Untitled Page
Statement of Financial Condition
August 29, 2008
Below you will find the unaudited Statement of Financial Condition for ShareBuilder Securities Corporation (the "Company") as of June 27, 2008. The Statement of Financial Condition is furnished to customers on a semi-annual basis in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC).
The Company is a member in good standing of the Financial Industry Regulatory Authority (the FINRA) (formerly known as the National Association of Securities Dealers) and Securities Investor Protection Corporation (SIPC). Customer accounts are secured up to $500,000 (limited to $100,000 for cash) by SIPC.
A COPY OF THE COMPANY'S MOST RECENT COMPLETE AUDITED FINANCIAL STATEMENTS PURSUANT TO SEC RULE 17A-5, IS AVAILABLE FOR EXAMINATION AT THE COMPANY'S MAIN OFFICE IN BELLEVUE, WASHINGTON AND AT THE REGIONAL OFFICE OF THE SECURITIES AND EXCHANGE COMMISSION IN LOS ANGELES, CALIFORNIA.
If you have any questions with regard to this Statement of Financial Condition or your account please email our Customer Service team at customercare@sharebuilder.com or call 1-800-747-2537 between the hours of 8.00am to 9.00pm (ET), Monday through Friday.
ShareBuilder Securities Corporation
(A wholly-owned subsidiary of ShareBuilder Corporation)
Unaudited Statement of Financial Condition
June 27, 2008
| Assets |
|
| Cash and cash equivalents |
$ 23,496,314 |
| Cash segregated under regulation |
0 |
| Receivables from clearing organizations |
25,000 |
| Receivables from customers |
31,932,157 |
| Accounts receivable |
6,528,288 |
| Securities owned |
3,220,083 |
| Prepaid expenses and other assets |
209,359,152 |
 |
| Total assets |
$ 274,560,994 |
|
 |
| Liabilities and stockholder's equity |
|
| Securities sold, not yet purchased |
$ 752,022 |
| Payable to customers |
525,912 |
| Payable to clearing organizations |
0 |
| Accounts payable and accrued liabilities |
51,325,517 |
| Fees payable to Parent |
891,048 |
| Deferred revenue |
305,371 |
| Deferred tax liabilities, net |
29,688,704 |
|
| Total liabilities |
$ 83,488,574 |
|
| Stockholder's equity: |
|
| Common stock, no par value: |
|
| Issued and outstanding shares - 1,000,000 |
214,809,624 |
| Accumulated deficit |
(23,737,204) |
|
| Total stockholder's equity |
191,072,420 |
|
| Total liabilities and stockholder's equity |
$ 274,560,994 |
|
See accompanying notes.
1. Organization and Nature of Business
ShareBuilder Securities Corporation (the Company), a Washington corporation, was formed on July 1, 1998. The Company is a broker-dealer registered with the Securities and Exchange Commission (the SEC) and is a member of the Financial Industry Regulatory Authority (the FINRA) (formerly known as the National Association of Securities Dealers). The Company provides broker-dealer services to self-directed investors. The Company is a wholly owned subsidiary of ShareBuilder Corporation (the Parent). On November 15, 2007, ING Bank, fsb, through its subsidiary ING Direct Securities, Inc. (IDSI), acquired all of the outstanding shares of ShareBuilder Corporation, parent of the Company. IDSI is a distributor of mutual funds of affiliates and is a wholly owned subsidiary of ING Bank, fsb, which in turn is an indirect subsidiary of ING Group N.V.
The Company is subject to the risks and challenges associated with other companies at a similar stage of development, including dependence on key individuals, continued successful development and marketing of services, and competition from substitute services and larger companies with greater financial, technical, management, and marketing resources.
2. Summary of Significant Accounting Policies
Financial Reporting Period
The Company reports on a 52- or 53-week year ending on the Friday nearest to June 30th. In July 2008, the Company received regulatory approval to change its fiscal year-end from June to December to align with the year-end of IDSI and ING Bank, fsb. Accordingly, the Company is required to furnish audited financial statements as of December 2008 for the July 2007 through December 2008 period, and an unaudited Statement of Financial Condition for the six months ended at June 27, 2008.
Use of Estimates in the Preparation of Statement of Financial Condition
The preparation of the Statement of Financial Condition in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the Statement of Financial Condition and accompanying notes. Management believes that the estimates utilized in preparing its Statement of Financial Condition are reasonable and prudent. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits, commercial paper, money market accounts, and investment accounts with financial institutions. Recorded amounts approximate fair value. The Company considers all cash deposits and highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Certain cash deposits may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits.
Securities
Securities owned include odd lot and fractional shares of readily marketable common stock, exchange-traded funds and mutual funds retained when the Company purchases shares on behalf of customers and are reported on a settlement-date basis. Marketable securities owned are recorded at fair value. Fair value is generally based on end-of-the-day quoted market prices.
Securities owned also include major stock index option contracts that are used by the Company to reduce the risk of significant market fluctuation on the value of marketable securities. The Company accounts for these derivative instruments pursuant to Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that the stock index contracts be recorded on the Statement of Financial Condition at fair value.
Securities sold, not yet purchased are stated at market value and represent obligations to deliver specified securities at predetermined prices with related changes in unrealized appreciation or depreciation reflected in net trading gain or loss. Market value is generally based on published market prices. The Company is obligated to acquire the securities sold short at prevailing market prices in the future to satisfy these obligations. Accordingly, these transactions result in off-balance sheet risk as the Company's ultimate obligation to satisfy the sale of securities sold, not yet purchased may exceed the amount reflected in the Statement of Financial Condition.
Goodwill and Intangible Assets
Included in prepaid expenses and other assets are goodwill and intangible assets identified upon the Parent's acquisition by IDSI and trademarks capitalized prior to the acquisition. The Company accounts for these assets under the provisions of SFAS No. 141 "Business Combinations" (SFAS no. 141) and SFAS No. 142 "Goodwill and Other Intangible Assets" (SFAS No. 142). Accordingly in compliance with these pronouncements, goodwill, the excess of the cost of an acquired entity over the net amounts assigned to assets acquired and liabilities assumed, is not amortized, but tested at least annually for impairment. Indentified intangible assets are amortized over their estimated useful lives, if determinable.
Margin Lending Operations
The Company offers its margin lending product to eligible customers collateralized by their respective security and cash holdings. Margin lending is subject to the margin rules of the Board of Governors of the Federal Reserve System (Federal Reserve), the margin requirements of the FINRA, and the Company's internal policies. Under the margin rules of the Federal Reserve, the customer is obligated to maintain net equity equal to at least 25 percent of the value of the securities in the account. However, the Company currently requires the customer to maintain net equity equal to at least 30 percent of the value of the securities in the account. The Company may increase this requirement up to 100 percent on certain accounts, groups of accounts, individual securities, or groups of securities, as deemed necessary.
The Company relies on funding from the Parent for its margin lending operations (see Note 9 "Related Party Transactions").
Margin Risk
By permitting customers to purchase on margin, the Company is subject to risks inherent in extending credits, especially during periods of rapidly declining markets in which the value of the collateral held by the Company could fall below the amount of the customer's indebtedness. To the extent that the margin loans exceed customer cash balances, the Company may not be able to obtain financing on favorable terms or in sufficient amounts from its clearing partner. Sharp changes in market values of substantial amounts of securities and the failure by parties to the borrowing transactions to honor their commitments could have a material adverse effect on the Company's revenues and profitability. In the event a customer fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices in order to fulfill the customer's obligations. The Company monitors required margin levels daily and, pursuant to such guidelines, requires customers to deposit additional collateral or reduce positions, when necessary. Management is responsible for supervising the risks associated with leverage and monitors the customers' margin positions to identify customer accounts that may need additional collateral or liquidation. The Company believes that it is unlikely that it will have to make any material payments under these arrangements, and no liability related to these has been recognized in the Statement of Financial Condition.
Receivables from and Payable to Customers
Receivables from and payable to customers include the amounts due from and due to customers on margin, securities, and cash transactions.
Revenue Recognition
Revenues consist primarily of broker-dealer trade commissions and subscription fees. Commissions are recognized on a settlement-date basis. However, commissions are adjusted if there is a material difference from the trade-date basis. Subscription fees, which consist of the monthly subscription fee charged to account holders for processing the program-specified number of transactions, are recognized on the first business day of the month to which the fee relates.
Other income consists of money market 12b-1 fees, IRA maintenance fees, retail sales, and other fees. These revenues are recognized as services are provided. Interest and dividend revenues are earned from the underlying securities owned and margin transactions and are accounted for on an accrual basis.
Sales and Marketing
Sales and marketing expenses reflect the costs associated with customer acquisition and are expensed as incurred.
Income Taxes
The Company is included in the consolidated federal income tax return filed by ING DIRECT Bancorp and subsidiaries. The Company accounts for income taxes on a separate return basis. The Company receives reimbursement from or makes payment to various affiliated entities for current taxes in accordance with the Tax Sharing Agreement between ING DIRECT Bancorp, the Company and its affiliates. In accordance with this agreement, ING DIRECT Bancorp determines the Company's share of federal income tax liability or benefit based on its contribution to the consolidated federal taxable income or loss.
The Company recognizes the deferred tax effects of temporary differences between book and tax bases of assets and liabilities. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not, based on current circumstances, are not expected to be realized.
New Accounting Pronouncements
In May 2008, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 162, The Hierarchy of Generally Accepted Accounting Principles. The FASB adopted a hierarchy of authoritative accounting guidance for nongovernmental entities, an action that did not change practice, but was expected to facilitate designating the coming codification of accounting standards as authoritative. SFAS No. 162 makes the hierarchy explicitly and directly applicable to preparers of financial statements, a step that recognizes the preparers' responsibilities for selecting the accounting principles for their financial statements. The Company is currently in the process of evaluating the impact of adopting this pronouncement.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133 ("SFAS No. 161"). Under Statement No. 161, corporations must disclose the fair value of derivative instruments and their gains or losses in tabular format and information about credit risk related contingent features in derivative agreements, counterparty credit risk, and strategies and objectives for using derivative instruments. The new Statement must be applied prospectively for interim periods and fiscal years beginning after November 15, 2008. The Company is currently in the process of evaluating the impact of adopting this pronouncement.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which replaces SFAS No. 141, Business Combinations, and requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This Statement also requires the acquirer in a business combination achieved in stages to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values. SFAS No. 141(R) makes various other amendments to authoritative literature intended to provide additional guidance or to confirm the guidance in that literature to that provided in this Statement. This Statement applies to business combinations for which the acquisition date is in fiscal years beginning after December 15, 2008. The Company is currently in the process of evaluating the impact of adopting this pronouncement.
3. Cash Segregated Under Other Regulations and Restricted Cash
SEC Rule 15c-3-3 requires cash to be segregated in a special reserve account for the exclusive benefit of customers trading on U.S. commodity exchanges. At June 27, 2008, no cash was required to be segregated by the Company to meet this requirement.
4. Receivables from and Payable to Clearing Organizations
The Company clears its proprietary and customer transactions with another broker-dealer through an omnibus relationship. The Company keeps a deposit of $25,000 to maintain this relationship. On April 17, 2008, the Company paid outstanding payables to its clearing broker using proceeds from a subordinated loan as described in Note 9 "Related Party Transactions." As a result, the Company had no payable outstanding to its clearing broker at June 27, 2008.
5. Mergers and Acquisitions
On November 15, 2007 the Company and its Parent were acquired by ING Bank, fsb, through its subsidiary ING DIRECT Securities, Inc., for $220 million in cash including all outstanding equity and equity related interests.
As a result of the acquisition, ShareBuilder Corporation, which includes ShareBuilder Securities Corporation, became a direct, wholly-owned subsidiary of ING DIRECT Securities, Inc. The acquisition was accounted for using the purchase method of accounting, which requires the allocation of the total purchase price to the assets acquired, including identified intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to assets acquired and liabilities assumed.
In accordance with generally accepted accounting principles (GAAP), the carrying value of goodwill and intangible assets are tested for impairment at least annually. At June 27, 2008, no circumstances indicate a potential decline in the fair value of the Company's goodwill or intangible assets, and therefore, no impairment has been charged to these assets.
Included in the Company's financial statements as of June 27, 2008, is the allocation of additional intangible assets of $96,856,297 net of $6,043,703 in accumulated depreciation and goodwill of $110,602,287.
6. Securities Owned and Securities Sold, Not Yet Purchased
At June 27, 2008, securities owned and securities sold, not yet purchased, include the following:
| | |
| |
Securities Owned |
Securities Sold,
Not Yet Purchased |
|
| Corporate stocks |
$ 3,157,493 |
$ 751,582 |
| Stock index option contracts |
62,590 |
440 |
|
| |
$ 3,220,083 |
$ 752,022 |
|
The clearing broker has the right to hypothecate the corporate shares owned by the Company.
7. Financial Instruments
Substantially all of the Company's financial instruments are carried at fair value or amounts approximating fair value. Assets, including cash and cash equivalents, securities owned, and certain receivables are carried at fair value or contracted amounts, which approximate fair value. Similarly, liabilities, including securities sold, not yet purchased, and certain payables are carried at fair value or contracted amounts approximating fair value.
In the normal course of business, the Company may enter into transactions in financial instruments to reduce exposure to changes in the fair value of the portfolio. At June 27, 2008, the Company had 11 stock index call options and 11 stock index put options. The underlying values (notional amounts) of the call and put options are approximately $1,406,218 and $1,406,218 respectively. Such option contracts are exchange-traded and settle on a daily basis. The notional amounts are not reflected on the Statement of Financial Condition and are indicative only of the position at June 27, 2008.
8. Fair Values of Assets and Liabilities
SFAS No. 157, Fair Value Measurements, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure requirements for fair value measurements. Additionally, SFAS No. 157 amended SFAS No. 107, Disclosure about Fair Value of Financial Instruments and, as such, the Company follows SFAS No. 157 in determination of fair value disclosure amounts. The disclosures required under SFAS No. 157 have been included in this note. The Company has not currently elected to adopt SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities and, accordingly, did not record a transition adjustment on January 1, 2008.
SFAS No. 157 applies when Companies are required to use market values for a particular instrument or for which they have chosen to use market values. In general, the standard does not apply to balance sheet items held at cost. Fair Value is defined as 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. Assumptions, or inputs, that market participants would use in pricing the asset or liability are used in valuation techniques to measure fair value. Inputs may be observable or unobservable and are prioritized into three broad levels: Quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). These levels aim to reflect the amount of certainty that pertains to the valuation of a financial asset or liability.
It is the Company's policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy in SFAS No. 157. The Company does not have any fair value Level 2 or Level 3 assets or liabilities at June 27, 2008.
Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon the Company's estimates, are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in the actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future values.
Following is a description of calculation methodologies used for assets and liabilities recorded at fair value and the basis for estimating fair value. These are reflected as recurring or nonrecurring in compliance with SFAS No. 157 disclosures.
Assets
Securities owned - Securities owned include odd lot and fractional shares of readily marketable common stock, exchange-traded funds and mutual funds retained when shares are purchased on behalf of customers. These assets are traded on an active exchange, such as the New York Stock Exchange, and therefore are recorded at fair value on a recurring basis and are classified as Level 1 securities.
Liabililties
Securities sold, not yet purchased - Securities sold, not yet purchased represent obligations to deliver specified securities at predetermined prices with related changes in unrealized appreciation or depreciation reflected in net trading gain or loss and are recorded at fair value on a recurring basis. Fair value measurement for securities sold, not yet purchased is based upon quoted prices on active exchanges, such as the New York Stock Exchange, and therefore are classified as Level 1 securities.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis.
| | | | |
| |
As of June 27, 2008 |
|
| |
Total |
Level1 |
Level2 |
Level3 |
|
| Assets |
|
|
|
|
|
| Securities owned |
$3,220,083 |
$3,220,083 |
$ - |
$ - |
|
| Liabilities |
|
|
|
|
|
| Securities sold,not yet purchased |
$ 752,022 |
$ 752,022 |
$ - |
$ - |
|
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
There were no adjustments in assets or liabilities recorded at fair value on a nonrecurring basis, and therefore no disclosures are required at June 27, 2008.
9. Related-Party Transactions
On November 15, the Company and its Parent were acquired by ING Bank, fsb, through its subsidiary ING DIRECT Securities, Inc., for $220 million in cash including all outstanding equity and equity related interests.
The Company incurs payables to and receivables from the Bank relating to operating transactions arising from the normal course of business. At June 27, 2008, the Company had net payables to the Bank in the amount of $4,180,489.
The Company shares certain resources and office space with the Parent and is charged a portion of compensation, benefits, accounting fees, office supplies, rent, depreciation, and other operating expenses based on proportionate usage during the fiscal year. Additionally, the Company entered into a License and Royalty Agreement (the License Agreement) with the Parent. The License Agreement provides for payments from the Company to the Parent for the Company's ongoing use of the software, technology, and trademarks generated and owned by the Parent.
In April 2008, the Parent entered into a $50 million Revolving Credit and Term Loan Agreement (the Loan) with the Bank. Interest accrues at the LIBOR plus 75 basis points. The Loan is renewed annually for successive one year terms and shall terminate on the 5th anniversary, or thereafter can also be renewed for successive one year terms until either party gives prior notice of termination within specified deadlines.
In conjunction with the Loan, the Company entered into a $35 million Subordinated Loan Agreement for Equity Capital (Subordinated Loan) with its Parent. The amount of accrued interest payable per month is $138,541, or 4.75% per annum on the principal, and matures in three years in April 2011. The cash proceeds from the Subordinated Loan are used and dealt with by the Company as part of its capital in the computation of net capital required by the SEC. The Subordinated Loan agreement has been approved by FINRA for the Company's use of proceeds in its broker-dealer operations. The proceeds of the Subordinated loan are primarily used to fund the Company's ongoing margin lending operations and to pay off related outstanding balances with the Company's clearing broker. At June 27, 2008, amounts payable by the Company to the Parent relating to the Subordinated Loan totaled $35,370,971 including accrued interest.
In the Statement of Financial Condition, "Fees payable to Parent" reflect amounts payable for the aforementioned operating agreement, accrued interest on the Subordinated Loan and the License and Royalty Agreement for expenses paid by the Parent on behalf of the Company.
In May 2008, the Company entered into a series of four dealer and omnibus operating agreements (Funds Agreements) with ING Funds Distributor, LLC, an indirect subsidiary of ING Group N.V. The Funds Agreements provide the Company with revenue sharing arrangements in exchange for selling ING mutual funds. The Funds Agreements are omnibus in nature where customer records reside with the Company and the Company receives service fees from ING Funds Distributor, LLC for managing customer accounts.
Many of the Company's employees participated in the Parent's stock option plan until November 15, 2007. Subsequently, the Company employees may participate in the 401(k), and the profit-sharing plan and other employee programs of IDSI and its affiliates.
10. Federal Income Taxes
The components of the Company's deferred tax assets and liabilities are as follows:
| |
| |
June 27, 2008 |
|
| Deferred tax assets: |
|
| Accrued vacation |
$ 84,247 |
| Depreciation and amortization |
54,628 |
| Accrued liabilities |
108,293 |
| Other |
38,610 |
| Net operating loss carryforwards |
4,030,589 |
|
| Total deferred tax assets |
4,316,367 |
| Deferred tax liabilities: |
|
| Prepaid expenses |
(102,907) |
| Intangible Assets |
(33,902,164) |
| Total deferred tax liabilities |
(34,005,071) |
|
| Net deferred tax liabilities |
($ 29,688,704) |
|
|
The Company does not have a valuation allowance because it is more likely than not that the deferred tax assets will be realized. The Company has net operating loss carryforwards of approximately $11.5 million, which are available to reduce future taxable income tax for federal income tax purposes. Such net operating loss carryforwards begin to expire in 2018. The Internal Revenue Code contains provisions that may limit the net operating loss carryforwards available to be used in any given year if certain events occur, including changes in ownership interests.
11. FASB Interpretation No. 48 (FIN 48)
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (FIN 48). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more-likely-than-not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. FIN 48 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. FIN 48 became effective for the Company on July 1, 2007 and resulted in no impact. As of June 27, 2008, there remains no impact to the Company.
Upon adoption and as of June 27, 2008, the Company has no unrecognized tax benefits. The Company records interest and penalties on potential income tax deficiencies as an addition to its provision for income tax expense. The Company's 2004 and subsequent tax years are subject to federal and state examination as of June 27, 2008.
12. Commitments and Contingencies
The Company is involved in litigation arising in the normal course of business. In the opinion of management, after consultation with legal counsel, the ultimate resolution of such litigation will not have a materially adverse effect on the Company's financial position or results of operations.
13. Net Capital Requirements
The Company is subject to the U.S. Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1) which requires that the Company maintain minimum net capital equivalent to the greater of $250,000 or 1/15 of aggregate indebtedness, and requires that the ratio of aggregate indebtedness to net capital shall not exceed 15 to 1. At June 27, 2008, the Company had net capital of $38,626,755 as defined, which was $37,423,565 in excess of its required minimum net capital of $1,203,190. The Company's ratio of aggregate indebtedness to net capital was 0.47 to 1 at June 27, 2008.
Advances to affiliates, repayment of subordinated borrowings, dividend payments, and other equity withdrawals are subject to certain notification and other provisions of the SEC Uniform Net Capital Rule or other regulatory bodies.
Under the clearing arrangement with the clearing broker, the Company is required to maintain certain minimum levels of net capital and to comply with other financial ratio requirements. At June 27, 2008, the Company was in compliance with all such requirements.