operations at an amount that is disproportional to its ownership percentage. New Accounting Standards
Refer to Note 2 - Summary of Significant Accounting Policies for additional
information regarding new Accounting Standards Updates ("ASU"s) issued by the
Siebert 2022 Form-10K 34
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