10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-32878

(Commission File Number)

PENSON WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Delaware	6211	75-2896356
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1700 Pacific Avenue, Suite 1400

Dallas, Texas 75201

(214) 765-1100

(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2008 (the last business day of the registrants’ most recently completed second fiscal quarter) was $209,133,281.

The number of outstanding shares of the registrant’s Common Stock, $0.01 par value, as of March 11, 2009 was 25,268,971.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of registrant’s Definitive Proxy Statement relating to its 2009 annual meeting of stockholders are incorporated by reference into Part III.

PENSON WORLDWIDE, INC.
Form 10-K
For the Fiscal Year Ended December 31, 2008

TABLE OF CONTENTS

Basis of Presentation			1
Special Note Regarding Forward-Looking Statements			1
PART I			5
	Item 1.	Business	5
	Item 1A.	Risk Factors	22
	Item 1B.	Unresolved Staff Comments	36
	Item 2.	Properties	36
	Item 3.	Legal Proceedings	36
	Item 4.	Submission of Matters to a Vote of Security Holders	38
PART II			38
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
	Item 6.	Selected Financial Data	42
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
	Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	58
	Item 8.	Financial Statements and Supplementary Data	60
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	60
	Item 9A.	Controls and Procedures	60
	Item 9B.	Other Information	61
PART III			61
	Item 10.	Directors, Executive Officers of the Registrant and Corporate Governance	61
	Item 11.	Executive Compensation	61
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	62
	Item 14.	Principal Accounting Fees and Services	62
PART IV			62
	Item 15.	Exhibits and Financial Statement Schedules	62
Signatures			63
EX-10.43
EX-10.44
EX-10.45
EX-10.46
EX-10.47
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

“Penson” and the Penson logo are our trademarks. Other service marks, trademarks and trade names referred to in this annual report are the property of their respective owners.

Basis of Presentation

In this Annual Report on Form 10-K, the term “Penson” refers to Penson Worldwide Inc., a Delaware corporation and its subsidiaries on a consolidated basis. Unless otherwise indicated, all references in this report to the “Company,” “Penson,” “we,” “us” and “our” refer to Penson Worldwide, Inc. and our subsidiaries.

Penson Worldwide, Inc. (“PWI”) is a holding company incorporated in Delaware. The Company conducts business through its wholly owned subsidiary SAI Holdings, Inc. (“SAI”). SAI conducts business through its principal direct and indirect operating subsidiaries, Penson Financial Services, Inc. (“PFSI”), Penson Financial Services Canada Inc. (“PFSC”), Penson Financial Services Ltd. (“PFSL”), Nexa Technologies, Inc. (“Nexa”), Penson GHCO (“Penson GHCO”) and Penson Asia Limited (“Penson Asia”). Through these operating subsidiaries, the Company provides securities and futures clearing services including integrated trade execution, clearing and custody services, trade settlement, technology services, risk management services, customer account processing and customized data processing services. The Company also participates in margin lending and securities lending and borrowing transactions, primarily to facilitate clearing activities and proprietary trading. PFSI is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”), and is licensed to do business in all fifty states of the United States of America. PFSC is an investment dealer and is subject to the rules and regulations of the Investment Industry Regulatory Organization of Canada (“IIROC”). PFSL provides settlement services to the London financial community and is a member of the Financial Services Authority (“FSA”) and the London Stock Exchange. Penson GHCO is a registered Futures Commission Merchant (“FCM”) with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”) and the FSA.

As of the date of this Annual Report, Penson has one class of common stock and one class of convertible preferred stock. The common stock is currently held by public shareholders and certain directors, officers and employees of the Company. None of the preferred stock is issued and outstanding. As used in this Annual Report, the term “common stock” means the common stock, and the term “preferred stock” means the convertible preferred stock, in each case unless otherwise specified.

Special Note Regarding Forward-Looking Statements

This Annual Report and the information contained herein contain forward-looking statements that involve both risk and uncertainty and that may not be based on current or historical fact. Although we believe our expectations to be accurate, forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Factors that could cause or contribute to such differences include but are not limited to:

•  interest rate fluctuations;

•  general economic conditions and the effect of economic conditions on consumer confidence;

•  reduced margin loan balances maintained by our customers;

•  fluctuations in overall market trading volume;

•  our ability to successfully implement new product offerings;

•  our ability to obtain future credit on favorable terms;

•  reductions in per transaction clearing fees;

•  legislative and regulatory changes;

•  monetary and fiscal policy changes and other actions by the Board of Governors of the Federal Reserve System (“Federal Reserve”);

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•  our ability to attract and retain customers and key personnel; and

•  those risks detailed from time to time in our press releases and periodic filings with the SEC.

Forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “hopes,” “may,” “will,” “plans,” “intends,” “estimates,” “could,” “should” “would,” “continue,” “seeks,” “pro forma,” or “anticipates” or other similar words (including their use in the negative), or by discussions of future matters such as the development of new technology, integration of acquisitions, possible changes in our regulatory environment and other statements that are not historical. Additional important factors that may cause our actual results to differ from our projections are detailed later in this report under the section entitled “Risk Factors.” You should not place undue reliance on any forward-looking statements, which speak only as of the date hereof. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement.

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Glossary of selected terms

“Algorithmic traders” means firms or individuals that engage in “algorithmic trading,” defined below.

“Algorithmic trading” means the automatic generation of size and timing of orders based on preset parameters, occurs largely as a result of complex computational models and is often highly if not totally automated (i.e., trading does not necessarily require the intervention of a live trader but is generated by computers). Such trading is at times referred to as “black box” trading.

“ASP” refers to “Application Service Provider,” which means a licensor of software products that hosts such products on its own proprietary or leased hardware and offers customer service relating to such products to the licensee.

“Back-end trading software” means software programs that interface between the clearing firm, exchange or ECN, and the trader using front-end trading software.

“CFD” or “Contract for Difference” means a contract between two parties, stipulating that the selling party will pay to the buying party the difference between the current value of any asset and its value at the time the contract terminates. If the difference is negative, then the buying party instead makes payment to the selling party.

“Clearing” means the verification of information between two counterparties (e.g. brokers) in a securities transaction and the subsequent settlement of that transaction, either as a book-entry transfer or through physical delivery of certificates, in exchange for payment. Clearing is the procedure by which an organization acts as an intermediary and assumes the role of buyer and seller for transactions in order to reconcile orders between transacting parties. Clearing enables the matching of buy and sell orders in a market and, typically, provides for more efficient markets as parties can make transfers to a clearing agent rather than to each individual party with whom they have transacted.

“Clearing firm” means the firm that provides clearing, custody, settlement and/or other services to correspondents and, at times, to customers. Clearing firms may or may not provide technology products and services such as front-end trading software and data.

“Client” means both correspondents and other customers who may not utilize our clearing, futures or securities products and services but which may, for example, use solely technology products and services.

“Correspondent” means entities (e.g. broker-dealers) that use our clearing firms’ respective regulated securities and/or futures record keeping, custody and/or settlement services as opposed to only using technology products and services. Our typical correspondent is a firm that introduces its customers to our clearing firms for clearing, custody and/or settlement services.

“Custody” means when a party has taken legal responsibility to hold another party’s assets such as physical securities. Custody services are the safe-keeping and managing of another party’s assets, as well as customer account maintenance and customized data processing services.

“Customers” means the customers of our Correspondents. Customers of our correspondents may be individuals or entities and may have an institutional or retail focus.

“Direct access” or “Direct market access” means when a front-end trading application permits the trader to select the market destination on which execution is desired and the order is transmitted completely electronically without human intervention.

“Electronic Communications Network” or “ECN” means an electronic system that matches buy and sell orders typically via computerized systems.

“Execution routing” means the sending of securities orders to exchanges and other market destinations such as market makers through the use of telecommunications infrastructure combined with proprietary or third party trading software.

“FCM” means futures commission merchant (which is similar to a broker-dealer but operates in the futures arena).

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“Front-end trading software” means software programs used by traders to access trading information and execute trades, and that interface with back-end software systems that communicate with the clearing firm, exchange or ECN. Level II trading software is a form of front-end trading software.

“Level I market information” means the most basic information available about a stock consisting principally of the bid and ask price and last trade data.

“Level II market information” means information from multiple exchanges and other markets for the same security type.

“Level I trading software” means a front-end trading software system designed to provide access to Level I market information for use in online trading.

“Level II trading software” means a front-end trading software system designed to provide access to Level II market information for use in active online trading and which enables a trader to select a specific exchange or market across various markets.

“Online trading” means trading via electronic means (typically via the Internet). Direct access trading, for example, is often viewed as a subset or a type of online trading.

“Settlement” means the conclusion of a securities transaction in which a broker-dealer pays for securities bought for a customer or delivers securities sold and receives payment from the buyer’s broker-dealer.

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PART I

Item 1.   Business

Overview

We are a leading provider of a broad range of critical securities and futures processing infrastructure products and services to the global financial services industry. Our products and services include securities and futures clearing and execution, financing and cash management technology and other related offerings, and we provide tools and services to support trading in multiple markets, asset classes and currencies. Unlike most other major clearing providers, we are not affiliated with a large financial institution and we generally do not compete with our clients in other lines of business. We believe that our position as the leading independent provider in our markets is a significant differentiating factor relative to our competitors. We supply a flexible offering of infrastructure and related products and services to our clients, available both on an unbundled basis and as a fully-integrated platform encompassing all of our products and services. We believe our ability to integrate our technology offerings into our products and services is a key advantage in our effort to expand our sales and attract new clients.

Clearing is the verification of information between two parties in a securities or futures transaction and the subsequent settlement of that transaction, either as a book-entry transfer or through physical delivery of certificates, in exchange for payment. Custody services are the safe-keeping and managing of another party’s assets, such as physical securities, as well as customer account maintenance and customized data processing services. Clients for whom we provide securities clearing and custody services are generally referred to as our “correspondents.”

Since starting our business in 1995 with three correspondents, we have grown to be a leading provider of clearing services. Based on the number of correspondents as of December 31, 2008, we are the largest independent clearing broker in the U.S., and among the top three clearing brokers overall in the U.S., the largest independent clearing broker in Canada and the second largest in the U.K. We have grown both organically and through acquisitions. As of December 31, 2008, we had 302 active correspondents worldwide, compared to 277 correspondents as of December 31, 2007, representing an increase of 9%. As of December 31, 2008, our pipeline of new correspondents under contract was 23, the majority of which we expect to begin clearing with us by June 30, 2009.

With operations based in the U.S., Canada, the U.K. and Asia, we have established a global presence primarily focused on the North American and European markets for equities, options, futures and fixed income products. We believe that international markets offer an important target market as certain characteristics of the U.S. market, including significant increases in retail, self-directed and online trading, and increased trading volumes and executions, continue to expand globally. We are organized into operating segments based on products and services and geographic regions (See Note 22 to our consolidated financial statements).

Our non-interest revenues include: fees from our correspondents for transaction processing and clearing; fees for providing technology solutions; and fees for providing other non-trading activities and services, including execution services, trade aggregation, prime brokerage, foreign exchange and fixed income. Clearing and commission fees are based principally on the number of trades we process. We also earn licensing and development fees from clients for their use of our technology solutions.

Our interest revenues are generated from customer-related balances and from our stock conduit borrowing transactions. Interest revenues from customers are generated from margin lending, securities lending and the reinvestment of customer funds. We also derive net interest revenue from our stock conduit borrowing activities, which consist of borrowing securities from one broker-dealer and lending the same securities to another broker-dealer on a matched book basis.

For the year ended December 31, 2008, we generated net revenues of $293.2 million. Clearing and commission fees, net interest income, technology revenues and other revenues comprised 51%, 26%, 8% and 15% of our net revenues, respectively. Approximately 34% of our securities correspondents generate both clearing and technology revenue. In addition, many of our customers generate revenue from both securities and futures trading, and trade in the U.S., Canada and the U.K. We estimate that direct market access broker-dealers accounted for 14.0% of these revenues and represented 11.9% of our total correspondents, traditional retail broker-dealers accounted for 12.7% of these revenues and represented 29.9% of our total correspondents, online broker-dealers

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accounted for 15.4% of these revenues and represented 10.0% of our total correspondents and institutional clients represented 17.1% of these revenues and were 26.1% of our total correspondents. The remainder of these revenues was provided primarily by broker-dealers trading on a proprietary basis, broker-dealers specializing in option trading, futures trading, hedge funds, algorithmic traders and financial technology firms. See also Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for more information.

As an integral part of our securities clearing relationships, we maintain a significant margin lending business with our correspondents and their customers. Under these margin lending arrangements, we extend credit to our correspondents and their customers so that they may purchase securities on margin. As is typical in margin lending arrangements, we extend credit for a portion of the purchase price of the securities, which is collateralized by existing securities and cash in the accounts of our correspondents and their customers. We also earn interest income from both our securities and futures operations by investing customers’ cash and we engage in securities lending activities as a means of financing our business and generating additional interest income. Over the past year, our net interest revenues decreased from $88.4 million in 2007 to $75.1 million in 2008, representing approximately 33% and 26% of our net revenues, respectively.

Clients

Currently, our principal clients are online, direct access and traditional retail brokers. Increasingly, we are adding as clients large banks, institutional brokers, financial technology companies and securities exchanges. Online broker-dealers enable investors through browser-based technology and perform trades through the broker via the Internet. Direct access broker-dealers provide investors with dedicated software which executes orders through direct exchange interfaces and provides real-time high speed Level II market information. Traditional retail brokers usually engage in agency trades for their customers, which may or may not be online. Institutional brokers and hedge funds typically engage in algorithmic trading or other proprietary trading strategies for their own account or, at times, agency trades for others. Our bank clients typically are non-U.S. entities making purchases for their brokerage operations. The type of financial technology client that would most likely use our products and services is a financial data content or trading software firm that purchases our data or combines its offerings with our trading software. Through our acquisitions of Goldenberg Hehmeyer and Co. (“GHCO”) and First Capitol Group LLC (“FCG”) in 2007, we have added a number of futures related clients, including introducing brokers, non-clearing FCMs, commercial customers, customers who engage in hedging and risk management activities and other customers who trade futures and other instruments.

We have made significant investments in our U.S. and international data and execution infrastructure, as well as various types of multi-currency and multi-lingual trading software. We believe we provide a flexible offering of infrastructure products and services to our clients, available both on an unbundled basis and as a fully-integrated solution. Our technology offerings are typically private-labeled to emphasize the client’s branding. We seek to put our clients’ interests first and we believe our position as the leading independent provider of U.S. securities clearing services is a significant differentiating factor. We believe we are well-positioned to take advantage of our significant investments in technology infrastructure to expand sales of our products and services to these and many other clients worldwide.

Industry trends

We believe that the market for securities and futures processing products and services is influenced by several significant industry trends creating continuing opportunities for us to expand our business, including:

Increase in trading volumes and executions.  The increase in trading volumes and executions in equities, options and futures markets over the past several years has led to an increase in the number of transactions requiring execution, processing and settlement. For the past decade, there has been significant growth in the overall market environment.

Shift to outsourced solutions.  Broker-dealers outside the U.S. are increasingly following the continuing and common practice in the U.S. of outsourcing their clearing functions. In addition, firms in the global securities and investment industry are expanding their use of third-party technology to manage their securities

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trading infrastructure.

Increase in trading in multiple markets.  Investors increasingly seek to trade in multiple markets, asset classes and currencies at once. The technological challenges associated with clearing, settlement, and custody in multiple geographies, currencies, and asset classes are prompting correspondents to seek the most comprehensive and sophisticated service providers. We have sought to capitalize on this trend by expanding our product offering into high growth areas such as the futures market, where we significantly expanded since early 2007. Revenues from our futures product offering comprised 18% of total net revenues in 2008 as compared to 6% in 2007.

Industry consolidation.  Although the significant effort and potential business disruption associated with conversion to a new clearing firm may discourage some correspondents from switching service providers, consolidation among clearing service providers has led to forced conversions. These conversions result in opportunities for correspondents to seek competing offers and, thus, for service providers to solicit new correspondents’ business without having to overcome the threshold issue of converting from an incumbent. We believe we have benefited from industry consolidation by attracting correspondents as a result of the acquisitions of major competitors by larger financial institutions.

Demand for increased reporting capabilities and integrated technology solutions.  Clients are increasingly demanding products that seamlessly integrate front, middle and back-office systems and allow for near real-time updating of account status and margin balances. Our ability to meet these demands makes us a preferred securities processing firm for correspondents in the growing algorithmic trading and hedge fund sectors.

Opportunities in the Canadian, European and Asian markets.  The securities and investments industries outside of the U.S., including those in Canada, Europe and Asia, have followed many of the same trends as the U.S. market. Many industry participants are now requiring the same complex and sophisticated clearing and execution services that are common in the U.S. In addition, clearing firms in these markets are less likely to own trading applications, creating opportunities for the sale of Nexa’s products. We opened our first Asian office in Hong Kong in the first quarter of 2007 and an office in Tokyo during 2008 in order to expand our Asian operations. Our Asian operations are currently focused on marketing our technology products.

Our product offering

Clearing and related services

As a securities and futures processing infrastructure provider, Penson’s services include securities and futures clearing and settlement, custody, account maintenance, data processing services, and technology services. Clearing is the verification of information and matching between two parties in a securities or futures transaction which is followed by the subsequent settlement of that transaction in exchange for payment or margin deposit. Custody services are the safe-keeping and managing of another party’s assets, such as securities, as well as customer account maintenance and customized data processing services. Clients for whom we provide securities clearing and custody services are generally referred to as our “correspondents” or “introducing brokers.” Through a recent acquisition, we now also provide commodity risk management and other services to certain of our futures customers.

We have made substantial investments in the development of customized data processing systems that we use to provide these “back-office” services to our correspondents on an integrated, efficient and cost-effective basis, allowing us to process a high volume of transactions without sacrificing stability and reliability. In 2008, we processed an average of 1.2 million equity transactions, 735,000 equity options contracts and 541,000 futures contracts per day. Our products and services reduce the need for our correspondents to make significant capital investments in a clearing infrastructure and allow them to focus on the core competencies of their businesses. These systems also enable our correspondents to provide customized, timely transaction and account information to their customers, and to monitor the risk level of their customers on a real-time basis. We have found that our comprehensive suite of advanced technology solutions is an important factor in winning new correspondents.

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As an integral part of our securities clearing relationships, we maintain a significant margin lending business with our correspondents and their customers. Under these margin lending arrangements, we extend credit to our correspondents and their customers so that they may purchase securities on margin. As is typical in margin lending arrangements, we extend credit for a portion of the purchase price of the securities, which is collateralized by existing securities and cash in the accounts of our correspondents and their customers. We also earn interest income from both our securities and futures operations by investing customers’ cash and we engage in securities lending activities as a means of financing our business and generating additional interest income.

Technology and data products

An important component of our business strategy is to identify and deploy technologies relevant to our target markets. Our technology and data product offerings, which are principally developed and marketed through our Nexa subsidiary, include customizable front-end trading platforms, a comprehensive database of real-time and historical U.S. and international equities, options and futures trade data, and order-management services. This technology embedded in our securities and futures processing infrastructure has enhanced our capacity to handle an increasing volume of transactions without a corresponding increase in personnel. We use our proprietary technology and technology licensed from third parties to provide customized, detailed account information to our clients. Our technology is critical to our vision of providing a flexible and comprehensive offering of products and services to our clients. Our technology revenues generally include revenues from software development and customization of products and features, but our technology products are designed to generate substantial subscription-based revenues. The majority of our technology revenues are recurring in nature and are generated by correspondents under contracts that generally have initial terms of two years.

Our competitive strengths

Established market position as the largest independent provider of correspondent clearing services in our primary markets.

We have grown organically and through acquisitions to become the leading independent provider of securities clearing services in our primary markets with 302 active correspondents in the U.S., Canadian and U.K. markets, which includes 43 futures correspondents as of December 31, 2008. As of December 31, 2008 (based on the number of correspondents), we were the largest independent clearing broker-dealer in both the U.S. and Canada, as well as the second largest clearing broker in the U.K. Furthermore, as of December 31, 2008 (based on the number of correspondents), we are also the third largest clearing broker in the U.S. overall. Unlike most other major clearing service providers, we are not affiliated with a large financial institution and we generally do not compete with our clients in other lines of business. We believe our position as the leading independent provider of securities clearing services in our primary markets is a significant differentiating factor.

Fully-integrated securities-processing and technology solutions.

We are a leading provider of infrastructure to financial intermediaries, offering integrated solutions with the ability to address all major securities-processing needs. Through the integration of our own technology across all of our products and services, we have been able to expand our client base and increase our revenue from existing clients. Our products and services facilitate trading in multiple markets, asset classes and currencies, with integrated execution, clearing and settlement solutions. It is our belief that, while some clients are willing to obtain these products from multiple vendors, many will determine that it is easier to obtain solutions with lower integration costs and risks from one provider that can also address the regulated securities aspects of their business.

Flexible services and infrastructure.

We provide a broad offering of infrastructure, technology and data products and services to our clients, available both on an unbundled basis and as a fully-integrated solution. We work closely with each of our clients to tailor the set of products and services appropriate for their individual needs.

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Highly attractive and diversified client base.

Our client base comprises the following categories:  online, direct market access, institutional, retail and algorithmic, options, futures and other. For the year ended December 31, 2008, no single category of customer represented more than 17.1% of total net revenues. In addition, no single customer represented more than 4.8% of net revenue, with our top ten customers only constituting 27.0% of our net revenues. Additionally, we have diversified our client base internationally through our operations in Canada, the U.K. and Asia, and by asset class through expanding our operations into the futures business and foreign exchange businesses.

Scalable, recurring revenue model.

Our business benefits from a highly scalable platform which is capable of processing significant additional volume with limited incremental increases in our expenses. We receive a recurring stream of revenues based on the trading volumes of each of our correspondents with a low marginal cost to process transactions. We typically maintain two- to three-year exclusive contracts with our correspondents. Furthermore, there are typically high switching costs as the transition from one provider of clearing services to another is disruptive to a correspondent’s business. In addition, a significant portion of our technology revenues are based on ASP arrangements with clients, linked to transactions and users. Thus, we become even more indispensable to our clients by not only licensing them our software but by also providing them with hardware to run our products along with related support services.

Proven and highly motivated management team.

With an average of 33 years of industry experience and holding a substantial equity interest in Penson, our three-member Executive Committee has the proven ability to manage our business through all stages of the business cycle. Roger J. Engemoen, Jr., Philip A. Pendergraft and Daniel P. Son, our Chairman, Chief Executive Officer and President, respectively, founded our business in 1995 and have built it to its current position.

Business strategies

Leverage existing platform to expand our product offerings and client base.

We believe our infrastructure provides a leading fully-integrated securities clearing and technology product package to our core market, and additional products can be offered and new clients can be added with minimal marginal cost. Using this infrastructure, we intend to expand our client base by:

•  Focusing on high-volume direct access and online broker-dealers and the futures trading industry.  We will continue to target our clearing services to the growing futures trading, direct access and online broker-dealer markets and on margin lending as a core complementary service.

•  Further expanding our client base in the institutional and retail brokerage markets.  We are expanding our focus on the traditional institutional and retail brokerage industry. Many institutional and retail brokers in the U.S. have outsourced their clearing functions, and we believe this trend is now increasing internationally, which creates opportunities for us on a global basis. We are also targeting these firms for our technology products and services.

•  Expanding our client base in the quantitative trading sector.  Our technology products enable us to increasingly market our services to the rapidly growing quantitative trading sector. This sector is among the most significant drivers of growth in the overall securities markets and we intend to increase our focus on these clients.

•  Expanding our futures business.  Our purchase of GHCO in February, 2007 was a significant step in expanding our futures clearing operations and our purchase of FCG in November, 2007 gives us the ability to expand our futures offering to clients that need risk management and other services.

•  Expand offering of portfolio margining.  Portfolio margining allows us to extend margin lending to cover a percentage of the purchase price of securities higher than the percentage required under Regulation T based on a risk calculation model approved by the SEC. We approve our correspondents internally for portfolio

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margining based on several factors, the most important of which is account size. At December 31, 2008, we had 322 portfolio margining accounts with a weighted average balance of approximately $39.9 million.

Expanding our operations internationally.

We believe our ability to service clients internationally will become more important as investors increasingly trade on a global basis. In addition, we intend to expand our margin lending business internationally. Our presence in the non-U.S. markets gives us several opportunities to pursue additional revenues across our product and service offerings. It allows us to better serve our customers who are U.S.-based by helping facilitate their growth and providing them with greater access to international markets. It also gives us greater access to the potential customer base in those local markets. We opened our first Asian office in Hong Kong in the first quarter of 2007 and an office in Tokyo in 2008, and we intend to expand our offering of technology products in Asian markets in 2009.

Enhance revenue potential of each client relationship.

We intend to grow in part by selling additional products to our existing clients. Many of our correspondents currently only utilize our clearing services, but we maintain a broad product suite across geographies that provides us with a significant opportunity to cross-sell our execution services to our current base of correspondents. We believe we have a significant opportunity to offer the full spectrum of clearing and execution services to many of Nexa’s clients, as well as offering technology services to our clearing and execution clients. For example, thinkorswim, Inc. started as a customer in the U.S. predominantly utilizing our options clearing service. After the acquisition of GHCO, we were able to convert them to our futures platform and subsequently we were able to capture their Canadian business.

Capitalize on industry trends.

We are positioned to benefit from several broad industry trends, including internationalization of trading activity, consolidation among service providers, and increased demand for trading infrastructure that supports multiple products on the same computer terminal, including equities, options, futures and foreign exchange as well as increased outsourcing of securities-processing.

Pursue accretive acquisitions.

Through our past acquisitions, we have grown internationally, expanded our product base and added correspondents. As of December 31, 2008, we had successfully integrated our acquisitions of Computer Clearing Services, Inc. (“CCS”), the clearing operations of Schonfeld Securities LLC, GHCO and FCG. While we will continue to invest in developing and enhancing our existing business solutions, we also intend to continue to pursue accretive acquisitions that will expand our technology product offerings, our clearing service capability and our client base.

Securities processing

Our securities and futures processing infrastructure products and services are principally marketed under the “Penson” brand name. Penson Worldwide, Inc. is the ultimate parent company for the businesses that provide these products and services in each geographic market we serve.

Clearing and related operations

United States

We generally provide securities clearing services to our correspondents in the U.S. on a fully-disclosed basis. In a fully-disclosed clearing transaction, the identity of the correspondent’s customer is known to us, and we are known to them, and we maintain the customer’s account and perform a variety of services as agent for the correspondent.

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Our U.S. securities clearing broker is PFSI, which is registered with the SEC and is a member of the following: New York Stock Exchange, NYSE Alternext, Chicago Board Options Exchange, Chicago Stock Exchange, International Securities Exchange, NASDAQ, NYSE ARCA Equities Exchange, NYSE ARCA Options Exchange, Philadelphia Stock Exchange, OneChicago, DTC, Euroclear, ICMA, MSRB, FINRA, NSCC, Options Clearing Corp., and Securities Investor Protection Corporation (“SIPC”) and is a participant of the Boston Options Exchange (“BOX”).

With respect to futures transactions, Penson GHCO provides our clearing and execution services for futures and FCG provides risk management and consultation services for some of our futures clients. Penson GHCO is regulated by the CFTC, the NFA and the FSA and is a member of the Chicago Board of Trade, the Chicago Mercantile Exchange, London International Financial Futures Exchange, the Minneapolis Grain Exchange, the Clearing Corporation, and the London Clearinghouse.

Canada

PFSC provides clearing services in accordance with the rules of the IIROC. Canada has four types of approved clearing models and our Canadian operation is approved for all of these. We concentrate primarily on providing services to Type 2 and Type 3 correspondent brokers. As a Type 2 or 3 carrying broker, our key responsibilities may include the trading of securities for customers’ accounts and for the correspondent’s principal business, making deliveries and settlements of cash and securities in connection with such trades, holding securities and/or cash of customers and of the correspondent and preparing and delivering directly to customers documents as required by applicable law and regulatory requirements with respect to the trades cleared by us, including confirmation of trades, monthly statements summarizing transactions for the preceding month and, for inactive accounts, statements of securities and money balances held by us for customers.

PFSC is our Canadian clearing broker and provides fully-disclosed and omnibus clearing services to the Canadian markets. In an omnibus relationship, the identity of the end customer is not always known to us. PFSC is a participating organization of the Toronto Stock Exchange, an approved participant with the Montreal Exchange and a member of the TSX Venture Exchange and various Canadian alternative trading systems. PFSC is a member of the Canadian Investor Protection Fund and is regulated by the IIROC and the securities regulatory authorities of each province and territory in Canada.

United Kingdom

In the U.K. we offer a broad range of securities clearing services that include: Model A and Model B clearing and settlement, Euroclear, global custody, customized data processing, regulatory reporting, execution, and portfolio management and modeling systems. In Model A clearing, we provide a purely administrative back-office service and act as agent for our correspondents’ customers, and supply these customers with the information needed to settle their transactions. Model B clearing provides the authority to process transactions under a fully-disclosed clearing model similar to the U.S. Under Model B clearing, we assume the positions and therefore full liability for the clearing and settlement of the trades. All our correspondents in the U.K. are categorized as Professional Clients under FSA Rules.

PFSL is our U.K. clearing broker. In the U.K., PFSL is a member of the London Stock Exchange and is authorized and regulated by the FSA.

Asia

We opened Penson Asia, our first Asian office, in Hong Kong in the first quarter of 2007 and an office in Tokyo in 2008. We entered into five technology services agreements with correspondents primarily related to North American and U.K. securities through our Penson Asia office in 2008 and expect to further expand our Asian business in 2009.

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Internet account portfolio information services

We have created customized software solutions to enable our correspondents and their customers to review their account portfolio information through the Internet. Through the use of our internally developed technology, combined with technology licensed from third parties, we are able to update the account portfolios of our correspondents’ customers as securities transactions are executed and cleared. A customer is able to access detailed and personalized information about his account, including current buying power, trading history and account balances. Further, our solution allows a customer to download brokerage account information into Quicken, a personal financial management software program, and other financial and spreadsheet applications so that all financial data can be integrated.

Holding and safeguarding securities and cash deposits

We hold and safeguard securities and cash deposits of our correspondents’ customers, which requires us to take legal responsibility for those assets. Many of our correspondents do not have the ability to hold securities and cash deposits due to regulatory requirements that require that the holder must comply with the net capital rules of the SEC and other regulators with respect to these activities.

Securities lending and borrowing

We lend securities that we hold for our correspondents and their customers to other broker-dealers as a means of financing our business and facilitating transactions. We also engage in conduit activities where we borrow securities from one broker-dealer and lend the same securities to another broker-dealer. This lending is permitted under and governed by SEC rules. See “Government regulation” and “Regulation of securities lending and borrowing.” All of our securities borrowing and lending activities are performed under a standard form of securities lending agreement, which governs each party’s rights to mark securities to market.

Proprietary trading

Certain of our subsidiaries engage in limited forms of proprietary trading. This trading includes computerized trading and non-automated trading strategies involving taking short-term proprietary positions in equities, options, fixed income and other securities, derivatives and foreign currencies. In general, these strategies involve relatively short-term exposure to the markets and are usually undertaken in conjunction with hedging strategies and the use of derivatives contracts designed to mitigate the risk associated with these proprietary positions. These activities in the aggregate are insignificant to revenues and pretax income.

Futures products

In addition to the futures clearing services provided by Penson GHCO, our FCG subsidiary provides retail, risk management and consultation services for certain of our futures clients.

Technology and data products

An important component of our business strategy is to identify and to deploy technologies relevant to our target markets. The technology embedded in our securities and futures processing infrastructure has enhanced our capacity to handle an increasing volume of transactions without a corresponding increase in personnel. We use our proprietary technology and technology licensed from third parties to provide customized, detailed account information to our clients. During 2008, we entered into an agreement with SunGard that requires SunGard to provide a dedicated non-stop processing platform for the processing of our U.S. clearing operations. We moved our clearing operations to the dedicated platform in the first quarter of 2009. Additionally, our technology is critical to our vision of providing a flexible and comprehensive offering of products and services to our clients.

Our technology and data product offerings include customizable front-end trading platforms, a comprehensive database of historic U.S. and international equities, options and futures trade data, and order-management services. Our approach to the development and acquisition of technology has allowed us to create an evolving suite of products that provides specific solutions to meet our clients’ individual requirements. We also provide risk

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management and consultation services to our futures customers through the FCG division of our Penson GHCO subsidiary.

Nexa provides our clients with innovative trading management technology with a global perspective. Nexa specializes in direct access trading technology and provides complete online brokerage solutions, including direct access trading applications, browser-based trading interface, back-office order management systems, market data feeds, historical data, and execution technology services, generally on a license-fee basis. Nexa’s FastPath product provides a full suite of Financial Information Exchange (“FIX”) gateway solutions for clients who require global connectivity, high throughput and reliability. FIX execution solutions allow clients to automatically transmit, receive or cancel advanced-order types, execution reports, order status, positions, liquidity flags and account balances. Clients can connect using their own front-end or back-office applications or utilize applications available from Nexa. We generally provide our solutions to our clients on a private-labeled basis to emphasize the client’s branding.

Nexa’s products, such as Omni Pro, Axis Pro, and Meridian, are designed to accommodate various market segments by providing different trading platforms and functionality to users. All of our front-end products benefit from several important features such as the ability to trade equities, options and futures and to have unified risk management for trading across multiple asset classes.

Although there is a significant market for front-end trading platforms that is independent of the market for clearing services, we have found that our ability to integrate our technology-related products with our clearing services provides clients with a compelling reason to use Penson for their clearing needs. We believe this broader, integrated offering is a significant factor in our conversion of client prospects into actual clients.

Our technology revenues generally include revenues from software development, customization of products and features and licensing fees, but our technology products are designed to generate substantial subscription-based revenue over time. Our technology revenues have increased over the last year from $15.2 million in 2007 to $22.2 million in 2008.

Institutional and active retail front-end trading software

Nexa has developed and is continuing to expand various front-end trading software products. We offer several products that are oriented towards different market segments. Omni Pro is a Level II trading platform oriented to professional traders and provides broker-dealer administrative modules. Level II software enables the trader, among other things, to view prices for the same security across various markets and to select the desired market for order execution. Axis Pro is a multi-currency Level II trading platform focused on active retail traders. Meridian is a Level I trading platform for less intensive applications for the active retail trader. Both Axis Pro and Meridian are offered with broker-dealer administrative modules, which allow broker-dealers to monitor customer buying power and other regulatory compliance tasks, and to provide a repository for customer information.

All of our front-end products benefit from a number of compelling features such as the ability to trade equities, options and futures and have unified risk management for trading across equities, options and futures. Many of our clearing competitors do not have similar systems that effect trades in all such instruments with similar risk mitigation capabilities. There is a dynamic market for front-end trading platforms that is independent of the market for our clearing services. However, we are finding that our ability to offer these products provides our clients with a compelling reason to use our clearing and other products and services and is increasingly important in our conversion of client prospects into actual clients.

Global execution infrastructure

Nexa has built significant proprietary software and licensed certain software and telecommunications services to enable our clients to use our technology infrastructure to send orders for securities to all major North American exchanges, ECNs and market destinations. We have extended this network to include numerous international destinations such as the London Stock Exchange, U.K. market makers and others. Our clients can choose to use our execution infrastructure, independent of our other services, or to opt for a bundled solution combining technology products together with clearing and settlement. This allows us to access a differentiated market segment for clients

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that clear with another firm or are self-clearing, but which do not have a similar infrastructure capability. In particular, because our network has been designed to maximize speed of execution, our offerings are very attractive to algorithmic traders for whom speed is essential to successful implementation of their trading strategies. Our infrastructure required significant time and investment to build and very few of our clearing competitors offer anything that is directly comparable.

Global data products

We believe it is critical to provide our clients with global trade data solutions. Nexa provides research-quality, historical intraday time series data plus real-time data feeds for the commodity and equity markets. Our suite of data products was significantly enhanced by our acquisition of the Tick Data assets in January 2005. Its database of historical intraday equities, options and futures data from exchanges in North America, Europe and Asia is presented tick-by-tick and is delivered in a compressed, proprietary format. The database of historical cash index data contains the most widely followed equity indices. Nexa also offers TickStream, a fully customized, low latency, real-time market data feed. Data is delivered through a simple-to-use application program interface (“API”) and powered by advanced ticker plants that have multiple direct connections to global exchanges. While these products do not currently generate material revenues, we provide data to over 3,000 clients, which we believe provides significant opportunities for cross-selling our other products and services.

Nexa has also built its own data ticker plant to access data from most U.S. and many foreign exchanges and market centers. We have also licensed certain foreign data from other sources. The result is a very comprehensive offering of real-time, delayed and historical data that we can market to our clients. As with the international execution hub, our clients can use our data solutions together with or independent of our other products and services. This enables us to compete with major securities data providers to offer comprehensive data solutions. Furthermore, historical data offerings are not offered by most data services providers or clearing firm competitors and enable us to serve new client segments such as algorithmic traders and hedge funds to which we have had relatively less historical exposure through our clearing operations.

Key licensed technology and proprietary customization

We license a software program called Phase3 from SunGard. Phase3 is an online, real-time data processing system for securities transactions. Phase3 performs the core settlement functions with industry clearing and depository organizations. During 2008, we entered into an agreement with SunGard that requires SunGard to provide a dedicated non-stop processing platform for the processing of our U.S. clearing operations. We moved our clearing operations to the dedicated platform in the first quarter of 2009. We have built a significant amount of proprietary software around Phase3 which allows us to customize Phase3 to meet each of our client’s unique needs. This customization increases the reliability and efficiency of our data processing model and permits us to process trades more quickly than if we relied on Phase3 alone. This customization also offers our clients more flexible access to information regarding their accounts, including the ability to:

•  see critical information in real-time on a continuously updated basis;

•  manage their buying power across different accounts containing diverse instruments such as equities, options and futures, and;

•  receive highly customized reports relating to their activity.

The above-noted products are principally used by our U.S. securities clearing subsidiary but, in many cases, enable our non-U.S. customers, both through our non-U.S. affiliates and directly, to access leading-edge products and services when trading in the U.S. markets. We offer third party software that we have licensed, which we believe offers an increased variety of settlement and clearing applications, to certain of our Canadian correspondents who trade futures products.

Sales and marketing

We focus our sales and marketing efforts in the U.S. primarily on the direct access and online sectors. We have also started to focus our efforts on the algorithmic trading and hedge fund sectors of the global securities

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and investment industry. We are aggressively marketing execution-only services to the global financial services market. In addition, we believe that a significant opportunity exists in foreign markets as the adoption of online trading expands in other countries. We have capitalized on this opportunity by implementing cross-border and multi-currency trade processing capabilities.

Following the completion of our IPO in May 2006, we increased our sales and marketing staff to take advantage of the additional financial resources which allowed us to expand our correspondent base. We significantly expanded our marketing efforts in Asia in 2008. We participate in industry conferences and trade shows and seek to differentiate our company from our competitors based on our reputation as an independent provider of a technology-focused integrated execution, clearing and settlement solution and based on our ability to support trading in multiple markets, multiple investment products and multiple currencies.

We generally enter into standard clearing agreements with our securities correspondents for an initial term of two years, during which we provide clearing services based on a schedule of fees determined by the nature of the financial instrument traded and the volume of the securities cleared. In some cases our standard contract will also include minimum monthly clearing charge requirements. Subsequent to the initial term, these contracts typically allow the correspondent to cancel our services upon providing us with 45 days written notice. Futures clearing contracts between us and our correspondents are generally terminable on 30 days notice. Futures clearing contracts directly between us and our customers are generally terminable at will.

As of December 31, 2008, we had 302 active correspondents worldwide, consisting of 259 active securities clearing correspondents and 43 active futures clearing correspondents. Of the 259 active securities clearing correspondents, 204 are located in the U.S., while our U.K. and Canadian clearing operations provide services for 17 correspondents and 38 correspondents, respectively. Before conducting business with a correspondent, we review a variety of factors relating to the prospective correspondent, including the correspondent’s experience in the securities industry, its financial condition and the personal backgrounds of the key principals of the firm. We seek to establish relationships with correspondents whose management teams and operations we believe will be successful in the long-term, so that we may benefit from increased clearing volume and margin lending activity as the businesses of our correspondents grow.

Strategic acquisitions

We have engaged in a number of acquisition transactions which have facilitated our ability to expand our client base and provide leading-edge technology infrastructure as well as to open international markets, positioning us to pursue a strategy of combining our increasingly global securities offerings with enhanced technology offerings on a multi-instrument, multi-currency, international platform. To date, none of our acquisitions have exceeded the defined significant subsidiary thresholds pursuant to Section 1-02(w) of SEC Regulation S-X.

In November 2007, our subsidiary Penson GHCO acquired all of the assets of FCG, an FCM and a leading provider of technology products and services to futures traders, and assigned the purchased membership interest to GHP1 effective immediately thereafter. We closed the transaction in November, 2007 and initially paid approximately $9.4 million in cash, subject to a reconciliation to reported actual net income, as defined in the purchase agreement, and approximately 150,000 shares of common stock valued at $2.2 million to the previous owners of FCG. In addition, we have agreed to pay an annual earnout of cash for the two year period following the actual net income reconciliation, based on average net income, subject to certain adjustments including cost of capital, for the acquired business. We finalized the acquisition valuation during the 3rd quarter of 2008 and recorded goodwill of approximately $4.0 million and intangibles of approximately $7.6 million. We accrued approximately $8.7 million related to the first year of the earnout period, of which $4.5 million was paid as of December 31, 2008. On May 31, 2008, Penson GHCO acquired substantially all of the assets of FCG as part of an internal reorganization and consolidation of assets. FCG currently conducts business as a division of Penson GHCO.

In November 2006, we entered into an agreement to acquire the partnership interests of Chicago-based GHCO, a leading international futures clearing and execution firm. We closed the transaction in February 2007 and paid $27.9 million, including cash and approximately 139,000 shares of common stock valued at $3.9 million to the previous owners of GHCO. In addition, we agreed to pay additional consideration in the form of an earnout over the next three years, in an amount equal to 25% of Penson GHCO’s pre-tax earnings, as defined in the purchase

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agreement executed with the previous owners of GHCO. We did not make an earnout payment relating to the first year of the integrated Penson GHCO acquisition (See Note 25 to our consolidated financial statements).

In November 2006, we acquired the clearing business of Schonfeld Securities LLC, a New York based securities firm. We closed the transaction in November 2006 and in January 2007, we issued approximately 1.1 million shares of common stock, valued at approximately $28.3 million, to the previous owners of Schonfeld as partial consideration for the assets acquired. In addition, we have agreed to pay an annual earnout of stock and cash over a four year period that commenced on June 1, 2007, based on net income, as defined in the purchase agreement, of the acquired business. A payment of approximately $26.6 million was paid in connection with the first year earnout that ended May 31, 2008. At December 31, 2008, a liability of approximately $17.5 million was accrued as a result of the second year earnout and is included in other liabilities in the consolidated statement of financial condition. The offset of this liability, goodwill, is included in other assets. We successfully completed the conversion of the seven Schonfeld correspondents in the second quarter of 2007.

Competition

The market for securities clearing and margin lending services is highly competitive. We expect competition to continue and intensify in the future. We encounter direct competition from firms that offer services to direct access and online brokers. Some of these competitors include Goldman Sachs Execution & Clearing, L.P.; Pershing LLC, a member of BNY Securities Group; National Financial Services LLC, a Fidelity Investments company; Merrill Lynch & Co., Inc., a subsidiary of Bank of America, MF Global Ltd. (formerly Man Financial) and RJ Obrien & Associates LLC. We also encounter competition from other clearing firms that provide clearing and execution services to the securities industry. Most of our competitors are affiliated with large financial institutions.

We believe that the principal competitive factors affecting the market for our clearing and margin lending services are breadth of services, technology, financial strength, client service and price. Based on management’s experience, we believe that we presently compete effectively with respect to most of these factors.

Some of our competitors have significantly greater financial, technical, marketing and other resources than we have. Some of our competitors offer a wider range of services and products than we offer and have greater name recognition and more extensive client bases. These competitors may be able to respond more quickly to new or evolving opportunities, technologies and client requirements than we can and may be able to undertake more extensive promotional activities and offer more attractive terms to clients. Recent advancements in computing and communications technology are substantially changing the means by which securities transactions are effected and processed, including more access online to a wide variety of services and information, and have created a demand for more sophisticated levels of client service. The provision of these services may entail considerable cost without an offsetting increase in revenues. Moreover, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties or may consolidate to enhance their services and products. New competitors or alliances among competitors may emerge and they may acquire significant market share. Additionally, large firms that currently perform their own clearing functions may decide to start marketing their clearing services to other firms.

In addition to companies that provide clearing services to our target markets, we are subject to the risk that one or more of our correspondents may elect to perform their clearing functions themselves. The option to convert to self-clearing operations may be attractive due to the fact that as the transaction volume of the correspondent increases, the cost of implementing the necessary infrastructure for self-clearing may be eventually offset by the elimination of per-transaction processing fees that would otherwise be paid to a clearing firm. Additionally, performing their own clearing services allows self-clearing firms to retain customer free credit balances and securities for use in margin lending activities. In order to make a clearing arrangement with us more attractive to these high-volume broker-dealers, we may offer such firms transaction volume discounts or other incentives.

Intellectual property and other proprietary rights

Despite the precautions we take to protect our intellectual property rights, it is possible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe upon our proprietary rights. It is also possible that third parties may independently develop technologies similar to ours. It

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may be difficult for us to police unauthorized use of our intellectual property. In addition, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity.

We have not incurred significant liabilities related to the use of our intellectual property in the past, however, we cannot assure you that claims of infringement of other parties’ proprietary rights or invalidity (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against us in the future. Any such claims, with or without merit, could be time consuming to defend, result in costly litigation, divert management’s attention and resources or require us to enter into royalty or licensing agreements.

Government regulation

The securities and financial services industries generally are subject to extensive regulation in the U.S. and elsewhere. As a matter of public policy, regulatory bodies in the U.S. and the rest of the world are charged with, among other things, safeguarding the integrity of the securities and other financial markets and with protecting the interests of customers participating in those markets, not with protecting the interests of creditors or the shareholders of regulated entities (such as Penson).

In the U.S., the securities and futures industry is subject to regulation under both federal and state laws. At the federal level, the SEC regulates the securities industry, while the CFTC regulates the futures industry. These federal agencies along with FINRA, NFA, the various stock and futures exchanges and other SROs require strict compliance with their rules and regulations. Companies that operate in these industries are subject to regulation concerning many aspects of their business, including trade practices, capital structure, record retention, money-laundering prevention, and the supervision of the conduct of directors, officers and employees. Failure to comply with any of these laws, rules or regulations could result in censure, fines, the issuance of cease-and-desist orders, the suspension or termination the operations of the Company or the suspension or disqualification of our directors, officers or employees. In the ordinary course of our operations, we and some of our officers and other employees have been subject to claims arising from the violation of such laws, rules and regulations.

As a registered broker-dealer, PFSI is required by law to belong to the Securities Investor Protection Corporation (“SIPC”). In the event of a member’s insolvency, the SIPC Fund provides protection for customer accounts up to $500,000 per customer, with a limitation of $100,000 on claims for cash balances.

In addition, we have subsidiaries in the U.K. and Canada that are involved in the securities and financial services industries and may expand our business into other countries in the future. To expand our services internationally, we will have to comply with the regulatory controls of each country in which we conduct business.

The securities and financial services industry in many foreign countries is heavily regulated. The varying compliance requirements of these different regulatory jurisdictions and other factors may limit our ability to expand internationally. Due to its focus on technology products, which are generally not subject to the regulatory regimes applicable to securities trading, Penson Asia is not subject to many of the same restrictions that apply to our U.K. and Canada subsidiaries.

The regulatory environment in which we operate is subject to change. Additional regulation, changes in existing laws and rules, or changes in interpretations or enforcement of existing laws and rules often directly affect the method of operation and profitability of securities firms.

Regulation of clearing activities

We provide clearing services in the U.S., Canada and Europe through our subsidiaries. Broker-dealers that clear their own trades are subject to substantially more regulatory requirements than brokers that rely on others to perform those functions. Errors in performing clearing functions, including clerical, technological and other errors related to the handling of funds and securities held by us on behalf of customers and broker-dealers, could lead to censures, fines or other sanctions imposed by applicable regulatory authorities as well as losses and liability in related lawsuits and proceedings brought by our clients, the customers of our clients and others. Due to our provision of futures in addition to securities clearing services, we are also subject to additional CFTC, NFA and

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futures exchange regulations. As a result, we must comply with an increased amount of regulatory requirements and face additional liabilities if we are not able to comply with the regulatory environment.

Regulation of securities lending and borrowing

We engage in securities lending and borrowing services with other broker-dealers by lending the securities that we hold for our correspondents and their customers to other broker-dealers, by borrowing securities from other broker-dealers to facilitate our customer transaction activity, or by borrowing securities from one broker-dealer and lending the same securities to another broker-dealer. Within the U.S., these types of securities lending and borrowing arrangements are governed by the SEC and the rules of the Federal Reserve. The following is what we believe to be a descriptive summary of some important SEC and Federal Reserve rules that govern these types of activities, but it is not intended to be an exhaustive list of the regulations that govern these types of activities.

Our securities lending and borrowing activities are primarily transacted through our U.S. broker-dealer subsidiary, which is subject to the SEC’s net capital rule and customer protection rule. The net capital rule, which specifies minimum net capital requirements for registered broker-dealers, is designed to ensure that broker-dealers will have adequate resources, including a percentage of liquid assets, to fund expenses of a self or court supervised liquidation. See “Business — Government regulation” and “Regulatory capital requirements.” While the net capital rule is designed to ensure that the broker-dealer has adequate resources to pay liquidation expenses, the objective of the SEC’s customer protection rule is to ensure that investment property of the firm’s customers will be available to be distributed to customers in a liquidation. The customer protection rule operates to protect both customer funds and customer securities. To protect customer securities, the customer protection rule requires that broker-dealers promptly obtain possession or control of customers’ fully-paid securities free of any lien. However, broker-dealers may lend or borrow customers’ securities purchased on margin or customers’ fully paid securities, if the broker-dealer provides collateral exceeding the market value of the securities it borrowed and makes certain other disclosures to the customer. With respect to customer funds, the customer protection rule requires broker-dealers to make deposits into an account held only for the benefit of customers (“reserve account”) based on its computation of the reserve formula. The reserve formula requires that broker-dealers compare the amount of funds it has received from customers or through the use of their securities (“credits”) to the amount of funds the firm has used to finance customer activities (“debits”). In this manner, the customer protection rule ensures that the broker-dealer’s securities lending and borrowing activities do not impact the amount of funds available to customers in the event of liquidation.

SEC Rules 8c-1 and 15c2-1 under the Exchange Act (the “hypothecation rules”) set forth requirements relating to the borrowing or lending of customers securities. The hypothecation rules prohibit us from borrowing or lending customers securities in situations where (1) the securities of one customer will be held together with securities of another customer, without first obtaining the written consent of each customer; (2) the securities of a customer will be held together with securities owned by a person or entity that is not a customer; or (3) the securities of a customer will be subject to a lien for an amount in excess of the aggregate indebtedness of all customers’ securities.

Regulation T was issued by the Federal Reserve pursuant to the Exchange Act in part to regulate the borrowing and lending of securities by brokers-dealers, as well as to regulate the extension of credit by broker-dealers. With respect to securities borrowing and lending, Regulation T requires that a borrowing or lending of securities by a broker-dealer be for a “proper purpose,” i.e. for the purpose of making delivery of the securities in the case of short sales, failure to receive securities required to be delivered, or other similar situations. If a broker-dealer reasonably anticipates a short sale or fail transaction, a borrowing may be made by the broker-dealer up to one settlement cycle in advance of trade date.

Regulation T also regulates payment requirements for transactions in customer cash accounts and the level of credit extended in customer margin accounts. A broker-dealer may extend credit to a customer in a margin account only against collateral consisting of cash or margin-eligible securities, as defined in the Exchange Act or “margin securities,” as defined in Regulation T. Under Regulation T, the current required initial margin for a long position in a margin equity security is 50 percent of the current market value of the security. The required margin for a short position is 150 percent of the current market value of the security. Maintenance margin requirements are set in accordance with the rules of the SROs. However, we may require the deposit of a higher percentage of the value of

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equity securities purchased on margin. Securities borrowed transactions are extensions of credit in that the securities lender generally receives cash collateral that exceeds the market value of the securities that were lent. In the National Securities Markets Improvements Act of 1996, the US Congress amended section 7(c) of the Exchange Act to exempt certain broker-dealers from the Federal Reserve’s credit regulations. Recently, the SEC and other SROs have approved new rules permitting portfolio margining that have the effect of permitting increased margin on securities and other assets held in portfolio margin accounts relative to non-portfolio accounts. We began offering portfolio margining to our clients in the second quarter of 2007 and have 322 portfolio margining accounts as of December 31, 2008.

With respect to such securities borrowing and lending, Regulation SHO issued under the Exchange Act generally prohibits, among other things, a broker-dealer from accepting a short sale order unless either the broker-dealer has already borrowed the security, has entered into a bona-fide arrangement to borrow the security or has “reasonable grounds” to believe that the security can be borrowed so that it can be delivered on the date delivery is due and has documented compliance with this requirement. . Effective October 17, 2008, the SEC adopted Rule 204T under the Exchange Act, which requires broker-dealers and clients to make delivery on short sales effected in the U.S. no later than T+3. Under Rule 204T, a clearing broker-dealer that does not purchase or borrow securities to cover any fail position as of the opening of trading on T+4 is subject to a borrowing penalty for each security that the clearing-broker fails to deliver (subject to the allocation provision noted below). The borrowing penalty will apply until the clearing broker-dealer purchases a sufficient amount of the security to make full delivery on the fail position and that purchase clears and settles. If a clearing broker-dealer becomes subject to the borrowing penalty, the penalty will prohibit the clearing broker-dealer from effecting short sales for its own account or for that of any correspondent broker-dealer or customer unless the clearing broker-dealer has borrowed the securities in question or has entered into a bona-fide arrangement to borrow the securities. Clearing broker-dealers are permitted to reasonably allocate the close-out requirement to a correspondent broker-dealer that is responsible for the fail position. Accordingly, if we have a fail position that we are unable to timely cover, or where the fail position was the responsibility of one of our correspondent broker-dealers and we cannot allocate the close-out responsibility to it, we would be subject to the borrowing penalty. We could remain subject to the borrowing penalty until such time as we have purchased a sufficient amount of the security to make full delivery on the fail position and that purchase has cleared and settled, which generally is three business days after the purchase. Rule 204T is due to expire on July 31, 2009, unless extended. Because of the requirements of Rule 204T, our costs associated with securities borrowings to facilitate customer short selling may significantly increase and the scope of our securities lending business may significantly decrease, which will adversely affect our operations and financial condition.

Failure to maintain the required net capital, accurately compute the reserve formula or comply with Regulation T, portfolio margining rules or Regulation SHO may subject us to suspension or revocation of registration by the SEC and suspension or expulsion by FINRA and other regulatory bodies and, if not cured, could ultimately require our U.S. broker-dealer subsidiary’s liquidation. A change in the net capital rule, the customer protection rule, Regulation T or the portfolio margining rules or the imposition of new rules could adversely impact our ability to engage in securities lending and borrowing.

Regulation of internet activities

Our business, both directly and indirectly, relies extensively on the Internet and other electronic communications gateways. To date, the use of the Internet has been relatively free from regulatory restraints. However, the governmental agencies within the U.S. and elsewhere are beginning to address regulatory issues that may arise in connection with the use of the Internet. Accordingly, new regulations or interpretations may be adopted that constrain our own and our correspondents’ abilities to transact business through the Internet or other electronic communications gateways.

Regulatory capital requirements

As a registered broker-dealer and member of FINRA, PFSI is subject to the SEC’s net capital rule. The net capital rule, which specifies minimum net capital requirements for registered broker-dealers, is designed to measure the general financial integrity and liquidity of a broker-dealer and requires that at least a minimum part of its assets

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be kept in relatively liquid form. Among deductions from net capital are adjustments, which are commonly called “haircuts,” which reflect the possibility of a decline in the market value of firm inventory prior to disposition.

Failure to maintain the required net capital would require us to cease securities activities during any period where we did not meet minimum levels of net capital and may subject us to suspension or revocation of registration by the SEC and suspension or expulsion by FINRA and other regulatory bodies and, if not cured, could ultimately require liquidation of our U.S. clearing operations. The net capital rule prohibits payments of dividends, redemption of stock, the prepayment of subordinated indebtedness and the making of any unsecured advance or loan to a stockholder, employee or affiliate, if such payment would reduce our net capital below required levels. Finally, FINRA rules prevent a broker-dealer from expanding its business or permit FINRA to require reductions in the broker-dealer’s business for broker-dealers experiencing financial or operational difficulties.

The net capital rule also requires notice to regulators with respect to certain capital withdrawals and provides that the SEC may restrict any capital withdrawal, including the withdrawal of equity capital, or unsecured loans or advances to stockholders, employees or affiliates, if such capital withdrawal, together with all other net capital withdrawals during a 30-day period, exceeds 30% of excess net capital and the SEC concludes that the capital withdrawal may be detrimental to the financial integrity of the broker-dealer. In addition, the net capital rule provides that the total outstanding principal amount of a broker-dealer’s indebtedness under specified subordination agreements, the proceeds of which are included in its net capital, may not exceed 70% of the sum of the outstanding principal amount of all subordinated indebtedness included in net capital, par or stated value of capital stock, paid in capital in excess of par, retained earnings and other capital accounts for a period in excess of 90 days.

A change in the net capital rule, the imposition of new rules or any unusually large charges against net capital could limit some of our operations that require the intensive use of capital and also could restrict our ability to withdraw capital from PFSI, which in turn could limit our ability to pay dividends, repay or repurchase debt, including the notes, or repurchase shares of outstanding stock. A significant operating loss or any unusually large charge against net capital could adversely affect our ability to expand or even maintain our present levels of business.

Our U.K. subsidiary is subject to FSA rules that require it to maintain adequate financial resources (including both capital resources and liquidity resources) in order to meet its liabilities as they fall due. The current capital resources requirement for the subsidiary is approximately £2.0 million although the capital resources requirement will vary depending on the current expenditure, liabilities and risks incurred or assumed. Capital resources may be constituted by eligible share capital and eligible subordinated debt. The subsidiary must constantly monitor compliance with its financial resource requirements, regularly submit financial reports to the FSA (monthly) and report any breach of the financial resource requirements to the FSA. A breach of the financial resource requirements may result in disciplinary action against the subsidiary for which it may receive a financial penalty, or where the breach is serious, a suspension or cessation of the subsidiary’s business and a withdrawal of the subsidiary’s authorization to conduct investment business in whole or in part. The imposition of FSA disciplinary sanctions, the temporary suspension of business or the partial revocation of the subsidiary’s authorization to conduct investment business may severely damage the reputation of the subsidiary and result in diminution of earnings. The revocation of the subsidiary’s authorization to conduct investment business in the U.K. may result in a discontinuation of our U.K. operations and the loss of its revenues.

PFSC is a member of the IIROC, an approved participant with the Montreal Exchange, a participating organization of the Toronto Stock Exchange and a member of the TSX Venture Exchange and various Canadian alternative trading systems. PFSC is subject to rules, including those of the IIROC, relating to the maintenance of capital. The IIROC regulates the maintenance of capital by member broker-dealers by requiring that broker-dealers periodically calculate their risk adjusted capital, referred to as RAC, in accordance with a prescribed formula which is intended to ensure that members will be in a position to meet their liabilities as they become due.

A member’s RAC is calculated by starting with its net allowable assets, which are assets that are conservatively valued with emphasis on liquidity, and excluding assets that cannot be disposed of in a short time frame or whose current realizable value is not readily known, net of all liabilities, and deducting the applicable minimum capital and margin requirements, adding tax recoveries, if any, and subtracting the member’s securities concentration charge.

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Furthermore, the IIROC rules provide for an early warning system which is designed to provide advance warning of a member encountering financial difficulties. Various parameters based on prescribed calculations involving the member’s RAC are designed to identify members with capital adequacy problems. If any of the parameters are violated, several sanctions or restrictions are imposed on the member. These sanctions, which may include the early filing of a monthly financial report, a written explanation to the IIROC from the Chief Executive Officer and Chief Financial Officer, a description of the resolution, or an on-site visit by an examiner, are designed to reduce further financial deterioration and prevent a subsequent capital deficiency.

Failure of a member to maintain the required risk adjusted capital as calculated in accordance with applicable IIROC requirements can result in further sanctions such as monetary penalties, suspension or other sanctions, including expulsion of the member.

Our futures clearing business is subject to the capital and segregation rules of the CFTC, NFA, and futures exchanges in the U.S. and the FSA and futures exchanges in the U.K. Our acquisition of GHCO and FCG substantially increased our exposure to these rules as well as the capital requirements of applicable exchanges and clearing houses of which we are a clearing member. If we fail to maintain the required capital or violate the customer segregation rules, we may be subject to monetary fines and the suspension or revocation of our license to clear futures contracts and carry customer accounts. Any interruption in our ability to continue this business would impact our revenues and profitability.

Margin risk management

Our margin lending activities expose our capital to significant risks. These risks include, but are not limited to, absolute and relative price movements, price volatility and changes in liquidity, over which we have virtually no control.

We attempt to minimize the risks inherent in our margin lending activities by retaining in our margin lending agreements the ability to adjust margin requirements as needed and by exercising a high degree of selectivity when accepting new correspondents. When determining whether to accept a new correspondent, we evaluate, among other factors, the correspondent’s experience in the industry, its financial condition and the background of the principals of the firm. In addition, we have multiple layers of protection, including the balances in customers’ accounts, correspondents’ commissions on deposit, clearing deposits and equity in correspondent firms, in the event that a correspondent or one of its customers does not deliver payment for our services. We also maintain a bad debt reserve.

Our customer agreements and fully-disclosed clearing agreements require industry arbitration in the event of a dispute. Arbitration is generally less expensive and more timely than dispute resolution through the court system. Although we attempt to minimize the risk associated with our margin lending activities, there is no assurance that the assumptions on which we base our decisions will be correct or that we are in a position to predict factors or events which will have an adverse impact on any individual customer or issuer, or the securities markets in general.

State and provincial regulation

Our subsidiary, PFSI, is a broker-dealer authorized to conduct business in all 50 states and the District of Columbia under applicable state securities regulations. PFSC is authorized to conduct business in all major provinces and territories in Canada.

Employees

As of December 31, 2008, we had 1,058 employees, of whom 480 were employed in clearing operations, 336 in technology support and development, 38 in sales and marketing and 204 in finance and administration. Of our 1,058 employees, 752 are employed in the U.S., 62 in the U.K., 237 in Canada and seven in Asia. Our employees are not represented by any collective bargaining organization or covered by a collective bargaining agreement. We believe that our relationship with our employees is good.

Our continued success depends largely on our ability to attract and retain highly skilled personnel. Competition for such personnel is intense, and should we be unable to recruit and retain the necessary personnel, the

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development, sale and performance of new or enhanced services would likely be delayed or prevented. In addition, difficulties we encounter in attracting and retaining qualified personnel may result in higher than anticipated salaries, benefits and recruiting costs, which could adversely affect our business.

Public reporting

Once filed with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at www.penson.com. The information found on our website is not part of this or any other report we file with or furnish to the SEC. Any materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The SEC maintains a website at www.sec.gov that contains the reports we file with the SEC. We also make available on our website, free of charge, our Code of Business Conduct and Ethics, our Corporate Business Principles and Governance Guidelines, and the charters for our Nominating and Corporate Governance, Audit and Compensation Committees. Any stockholder who so requests may obtain a printed copy of any of these documents, free of charge, by writing to us at 1700 Pacific Avenue, Suite 1400, Dallas, Texas 75201, Attention: Corporate Secretary.

Item 1A.   Risk Factors

Many factors could have an effect on PWI’s financial condition, cash flows and results of operations. We are subject to various risks resulting from changing economic, environmental, political, industry, business and financial conditions. The principal factors are described below.

Risks related to our business and our industry

We face substantial competition from other securities and commodities processing and infrastructure firms, which could harm our financial performance and reduce our market share.

The market for securities and futures processing infrastructure products and services is rapidly evolving and highly competitive. We compete with a number of firms that provide similar products and services to our market. Our competitors include Goldman Sachs Execution & Clearing, L.P.; Pershing LLC, a member of BNY Securities Group; National Financial Services LLC, a Fidelity Investments company; Merrill Lynch & Co., Inc., a subsidiary of Bank of America, MF Global Ltd. (formerly Man Financial) and RJ Obrien & Associates LLC. Many of our competitors have significantly greater financial, technical, marketing and other resources than we have. Some of our competitors also offer a wider range of services and financial products than we do and have greater name recognition and more extensive client bases than ours. These competitors may be able to respond more quickly to new or changing opportunities, technologies and client requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to clients and adopt more aggressive pricing policies than ours. There can be no assurance that we will be able to compete effectively with current or future competitors. If we fail to compete effectively, our market share could decrease and our business, financial condition and operating results could be materially harmed.

Increased competition has contributed to the decline in net clearing revenue per transaction that we have experienced in recent years and may continue to create downward pressure on our net clearing revenue per transaction. In the past, we have responded to the decline in net clearing revenue by reducing our expenses, but if the decline continues, we may be unable to reduce our expenses at a comparable rate. Our failure to reduce expenses comparably would reduce our profit margins.

We depend on a limited number of clients for a significant portion of our clearing revenues.

Our ten largest current clients accounted for 27.0% of our total net revenues for the year ended December 31, 2008, while no client accounted for more than 4.8% of net revenues. The loss of even a small number of these clients at any one time could cause our revenues to decline. Our clearing contracts generally have an initial term of two years, and allow the correspondent to cancel our services upon providing us with 45 days of notice, in most cases after the expiration of the fixed term. Many of our futures clearing contracts with correspondents may be terminated with a 30-day notice. Our clearing contracts with these correspondents can also terminate automatically if we are

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suspended from any of the national exchanges of which we are a member for failure to comply with the rules or regulations thereof. In past periods, we have experienced temporary declines in our revenues when large clients have switched to other service providers. There can be no assurance that our largest clients will continue to use our products and services.

Our clearing operations could expose us to legal liability for errors in performing clearing functions and improper activities of our correspondents.

Any intentional failure or negligence in properly performing our clearing functions or any mishandling of funds and securities held by us on behalf of our correspondents and their customers could lead to censures, fines or other sanctions by applicable authorities as well as actions in tort brought by parties who are financially harmed by those failures or mishandlings. Any litigation that arises as a result of our clearing operations could harm our reputation and cause us to incur substantial expenses associated with litigation and damage awards that could exceed our liability insurance by unknown but significant amounts. In the normal course of business, we purchase and sell securities as both principal and agent. If another party to the transaction fails to fulfill its contractual obligations, we may incur a loss if the market value of the security is different from the contract amount of the transaction.

In the past, clearing firms in the U.S. have been held liable for failing to take action upon the receipt of customer complaints, failing to know about the suspicious activities of correspondents or their customers under circumstances where they should have known, and even aiding and abetting, or causing, the improper activities of their correspondents. Although our correspondents provide us with indemnity under our contracts, we cannot assure you that our procedures will be sufficient to properly monitor our correspondents or protect us from liability for the acts of our correspondents under current laws and regulations or that securities industry regulators will not enact more restrictive laws or regulations or change their interpretations of current laws and regulations. If we fail to implement proper procedures or fail to adapt our existing procedures to new or more restrictive regulations, we may be subject to liability that could result in substantial costs to us and distract our management from our business.

Sharp decreases in short-term interest rates have negatively impacted the profitability of our margin lending business.

The profitability of our margin lending activities depends to a great extent on the difference between interest income earned on margin loans and investments of customer cash and the interest expense paid on customer cash balances and borrowings. While they are not linearly connected, if short-term interest rates fall, we generally expect to receive a smaller gross interest spread, causing the profitability of our margin lending and other interest-sensitive revenue sources to decline. Recent decreases in short-term interest rates have contributed to a decrease in our profitability and will continue to do so while lower rates continue to be in effect. Assuming constant customer balances, we expect that a 25 bps change in the federal funds rate would affect our pre-tax income by approximately $750,000 per quarter.

Short-term interest rates are highly sensitive to factors that are beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities. In particular, decreases in the federal funds rate by the Federal Reserve usually lead to decreasing interest rates in the U.S., which generally lead to a decrease in the gross spread we earn. This is most significant when the federal funds rate is on the lower end of its historical range, as it is today. Interest rates in Canada and Europe are also subject to fluctuations based on governmental policies and economic factors and these fluctuations could also affect the profitability of our margin lending operations in these markets.

Our margin lending business subjects us to credit risks and if we are unable to liquidate an investor’s securities when the margin collateral becomes insufficient, the profitability of our business may suffer.

We provide margin loans to investors; therefore, we are subject to risks inherent in extending credit. As of December 31, 2008, our receivables from customers and correspondents were $822.3 million, which predominantly reflected margin loans. Our credit risks include the risk that the value of the collateral we hold could fall below the amount of an investor’s indebtedness. This risk is especially great when the market is rapidly declining. Agreements

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with margin account investors permit us to liquidate their securities with or without prior notice in the event that the amount of margin collateral becomes insufficient. Despite those agreements and our house policies with respect to margin, which may be more restrictive than is required under applicable laws and regulations, we may be unable to liquidate the customers’ securities for various reasons, including the fact that:

•  the pledged securities may not be actively traded;

•  there may be an undue concentration of securities pledged; or

•  an order to stop transfer by the issuer of securities may be issued with regard to pledged securities.

In the U.S., our margin lending is subject to the margin rules of the Federal Reserve and FINRA, whose rules generally permit margin loans of up to 50% of the value of the securities collateralizing the margin account loan at the time the loan is made, subject to requirements that the customer deposit additional securities or cash in its accounts so that the customers’ equity in the account is at least 25% of the value of the securities in the account. We are also subject to rules and regulations in Canada and the U.K. with regard to our margin lending activities in those markets. In certain circumstances, we may provide a higher degree of margin leverage to our correspondents with respect to their proprietary trading businesses than otherwise permitted by the margin rules described above based on an exemption for correspondents that purchase a class of preferred stock of PFSI. In addition, for our portfolio margining accounts, we are able to extend substantially more credit to approved customers pursuant to a risk formula adopted by the SEC. As a result, we may increase the risks otherwise associated with margin lending with respect to these correspondents and customer accounts.

We rely, in part, on third parties to provide and support the software and systems we use to provide our services. Any interruption or cessation of service by these third parties could harm our business.

We have contracted with SunGard Data Systems and IBM Canada Limited (“IBM Canada”) to provide a major portion of the software and systems necessary for our execution and clearing services. On September 25, 2008, we entered into an amendment to our current agreement with SunGard that requires SunGard to provide a dedicated non-stop processing platform for the processing of our U.S. clearing operations. Our current agreement with SunGard will expire in the first or second quarter of 2014, depending upon when certain new pricing terms under the amendment become effective, but can be terminated by SunGard upon written notice in the event that we breach the agreement. Our current agreement with IBM Canada which expired in December 2008, is currently operating on a month-to-month basis. We expect to renew our agreement with IBM Canada during the first or second quarter of 2009. The agreement with IBM Canada can be terminated by IBM Canada upon written notice in the event that we breach the agreement. In the past, we have experienced processing delays, occasional hardware and software outages with SunGard and IBM Canada. Any major interruption in our ability to process our transactions through SunGard or IBM Canada would harm our relationships with our clients and impact our growth. We also license many additional generally available software packages. Failures in any of these applications could also harm our business operations.

We rely on SunGard, IBM Canada and other third parties to enhance their current products, develop new products on a timely and cost-effective basis, and respond to emerging industry standards and other technological changes. We believe that the provision of a dedicated non-stop processing platform by SunGard will allow us to process the U.S. trade volume we anticipate for 2009 and beyond. If in the future, however, enhancements or upgrades of third-party software and systems cannot be integrated with our technologies or if the technologies on which we rely fail to respond to industry standards or technological changes, we may be required to redesign our proprietary systems. Software products may contain defects or errors, especially when first introduced or when new versions or enhancements are released. The inability of third parties to supply us with software or systems on a reliable, timely basis or to allocate sufficient capacity to meet our trading volume requirements could harm relationships with our clients and our ability to achieve our projected level of growth.

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Our products and services, and the products and services provided to us by third parties, may infringe upon intellectual property rights of third parties, and any infringement claims could require us to incur substantial costs, distract our management or prevent us from conducting our business.

Although we attempt to avoid infringing upon known proprietary rights of third parties and typically incorporate indemnification provisions in any agreements where we license third party software, we are subject to the risk of claims alleging infringement of third-party proprietary rights. If we infringe upon the rights of third parties through use of our proprietary software or software licensed to us by third parties, we may be unable to obtain licenses to use those or similar rights on commercially reasonable terms. In either of these events, we would need to undertake substantial reengineering to continue offering our services and may not be successful. In addition, any claim of infringement could cause us to incur substantial costs defending the claim, even if the claim is invalid, and could distract our management from our business. Furthermore, a party making such a claim could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from conducting our business.

We may not be able to protect our intellectual property rights against unauthorized use and infringement by third parties, and our failure to do so may weaken our competitive position, and any legal claim we seek to pursue may require us to incur substantial cost and distract management and us from conducting our business.

Despite the precautions we take to protect our intellectual property rights, it is possible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe upon our proprietary rights. It is also possible that third parties may independently develop technologies similar to ours. It may be difficult for us to police unauthorized use of our intellectual property. We cannot be certain that our intellectual property rights are sufficiently protected against unauthorized use and infringement by third parties, and our failure to do so may weaken our competitive position. In addition, litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets, which may require us to incur substantial cost and distract our management and us from conducting our business. See also “Business — Intellectual property and other proprietary rights.”

If our clients’ account information is misappropriated, we may be held liable or suffer harm to our reputation.

We employ what we believe to be a high degree of care in protecting our clients’ confidential information. To effect secure transmissions of confidential information over computer systems and the Internet, we rely on encryption and authentication technology. If third parties penetrate our network security or otherwise misappropriate our clients’ personal or account information, or we were to otherwise release any such confidential information without our clients’ permission, unintentionally or otherwise, we could be subject to liability arising from claims related to impersonation or similar fraud claims or other misuse of personal information, as well as suffer harm to our reputation. While we periodically test the integrity and security of our systems, we cannot assure you that our efforts to maintain the confidentiality of our clients’ account information will be successful.

Internet security concerns have been a barrier to the acceptance of online trading, and any well-publicized compromise of security could hinder the growth of the online brokerage industry. We cannot assure you that advances in computer capabilities, new discoveries in the field of cryptography or other events or developments will not result in a compromise or breach of the technology we use to protect clients’ transactions and account data. We may incur significant costs to protect against the threat of network or Internet security breaches or to alleviate problems caused by such breaches.

We may be subject to material litigation proceedings that could harm our business.

We are subject from time-to-time to legal claims or regulatory matters involving stockholder, customer, and other issues on a global basis, based on our activity or the activity of our correspondents. As described in “Item 3: Legal Proceedings,” we are currently engaged in a number of litigation matters. These matters include our involvement in a bankruptcy proceeding concerning Sentinel Management Group, Inc. (“Sentinel”), which is

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described in detail in Item 3. The bankruptcy trustee in this matter is seeking the return of pre- and post-bankruptcy petition transfers made to Penson GHCO and PFFI, to which we have objected. We intend to vigorously defend this position, but we are not able to predict the outcome of this dispute at this time. In the event that Penson GHCO and PFFI are obligated to return a substantial portion of previously distributed funds to the Sentinel estate, it could have a material adverse effect on our operating results for the period in which the payment is made.

Litigation generally is subject to inherent uncertainties, and unfavorable rulings can occur. An unfavorable ruling in any matter could include monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting us from providing clearing or technology services. If we were to receive an unfavorable ruling in a matter, our business and results of operations could be materially harmed.

Any slowdown or failure of our computer or communications systems could subject us to liability for losses suffered by our clients or their customers.

Our services depend on our ability to store, retrieve, process and manage significant databases, and to receive and process securities and futures orders through a variety of electronic media. Our principal computer equipment and software systems, including back up systems, are maintained at various locations such as Texas, Chicago, New Jersey, Toronto, Montreal and London. Our systems or any other systems in the trading process could slow down significantly or fail for a variety of reasons, including:

•  computer viruses or undetected errors in our internal software programs or computer systems;

•  inability to rapidly monitor all intraday trading activity;

•  inability to effectively resolve any errors in our internal software programs or computer systems once they are detected;

•  heavy stress placed on our systems during peak trading times; or

•  power or telecommunications failure, fire, tornado or any other natural disaster.

The average daily trade volume generated by our correspondents increased dramatically from 2006 to 2008. We believe that the additional software we licensed and changes we made to our operating procedures allowed us to accommodate the increased volume. While we continue to monitor system loads and performance and implement system upgrades to handle predicted increases in trading volume and volatility, we cannot assure you that we will be able to accurately predict future volume increases or volatility or that our systems will be able to accommodate these volume increases or volatility without failure or degradation. Any significant degradation or failure of our computer systems, communications systems or any other systems in the clearing or trading processes could cause the customers of our clients to suffer delays in the execution of their trades. These delays could cause substantial losses for our clients or their customers and could subject us to claims and losses, including litigation claiming fraud or negligence, damage our reputation, increase our service costs, cause us to lose revenues or divert our technical resources.

If our operational systems and infrastructure fail to keep pace with our anticipated growth, we may experience operating inefficiencies, client dissatisfaction and lost revenue opportunities.

We have experienced significant growth in our client base, business activities and the number of our employees. The growth of our business and expansion of our client base has placed, and will continue to place, a significant strain on our management and operations. We believe that our current and anticipated future growth will require the implementation of new and enhanced communications and information systems, the training of personnel to operate these systems and the expansion and upgrade of core technologies. While many of our systems are designed to accommodate additional growth without redesign or replacement, we may nevertheless need to make significant investments in additional hardware and software to accommodate growth. In addition, we cannot assure you that we will be able to accurately predict the timing or rate of this growth or expand and upgrade our systems and infrastructure on a timely basis.

In addition, the scope of procedures for assuring compliance with applicable rules and regulations has changed as the size and complexity of our business has increased. We have implemented and continue to implement formal

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compliance procedures to respond to these changes and the impact of our growth. Our future operating results will depend on our ability:

•  to improve our systems for operations, financial controls, and communication and information management;

•  to refine our compliance procedures and enhance our compliance oversight; and

•  to recruit, train, manage and retain our employees.

Our growth has required and will continue to require increased investments in management personnel and systems, financial systems and controls and office facilities. In the absence of continued revenue growth, the costs associated with these investments would cause our operating margins to decline from current levels. We cannot assure you that we will be able to manage or continue to manage our recent or future growth successfully. If we fail to manage our growth, we may experience operating inefficiencies, dissatisfaction among our client base and lost revenue opportunities.

A failure in the operational systems of third parties could significantly disrupt our business and cause losses.

We face the risk of operational failure, termination or capacity constraints of any of the clearing agents, exchanges, clearing houses or other financial intermediaries we use to facilitate our securities transactions. In recent years, there has been significant consolidation among clearing agents, exchanges, clearing houses and other financial intermediaries, which has increased our exposure to operational failure, termination or capacity constraints of the particular financial intermediaries that we use and could affect our ability to find adequate and cost-effective alternatives in the event of any such failure, termination or constraint. Any such failure, termination or constraint could adversely affect our ability to effect transactions, service our clients and manage our exposure to risk.

If we are unable to respond to the demands of our existing and new clients, our ability to reach our revenue goals or maintain our profitability could be diminished.

The global securities and futures industry is characterized by increasingly complex infrastructures and products, new and changing business models and rapid technological changes. Our clients’ needs and demands for our products and services evolve with these changes. For example, an increasing number of our clients are from market segments including hedge funds, algorithmic traders and direct access customers who demand increasingly sophisticated products. Our future success will depend, in part, on our ability to respond to our clients’ demands for new services, products and technologies on a timely and cost-effective basis, to adapt to technological advancements and changing standards and to address the increasingly sophisticated requirements of our clients.

Our existing correspondents may choose to perform their own clearing services as their operations grow, in which case we would lose the revenues generated by such correspondents.

We market our clearing services to our existing correspondents on the strength of our ability to process transactions and perform related back-office functions at a lower cost than the correspondents could perform these functions themselves. As our correspondents’ operations grow, they often consider the option of performing clearing functions themselves, in a process referred to in the securities industry as “self-clearing.” As the transaction volume of a correspondent grows, the cost of implementing the necessary infrastructure for self-clearing may be eventually offset by the elimination of per-transaction processing fees that would otherwise be paid to a clearing firm. Additionally, performing their own clearing services allows self-clearing firms to retain their customers’ margin balances, free credit balances and securities for use in margin lending activities. If our clients choose to self-clear, we would lose their revenue and our business could be adversely affected.

Our ability to sell our services and grow our business could be significantly impaired if we lose the services of key personnel.

Our business is highly dependent on a small number of key executive officers. We have entered into compensation agreements with various personnel, but we do not have employment agreements with most of

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our employees. The loss of the services of any of the key personnel or the inability to identify, hire, train and retain other qualified personnel in the future could harm our business. Competition for key personnel and other highly qualified technical and managerial personnel in the securities and futures processing infrastructure industry is intense, and there is no assurance that we would be able to recruit management personnel to replace these individuals in a timely manner, or at all, on acceptable terms.

We may face risks associated with potential future acquisitions that could reduce our profitability or hinder our ability to successfully expand our operations.

Over the past few years, our business strategy has included engaging in acquisitions which have facilitated our ability to provide technology infrastructure and establish a presence in international markets. We have completed four acquisitions since 2006, including the acquisitions of GHCO and FCG in 2007, which significantly expanded our futures business. In the future, we plan to acquire additional businesses or technologies as part of our growth strategy. We cannot assure you that we will be able to successfully integrate future acquisitions, which potentially involve the following risks:

•  diversion of management’s time and attention to the negotiation of the acquisitions;

•  difficulties in assimilating acquired businesses, technologies, operations and personnel including, but not limited to, the increased trade volume of acquired businesses;

•  the need to modify financial and other systems and to add management resources;

•  assumption of unknown liabilities of the acquired businesses;

•  unforeseen difficulties in the acquired operations and disruption of our ongoing business;

•  dilution to our existing stockholders due to the issuance of equity securities, which may make it difficult for us to raise capital in equity financing in the future;

•  possible adverse short-term effects on our cash flows or operating results; and

•  possible accounting charges due to impairment of goodwill or other purchased intangible assets.

Failure to manage our acquisitions to avoid these risks could harm our business, financial condition and operating results.

Restrictive covenants in our credit facilities may limit our ability to engage in certain transactions.

Our credit facility contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things, incur additional indebtedness or issue preferred stock, pay dividends on or make other distributions on or repurchase our capital stock or make other restricted payments, make investments, and sell certain assets. In 2007, we deemed it to be in the best interests of our stockholders to commence a stock repurchase program, and obtained bank approval to repurchase up to $37.5 million of our common stock. We have not determined that an additional stock repurchase program would be advisable at this time, but if we were to do so, we cannot assure you that we will be able to gain all necessary approvals for any such program.

In addition, the credit facility contains covenants that require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may not be able to meet those tests at all. A breach of any of these covenants could result in a default under the credit facility. Upon the occurrence of an event of default under the credit facility, the lenders could elect to declare all amounts outstanding under the credit facility to be immediately due and payable and terminate all commitments to extend further credit. If the lenders under the credit facility accelerated the repayment of borrowings, we may not have sufficient assets to repay the credit facility which could have a material adverse effect on the value of our stock.

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Our inability to obtain credit on favorable terms could significantly restrict our business activities

Our primary credit facility is set to expire in May 2009. There is no guarantee that we will be able to renew our credit facility or obtain credit from an alternative source on favorable terms. Failure to renew our existing credit facility or obtain suitable alternative funding may significantly curtail our business activities, which will have a materially adverse effect on our financial condition.

Our revenues may decrease due to declines in trading volume, market prices, liquidity of securities markets or proprietary trading activity.

We generate revenues primarily from transaction processing fees we earn from our clearing operations and interest income from our margin lending activities and interest earned by investing customers’ cash. These revenue sources are substantially dependent on customer trading volumes, market prices and liquidity of securities markets. Over the past several years the U.S. and foreign securities markets have experienced significant volatility. Sudden or gradual but sustained declines in market values of securities can result in:

•  reduced trading activity;

•  illiquid markets;

•  declines in the market values of securities carried by our customers and correspondents;

•  the failure of buyers and sellers of securities to fulfill their settlement obligations;

•  reduced margin loan balances of investors; and

•  increases in claims and litigation.

The occurrence of any of these events would likely result in reduced revenues and decreased profitability from our clearing operations and margin lending activities.

Certain of our subsidiaries engage in proprietary trading activities. Please see our discussion in “Business — Securities-processing” and “Proprietary trading.” Historically these activities have accounted for a very small portion of our total revenues and net income. With respect to most of such trading, we endeavor to limit our exposure to markets through, among other means, employing hedging strategies and by limiting the period of time for which we have exposure to markets. However, we are not completely protected against market risk from such trading at any particular point in time and proprietary trading risks could adversely impact operating results in a specific financial period.

Recent market instability could negatively affect our operations and financial condition.

Our business is affected by conditions in the global financial markets and economic conditions generally, as well as by the soundness of particular financial services institutions with which we transact business. Among other things, national and international markets have recently suffered increasing turmoil caused by a sharp downturn in markets for mortgage-related securities and non-investment grade debt securities and loans. Several large financial institutions including, without limitation, commercial banks, insurance companies, and brokerage firms, have either filed for bankruptcy or been the subject of governmental intervention such as loans, equity infusions or direct government ownership in receivership. Others have been sold in whole or in part to third parties. Financial services institutions that deal with each other are often interrelated as a result of trading, clearing, counterparty, or other relationships. As a result, a default or failure by, or even concerns about the stability or liquidity of, one or more financial services institutions could lead to significant market-wide liquidity problems, or losses or defaults by other institutions, including us. In addition, our operations may suffer to the extent that ongoing market volatility causes individuals and institutional traders and other market participants to curtail or forego trading activities, which could adversely affect our operations and financial conditions.

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Our significant non-U.S. operation exposes us to global exchange rate fluctuations that could impact our profitability.

We are exposed to market risk through commercial and financial operations. Our market risk consists principally of exposure to fluctuations in currency exchange and interest rates. As we conduct a significant portion of our operations outside the U.S., fluctuations in currencies of other countries, especially the British Pound, the Euro and the Canadian dollar, may materially affect our operating results. As we continue to expand our business operations globally, our exposure to fluctuations in currencies of other countries will continue to increase.

We do not typically use financial instruments to hedge our income statement exposure to foreign currency fluctuations. A substantial portion of our revenues and cost of operating expenses are denominated in currencies other than the U.S. dollar. In our consolidated financial statements, we translate our local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period and financial position based on the exchange rate at the end of that period. During times of a strengthening U.S. dollar, at a constant level of business, our reported international revenues, earnings, assets and liabilities will be reduced because the local currency will translate into fewer U.S. dollars.

Given the volatility of exchange rates, we may not be able to manage our currency transaction and/or translation risks effectively, or volatility in currency exchange rates may expose our financial condition or results of operations to a significant additional risk.

The growth of electronic trading and our increasing provision of direct market access to our correspondents may subject us to additional market exposure.

The growth of electronic trading and the introduction of new products and technologies presents certain additional challenges. As we increasingly allow direct market access to our correspondents through our systems and as we allow certain of our correspondents to clear or execute some or all of their trades through third parties, we may face additional potential liabilities due to our inability to monitor all of the trading activities of our correspondents. If we cannot adequately assess the risks involved with all of the trading activities of our correspondents, we may be unable to protect ourselves from those risks.

New short-selling requirements could increase our costs, adversely affect our securities lending business and, in the event we fail to comply, result in significant penalties.

Effective October 17, 2008, the SEC adopted Rule 204T under the Exchange Act, which requires clearing broker-dealers to make delivery on short sales effected in the U.S. no later than T+3. Under Rule 204T, clearing broker-dealers that do not purchase or borrow securities to cover any fail position as of the opening of trading on T+4 are subject to a borrowing penalty for each security that the clearing-broker fails to deliver (subject to the allocation provision noted below). The borrowing penalty will apply until the clearing broker purchases a sufficient amount of the security to make full delivery on the fail position and that purchase clears and settles. If a clearing broker becomes subject to the borrowing penalty, the penalty will prohibit the clearing broker from effecting short sales in that security for its own account or for that of any introducing broker or customer unless the clearing broker has borrowed the securities in question or has entered into a bona fide arrangement to borrow the securities. Clearing broker-dealers are permitted to reasonably allocate the close-out requirement to an introducing broker that is responsible for the fail position. As the clearing broker-dealer, if we are unable to timely cover a fail position and cannot allocate the close-out responsibility to the broker-dealer that is responsible for the fail position, we would be subject to the borrowing penalty until such time as we have purchased a sufficient amount of the security to make full delivery on the fail position and that purchase has cleared and settled, which generally is three business days after the purchase. Rule 204T is currently scheduled to expire on July 31, 2009, unless extended. Foreign jurisdictions in which we operate also have restrictions on short selling. Because of the requirements of Rule 204T and foreign restrictions on short selling, our costs associated with securities borrowings to facilitate customer short selling may significantly increase and the scope of our securities lending business may significantly decrease, which will adversely affect our operations and financial conditions. These changes and potential future regulatory changes related to short-selling of securities may have a negative impact on our ability to earn the spreads we have historically collected.

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General economic and political conditions and broad trends in business and finance that are beyond our control may contribute to reduced levels of activity in the securities markets, which could result in lower revenues from our business operations.

Trading volume, market prices and liquidity are affected by general national and international economic and political conditions and broad trends in business and finance that result in changes in volume and price levels of securities transactions. These factors include:

•  the availability of short-term and long-term funding and capital;

•  the level and volatility of interest rates;

•  legislative and regulatory changes;

•  currency values and inflation; and

•  national, state and local taxation levels affecting securities transactions.

These factors are beyond our control and may contribute to reduced levels of activity in the securities markets. Our largest source of revenues has historically been our revenues from clearing operations, which are largely driven by the volume of trading activities of the customers of our correspondents and proprietary trading by our correspondents. Our margin lending revenues and our technology revenues are also impacted by changes in the trading activities of our correspondents and clients. Accordingly, any significant reduction in activity in the securities markets would likely result in lower revenues from our business operations.

Our quarterly revenue and operating results are subject to significant fluctuations.

Our quarterly revenue and operating results may fluctuate significantly in the future due to a number of factors, including:

•  changes in the proportion of clearing operations revenues and interest income;

•  our lengthy sales and integration cycle with new correspondents;

•  the gain or loss of business from a correspondent;

•  reductions in per-transaction clearing fees;

•  changes in bad debt expense from margin lending as compared to historical levels;

•  changes in the rates we charge for margin loans, changes in the rates we pay for cash deposits we hold on behalf of our correspondents and their customers and changes in the rates at which we can invest such cash deposits;

•  changes in the market price of securities and our ability to manage related risks;

•  fluctuations in overall market trading volume;

•  the relative success and/or failure of third party clearing competitors, many of which have increasingly larger resources than we have as a result of recent consolidation in our industry;

•  the relative success and/or failure of third party technology competitors including, without limitation, competitors to our Nexa business;

•  our ability to manage personnel, overhead and other expenses; and

•  the amount and timing of capital expenditures.

Our expense structure is based on historical expense levels and the expected levels of demand for our clearing, margin lending and other services. If demand for our services declines, we may be unable to adjust our cost structure on a timely basis in order to sustain our profitability.

Due to the foregoing factors, period-to-period comparisons of our historical revenues and operating results are not necessarily meaningful, and you should not rely upon such comparisons as indicators of future performance. We

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also cannot assure you that we will be able to sustain the rates of revenue growth we have experienced in the past, improve our operating results or sustain our profitability on a quarterly basis.

Our involvement in futures and options markets subjects us to risks inherent in conducting business in those markets.

We principally clear futures and options contracts on behalf of our correspondents and their respective customers. Trading in futures and options contracts is generally more highly leveraged than trading in other types of securities. This additional leverage increases the risk associated with trading in futures and options contracts, which in turn raises the risk that a correspondent, introducing broker, or customer may not be able to fully repay its creditors, including us, if it experiences losses in its futures and options contract trading business. We have recently acquired the partnership interests of GHCO, and the limited liability company interests of FCG, which will substantially increase our operations in the futures markets. Because of this increased activity, we will face more exposure to the risks associated with the clearing of futures contracts.

We may not be able to or determine not to hedge our foreign exchange risk.

As a dealer for foreign exchange trades, we enter into currency transactions with certain of our institutional clients or other institutions using modeled prices that we determine and may seek to hedge our risk by making similar transactions on the various exchanges or electronic communication networks of which we are a participant. While we expect to be able to limit our risk in our transactions with our clients through hedging transactions on exchanges or ECNs or through other counterparty relationships, there is no guarantee that we will be able to enter into these transactions at prices similar to those which we entered into with our clients. In addition, while we may intend to enter into the hedging transactions after we enter into a transaction with our client or the relevant institution, it is possible that currency prices could fluctuate before we are able to enter into such hedging transactions or, for other reasons, we may determine not to hedge such risk.

The securities and futures businesses are highly dependent on certain market centers that may be targets of terrorism.

Our business is dependent on exchanges and market centers being able to process trades. Terrorist activities in September 2001 caused the U.S. securities markets to close for four days. This impacted our revenue and profitability for that period of time. If future terrorist incidents cause interruption of market activity, our revenues and profits may be impacted negatively again.

Risks related to government regulation

All aspects of our business are subject to extensive government regulation. If we fail to comply with these regulations, we may be subject to disciplinary or other action by regulatory organizations, and our business may be harmed.

The securities industry in the U.S. is subject to extensive regulation under both federal and state laws. In addition to these laws, we must comply with rules and regulations of the SEC, FINRA, the CFTC, the NFA, various stock and futures exchanges, state securities commissions and other regulatory bodies charged with safeguarding the integrity of the securities markets and other financial markets and protecting the interests of investors participating in these markets. On December 1, 2008, PFSI became a member of the New York Stock Exchange, which subjects us to additional rules and regulations. Broker-dealers and FCMs are subject to regulations covering all aspects of the securities and futures businesses, including:

•  sales methods;

•  trade practices among broker-dealers and FCMs;

•  use and safekeeping of investors’ funds and securities;

•  capital structure;

•  margin lending;

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•  record keeping;

•  conduct of directors, officers and employees; and

•  supervision of investor accounts.

Our ability to comply with these regulations depends largely on the establishment and maintenance of an effective compliance system as well as our ability to attract and retain qualified compliance personnel. We could be subject to disciplinary or other actions due to claimed non-compliance with these regulations in the future and even for the claimed non-compliance of our correspondents with such regulations. If a claim of non-compliance is made by a regulatory authority, the efforts of our management could be diverted to responding to such a claim and we could be subject to a range of possible consequences, including the payment of fines and the suspension of one or more portions of our business. Additionally, our clearing contracts generally include automatic termination provisions which are triggered in the event we are suspended from any of the national exchanges of which we are a member for failure to comply with the rules or regulations thereof.

We and certain of our officers and employees have been subject to claims of non-compliance in the past, and may be subject to claims and legal proceedings in the future.

We also operate clearing and related businesses in the U.K. and Canada and execute transactions in global markets. These non-U.S. businesses are also heavily regulated. To the extent that different regulatory regimes impose inconsistent or iterative requirements on the conduct of our business, we will face complexity and additional costs in our compliance efforts. In addition, as we expand into new non-U.S. markets with which we may have relatively less experience, there is a risk that our lack of familiarity with the regulations impacting such markets may affect our performance and results.

The regulatory environment in which we operate has experienced increasing scrutiny by regulatory authorities in recent years and further changes in legislation or regulations may affect our ability to conduct our business or reduce our profitability.

The legislative and regulatory environment in which we operate has undergone significant change in the past and may undergo further change in the future. The CFTC, the SEC, FINRA, NFA, various securities or futures exchanges and other U.S. and foreign governmental or regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws and regulations. These legislative and regulatory initiatives may affect the way in which we conduct our business and may make our business less profitable. Changes in the interpretation or enforcement of existing laws and regulations by those entities may also adversely affect our business. Certain regulatory authorities have been more likely in recent years to commence enforcement actions against companies in our industry and penalties and fines sought by certain regulatory authorities have increased substantially in recent years.

In addition, because our industry is heavily regulated, regulatory approval may be required prior to expansion of our business activities. We may not be able to obtain the necessary regulatory approvals for any desired expansion. Even if approvals are obtained, they may impose restrictions on our business and could require us to incur significant compliance costs or adversely affect the development of business activities in affected markets.

If we do not maintain the capital levels required by regulations, we may be subject to fines, suspension, revocation of registration or expulsion by regulatory authorities.

We are subject to stringent rules imposed by the SEC, FINRA, and various other regulatory agencies which require broker-dealers to maintain specific levels of net capital. Net capital is the net worth of a broker-dealer, less deductions, for other types of assets including assets not readily convertible into cash and specified percentages of a broker-dealer’s proprietary securities positions. If we fail to maintain the required net capital, we may be subject to suspension or revocation of registration by the SEC and suspension or expulsion by FINRA, which, if not cured, could ultimately lead to our liquidation. If the net capital rules are changed or expanded, or if there is an unusually large charge against our net capital, we might be required to limit or discontinue our clearing and margin lending operations that require the intensive use of capital. In addition, our ability to withdraw capital from our subsidiaries could be restricted, which in turn could limit our ability to pay dividends, repay or repurchase debt, including the

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notes, at the parent company level and redeem or purchase shares of our outstanding stock, if necessary. A large operating loss or charge against net capital could impede our ability to expand or even maintain our present volume of business.

Our futures clearing business is subject to the capital and segregation rules of the NFA and CFTC. Our recent acquisitions of GHCO and FCG substantially increased our exposure to these rules. If we fail to maintain the required capital, or if we violate the customer segregation rules, we may be subject to monetary fines, and the suspension or revocation of our license to clear futures contracts. Any interruption in our ability to continue this business would impact our revenues and profitability.

Outside of the U.S., we are subject to other regulatory capital requirements. Our U.K. subsidiary is subject to capital adequacy rules that require our subsidiary to maintain stockholders’ equity and qualifying subordinated loans at specified minimum levels. If we fail to maintain the required regulatory capital, we may be subject to fine, suspension or revocation of our license with the FSA. If our license is suspended or revoked or if the capital adequacy requirements are changed or expanded, we may be required to discontinue our U.K. operations, which could result in diminished revenues.

As a member of the IIROC, an approved participant with the Montreal Exchange, a participating organization with the Toronto Stock Exchange and a member of the TSX Venture Exchange and various Canadian alternative trading systems, PFSC is subject to the rules and policies of the IIROC and other rules relating to the maintenance of regulatory capital. Specifically, to ensure that the IIROC members will be able to meet liabilities as they become due, the IIROC requires its member broker-dealers to periodically calculate their risk adjusted capital in accordance with a prescribed formula. If PFSC fails to maintain the required risk adjusted capital, it may be subject to monetary sanctions, suspensions or other sanctions, including expulsion as a member. If PFSC is sanctioned or expelled or if the risk adjusted capital requirements are changed or expanded, PFSC may be required to discontinue operations in Canada, which could result in diminished revenues.

In addition, some of the investments we make in our business may impact our regulatory capital. We have made large investments into Nexa and expect to continue to do so in the future. Investments in non-regulated subsidiaries and increases in illiquid assets, including unsecured customer accounts decrease the capital available for our regulated subsidiaries. If we experience increased levels of unsecured and partially secured accounts in the future, our financial results may be harmed.

Procedures and requirements of the USA PATRIOT Act may expose us to significant costs or penalties.

As participants in the financial services industry, our subsidiaries are subject to laws and regulations, including the USA PATRIOT Act of 2001, which require that they know certain information about their customers and monitor transactions for suspicious financial activities. The cost of complying with the PATRIOT Act and related laws and regulations is significant. We may face particular difficulties in identifying our international customers, gathering the required information about them and monitoring their activities. We face risks that our policies, procedures, technology and personnel directed toward complying with the PATRIOT Act are insufficient and that we could be subject to significant criminal and civil penalties due to noncompliance. Such penalties could have a material adverse effect on our business, financial condition and operating results and cash flows.

Risks related to our corporate structure

Our discontinued operations expose us to legal and other risks.

Although the split off transaction described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Discontinued Operations,” occurred over two years ago, we may incur future liabilities related to the operations of the SAMCO entities. Due to the Company’s indirect ownership of the SAMCO entities prior to our initial public offering we may be exposed to additional liabilities beyond what we may ordinarily encounter in our typical customer relationships.

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Provisions in our certificate of incorporation and bylaws and under Delaware law may prevent or frustrate a change in control or a change in management that stockholders believe is desirable.

Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

•  a classified board of directors;

•  limitations on the removal of directors;

•  advance notice requirements for stockholder proposals and nominations of directors at meetings of our stockholders; and

•  the inability of stockholders to act by written consent or to call special meetings.

In addition, our board of directors has the ability to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used to institute a rights plan, or a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors.

The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of incorporation. In addition, absent approval of our board of directors, our bylaws may only be amended or repealed by the affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote.

In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of our Company.

Risks related to our requirements as a public company

Our stockholders could be harmed if our management and larger stockholders use their influence in a manner adverse to other stockholders’ interests.

At the date of this report, our executive officers, directors and 5% stockholders will beneficially own, in the aggregate, approximately 36.9% of our outstanding common stock. As a result, these stockholders may have the ability to control all fundamental matters affecting us, including the election of the majority of the board of directors and approval of significant corporate transactions. This concentration of ownership may also delay or prevent a change in our control even if beneficial to stockholders. The interests of these stockholders with respect to such matters could conflict with the interests of public stockholders.

The price of our common stock may be volatile.

Since the completion of our initial public offering in May 2006, the price at which our common stock has traded has been subject to significant fluctuation. The price of our common stock may continue to be volatile in the future and could be subject to wide fluctuations in response to:

•  reductions in market prices or volume;

•  changes in securities or other government regulations;

•  quarterly variations in operating results;

•  our technological capabilities to accommodate any future growth in our operations or clients;

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•  announcements of technological innovations, new products, services, significant contracts, acquisitions or joint ventures by us or our competitors;

•  issuance and sales of our securities in financing transactions; and

•  changes in financial estimates and recommendations by securities analysts or our failure to meet or exceed analyst estimates.

As a result, shareholders may be unable to sell their stock at or above the price they paid for it.

Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to provide an attestation report as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

We are continuously evaluating our internal controls over financial reporting in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”) and rules and regulations of the SEC there under, which we refer to as Section 404. While we have not identified material weaknesses to date, we may from time to time identify conditions that may result in material weaknesses.

Item 1B.   Unresolved Staff Comments

None

Item 2.   Properties

Description of property

Our headquarters are located in Dallas, Texas, under a lease that expires in June 2016. Beginning in January 2007, we began to lease approximately 13,100 additional square feet, which increased our fixed rent expenses by approximately $220,000 per year and our liability for additional rent. Including the new space, we lease approximately 94,690 square feet at our headquarters, and our fixed rent is approximately $134,000 per month. We have one five-year option to extend the lease at the prevailing market rate. We sublease approximately 18,000 square feet of this space to SAMCO Holdings. In addition, our subsidiaries lease approximately 13,340 square feet in London and 42,420 square feet in the Canadian cities of Montreal and Toronto for our subsidiaries. We also lease additional office space at locations in California, Illinois, New York, Minnesota, Wisconsin and Texas to support our operations. We believe that our present facilities, together with our current options to extend lease terms and occupy additional space, are adequate for our current needs.

Item 3.   Legal Proceedings

In re Sentinel Management Group, Inc. is a Chapter 11 bankruptcy case filed on August 17, 2007 in the U.S. Bankruptcy Court for the Northern District of Illinois by Sentinel Management Group, Inc., a registered futures commission merchant (“Sentinel”). Prior to the filing of this action, Penson GHCO and Penson Financial Futures, Inc. (“PFFI”) held customer segregated accounts with Sentinel totaling approximately $36 million. Sentinel subsequently sold certain securities to Citadel Equity Fund, Ltd. and Citadel Limited Partnership. On August 20, 2007, the Bankruptcy Court authorized distributions of 95 percent of the proceeds Sentinel received from the sale of those securities to certain FCM clients of Sentinel, including Penson GHCO. This distribution to the Penson GHCO and PFFI customer segregated accounts along with a distribution received immediately prior to the bankruptcy filing total approximately $25.4 million.

On May 12, 2008, a committee of Sentinel creditors, consisting of a majority of non-FCM creditors, together with the trustee appointed to manage the affairs and liquidation of Sentinel (the “Sentinel Trustee”), filed with the Court their proposed Plan of Liquidation (the “Committee Plan”) and on May 13, 2008 filed a Disclosure Statement related thereto. The Committee Plan allows the Sentinel Trustee to seek the return from FCMs, including Penson GHCO, of a portion of the funds previously distributed to their customer segregated accounts. On June 19, 2008, the Court entered an order approving the Disclosure Statement over objections by Penson GHCO and others. The

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Bankruptcy Court held confirmation hearings on August 12, 2008, and August 13, 2008, respectively, regarding the Committee Plan. The Court heard testimony regarding the Committee Plan and entertained objections from several parties. At the conclusion of the Committee Plan confirmation hearings, the Court granted all interested parties additional time to submit additional documents to the Court in support of their respective positions. On September 16, 2008, the Sentinel Trustee filed suit against Penson GHCO and PFFI along with several other FCMs that received distributions to their customer segregated accounts from Sentinel. The suit against Penson GHCO and PFFI seeks the return of approximately $23.6 million of post-bankruptcy petition transfers and $14.4 million of pre-bankruptcy petition transfers. The suit also seeks to declare that the funds distributed to the customer segregated accounts of Penson GHCO and PFFI by Sentinel are the property of the Sentinel Estate rather than the property of customers of Penson GHCO and PFFI. On December 15, 2008, over the objections of Penson GHCO and PFFI, the court entered an order confirming the Committee Plan. A motion to clarify the court’s ruling has been filed and the court has set a briefing schedule and will rule once all the pleadings have been filed. During the appeals process, there is no stay of the confirmation order and the Committee Plan has therefore become effective. The Company believes that the Court was correct in ordering the prior distributions and Penson GHCO and PFFI intend to vigorously defend their position. However, there can be no assurance that any actions by Penson GHCO or PFFI will result in a limitation or avoidance of potential repayment liabilities. In the event that Penson GHCO and PFFI are obligated to return all previously distributed funds to the Sentinel Estate, any losses we might suffer would most likely be partially mitigated as it is likely that Penson GHCO and PFFI would share in the funds ultimately disbursed by the Sentinel Estate. On January 7, 2009 Penson GHCO, PFFI and a number of other FCMs that had placed customer funds with Sentinel filed a motion to withdraw the reference with the federal district court for the Northern District of Illinois, effectively asking the federal district court to remove the Sentinel case from the bankruptcy court and consolidate it with other Sentinel related actions in the federal district court. There can be no assurance that Penson GHCO’s or PFFI’s motion will be granted.

Various Claimants v. Penson Financial Services, Inc., et al.  On July 18, 2006, three claimants filed separate arbitration claims with the NASD (which is now known as FINRA) against PFSI related to the sale of certain collateralized mortgage obligations by SAMCO Financial Services, Inc. (“SAMCO Financial”), a former correspondent of PFSI, to its customers. In the ensuing months, additional arbitration claims were filed against PFSI and certain of our directors and officers based upon substantially similar underlying facts. These claims generally allege, among other things, that SAMCO Financial, in its capacity as broker, and PFSI, in its capacity as the clearing broker, failed to adequately supervise certain registered representatives of SAMCO Financial, and otherwise acted improperly in connection with the sale of these securities during the time period from approximately June, 2004 to May, 2006. Claimants have generally requested compensation for losses incurred through the depreciation in market value or liquidation of the collateralized mortgage obligations, interest on any losses suffered, punitive damages, court costs and attorneys’ fees. In addition to the arbitration claims, on March 21, 2008, Ward Insurance Company, Inc., et al, filed a claim against PFSI and Roger J. Engemoen, Jr., the Company’s Chairman of the Board, in the Superior Court of California, County of San Diego, Central District, based upon substantially similar facts. This case was filed after a FINRA arbitration panel had previously ruled against the claimant on substantially similar facts, but, in that action, PFSI and Mr. Engemoen were not parties. The Company is, among other defenses asserted, seeking to have the court enforce the earlier arbitration panel determination.

Mr. Engemoen, the Company’s Chairman of the Board, is the Chairman of the Board, and beneficially owns approximately 49% of the outstanding stock, of SAMCO Holdings, Inc., the holding company of SAMCO Financial and SAMCO Capital Markets, Inc. (SAMCO Holdings, Inc. and its affiliated companies are referred to as the “SAMCO Entities”). Certain of the SAMCO Entities received certain assets from the Company when those assets were split-off immediately prior to the Company’s initial public offering in 2006 (the “Split-Off”). In connection with the Split-Off and through contractual and other arrangements, certain of the SAMCO Entities have agreed to indemnify the Company and its affiliates against liabilities that were incurred by any of the SAMCO Entities in connection with the operation of their businesses, either prior to or following the Split-Off. Accordingly, the Company has tendered the claims referenced above to certain of the SAMCO Entities for indemnification, and the SAMCO Entities have been reimbursing the Company for all of its out-of-pocket liabilities incurred in connection with the claims. To date, virtually all of the expenses that have been subject to these indemnification claims have related to defense costs, and PFSI has ultimately paid only one very minimal amount directly to one claimant with respect to these matters. The Company has continued to monitor its ultimate exposure in connection with these

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claims and, until recently, has determined that its exposure in connection with these matters has been minimal. During the third quarter of 2008, the Company’s management determined that, based on the financial condition of the SAMCO Entities, sufficient risk exists with respect to the indemnification protections to warrant a modification of these arrangements with the SAMCO Entities, as described below.

On November 5, 2008, the Company entered into a settlement agreement with certain of the SAMCO Entities pursuant to which the Company received a limited personal guaranty from Mr. Engemoen of certain of the indemnification obligations of various SAMCO Entities with respect to claims related to the underlying facts described above, and, in exchange, the Company agreed to limit the aggregate indemnification obligations of the SAMCO Entities with respect to certain matters described above to $2,965,243. Unpaid indemnification obligations of $800,000 were satisfied prior to February 15, 2009. Of the $800,000 obligation, $86,000 was satisfied through a setoff against an obligation owed to the SAMCO Entities by PFSI, with the balance to be paid in cash. The remaining $2,165,243 indemnity obligation will be payable in cash, of which $600,000 is to be paid to the Company by no later than June 15, 2009 and the remainder by no later than December 31, 2009. Mr. Engemoen has guaranteed the payment of these obligations up to an aggregate of $2.0 million, within thirty (30) days of any default by the SAMCO Entities of their obligations under the settlement agreement. In addition to the above stated liabilities, the SAMCO Entities will also be responsible for any costs associated with collection under the foregoing settlement agreement together with any interest accrued on any past due amounts, and Mr. Engemoen will be responsible for any additional costs associated with collection under his guaranty together with any interest accrued on any past due amounts. The SAMCO Entities will remain responsible for the payment of their own defense costs and any claims from any third parties not expressly released under the settlement agreement, irrespective of amounts paid to indemnify the Company. The settlement agreement only relates to the matters described above and does not alter the indemnification obligations of the SAMCO Entities with respect to unrelated matters.

In the event the exposure of the Company with respect to these claims exceeds the agreed limits on the indemnification obligations of the SAMCO Entities and the guaranty of Mr. Engemoen, such excess amounts may be borne by the Company. While we believe that the claims against us are without merit, there can be no assurance that our defenses and indemnification protections will be sufficient to avoid all liabilities. Accordingly, to account for liabilities related to the aforementioned claims that may be borne by the Company, we recorded a pre-tax charge of $2.35 million in the third quarter of 2008. The Company will continue to monitor its financial exposure with respect to these matters and there can be no assurance that the Company’s ultimate costs with respect to these claims will not exceed the amount of this reserve.

In the general course of business, the Company and certain of its officers have been named as defendants in other various pending lawsuits and arbitration proceedings. These other claims allege violation of federal and state securities laws, among other matters. The Company believes that resolution of these claims will not result in any material adverse effect on its business, financial condition, or results of operation.

Item 4.   Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of 2008.

PART II

Item 5.   Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market information

The Common Stock of the Company has been traded on the NASDAQ Global Select Market under the symbol PNSN since the Company’s initial public offering on May 16, 2006. Prior to that time there was no public market for the Company’s Common Stock or other securities.

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The following table sets forth the high and low closing sales prices of our Common Stock, for the periods indicated.

	Price Range
	High		Low
2008
Quarter ended March 31, 2008	$	14.26	$	8.15
Quarter ended June 30, 2008	$	13.61	$	9.37
Quarter ended September 30, 2008	$	19.11	$	10.69
Quarter ending December 31, 2008	$	13.48	$	4.98
2007
Quarter ended March 31, 2007	$	33.22	$	25.32
Quarter ended June 30, 2007	$	34.08	$	24.10
Quarter ended September 30, 2007	$	25.40	$	15.50
Quarter ending December 31, 2007	$	19.59	$	13.58

Holders

No shares of the Company’s preferred stock are issued and outstanding. As of March 9, 2009, there were 61 holders of record of our common stock. By including persons holding shares in broker accounts under street names, however, we estimate our shareholder base to be 3,717 as of March 9, 2009.

Dividend policy

We currently intend to retain any earnings to develop and expand our business and do not anticipate paying cash dividends in the foreseeable future. Any future determination with respect to the payment of dividends will be at the discretion of our board of directors and will depend upon, among other things, our operating results, financial condition and regulatory capital requirements, the terms of then-existing indebtedness, general business conditions and other factors our board of directors deems relevant.

Our board of directors may, at any time, modify or revoke our dividend policy on our common stock.

Under Delaware law, our board of directors may declare dividends only to the extent of our “surplus” (which is defined as total assets at fair market value minus total liabilities, minus statutory capital), or if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal years. The value of a corporation’s assets can be measured in a number of ways and may not necessarily equal their book value. The value of our capital may be adjusted from time to time by our board of directors but in no event will be less than the aggregate par value of our issued stock. Our board of directors may base this determination on our consolidated financial statements, a fair valuation of our assets or another reasonable method. Our board of directors will seek to assure itself that the statutory requirements will be met before actually declaring dividends. In future periods, our board of directors may seek opinions from outside valuation firms to the effect that our solvency or assets are sufficient to allow payment of dividends, and such opinions may not be forthcoming. If we sought and were not able to obtain such an opinion, we likely would not be able to pay dividends. In addition, pursuant to the terms of our preferred stock (were any to be issued), we are prohibited from paying a dividend on our common stock unless all payments due and payable under the preferred stock have been made.

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PWI’s purchases of its equity securities

The table below sets forth the information with respect to purchases made by or on behalf of the Company of its common stock during the fourth quarter of the year ended December 31, 2008:

					Total Number of
					Shares Purchased as		Maximum Number of
	Total Number				Part of Publicly		Shares that May Yet be
	of Shares		Average Price		Announced Plans or		Purchased Under the Plans
Period	Purchased(a)		Paid per Share		Programs		or Programs(b)
October		3,810	$	12.92		—		362,899
November		6,958	$	6.38		—		734,898
December		8,951	$	7.44		—		630,195

(a)	Includes shares withheld to cover tax-withholding requirements related to the vesting of restricted stock units issued to employees pursuant to the Company’s shareholder-approved stock incentive plan.
(b)	Remaining shares represent the remaining dollar amount authorized divided by the average purchase price in the month.

Recent sales of unregistered securities

None

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Stock Performance Graph
Cumulative Total Return to Stockholders
Penson Worldwide, Inc., NASDAQ Composite Index and NASDAQ Financial Stocks Index
% Return to Stockholders, May 16, 2006 to December 31, 2008

Total Return Performance

This comparison is based on a return assuming $100 invested May 16, 2006 in Penson Worldwide, Inc. Common Stock, the NASDAQ Composite Index and the NASDAQ Financial Stocks Index, assuming the reinvestment of all dividends. May 16, 2006 is the date the Company’s Common Stock commenced trading on the NASDAQ Global Select Market.

The above Stock Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

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Item 6.   Selected Financial Data

The following table sets forth summary consolidated financial data for our company for the periods indicated below. The summary consolidated statements of income data for the three years ended December 31, 2008 and the summary consolidated balance sheet data as of December 31, 2008 and 2007 has been derived from our audited consolidated financial statements included elsewhere in this document, and should be read in conjunction with the “Management’s discussion and analysis of financial condition and results of operations” section below and our consolidated financial statements and the notes included in this Annual Report on pages F-2 through F-36. The consolidated statements of income data for the years ended December 31, 2005 and 2004 and the consolidated balance sheet data as of December 31, 2006, 2005 and 2004, all of which are set forth below, are based on the Company’s historical audited consolidated financial statements and the underlying accounting records.

	Year Ended December 31,
	2008		2007		2006		2005		2004
	(In thousands, except per share data)
Consolidated statement of income data:
Net revenues	$	293,170	$	264,725	$	198,189	$	127,907	$	102,478
Total expenses(1)		276,521		222,767		160,611		123,229		94,296
Income from continuing operations before income taxes		16,649		41,958		37,578		4,678		8,182
Income tax expense		5,993		15,125		13,299		1,951		1,489
Income from continuing operations		10,656		26,833		24,279		2,727		6,693
Income from discontinued operations, net of tax(2)		—		—		243		177		1,060
Net income	$	10,656	$	26,833	$	24,522	$	2,904	$	7,753
Earnings per share — basic
Earnings per share from continuing operations	$	.42	$	1.02	$	1.07	$	0.18	$	0.51
Earnings per share from discontinued operations		—		—		0.01		0.01		0.08
Earnings per share	$	.42	$	1.02	$	1.08	$	0.19	$	0.59
Earning per share — diluted
Earnings per share from continuing operations	$	.42	$	1.00	$	1.05	$	0.16	$	0.43
Earnings per share from discontinued operations		—		—		0.01		0.01		0.07
Earnings per share	$	.42	$	1.00	$	1.06	$	0.17	$	0.50
Weighted average shares outstanding — basic and diluted
Basic		25,217		26,232		22,689		15,185		13,136
Diluted		25,416		26,817		23,058		18,300		16,456

(1)

Results from 2008, 2007 and 2006 include $4.5 million, $4.7 million and $3.1 million of compensation expense related to the implementation of SFAS No. 123(R). Accordingly, 2008, 2007 and 2006 results may not be comparable to prior periods.

(2)

Concurrent with our public offering, we split off certain non-core business operations into SAMCO Holdings, a newly formed company which gives effect to a capital contribution to SAMCO in an amount equal to the difference between the net book value of the division to be split off, as of such date, and the value of the 1,041,667 shares of our common stock to be exchanged in the split off. Except as otherwise indicated, financial information presented sets forth the results of operations and balance sheet data of the entities split off as

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discontinued operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Discontinued Operations.”

	As of December 31,
	2008		2007		2006		2005		2004
	(In thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	38,825	$	120,923	$	103,054	$	99,506	$	35,155
Total assets		5,539,195		7,846,977		4,644,390		3,578,881		2,342,844
Notes payable		75,000		55,000		10,000		52,395		38,931
Total stockholders’ equity		264,467		265,428		211,784		89,952		67,716

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with Part II, Item 6 “Selected Financial Data” and our audited consolidated financial statements and the related notes included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors including the risks discussed in Item 1A “Risk Factors” “Special Note Regarding Forward-Looking Statements” and elsewhere in this annual report on Form 10-K.

Market and Economic Conditions in 2008

During 2008, financial and credit market dislocations, and the recession, continued amidst increasing volatility, causing rapid changes among a wide variety of financial indicators and markets:

•  The Federal Reserve lowered interest rates approximately 400 basis points to approximately .25% at December 31, 2008 from 4.25% at December 31, 2007.

•  The VIX, the ticker symbol for the Chicago Board of Options Exchange Volatility Index, a popular measure of implied stock market volatility, reached an intraday high of more than 89 in October 2008, versus an average of about 19 since 1990.

•  In September and October of 2008, the U.S., U.K. and other countries implemented a series of temporary and other, more lasting restrictions on the short sales of shares of financial service companies.

•  The New York Stock Exchange short interest, which, as a percentage of total shares outstanding at month-end, reached a high of 4.86 in July 2008, an increase of 43% from December 2007, and, following the implemented restrictions, declined 26%, to 3.59 in December 2008.

•  The Dow Jones Industrial Average closed at 8,778 on December 31, 2008, having previously reached a low of 7,392 in November 2008, from a high for the year of 13,338 in January 2008.

•  Consolidated NASDAQ trading volume increased 47%, to 2.3 trillion shares in 2008, from 1.5 trillion shares in 2007.

•  Margin debt on NYSE stocks declined 42%, to $187 billion in December 2008, from $323 billion in December 2007.

Overview

We are a leading provider of a broad range of critical securities and futures processing infrastructure products and services to the global financial services industry. Our products and services include securities and futures clearing and execution, financing and cash management technology and other related offerings, and we provide tools and services to support trading in multiple markets, asset classes and currencies.

Since starting our business in 1995 with three correspondents, we have grown to serve approximately 259 active securities clearing correspondents and 43 futures clearing correspondents as of December 31, 2008. Our net

43

revenues were approximately $293 million in 2008, $265 million in 2007 and $198 million in 2006, and consist primarily of transaction processing fees earned from our clearing operations and net interest income earned from our margin lending activities, from investing customers’ cash and from stock lending activities. Our clearing and commission fees are based principally on the number of trades we clear. We receive interest income from financing the securities purchased on margin by the customers of our clients. We also earn licensing and development revenues from fees we charge to our clients for their use of our technology solutions.

Starting with the fourth quarter and year-end 2007 results, the Company started reporting on the more widely used “net revenues” basis, instead of “total revenues” used previously. Total revenues will continue to be included in the consolidated statements of income. Net revenues reflect interest revenue from securities operations after deducting associated interest expenses. The Company believes this provides a more useful assessment of the actual contribution of its operations that generate interest revenue.

Fiscal 2008 highlights

•  We added a net 25 new correspondents during the year to a record 302. At December 31, 2008 we had 23 signed correspondents that have not yet begun generating revenue.

•  We achieved record annual clearing and commission revenues of $150.6 million and technology revenues of $22.2 million for the year ended December 31, 2008.

•  The federal funds rate decreased approximately 400 basis points to approximately .25% during 2008, which we estimate based on December 2007 quarter average customer balances decreased net interest revenues by approximately $25.1 million.

•  Since its introduction in the fourth quarter of 2007, trade aggregation has positively impacted revenues by approximately $6.1 million in 2008.

•  In the third quarter we recorded a $2.4 million litigation reserve — see Part I, Item 3. Legal Proceedings.

•  Securities lending decreased approximately $1.1 billion from the fourth quarter of 2007 principally as a result of the regulatory changes surrounding short sale transactions implemented by the SEC.

•  During the fourth quarter we recorded a $26.4 million correspondent asset loss related to an unsecured receivable from Evergreen Capital Partners, Inc. See Note 26 to our consolidated financial statements.

Acquisition of FCG

In November, 2007, our subsidiary Penson GHCO acquired all of the assets of FCG, an FCM and a leading provider of technology products and services to futures traders, and assigned the purchased membership interest to GHP1 effective immediately thereafter. We closed the transaction in November, 2007 and paid approximately $9.4 million in cash, subject to a reconciliation to reported actual net income for the period ended November 30, 2008, as defined in the purchase agreement and approximately 150,000 shares of common stock valued at $2.2 million to the previous owners of FCG. In addition, the Company agreed to pay an annual earnout in cash for the two year period following the actual net income reconciliation, based on average net income, subject to certain adjustments including cost of capital, for the acquired business. The Company finalized the acquisition valuation during the third quarter of 2008 and recorded goodwill of approximately $4.0 million and intangibles of approximately $7.6 million. The Company accrued approximately $8.7 million related to the first year of the earnout period, of which $4.5 million was paid as of December 31, 2008. The financial results of FCG have been included in the Company’s consolidated financial statements since the November 30, 2007 acquisition date. On May 31, 2008, Penson GHCO acquired substantially all of the assets of FCG as part of an internal reorganization and consolidation of assets. FCG currently conducts business as a division of Penson GHCO.

Acquisition of GHCO

In November 2006, the Company entered into a definitive agreement to acquire the partnership interests of Chicago-based GHCO, a leading international futures clearing and execution firm. The Company closed the transaction on February 16, 2007 and paid $27.9 million, including cash and approximately 139,000 shares of

44

common stock valued at $3.9 million to the previous owners of GHCO. In addition, the Company agreed to pay additional consideration in the form of an earnout over the next three years, in an amount equal to 25% of Penson GHCO’s pre-tax earnings, as defined in the purchase agreement executed with the previous owners of GHCO. The Company did not make an earnout payment related to the first year of the integrated Penson GHCO business (see Note 25 to our consolidated financial statements). Goodwill of approximately $2.8 million and intangibles of approximately $1.0 million were recorded in connection with the acquisition. The assets and liabilities acquired as well as the financial results of Penson GHCO have been included in the Company’s consolidated financial statements since the February 16, 2007 acquisition date.

Acquisition of Schonfeld

In November 2006, we acquired the clearing business of Schonfeld Securities LLC, a New York based securities firm. The Company closed the transaction in November 2006 and in January 2007, the Company issued approximately 1.1 million shares of common stock valued at $28.3 million to the previous owners of Schonfeld as partial consideration for the assets acquired of which approximately $14.8 million was recorded as goodwill and $13.5 million as intangibles. In addition, the Company agreed to pay an annual earnout of stock and cash over a four year period that commenced on June 1, 2007, based on net income, as defined in the asset purchase agreement, for the acquired business. The Company successfully completed the conversion of the seven Schonfeld correspondents in the second quarter of 2007. A payment of approximately $26.6 million was paid in 2008 in connection with the first year earnout that ended May 31, 2008. At December 31, 2008, a liability of approximately $17.5 million was accrued as a result of the second year earnout and is included in other liabilities in the consolidated statement of financial condition. The offset of this liability, goodwill, is included in other assets.

Acquisition of Computer Clearing Services, Inc.

In May, 2005, the Company entered into a definitive agreement to acquire CCS. In January 2006, the Company paid $4.1 million for substantially all of the assets and certain liabilities of CCS and closed the transaction. The results of CCS’ operations have been included in the consolidated financial statements since that date. In addition the Company agreed to a contingent payout of an average of 25% of CCS qualified annual revenue over four years from January 2006. The contingent payout consists of a combination of cash and the Company’s common stock. The Company has recorded goodwill of approximately $19.6 million and intangibles of approximately $.5 million. At December 31, 2008, a liability of approximately $2.4 million had been accrued as a result of this contingent payout, and is included in other liabilities in the consolidated statement of financial condition. The offset of this liability, goodwill, is included in other assets. Approximately $1.2 million was paid during the first quarter of 2009.

Financial overview

Net revenues

Revenues

We generate revenues from most clients in several different categories. Clients generating revenues for us from clearing transactions almost always also generate interest income from related balances. Revenues from clearing transactions are driven largely by the volume of trading activities of the customers of our correspondents and proprietary trading by our correspondents. Our average clearing revenue per trade is a function of numerous pricing elements that vary based on individual correspondent volumes, customer mix, and the level of margin debit balances and credit balances. Our clearing revenue fluctuates as a result of these factors as well as changes in trading volume. We focus on maintaining the profitability of our overall correspondent relationships, including the clearing revenue from trades and net interest from related customer margin balances, and by reducing associated variable costs. We collect the fees for our services directly from customer accounts when trades are processed. We only remit commissions charged by our correspondents to them after deducting our charges. For this reason, we have no significant receivables to collect.

Our largest source of revenue is interest income. We often refer to our interest income as “Interest, gross” to distinguish this category of revenue from “Interest, net” that is generally used in our industry. Interest, gross is generated by charges to customers or correspondents on margin balances and interest earned by investing customers’ cash, and therefore these revenues fluctuate based on the volume of our total margin loans outstanding, the volume of the cash

45

balances we hold for our correspondents’ customers, the rates of interest we can competitively charge on margin loans and the rates at which we can invest such balances. We also earn interest from our stock borrowing and lending activities.

Technology revenues are a growing part of our business and consist primarily of both development and transactional revenues generated by Nexa. A significant portion of these revenues are collected directly from clearing customers along with other charges for clearing services as described above. Most development revenues and some transaction revenues are collected directly from clients and are reflected as receivables until they are collected.

Other revenues include charges assessed directly to customers for certain transactions or types of accounts and profits from proprietary trading activities, including foreign exchange transactions and fees charged to our correspondents’ customers. Subject to certain exceptions, our clearing brokers in the U.S., Canada and the U.K. each generate these types of transactions.

Interest expense from securities operations

Interest expense is incurred in our daily operations in connection with interest we pay on credit balances we hold and on short-term borrowings we make to fund activities of our correspondents and their customers. We have two primary sources of borrowing: commercial banks and stock lending institutions. Regulations differ by country as to how operational needs can be funded, but we often find that stock loans that are secured with customer or correspondent securities as collateral can be obtained at a lower rate of interest than loans from commercial banks. Operationally, we review cash requirements each day and borrow the requirements from the most cost effective source.

Revenues from clearing and commission fees represented 51% and 45% of our total net revenues for the year ended December 31, 2008 and 2007, respectively. Net interest income represented 26% and 33%, respectively, of our total net revenues for the year ended December 31, 2008 and 2007.

Expenses

Employee compensation and benefits

Our largest category of expense is the compensation and benefits that we pay to our employees, which includes salaries, bonuses, group insurance, contributions to benefit programs, stock compensation and other related employee costs. These costs vary by country according to the local prevailing wage standards. We utilize technology whenever practical to limit the number of employees and thus keep costs competitive. In the U.S., most of our employees are located in cities where employee costs are lower than where our largest competitors primarily operate. A portion of total employee compensation is paid in the form of bonuses and performance-based compensation. As a result, depending on the performance of particular business units and the overall Company performance, total employee compensation and benefits could vary materially from period to period.

Other operating expenses

Expenses incurred to process trades include floor brokerage and exchange and clearance fees, and those expenses tend to vary significantly with the level of trading activity. The related data processing and communication costs vary less with the level of trading activity. Occupancy and equipment expenses include lease expenses for office space, computers and other equipment that we require to operate our businesses. Other expenses include legal, regulatory, professional consulting fees and accounting expenses along with travel and miscellaneous expenses.

As a public company, we are subject to the requirements of the Sarbanes-Oxley Act of 2002, which requires us to incur significant expenditures to update our documentation, review and test our existing systems of internal controls in accordance with this Act. This could require us to hire and train additional personnel to comply with these requirements.

In addition, as a public company we incur additional costs for external advisers such as legal, accounting, auditing and investor relations services.

Profitability of services provided

Management records revenue for the clearing operations and technology business separately as well as all expenses associated with each business to determine net profitability before income tax. We also separately record interest income and interest expense to determine the overall profitability of this activity.

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Results of operations

The following table summarizes our operating results as a percentage of net revenues for each of the periods shown.

	Year Ended December 31
	2008			2007			2006
Revenues:
Clearing and commission fees		51	%		45	%		41	%
Technology		8	%		6	%		6	%
Interest, gross		57	%		86	%		83	%
Other revenues		15	%		16	%		15	%
Total revenues		131	%		153	%		145	%
Interest expense from securities operations		31	%		53	%		45	%
Net revenues		100	%		100	%		100	%
Expenses:
Employee compensation and benefits		39	%		38	%		40	%
Floor brokerage exchange and clearance fees		9	%		9	%		10	%
Communications and data processing		13	%		13	%		12	%
Occupancy and equipment		10	%		9	%		9	%
Vendor related asset impairment		—			4	%		—
Correspondent asset loss		9	%		—			—
Other expenses		13	%		10	%		8	%
Interest expense on long-term debt		1	%		1	%		2	%
Total expenses		94	%		84	%		81	%
Income from continuing operations before income taxes		6	%		16	%		19	%
Provision for income taxes		2	%		6	%		7	%
Income from continuing operations		4	%		10	%		12	%

Comparison of years ended December 31, 2008 and December 31, 2007

Overview

Results of operations improved in our clearing operations and in our technology business for the year ended December 31, 2008 compared to the year ended December 31, 2007. We saw a decline in our net interest earned as a result in the decreases in the targeted federal funds rate that began in the fourth quarter of 2007 and continued throughout 2008. Operating results decreased during 2008, as compared to 2007, due to decreases in the average federal funds rate, which led to lower interest rate spreads and the correspondent asset loss related to the unsecured receivable from Evergreen Capital Partners, Inc. (see Note 26 to our consolidated financial statements) during the fourth quarter of 2008, offset by increased trading volumes in the U.S. and Canada, the results of a full year of Penson GHCO (acquired in February 2007) and the acquisitions of Schonfeld (acquired in November 2006, with the majority of the conversions completed in the second quarter 2007) and FCG in November 2007 and the improvements in our Nexa business discussed below. Operating results in 2007 were negatively affected by the charge incurred in the third quarter of 2007 resulting from the vendor related asset impairment (see Note 25 to our consolidated financial statements). In addition, our U.K. business incurred an operating loss of $2.7 million in 2008 compared to operating profit of $2.6 million in 2007 due to lower trading volumes, primarily in the contract for difference business.

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In 2008 we saw increased profitability in our stock loan conduit business. The business consists of a “matched book” where we borrow stock from an independent party in the securities business and then loan the exact same shares to a third party who needs the shares. We pay interest expense on the borrowings and earn interest income on the loans, earning a net spread of 30 to 90 basis points on the transactions. Due to recent regulatory and marketplace changes regarding short-selling of certain securities, clearing brokers that violate certain short-selling rules, including the failure to timely deliver securities, are now subject to significantly more stringent penalties. These changes and potential future regulatory changes have had and may continue to have a negative impact on the earnings we have historically seen in our conduit business.

We also have made improvements in our technology business. Nexa experienced an operating profit of $.4 million for 2008 as compared to a $1.8 million operating loss for 2007. Increases in development and recurring revenues and approximately $2 million in licensing fees resulting from a licensing agreement signed in the third quarter of 2008 accounted for this improvement.

The above factors resulted in lower operating income for the year ended December 31, 2008 compared to the year ended December 31, 2007.

The following is a summary of the increases (decreases) in the categories of net revenues and expenses for the year ended December 31, 2008 compared to the year ended December 31, 2007.

				%
				Change from
	Amount			Previous Year
	(In thousands)
Revenues:
Clearing and commission fees	$	32,649			27.7
Technology		7,000			46.1
Interest:
Interest on asset based balances		(43,344	)		(28.3	)
Interest on conduit borrows		(19,378	)		(28.1	)
Money market		2			—
Interest, gross		(62,720	)		(27.5	)
Other revenue		2,138			4.9
Total revenues		(20,933	)		(5.2	)
Interest expense:
Interest expense on liability based balances		(26,638	)		(34.0	)
Interest on conduit loans		(22,740	)		(36.9	)
Interest expense from securities operations		(49,378	)		(35.3	)
Net revenues		28,445			10.7
Expenses:
Employee compensation and benefits		11,736			11.5
Floor brokerage, exchange and clearance fees		(1,208	)		(4.4	)
Communications and data processing		8,496			27.6
Occupancy and equipment		5,317			22.6
Vendor related asset impairment		(10,034	)		(92.4	)
Correspondent asset loss		26,421
Other expenses		12,066			47.6
Interest expense on long-term debt		960			33.2
		53,754			24.1
Income from continuing operations before income taxes	$	(25,309	)		(60.3	)

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Net revenues

Net revenues increased $28.4 million, or 10.7%, to $293.2 million from the year ended December 31, 2007 to the year ended December 31, 2008. The increase is primarily attributed to the following:

Clearing and commission fees increased $32.6 million, or 27.7%, to $150.6 million, during this same period primarily due to our acquisitions of GHCO, FCG and the clearing operations of Schonfeld, an increase in the number of correspondents, a change in our mix of correspondents and an increase in our volume of transactions in the U.S. and Canada.

Technology revenue increased $7.0 million, or 46.1%, to $22.2 million primarily due to higher recurring and development revenue as well approximately $2 million in licensing fees resulting from a licensing agreement signed in the third quarter of 2008.

Interest, gross decreased $62.7 million, or 27.5%, to $165.8 million during the year ended December 31, 2008 compared to the year ended December 31, 2007. Interest revenues from customer balances decreased $43.3 million, or 27.2%, to $116.3 million as our average daily interest rate decreased 212 basis points or 46.9% to 2.40% offset by an increase in our earning assets of $1.2 billion, or 35.0% to $4.6 billion for the year ended December 31, 2008. Interest income from our stock conduit borrows operations decreased $19.4 million, or 28.1%, to $49.5 million, as a result of a decrease in our average daily interest rate of approximately 115 basis points, or 25.4%, to 3.37% coupled with a $57.5 million, or 3.8% decrease in our average daily assets.

Other revenue increased $2.1 million, or 4.9% to $45.4 million, due to the introduction of trade aggregation in the U.S. in the fourth quarter of 2007, which resulted in an increase of approximately $2.2 million, increased fees and increased foreign exchange trading revenues offset by decreases in equity trading revenues.

Interest expense from securities operations decreased $49.4 million, or 35.3%, to $90.7 million from the year ended December 31, 2007 to the year ended December 31, 2008. Interest expense from clearing operations decreased $26.6 million, or 34.0%, to $51.8 million, as our average daily interest rate decreased 158 basis points, or 54.3%, to 1.33%, offset by an increase in our daily average balances of our short-term obligations of $1.2 billion, or 43.8%, to $3.9 billion. Interest from our stock conduit loans decreased $22.7 million, or 36.9%, due to a 138 basis point decrease in our average daily interest rate to 2.67%, combined with a $64.0 million, or 4.2% decrease in our average daily balances to $1.5 billion.

Interest, net decreased from $88.4 million for the year ended December 31, 2007 to $75.1 million for the year ended December 31, 2008. This decrease was primarily due to a diminished interest rate spread on customer balances of 33.5% to 107 basis points at December 31, 2008 from 161 basis points at December 31, 2007 brought on by decreases in the targeted federal funds rate offset by higher average balances.

Employee compensation and benefits

Total employee costs increased $11.7 million, or 11.5%, to $113.7 million from the year ended December 31, 2007 to the year ended December 31, 2008, primarily due to a 15% increase in headcount to 1,058 as of December 31, 2008 as well as the affect of acquiring Penson GHCO in February 2007 and FCG in November 2007. The headcount increase is primarily attributed to increases in our U.S. clearing operations as a result of the expansion of our services offered and the number of correspondents served as well as the acquisition of FCG in November 2007.

Floor brokerage, exchange and clearance fees

Floor brokerage, exchange and clearance fees decreased $1.2 million, or 4.4% to $26.1 million for the year ended December 31, 2008 from the year ended December 31, 2007, as a result of larger exchange refunds in the first quarter combined with lower fourth quarter clearance fees as well as decreases in the CFD business in 2008 compared to 2007 offset by higher clearing volumes and the acquisitions of GHCO, FCG and Schonfeld.

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Communication and data processing

Total expenses for our communication and data processing requirements increased $8.5 million, or 27.6%, to $39.3 million from the year ended December 31, 2007 to the year ended December 31, 2008. This increase reflects additional growth in volumes in our U.S. operations, primarily from the Schonfeld acquisition, and in our Canadian operations.

Occupancy and equipment

Total expenses for occupancy and equipment increased $5.3 million, or 22.6%, to $28.9 million from the year ended December 31, 2007 to the year ended December 31, 2008. This increase is primarily due to additional equipment that was acquired to support the growth in our businesses.

Vendor related asset impairment

In 2007 we recorded a charge of $10.9 million from the loss of funds placed with Sentinel Management Group. For the year ended December 31, 2008 we have incurred expenses $.8 million related to ongoing legal costs. See Part I, Item 3. Legal Proceedings and note 25 to our consolidated financial statements.

Correspondent asset loss

As reported in October 2008, the Company’s Canadian subsidiary obtained an unsecured receivable as a result of a number of transactions involving listed Canadian equity securities by Evergreen Capital Partners Inc. (“Evergreen”) on behalf of itself and/or its customers, for which Evergreen and/or its customers were unable to make payment. Subsequently, Evergreen ceased operations and filed for bankruptcy protection. The Company commenced an investigation into the circumstances surrounding the events that resulted in the unsecured receivable and retained the services of various professional advisors to assist in the investigation.

In connection with the Company’s preparation of its financial statements for inclusion in this annual report on Form 10-K, the Company’s management, after consultation with the Company’s Board of Directors and outside advisors, concluded that as of December 31, 2008, a significant amount of the receivable was not recoverable and recorded a charge of approximately $26.4 million, net of estimated recoveries and professional fees. The Company is continuing to explore ways to further recover amounts associated with this charge and, other than recurring professional fees, does not anticipate incurring any additional losses relative to this matter.

Based on our internal review, we are satisfied with our operations around the world and believe they should not be subject to a similar risk. We also retained Promontory Financial Group as an outside risk consultant to evaluate our risk monitoring systems. We have designed and implemented several new risk management and fraud detection processes, which we believe will prevent any future recurrences of this type of activity.

Other expenses

Other expenses increased $12.1 million, or 47.6%, to $37.4 million from the year ended December 31, 2007 to the year ended December 31, 2008. The increase relates to increases in legal, professional consulting fees related to maintenance, support and other improvements to our capacity and accounting expenses and a $2.4 million litigation reserve (see Part I, Item 3. Legal Proceedings).

Interest expense on long- term debt

Interest expense on long-term debt increased from $2.9 million for the year ended December 31, 2007 to $3.9 million for the year ended December 31, 2008 as a result of higher borrowing levels offset by lower interest rates.

Provision for income taxes

Income tax expense, based on an effective income tax rate of approximately 36.0%, was $6.0 million for the year ended December 31, 2008 as compared to an effective tax rate of 36.0% and $15.1 million for the year ended

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December 31, 2007. This decrease is primarily attributed to lower pretax income of approximately $25.3 million due to the correspondent asset loss previously discussed. Additionally, the Company received international trade tax credits in Canada related to prior years, offset by a lower benefit from stock-based compensation as a result of book expense exceeding tax deductible amounts.

Net income

As a result of the foregoing, net income decreased to $10.7 million for the year ended December 31, 2008 from $26.8 million for the year ended December 31, 2007.

Comparison of years ended December 31, 2007 and December 31, 2006

Overview

Results of operations continued to show improvement in our clearing operations, interest earned and in our technology business for the year ended December 31, 2007 compared to the year ended December 31, 2006. Operating results from each business improved during 2007 as compared to 2006, due to the Schonfeld acquisition, continued growth in our existing U.S. and Canadian operations and the improvements in our U.K. and Nexa businesses discussed below.

We have continued to see an expansion in our stock loan conduit business. The business consists of a “matched book” where we borrow stock from an independent party in the securities business and then loan the exact same shares to a third party who needs the shares. We pay interest expense on the borrowings and earn interest income on the loans, earning a net spread of 30 to 90 basis points on the transactions.

We continued to make significant progress in our U.K. operations and our Nexa business. For the year ended December 31, 2007, U.K. operating income was $2.6 million as compared to a loss of $1.4 million for the year ended December 31, 2006.

We also experienced improvements in our technologies business. Nexa experienced an operating loss of $1.8 million for the year ended December 31, 2007 as compared to $4.4 million for the same period in 2006. Increases in development revenues, recurring revenues and control of expenses have accounted for this improvement.

The above factors resulted in substantially improved operating results for the year ended December 31, 2007 compared to the year ended December 31, 2006.

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The following is a summary of the increases (decreases) in the categories of net revenues and expenses for the year ended December 31, 2007 compared to the year ended December 31, 2006.

				%
				Change from
	Amount			Previous Year
	(In thousands)
Revenues:
Clearing and commission fees	$	35,999			44.0
Technology		3,280			27.5
Interest:
Interest on asset based balances		45,255			42.0
Interest on conduit borrows		18,568			36.9
Money market		855			14.6
Interest, gross		64,678			39.5
Other revenue		13,227			44.1
Total revenues		117,184			40.7
Interest expense:
Interest expense on liability based balances		35,110			81.0
Interest on conduit loans		15,538			33.7
Interest expense from securities operations		50,648			56.6
Net revenues		66,536			33.6
Expenses:
Employee compensation and benefits		22,250			27.9
Floor brokerage, exchange and clearance fees		6,935			34.0
Communications and data processing		6,701			27.8
Occupancy and equipment		6,131			35.2
Vendor related asset impairment		10,861
Other expenses		9,335			58.2
Interest expense on long-term debt		(57	)		(1.9	)
		62,156			38.7
Income from continuing operations before income taxes	$	4,380			11.7

Net revenues

Net revenues increased $66.5 million, or 33.6%, to $264.7 million from the year ended December 31, 2006 to the year ended December 31, 2007. The increase is primarily attributed to the following:

Clearing and commission fees increased $36.0 million, or 44.0% to $117.9 million primarily due to our acquisitions of GHCO and Schonfeld, an increase in the number of correspondents, a change in our mix of correspondents and an increase in our volume of transactions.

Interest, gross increased 39.5%, to $228.5 million during the year over year period. Interest, gross from customer balances accounted for $46.1 million, or 71.3% of this increase. The increase was attributed to an increase in our average daily interest earning assets of $1.1 billion, or 50.0% to $3.4 billion for the year ended December 31, 2007, offset by a decrease of approximately 25 basis points to 4.5% on our average daily interest rate. The remaining increase of $18.6 million relates to increases from our stock conduit borrows operations. The increase was due to an increase of approximately $447.8 million or 41.6% in our average daily balance, offset by a decrease of 15 basis points to 4.5% on our average daily interest rate.

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Technology revenue increased $3.3 million, or 27.5%, primarily due to higher recurring revenue.

Other revenue increased $13.2 million, or 44.1%, primarily due to the GHCO acquisition and increased equity and option execution fees in the U.S. and U.K.

Interest expense from securities operations increased $50.6 million, or 56.6%, to $140.1 million from the year ended December 31, 2006 to the year ended December 31, 2007. Interest expense from our short-term obligations accounted for $35.1 million or 69.3% of the increase. Our average daily balances increased $1.1 billion, or 65.9%, to $2.7 billion for the year ended December 31, 2007. During this same period, our average daily interest rate increased approximately 25 basis points to 2.9%. Interest from our stock conduit loans increased $15.5 million to $61.6 million, due to an increase of $444 million in daily average balances, offset by a 23 basis point decrease to approximately 4.1% in our average daily interest rate.

Interest, net increased from approximately $74.4 million for the year ended December 31, 2006 to $88.4 million for the year ended December 31, 2007. This improvement was due to higher customer balances, and partially offset by a decrease in our overall interest spread.

We encountered a 75 basis point decrease in the federal funds rate in the fourth quarter, resulting in an effective rate for the quarter of 4.5%.

Employee compensation and benefits

Total employee costs increased $22.3 million, or 27.9%, to $102.0 million from the year ended December 31, 2006 to the year ended December 31, 2007. The primary reasons for this increase were:

1) a 23.5% increase in headcount from 763 as of December 31, 2006 to 942 as of December 31, 2007. The increase occurred primarily in our U.S. and Canadian clearing operations due to the continued expansion of the variety of our services and the number of correspondents served in those markets. Additionally, we increased our employee base by 106 as a result of the GHCO and FCG acquisitions which accounted for 32.3% of the compensation expense increase.

2) we had increased expenses related to the adoption of SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”) and a full year of expense in 2007 compared to approximately eight months of expense in 2006 due to our May 2006 IPO. These expenses represented $4.7 million in 2007 compared to $3.1 million in 2006 and accounted for 7.2% of the increase.

Floor brokerage, exchange and clearance fees

Total expenses in this category increased $6.9 million, or 34.0% to $27.3 million for the year ended December 31, 2007 to the year ended December 31, 2006, primarily due to the acquisitions of Schonfeld and GHCO and higher clearing volumes.

Communications and data processing

Total expenses for our communications and data processing requirements increased $6.7 million, or 27.8%, to $30.8 million from the year ended December 31, 2006 to the year ended December 31, 2007. This increase reflected additional growth in volumes in our U.S. operations, primarily from the GHCO and Schonfeld acquisitions, and in our Canadian operations, offset by lower data processing fees per transaction in the U.S.

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Occupancy and equipment

Total expense for occupancy and equipment increased $6.1 million, or 35.2%, to $23.6 million from the year ended December 31, 2006 to the year ended December 31, 2007. This increase was primarily due to the additional equipment required to support the growth in our businesses and the addition of GHCO.

Vendor related asset impairment

We recorded a charge of $10.9 million from the loss of funds placed with Sentinel Management Group, which is now in bankruptcy (see Note 25 to our consolidated financial statements).

Other expenses

Other expenses increased $9.3 million, or 58.2%, to $25.4 million from the year ended December 31, 2006 to the year ended December 31, 2007. The increase related to increases in travel, professional fees, Sarbanes-Oxley compliance, intangible amortization, bank charges, advertising and the acquisition of GHCO.

Interest expense on long-term debt

Interest expense on long-term debt decreased from $3.0 million for the year ended December 31, 2006 to $2.9 million for the year ended December 31, 2007.

Provision for income taxes

Income tax expense, based on a tax rate of 36.0%, increased $1.8 million from $13.3 million for the year ended December 31, 2006 compared to $15.1 million for the year ended December 31, 2007. This was due to higher income before taxes in 2007 as compared to December 31, 2006 as well as a lower effective rate in 2006 of .6% related to the elimination of a the valuation allowance of approximately $1.6 million associated with net operating loss carry forwards that were utilized.

Net income

As a result of the foregoing, net income increased to $26.8 million for the year ended December 31, 2007 as compared to $24.5 million for the year ended December 31, 2006.

Liquidity and capital resources

Operating Liquidity — Our clearing broker-dealer subsidiaries typically finance their operating liquidity needs through secured bank lines of credit and through secured borrowings from stock lending counterparties in the securities business, which we refer to as “stock loans.” Most of our borrowings are driven by the activities of our clients or correspondents, primarily the purchase of securities on margin by those parties. As of December 31, 2008, we had eight uncommitted lines of credit with eight financial institutions for the purpose of facilitating our clearing business as well as the activities of our customers and correspondents. Six of these lines of credit permitted us to borrow up to an aggregate of approximately $340.5 million while two lines had no stated limit. As of December 31, 2008, we had approximately $130.8 million in short-term bank loans outstanding which left approximately $262.0 million available under our lines of credit with stated limitations.

As noted above, our businesses that are clearing brokers also have the ability to borrow through stock loan arrangements. There are no specific limitations on our borrowing capacities pursuant to our stock loan arrangements. Borrowings under these arrangements bear interest at variable rates, are secured primarily by our firm inventory or customers’ margin account securities, and are repayable on demand. At December 31, 2008, we had approximately $319.8 million in borrowings under stock loan arrangements.

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As a result of our customers’ and correspondents’ aforementioned activities, our operating cash flows may vary from year to year.

Capital Resources — PWI provides capital to all of our subsidiaries. PWI has the ability to obtain capital through equipment leases and through a $75.0 million line of credit. While equipment purchased under capital leases is typically secured by the equipment itself, PWI’s line of credit is not secured. As of December 31, 2008, the Company had $75.0 million outstanding on this line of credit that expires in May 2009.

We plan to finance our future capital needs with operating earnings. Subject to favorable market conditions, the Company also has the ability to obtain liquidity via follow-on offerings in the public and private equity and debt markets. Net proceeds from our May 2006 IPO were approximately $111.1 million. After providing for the capital contribution of $7.3 million made to SAMCO in accordance with the split off agreement, we used the balance of the net proceeds from this offering to repay debt, including approximately $36.6 million of long-term indebtedness under a bank term loan, and a $15.1 million short-term promissory note. The remaining proceeds were used to repay a portion of our outstanding debt under several short-term loans from our existing uncommitted bank lines of credit or under stock loans, which we use for the daily working capital needs of our subsidiaries.

As a holding company, we access the earnings of our operating subsidiaries through the receipt of dividends from these subsidiaries. Some of our subsidiaries are subject to the requirements of securities regulators in their respective countries relating to liquidity and capital standards, which may serve to limit funds available for the payment of dividends to the holding company.

Our principal U.S. broker-dealer subsidiary, PFSI, is subject to the SEC Uniform Net Capital Rule (“Rule 15c3-1”), which requires the maintenance of a minimum net capital. PFSI elected to use the alternative method, permitted by Rule 15c3-1, which requires PFSI to maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit balances, as defined in the SEC’s Reserve Requirement Rule (“Rule 15c3-3”). At December 31, 2008, PFSI had net capital of $85.5 million, which was $66.5 million in excess of its required net capital of $19.0 million.

Our Penson GHCO, PFSL and PFSC subsidiaries are also subject to minimum financial and capital requirements. These requirements are not material either individually or collectively to the consolidated financial statements as of December 31, 2008. All subsidiaries were in compliance with their minimum financial and capital requirements as of December 31, 2008.

Contractual obligations

We have contractual obligations to make future payments under long-term debt and long-term non-cancelable lease agreements and have contingent commitments under a variety of commercial arrangements. See Note 20 to our consolidated financial statements for further information regarding our commitments and contingencies. There were no amounts outstanding under repurchase agreements at December 31, 2008. The table below shows our contractual obligations and commitments as of December 31, 2008, including our payments due by period:

			Less Than						More Than
Contractual Obligations	Total		1 Year		1—3 Years		4—5 Years		5 Years
	(In thousands)
Long-term debt obligations and accrued interest(1)	$	75,152	$	75,152	$	—	$	—	$	—
Capital lease obligations		10,780		5,714		5,066		—		—
Operating lease obligations		32,136		5,093		9,370		7,452		10,221
Total	$	118,068	$	85,959	$	14,436	$	7,452	$	10,221

(1) The entire long-term debt balance is a revolving credit facility which the Company may pay down at any time, accordingly, only interest accrued at December 31 has been included here.

During 2006, our Dallas corporate building lease was extended until June 2016. Under the terms of that lease, effective July 1, 2006, we leased approximately an additional 26,000 square feet, which increased our rent expense by an additional $0.2 million a year.

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In May 2006, we repaid all long-term debt obligations and accrued interest with the proceeds from our IPO and terminated our credit agreement. We subsequently entered into a new three year credit facility for $75 million that expires in May 2009.

As of December 31, 2008 the Company had accrued income tax liabilities for uncertain tax positions of approximately $1.0 million. These liabilities have not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.

Off-balance sheet arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

See Note 16 to the consolidated financial statements for information on off-balance sheet arrangements and Note 24 to the consolidated financial statements for information on exchange member guarantees.

Critical accounting policies

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We review our estimates on an on-going basis. We base our estimates on our experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to consolidated financial statements, we believe the accounting policies that require management to make assumptions and estimates involving significant judgment are those relating to revenue recognition, software development and the valuation of stock-based compensation.

Revenue recognition

Revenues from clearing transactions are recorded in the Company’s consolidated financial statements on a trade date basis. Cash received in advance of revenue recognition is recorded as deferred revenue.

There are three major types of technology revenues: (1) completed products that are processing transactions every month generate revenues per transaction which are recognized on a trade date basis; (2) these same completed products may also generate monthly terminal charges for the delivery of data or processing capability which are recognized in the month to which the charges apply; (3) technology development services are recognized when the service is performed or under the terms of the technology development contract as described below. Interest and other revenues are recorded in the month that they are earned.

To date, the majority of our technology development contracts have not required significant production, modification or customization such that the service element of our overall relationship with the client generally does meet the criteria for separate accounting under Statement of Position (“SOP”) 97-2, Software Revenue Recognition (“SOP 97-2”). All of our products are fully functional when initially delivered to our clients, and any additional technology development work that is contracted for is as outlined below. Technology development contracts generally cover only additional work that is performed to modify existing products to meet the specific needs of individual customers. This work can range from cosmetic modifications to the customer interface (private labeling) to custom development of additional features requested by the client. Technology revenues arising from development contracts are recorded on a percentage-of-completion basis based on outputs unless there are significant uncertainties preventing the use of this approach in which case a completed contract basis is used. The Company’s revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations, including SOP 97-2 and Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production Type Contracts (“SOP 81-1”), Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”), and other applicable revenue recognition guidance and interpretations.

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Fair value

The Company adopted the provisions of SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), with the exception of nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), which was delayed by FASB Staff Position No. FAS 157-2, effective January 1, 2008. SFAS No. 157 defines fair value 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. The Company’s financial assets and liabilities are primarily recorded at fair value.

In determining fair value, the Company uses various valuation approaches, including market, income and/or cost approaches. SFAS No. 157 establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:

•  Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Assets and liabilities utilizing Level 1 inputs include corporate equity, U.S. Treasury and money market securities. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.

•  Level 2 — Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Assets and liabilities utilizing Level 2 inputs include certificates of deposit, term deposits, corporate debt securities and Canadian government obligations. These financial instruments are valued by quoted prices that are less frequent than those in active markets or by models that use various assumptions that are derived from or supported by data that is generally observable in the marketplace. Valuations in this category are inherently less reliable than quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying assumptions.

•  Level 3 — Valuations based on inputs that are unobservable and not corroborated by market data. The Company does not currently have any financial instruments utilizing Level 3 inputs. These financial instruments have significant inputs that cannot be validated by readily determinable data and generally involve considerable judgment by management.

See Note 6 to our consolidated financial statements for a description of the financial assets carried at fair value.

Software development

Costs associated with software developed for internal use are capitalized based on SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and other related guidance. Capitalized costs include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll for employees directly associated with, and who devote time to, the development of the internal-use software. Costs incurred in development and enhancement of software that do not meet the capitalization criteria, such as costs of activities performed during the preliminary and post- implementation stages, are expensed as incurred. Costs incurred in development and enhancements that do not meet the criteria to capitalize are activities performed during the application development stage such as designing, coding, installing and testing. The critical estimate related to this process is the determination of the amount of time devoted by employees to specific

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stages of internal-use software development projects. We review any impairment of the capitalized costs on a periodic basis.

Stock-based compensation

The Company accounts for stock-based employee compensation plans under the provisions of SFAS No. 123(R) that focuses primarily on accounting for transactions in which an entity exchanges its equity instruments for employee services, and carries forward prior guidance for share-based payments for transactions with non-employees. Under the modified prospective transition method, the Company is required to recognize compensation cost, after the effective date, for the portion of all previously granted awards that were not vested, and the vested portion of all new stock option grants and restricted stock. The compensation cost is based upon the original grant-date fair market value of the grant. The Company recognizes expense relating to stock-based compensation on a straight-line basis over the requisite service period which is generally the vesting period. Forfeitures of unvested stock grants are estimated and recognized as reduction of expense.

Item 7A.   Quantitative and Qualitative Disclosure about Market Risk

Prior to the fourth quarter of 2007, we did not have material exposure to reductions in the targeted federal funds rate. Beginning in the fourth quarter of 2007 there were significant decreases in these rates. We encountered a 75 basis point decrease in the federal funds rate in the fourth quarter of 2007. Actual rates fell approximately 400 basis points during 2008, to a federal funds rate of approximately .25% as of December 31, 2008. Based upon the December quarter average customer balances, assuming no increase, and adjusting for the timing of these rate reductions, we believe that each 25 basis point increase or decrease will affect pretax income by approximately $.75 million per quarter. Despite such interest rate changes, we do not have material exposure to commodity price changes or similar market risks. Accordingly, we have not entered into any derivative contracts to mitigate such risk. In addition, we do not maintain material inventories of securities for sale, and therefore are not subject to equity price risk.

We extend margin credit and leverage to our correspondents and their customers, which is subject to various regulatory and clearing firm margin requirements. Margin credit is collateralized by cash and securities in the customers’ accounts. Our directors and executive officers and their associates, including family members, from time to time may be or may have been indebted to one or more of our operating subsidiaries or one of their respective correspondents or introducing brokers, as customers, in connection with margin account loans. Such indebtedness is in the ordinary course of business, is on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated third parties who are not our employees and does not involve a more than normal risk of collectability or present other unfavorable features. Leverage involves securing a large potential future obligation with a proportional amount of cash or securities. The risks associated with margin credit and leverage increase during periods of fast market movements or in cases where leverage or collateral is concentrated and market movements occur. During such times, customers who utilize margin credit or leverage and who have collateralized their obligations with securities may find that the securities have a rapidly depreciating value and may not be sufficient to cover their obligations in the event of liquidation. We are also exposed to credit risk when our correspondents’ customers execute transactions, such as short sales of options and equities, which can expose them to risk beyond their invested capital. We are indemnified and held harmless by our correspondents from certain liabilities or claims, the use of margin credit, leverage and short sales of their customers. However, if our correspondents do not have sufficient regulatory capital to cover such problems, we may be exposed to significant off-balance sheet risk in the event that collateral requirements are not sufficient to fully cover losses that customers may incur and those customers and their correspondents fail to satisfy their obligations. Our account level margin credit and leverage requirements meet or exceed those required by Regulation T of the Board of Governors of the Federal Reserve, or similar regulatory requirements in other jurisdictions. The SEC and other SROs have approved new rules permitting portfolio margining that have the effect of permitting increased leverage on securities held in portfolio margin accounts relative to non-portfolio accounts. We began offering portfolio margining to our clients in 2007. We intend to continue to meet or exceed any account level margin credit and leverage requirements mandated by the SEC, other SROs, or similar regulatory requirements in other jurisdictions as we expand the offering of portfolio margining to our clients.

58

The profitability of our margin lending activities depends to a great extent on the difference between interest income earned on margin loans and investments of customer cash and the interest expense paid on customer cash balances and borrowings. If short-term interest rates fall, we generally expect to receive a smaller gross interest spread, causing the profitability of our margin lending and other interest-sensitive revenue sources to decline. Short-term interest rates are highly sensitive to factors that are beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities. In particular, decreases in the federal funds rate by the Federal Reserve System usually lead to decreasing interest rates in the U.S., which generally lead to a decrease in the gross spread we earn. This is most significant when the federal funds rate is on the low end of its historical range, as is the case now. Interest rates in Canada and Europe are also subject to fluctuations based on governmental policies and economic factors and these fluctuations could also affect the profitability of our margin lending operations in these markets.

Given the volatility of exchange rates, we may not be able to manage our currency transaction and/or translation risks effectively, or volatility in currency exchange rates may expose our financial condition or results of operations to a significant additional risk.

59

Item 8.   Financial Statements and Supplementary Data

The Company’s consolidated financial statements and supplementary data are included in pages F-2 through F-36 of this Annual Report on Form 10-K. See accompanying “Item 15. Exhibits and Financial Statement Schedules” and Index to the consolidated financial statements on page F-1.

Quarterly results of operations (unaudited)

	Dec. 31,			Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,		Jun. 30,		Mar. 31,
Quarter Ended	2008			2008		2008		2008		2007		2007		2007		2007
	(In thousands, except per share data)
Revenues:
Clearing and commission fees	$	36,478		$	40,215	$	37,348	$	36,513	$	34,607	$	30,670	$	27,963	$	24,665
Technology		6,102			6,190		5,100		4,799		4,538		3,876		3,758		3,019
Interest, gross		25,095			47,250		44,934		48,478		58,385		60,647		61,210		48,235
Other		13,023			11,267		11,294		9,783		13,204		9,895		11,063		9,067
Total revenues		80,698			104,922		98,676		99,573		110,734		105,088		103,994		84,986
Interest expense on short-term obligations		11,638			25,620		24,068		29,373		35,171		36,992		39,614		28,300
Net revenues		69,060			79,302		74,608		70,200		75,563		68,096		64,380		56,686
Expenses:
Employee compensation and benefits		27,218			28,197		29,477		28,823		27,864		25,739		24,903		23,473
Floor brokerage, exchange and clearance fees		5,055			8,568		8,692		3,803		5,558		6,615		7,107		4,991
Communications and data processing		10,225			10,274		9,579		9,188		10,345		8,593		8,106		6,781
Occupancy and equipment		6,762			7,810		7,293		7,022		6,674		6,075		5,993		4,828
Vendor related asset impairment		243			320		189		75		51		10,810		—		—
Correspondent asset loss		26,421			—		—		—		—		—		—		—
Other expenses		10,222			11,187		8,742		7,282		7,836		6,939		5,806		4,786
Interest expense on long-term debt		807			885		1,086		1,076		1,207		760		474		453
		86,953			67,241		65,058		57,269		59,535		65,531		52,389		45,312
Income (loss) before income taxes		(17,893	)		12,061		9,550		12,931		16,028		2,565		11,991		11,374
Income tax expense (benefit)		(7,092	)		4,583		3,653		4,849		5,834		618		4,437		4,236
Net income (loss)	$	(10,801	)	$	7,478	$	5,897	$	8,082	$	10,194	$	1,947	$	7,554	$	7,138
Earnings (loss) per share — basic	$	(0.43	)	$	0.30	$	0.23	$	0.32	$	0.40	$	0.07	$	0.28	$	0.27
Earnings (loss) per share — diluted	$	(0.43	)	$	0.29	$	0.23	$	0.32	$	0.39	$	0.07	$	0.28	$	0.27
Weighted average shares outstanding — basic		25,187			25,108		25,115		25,461		25,502		26,402		26,689		26,328
Weighted average shares outstanding — diluted		25,187			25,811		25,200		25,541		26,314		26,920		27,276		26,905

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Evaluation of disclosure controls and procedures

An evaluation was conducted under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2008. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2008 to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules.

60

Changes in internal control over financial reporting

There have not been any changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended) during the quarter ended December 31, 2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Management’s report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on our assessment, management believes that, as of December 31, 2008, we have maintained effective internal control over financial reporting.

The Company’s independent registered public accounting firm has audited the Company’s internal control over financial reporting as of December 31, 2008 as stated in their report.

Inherent limitation of the effectiveness of internal control

A control system, no matter how well conceived, implemented and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of such inherent limitations, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company or any division of a company have been detected.

Item 9B.   Other Information

None.

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

The information required by this Item 10 is incorporated herein by reference from the section captioned “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s definitive proxy statement for the 2009 annual meeting of stockholders to be filed not later than April 30, 2009 with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “2009 Proxy Statement”).

Item 11.   Executive Compensation

The information required by this Item 11 is incorporated by reference from the section captioned “Executive Compensation” of the 2009 Proxy Statement.

61

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity compensation plans

	Number of Securities to		Weighted-Average
	be Issued Upon Exercise		Exercise Price of		Number of Securities
	of Outstanding Options,		Outstanding Options,		Remaining Available
Plan Category	Warrants and Rights(c)		Warrants and Rights		for Future Issuance
Equity Compensation Plans Approved by Security Holders(d)		1,776,456	$	15.12		895,198
Equity Compensation Plans Not Approved By Security Holders		—		—		—
		1,776,456	$	15.12		895,198

(c)	Includes shares issuable for unvested restricted stock units.
(d)	Includes shares issuable pursuant to the Penson Worldwide, Inc. Amended and Restated 2000 Stock Incentive Plan, of which there were 758,969 shares remaining available for future issuance and the Penson Worldwide, Inc. 2005 Employee Stock Purchase Plan of which there were 136,229 shares remaining available for future issuance.

Other information required by this Item 12 is incorporated by reference from the section captioned “Security Ownership of Certain Beneficial Owners and Management” of the 2009 Proxy Statement.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated by reference from the section captioned “Certain Relationships and Related Party Transactions” of the 2009 Proxy Statement.

Item 14.   Principal Accounting Fees and Services

The information required by this Item 14 is incorporated by reference from the section captioned “Ratification of Independent Registered Public Accounting Firm” of the 2009 Proxy Statement.

PART IV

Item 15.   Exhibits and Financial Statement Schedules

1. Financial statements.

The reports of our independent registered public accounting firm and our consolidated financial statements are listed below and begin on page F-1 of this Annual Report on Form 10-K.

	Page
	Number
Report of Independent Registered Public Accounting Firm		F-2
Statements of Financial Condition		F-4
Statements of Income		F-5
Statements of Stockholders’ Equity		F-6
Statements of Cash Flows		F-7
Notes to the Consolidated Financial Statements		F-8

2. Financial statement schedules.

None.

3. Exhibit list.

The exhibits required to be furnished pursuant to Item 15 are listed in the Exhibit Index filed herewith, which Exhibit Index is incorporated herein by reference.

62

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

PENSON WORLDWIDE, INC.

By:  /s/  PHILIP A. PENDERGRAFT

Name:     Philip A. Pendergraft

Title:  Chief Executive Officer

Date: March 12, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  ROGER J. ENGEMOEN, JR. Roger J. Engemoen, Jr.	Chairman	March 12, 2009
/s/  PHILIP A. PENDERGRAFT Philip A. Pendergraft	Chief Executive Officer (Principal Executive Officer) and Director	March 12, 2009
/s/  DANIEL P. SON Daniel P. Son	President and Director	March 12, 2009
/s/  KEVIN W. MCALEER Kevin W. McAleer	Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)	March 12, 2009
/s/  JAMES S. DYER James S. Dyer	Director	March 12, 2009
/s/  DAVID JOHNSON David Johnson	Director	March 12, 2009
/s/  THOMAS R. JOHNSON Thomas R. Johnson	Director	March 12, 2009
/s/  DAVID M. KELLY David M. Kelly	Director	March 12, 2009
/s/  DAVID REED David Reed	Director	March 12, 2009

63

Index to consolidated financial statements

Penson Worldwide, Inc. consolidated financial statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Statements of Financial Condition	F-4
Statements of Income	F-5
Statements of Stockholders’ Equity	F-6
Statements of Cash Flows	F-7
Notes to the Consolidated Financial Statements	F-8

F-1

Report of independent registered public accounting firm

Board of Directors and Stockholders

Penson Worldwide, Inc.

Dallas, Texas

We have audited the accompanying consolidated statements of financial condition of Penson Worldwide, Inc. (the “Company”) as of December 31, 2008 and 2007 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Penson Worldwide, Inc. at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Penson Worldwide, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 12, 2009, expressed an unqualified opinion thereon.

/s/  BDO Seidman, llp

BDO Seidman, LLP

Dallas, Texas

March 12, 2009

F-2

Report of independent registered public accounting firm

Board of Directors and Stockholders

Penson Worldwide, Inc.

Dallas, Texas

We have audited Penson Worldwide, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Penson Worldwide, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Penson Worldwide, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008 and our report dated March 12, 2009 expressed an unqualified opinion thereon.

/s/  BDO Seidman, llp

BDO Seidman, LLP

Dallas, Texas

March 12, 2009

F-3

Penson Worldwide, Inc.

Consolidated Statements of Financial Condition

	December 31,
	2008			2007
	(In thousands,
	except par values)
ASSETS
Cash and cash equivalents	$	38,825		$	120,923
Cash and securities — segregated under federal and other regulations		2,383,948			1,437,561
Receivable from broker-dealers and clearing organizations (including securities at fair value of $17,369 at December 31,2008 and $7,766 at December 31, 2007)		318,278			1,519,078
Receivable from customers, net		687,194			1,324,213
Receivable from correspondents		135,092			532,504
Securities borrowed		964,080			2,065,997
Securities owned, at fair value		429,531			235,680
Deposits with clearing organizations (including securities at fair value of $290,316 at December 31, 2008 and $253,233 at December 31, 2007)		327,544			293,230
Property and equipment, net		28,428			27,028
Other assets		226,275			290,763
Total assets	$	5,539,195		$	7,846,977
LIABILITIES AND STOCKHOLDERS’ EQUITY
Payable to broker-dealers and clearing organizations	$	345,094		$	1,077,312
Payable to customers		3,575,401			3,590,315
Payable to correspondents		161,422			616,863
Short-term bank loans		130,846			340,530
Notes payable		75,000			55,000
Securities loaned		842,034			1,726,677
Securities sold, not yet purchased, at fair value		48,383			82,116
Accounts payable, accrued and other liabilities		96,548			92,736
Total liabilities		5,274,728			7,581,549
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000 shares authorized; none issued and outstanding as of December 31, 2008 and 2007		—			—
Common stock, $0.01 par value, 100,000 shares authorized; 28,604 issued and 25,207 outstanding as of December 31, 2008; 28,226 issued and 25,543 outstanding as of December 31, 2007		286			282
Additional paid-in capital		244,052			238,253
Accumulated other comprehensive income (loss)		(3,025	)		6,964
Retained earnings		76,471			65,815
Treasury stock, at cost; 3,397 shares at December 31, 2008; 2,683 shares at December 31, 2007		(53,317	)		(45,886	)
Total stockholders’ equity		264,467			265,428
Total liabilities and stockholders’ equity	$	5,539,195		$	7,846,977

See accompanying notes to consolidated financial statements.

F-4

Penson Worldwide, Inc.

Consolidated Statements of Income

	Year Ended December 31,
	2008		2007		2006
	(In thousands, except per share data)
Revenues
Clearing and commission fees	$	150,554	$	117,905	$	81,906
Technology		22,191		15,191		11,911
Interest, gross		165,757		228,477		163,799
Other		45,367		43,229		30,002
Total Revenue		383,869		404,802		287,618
Interest expense from securities operations		90,699		140,077		89,429
Net revenues		293,170		264,725		198,189
Expenses
Employee compensation and benefits		113,715		101,979		79,729
Floor brokerage, exchange and clearance fees		26,118		27,326		20,391
Communications and data processing		39,266		30,770		24,069
Occupancy and equipment		28,887		23,570		17,439
Vendor related asset impairment		827		10,861		—
Correspondent asset loss		26,421		—		—
Other expenses		37,433		25,367		16,032
Interest expense on long-term debt		3,854		2,894		2,951
		276,521		222,767		160,611
Income from continuing operations before income taxes		16,649		41,958		37,578
Income tax expense		5,993		15,125		13,299
Income from continuing operations		10,656		26,833		24,279
Income from discontinued operations, net of tax expense of $0, $0 and $156, respectively		—		—		243
Net income	$	10,656	$	26,833	$	24,522
Earnings per share-basic:
Earnings per share from continuing operations	$	0.42	$	1.02	$	1.07
Earnings per share from discontinued operations		—		—		0.01
Net income per share	$	0.42	$	1.02	$	1.08
Earnings per share-diluted:
Earnings per share from continuing operations	$	0.42	$	1.00	$	1.05
Earnings per share from discontinued operations		—		—		0.01
Net income per share	$	0.42	$	1.00	$	1.06
Weighted average shares — basic		25,217		26,232		22,689
Weighted average shares — diluted		25,416		26,817		23,058

See accompanying notes to consolidated financial statements

F-5

Penson Worldwide, Inc.

Consolidated Statements of Stockholders’ Equity

															Accumulated
	Preferred								Additional						Other						Total
	Stock			Common stock					Paid-In			Treasury			Comprehensive			Retained			Stockholders’
	Amount			Shares			Amount		Capital			Stock			Income (loss)			Earnings			Equity
	(In thousands)
Balance, December 31, 2005	$	34,680			15,180		$	152	$	38,090		$	—		$	1,990		$	15,040		$	89,952
Net income		—			—			—		—			—			—			24,522			24,522
Foreign currency translation adjustments, net of tax of $109		—			—			—		—			—			169			—			169
Proceeds from initial public offering		—			7,197			72		114,080			—			—			—			114,152
Direct costs of capital raised		—			—			—		(3,074	)		—			—			—			(3,074	)
Preferred stock converted into common stock		(34,680	)		3,526			35		34,645			—			—			—			—
Repurchase of treasury stock		—			(1,076	)		1		(1	)		(17,708	)		—			—			(17,708	)
Stock-based compensation expense		—			113			—		3,120			(710	)		—			—			2,410
Exercise of stock options		—			75			1		348			—			—			—			349
Purchases of stock under the employee stock purchase plan		—			63			1		1,011			—			—			—			1,012
Balance, December 31, 2006		—			25,078			262		188,219			(18,418	)		2,159			39,562			211,784
Net income		—			—			—		—			—			—			26,833			26,833
Foreign currency translation adjustments, net of tax of $3,098		—			—			—		—			—			4,805			—			4,805
Repurchase of treasury stock		—			(1,607	)		—		—			(27,468	)		—			—			(27,468	)
Stock-based compensation expense		—			173			1		4,692			—			—			—			4,693
Exercise of stock options		—			112			1		1,066			—			—			—			1,067
Excess tax benefit from stock-based compensation plans		—			—			—		823			—			—			—			823
Purchases of stock under the employee stock purchase plan		—			128			1		2,014			—			—			—			2,015
Issuance of common stock		—			1,659			17		41,439			—			—			—			41,456
Cumulative effect of adoption of FIN 48		—			—			—		—			—			—			(580	)		(580	)
Balance, December 31, 2007		—			25,543			282		238,253			(45,886	)		6,964			65,815			265,428
Net income		—			—			—		—			—			—			10,656			10,656
Foreign currency translation adjustments, net of tax of $6,440		—			—			—		—			—			(9,989	)		—			(9,989	)
Repurchase of treasury stock		—			(714	)		—		—			(7,431	)		—			—			(7,431	)
Stock-based compensation expense		—			188			2		4,521			—			—			—			4,523
Exercise of stock options		—			36			—		168			—			—			—			168
Excess tax deficiency from stock-based compensation plans		—			—			—		(459	)		—			—			—			(459	)
Purchases of stock under the employee stock purchase plan		—			110			1		999			—			—			—			1,000
Issuance of common stock		—			44			1		570			—			—			—			571
Balance, December 31, 2008	$	—			25,207		$	286	$	244,052		$	(53,317	)	$	(3,025	)	$	76,471		$	264,467

See accompanying notes to consolidated financial statements

F-6

Penson Worldwide, Inc.

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Cash flows from operating activities:
Net income	$	10,656		$	26,833		$	24,522
Income from discontinued operations		—			—			(243	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		20,247			16,777			11,321
Deferred income taxes		977			(2,274	)		1,625
Stock based compensation		4,523			4,693			3,120
Operating activities from discontinued operations		—			—			243
Changes in operating assets and liabilities:
Cash and securities — segregated under federal and other regulations		(1,005,993	)		(804,145	)		(210,300	)
Net receivable/payable with customers		736,513			1,291,953			667,186
Net receivable/payable with correspondents		(63,611	)		(51,266	)		52,078
Securities borrowed		1,089,050			(282,594	)		(410,480	)
Securities owned		(234,799	)		(58,533	)		(46,067	)
Deposits with clearing organizations		(35,589	)		(82,314	)		(67,723	)
Other assets		92,189			(146,832	)		(6,881	)
Net receivable/payable with broker-dealers and clearing organizations		449,542			(334,763	)		(98,013	)
Securities loaned		(882,064	)		137,282			57,172
Securities sold, not yet purchased		(25,495	)		21,992			23,329
Accounts payable, accrued and other liabilities		8,051			24,114			13,341
Net cash provided by (used in) operating activities		164,197			(239,077	)		14,230
Cash flows from investing activities:
Business combinations, net of cash acquired		(33,370	)		(34,156	)		(4,536	)
Purchases of property and equipment		(19,031	)		(15,484	)		(12,647	)
Net cash used in investing activities		(52,401	)		(49,640	)		(17,183	)
Cash flows from financing activities:
Proceeds from notes payable		20,000			206,000			95,300
Repayments of notes payable		—			(161,000	)		(137,695	)
Net borrowing on short-term bank loans		(196,380	)		280,344			(55,736	)
Exercise of stock options		168			1,067			349
Excess tax benefit on exercise of stock options		75			823			4
Purchase of treasury stock		(7,431	)		(27,468	)		(7,976	)
Proceeds from initial public offering		—			—			114,152
Direct costs of capital raised		—			—			(3,074	)
Issuance of common stock, net		1,000			2,015			1,008
Net cash provided by (used in) financing activities		(182,568	)		301,781			6,332
Effect of exchange rates on cash		(11,326	)		4,805			169
Increase (decrease) in cash and cash equivalents		(82,098	)		17,869			3,548
Cash and cash equivalents at beginning of period		120,923			103,054			99,506
Cash and cash equivalents at end of period	$	38,825		$	120,923		$	103,054
Supplemental cash flow disclosures:
Interest payments	$	18,277		$	23,252		$	12,457
Income tax payments	$	19,639		$	16,466		$	9,408
Non-cash financing activity:
Distribution of net assets of discontinued operations	$	—		$	—		$	(10,442	)

See accompanying notes to consolidated financial statements.

F-7

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements

(In thousands, except per share data or where noted)

1.   Basis of Presentation

Organization and Business — Penson Worldwide, Inc. (“PWI”) is a holding company incorporated in Delaware. The Company conducts business through its wholly owned subsidiary SAI Holdings, Inc. (“SAI”). SAI conducts business through its principal direct and indirect operating subsidiaries, Penson Financial Services, Inc. (“PFSI”), Penson Financial Services Canada Inc. (“PFSC”), Penson Financial Services Ltd. (“PFSL”), Nexa Technologies, Inc. (“Nexa”), Penson GHCO (“Penson GHCO”) and Penson Asia Limited (“Penson Asia”). Through these operating subsidiaries, the Company provides securities and futures clearing services including integrated trade execution, clearing and custody services, trade settlement, technology services, risk management services, customer account processing and customized data processing services. The Company also participates in margin lending, securities lending and borrowing transactions, primarily to facilitate clearing activities and proprietary trading.

As of the date of this Annual Report, Penson has one class of common stock and one class of convertible preferred stock. The common stock is currently held by public shareholders and certain directors, officers and employees of the Company. None of the preferred stock is issued and outstanding. As used in this Annual Report, the term “common stock” means the common stock, and the term “preferred stock” means the convertible preferred stock, in each case unless otherwise specified.

The accompanying consolidated financial statements include the accounts of PWI. and its wholly-owned subsidiary SAI, SAI’s subsidiaries include among others, PFSI, Nexa, Penson Execution Services, Inc., GHP1, Inc. (“GHP1”), which includes its direct and indirect subsidiaries GHP2, LLC (“GHP2”), First Capitol Group, LLC (“FCG”) and Penson GHCO and Penson Holdings, Inc., which includes its subsidiaries PFSC, PFSL and Penson Asia. All significant intercompany transactions and balances have been eliminated in consolidation.

In connection with the delivery of products and services to its clients and customers, the Company manages its revenues and related expenses in the aggregate. As such, the Company evaluates the performance of its business activities, the Company evaluates clearing and commission, technology, interest income along with the associated interest expense as one integrated activity.

The Company’s cost infrastructure supporting its business activities varies by activity. In some instances, these costs are directly attributable to one business activity and sometimes to multiple activities. As such, in assessing the performance of its business activities, the Company does not consider these costs separately, but instead, evaluates performance in the aggregate along with the related revenues.

Therefore, the Company’s pricing considers both the direct and indirect costs associated with transactions associated with each business activity, the client relationship and the demand for the particular product or service in the marketplace. As a result, the Company does not manage or capture the costs associated with the products or services sold, or its general and administrative costs by revenue line.

2.   Summary of significant accounting policies

Securities Transactions — Proprietary securities transactions are recorded at market value on a trade-date basis. Customer securities transactions are reported on a settlement-date basis. Amounts receivable and payable for securities transactions that have not reached their contractual settlement date are recorded net on the consolidated statements of financial condition. All such pending transactions were settled after December 31, 2008 without any material adverse effect on the Company’s financial condition.

Securities Lending Activities — Securities borrowed and securities loaned transactions are reported as collateralized financings. Securities borrowed transactions occur when the Company deposits cash with the lender in exchange for borrowing securities. With respect to securities loaned, the Company receives in cash an amount

F-8

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

generally in excess of the market value of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary.

Reverse Repurchase and Repurchase Agreements — The Company enters into transactions involving purchases of securities under agreements to resell (“reverse repurchase agreements”) or sales of securities under agreements to repurchase (“repurchase agreements”), which are accounted for as collateralized financings except where the Company does not have an agreement to sell (or purchase) the same or substantially the same securities before maturity at a fixed or determinable price. It is the policy of the Company to obtain possession of collateral with a market value equal to or in excess of the principal amount loaned under reverse repurchase agreements. To ensure that the market value of the underlying collateral remains sufficient, collateral is generally valued daily and the Company may require counterparties to deposit additional collateral or may return collateral pledged when appropriate. Reverse repurchase agreements are carried at the amounts at which the securities were initially acquired plus accrued interest. Repurchase agreements are carried at the amounts at which the securities were initially sold plus accrued interest.

Revenue Recognition — Revenues from clearing transactions are recorded in the Company’s consolidated financial statements on a trade date basis. Cash received in advance of revenue recognition is recorded as deferred revenue.

There are three major types of technology revenues: (1) completed products that are processing transactions every month generate revenues per transaction which are recognized on a trade date basis; (2) these same completed products may also generate monthly terminal charges for the delivery of data or processing capability which are recognized in the month to which the charges apply; (3) technology development services are recognized when the service is performed or under the terms of the technology development contract as described below. Interest and other revenues are recorded in the month that they are earned.

To date, the majority of our technology development contracts have not required significant production, modification or customization such that the service element of our overall relationship with the client generally does meet the criteria for separate accounting under Statement of Position (“SOP”) 97-2, Software Revenue Recognition (“SOP 97-2”). All of our products are fully functional when initially delivered to our clients, and any additional technology development work that is contracted for is as outlined below. Technology development contracts generally cover only additional work that is performed to modify existing products to meet the specific needs of individual customers. This work can range from cosmetic modifications to the customer interface (private labeling) to custom development of additional features requested by the client. Technology revenues arising from development contracts are recorded on a percentage-of-completion basis based on outputs unless there are significant uncertainties preventing the use of this approach in which case a completed contract basis is used. The Company’s revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations, including SOP 97-2 and Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production Type Contracts (“SOP 81-1”), Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”), and other applicable revenue recognition guidance and interpretations.

Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Beginning with the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) as of January 1, 2007, the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the

F-9

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

period in which the change in judgement occurs. Prior to the adoption of FIN 48, the Company recognized the effect of income tax positions only if such positions were probable of being sustained.

Property and Equipment — Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives, generally 3 to 7 years, of the assets using the straight-line method for financial reporting and accelerated methods for income tax purposes. The Company periodically reviews the carrying value of its long-lived assets for possible impairment. In management’s opinion, there is no impairment of such assets at December 31, 2008.

Goodwill — Goodwill represents the excess purchase price over all tangible and identifiable intangible net assets acquired in a business acquisition. Substantially all of the Company’s goodwill is deductible for tax purposes. The Company complies with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”) which requires, among other things, that companies no longer amortize goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. The Company will conduct on at least an annual basis a review of its reporting units’ assets and liabilities to determine whether the goodwill is impaired. The goodwill impairment test is a two-step test. Under the first step, fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of the goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with FASB Statement No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value fo the reporting unit exceeds its carrying value, step two does not need to be performed. The Company conducted its annual impairment during the fourth quarter of 2008 and in management’s opinion, there was no impairment of such assets at December 31, 2008. The changes in goodwill during 2008 and 2007 were as follows:

Balance, December 31, 2006	$	9,281
Goodwill acquired		34,836
Balance, December 31, 2007		44,117
Goodwill acquired		50,770
Balance, December 31, 2008	$	94,887

Goodwill is included in other assets in the consolidated statements of financial condition.

Intangibles — Intangibles consisted of the following at December 31:

	Gross Carrying		Accumulated
2008	Amount		Amortization		Net Book Value
Customer related intangible assets	$	20,007	$	2,310	$	17,697
Purchased technology		14,082		11,521		2,561
Other		2,760		140		2,620
Total	$	36,849	$	13,971	$	22,878

	Gross Carrying		Accumulated
2007	Amount		Amortization		Net Book Value
Customer related intangible assets	$	14,497	$	850	$	13,647
Purchased technology		14,082		8,923		5,159
Other		12,218		64		12,154
Total	$	40,797	$	9,837	$	30,960

F-10

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Customer related intangible assets represents customer contracts obtained as part of acquired businesses and are amortized on a straight-line basis over their estimated useful lives, ranging from 10 to 15 years. Purchased technology represents software and technology intangible assets acquired as part of acquired businesses and are amortized over their useful lives, generally 5 years. In 2008 other related primarily to the efutures.com domain name acquired with FCG which has an indefinite life and a non-compete agreement with an estimated useful life of 11 years. In 2007, other consisted primarily to the FCG acquisition, in which the Company had not yet completed the purchase price allocation. Intangible assets are included in other assets. Amortization expense related to intangible assets was approximately $4,132, $3,554 and $2,527 in 2008, 2007 and 2006, respectively. The Company estimates that amortization expense will be approximately $3,900 in 2009, $1,800 in 2010, $1,600 in 2011 and $1,500 in 2012 and 2013, respectively.

Financing Costs — Financing costs associated with the Company’s debt financing arrangements are capitalized and amortized over the life of the related debt in compliance with the effective interest method of SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases, an amendment of FASB Statements No. 13, 60, and 65 and a rescission of FASB Statement No. 17.

Operating Leases — Rent expense is provided on operating leases evenly over the applicable lease periods taking into account rent holidays. Amortization of leasehold improvements is provided evenly over the lesser of the estimated useful life or expected lease terms.

Stock-Based Compensation — The Company accounts for stock-based employee compensation plans under the provisions of SFAS No. 123(R) that focuses primarily on accounting for transactions in which an entity exchanges its equity instruments for employee services, and carries forward prior guidance for share-based payments for transactions with non-employees. Under the modified prospective transition method, the Company is required to recognize compensation cost, after the effective date, January 1, 2006, for the portion of all previously granted awards that were not vested, and the vested portion of all new stock option grants and restricted stock. The compensation cost is based upon the original grant-date fair value of the grant. The Company recognizes expense relating to stock-based compensation on a straight-line basis over the requisite service period which is generally the vesting period. Forfeitures of unvested stock grants are estimated and recognized as reduction of expense.

Management’s Estimates and Assumptions — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Company reviews all significant estimates affecting the consolidated financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance.

Cash and Cash Equivalents — The Company considers cash equivalents to be highly liquid investments with original maturities of less than 90 days that are not held for sale in the ordinary course of business. Assets segregated for regulatory purposes are not included as cash and cash equivalents for purposes of the consolidated statements of cash flows because such assets are segregated for the benefit of customers only.

Securities Owned and Securities Sold, Not Yet Purchased — The Company has classified its investments in securities owned and securities sold, not yet purchased as “trading” and has reported those investments at their fair or market values in the consolidated statements of financial condition. Unrealized gains or losses are included in earnings.

Fair Value of Financial Instruments — The financial instruments of the Company are reported on the consolidated statements of financial condition at fair values, or at carrying amounts that approximate fair values because of the short maturity of the instruments. See Note 6 for a description of financial instruments carried at fair value.

F-11

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Allowance for Doubtful Accounts — The Company generally does not lend money to customers or correspondents except on a fully collateralized basis. When the value of that collateral declines, the Company has the right to demand additional collateral. In cases where the collateral loses its liquidity, the Company might also demand personal guarantees or guarantees from other parties. In valuing receivables that become less than fully collateralized, the Company compares the market value of the collateral and any additional guarantees to the balance of the loan outstanding. To the extent that the collateral, the guarantees and any other rights the Company has against the customer or the related introducing broker are not sufficient to cover any potential losses, then the Company records an appropriate allowance for doubtful accounts. The Company monitors every account that is less than fully collateralized with liquid securities every day. The Company reviews all such accounts on a monthly basis to determine if a change in the allowance for doubtful accounts is necessary. This specific, account-by-account review is supplemented by the risk management procedures that identify positions in illiquid securities and other market developments that could affect accounts that otherwise appear to be fully collateralized. The corporate and local country risk management officers monitor market developments on a daily basis. The Company maintains an allowance for doubtful accounts that represents amounts, in the judgment of management, necessary to adequately absorb losses from known and inherent losses in outstanding receivables. Provisions made to this allowance are charged to operations based on anticipated recoverability. The allowance for doubtful accounts was $8,160 and $6,493 at December 31, 2008 and 2007 respectively.

Software Costs and Expenses — Costs associated with software developed for internal use are capitalized based on SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and other related guidance. Capitalized costs include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll for employees directly associated with, and who devote time to, the development of the internal-use software. Costs incurred in development and enhancement of software that do not meet the capitalization criteria, such as costs of activities performed during the preliminary and post-implementation stages, are expensed as incurred. Costs incurred in development and enhancements that do not meet the criteria to capitalize are activities performed during the application development stage such as designing, coding, installing and testing. The critical estimate related to this process is the determination of the amount of time devoted by employees to specific stages of internal-use software development projects. The Company reviews any impairment of the capitalized costs on a periodic basis. The Company amortizes such costs over the estimated useful life of the software, which is three to five years once the software has been placed in service. The Company capitalized software development costs of approximately $5,491, $2,049 and $0 in 2008, 2007 and 2006 respectively. Amortization expense related to capitalized software development costs was approximately $719, $322 and $0 for the years ended December 31, 2008, 2007 and 2006, respectively.

Net Income Per Share — Net income per common share is computed by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period presented. Basic earnings per share excludes any dilutive effects of options. Diluted net income per share considers the impact of potential dilutive common shares, unless the inclusion of such shares would have an antidilutive effect.

Foreign Currency Translation Adjustments — In accordance with SFAS No. 52, Foreign Currency Translation, the Company has, in consolidation, translated the account balances of PFSL and PFSC from their functional currency to U.S. Dollars, the Company’s reporting currency. Translation gains and losses are recorded as an accumulated balance, net of tax, in the consolidated statements of stockholders’ equity.

Reclassifications — The Company has reclassified certain prior period amounts to conform to current year’s presentation. The reclassifications had no effect on the consolidated statements of operations or stockholders’ equity as previously reported.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141(R), Business Combinations (“SFAS No. 141(R)”). This statement requires

F-12

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

the acquirer in a business combination to recognize the full fair value of assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity at the acquisition date, requires the expensing of acquisition-related costs, as well as the measurement of any contractual considerations and contingent consideration at fair value at the acquisition date. SFAS No. 141(R) applies to all transactions or other events in which the Company obtains control of one or more businesses, including those sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer of consideration. This Statement is effective prospectively for business combinations for which the acquisition date is on or after January 1, 2009. The Company is currently evaluating the impact of adopting SFAS No. 141(R) on the Company’s consolidated financial statements.

On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). This statement permits companies to choose to measure many financial assets and liabilities and certain other items at fair value. A company will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may be applied on an instrument-by-instrument basis, with several exceptions, such as those investments accounted for by the equity method, and once elected, the option is irrevocable unless a new election date occurs. The fair value option can be applied only to entire instruments and not to portions thereof. SFAS No. 159 is effective as of the beginning of a company’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the company makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157. The Company adopted SFAS No. 159 as of January 1, 2008. As of December 31, 2008 the Company has not elected to apply the fair value option to any financial assets or liabilities.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). This statement defines fair value, establishes valuation techniques for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, that delays the effective date of SFAS No. 157 for all nonfinancial assets and liabilities except for those recognized or disclosed at least annually. Except for the delay for nonfinancial assets and liabilities, SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted the relevant provisions of SFAS No. 157 on January 1, 2008. The adoption did not have any material impact on its results of operations or financial position.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB 110 amends the SEC’s views discussed in Staff Accounting Bulletin 107 (“SAB 107”) regarding the use of the “simplified” method in developing estimates of the expected lives of share options in accordance with SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”). The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the “simplified” method beyond December 31, 2007. SAB 110 is effective for the Company’s fiscal year beginning January 1, 2008. The Company will continue to use the “simplified” method until it has the historical data necessary to provide reasonable estimates of expected lives in accordance with SAB 107, as amended by SAB 110. The adoption of SAB 110 did not have a material impact on the Company’s results of operations or financial position.

In April 2008, the FASB issued FASB Staff Position Financial Accounting Standard 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). In developing assumptions about renewal or extension, FSP FAS 142-3 requires an entity to consider its own historical experience, or in the absence of that experience, the entity shall consider the assumptions of a market participant adjusted for the entity-specific factors in paragraph 11 of SFAS 142. FSP FAS 142-3 is effective for fiscal years beginning after

F-13

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

December 15, 2008. Earlier adoption is prohibited. The Company believes the adoption of FSP FAS 142-3 will not have a material effect on the consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP (“the GAAP hierarchy”). SFAS 162 makes the GAAP hierarchy directly applicable to preparers of financial statements. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board’s amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of SFAS 162 is not expected to have any impact on the Company’s results of operations, financial condition or cash flows.

On October 10, 2008 , the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is not Active (“FSP FAS 157-3”). FSP FAS 157-3 clarifies the application of FAS 157 in a market that is not active and illustrates key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate. The disclosure provisions of SFAS No. 154, Accounting Changes and Error Corrections for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. The adoption of FSP FAS 157-3 did not have a material impact on the Company’s results of operations, financial condition, or cash flows.

3.   Discontinued operations

In May, 2006, the Company completed the disposal by split off of certain non-core business operations that were placed into the subsidiaries of a newly formed holding company known as SAMCO Holdings, Inc. (“SAMCO”). Existing stockholders of the Company exchanged $10,442 of SAMCO net assets and $7,266 of cash for 1,042 Penson shares. The split off transaction was structured to be tax free to the Company and its stockholders, and the net assets were distributed at net book value. Though there is substantial common ownership between the Company and SAMCO, the Company did not retain any ownership interest in SAMCO, which is operated independently. This activity meets the definition of a component of an entity in accordance with SFAS No. 144, Accounting for the Disposal of Long-Lived Assets, and the results of operations for the activity have been classified as discontinued operations for all periods presented. The following results of operations for SAMCO have been presented as income from discontinued operations in the accompanying consolidated statements of income:

	Year Ended December 31,
	2008		2007		2006
Revenues	$	—	$	—	$	9,565
Costs and expenses		—		—		9,166
Income before income taxes		—		—		399
Income taxes		—		—		156
Income from discontinued operations	$	—	$	—	$	243

4.   Acquisitions

First Capitol Group, LLC

In November, 2007, our subsidiary Penson GHCO acquired all of the assets of FCG, an FCM and a leading provider of technology products and services to futures traders, and assigned the purchased membership interest to GHP1 effective immediately thereafter. We closed the transaction in November, 2007 and paid approximately

F-14

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

$9.4 million in cash, subject to a reconciliation to reported actual net income for the period ended November 30, 2008, as defined in the purchase agreement and approximately 150 shares of common stock valued at $2.2 million to the previous owners of FCG. The Company subsequently paid a holdback of approximately $.8 million. In addition, the Company agreed to pay an annual earnout in cash for the two year period following the actual net income reconciliation, based on average net income, subject to certain adjustments including cost of capital, for the acquired business. The Company accrued approximately $8.7 million related to the first year of the earnout period, of which $4.5 million was paid as of December 31, 2008. The Company finalized the acquisition valuation during the third quarter of 2008 and recorded goodwill of approximately $4.0 million and intangibles of approximately $7.6 million. The financial results of FCG have been included in the Company’s consolidated financial statements since the November 30, 2007 acquisition date. On May 31, 2008, Penson GHCO acquired substantially all of the assets of FCG as part of an internal reorganization and consolidation of assets. FCG currently conducts business as a division of Penson GHCO.

Goldenberg Hehmeyer and Co.

In November 2006, the Company entered into a definitive agreement to acquire the partnership interests of Chicago-based Goldenberg Hehmeyer and Co. (“GHCO”), a leading international futures clearing and execution firm. The Company closed the transaction on February 16, 2007 and paid $27.9 million, including cash and approximately 139 shares of common stock to the previous owners of GHCO. In addition, the Company agreed to pay additional consideration in the form of an earnout over the next three years, in an amount equal to 25% of Penson GHCO’s pre-tax earnings, as defined in the purchase agreement executed with the previous owners of GHCO. The Company did not make an earnout payment related to the first year of the integrated Penson GHCO business and does not anticipate making a payment related to the second year of the earnout (see Note 25). Goodwill of approximately $2.8 million and intangibles of approximately $1.0 million were recorded in connection with the acquisition. The assets and liabilities acquired as well as the financial results of Penson GHCO have been included in the Company’s consolidated financial statements since the February 16, 2007 acquisition date.

Acquisition of the clearing business of Schonfeld Securities, LLC

In November 2006, we acquired the clearing business of Schonfeld Securities LLC, a New York based securities firm. The Company closed the transaction in November 2006 and in January 2007, the Company issued approximately 1.1 million shares of common stock valued at $28.3 million to the previous owners of Schonfeld as partial consideration for the assets acquired of which approximately $14.8 million was recorded as goodwill and $13.5 million as intangibles. In addition, the Company agreed to pay an annual earnout of stock and cash over a four year period that commenced on June 1, 2007, based on net income, as defined in the asset purchase agreement, for the acquired business. The Company successfully completed the conversion of the seven Schonfeld correspondents in the second quarter of 2007. A payment of approximately $26.6 million was paid in connection with the first year earnout that ended May 31, 2008. At December 31, 2008, a liability of approximately $17.5 million was accrued as a result of the second year earnout and is included in other liabilities in the consolidated statement of financial condition. The offset of this liability, goodwill, is included in other assets.

Computer Clearing Services, Inc.

In May, 2005, the Company entered into a definitive agreement to acquire Computer Clearing Services, Inc. (“CCS”). In January 2006, the Company paid $4,136 for substantially all of the assets and certain liabilities of CCS and closed the transaction. The results of CCS’ operations have been included in the consolidated financial statements since that date. In addition the Company agreed to a contingent payout of an average of 25% of CCS qualified annual revenue over four years from January 2006. The contingent payout consists of a combination of cash and the Company’s common stock. The Company has recorded goodwill of approximately $19.6 million and intangibles of approximately $.5 million. At December 31, 2008, a liability of approximately $2.4 million had been accrued as a result of this contingent payout, and is included in other liabilities in the consolidated statement of

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Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

financial condition. The offset of this liability, goodwill, is included in other assets. Approximately $1.2 million was paid in the first quarter of 2009.

5.   Computation of net income per share

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computation as required by SFAS No. 128, Net Income Per Share. Common stock equivalents related to stock options are excluded from diluted net income per share calculation if their effect would be anti-dilutive to net income per share before discontinued operations.

	Year Ended December 31,
	2008		2007		2006
Basic and diluted:
Income from continuing operations	$	10,656	$	26,833	$	24,279
Income from discontinued operations, net		—		—		243
Net income	$	10,656	$	26,833	$	24,522
Weighted average common shares outstanding — basic		25,217		26,232		22,689
Incremental shares from outstanding stock options		33		202		169
Incremental shares from non-vested restricted stock units		12		120		130
Shares issuable		154		263		70
Weighted average common shares and common share equivalents — diluted		25,416		26,817		23,058
Basic earnings per common share:
Before cumulative effect of discontinued operations	$	.42	$	1.02	$	1.07
Discontinued operations		—		—		0.01
Basic earnings per common share	$	.42	$	1.02	$	1.08
Diluted earnings per common share:
Before cumulative effect of discontinued operations	$	.42	$	1.00	$	1.05
Discontinued operations		—		—		0.01
Diluted earnings per common share	$	.42	$	1.00	$	1.06

At December 31, 2008, 2007 and 2006 stock options and restricted stock units totaling 1,565, 1,348 and 26, respectively were excluded from the computation of diluted EPS as their effect would have been anti-dilutive.

6.   Fair Value of Financial Instruments

The Company adopted SFAS No. 157, effective January 1, 2008. SFAS No. 157 applies to all financial instruments that are measured and reported on a fair value basis. This includes items in “Receivable from broker-dealers and clearing organizations”, “Securities owned, at fair value”, “Deposits with clearing organizations” and “Securities sold, not yet purchased, at fair value” on the consolidated statements of financial condition that are reported at fair value.

SFAS No. 157 defines fair value 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. In determining fair value, the Company uses various valuation approaches, including market, income and/or cost approaches. SFAS No. 157 establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by

F-16

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:

•  Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.

•  Level 2 — Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. These financial instruments are valued by quoted prices that are less frequent than those in active markets or by models that use various assumptions that are derived from or supported by data that is generally observable in the marketplace. Valuations in this category are inherently less reliable than quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying assumptions.

•  Level 3 — Valuations based on inputs that are unobservable and not corroborated by market data. The Company does not currently have any financial instruments utilizing Level 3 inputs. These financial instruments have significant inputs that cannot be validated by readily determinable data and generally involve considerable judgment by management.

The following is a description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis:

U.S. government and agency securities

U.S. government securities are valued using quoted market prices in active markets. Accordingly, U.S. government securities are categorized in Level 1 of the fair value hierarchy

U.S. agency securities consist of agency issued debt and are valued using quoted market prices. As such these securities are categorized in Level 1 of the fair value hierarchy.

Canadian government obligations

Canadian government securities include both Canadian federal obligations and Canadian provincial obligations. These securities are valued using quoted market prices. These bonds are generally categorized in Level 2 of the fair value hierarchy as the price quotations are not always from active markets.

Corporate debt

Corporate bonds are generally valued using quoted market prices. Corporate bonds are generally classified in Level 2 of the fair value hierarchy as prices are not always from active markets.

Corporate equity

Corporate equity securities represent exchange-traded securities are generally valued based on quoted prices in active markets. These securities are categorized in Level 1 of the fair value hierarchy.

F-17

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Certificates of deposit and term deposits

The fair value of certificates of deposits and term deposits is estimated using third-party quotations. These deposits are categorized in Level 2 of the fair value hierarchy.

Money market

Money market funds are generally valued based on quoted prices in active markets. These securities are categorized in Level 1 of the fair value hierarchy.

The following table summarizes by level within the fair value hierarchy “Receivable from broker-dealers and clearing organizations”, “Securities owned, at fair value”, “Deposits with clearing organizations” and “Securities sold, not yet purchased, at fair value” as of December 31, 2008.

	Level 1		Level 2		Total
Receivable from broker-dealers and clearing organizations
U.S. government and agency securities	$	17,369	$	—	$	17,369
	$	17,369	$	—	$	17,369
Securities owned
Corporate equity	$	2,531	$	—	$	2,531
Corporate debt		—		24,062		24,062
Certificates of deposit and term deposits		—		82,049		82,049
U.S. government and agency securities		63,261		—		63,261
Canadian government obligations		—		51,428		51,428
Money market		206,200		—		206,200
	$	271,992	$	157,539	$	429,531
Deposits with clearing organizations
U.S. government and agency securities	$	231,962	$	—	$	231,962
Money market		58,354		—		58,354
	$	290,316	$	—	$	290,316
Securities sold, not yet purchased
Corporate equity	$	2,922	$	—	$	2,922
Corporate debt		—		16,217		16,217
Certificates of deposit and term deposits		—		9,658		9,658
Canadian government obligations		—		19,586		19,586
	$	2,922	$	45,461	$	48,383

7.   Segregated assets

Cash and securities segregated under U.S. federal and other regulations totaled $2,383,948 at December 31, 2008. Cash and securities segregated under federal and other regulations by PFSI totaled $2,202,241 at December 31, 2008. Of this amount, $2,135,457 was segregated for the benefit of customers under Rule 15c3-3 of the Securities and Exchange Commission, against a requirement as of December 31, 2008 of $2,069,448. The remaining balance of $66,784 at year end relates to the Company’s election to compute a reserve requirement for Proprietary Accounts of Introducing Broker-Dealers (“PAIB”), as defined against a requirement as of December 31, 2008 of $62,928. An additional deposit of $2,300 was made on January 5, 2009 as allowed by Rule 15c3-3. The

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Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

PAIB is completed in order for each correspondent firm that uses the Company as its clearing broker-dealer to classify its assets held by the Company as allowable assets in the correspondent’s net capital calculation. In addition, $379,710, including $11,434 in cash, was segregated for the benefit of customers by Penson GHCO to Commodity Futures Trading Commission Rule 1.20. Finally, $23,001 was segregated under similar Canadian regulations by PFSC and $147,272 was segregated under similar regulations in the United Kingdom by PFSL. At December 31, 2007, $1,437,561 was segregated for the benefit of customers under Rule 15c3-3 of the Exchange Act and PAIB, and similar Canadian and United Kingdom regulations.

8.   Receivable from and payable to broker-dealers and clearing organizations

Amounts receivable from and payable to broker-dealers and clearing organizations consists of the following:

	December 31,
	2008		2007
Receivable:
Securities failed to deliver	$	75,022	$	499,966
Receivable from clearing organizations		243,256		1,019,112
	$	318,278	$	1,519,078
Payable:
Securities failed to receive	$	41,108	$	468,421
Payable to clearing organizations		303,986		608,891
	$	345,094	$	1,077,312

Receivables from broker-dealers and clearing organizations include amounts receivable for securities failed to deliver, amounts receivable from clearing organizations relating to open transactions, good-faith and margin deposits, and floor-brokerage receivables. Payables to broker-dealers and clearing organizations include amounts payable for securities failed to receive, amounts payable to clearing organizations on open transactions, and floor-brokerage payables. In addition, the net receivable or payable arising from unsettled trades is reflected in these categories.

9.   Receivable from and payable to customers and correspondents

Receivable from and payable to customers and correspondents include amounts due on cash and margin transactions. Securities owned by customers and correspondents are held as collateral for receivables. Such collateral is not reflected in the consolidated financial statements. Payable to correspondents also includes commissions due on customer transactions.

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Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

10.  Securities owned and securities sold, not yet purchased

Securities owned and securities sold, not yet purchased consist of trading and investment securities at fair value as follows:

	December 31,
	2008		2007
Securities Owned:
Corporate equity and debt	$	26,593	$	74,962
Certificates of deposit and term deposits		82,049		9,502
U.S. federal and agency securities		63,261		41,153
Canadian government obligations		51,428		95,063
Money market		206,200		15,000
	$	429,531	$	235,680
Securities Sold, Not Yet Purchased:
Corporate equity and debt	$	19,139	$	45,273
Certificates of deposit and term deposits		9,658		1,989
Canadian government obligations		19,586		34,854
	$	48,383	$	82,116

11.   Reverse repurchase and repurchase agreements

At December 31, 2008 and 2007, reverse repurchase agreements of $50,706 and $167,769, respectively, are included in other assets and repurchase agreements of $0 and $1,353 are included in accounts payable, accrued and other liabilities in the consolidated statements of financial condition.

12.   Property and equipment

Property and equipment consists of the following:

	December 31,
	2008		2007
Equipment	$	26,604	$	23,868
Software		46,372		34,615
Furniture		4,837		4,611
Leasehold improvements		6,293		6,349
Other		1,647		1,306
		85,753		70,749
Less accumulated depreciation and amortization		57,325		43,721
Property and equipment, net	$	28,428	$	27,028

Depreciation and amortization is provided over the estimated useful lives of the assets using the straight-line method for financial reporting and accelerated methods for income tax purposes. Depreciation and amortization is provided over three to seven years for equipment and other, over three years for software, over five years for furniture and over the lesser of the estimated useful life or lease term from three to twelve years for leasehold improvements. Depreciation and amortization expense for the years ended December 31, 2008, 2007 and 2006 was approximately $15,990, $12,769 and $8,176, respectively.

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Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

13.   Short-term bank loans

At December 31, 2008 and 2007, the Company had $130,846 and $340,530, respectively in short-term bank loans outstanding with weighted average interest rates of approximately 1.4% and 4.4% at. As of December 31, 2008 the Company had eight uncommitted lines of credit with eight financial institutions. Six of these lines of credit permitted the Company to borrow up to an aggregate of approximately $340,540 while two lines did not have specified borrowing limits.

The Company also has the ability to borrow under stock loan arrangements. At December 31, 2008 and 2007, the Company had approximately $319,801 and $479,410, respectively, in borrowings and no specific limitations on additional borrowing capacities. Borrowings under these arrangements bear interest at variable rates, are secured primarily by our firm inventory and customers’ margin account securities, and are repayable on demand. The remaining balance in securities loaned relates to the Company’s conduit stock loan business.

14.   Notes payable

Notes Payable consists of the following:

	December 31,
	2008		2007
Bank credit line up to $75,000, unsecured, with a variable rate of interest that approximated 3.5% and 7.6% at December 31, 2008 and 2007. Payable in full in May, 2009	$	75,000	$	55,000
	$	75,000	$	55,000

The Company’s notes payable contain certain restrictive covenants. These covenants require that the Company meet certain requirements such as the maintenance of minimum net worth, liquidity and income levels, and restrict additional borrowings, dividends or other distributions without prior consent of the lenders. The Company was in compliance with all covenant requirements as of December 31, 2008.

Approximate future annual maturities of the Company’s notes payable at December 31, 2008 are listed below:

	Amount
2009	$	75,000
	$	75,000

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Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

15.   Stockholders’ Equity

The following table details the Company’s share activity

	Preferred			Common			Treasury
	Stock			Stock			Stock
Balance, December 31, 2005		3,596			15,180			—
Issuances in connection with initial public offering		—			7,197			—
Preferred stock converted into common stock		(3,596	)		3,526			—
Repurchase of treasury stock		—			(1,076	)		1,076
Stock-based compensation		—			113			—
Purchases under the employee stock purchase plan		—			63			—
Exercise of stock options		—			75			—
Balance, December 31, 2006		—			25,078			1,076
Issuance of common stock		—			1,659			—
Repurchase of treasury stock		—			(1,607	)		1,607
Stock-based compensation		—			173			—
Purchases under the employee stock purchase plan		—			128			—
Exercise of stock options		—			112			—
Balance, December 31, 2007		—			25,543			2,683
Issuance of common stock		—			44			—
Repurchase of treasury stock		—			(714	)		714
Stock-based compensation		—			188			—
Purchases under the employee stock purchase plan		—			110			—
Exercise of stock options		—			36			—
Balance, December 31, 2008		—			25,207			3,397

Preferred Conversion

As a result of the Company’s initial public offering of common stock, all outstanding shares of Series A and Series B preferred stock were converted to 3,526 shares of common stock. Upon conversion, all outstanding shares of Series A and Series B preferred stock, including all undeclared and accrued dividends, were converted into the number of shares of common stock determined by dividing the applicable Original Purchase Price by the applicable Conversion Price. The “Original Purchase Price” was $9.41 per share for Series A preferred stock and $10.65 per share for Series B preferred stock. The initial “Conversion Price” per share for Series A and Series B preferred stock was the Original Purchase Price applicable for each series.

Additional Paid-In Capital

During the years ended December 31, 2008 and 2007, the Company granted 0 and 160 stock options with a fair value totaling $0 and $1,074, respectively and 599 and 94 restricted stock units (“RSUs”) with a fair value of $6,027 and $2,543, respectively. As a result, additional paid-in capital increased by $4,521 and $4,692 during the years ended December 31, 2008 and 2007 to reflect the amortization of the fair value of the stock options and RSUs. This increase included $184 and $350 of expense related to features of the employee stock purchase plan (see Note 19).

F-22

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Accumulated Other Comprehensive Income (loss)

Comprehensive income, which is displayed in the consolidated statements of stockholders’ equity, represents net earnings plus the results of certain stockholders’ equity changes not reflected in the consolidated statements of income.

The after-tax components of accumulated other comprehensive income are as follows:

	Year Ended December 31,
	2008			2007		2006
Net income	$	10,656		$	26,833	$	24,522
Foreign currency translation gain (loss)		(9,989	)		4,805		169
Comprehensive income	$	667		$	31,638	$	24,691

The exchange rates used in the translation of amounts into U.S. dollars are as follows:

	Year Ended December 31,
	2008		2007		2006
Canadian Dollars
Income statement	$	0.95	$	0.95	$	0.88
Balance sheet		.82		1.01		0.86
British Pounds
Income statement	$	1.85	$	2.01	$	1.92
Balance sheet		1.44		1.99		1.96

The rate used to translate asset and liability accounts is the exchange rate in effect at the balance sheet date. The rate used to translate income statement accounts is the weighted average exchange rate in effect during the period.

Dividends

The Company does not currently pay dividends on its common shares and there are no preferred shares outstanding.

16.   Financial instruments with off-balance sheet risk

In the normal course of business, the Company purchases and sells securities as both principal and agent. If another party to the transaction fails to fulfill its contractual obligation, the Company may incur a loss if the market value of the security is different from the contract amount of the transaction.

The Company deposits customers’ margin account securities with lending institutions as collateral for borrowings. If a lending institution does not return a security, the Company may be obligated to purchase the security in order to return it to the customer. In such circumstances, the Company may incur a loss equal to the amount by which the market value of the security on the date of nonperformance exceeds the value of the loan from the institution.

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 to fulfill the customer’s obligations. The Company seeks to control the risks associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company monitors required margin levels daily and, pursuant to such guidelines, requires customers to deposit additional collateral or to reduce positions when necessary.

Securities purchased under agreements to resell are collateralized by U.S. Government or U.S. Government-guaranteed securities. Such transactions may expose the Company to off-balance-sheet risk in the event such

F-23

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

borrowers do not repay the loans and the value of collateral held is less than that of the underlying contract amount. A similar risk exists on Canadian Government securities purchased under agreements to resell that are a part of other assets. These agreements provide the Company with the right to maintain the relationship between market value of the collateral and the contract amount of the receivable.

The Company’s policy is to continually monitor its market exposure and counterparty risk. The Company does not anticipate nonperformance by counterparties and maintains a policy of reviewing the credit standing of all parties, including customers, with which it conducts business.

For customers introduced on a fully-disclosed basis by other broker-dealers, the Company has the contractual right of recovery from such introducing broker-dealers in the event of nonperformance by the customer.

In addition, the Company has sold securities that it does not currently own and will therefore be obligated to purchase such securities at a future date. The Company has recorded these obligations in the financial statements at December 31, 2008, at fair values of the related securities and will incur a loss if the fair value of the securities increases subsequent to December 31, 2008.

17.   Related party transactions

The Company acquired SAMCO Holdings, Inc. during 2003. Prior to the acquisition, PFSI provided securities clearing and related services to and financed security inventory positions for Service Asset Management Company and SAMCO Financial Services, Inc. See Note 3 regarding the split off of these operations.

The Company’s chairman, Mr. Engemoen, is a significant stockholder (directly or indirectly) in, and serves as the Chairman of the Board for, SAMCO Holdings, Inc. (“SAMCO”), which owns all of the outstanding stock or equity interests, as applicable, of each of SAMCO Financial Services, Inc. (“SAMCO Financial”), SAMCO Capital Markets, Inc. (“SAMCO Capital Markets”), and SAMCO-BD, LLC (“SAMCO-BD”). SAMCO and its affiliated entities are referred to as the “SAMCO Entities.” The Company currently provides technology support and other similar services to SAMCO and provides clearing services, including margin lending, to the customers of SAMCO Capital Markets. The Company had provided clearing and margin lending services to customers of SAMCO Financial prior to SAMCO Financial’s termination of its broker-dealer status on December 31, 2006.

On July 18, 2006, three claimants filed separate arbitration claims with the NASD (which is now known as FINRA) against PFSI related to the sale of certain collateralized mortgage obligations by SAMCO Financial to its customers. In the ensuing months, additional arbitration claims were filed against PFSI and certain of the Company’s directors and officers based upon substantially similar underlying facts. These claims generally allege, among other things, that SAMCO Financial, in its capacity as broker, and PFSI, in its capacity as the clearing broker, failed to adequately supervise certain registered representatives of SAMCO Financial, and otherwise acted improperly in connection with the sale of these securities during the time period from approximately June, 2004 to May, 2006. Claimants have generally requested compensation for losses incurred through the depreciation in market value or liquidation of the collateralized mortgage obligations, interest on any losses suffered, punitive damages, court costs and attorneys’ fees. In addition to the arbitration claims, on March 21, 2008, Ward Insurance Company, Inc., et al, filed a claim against PFSI and Roger J. Engemoen, Jr., the Company’s Chairman of the Board, in the Superior Court of California, County of San Diego, Central District, based upon substantially similar facts.

On November 5, 2008, the Company entered into a settlement agreement with certain of the SAMCO Entities pursuant to which the Company received a limited personal guaranty from Mr. Engemoen of certain of the indemnification obligations of various SAMCO Entities with respect to claims related to the underlying facts described above, and, in exchange, the Company agreed to limit the aggregate indemnification obligations of the SAMCO Entities with respect to certain matters described above to $2,965. Unpaid indemnification obligations of $800 were satisfied prior to February 15, 2009. Of the $800 obligation, $86 was satisfied through a setoff against an obligation owed to the SAMCO Entities by PFSI, with the balance paid in cash. The remaining $2,165 indemnity obligation will be payable in cash, of which $600 is to be paid to the Company by no later than June 15, 2009 and the

F-24

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

remainder by no later than December 31, 2009. Mr. Engemoen has guaranteed the payment of these obligations up to an aggregate of $2,000, within thirty (30) days of any default by the SAMCO Entities of their obligations under the settlement agreement. In addition to the above stated liabilities, the SAMCO Entities will also be responsible for any costs associated with collection under the foregoing settlement agreement together with any interest accrued on any past due amounts, and Mr. Engemoen will be responsible for any additional costs associated with collection under his guaranty together with any interest accrued on any past due amounts. The SAMCO Entities will remain responsible for the payment of their own defense costs and any claims from any third parties not expressly released under the settlement agreement, irrespective of amounts paid to indemnify the Company. The settlement agreement only relates to the matters described above and does not alter the indemnification obligations of the SAMCO Entities with respect to unrelated matters.

Technology support and similar services are provided to SAMCO pursuant to the terms of a Transition Services Agreement entered into between the Company and SAMCO on May 16, 2006. That agreement was entered into at arm’s length and the Company believes it to be on market terms. Clearing services are provided to SAMCO Capital Markets pursuant to the terms of a clearing agreement entered into between the Company and SAMCO Capital Markets on May 19, 2005. That agreement was also entered into at arm’s length and is similar to clearing agreements the Company enters into from time to time with other similarly situated correspondents. The Company believes the terms to be no more favorable to SAMCO Capital Markets than what the Company would offer similarly situated correspondents. In 2008, the Company generated $105 in revenue from the Company’s provision of technology support and similar services to SAMCO and approximately $410 in revenue from the Company’s clearing relationship with SAMCO Capital Markets.

The Company sublet space to SAMCO Capital Markets at the Company’s principal offices at 1700 Pacific Avenue in Dallas, Texas and at One Penn Plaza, in New York, NY. For each sublease, SAMCO Capital Markets is required to pay the percentage of the rental expense the Company incurs equal to the percentage of space SAMCO Capital Markets occupies. The Company believes each sublease to be on market terms. In 2008, for occupying the 20th floor of the Company’s Dallas office, SAMCO Capital Markets made payments totaling $125 in rental expense to the landlord of that property. For occupying half of the 51st floor in the Company’s New York office, SAMCO Capital Markets made payments totaling $682 to the landlord of that property. SAMCO Capital Markets sublets space to us at 6805 Capital of Texas Highway, Suite 350, Austin, Texas, pursuant to a sublease agreement that we believe was entered into on market terms. In 2008, we paid $106 to SAMCO Capital Markets for occupying office space in Austin.

18.   Employee benefit plan

The Company sponsors a defined contribution 401(k) employee benefit plan (the “Plan”) that covers substantially all U.S. employees. Under the Plan, the Company may make a discretionary contribution. All U.S. employees are eligible to participate in the Plan, based on meeting certain age and term of employment requirements. The Company contributed approximately $1,278, $1,044 and $816 during 2008, 2007 and 2006, respectively.

19.   Stock-based compensation

The Company makes awards of stock options and restricted stock units (“RSUs”) under the 2000 Stock Incentive Plan, as amended in April, 2008, under which 3,214 shares of common stock have been authorized for issuance. Of this amount, options and RSUs to purchase 2,455 shares of common stock, net of forfeitures have been granted and 759 shares remain available for future grant at December 31, 2008. The Company also provides an employee stock purchase plan (“ESPP”).

The 2000 Stock Incentive Plan includes three separate programs: the discretionary option grant program under which eligible individuals in the Company’s employ or service (including officers, non-employee board members and consultants) may be granted options to purchase shares of common stock of the Company; the stock issuance

F-25

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

program under which such individuals may be issued shares of common stock directly or stock awards that vest over time, through the purchase of such shares or as a bonus tied to the performance of services; and the automatic grant program under which grants will automatically be made at periodic intervals to eligible non-employee board members. The Company’s board of directors or its compensation committee may amend or modify the 2000 Stock Incentive Plan at any time, subject to any required stockholder approval.

Stock options

During 2007 and 2006, the Company granted stock options to employees. The grant price of the options was the market value at the date of grant. The options have a term of seven years and vest quarterly over four years. Additionally, the Company granted stock options to its non-employee directors. Options issued to non-employee directors have a term of ten years and vest quarterly over three years.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The weighted average assumptions used in the model are outlined in the following table:

	Year Ended December 31,
	2008		2007			2006
Weighted-average grant date fair value	$	—	$	6.93		$	4.82
Weighted average assumptions used:
Expected volatility		—		27.0	%		20.0	%
Expected term (in years)		—		3.90			4.790
Risk-free interest rate		—		4.7	%		5.0	%
Expected dividend yield		—		—			—

Due to its own lack of extensive history, the Company utilizes historical industry volatilities as well as historical volatilities of peer companies when computing the expected volatility assumption to be used in the Black-Scholes-Merton calculations for new grants. Also because of its limited trading history, when establishing the expected life assumptions, the Company utilizes the “simplified” method permitted by SAB 110 to determine the expected term of the future option grants. The Company typically grants options with a contractual term of seven years which vest quarterly over four years. The resulting expected term from the simplified method is 4.75 years.

The Company recorded compensation expense relating to options of approximately $1,521, $1,683 and $970 during the years ended December 31, 2008, 2007 and 2006, respectively.

F-26

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

A summary of the Company’s stock option activity is as follows:

						Weighted		Aggregate
				Weighted		Average		Intrinsic
	Number of			Average		Contractual		Value of In-the
	Shares			Exercise Price		Term		Money Options
				(In whole dollars)		(In years)
Outstanding, December 31, 2005		227		$	4.04		6.16		—
Granted		1,145			17.21		—		—
Exercised		(75	)		4.67		—		—
Forfeited, cancelled or expired		(17	)		17.00		—		—
Outstanding, December 31, 2006		1,280		$	15.44		6.43	$	15,320
Granted		160			25.22		—		—
Exercised		(112	)		9.54		—		—
Forfeited, cancelled or expired		(159	)		17.16		—		—
Outstanding, December 31, 2007		1,169		$	17.10		5.79	$	946
Granted		—			—		—		—
Exercised		(35	)		4.72		—		—
Forfeited, cancelled or expired		(106	)		18.95		—		—
Outstanding, December 31, 2008		1,028		$	17.35		4.78	$	206
Options exercisable at December 31, 2008		682		$	16.89		4.77	$	206

The aggregate intrinsic value of the options exercised during the years ended December 31, 2008, 2007 and 2006 was $367, $2,065 and $1,266. At December 31, 2008 and 2007, the Company had approximately $1,561 and $3,047 of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average period of 1.57 and 2.40 years, respectively. Cash received from stock option exercises totaled approximately $168 during the year ended December 31, 2008.

Restricted Stock Units

A summary of the Company’s Restricted Stock Unit activity is as follows:

				Weighted		Weighted
				Average		Average		Aggregate
	Number of			Grant Date		Contractual		Intrinsic
	Units			Fair Value		Term		Value
				(In whole dollars)		(In years)
Outstanding, December 31, 2005		64		$	—		—		—
Granted		640			14.64		—		—
Vested and issued		(122	)		13.57		—		—
Terminated, cancelled or expired		(23	)		16.07		—		—
Outstanding, December 31, 2006		559		$	14.44		3.2	$	15,335
Granted		94			27.12		—		—
Vested and issued		(170	)		15.51		—		—
Terminated, cancelled or expired		(93	)		13.42		—		—
Outstanding, December 31, 2007		390		$	17.39		2.6	$	5,596
Granted		599			10.07		—		—
Vested and issued		(188	)		15.22		—		—
Terminated, cancelled or expired		(52	)		17.97		—		—
Outstanding, December 31, 2008		749		$	12.06		2.9	$	5,704

F-27

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

The Company recorded compensation expense relating to restricted stock units of approximately $2,818, $2,660 and $1,935 during the years ended December 31, 2008, 2007 and 2006, respectively. There is approximately $7,739 and $5,847 of unamortized compensation expense, net of estimated forfeitures, related to unvested restricted stock units outstanding at December 31, 2008 and 2007.

Employee stock purchase plan

In July, 2005, the Company’s board of directors adopted the ESPP, designed to allow eligible employees of the Company to purchase shares of common stock, at semiannual intervals, through periodic payroll deductions. A total of 313 shares of common stock were initially reserved under the ESPP. The share reserve will automatically increase on the first trading day of January each calendar year, beginning in calendar year 2007, by an amount equal to 1% of the total number of outstanding shares of common stock on the last trading day in December in the prior calendar year. In no event will any such annual increase exceed 63 shares.

The ESPP may have a series of offering periods, each with a maximum duration of 24 months. Offering periods will begin at semi-annual intervals as determined by the plan administrator. Individuals regularly expected to work more than 20 hours per week for more than five calendar months per year may join an offering period on the start date of that period. However, employees may participate in only one offering period at a time. Participants may contribute 1% to 15% of their annual compensation through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share shall be determined by the plan administrator at the start of each offering period and shall not be less than 85% of the lower of the fair market value per share on the start date of the offering period in which the participant is enrolled or the fair market value per share on the semi-annual purchase date. The plan administrator shall have the discretionary authority to establish the maximum number of shares of common stock purchasable per participant and in total by all participants in that particular offering period. The Company’s board of directors or its Compensation Committee may amend, suspend or terminate the ESPP at any time, and the ESPP will terminate no later than the last business day of June 2015. As of December 31, 2008 and 2007, 438 and 375 shares of common stock had been reserved and 301 and 128 shares of common stock had been purchased by employees pursuant to the ESPP plan. The Company recognized $184 and $350 in expense during 2008 and 2007, respectively, related to the features of the plan.

20.   Commitments and contingencies

The Company has obligations under capital and operating leases with initial noncancelable terms in excess of one year. Minimum non-cancelable lease payments required under operating and capital leases for the years subsequent to December 31, 2008, are as follows:

	Capital		Operating
	Leases		Leases
2009	$	5,714	$	5,093
2010		3,755		4,757
2011		1,311		4,613
2012		—		3,783
2013		—		3,669
2014 and thereafter		—		10,221
	$	10,780	$	32,136

The Company has recorded assets under capital leases, included in property and equipment in the consolidated statements of financial condition, totaling $14,914 of equipment and $3,228 of software at December 31, 2008 and $12,479 of equipment and $2,163 of software at December 31, 2007. The related capital lease obligations are included in accounts payable, accrued and other liabilities on the consolidated statements of financial condition.

F-28

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Rent expense for the years ended December 31, 2008, 2007 and 2006 was $10,935, $11,010 and $7,212, respectively.

From time to time, we are involved in other legal proceedings arising in the ordinary course of business relating to matters including, but not limited to, our role as clearing broker for our correspondents. In some instances, but not all, where we are named in arbitration proceedings solely in our role as the clearing broker for our correspondents, we are able to pass through expenses related to the arbitration to the correspondent involved in the arbitration (see Note 17).

Under its bylaws, the Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director’s serving in such capacity. The Company has entered into indemnification agreements with each of its directors that require us to indemnify our directors to the extent permitted under our bylaws and applicable law. Although management is not aware of any claims, the maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has a directors and officer liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal and has no liabilities recorded for these agreements as of December 31, 2008.

21.   Income taxes

Provisions for income taxes consist of the following:

	Year Ended December 31,
	2008		2007			2006
Income tax expense
Current	$	5,016	$	17,399		$	11,830
Deferred		977		(2,274	)		1,625
Total	$	5,993	$	15,125		$	13,455
Income tax expense
Continuing operations	$	5,993	$	15,125		$	13,299
Discontinued operations		—		—			156
	$	5,993	$	15,125		$	13,455

The differences in income tax provided and the amounts determined by applying the statutory rate to income before income taxes results from the following:

	Year Ended December 31,
	2008			2007			2006
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Lower tax rates applicable to non-U.S. earnings		(2.4	)		(2.7	)		(0.1	)
International trade tax credit		(4.8	)		—			—
State and local income taxes		5.2			2.6			3.0
Stock-based compensation		3.4			1.0			0.5
Other, net		(0.4	)		0.1			1.1
Change in valuation allowance due to NOL utilization		—			—			(4.1	)
		36.0	%		36.0	%		35.4	%

F-29

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Deferred taxes are determined based on temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. Valuation allowances recorded on the balance sheet dates are necessary in cases where management believes that it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management has determined that no valuation allowance was necessary at December 31, 2008 and 2007. Deferred taxes are included in other assets as of December 31, 2008 and 2007.

Deferred income taxes consist of the following:

	December 31,
	2008			2007
Current deferred taxes:
Bad debt allowance	$	1,559		$	1,033
Accrued expenses		662			—
Prepaid assets		(1,498	)		(976	)
Total	$	723		$	57
Non-current deferred taxes:
Fixed asset basis differences	$	1,241		$	1,324
Intangible assets		(183	)		1,714
Stock-based compensation		1,078			633
Other		(167	)		(59	)
Total	$	1,969		$	3,612
Total	$	2,692		$	3,669

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The Company intends to continue to reinvest earnings of the non-US entities for the foreseeable future and , therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. The Company does not anticipate the results of any open examinations would result in a material change to its financial position.

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $580 increase to reserves for uncertain tax positions. This increase was accounted for as a cumulative adjustment to retained earnings on the consolidated statements of financial condition. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 1, 2007	$	580
Additions based on tax positions related to the current year		398
Reductions for tax positions of prior years		(152	)
Balance at December 31, 2007		826
Additions based on tax positions related to the current year		657
Reductions for tax positions of prior years		(526	)
Balance at December 31, 2008	$	957

F-30

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes. The Company had accrued approximately $320 and $209 for the payment of penalties and interest at December 31, 2008 and 2007 respectively. The reserves for uncertain tax positions are included in accounts payable, accrued and other liabilities as of December 31, 2008 and 2007.

22.   Segment information

The Company is organized into operating segments based on products and services and geographic regions. These operating segments have been aggregated into three reportable segments; United States, Canada and Other. The Company evaluates the performance of its operating segments based upon operating income before unusual and non-recurring items. The following table summarizes selected financial information:

	United
December 31, 2008	States		Canada			Other		Consolidated
Revenues	$	291,643	$	71,302		$	20,924	$	383,869
Interest, net		61,535		11,365			2,158		75,058
Income (loss) before tax		25,993		(9,554	)		210		16,649
Net income (loss)		15,532		(4,964	)		88		10,656
Segment assets		4,610,951		607,500			320,744		5,539,195
Goodwill and intangibles		116,915		538			312		117,765
Capital expenditures		14,803		1,130			3,098		19,031
Depreciation and amortization		13,265		1,536			1,314		16,115
Amortization of intangibles		4,121		11			—		4,132

	United
December 31, 2007	States		Canada		Other		Consolidated
Revenues	$	303,999	$	75,279	$	25,524	$	404,802
Interest, net		73,688		12,664		2,048		88,400
Income before tax		23,238		16,025		2,695		41,958
Net income		13,519		11,442		1,872		26,833
Segment assets		5,957,182		1,619,398		270,397		7,846,977
Goodwill and intangibles		74,216		549		312		75,077
Capital expenditures		11,888		1,807		1,789		15,484
Depreciation and amortization		10,853		1,388		982		13,223
Amortization of intangibles		3,498		56		—		3,554

	United
December 31, 2006	States		Canada		Other			Consolidated
Revenue	$	213,724	$	58,591	$	15,303		$	287,618
Interest, net		64,680		8,552		1,138			74,370
Income (loss) before tax		26,062		12,842		(1,326	)		37,578
Income from discontinued operations		243		—		—			243
Net income (loss)		17,509		8,390		(1,377	)		24,522
Segment assets		3,745,876		684,682		213,832			4,644,390
Goodwill and intangibles		16,151		605		—			16,756
Capital expenditures		9,844		1,451		1,352			12,647
Depreciation and amortization		6,585		1,619		590			8,794
Amortization of intangibles		2,527		—		—			2,527

F-31

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

23.   Regulatory requirements

PFSI is subject to the SEC Uniform Net Capital Rule (“Rule 15c3-1”), which requires the maintenance of minimum net capital. PFSI elected to use the alternative method, permitted by Rule 15c3-1, which requires that PFSI maintain minimum net capital, as defined, equal to the greater of $250 or 2% of aggregate debit balances, as defined in the SEC’s Reserve Requirement Rule (“Rule 15c3-3”). At December 31, 2008, PFSI had net capital of $85,535, and was $66,558 in excess of its required net capital of $18,977. At December 31, 2007, PFSI had net capital of $106,746, and was $83,764 in excess of its required net capital of $22,982.

Our Penson GHCO, PFSL and PFSC subsidiaries are also subject to minimum financial and capital requirements. All subsidiaries were in compliance with their minimum financial and capital requirements as of December 31, 2008.

The regulatory rules referred to above may restrict the Company’s ability to withdraw capital from its regulated subsidiaries, which in turn could limit the Subsidiaries’ ability to pay dividends and the Company’s abilities to satisfy its debt obligations. PFSC and PFSL are subject to regulatory requirements in their respective countries which also limit the amount of dividends that they may be able to pay to their parent. The Company has no current plans to seek any dividends from these entities.

24.   Guarantees

FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, (“FIN 45”) requires the Company to disclose information about its obligations under certain guarantee arrangements. FIN 45 defines guarantees as contracts and indemnification agreements that contingently require a guarantor to make payments for the guaranteed party based on changes in an underlying (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or non-occurrence of a specified event) asset, liability, or equity security of a guaranteed party. FIN 45 also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity’s failure to perform under an agreement as well as indirect guarantees of the indebtedness of others.

The Company is a member of various exchanges that trade and clear securities, futures and commodities. Associated with its membership, the Company may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchange. While the rules governing different exchange memberships vary, in general the Company’s guarantee obligations would arise only if the exchange had previously exhausted its resources. In addition, any such guarantee obligation would be apportioned among the other non-defaulting members of the exchange. Any potential contingent liability under these membership agreements cannot be estimated. Prior to making such an estimate, the Company would be required to know the size of the member company that would experience financial difficulty as well as the amount of recovery that could be expected from the exchange as well as the other member firms of the exchange. Accordingly, the Company has not recorded any liability in the consolidated financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote.

25.   Vendor related asset impairment

Penson GHCO and Penson Financial Futures, Inc. (“PFFI”) held customer segregated accounts with Sentinel totaling approximately $36 million. Sentinel subsequently sold certain securities to Citadel Equity Fund, Ltd. and Citadel Limited Partnership. On August 20, 2007, the Bankruptcy Court authorized distributions of 95 percent of the proceeds Sentinel received from the sale of those securities to certain FCM clients of Sentinel, including Penson GHCO. This distribution to the Penson GHCO and PFFI customer segregated accounts along with a distribution received immediately prior to the bankruptcy filing total approximately $25.4 million.

On May 12, 2008, a committee of Sentinel creditors, consisting of a majority of non-FCM creditors, together with the trustee appointed to manage the affairs and liquidation of Sentinel (the “Sentinel Trustee”), filed with the

F-32

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Court their proposed Plan of Liquidation (the “Committee Plan”) and on May 13, 2008 filed a Disclosure Statement related thereto. The Committee Plan allows the Sentinel Trustee to seek the return from FCMs, including Penson GHCO, of a portion of the funds previously distributed to their customer segregated accounts. On June 19, 2008, the Court entered an order approving the Disclosure Statement over objections by Penson GHCO and others. The Bankruptcy Court held confirmation hearings on August 12, 2008, and August 13, 2008, respectively, regarding the Committee Plan. The Court heard testimony regarding the Committee Plan and entertained objections from several parties. At the conclusion of the Committee Plan confirmation hearings, the Court granted all interested parties additional time to submit additional documents to the Court in support of their respective positions. On September 16, 2008, the Sentinel Trustee filed suit against Penson GHCO and PFFI along with several other FCMs that received distributions to their customer segregated accounts from Sentinel. The suit against Penson GHCO and PFFI seeks the return of approximately $23.6 million of post-bankruptcy petition transfers and $14.4 million of pre-bankruptcy petition transfers. The suit also seeks to declare that the funds distributed to the customer segregated accounts of Penson GHCO and PFFI by Sentinel are the property of the Sentinel Estate rather than the property of customers of Penson GHCO and PFFI. On December 15, 2008, over the objections of Penson GHCO and PFFI, the court entered an order confirming the Committee Plan. A motion to clarify the court’s ruling has been filed and the court has set a briefing schedule and will rule once all the pleadings have been filed. During the appeals process, there is no stay of the confirmation order and the Committee Plan has therefore become effective. The Company believes that the Court was correct in ordering the prior distributions and Penson GHCO and PFFI intend to vigorously defend their position. However, there can be no assurance that any actions by Penson GHCO or PFFI will result in a limitation or avoidance of potential repayment liabilities. In the event that Penson GHCO and PFFI are obligated to return all previously distributed funds to the Sentinel Estate, any losses we might suffer would most likely be partially mitigated as it is likely that Penson GHCO and PFFI would share in the funds ultimately disbursed by the Sentinel Estate. On January 7, 2009 Penson GHCO, PFFI and a number of other FCMs that had placed customer funds with Sentinel filed a motion to withdraw the reference with the federal district court for the Northern District of Illinois, effectively asking the federal district court to remove the Sentinel case from the bankruptcy court and consolidate it with other Sentinel related actions in the federal district court. There can be no assurance that Penson GHCO’s or PFFI’s motion will be granted.

26.   Correspondent asset loss

As reported in October 2008, the Company’s Canadian subsidiary obtained an unsecured receivable as a result of a number of transactions involving listed Canadian equity securities by Evergreen Capital Partners Inc. (“Evergreen”) on behalf of itself and/or its customers, for which Evergreen and/or its customers were unable to make payment. Subsequently, Evergreen ceased operations and filed for bankruptcy protection. The Company commenced an investigation into the circumstances surrounding the events that resulted in the unsecured receivable and retained the services of various professional advisors to assist in the investigation.

In connection with the Company’s preparation of its 2008 financial statements, the Company’s management, after consultation with the Company’s Board of Directors and outside advisors, concluded that as of December 31, 2008, a significant amount of the receivable was not recoverable and recorded a charge of approximately $26.4 million, net of estimated recoveries and professional fees. The Company is continuing to explore ways to further recover amounts associated with this charge and, other than recurring professional fees, does not anticipate incurring any additional losses relative to this matter.

27.   Stock repurchase program

On July 3, 2007, the Company’s board of directors authorized the Company to purchase up to $25.0 million of its common stock in open market purchases and privately negotiated transactions. The Company repurchased approximately 1,475 shares at an average price of $16.98 per share. The repurchase program was completed in October 2007. On December 6, 2007, the Company’s board of directors authorized the Company to purchase an additional $12.5 million of its common stock. In 2007, the Company repurchased approximately 74 shares at an

F-33

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

average price of $14.28 per share. During 2008, the Company repurchased approximately 654 shares at an average price of $10.32 per share. As of December 31, 2008 the Company has repurchased a total of 2,203 shares at an average price of $14.91 per share and has approximately $4,689 available for future purchase.

28.  Condensed Financial Statements of Penson Worldwide, Inc. (parent only)

Presented below are the Condensed Statements of Financial Condition, Income and Cash Flows for the Company on a unconsolidated basis.

Penson Worldwide, Inc. (parent only)
Condensed Statements of Financial Condition

	December 31,
	2008		2007
Assets
Cash and cash equivalents	$	9	$	12
Receivable from affiliates		140,255		133,761
Property and equipment, net		5,815		6,992
Investment in subsidiaries		194,236		189,020
Other assets		6,789		4,778
Total assets	$	347,104	$	334,563
Liabilities and stockholders’ equity
Notes payable	$	75,000	$	55,000
Accounts payable, accrued and other liabilities		7,637		14,135
Total liabilities		82,637		69,135
Total stockholders’ equity		264,467		265,428
Total liabilities and stockholders’ equity	$	347,104	$	334,563

F-34

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Penson Worldwide, Inc. (parent only)
Condensed Statements of Income

	Year Ended December 31,
	2008			2007			2006
Revenues	$	5,097		$	4,776		$	2,805
Expenses
Employee compensation and benefits		11,533			440			397
Communications and data processing		60			—			—
Occupancy and equipment		4,745			—			—
Other expenses		6,562			8,132			4,692
Interest expense on long-term debt		3,854			2,894			1,643
		26,754			11,466			6,732
Loss before income taxes and equity in earnings of subsidiaries		(21,657	)		(6,690	)		(3,927	)
Income tax benefit		(10,669	)		(11,057	)		(8,782	)
Income (loss) before equity in earnings of subsidiaries		(10,988	)		4,367			4,855
Equity in earnings of subsidiaries		21,644			22,466			19,667
Net income	$	10,656		$	26,833		$	24,522

F-35

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Penson Worldwide, Inc. (parent only)
Condensed Statements of Cash Flows

	Year Ended December 31,
	2008			2007			2006
Cash flows from operating activities:
Net income	$	10,656		$	26,833		$	24,522
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		4,722			4,112			2,564
Deferred income taxes		977			(2,274	)		1,625
Stock based compensation		4,523			4,693			3,120
Changes in operating assets and liabilities:
Net receivable/payable with affiliates		(6,494	)		(29,500	)		(6,194	)
Other assets		(2,417	)		(262	)		2,203
Accounts payable, accrued and other liabilities		(5,695	)		4,808			1,191
Net cash provided by operating activities		6,272			8,410			29,031
Cash flows from investing activities:
Purchase of property and equipment, net		(3,545	)		(4,277	)		(4,301	)
Decrease (increase) in investment in subsidiaries		(5,216	)		(30,369	)		(120,388	)
Net cash used in investing activities		(8,761	)		(34,646	)		(124,689	)
Cash flows from financing activities:
Proceeds from notes payable		20,000			206,000			95,300
Repayments of notes payable		—			(161,000	)		(104,288	)
Exercise of stock options		168			1,067			349
Excess tax benefit on exercise of stock options		75			823			4
Purchase of treasury stock		(7,431	)		(27,468	)		(7,976	)
Proceeds from initial public offering		—			—			114,152
Direct costs of capital raised		—			—			(3,074	)
Issuance of common stock, net		1,000			2,016			1,008
Net cash provided by financing activities		13,812			21,438			95,475
Effect of exchange rates on cash		(11,326	)		4,805			169
Increase (decrease) in cash and cash equivalents		(3	)		7			(14	)
Cash and cash equivalents at beginning of period		12			5			19
Cash and cash equivalents at end of period	$	9		$	12		$	5
Supplemental cash flow disclosures:
Interest payments	$	4,265		$	1,562		$	982
Income tax payments	$	11,762		$	9,940		$	6,922

F-36

INDEX TO EXHIBITS

				Incorporated by Reference					Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit			Date
	2	.1	Stock Purchase Agreement by and among SAI Holdings, Inc., Computer Clearing Services, Inc., and the Selling Stockholders dated May 12, 2005, as amended July 8, 2005	S-1	333-127385		2	.1	8/10/05
	2	.2	Asset Purchase Agreement by and among SAI Holdings, Inc., Computer Clearing Services, Inc., and the Computer Clearing Services, Inc. Stockholders dated January 31, 2006	S-1/A	333-127385		2	.2	3/21/06
	2	.3	Asset Purchase Agreement by and between SAI Holdings, Inc. and Schonfeld Securities, LLC, dated as of November 20, 2006	8-K	001-32878		2	.1	11/21/06
	2	.4	Purchase Agreement by and among Goldenberg Hehmeyer & Co. and Goldenberg LLC, Hehmeyer LLC, GHCO Partners LLC, GH Traders LLC, each of the Principals listed on the signature pages thereto and SAI Holdings, Inc., GHP1, Inc., GHP2, LLC and Christopher Hehmeyer in his capacity as Sellers’ Representative	8-K	001-32878		2	.1	11/7/06
	2	.5	Letter Agreement, dated as of October 8, 2007, by and among SAI Holdings, Inc., Penson Financial Services, Inc., Schonfeld Group Holdings LLC, Schonfeld Securities, LLC, Opus Trading Fund LLC and Quantitative Trading Strategies LLC	8-K	001-32878		2	.1	10/12/07
	3	.1	Form of Amended and Restated Certificate of Incorporation of Penson Worldwide, Inc.	S-1/A	333-127385		3	.1	5/1/06
	3	.2	Form of Amended and Restated Bylaws of Penson Worldwide, Inc.	S-1/A	333-127385		3	.2	4/24/06
	4	.1	Specimen certificate for shares of Common Stock	S-1	333-127385		4	.1	4/24/06
	4	.2+	Amended and Restated Registration Rights Agreement between Roger J. Engemoen, Jr., Philip A. Pendergraft and Daniel P. Son and Penson Worldwide, Inc. dated November 30, 2000	S-1	333-127385		4	.2	8/10/05
	4	.3	Amended and Restated Investors’ Rights Agreement between TCV V, L.P., TCV Member Fund, L.P., Penson Worldwide, Inc., and the Company Subsidiaries dated December 31, 2005	S-1/A	333-127385		4	.3	10/19/05
	10	.1+	Penson Worldwide, Inc. Amended and Restated 2000 Stock Incentive Plan	S-1/A	333-127385		10	.1	4/24/06
	10	.2+	Penson Worldwide, Inc. 2005 Employee Stock Purchase Plan	S-1/A	333-127385		10	.2	4/24/06
	10	.3	1700 Pacific Avenue Office Lease by and between F/P/D Master Lease, Inc. and Penson Financial Services, Inc. (f/k/a Service Asset Management Company) dated May 20, 1998 as amended July 16, 1998, February 17, 1999, September 20, 1999, November 30, 1999, May 25, 2000 and January 9, 2001	S-1	333-127385		10	.3	8/10/05
	10	.4	Lease of Premises between Downing Street Holdings (330 Bay St), Inc. and Penson Financial Services Canada Inc. (one of our subsidiaries) dated September 17, 2002	S-1	333-127385		10	.4	8/10/05
	10	.5	Offer to Lease between Penson Financial Services Canada Inc. and 360 St-Jacques Nova Scotia Company dated October 14, 2003	S-1	333-127385		10	.5	8/10/05

				Incorporated by Reference					Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit			Date
	10	.6	Lease agreement between Derwent Valley London Limited, Derwent Valley Central Limited, Penson Financial Services Limited, and Penson Worldwide, Inc. effective August 11, 2005	S-1	333-127385		10	.6	8/10/05
	10	.7	Amended and Restated Loan Agreement by and between SAI Holdings, Inc. (f/k/a Service Asset Investments, Inc.) and Guaranty Bank (f/k/a Guaranty Federal Bank, F.S.B.), dated April 30, 2001, as amended March 24, 2005 and May 6, 2005	S-1	333-127385		10	.7	8/10/05
	10	.8	Fifth Amended and Restated Stock Pledge Agreement by and between SAI Holdings, Inc. (f/k/a Service Asset Investments, Inc.) and Guaranty Bank (f/k/a Service Asset Investments, Inc.), dated October 4, 2004, as reaffirmed by the Reaffirmation of Stock Pledge Agreements dated March 24, 2005	S-1	333-127385		10	.8	8/10/05
	10	.9+	Fifth Amended and Restated Guaranty Agreements in connection with the Amended and Restated Loan Agreement by and between SAI Holdings, Inc. (f/k/a Service Asset Investments, Inc.) and Guaranty Bank (f/k/a Service Asset Investments, Inc.), by Daniel P. Son, Philip A. Pendergraft, William D. Gross, and Roger J. Engemoen, Jr. as Guarantors, all dated December 31, 2002, as reaffirmed by the Eleventh Amendment to the Amended and Restated Loan Agreement dated March 24, 2005	S-1	333-127385		10	.9	8/10/05
	10	.10†	Credit Agreement, dated as of May 26, 2006 among Penson Worldwide, Inc., Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Line of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent, and the other lenders party thereto	10-Q	001-32878		10	.1	8/11/06
	10	.11†	Remote Processing Agreement between Penson Worldwide, Inc. and SunGard Data Systems Inc. dated July 10, 1995, as amended September 13, 1996 and August 1, 2002	S-1/A	333-127385		10	.11	8/10/05
	10	.12	Form of SAMCO Reorganization Agreement by and between Penson Worldwide, Inc., SAI Holdings, Inc. and Penson Financial Services, Inc. and SAMCO Capital Markets, Inc. and SAMCO Holdings, Inc.	S-1/A	333-127385		10	.12	5/1/06
	10	.13	Form of Transition Services Agreement by and between SAMCO Holdings, Inc. and Penson Worldwide, Inc.	S-1/A	333-127385		10	.13	5/1/06
	10	.14+	Employment Letter Agreement between the Company and David Henkel dated January 16, 2002	S-1	333-127385		10	.14	8/10/05
	10	.15+	Employment Letter Agreement between the Company and Andrew Koslow dated August 26, 2002	S-1	333-127385		10	.15	8/10/05
	10	.16+	Form of Indemnification Agreement entered into between Penson Worldwide, Inc. and its officers and directors	S-1	333-127385		10	.16	8/10/05
	10	.17	Thirteenth Amendment to Amended and Restated Loan Agreement by and between SAI Holdings, Inc. (f/k/a Service Asset Investments, Inc.) and Guaranty Bank (f/k/a Guaranty Federal Bank, F.S.B.), dated September 19, 2005	S-1/A	333-127385		10	.17	9/23/05
	10	.18	Fourteenth Amendment to Amended and Restated Loan Agreement by and between SAI Holdings, Inc. (f/k/a Service Asset Investments, Inc.) and Guaranty Bank (f/k/a Guaranty Federal Bank, F.S.B.), dated December 31, 2005	S-1/A	333-127385		10	.18	10/19/05

				Incorporated by Reference					Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit			Date
	10	.19	Fifteenth Amendment to Amended and Restated Loan Agreement and Waiver by and between SAI Holdings, Inc. (f/k/a Service Asset Investments, Inc.) and Guaranty Bank, dated December 28, 2005	S-1/A	333-127385		10	.19	3/21/06
	10	.20	Promissory Note by and between the Company and JPMorgan Chase Bank, N.A. dated December 30, 2005	S-1/A	333-127385		10	.20	3/21/06
	10	.21	Registration Rights Agreement by and between Penson Worldwide, Inc. and Schonfeld Securities, LLC, dated as of November 20, 2006	8-K	001-32878		10	.1	3/21/06
	10	.22	Stockholder’s Agreement effective as of November 20, 2006 between Penson Worldwide, Inc. and Schonfeld Securities, LLC	8-K	001-32878		10	.2	11/21/06
	10	.23	Guaranty Agreement made as of November 20, 2006 by Schonfeld Group Holdings LLC in favor of SAI Holdings, Inc. and Penson Financial Services, Inc.	8-K	001-32878		10	.3	11/21/06
	10	.24	Unconditional Guaranty Agreement made as of November 20, 2006 by Schonfeld Group Holdings LLC, Schonfeld Securities LLC and Steven B. Schonfeld in favor of Penson Financial Services, Inc.	8-K	001-32878		10	.4	11/21/06
	10	.25	Termination/Compensation Payment Agreement, dated as of November 20, 2006, by and among Opus Trading Fund LLC, Quantitative Trading Solutions, LLC and Penson Financial Services, Inc.	8-K	001-32878		10	.5	11/21/06
	10	.26+	Employment Letter Agreement between the Company and Kevin W. McAleer dated February 15, 2006	S-1/A	333-127385		10	.22	3/21/06
	10	.27+	Executive Employment Agreement between the Company and Philip A. Pendergraft dated April 21, 2006	S-1/A	333-127385		10	.23	5/1/06
	10	.28+	Executive Employment Agreement between the Company and Daniel P. Son dated April 21, 2006	S-1/A	333-127385		10	.24	5/1/06
	10	.29	Eighth Amendment to 1700 Pacific Avenue Office Lease by and between Berkeley First City, Ltd. and Penson Worldwide, Inc. dated April 12, 2006	S-1/A	333-127385		10	.25	5/9/06
	10	.30	Sixteenth Amendment to Amended and Restated Agreement by and between SAI Holdings, Inc. (f/k/a Service Asset Investments, Inc.) and Guaranty Bank (f/k/a Guaranty Federal Bank, F.S.B.), dated April 21, 2006	S-1/A	333-127385		10	.27	5/1/06
	10	.31	Guaranty Bank Consent, dated May 8, 2006, to SAMCO Reorganization Agreement by and between Penson Worldwide, Inc., SAI Holdings, Inc. and Penson Financial Services, Inc. and SAMCO Capital Markets, Inc. and SAMCO Holdings, Inc.	S-1/A	333-127385		10	.27	5/9/06
	10	.32†	Amendment to Remote Processing Agreement between Penson Worldwide, Inc. and SunGard Data Systems Inc. dated July 10, 1995, as amended September 13, 1996 and August 1, 2002	8-K	001-32878		10	.10	7/31/06
	10	.33	First Amendment to Credit Agreement, dated the 29th day of September, 2006, to be effective as of May 26, 2006, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	8-K	001-32878		10	.1	10/3/06

				Incorporated by Reference					Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit			Date
	10	.34	Second Amendment to Credit Agreement, dated the 16th day of February, 2007, to be effective as of May 26, 2006, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	8-K	001-32878		10	.1	2/16/07
	10	.35	Letter Agreement dated February 16th, 2007, amending that certain Purchase Agreement dated as of November 6, 2006 among Goldenberg Hehmeyer & Co., Goldenberg LLC, Hehmeyer LLC, GH Trading LLC, GHCO Partners LLC, Christopher Hehmeyer, Ralph Goldenberg, SAI Holdings, Inc., GH1 Inc. and GH2 LLC and Christopher Hehmeyer in his capacity as Seller’s Representative	8-K	001-32878		10	.2	2/16/07
	10	.36	Third Amendment to Credit Agreement, dated the 5th day of April, 2007, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	10-Q	001-32878		10	.1	5/11/07
	10	.37	Fourth Amendment to Credit Agreement, dated the 31st day of July, 2007, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	10-Q	001-32878		10	.1	8/14/07
	10	.38†	Fifth Amendment to Credit Agreement, dated the 19th day of September, 2007, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	10-Q	001-32878		10	.1	11/13/07
	10	.39†	Schedule E, dated July 23, 2007, to the Remote Processing Agreement between Penson Worldwide, Inc. and SunGard Data Systems Inc. dated July 10, 1995, as amended September 13, 1996 and August 1, 2002	10-Q	001-32878		10	.2	11/13/07
	10	.40	Sixth Amendment to Credit Agreement, dated the 5th day of December, 2007, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	10-K	001-32878		10	.40	3/14/08
	10	.41+	2008 Restricted Stock Bonus Incentive Plan	8-K	001-32878		10	.1	6/25/08
	10	.42	Seventh Amendment to Credit Agreement, dated the 21st day of July, 2008, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	8-K	001-32878		10	.1	7/25/08
	10	.43*	Settlement Agreement dated November 5, 2008, by and among SAMCO Holdings, Inc., SAMCO Financial Services, Inc. and SAMCO Capital Markets, Inc., on the one hand, and Penson Worldwide, Inc. and Penson Financial Services, Inc., on the other hand

				Incorporated by Reference					Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit			Date
	10	.44+*	Amended and Restated Executive Employment Agreement between the Company and Daniel P. Son, dated December 31, 2008
	10	.45+*	Amended and Restated Executive Employment Agreement between the Company and Philip A. Pendergraft, dated December 31, 2008
	10	.46+*	Amendment to Compensation Letter between the Company and Andrew B. Koslow, dated December 31, 2008
	10	.47+*	Amendment to Compensation Letter between the Company and Kevin W. McAleer, dated December 31, 2008
	11	.1	Statement regarding computation of per share earnings	S-1/A	333-127385		11	.1	5/1/06
	21	.1*	List of Subsidiaries
	23	.1*	Consent of BDO Seidman, LLP
	31	.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	31	.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	32	.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	32	.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

*	Filed herewith.
+	Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
†	Confidential treatment has been requested for certain information contained in this document. Such information has been omitted and filed separately with the Securities and Exchange Commission.

EX-10.43

Exhibit 10.43

SETTLEMENT AGREEMENT

     This SETTLEMENT AGREEMENT (this “Settlement Agreement”) is made and entered into this 5th day of November, 2008 by and between SAMCO Holdings, Inc. (“Holdings”), SAMCO Financial Services, Inc. (“SFS”), and SAMCO Capital Markets, Inc. (“SCM,” and together with Holdings and SFS, “SAMCO”), on the one hand, and Penson Worldwide, Inc. (“PWI”) and Penson Financial Services, Inc. (“PFSI,” and together with PWI, “Penson”), on the other hand.

W I T N E S S E T H:

     WHEREAS, each of SAMCO and Mr. Roger J. Engemoen, Jr. (“Guarantor”) are parties in one or more of the proceedings listed on Exhibit A (the “Cases”) or have indemnification obligations owing to Penson in respect thereof; and

     WHEREAS, PWI and PFSI on their own behalf and on behalf of their respective affiliates, predecessors, representatives, shareholders, officers, directors, agents, successors and assigns (all of whom are, together with PFSI and PWI, referred to herein collectively as the “Penson Parties”), on the one hand, and Holdings, SFS and SCM on their own behalf and on behalf of their respective affiliates, predecessors, representatives, shareholders, officers, directors, agents, successors and assigns (all of whom are, together with Holdings, SFS and SCM, referred to herein collectively as the “SAMCO Parties”), desire to set forth below the terms on which the parties will, upon full and complete satisfaction of the terms of this Settlement Agreement, resolve and satisfy their obligations to each other to the extent set forth in this Settlement Agreement;

     NOW, THEREFORE, in consideration of the payments, promises, guaranties, covenants and agreements as set forth below and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agree as follows:

     1. SAMCO Payments and Guaranty. In connection with the resolution of potential disputes between certain SAMCO Parties and Penson Parties, each of the SAMCO Parties agrees and acknowledges that any and all payments made by the SAMCO Parties to PFSI under Section 1 are made against undisputed obligations due and owing to one or more of the Penson Parties by one or more of the SAMCO Parties and, accordingly, such payments shall not be returned, nor shall any SAMCO Party make claim against any such payment after it has been delivered to PFSI. However, to the extent partial payments are made, such payments shall be credited towards any obligations that are due and owing. Each of the SAMCO Parties hereby covenants to do the following:

• No later than February 15, 2009, the SAMCO Parties, or any one or more of them, shall pay to PFSI an aggregate of $714,000 in immediately available funds (the “First Payment”);

• In addition to the First Payment and the waiver of rights with respect to the LLC

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Funds (defined below), the SAMCO Parties, or any one or more of them, shall also pay to PFSI, as settlement payments in respect of the SAMCO Parties’ obligations to indemnify the Penson Parties in respect of the Cases, an aggregate additional amount of $2,165,243, of which $600,000 shall be paid no later than June 15, 2009, and $1,565,243 shall be paid no later than December 31, 2009 (such amounts, together with the First Payment and the waiver with respect to the LLC Funds, referred to herein as the “Settlement Payment”) (notwithstanding anything to the contrary herein, to the extent any indemnification obligations of any SAMCO Parties shall be less than the amount of any Settlement Payment due at the dates set forth herein, the date such portion of such Settlement Payment shall be due shall be deferred to the date when indemnification obligations have matured and are at least equal to the Settlement Payment due, it being further understood and agreed that the SAMCO Parties obligations hereunder shall not be deemed to have been completed until all of the Settlement Payment has been timely received by the applicable Penson Parties); and

•

Contemporaneously with the execution and delivery of this Settlement Agreement, Guarantor shall execute and deliver to PFSI the Guaranty, in the form attached hereto as Exhibit B (the “Guaranty”) and shall fully and completely pay and perform all of his obligations thereunder.

For purposes of this Settlement Agreement, the term “LLC Funds” shall mean an amount equal to $86,000, which PFSI owes to the SAMCO Parties in connection with the SAMCO Parties’ previous assignment to PFSI of the right to receive all economic interests attributable to PFSI’s interest in each of Capital Management, LLC and IBC Associates, L.L.C. The LLC Funds shall be deemed to have been paid in full as of the date of this Settlement Agreement.

     2. Release by the Penson Parties. Effective as of the date hereof, the Penson Parties shall be deemed to have waived any and all rights any Penson Party may hold, have held or could hold against any SAMCO Party, including, but not limited to any liability created by any indemnity, solely with respect to (i) any claims brought by persons or entities solely in their capacity as SFS customers, arising from events alleged to have occurred in the Cases; and (ii) any future claims brought by persons or entities solely in their capacity as SFS customers based upon substantially similar facts to those alleged to have occurred in one or more of the Cases, involving substantially the same causes of action and either the alleged actions and/or omissions of (A) Mr. Solow and/or his employees and/or other independent contractors with which he was associated while he was an independent contractor for SFS as in the Cases (whether or not such person or parties are actually impleaded in the Cases) or (B) other parties actually impleaded in one or more of the Cases. It is expressly agreed and acknowledged by the parties that (A) this Settlement Agreement in no way limits any claim the Penson Parties may have against any one or more of the SAMCO Parties with respect to any other matter not expressly covered by this Settlement Agreement and, notwithstanding the immediately preceding sentence to the contrary, the Penson Parties may continue to implead and/or assert cross claims against SFS into the Cases (and any future cases) and SFS shall not resist or refuse to be so impleaded on the basis of this Settlement Agreement, and (B) the SAMCO Parties shall otherwise remain obligated to pay (I)

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their own defense costs with respect to the Cases (and any future cases) and (II) any judgments or arbitral awards by any court or arbitration panel actually rendered against the SAMCO Parties in the Cases (and any future cases) for acts or conduct caused or attributable to the SAMCO Parties.

     3. Release by the SAMCO Parties. Effective as of the date hereof, the SAMCO Parties each shall be deemed to have waived any and all rights any SAMCO Party may hold, have held or could hold against any Penson Party, including, but not limited to any liability created by any indemnity, arising from (i) events alleged to have occurred in the Cases; and (ii) any future liability or obligation of the Penson Parties, or any of them, relating to any future claims brought by persons or entities solely in their capacity as SFS customers based upon substantially similar facts to those alleged to have occurred in one or more of the Cases, involving substantially the same causes of action and either the alleged actions and/or omissions of (A) Mr. Solow and/or his employees and/or other independent contractors with which he was associated while he was an independent contractor for SFS as in the Cases (whether or not such person or parties are actually impleaded in the Cases), or (B) other parties actually impleaded in one or more of the Cases. It is expressly agreed and acknowledged by the parties that (A) this Settlement Agreement in no way limits any claim the SAMCO Parties may have against any one or more of the Penson Parties with respect to any other matter not expressly covered by this Settlement Agreement, and (B) the Penson Parties shall otherwise remain obligated to pay any judgments or arbitral awards by any court or arbitration panel actually rendered against the Penson Parties in the Cases (and any future cases) for acts or conduct caused or attributable to the Penson Parties.

     4. Financial Statements. Each of the SAMCO Parties shall deliver to PWI financial statements regarding such SAMCO Party’s financial operations and condition on a monthly basis, not later than the 25th day after the end of each month, which financial statements shall be certified to be true and correct by an officer of the applicable SAMCO Party. Such certified financial statements shall include all financial information reasonably requested by PWI. PWI’s rights under this Section 4 shall be in addition to, and not in limitation of, any contractual or other rights currently held by PWI or any of the Penson Parties.

     5. Termination. The Penson Parties may terminate this Settlement Agreement and, without limitation, revoke any relief afforded to the SAMCO Parties pursuant to Section 2, without liability and without returning any payments made to any of them hereunder: (i) upon written notice, should any of the SAMCO Parties and Guarantor default on any of their respective obligations under this Settlement Agreement or the Guaranty at any time; or (ii) immediately, without notice, upon SCM, Holdings or Guarantor becoming insolvent or filing for, or becoming subject to, bankruptcy proceedings or proceedings similar to bankruptcy and payments owed pursuant to this Settlement Agreement and/or the Guaranty are not timely paid as set forth in herein and therein (the occurrence of any of the foregoing events shall be deemed a “SAMCO Event of Default”). In addition to all other rights and remedies of the Penson Parties, should a SAMCO Event of Default occur relating to any payment required to be made pursuant to this Settlement Agreement, the SAMCO Parties shall pay interest on such unpaid amount at the Brokers Call Rate (announced from time to time by PFSI as applicable to its

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customers and payable on the basis of a year comprised of 365 days) from the date such payment was to have been made by the Guarantor through the date such amount is been paid.

     6. No Prior Assignment of Claim. Each of the SAMCO Parties and Guarantor, on the one hand, and the Penson Parties, on the other hand, hereby represents and warrants that it has not assigned to any third party any claims, demands, actions and/or causes of action that would otherwise be covered by or the subject of this Settlement Agreement.

     7. Authority. Each of the signatories hereto hereby represents and warrants that it has the power and authority to enter into this Settlement Agreement.

     8. Successors and Assigns. This Settlement Agreement is binding on and for the benefit of the parties and their respective successors and assigns. This Settlement Agreement may not be assigned by any party except that the Penson Parties may assign this Settlement Agreement to any successor in interest. Prior to the satisfaction of the SAMCO Parties obligations under this Settlement Agreement, no SAMCO Parties may engage in any transaction which would reasonably be expected to significantly adversely affect the ability of the SAMCO Parties to perform their obligations under this Settlement Agreement.

     9. Amendment. This Settlement Agreement may not be changed except in writing signed by the parties against whose interest such change shall operate.

     10. Governing Law. This Settlement Agreement shall be governed by the laws of the State of Texas as to all matters, including but not limited to matters of validity, construction, effect and performance, exclusive of the principles of conflict of laws thereof.

     11. Jurisdiction. This Settlement Agreement is executed and performable in part in Dallas County, Texas. Exclusive venue for all lawsuits or claims arising from this Settlement Agreement shall be in the civil district courts of Dallas County, Texas, and each party hereto agrees to not bring any such action in the courts of any State or County.

     12. Notice. All notices and other communications required or permitted by this Settlement Agreement shall be in writing and shall be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the other parties):

SAMCO Parties: Roger J. Engemoen, Jr.
6805 Capital of Texas Hwy, Suite 350
Austin, Texas 78731
Fax no.: (512) 231-8526

and

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To: Roger J. Engemoen, Jr., as guarantor
1907 Georgia Landing Cove
Austin, Texas 78746

Penson Parties: Attn: Audit Committee Chairman
1700 Pacific Avenue, Suite 1400
Dallas, Texas 75201
Fax no.: (214) 765-1164

with a copy
to: Andrew B. Koslow
1700 Pacific Avenue, Suite 1400
Dallas, Texas 75201
Fax no.: (214) 765-1164

     13. Construction. In the event that any terms of this Settlement Agreement become subject to construction by any court or arbitration panel, the terms of the Settlement Agreement shall be construed reasonably, equally, equitably, and fairly with regard to all parties, and shall not be strictly construed against the released parties or against any party as the drafting party.

     14. Counterparts. This Settlement Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Settlement Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. The exchange of copies of this Settlement Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Settlement Agreement as to the parties and may be used in lieu of the original Settlement Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

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     IN WITNESS WHEREOF, the undersigned have executed this Settlement Agreement as of the date first above written.

SAMCO Holdings, Inc.
	By:	/s/ Roger J. Engemoen, Jr.
	Name:	Roger J. Engemoen, Jr.
	Title:	Chairman
SAMCO Financial Services, Inc.
	By:	/s/ S. Jim Allen, Jr.
	Name:	/s/ S. Jim Allen, Jr.
	Title:	CEO
SAMCO Capital Markets, Inc.
	By:	/s/ Roger J. Engemoen, Jr.
	Name:	Roger J. Engemoen, Jr.
	Title:	Chairman

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Penson Worldwide, Inc.
	By:	/s/ Andrew B. Koslow
	Name:	Andrew B. Koslow
	Title:	Authorized Signatory
Penson Financial Services, Inc.
	By:	/s/ Andrew B. Koslow
	Name:	Andrew B. Koslow
	Title:	Authorized Signatory

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Exhibit A

Cases

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Exhibit B

GUARANTY

This Guaranty (the “Guaranty”) dated as of November 5, 2008, is made by the undersigned (“Guarantor”) in favor of Penson Financial Services, Inc. (“Penson”).

Guarantor has agreed to execute this Guaranty in favor of Penson as Guarantor will derive benefits from Penson’s entry into the Settlement Agreement with SAMCO Holdings, Inc., SAMCO Capital Markets, Inc. and SAMCO Financial Services, Inc. (the “SAMCO Affiliates”) dated the date hereof (the “Settlement Agreement”). Accordingly, to induce Penson to enter into the Settlement Agreement and to release obligations owing by any SAMCO Affiliates with respect to the Cases, Guarantor agrees as follows:

1.	Guaranty. Guarantor hereby unconditionally and irrevocably guarantees to Penson, and its successors and assigns, the full and prompt payment of any and all amounts owed by any of the SAMCO Affiliates to Penson, pursuant to the Settlement Agreement a copy of which is attached hereto as Exhibit A. Guarantor’s Obligations (defined below) shall be due no later than 30 days after any default by any SAMCO Affiliate under the Settlement Agreement. Interest on all amounts due hereunder shall accrue if payment is not made when due by Guarantor at the Broker’s Call rate announced from time to time by Penson with respect to its clients (payable on the basis of a year comprised of 365 days) from the date such payments are due until the date paid. Notwithstanding anything to the contrary contained herein Guarantor shall never be obligated to pay more than an aggregate amount of $2,000,000 hereunder plus (i) interest on the amounts demanded by Penson at the rate provided for herein from the date of Penson’s demand hereunder until paid in full, to the extent accrued, and (ii) all fees and expenses of Penson incurred in connection with enforcing its rights against Guarantor hereunder, including reasonable attorney fees (collectively, the “Obligations”).
2.	Guarantor’s Liability. Guarantor’s liability hereunder shall be irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance that might constitute a discharge of a surety or guarantor other than the indefeasible payment and performance in full of the Obligations. Guarantor agrees as follows: (i) Guarantor’s liability hereunder shall not be contingent upon Penson’s exercise of any remedy it may have against any other person or entity (“Person”) or against any collateral for any Obligations, other than the thirty day grace period set forth herein; (ii) Guarantor’s payment of a portion, but not all, of the Obligations shall in no way limit or affect Guarantor’s liability for any unsatisfied portion of the Obligations; (iii) Guarantor’s liability shall remain in full force and effect and not be impaired or affected by any (A) insolvency, bankruptcy, reorganization, composition, assignment, liquidation or dissolution of any Person as allowed under applicable law, (B) limitation, discharge or cessation of liability of any Person for any Obligations under applicable law; (C) assignment or other transfer, in whole or in part, of any of Penson’s rights or interests under this Guaranty; and (D) claim, defense or setoff, other than that of prior performance that any Person may assert, including any defense of incapacity or lack of authority to execute a document as allowed under applicable law.
3.	Consents. Guarantor hereby consents and agrees that, without notice to or assent from Guarantor: (i) the time, manner, place or terms of any payment and/or performance under any agreement with any SAMCO Affiliate may be extended or changed; and (ii) Penson may release, in whole or in part, any Person liable for any part of the Obligations or exercise or refrain from exercising any right or remedy of Penson even if the same results in the elimination of any right of subrogation or other right of Guarantor; in each case as Penson deems advisable without impairing or affecting this Guaranty.
4.	Obligations Not Affected; Waivers. Guarantor’s covenants, agreements and obligations under this Guaranty shall in no way be released, diminished, reduced, impaired or otherwise affected by reason of the happening from time to time of any of the following things, for any reason, whether by voluntary act, operation of law or order of any competent governmental authority and whether or not Guarantor is given any notice or is asked for or gives any further consent (all requirements for which, however arising, Guarantor hereby waives): (i) any right to require Penson to proceed against another Person; or (ii) the defense of the statute of limitations in any action hereunder and any right of set off or counterclaim or other defense or benefit afforded by applicable law in favor of sureties or guarantors (iii) failure, omission, delay, neglect, refusal or

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	lack of diligence by Penson to assert, enforce, give notice of intent to exercise—or any other notice with respect to—or exercise any right, privilege, power or remedy conferred Penson or any other Person in any of the Cases or by law or action on the part of Penson or any other Person granting indulgence, grace, adjustment, forbearance or extension of any kind to any Person, or (iv) death, legal incapacity, disability, voluntary or involuntary liquidation, dissolution, sale of any collateral, marshaling of assets and liabilities, change in corporate or organizational status, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt or other similar proceedings of or affecting any SAMCO Affiliate or any of the assets of any SAMCO Affiliate, even if any of the indebtedness of any SAMCO Affiliate is thereby rendered void, unenforceable or uncollectible. The Obligations shall conclusively be deemed to have been contracted and permitted to exist in reliance upon this Guaranty. Guarantor waives diligence, presentment, protest, demand for payment, notice of default dishonor or nonpayment to or upon any other Person in respect of the Obligations.
5.	Subrogation. Until all payments required under the Settlement Agreement have been made, Guarantor shall not have or directly or indirectly exercise, (i) any rights of subrogation, or (ii) any rights of contribution, indemnification, reimbursement or suretyship claims arising out of this Guaranty. If any amount shall be paid to Guarantor on account of the forgoing rights at any time when any Obligations are outstanding, such amount shall be held in trust for Penson’s benefit and shall be forthwith paid to Penson in respect of the Obligations. It is expressly agreed and acknowledged that in no way shall this Guaranty affect Guarantor’s rights to receive any (A) director and officer or other insurance protections afforded to him through policies held by any of Penson or its affiliates for any claims against him in his individual capacity including, but not limited to, insurance for the Claims set forth in Exhibit A to the Settlement Agreement or (B) any indemnity payments based on indemnification rights existing by agreement or under applicable law.
6.	Continuing Guaranty; Set Off. Guarantor agrees that this Guaranty is a continuing guaranty relating to all Obligations and acknowledges that this Guaranty shall remain in full force and effect even during periods when no Obligations exist. To the extent any Obligation performed is rescinded, such Obligation shall be revived in full force and effect without reduction or discharge with respect to Guarantor. Penson shall also have the unlimited right to setoff any amounts owed to it by Guarantor against any obligation of Penson to Guarantor. This Guaranty is a guaranty of payment and not merely a guaranty of collection.
7.	Payments. All payments made by Guarantor shall be applied in such order as Penson shall elect. Guarantor shall make all payments without deduction, set off or counterclaim and Guarantor hereby waives any common law or contractual right of offset against Penson with respect to the Obligations. Penson shall not be required to provide notice with respect to any claim under this Guaranty but shall, upon Guarantor’s request, provide reasonable evidence of the occurrence of payments by Penson with respect to the Obligations created under this Guaranty. Obligations shall be deemed to arise 30 days after any default by any SAMCO Affiliate under the Settlement Agreement in accordance with the terms of the Settlement Agreement. Guarantor agrees that, if at any time all or any part of any payments previously received by Penson from Guarantor must be returned by Penson — or recovered from Penson — for any reason (including the order of any bankruptcy court), this Guaranty shall automatically be reinstated to the same effect as if the prior application had not been made.
8.	Financial Information/Other Covenants. Guarantor represents and warrants to Penson that (i) Guarantor has sufficient assets to pay the Obligations based on information previously provided to Penson and (ii) so long as this Guaranty is in effect, Guarantor shall furnish to Penson such information from time to time relating to Guarantor’s financial condition as Penson may reasonably request and will execute and deliver such further documents and perform such acts as Penson shall deem necessary to effectuate the purposes of this Guaranty and shall reasonably request. Guarantor acknowledges and agrees that, as of the date of the Guaranty until such time as Penson shall determine otherwise, Guarantor shall deliver such financial information monthly by no later than the 25th day after the end of each such month. Guarantor covenants to maintain at all times a Net Worth (as hereinafter defined) equal to at least $10,000,000. “Net Worth” means the gross fair market value of total assets exclusive of amounts due from related parties and excluding all intangibles less total liabilities, which liabilities include but are not limited to estimated taxes on asset appreciation and any reserves or offsets against losses, all calculated in accordance with generally accepted accounting principles. Guarantor further covenants not to incur any (A) indebtedness other than that set forth on Schedule 1 hereto except to the extent such indebtedness would not exceed $6,000,000 in the aggregate or (B) liens on any indebtedness other than as that set forth on Schedule 1 hereto except to the extent the amount of such secured indebtedness would not exceed $6,000,000 in the aggregate (the terms

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	“indebtedness” and ‘liens” shall be broadly interpreted, respectively, to mean all indebtedness of any kind (including, without limitation, pursuant to guaranties) and all liens and security interests of any kind.
9.	Notices/Costs and Expenses. All notices hereunder shall be in writing and shall be mailed, sent via telecopy or delivered by hand (i) if to Penson to 1700 Pacific Ave., Suite 1400, Dallas, TX 75201, att: General Counsel and Audit Committee Chairman, telecopy (214) 765-1164 ; and (ii) if to Guarantor, at or it its address or telecopy number set forth below its name on the signature page hereof, or, in each case, to such other address or telecopy number as such party shall have designated in writing to the other party. All notices shall be effective upon receipt. Guarantor agrees to pay on demand all costs and expenses of Penson and fees and disbursements of counsel in connection with the enforcement of this Guaranty.
10.	Binding Effect; Entire Agreement; Amendments; Severability. This Guaranty shall be binding upon Guarantor and its successors, assigns, personal representatives, heirs and legatees; provided that Guarantor shall not have the right to assign or transfer Guarantor’s rights or obligations hereunder without Penson’s prior written consent. This Guaranty constitutes the entire agreement of Guarantor with respect to the matters set forth herein and supersedes any prior oral or written agreement with respect thereto. This Guaranty may not be modified without a written instrument executed by Guarantor and Penson. Whenever possible, each provision hereof shall be interpreted as to be effective and valid under all applicable laws and regulations. If, however, any provision hereof shall be prohibited under any such law or regulation, it shall be deemed modified to conform to the minimum requirements of such law or regulation, or if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition without affecting the remaining provisions hereof.
11.	Governing Law; Consent to Jurisdiction. This Guaranty shall be governed by and construed in accordance with the laws of the State of Texas (without application of conflicts of laws principles). Any judicial proceeding brought by Guarantor against Penson on any dispute arising out of this Guaranty or any matter related hereto shall be brought solely in the appropriate state or Federal courts located in Dallas, Texas. Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the in personam jurisdiction of the state and Federal courts sitting in Dallas County, Texas, in each case with respect to any action or proceeding arising out of or relating to this Guaranty. Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty in any such court. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
12.	WAIVER OF JURY TRIAL. TO THE EXTENT ALLOWED BY APPLICABLE LAW, THE GUARANTOR AND PENSON EACH IRREVOCABLY WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON, ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE OBLIGATIONS.
13.	Relationship to SAMCO Affiliates. The value of the consideration received and to be received by Guarantor is reasonably worth at least as much as the liability and obligation of Guarantor incurred or arising under this Guaranty and all related agreements. Guarantor has determined that such liability and obligation may reasonably be expected to substantially benefit Guarantor directly or indirectly. Guarantor has had full and complete access to the underlying papers relating to the Obligations and all other papers executed by any obligor or any other Person in connection with the Obligations, has reviewed them and is fully aware of the meaning and effect of their contents. Guarantor is fully informed of all circumstances which bear upon the risks of executing this Guaranty and which a diligent inquiry would reveal. Guarantor has adequate means to obtain from SAMCO Affiliates on a continuing basis information concerning their financial condition, and is not depending on Penson to provide such information, now or in the future. Guarantor agrees that Penson shall have no obligation to advise or notify Guarantor or to provide Guarantor with any data or information,
14.	Guarantor Solvent. Guarantor is now solvent, and no bankruptcy or insolvency proceedings are pending or contemplated by or—to the best of Guarantor’s knowledge—against Guarantor. Guarantor’s liabilities and obligations under this Guaranty do not currently render Guarantor insolvent or cause Guarantor’s liabilities to exceed Guarantor’s assets.
15.	Guarantor Release. Effective as of the date of this Guaranty, Guarantor waives any and all rights he may hold, have held or could hold against any Penson Party (as defined in the Settlement Agreement), to recover any amount paid under this Guaranty or the Settlement Agreement, or any expense incurred under this

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Guaranty or the Settlement Agreement. It is expressly agreed and acknowledged that in no way shall this Guaranty affect Guarantor’s rights to receive any (A) director and officer or other insurance protections afforded to him through policies held by any of the Penson Parties for any claims against him in his individual capacity including but not limited to, the Cases set forth on Exhibit A to the Settlement Agreement, or (B) any indemnity payments based on indemnification rights existing by agreement or under applicable law.

IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the date first written above.

/s/ Roger J. Engemoen, Jr.
By: Roger J. Engemoen, Jr.

Address:
1907 Georgia Landing Cove
Austin, Texas 78746

/s/ Christine S. Engemoen
By: Christine S. Engemoen

[Spousal Consent]

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EX-10.44

Exhibit 10.44

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

     This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (the “EA”) is made and entered into this 31st day of December, 2008, by and among Daniel P. Son (the “Executive”), a resident of Texas, and Penson Worldwide, Inc., a Delaware corporation (the “Company”).

     WHEREAS, Executive is currently a party to an employment agreement with the Company dated April 21, 2006, as amended on June 19th, 2008, (the “Prior Agreement”).

     WHEREAS, the Company desires that Executive continue to be employed by the Company and Executive is willing to continue to be employed by the Company; and

     WHEREAS, the Company and Executive desire to amend and restate the terms and conditions of the Prior Agreement in order to bring those terms and conditions into documentary compliance with the final Treasury Regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and continue Executive’s employment with the Company in accordance with those amended and restated terms and conditions.

     In consideration of the mutual agreements hereinafter set forth, Executive and the Company have agreed and do hereby agree as follows:

I. Employment.

     A. Executive’s employment pursuant to this EA is conditioned on Executive’s signature agreement to, and ongoing compliance with the Confidential Information, Invention Assignment and Arbitration Agreement, which is attached as Exhibit A hereto (“Confidential Information Agreement”).

     B. Commencing as of the date hereof (the “Effective Date”), and for an indefinite period thereafter, Executive shall be employed pursuant to this EA by the Company, or by a designated subsidiary of the Company (the Company or such subsidiary, as the case may be, that employs Executive will be hereinafter referred to as the “Employer”). Executive’s employment pursuant to this EA shall continue for an indefinite period, until terminated by either Executive or Employer.

     C. Subject only to the provisions of Section VII, Executive’s employment shall be “at-will,” meaning that either Executive or Employer may terminate it at any time, with or without any advance notice and with or without any particular reason or cause or advance procedures. It also means that Executive’s job duties, responsibilities, title, reporting level, regular place of employment, compensation, benefits and Employer’s policies and procedures can be changed, in the sole discretion of Employer, at any time, with or without advance notice and with or without any particular reason or cause or advance procedures.

     D. In agreeing to be employed pursuant to this EA, Executive represents and warrants that Executive has not previously entered into, and in the future shall not enter into, any agreement, either written or oral, that conflicts with any of Executive’s obligations under this EA or may be an impediment to Executive providing services under this EA.

II. Position.

     A. Executive shall be employed by Employer on a regular full-time basis, with the job title of President, reporting to the Board of Directors. Executive shall have such job duties and responsibilities commensurate with such position, which may change as Employer’s business needs and market conditions change from time-to-time.

____ Daniel P. Son
Executive Employment Agreement

Page 1 of 13

     B. Executive’s initial, regular place or base of employment shall be at the Company’s principal office in Dallas, Texas.

     C. During Executive’s employment with Employer, Executive shall devote Executive’s full business time, best efforts, abilities, energies and skills to the good faith performance of Executive’s job duties and responsibilities hereunder, and shall perform said duties and responsibilities at all reasonable times and places in accordance with reasonable directions and requests made by the Employer consistent with Executive’s position and Employer’s business needs as determined by Employer. Executive shall not engage in any other employment, business, or business-related activity unless Executive receives prior written approval from Employer’s Board of Directors to hold such outside employment or engage in such business or activity, which written approval shall not be unreasonably withheld if such outside employment, business or activity would not in any way be competitive with the business or proposed business of Employer or otherwise conflict with or adversely affect in any way Executive’s ability to fulfill Executive’s obligations under this EA. Executive shall not be required to receive prior written approval for activities related to family investments or charitable organizations.

III. Cash Compensation.

     A. Salary Compensation.

          1. Effective July 1, 2008, Executive shall earn and be paid a salary, at a weekly rate of Ten Thousand Five Hundred Seventy-Six Dollars and Ninety-Three Cents ($10,576.93) which is equivalent to Five Hundred Fifty Thousand Dollars and No Cents ($550,000.00) per annum.

          2. Executive’s salary shall be paid at periodic intervals in accordance with Employer’s regular payroll schedule and practices.

          3. Executive’s salary rate shall be reviewed from time-to-time, generally on an annual basis, and may be changed by the Compensation Committee of Company’s Board of Directors (the “Compensation Committee”) in its sole discretion.

     B. Annual Bonus Compensation Opportunities. As a performance and retention incentive, Executive shall be eligible to earn an annual bonus award. The terms and conditions of each such annual bonus award opportunity shall be provided in writing to Executive not later than January 31 of the calendar year for which the bonus is to be earned and shall be attached to this Agreement each year as Attachment 1. However, the following will apply to each annual bonus award opportunity made available to Executive during Executive’s employment with Employer.

          1. Each annual bonus award opportunity will be conditioned on Employer’s achievement of calendar year revenue and net income objectives, and any other objectives, established in the discretion of the Board for the calendar year.

          2. Each annual bonus award opportunity also will be conditioned on Executive’s full-time active services to Employer continuously through the calendar year. However, should Executive be terminated without cause, leave for good reason, die or become permanently disabled, Executive or his estate will be entitled to all bonus compensation that has been earned in accordance with the terms of the then applicable annual bonus award opportunity but not yet paid at the time of Executive’s departure, death or permanent disability, including any bonus compensation earned for partial portions of a calendar year.

          3. Any bonus awarded to Executive pursuant to this Section III. B shall be paid to Executive in accordance with the terms of Attachment 1; however, such bonus shall be

____ Daniel P. Son
Executive Employment Agreement

Page 2 of 13

paid to Executive not later than the 15th day of the third calendar month following the close of the calendar year for which such bonus is earned.

          4. The Employer may provide for periodic progress bonus awards against the total annual bonus opportunity.

     C. Discretionary Bonuses. To the extent Employer exceeds both its revenue and its net income and/or any other objectives established for a calendar year by the Board, Executive shall be eligible for a discretionary bonus award, which would be in addition to Executive’s annual bonus award opportunity. Whether to grant such additional bonus award and, if so, in what form and amount, shall be determinations made in the sole discretion of the Board. Any such discretionary bonus shall be paid to Executive not prior to January 1 of the calendar year following the calendar year for which such bonus is earned and not later than the 15th day of the third calendar month following the close of the calendar year for which such bonus is earned

     D. Withholdings. All cash compensation paid to Executive pursuant to this EA, including any Severance Benefits per Section VII.B., shall be subject to (i) any and all applicable federal, state and local income and employment withholding taxes; (ii) other amounts required to be deducted or withheld by Employer under applicable law or order requiring the withholding or deduction of amounts otherwise payable as compensation or wages to employees; (iii) such other withholdings and deductions as may be allowed by applicable law; and (iv) such other withholdings and deductions as may be authorized in writing by Executive.

IV. Employee Benefits & Expenses.

     A. Employee Benefits. Executive shall be eligible to participate in all employee benefits and benefit plans generally made available to executive employees of Employer from time-to-time, subject to the terms, conditions and relevant qualification criteria for such benefits and benefit plans. Employer, in its discretion, may change from time-to-time the employee benefits and benefit plans it generally makes available to its executive employees.

     B. Expenses & Expense Reimbursement. Executive shall be entitled to reimbursement from Employer of all reasonable and necessary business, travel and entertainment expenses incurred by Executive in the performance of Executive’s job responsibilities hereunder, subject to the expense reimbursement policies and procedures of Employer in effect from time-to-time. Executive must submit proper documentation for each such expense within one hundred twenty (120) days after the later of (i) Executive’s incurrence of such expense or (ii) Executive’s receipt of the invoice for such expense. If such expense qualifies hereunder for reimbursement, then the Employer shall reimburse Executive for that expense within thirty (30) business days thereafter. In no event shall any such expense be reimbursed later than the close of the calendar year following the calendar year in which is incurred. The amount of reimbursement to which Executive becomes entitled in any calendar year will not affect the amount of expenses eligible for reimbursement hereunder in any other calendar year. In addition, none of Executive’s rights to such reimbursement may be liquidated or exchanged for any other benefit or payment.

V. Equity

     A. Stock Options & Change in Control. Executive will be eligible for stock option and other equity grants in the discretion of the Compensation Committee. The stock option agreement for each stock option granted to Executive shall contain the following terms relative to a “Change in Control” (defined in Section VI.B.2 below).

          1. Immediately upon a “Change in Control,” twenty-five percent (25%) of all of Executive’s then-outstanding option shares, under each stock option granted to Executive,

____ Daniel P. Son
Executive Employment Agreement

Page 3 of 13

shall immediately vest and be exercisable, unless Executive’s then-outstanding options are not assumed by the surviving entity in such Change in Control transaction, in which case one hundred percent (100%) of Executive’s then-outstanding option shares, under all stock options granted to Executive, shall immediately vest and be exercisable.

          2. If Executive’s employment with the Company or a successor is terminated “Without Cause” (defined in Section VI.C, below) by the Company or its successor within 12 months after the effective date of a “Change in Control,” or if Executive terminates his employment with the Company or its successor for “Good Reason” within 12 months after the effective date of a “Change in Control”, then one hundred percent (100%) of Executive’s then-outstanding option shares, under each stock option granted to Executive, shall immediately vest and be exercisable as of the effective date of Executive’s termination of employment (“Termination Date”) provided that the conditions of Section VII.A.2 and Section VII.B.2 (a)-(b) below have been satisfied by Executive.

     B. Stock Options at Death or Permanent Disability. The terms of each stock option granted to Executive shall provide that one hundred percent (100%) of Executive’s then-outstanding option shares shall immediately vest and become exercisable in the event of Executive’s death or permanent disability.

VI. Termination of Employment

Although Executive’s employment shall be “at-will,” termination of the employment relationship between Executive and Employer shall be classified in one of the following categories, for the limited purpose only of the Severance Benefit Opportunity of Section VII.B, below:

     A. By Employer for Cause. Termination of Executive’s employment by Employer for “Cause” means a termination by Employer of Executive’s employment for any of the following reasons, upon written notice to Executive at any time:

          1. Executive’s conviction or plea of nolo contendre to a felony offense or crime of violence or dishonesty; or

          2. The Company’s good faith determination, upon majority vote of Company’s Board of Directors, that:

               a. Executive has engaged in theft, fraud, embezzlement or dishonest conduct with respect to any property or funds of Employer, any affiliate, subsidiary or parent of Employer, or of any vendor, partner, employee or customer of Employer that is harmful to Employer, to an affiliate, subsidiary or parent of Employer or to the business, operations, reputation or business prospects of any of them;

               b. Executive has breached any of his obligations under the Confidential Information Agreement signed by Executive as a condition of this EA;

               c. Executive has engaged in an act of misconduct which has had an adverse effect on the business, operations, reputation or business prospects of Employer or of an affiliate, subsidiary or parent of Employer;

               d. Executive has failed to adequately perform the material duties or fulfill the responsibilities of Executive’ position; provided, however, that Employer shall have given written notice to Executive, and Executive shall have had a period of thirty (30) days within which to cure/remedy the failure(s), described in such written notice giving rise to possible termination for Cause under this Section VI.A.2.d; or

____ Daniel P. Son
Executive Employment Agreement

Page 4 of 13

               e. Executive has breached one or more of Executive’s other obligations under this EA; provided, however, that Employer shall have given written notice to Executive, and Executive shall have had a period of thirty (30) days within which to cure/remedy the breach, described in such written notice, giving rise to possible termination for by Employer for Cause under this Section VI.A.2.e.

     B. By Executive for Good Reason.

          1. Termination of Executive’s employment by Executive shall qualify as a termination by Executive for “Good Reason” if all of the following conditions are met:

               a. Executive shall have given advance written notice of termination to Employer (“Notice”), in accordance with Section VIII.H below, which includes the following:

                    (1) a description of the act, omission or breach giving rise to the Notice, and

                    (2) a date on which Executive intends the termination to be effective (“Termination Date”), that is no earlier than 30 days after the date the Notice is delivered to the Employer;

               b. The act, omission or breach described in the Notice is one of the following:

                    (1) A material reduction, without Executive’s consent, of Executive’s salary rate or bonus award opportunity, unless the salary rates of all Employer’s executive-level employees also have been reduced by at least the same percent by which Executive’s salary rate has been reduced. For purposes of the foregoing, a reduction in Executive’s salary rate or bonus award opportunity by more than ten percent (10%) shall be deemed to be a material reduction;

                    (2) A material relocation, without Executive’s consent, of Executive’s regular place or base of employment. For purposes of the foregoing, a change of the geographic location of Executive’s regular place or base of employment by more than fifty (50) miles shall be deemed to be a material change; or

                    (3) A material breach by Employer of one or more of its obligations under this EA;

               c. The act, omission or breach described in the Notice first occurred:

                    (1) during the 12 months after the effective date of a “Change in Control” of the Company and

                    (2) no earlier than 90 days before the date the Notice is delivered to the Employer; and

               d. The Employer failed to remedy, before the Termination Date, the act, omission or breach described in the Notice.

          2. A “Change in Control” means a change in the ownership or control of the Company, effected through any of the following transactions first occurring after the Company’s IPO, and excluding the Company’s IPO:

               a. a merger, consolidation or reorganization approved by the Company’s stockholders, unless securities representing more than fifty percent (50%) of the total

____ Daniel P. Son
Executive Employment Agreement

Page 5 of 13

combined voting power of the outstanding voting securities of the successor entity are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the outstanding voting securities of the Company immediately prior to such transaction;

               b. any stockholder-approved sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company; or

               c. the acquisition, directly or indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities.

     C. Without Cause. Executive’s employment is terminated “Without Cause” if it is terminated in any of the following circumstances:

          1. due to Executive’s death;

          2. due to Executive’s “Disability” which shall mean a termination upon written notice, or on such prospective date specified in such notice, delivered by the Employer to Executive, due to Executive’s inability, either with or without reasonable accommodation, by reason of any physical or mental injury, illness or impairment, to substantially perform the essential functions required of Executive under this EA for a period of six (6) months during any rolling 12 month period;

          3. upon any notice, written notice, or on such prospective date specified in such notice, delivered by the Employer to Executive, for a reason other than any of the reasons described as “Cause” in Section VI.A above; or

          4. upon written notice, or on such prospective date specified in such notice, delivered by Executive to the Employer, for a reason other than reasons and the conditions that qualify as “Good Reason” under Section VI.B.1, above.

VII. Obligations Upon Termination.

     A. Any Termination. In addition to any other obligations that may apply under the Confidential Information Agreement and/or under this EA, the Parties shall have the following obligations upon any termination of their employment relationship pursuant to this EA:

          1. Employer:

               a. Employer shall pay Executive (or Executive’s estate) any unpaid cash compensation earned by Executive pursuant to this EA through the Termination Date; and

               b. Employer shall allow Executive and/or Executive’s dependents, at their sole cost and expense, to continue participation after the Termination Date in those group health benefit plans in which Executive and/or Executive’s dependents are entitled to participate pursuant to the terms and conditions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”).

               c. Employer shall allow Executive and/or Executive’s estate, at their sole cost and expense, to exercise all of Executive’s vested option shares, including those vested

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consistent with Section V.B, in accordance with the terms and conditions of the applicable stock option plan and stock option agreement that govern such option shares.

          2. Executive:

               a. No later than fifteen (15) days after the Termination Date, Executive shall return to Employer all items of property that had been provided for Executive’s use during employment with Employer or with any of its predecessors, or had been paid for by Employer or any of its predecessors, and

               b. No later than fifteen (15) days after the Termination Date, Executive shall return to Employer all documents created or received during the course of Executive’s employment with Employer or with any of its predecessors, except Executive may retain Executive’s personal copies of documents evidencing Executive’s hire, compensation, benefits, stock options, this EA, the Confidential Information Agreement and any documents that may have been received by Executive as a stockholder of the Company.

     B. Severance Benefit Opportunity. Subject to the conditions of Section VII.B.2 below, Employer shall provide Severance Benefits to Executive for the Severance Period in the event that Executive’s employment with Employer (i) is terminated by Employer without Cause or (ii) is terminated by Executive for Good Reason. Such Severance Benefits, if and to the extent provided, are not compensation for past services or labor performed by Executive, but to preserve the goodwill existing between the Parties, to resolve any disputes or disagreements that may exist between them relating to Executive’s employment and the termination thereof, and to assist Employer and Executive to move onto other business and employment opportunities, respectively.

          1. Severance Benefits during Severance Period. The “Severance Period” shall extend for twelve (12) months. It shall commence on the first pay date within the sixty (60)-day period measured from the date of Executive’s “Separation from Service” (as defined in Section VII.B.3) due to his termination without Cause or his resignation for Good Reason. “Severance Benefits” shall consist of the following:

               a. Post-Termination Payments. Periodic payments at Executive’s weekly salary rate in effect just prior to the time of the act or omission resulting in Executive’s termination (“Severance Payments”). Such payments shall be paid during the Severance Period at periodic intervals in accordance with Employer’s regular payroll schedule and practices.

               Any salary continuation payments to which Executive becomes entitled in accordance with this Section VII.B.1 shall be treated as a right to a series of separate payments for purposes of Section 409A of the Code, and each such payment that becomes due and payable during the period commencing with the date of Executive’s Separation from Service and ending on March 15 of the succeeding calendar year is hereby designated a “Short-Term Deferral Payment” and shall be paid during that period.

               b. COBRA Premium Payments. Provided Executive and/or his dependents are eligible and timely elect to continue their healthcare coverage under the Company’s group health plan pursuant to their rights under COBRA, Employer will reimburse Executive for the costs he incurs to obtain such continued coverage for himself and his eligible dependents (collectively, the “Coverage Costs”). In order to obtain reimbursement for such Coverage Costs, Executive must submit appropriate evidence to Employer of each periodic payment within sixty (60) days after the payment date, and Employer shall within thirty (30) days after such submission reimburse Executive for that payment. During the period such medical care coverage remains in effect hereunder, the following provisions shall govern the arrangement: (a) the amount of Coverage Costs eligible for reimbursement in any one calendar year of such coverage shall not affect the amount of Coverage Costs eligible for reimbursement in any other

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calendar year for which such reimbursement is to be provided hereunder; (ii) no Coverage Costs shall be reimbursed after the close of the calendar year following the calendar year in which those Coverage Costs were incurred; and (iii) Executive’s right to the reimbursement of such Coverage Costs cannot be liquidated or exchanged for any other benefit. To the extent the reimbursed Coverage Costs constitute taxable income to Executive, Employer shall report the reimbursement as taxable W-2 wages and collect the applicable withholding taxes, and any remaining tax liability shall be Executive’s sole responsibility.

          2. Severance Benefit Conditions & Limitations.

               a. In order to receive any Severance Benefits, Executive must execute a Post-Termination General Release of All Claims Agreement, in a form provided by Employer that is substantially similar in all material respects to Exhibit B hereto, which is made a part of this EA (“General Release”) within 21 days (or 45 days if such longer period is required under applicable law) following Executive’s Separation from Service; provided, however, that the General Release becomes effective and enforceable in accordance with its terms.

               b. Executive shall provide, cooperatively and in good faith, to those person(s) designated by Employer, all information necessary to effectively transition to others Executive’s job, technical, operational and financial information and knowledge, work product and pending work, as and to the extent requested by Employer during the 60-day period after the Termination Date.

               c. In order to receive and continue to receive Severance Benefits, Executive must comply with Executive’s obligations under the Confidential Information Agreement in accordance with its terms, and must comply with the restrictions of this Section VII.B.2.c. For the purposes of this Section VII.B.2.c, the following definitions shall apply: (i) “Business” means the development, marketing and sales of technology-based processing solutions for the execution, clearing, custody and settlement of securities, commodities and/or foreign exchange transactions; (ii) “Customer” means any person, entity or business that was a customer, or was specifically targeted to become a customer, of the Employer or the Company during the one (1)-year period prior to the Termination Date; (iii) “Territory” means and includes each of the fifty (50) states of the United States of America and its protectorates, Canada, the United Kingdom, Japan and Hong Kong; and (iv) “Service Provider,” means any person who is during the Severance Period, and was at any time during the one (1)-year period prior to the Termination Date, an employee, consultant, or independent contractor of the Employer or the Company.

                    (1) Non-Solicitation of Service Providers. During the Severance Period, Executive shall not, anywhere in the Territory, on Executive ‘s own behalf or on behalf of any other person or entity, either directly or indirectly recruit, encourage or solicit any Service Provider to leave or reduce that Service Provider’s employment with or services to the Employer or to the Company

                    (2) Non-Solicitation of Customers. During the Severance Period, Executive shall not, anywhere in the Territory, on Executive’s own behalf or on behalf of any other person or entity, either directly or indirectly, contact, recruit, encourage or solicit any Customer with respect to the Business.

                    (3) Non-Competition. During the Severance Period, Executive shall not, anywhere in the Territory, whether as an employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director, joint venturer, trustee, stockholder, investor, lender or guarantor of any corporation, partnership or other entity, or in any other capacity, either directly or indirectly (on Executive’s own behalf or on behalf of any other person or entity) (a) engage in the Business or (b) permit Executive ‘s name to be used in the Business. Notwithstanding the foregoing, Executive may own, directly or indirectly, solely as an investment, up to two percent (2%) of any class of “publicly traded securities” of any business that is competitive with or similar to the Business or any person who owns a business that is competitive with or similar to the Business.

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Executive acknowledges and agrees that each of the restrictions of this Section VII.B.2.c. is reasonable with respect to subject matter, length of time, and geographic area, and will not prevent Executive from pursuing an occupation or living during the Severance Period.

               d. In the event that Executive breaches any of Executive’s obligations under Section VII.B.2.c. above prior to expiration of the Severance Period:

                    (1) Executive shall cease to be entitled to any further Severance Benefits, otherwise to be provided under Section VII.B.1 above, except that Executive shall be eligible to receive or retain, as the case may be, Severance Benefits equal to fifty percent (50%) of the total amount of Severance Benefits to which Executive otherwise would have been eligible to receive in the absence of such breach. Any additional payments that Executive is eligible to receive pursuant to this Section in order to bring the total amount of Severance Benefits to 50% shall be paid at the same time or times as such payments would otherwise have been paid under section VII.B.1;

                    (2) Employer shall be entitled to recover from Executive any and all amounts that may have been paid to or on behalf of Executive as Severance Benefits in excess of fifty percent (50%) of the total amount of Severance Benefits to which Executive otherwise would have been eligible to receive in the absence of Executive’s breach; and

                    (3) Employer shall be entitled to take any and all action(s) necessary to pursue legal and equitable remedies against Executive, including, without limitation, injunctive relief.

               e. Severance Benefits provided under Section VII.B.1 above, shall in all cases be reduced by any payments or benefits to which Executive may be entitled under the federal Worker Adjustment Retraining Notification Act, and/or under any applicable state law counterpart statute.

               f. Severance Benefits under Section VII.B.1 above shall be the only severance and/or measure of damages or loss, to which Executive shall be entitled upon any termination of Executive’s employment with Employer. Except as set forth in Section VII.A.1 above, no other amounts or benefits shall be owed to Executive including but not limited to under any other plan, program or practice of Employer or of any subsidiary, affiliate or parent of Employer.

     3. Separation from Service. For purposes of this Agreement, “Separation from Service” shall mean Executive’s cessation of Employee status and shall be deemed to occur at such time as the level of the bona fide services Executive is to perform in Employee status (or as a consultant or other independent contractor) permanently decreases to a level that is not more than twenty percent (20%) of the average level of services Executive rendered in Employee status during the immediately preceding thirty-six (36) months (or such shorter period for which Executive may have rendered such service). Any such determination as to Separation from Service, however, shall be made in accordance with the applicable standards of the Treasury Regulations issued under Code Section 409A. For purposes of determining whether Executive has incurred a Separation from Service, Executive will be deemed to continue in “Employee” status for so long as he remains in the employ of one or more members of the Employer Group, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. “Employer Group” means the Company and any other corporation or business controlled by, controlling or under common control with, the Company as determined in accordance with Sections 414(b) and (c) of the Code and the Treasury Regulations thereunder, except that in applying Sections 1563(a)(1), (2) and (3) for purposes of determining the controlled group of corporations under Section 414(b), the phrase “at least 50 percent” shall

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be used instead of “at least 80 percent” each place the latter phrase appears in such sections and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses that are under common control for purposes of Section 414(c), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in Section 1.414(c)-2 of the Treasury Regulations.

          4. Section 409A.

               a. This Agreement is intended to comply with the requirements of Code Section 409A. Accordingly, all provisions herein shall be construed and interpreted to comply with Code Section 409A and if necessary, any such provision shall be deemed amended to comply with Code Section 409A and the regulations thereunder.

               b. Notwithstanding any provision to the contrary in this EA, no Severance Benefits to which Executive otherwise becomes entitled under this EA, shall be made or provided to Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of his Separation from Service or (ii) the date of his death, if Executive is deemed, pursuant to procedures established by the Compensation Committee in accordance with the applicable standards of Code Section 409A and the Treasury Regulations thereunder and applied on a consistent basis for all non-qualified deferred compensation plans subject to Code Section 409A, to be a “specified employee” at the time of such Separation from Service and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all Severance Benefits that otherwise would have been payable or reimbursed to Executive during the deferral period shall be paid or reimbursed to Executive in a lump sum, and any remaining Severance Benefits due to Executive pursuant to this EA shall be paid or provided in accordance with Section VII.B.1. The specified employees subject to such a delayed commencement date shall be identified on December 31 of each calendar year. If Executive is so identified on any such December 31, he shall have specified employee status for the twelve (12)-month period beginning on April 1 of the following calendar year.

               c. Unless required by Section 409A of the Code, the six-month holdback set forth in Section VII.B.4.b above shall not be applicable to (i) any Severance Benefits under Sections VII.B.1 that qualify as Short-Term Deferral Payments and (ii) any remaining portion of such Severance Payments paid after Executive’s Separation from Service to the extent (A) that the dollar amount of those payments does not exceed two (2) times the lesser of (x) Executive’s annualized compensation (based on his annual rate of pay for the calendar year preceding the calendar year of his Separation from Service, adjusted to reflect any increase during that calendar year which was expected to continue indefinitely had his Separation from Service not occurred) or (y) the maximum amount of compensation that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive has a Separation from Service, and (B) such Severance Payments are to be made to Executive no later than the last day of the second calendar year following the calendar year in which the Separation from Service occurs.

VIII. Miscellaneous.

     A. Governing Law. This EA shall be construed and interpreted in accordance with the laws of State of Texas.

     B. Severability. Should any provision (or portion of provision) of this EA become or be deemed unenforceable, such unenforceability will not affect any other provision and this EA shall be construed as if such unenforceable provision (or portion of provision) had never been contained herein, except that if the restrictions of VII.B.2.c(2)-(3), are found to be unenforceable, Executive shall not be entitled to more than 50% of the Severance Benefits provided by Section VII.B.1.

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     C. Remedies. Except as otherwise provided herein, all rights and remedies provided pursuant to this EA or by law shall be cumulative, and no such right or remedy shall be exclusive of any other. Either of the Parties may pursue any one or more rights or remedies hereunder or may seek damages or specific performance in the event of the other party’s breach hereunder or may pursue any other available remedy.

     D. Arbitration. Any and all disputes by and among any of the Parties that arise from or relate to this EA shall be resolved through final and binding arbitration which shall be instead of any civil litigation, except to the extent specifically set forth in Section VIII.D.5., below. Each of the Parties hereby waives their respective right to a jury trial as to such disputes, and understands and agrees that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof. The provisions of this Section VIII D. shall replace and supersede the provisions of Section 5 of the Confidential Information Agreement in its entirety.

          1. Arbitration shall be conducted in Dallas, Texas, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“AAA Rules”) then in effect and to the extent consistent with applicable law, although the arbitrator shall be selected by mutual agreement of the parties and need not be a panel member of the American Arbitration Association. It is the Parties’ intent that, prior to initiating arbitration proceedings, the Parties shall mediate their dispute with one another in a good faith attempt to avoid the necessity of resolving their disputes through arbitration proceedings.

          2. The arbitrator shall allow the discovery authorized and/or required by applicable law in arbitration proceedings, including but not limited to discovery available under applicable State and/or federal arbitration statutes, including the Federal Arbitration Act.

          3. The arbitrator shall issue a written award that sets forth the essential findings of fact and conclusions of law on which the award is based. The arbitrator shall have the authority to award any relief authorized by applicable law in connection with the asserted claims or disputes. The arbitrator’s award shall be subject to correction, confirmation, or vacation, as provided by any applicable law setting forth the standard of judicial review of arbitration awards.

          4. Each party to the arbitration shall bear their own respective attorneys’ fees and costs incurred in connection with the arbitration; and the parties shall share equally the arbitrator’s fees, unless law applicable at the time of the arbitration hearing requires otherwise. The arbitrator shall award attorneys’ fees and costs of arbitration to the prevailing party. If there is a dispute as to which of the Parties is the prevailing party in the arbitration, the Arbitrator will decide this issue.

          5. Any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of Sections 2 and 4 of the Confidential Information Agreement may, at the election of the Company in its sole discretion, be brought in any state or federal court of competent jurisdiction. In connection therewith, Executive acknowledges that his breach of or other failure to comply with any provision of the foregoing Sections would cause irreparable harm to the Company for which there is no adequate remedy at law, and that in the event of such breach or failure the Company shall have, in addition to any and all remedies at law, the right to an injunction, specific performance, or other equitable relief to prevent the violation of his obligations thereunder.

          6. To the extent that any of the AAA Rules or anything in this Section VIII.D. conflicts with any arbitration procedures required by applicable law, the arbitration procedures required by applicable law shall govern. In the event Executive is a registered representative under the rules of the Financial Industry Regulatory Authority (“FINRA”), then notwithstanding anything to the contrary in this Section, if required by the rules of FINRA, the arbitration shall be conducted in accordance with the rules and procedures of FINRA, the Company’s Employee

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Handbook and other Company documentation (each of which contain policies and procedures relating to FINRA arbitration).

     E. Assignment; Successors. This EA may not be assigned by Executive. This EA may be assigned by Employer, upon written notice to Executive, and shall be binding on the successors of Employer.

     F. Changes to Agreement. This EA may only be changed by another written agreement signed by Executive and by a duly authorized representative of Company. Notwithstanding the foregoing, the Company reserves the right to amend this EA in any way that the Company in good faith determines may be advisable to help ensure compliance with Section 409A of the Code and any regulations or other guidance thereunder (together, “Section 409A”). Any such amendment shall preserve, to the extent reasonably possible and in a manner intended to satisfy Section 409A and avoid the imputation of penalties or taxes under Section 409A, the original intent of the parties and the level of benefits hereunder.

     G. Counterparts. This EA may be executed in more than one counterpart, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

     H. Notices. Notice under this EA, including any change to the following and assignment of this EA by the Company, shall be delivered as follows:

To the Company:	Penson Worldwide, Inc.
	1700 Pacific Avenue, Suite 1400
	Dallas, Texas 75201
	Attn: Chairman, Compensation Committee
To: Executive:	Daniel P. Son
	1700 Pacific Avenue, Suite 1400
	Dallas, Texas 75201

     I. Complete Agreement. There are no promises, representations or commitments made by, between or among Executive and Employer regarding the subjects covered by this EA that do not appear expressly written in this EA. In executing this EA, each of the Parties represents and warrants to the others that it is not relying on any promises, representations, negotiations, statements or commitments that are not expressly set forth in this EA. This EA supersedes, cancels and replaces any and all prior verbal and written agreements between the Parties regarding any of the subjects covered by this EA, other than the Confidential Information Agreement and the agreements evidencing any of Executive’s outstanding equity awards.

     J. Right to Counsel. Executive acknowledges that he has had the right to consult with counsel and is fully aware of his rights and obligations under this EA.

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IN WITNESS WHEREOF, the Parties have executed this EA as of the date first above written.

EXECUTIVE:

/s/ Daniel P. Son

Name: Daniel P. Son

THE COMPANY — Penson Worldwide, Inc.:

/s/ David Johnson

By:     David Johnson

Title:     Chair, Compensation Committee

               Board of Directors

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EX-10.45

Exhibit 10.45

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

     This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (the “EA”) is made and entered into this 31st day of December, 2008, by and among Philip A. Pendergraft (the “Executive”), a resident of Texas, and Penson Worldwide, Inc., a Delaware corporation (the “Company”).

     WHEREAS, Executive is currently a party to an employment agreement with the Company dated April 21, 2006, as amended on June 19th, 2008, (the “Prior Agreement”).

     WHEREAS, the Company desires that Executive continue to be employed by the Company and Executive is willing to continue to be employed by the Company; and

     WHEREAS, the Company and Executive desire to amend and restate the terms and conditions of the Prior Agreement in order to bring those terms and conditions into documentary compliance with the final Treasury Regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and continue Executive’s employment with the Company in accordance with those amended and restated terms and conditions.

     In consideration of the mutual agreements hereinafter set forth, Executive and the Company have agreed and do hereby agree as follows:

I. Employment.

     A. Executive’s employment pursuant to this EA is conditioned on Executive’s signature agreement to, and ongoing compliance with the Confidential Information, Invention Assignment and Arbitration Agreement, which is attached as Exhibit A hereto (“Confidential Information Agreement”).

     B. Commencing as of the date hereof (the “Effective Date”), and for an indefinite period thereafter, Executive shall be employed pursuant to this EA by the Company, or by a designated subsidiary of the Company (the Company or such subsidiary, as the case may be, that employs Executive will be hereinafter referred to as the “Employer”). Executive’s employment pursuant to this EA shall continue for an indefinite period, until terminated by either Executive or Employer.

     C. Subject only to the provisions of Section VII, Executive’s employment shall be “at-will,” meaning that either Executive or Employer may terminate it at any time, with or without any advance notice and with or without any particular reason or cause or advance procedures. It also means that Executive’s job duties, responsibilities, title, reporting level, regular place of employment, compensation, benefits and Employer’s policies and procedures can be changed, in the sole discretion of Employer, at any time, with or without advance notice and with or without any particular reason or cause or advance procedures.

     D. In agreeing to be employed pursuant to this EA, Executive represents and warrants that Executive has not previously entered into, and in the future shall not enter into, any agreement, either written or oral, that conflicts with any of Executive’s obligations under this EA or may be an impediment to Executive providing services under this EA.

II. Position.

     A. Executive shall be employed by Employer on a regular full-time basis, with the job title of Chief Executive Officer, reporting to the Board of Directors. Executive shall have such job duties and responsibilities commensurate with such position, which may change as Employer’s business needs and market conditions change from time-to-time.

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     B. Executive’s initial, regular place or base of employment shall be at the Company’s principal office in Dallas, Texas.

     C. During Executive’s employment with Employer, Executive shall devote Executive’s full business time, best efforts, abilities, energies and skills to the good faith performance of Executive’s job duties and responsibilities hereunder, and shall perform said duties and responsibilities at all reasonable times and places in accordance with reasonable directions and requests made by the Employer consistent with Executive’s position and Employer’s business needs as determined by Employer. Executive shall not engage in any other employment, business, or business-related activity unless Executive receives prior written approval from Employer’s Board of Directors to hold such outside employment or engage in such business or activity, which written approval shall not be unreasonably withheld if such outside employment, business or activity would not in any way be competitive with the business or proposed business of Employer or otherwise conflict with or adversely affect in any way Executive’s ability to fulfill Executive’s obligations under this EA. Executive shall not be required to receive prior written approval for activities related to family investments or charitable organizations.

III. Cash Compensation.

     A. Salary Compensation.

          1. Effective July 1, 2008, Executive shall earn and be paid a salary, at a weekly rate of Eleven Thousand Five Hundred Thirty-Eight Dollars and Forty-Six Cents ($11,538.46) which is equivalent to Six Hundred Thousand Dollars and No Cents ($600,000.00) per annum.

          2. Executive’s salary shall be paid at periodic intervals in accordance with Employer’s regular payroll schedule and practices.

          3. Executive’s salary rate shall be reviewed from time-to-time, generally on an annual basis, and may be changed by the Compensation Committee of Company’s Board of Directors (the “Compensation Committee”) in its sole discretion.

     B. Annual Bonus Compensation Opportunities. As a performance and retention incentive, Executive shall be eligible to earn an annual bonus award. The terms and conditions of each such annual bonus award opportunity shall be provided in writing to Executive not later than January 31 of the calendar year for which the bonus is to be earned and shall be attached to this Agreement each year as Attachment 1. However, the following will apply to each annual bonus award opportunity made available to Executive during Executive’s employment with Employer.

          1. Each annual bonus award opportunity will be conditioned on Employer’s achievement of calendar year revenue and net income objectives, and any other objectives, established in the discretion of the Board for the calendar year.

          2. Each annual bonus award opportunity also will be conditioned on Executive’s full-time active services to Employer continuously through the calendar year. However, should Executive be terminated without cause, leave for good reason, die or become permanently disabled, Executive or his estate will be entitled to all bonus compensation that has been earned in accordance with the terms of the then applicable annual bonus award opportunity but not yet paid at the time of Executive’s departure, death or permanent disability, including any bonus compensation earned for partial portions of a calendar year.

          3. Any bonus awarded to Executive pursuant to this Section III. B shall be paid to Executive in accordance with the terms of Attachment 1; however, such bonus shall be

     Philip A. Pendergraft

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paid to Executive not later than the 15th day of the third calendar month following the close of the calendar year for which such bonus is earned.

          4. The Employer may provide for periodic progress bonus awards against the total annual bonus opportunity.

     C. Discretionary Bonuses. To the extent Employer exceeds both its revenue and its net income and/or any other objectives established for a calendar year by the Board, Executive shall be eligible for a discretionary bonus award, which would be in addition to Executive’s annual bonus award opportunity. Whether to grant such additional bonus award and, if so, in what form and amount, shall be determinations made in the sole discretion of the Board. Any such discretionary bonus shall be paid to Executive not prior to January 1 of the calendar year following the calendar year for which such bonus is earned and not later than the 15th day of the third calendar month following the close of the calendar year for which such bonus is earned

     D. Withholdings. All cash compensation paid to Executive pursuant to this EA, including any Severance Benefits per Section VII.B., shall be subject to (i) any and all applicable federal, state and local income and employment withholding taxes; (ii) other amounts required to be deducted or withheld by Employer under applicable law or order requiring the withholding or deduction of amounts otherwise payable as compensation or wages to employees; (iii) such other withholdings and deductions as may be allowed by applicable law; and (iv) such other withholdings and deductions as may be authorized in writing by Executive.

IV. Employee Benefits & Expenses.

     A. Employee Benefits. Executive shall be eligible to participate in all employee benefits and benefit plans generally made available to executive employees of Employer from time-to-time, subject to the terms, conditions and relevant qualification criteria for such benefits and benefit plans. Employer, in its discretion, may change from time-to-time the employee benefits and benefit plans it generally makes available to its executive employees.

     B. Expenses & Expense Reimbursement. Executive shall be entitled to reimbursement from Employer of all reasonable and necessary business, travel and entertainment expenses incurred by Executive in the performance of Executive’s job responsibilities hereunder, subject to the expense reimbursement policies and procedures of Employer in effect from time-to-time. Executive must submit proper documentation for each such expense within one hundred twenty (120) days after the later of (i) Executive’s incurrence of such expense or (ii) Executive’s receipt of the invoice for such expense. If such expense qualifies hereunder for reimbursement, then the Employer shall reimburse Executive for that expense within thirty (30) business days thereafter. In no event shall any such expense be reimbursed later than the close of the calendar year following the calendar year in which is incurred. The amount of reimbursement to which Executive becomes entitled in any calendar year will not affect the amount of expenses eligible for reimbursement hereunder in any other calendar year. In addition, none of Executive’s rights to such reimbursement may be liquidated or exchanged for any other benefit or payment.

V. Equity

     A. Stock Options & Change in Control. Executive will be eligible for stock option and other equity grants in the discretion of the Compensation Committee. The stock option agreement for each stock option granted to Executive shall contain the following terms relative to a “Change in Control” (defined in Section VI.B.2 below).

          1. Immediately upon a “Change in Control,” twenty-five percent (25%) of all of Executive’s then-outstanding option shares, under each stock option granted to Executive,

     Philip A. Pendergraft

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shall immediately vest and be exercisable, unless Executive’s then-outstanding options are not assumed by the surviving entity in such Change in Control transaction, in which case one hundred percent (100%) of Executive’s then-outstanding option shares, under all stock options granted to Executive, shall immediately vest and be exercisable.

          2. If Executive’s employment with the Company or a successor is terminated “Without Cause” (defined in Section VI.C, below) by the Company or its successor within 12 months after the effective date of a “Change in Control,” or if Executive terminates his employment with the Company or its successor for “Good Reason” within 12 months after the effective date of a “Change in Control”, then one hundred percent (100%) of Executive’s then-outstanding option shares, under each stock option granted to Executive, shall immediately vest and be exercisable as of the effective date of Executive’s termination of employment (“Termination Date”) provided that the conditions of Section VII.A.2 and Section VII.B.2 (a)-(b) below have been satisfied by Executive.

     B. Stock Options at Death or Permanent Disability. The terms of each stock option granted to Executive shall provide that one hundred percent (100%) of Executive’s then-outstanding option shares shall immediately vest and become exercisable in the event of Executive’s death or permanent disability.

VI. Termination of Employment

Although Executive’s employment shall be “at-will,” termination of the employment relationship between Executive and Employer shall be classified in one of the following categories, for the limited purpose only of the Severance Benefit Opportunity of Section VII.B, below:

     A. By Employer for Cause. Termination of Executive’s employment by Employer for “Cause” means a termination by Employer of Executive’s employment for any of the following reasons, upon written notice to Executive at any time:

          1. Executive’s conviction or plea of nolo contendre to a felony offense or crime of violence or dishonesty; or

          2. The Company’s good faith determination, upon majority vote of Company’s Board of Directors, that:

               a. Executive has engaged in theft, fraud, embezzlement or dishonest conduct with respect to any property or funds of Employer, any affiliate, subsidiary or parent of Employer, or of any vendor, partner, employee or customer of Employer that is harmful to Employer, to an affiliate, subsidiary or parent of Employer or to the business, operations, reputation or business prospects of any of them;

               b. Executive has breached any of his obligations under the Confidential Information Agreement signed by Executive as a condition of this EA;

               c. Executive has engaged in an act of misconduct which has had an adverse effect on the business, operations, reputation or business prospects of Employer or of an affiliate, subsidiary or parent of Employer;

               d. Executive has failed to adequately perform the material duties or fulfill the responsibilities of Executive’ position; provided, however, that Employer shall have given written notice to Executive, and Executive shall have had a period of thirty (30) days within which to cure/remedy the failure(s), described in such written notice giving rise to possible termination for Cause under this Section VI.A.2.d; or

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               e. Executive has breached one or more of Executive’s other obligations under this EA; provided, however, that Employer shall have given written notice to Executive, and Executive shall have had a period of thirty (30) days within which to cure/remedy the breach, described in such written notice, giving rise to possible termination for by Employer for Cause under this Section VI.A.2.e.

     B. By Executive for Good Reason.

          1. Termination of Executive’s employment by Executive shall qualify as a termination by Executive for “Good Reason” if all of the following conditions are met:

               a. Executive shall have given advance written notice of termination to Employer (“Notice”), in accordance with Section VIII.H below, which includes the following:

                    (1) a description of the act, omission or breach giving rise to the Notice, and

                    (2) a date on which Executive intends the termination to be effective (“Termination Date”), that is no earlier than 30 days after the date the Notice is delivered to the Employer;

               b. The act, omission or breach described in the Notice is one of the following:

                    (1) A material reduction, without Executive’s consent, of Executive’s salary rate or bonus award opportunity, unless the salary rates of all Employer’s executive-level employees also have been reduced by at least the same percent by which Executive’s salary rate has been reduced. For purposes of the foregoing, a reduction in Executive’s salary rate or bonus award opportunity by more than ten percent (10%) shall be deemed to be a material reduction;

                    (2) A material relocation, without Executive’s consent, of Executive’s regular place or base of employment. For purposes of the foregoing, a change of the geographic location of Executive’s regular place or base of employment by more than fifty (50) miles shall be deemed to be a material change; or

                    (3) A material breach by Employer of one or more of its obligations under this EA;

               c. The act, omission or breach described in the Notice first occurred:

                    (1) during the 12 months after the effective date of a “Change in Control” of the Company and

                    (2) no earlier than 90 days before the date the Notice is delivered to the Employer; and

               d. The Employer failed to remedy, before the Termination Date, the act, omission or breach described in the Notice.

          2. A “Change in Control” means a change in the ownership or control of the Company, effected through any of the following transactions first occurring after the Company’s IPO, and excluding the Company’s IPO:

               a. a merger, consolidation or reorganization approved by the Company’s stockholders, unless securities representing more than fifty percent (50%) of the total

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combined voting power of the outstanding voting securities of the successor entity are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the outstanding voting securities of the Company immediately prior to such transaction;

               b. any stockholder-approved sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company; or

               c. the acquisition, directly or indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities.

     C. Without Cause. Executive’s employment is terminated “Without Cause” if it is terminated in any of the following circumstances:

          1. due to Executive’s death;

          2. due to Executive’s “Disability” which shall mean a termination upon written notice, or on such prospective date specified in such notice, delivered by the Employer to Executive, due to Executive’s inability, either with or without reasonable accommodation, by reason of any physical or mental injury, illness or impairment, to substantially perform the essential functions required of Executive under this EA for a period of six (6) months during any rolling 12 month period;

          3. upon any notice, written notice, or on such prospective date specified in such notice, delivered by the Employer to Executive, for a reason other than any of the reasons described as “Cause” in Section VI.A above; or

          4. upon written notice, or on such prospective date specified in such notice, delivered by Executive to the Employer, for a reason other than reasons and the conditions that qualify as “Good Reason” under Section VI.B.1, above.

VII. Obligations Upon Termination.

     A. Any Termination. In addition to any other obligations that may apply under the Confidential Information Agreement and/or under this EA, the Parties shall have the following obligations upon any termination of their employment relationship pursuant to this EA:

          1. Employer:

               a. Employer shall pay Executive (or Executive’s estate) any unpaid cash compensation earned by Executive pursuant to this EA through the Termination Date; and

               b. Employer shall allow Executive and/or Executive’s dependents, at their sole cost and expense, to continue participation after the Termination Date in those group health benefit plans in which Executive and/or Executive’s dependents are entitled to participate pursuant to the terms and conditions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”).

               c. Employer shall allow Executive and/or Executive’s estate, at their sole cost and expense, to exercise all of Executive’s vested option shares, including those vested

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consistent with Section V.B, in accordance with the terms and conditions of the applicable stock option plan and stock option agreement that govern such option shares.

          2. Executive:

               a. No later than fifteen (15) days after the Termination Date, Executive shall return to Employer all items of property that had been provided for Executive’s use during employment with Employer or with any of its predecessors, or had been paid for by Employer or any of its predecessors, and

               b. No later than fifteen (15) days after the Termination Date, Executive shall return to Employer all documents created or received during the course of Executive’s employment with Employer or with any of its predecessors, except Executive may retain Executive’s personal copies of documents evidencing Executive’s hire, compensation, benefits, stock options, this EA, the Confidential Information Agreement and any documents that may have been received by Executive as a stockholder of the Company.

     B. Severance Benefit Opportunity. Subject to the conditions of Section VII.B.2 below, Employer shall provide Severance Benefits to Executive for the Severance Period in the event that Executive’s employment with Employer (i) is terminated by Employer without Cause or (ii) is terminated by Executive for Good Reason. Such Severance Benefits, if and to the extent provided, are not compensation for past services or labor performed by Executive, but to preserve the goodwill existing between the Parties, to resolve any disputes or disagreements that may exist between them relating to Executive’s employment and the termination thereof, and to assist Employer and Executive to move onto other business and employment opportunities, respectively.

          1. Severance Benefits during Severance Period. The “Severance Period” shall extend for twelve (12) months. It shall commence on the first pay date within the sixty (60)-day period measured from the date of Executive’s “Separation from Service” (as defined in Section VII.B.3) due to his termination without Cause or his resignation for Good Reason. “Severance Benefits” shall consist of the following:

               a. Post-Termination Payments. Periodic payments at Executive’s weekly salary rate in effect just prior to the time of the act or omission resulting in Executive’s termination (“Severance Payments”). Such payments shall be paid during the Severance Period at periodic intervals in accordance with Employer’s regular payroll schedule and practices.

               Any salary continuation payments to which Executive becomes entitled in accordance with this Section VII.B.1 shall be treated as a right to a series of separate payments for purposes of Section 409A of the Code, and each such payment that becomes due and payable during the period commencing with the date of Executive’s Separation from Service and ending on March 15 of the succeeding calendar year is hereby designated a “Short-Term Deferral Payment” and shall be paid during that period.

               b. COBRA Premium Payments. Provided Executive and/or his dependents are eligible and timely elect to continue their healthcare coverage under the Company’s group health plan pursuant to their rights under COBRA, Employer will reimburse Executive for the costs he incurs to obtain such continued coverage for himself and his eligible dependents (collectively, the “Coverage Costs”). In order to obtain reimbursement for such Coverage Costs, Executive must submit appropriate evidence to Employer of each periodic payment within sixty (60) days after the payment date, and Employer shall within thirty (30) days after such submission reimburse Executive for that payment. During the period such medical care coverage remains in effect hereunder, the following provisions shall govern the arrangement: (a) the amount of Coverage Costs eligible for reimbursement in any one calendar year of such coverage shall not affect the amount of Coverage Costs eligible for reimbursement in any other

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calendar year for which such reimbursement is to be provided hereunder; (ii) no Coverage Costs shall be reimbursed after the close of the calendar year following the calendar year in which those Coverage Costs were incurred; and (iii) Executive’s right to the reimbursement of such Coverage Costs cannot be liquidated or exchanged for any other benefit. To the extent the reimbursed Coverage Costs constitute taxable income to Executive, Employer shall report the reimbursement as taxable W-2 wages and collect the applicable withholding taxes, and any remaining tax liability shall be Executive’s sole responsibility.

          2. Severance Benefit Conditions & Limitations.

               a. In order to receive any Severance Benefits, Executive must execute a Post-Termination General Release of All Claims Agreement, in a form provided by Employer that is substantially similar in all material respects to Exhibit B hereto, which is made a part of this EA (“General Release”) within 21 days (or 45 days if such longer period is required under applicable law) following Executive’s Separation from Service; provided, however, that the General Release becomes effective and enforceable in accordance with its terms.

               b. Executive shall provide, cooperatively and in good faith, to those person(s) designated by Employer, all information necessary to effectively transition to others Executive’s job, technical, operational and financial information and knowledge, work product and pending work, as and to the extent requested by Employer during the 60-day period after the Termination Date.

               c. In order to receive and continue to receive Severance Benefits, Executive must comply with Executive’s obligations under the Confidential Information Agreement in accordance with its terms, and must comply with the restrictions of this Section VII.B.2.c. For the purposes of this Section VII.B.2.c, the following definitions shall apply: (i) “Business” means the development, marketing and sales of technology-based processing solutions for the execution, clearing, custody and settlement of securities, commodities and/or foreign exchange transactions; (ii) “Customer” means any person, entity or business that was a customer, or was specifically targeted to become a customer, of the Employer or the Company during the one (1)-year period prior to the Termination Date; (iii) “Territory” means and includes each of the fifty (50) states of the United States of America and its protectorates, Canada, the United Kingdom, Japan and Hong Kong; and (iv) “Service Provider,” means any person who is during the Severance Period, and was at any time during the one (1)-year period prior to the Termination Date, an employee, consultant, or independent contractor of the Employer or the Company.

                    (1) Non-Solicitation of Service Providers. During the Severance Period, Executive shall not, anywhere in the Territory, on Executive ’s own behalf or on behalf of any other person or entity, either directly or indirectly recruit, encourage or solicit any Service Provider to leave or reduce that Service Provider’s employment with or services to the Employer or to the Company

                    (2) Non-Solicitation of Customers. During the Severance Period, Executive shall not, anywhere in the Territory, on Executive’s own behalf or on behalf of any other person or entity, either directly or indirectly, contact, recruit, encourage or solicit any Customer with respect to the Business.

                    (3) Non-Competition. During the Severance Period, Executive shall not, anywhere in the Territory, whether as an employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director, joint venturer, trustee, stockholder, investor, lender or guarantor of any corporation, partnership or other entity, or in any other capacity, either directly or indirectly (on Executive’s own behalf or on behalf of any other person or entity) (a) engage in the Business or (b) permit Executive ’s name to be used in the Business. Notwithstanding the foregoing, Executive may own, directly or indirectly, solely as an investment, up to two percent (2%) of any class of “publicly traded securities” of any business that is competitive with or similar to the Business or any person who owns a business that is competitive with or similar to the Business.

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Executive acknowledges and agrees that each of the restrictions of this Section VII.B.2.c. is reasonable with respect to subject matter, length of time, and geographic area, and will not prevent Executive from pursuing an occupation or living during the Severance Period.

               d. In the event that Executive breaches any of Executive’s obligations under Section VII.B.2.c. above prior to expiration of the Severance Period:

                    (1) Executive shall cease to be entitled to any further Severance Benefits, otherwise to be provided under Section VII.B.1 above, except that Executive shall be eligible to receive or retain, as the case may be, Severance Benefits equal to fifty percent (50%) of the total amount of Severance Benefits to which Executive otherwise would have been eligible to receive in the absence of such breach. Any additional payments that Executive is eligible to receive pursuant to this Section in order to bring the total amount of Severance Benefits to 50% shall be paid at the same time or times as such payments would otherwise have been paid under section VII.B.1;

                    (2) Employer shall be entitled to recover from Executive any and all amounts that may have been paid to or on behalf of Executive as Severance Benefits in excess of fifty percent (50%) of the total amount of Severance Benefits to which Executive otherwise would have been eligible to receive in the absence of Executive’s breach; and

                    (3) Employer shall be entitled to take any and all action(s) necessary to pursue legal and equitable remedies against Executive, including, without limitation, injunctive relief.

               e. Severance Benefits provided under Section VII.B.1 above shall in all cases be reduced by any payments or benefits to which Executive may be entitled under the federal Worker Adjustment Retraining Notification Act, and/or under any applicable state law counterpart statute.

               f. Severance Benefits under Section VII.B.1 above shall be the only severance and/or measure of damages or loss to which Executive shall be entitled upon any termination of Executive’s employment with Employer. Except as set forth in Section VII.A.1 above, no other amounts or benefits shall be owed to Executive, including but not limited to under any other plan, program or practice of Employer or of any subsidiary, affiliate or parent of Employer.

     3. Separation from Service. For purposes of this Agreement, “Separation from Service” shall mean Executive’s cessation of Employee status and shall be deemed to occur at such time as the level of the bona fide services Executive is to perform in Employee status (or as a consultant or other independent contractor) permanently decreases to a level that is not more than twenty percent (20%) of the average level of services Executive rendered in Employee status during the immediately preceding thirty-six (36) months (or such shorter period for which Executive may have rendered such service). Any such determination as to Separation from Service, however, shall be made in accordance with the applicable standards of the Treasury Regulations issued under Code Section 409A. For purposes of determining whether Executive has incurred a Separation from Service, Executive will be deemed to continue in “Employee” status for so long as he remains in the employ of one or more members of the Employer Group, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. “Employer Group” means the Company and any other corporation or business controlled by, controlling or under common control with, the Company as determined in accordance with Sections 414(b) and (c) of the Code and the Treasury Regulations thereunder, except that in applying Sections 1563(a)(1), (2) and (3) for purposes of determining the controlled group of corporations under Section 414(b), the phrase “at least 50 percent” shall

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be used instead of “at least 80 percent” each place the latter phrase appears in such sections and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses that are under common control for purposes of Section 414(c), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in Section 1.414(c)-2 of the Treasury Regulations.

          4. Section 409A.

               a. This Agreement is intended to comply with the requirements of Code Section 409A. Accordingly, all provisions herein shall be construed and interpreted to comply with Code Section 409A and if necessary, any such provision shall be deemed amended to comply with Code Section 409A and the regulations thereunder.

               b. Notwithstanding any provision to the contrary in this EA, no Severance Benefits to which Executive otherwise becomes entitled under this EA, shall be made or provided to Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of his Separation from Service or (ii) the date of his death, if Executive is deemed, pursuant to procedures established by the Compensation Committee in accordance with the applicable standards of Code Section 409A and the Treasury Regulations thereunder and applied on a consistent basis for all non-qualified deferred compensation plans subject to Code Section 409A, to be a “specified employee” at the time of such Separation from Service and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all Severance Benefits that otherwise would have been payable or reimbursed to Executive during the deferral period shall be paid or reimbursed to Executive in a lump sum, and any remaining Severance Benefits due to Executive pursuant to this EA shall be paid or provided in accordance with Section VII.B.1. The specified employees subject to such a delayed commencement date shall be identified on December 31 of each calendar year. If Executive is so identified on any such December 31, he shall have specified employee status for the twelve (12)-month period beginning on April 1 of the following calendar year.

               c. Unless required by Section 409A of the Code, the six-month holdback set forth in Section VII.B.4.b above shall not be applicable to (i) any Severance Benefits under Sections VII.B.1 that qualify as Short-Term Deferral Payments and (ii) any remaining portion of such Severance Payments paid after Executive’s Separation from Service to the extent (A) that the dollar amount of those payments does not exceed two (2) times the lesser of (x) Executive’s annualized compensation (based on his annual rate of pay for the calendar year preceding the calendar year of his Separation from Service, adjusted to reflect any increase during that calendar year which was expected to continue indefinitely had his Separation from Service not occurred) or (y) the maximum amount of compensation that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive has a Separation from Service, and (B) such Severance Payments are to be made to Executive no later than the last day of the second calendar year following the calendar year in which the Separation from Service occurs.

VIII. Miscellaneous.

     A. Governing Law. This EA shall be construed and interpreted in accordance with the laws of State of Texas.

     B. Severability. Should any provision (or portion of provision) of this EA become or be deemed unenforceable, such unenforceability will not affect any other provision and this EA shall be construed as if such unenforceable provision (or portion of provision) had never been contained herein, except that if the restrictions of VII.B.2.c(2)-(3), are found to be unenforceable, Executive shall not be entitled to more than 50% of the Severance Benefits provided by Section VII.B.1.

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     C. Remedies. Except as otherwise provided herein, all rights and remedies provided pursuant to this EA or by law shall be cumulative, and no such right or remedy shall be exclusive of any other. Either of the Parties may pursue any one or more rights or remedies hereunder or may seek damages or specific performance in the event of the other party’s breach hereunder or may pursue any other available remedy.

     D. Arbitration. Any and all disputes by and among any of the Parties that arise from or relate to this EA shall be resolved through final and binding arbitration which shall be instead of any civil litigation, except to the extent specifically set forth in Section VIII.D.5., below. Each of the Parties hereby waives their respective right to a jury trial as to such disputes, and understands and agrees that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof. The provisions of this Section VIII D. shall replace and supersede the provisions of Section 5 of the Confidential Information Agreement in its entirety.

          1. Arbitration shall be conducted in Dallas, Texas, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“AAA Rules”) then in effect and to the extent consistent with applicable law, although the arbitrator shall be selected by mutual agreement of the parties and need not be a panel member of the American Arbitration Association. It is the Parties’ intent that, prior to initiating arbitration proceedings, the Parties shall mediate their dispute with one another in a good faith attempt to avoid the necessity of resolving their disputes through arbitration proceedings.

          2. The arbitrator shall allow the discovery authorized and/or required by applicable law in arbitration proceedings, including but not limited to discovery available under applicable State and/or federal arbitration statutes, including the Federal Arbitration Act.

          3. The arbitrator shall issue a written award that sets forth the essential findings of fact and conclusions of law on which the award is based. The arbitrator shall have the authority to award any relief authorized by applicable law in connection with the asserted claims or disputes. The arbitrator’s award shall be subject to correction, confirmation, or vacation, as provided by any applicable law setting forth the standard of judicial review of arbitration awards.

          4. Each party to the arbitration shall bear their own respective attorneys’ fees and costs incurred in connection with the arbitration; and the parties shall share equally the arbitrator’s fees, unless law applicable at the time of the arbitration hearing requires otherwise. The arbitrator shall award attorneys’ fees and costs of arbitration to the prevailing party. If there is a dispute as to which of the Parties is the prevailing party in the arbitration, the Arbitrator will decide this issue.

          5. Any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of Sections 2 and 4 of the Confidential Information Agreement may, at the election of the Company in its sole discretion, be brought in any state or federal court of competent jurisdiction. In connection therewith, Executive acknowledges that his breach of or other failure to comply with any provision of the foregoing Sections would cause irreparable harm to the Company for which there is no adequate remedy at law, and that in the event of such breach or failure the Company shall have, in addition to any and all remedies at law, the right to an injunction, specific performance, or other equitable relief to prevent the violation of his obligations thereunder.

          6. To the extent that any of the AAA Rules or anything in this Section VIII.D. conflicts with any arbitration procedures required by applicable law, the arbitration procedures required by applicable law shall govern. In the event Executive is a registered representative under the rules of the Financial Industry Regulatory Authority (“FINRA”), then notwithstanding anything to the contrary in this Section, if required by the rules of FINRA, the arbitration shall be conducted in accordance with the rules and procedures of FINRA, the Company’s Employee

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Handbook and other Company documentation (each of which contain policies and procedures relating to FINRA arbitration).

     E. Assignment; Successors. This EA may not be assigned by Executive. This EA may be assigned by Employer, upon written notice to Executive, and shall be binding on the successors of Employer.

     F. Changes to Agreement. This EA may only be changed by another written agreement signed by Executive and by a duly authorized representative of Company. Notwithstanding the foregoing, the Company reserves the right to amend this EA in any way that the Company in good faith determines may be advisable to help ensure compliance with Section 409A of the Code and any regulations or other guidance thereunder (together, “Section 409A”). Any such amendment shall preserve, to the extent reasonably possible and in a manner intended to satisfy Section 409A and avoid the imputation of penalties or taxes under Section 409A, the original intent of the parties and the level of benefits hereunder.

     G. Counterparts. This EA may be executed in more than one counterpart, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

     H. Notices. Notice under this EA, including any change to the following and assignment of this EA by the Company, shall be delivered as follows:

To the Company:	Penson Worldwide, Inc.
	1700 Pacific Avenue, Suite 1400
	Dallas, Texas 75201
	Attn: Chairman, Compensation Committee
To: Executive:	Philip A. Pendergraft
	1700 Pacific Avenue, Suite 1400
	Dallas, Texas 75201

     I. Complete Agreement. There are no promises, representations or commitments made by, between or among Executive and Employer regarding the subjects covered by this EA that do not appear expressly written in this EA. In executing this EA, each of the Parties represents and warrants to the others that it is not relying on any promises, representations, negotiations, statements or commitments that are not expressly set forth in this EA. This EA supersedes, cancels and replaces any and all prior verbal and written agreements between the Parties regarding any of the subjects covered by this EA, other than the Confidential Information Agreement and the agreements evidencing any of Executive’s outstanding equity awards.

     J. Right to Counsel. Executive acknowledges that he has had the right to consult with counsel and is fully aware of his rights and obligations under this EA.

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IN WITNESS WHEREOF, the Parties have executed this EA as of the date first above written.

EXECUTIVE:
/s/ Philip A. Pendergraft
Name: Philip A. Pendergraft
THE COMPANY – Penson Worldwide, Inc.:
/s/ David Johnson
By:	David Johnson
Title:	Chair, Compensation Committee Board of Directors

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EX-10.46

Exhibit 10.46

Mr. Andrew B. Koslow
2942 Divisadero St.
San Francisco, CA 94123

     Re:      Amendment of Compensation Letter

Dear Andy:

     This letter agreement (the “Amendment Agreement”) amends that certain compensation letter between you and Penson Worldwide, Inc. (“PWI”) dated as of August 26, 2002 (the “Compensation Letter”).

     You and PWI have agreed to amend the terms and conditions of the Compensation Letter in order to bring those terms and conditions into documentary compliance with the final Treasury Regulations under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, you and PWI hereby agree that, effective December 31, 2008, the Compensation Letter shall be amended as follows:

     1. Payment of Bonus. Any discretionary bonus payable to you with respect to any year pursuant to Section 2 of the Compensation Letter will be paid to you not later than the 15th day of the third calendar month following the close of such calendar year.

     2. Severance Payment. Any severance payable to you under Section 7 of the Compensation Letter will be paid in accordance with PWI’s normal payroll practices for salaried employees commencing with the payroll date coincident with or following your Separation from Service (as such term is defined under Section 409A). Any such payments to which you become entitled shall be treated as a right to a series of separate payments for purposes of Section 409A, and each such separate payment that becomes due and payable during the period commencing with the date of your Separation from Service and ending on March 15 of the succeeding calendar year is hereby designated a “Short-Term Deferral Payment” and shall be paid during that period.

     3. Compliance with Section 409A.

          a. The Compensation Letter as amended by this Amendment Agreement is intended to comply with the requirements of Section 409A. Accordingly, all provisions herein shall be construed and interpreted to comply with Section 409A and, if necessary, any such provision shall be deemed amended to comply with Section 409A and the regulations thereunder.

          b. Notwithstanding any provision to the contrary in the Compensation Letter as amended by this Amendment Agreement, no payments or benefits to which you become entitled under the Compensation Letter in connection with the termination of your employment with the Company shall be made or paid to you prior to the earlier of (i) the first day of the seventh (7th) month following the date of your Separation from Service due to such termination of employment or (ii) the date of your death, if you are deemed, pursuant to the procedures established by the Compensation Committee in accordance with the applicable standards of Section 409A and the Treasury Regulations thereunder and applied on a consistent basis for all

for all non-qualified deferred compensation plans subject to Section 409A, to be a “specified employee” at the time of such Separation from Service and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A(a)(2). Upon the expiration of the applicable Section 409A(a)(2) deferral period, all payments deferred pursuant to this Section 3b shall be paid in a lump sum to you, and any remaining payments due under the Agreement shall be paid in accordance with the normal payment dates specified for them herein. The specified employees subject to such a delayed commencement date shall be identified on December 31 of each calendar year. If you are so identified on any such December 31, you shall have specified employee status for the twelve (12)-month period beginning on April 1 of the following calendar year.

          c. Unless required by Section 409A, the six-month holdback set forth in Section 3b above shall not be applicable to (i) any severance payments that qualify as Short-Term Deferral Payments and (ii) any remaining portion of such severance payments paid after your Separation from Service to the extent (A) that the dollar amount of those payments does not exceed two (2) times the lesser of (x) your annualized compensation (based on your annual rate of pay for the calendar year preceding the calendar year of your Separation from Service, adjusted to reflect any increase during that calendar year which was expected to continue indefinitely had your Separation from Service not occurred) or (y) the maximum amount of compensation that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which you have a Separation from Service, and (B) such severance payments are to be made to you no later than the last day of the second calendar year following the calendar year in which the Separation from Service occurs.

     6. Right to Advice of Counsel. You acknowledge that you have had the right to consult with counsel and are fully aware of your rights and obligations under the Compensation Letter and this Amendment Agreement.

     7. Remaining Terms: Except for the amendments set forth in this Amendment Agreement, all of the other terms of the Compensation Letter shall remain in full force and effect. This Amendment Agreement does not modify or affect your at-will employment status, which means that you or the Company may terminate your employment relationship at any time for any reason, with or without cause.

	Penson Worldwide, Inc.
	By: /s/ Philip A. Pendergraft
	Title: CEO
	Agreed and Acknowledged:
Date: December 31, 2008	/s/ Andrew B. Koslow
	Andrew B. Koslow

2

EX-10.47

Exhibit 10.47

Mr. Kevin W. McAleer
17516 Oak Mount Place
Dallas, Texas 75287

     Re:      Amendment of Compensation Letter

Dear Kevin:

     This letter agreement (the “Amendment Agreement”) amends that certain compensation letter between you and Penson Worldwide, Inc. (“PWI”) dated as of February 15, 2006 (the “Compensation Letter”).

     You and PWI have agreed to amend the terms and conditions of the Compensation Letter in order to bring those terms and conditions into documentary compliance with the final Treasury Regulations under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, you and PWI hereby agree that, effective December 31, 2008, the Compensation Letter shall be amended as follows:

     1. Payment of Bonus. Any bonus payable to you with respect to any year pursuant to Section 2 of the Compensation Letter will be paid to you not later than the 15th day of the third calendar month following the close of such calendar year.

     2. Severance Payment. Any severance payable to you under Section 8 of the Compensation Letter will be paid in accordance with PWI’s normal payroll practices for salaried employees commencing with the payroll date coincident with or following your Separation from Service (as such term is defined under Section 409A). Any such payments to which you become entitled shall be treated as a right to a series of separate payments for purposes of Section 409A, and each such separate payment that becomes due and payable during the period commencing with the date of your Separation from Service and ending on March 15 of the succeeding calendar year is hereby designated a “Short-Term Deferral Payment” and shall be paid during that period.

     3. Compliance with Section 409A.

          a. The Compensation Letter as amended by this Amendment Agreement is intended to comply with the requirements of Section 409A. Accordingly, all provisions herein shall be construed and interpreted to comply with Section 409A and, if necessary, any such provision shall be deemed amended to comply with Section 409A and the regulations thereunder.

          b. Notwithstanding any provision to the contrary in the Compensation Letter as amended by this Amendment Agreement, no payments or benefits to which you become entitled under the Compensation Letter in connection with the termination of your employment with the Company shall be made or paid to you prior to the earlier of (i) the first day of the seventh (7th) month following the date of your Separation from Service due to such termination of employment or (ii) the date of your death, if you are deemed, pursuant to the procedures established by the Compensation Committee in accordance with the applicable standards of Section 409A and the Treasury Regulations thereunder and applied on a consistent basis for all

for all non-qualified deferred compensation plans subject to Section 409A, to be a “specified employee” at the time of such Separation from Service and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A(a)(2). Upon the expiration of the applicable Section 409A(a)(2) deferral period, all payments deferred pursuant to this Section 3b shall be paid in a lump sum to you, and any remaining payments due under the Agreement shall be paid in accordance with the normal payment dates specified for them herein. The specified employees subject to such a delayed commencement date shall be identified on December 31 of each calendar year. If you are so identified on any such December 31, you shall have specified employee status for the twelve (12)-month period beginning on April 1 of the following calendar year.

          c. Unless required by Section 409A, the six-month holdback set forth in Section 3b above shall not be applicable to (i) any severance payments that qualify as Short-Term Deferral Payments and (ii) any remaining portion of such severance payments paid after your Separation from Service to the extent (A) that the dollar amount of those payments does not exceed two (2) times the lesser of (x) your annualized compensation (based on your annual rate of pay for the calendar year preceding the calendar year of your Separation from Service, adjusted to reflect any increase during that calendar year which was expected to continue indefinitely had your Separation from Service not occurred) or (y) the maximum amount of compensation that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which you have a Separation from Service, and (B) such severance payments are to be made to you no later than the last day of the second calendar year following the calendar year in which the Separation from Service occurs.

     6. Right to Advice of Counsel. You acknowledge that you have had the right to consult with counsel and are fully aware of your rights and obligations under the Compensation Letter and this Amendment Agreement.

     7. Remaining Terms: Except for the amendments set forth in this Amendment Agreement, all of the other terms of the Compensation Letter shall remain in full force and effect. This Amendment Agreement does not modify or affect your at-will employment status, which means that you or the Company may terminate your employment relationship at any time for any reason, with or without cause.

	Penson Worldwide, Inc.
	By: /s/ Philip A. Pendergraft
	Title: CEO
	Agreed and Acknowledged:
Date: December 31, 2008	/s/ Kevin W. McAleer
	Kevin W. McAleer

2

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF PENSON WORLDWIDE, INC.

1. SAI Holdings, Inc. (a Texas corporation)

2. Penson Financial Services, Inc. (a North Carolina corporation that is a subsidiary of SAI Holdings, Inc.)

3. Nexa Technologies, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

4. Penson Holdings, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

5. Penson Financial Futures, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

6. Penson Execution Services, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

7. Penson Financial Services Limited (a company incorporated in England that is a subsidiary of Penson Holdings, Inc.)

8. Worldwide Nominees Ltd. (a company incorporated in England that is a subsidiary of Penson Financial Services Limited)

9. Penson Financial Services Canada Inc. (a Canadian corporation that is a Subsidiary of Penson Holdings, Inc.)

10. Penson Ventures, Inc. (a Canadian corporation that is a Subsidiary of Penson Holdings, Inc.)

11. Penson Asia Limited (a Hong Kong company that is a subsidiary of Penson Holdings, Inc.)

12. Market Essentials Group, Inc. (a Canadian corporation that is a subsidiary of Penson Ventures, Inc.)

13. Turnpike Trading Systems, Inc. (a Canadian corporation that is a Subsidiary of Penson Ventures, Inc.)

14. GHP1, Inc. (a Texas corporation that is a subsidiary of SAI Holdings, Inc.)

15. GHP2, LLC (a Delaware limited liability company that is a subsidiary of GHP1, Inc.)

16. Penson GHCO (an Illinois general partnership that is a subsidiary of GHP1, Inc. and GHP2, LLC)

17. First Capital Group, LLC (a Delaware limited liability company that is a subsidiary of GHP1, Inc.)

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Penson Worldwide, Inc.
Dallas, Texas

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-134374) of Penson Worldwide, Inc. of our reports dated March 12, 2009, relating to the consolidated financial statements and the effectiveness of Penson Worldwide, Inc.’s internal control over financial reporting, which appears in this Form 10-K.

/s/ BDO Seidman, LLP          
BDO Seidman, LLP

Dallas, Texas
March 12, 2009

EX-31.1

Exhibit 31.1

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Philip A. Pendergraft, certify that:

1.	I have reviewed this annual report on Form 10-K of Penson Worldwide, Inc;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 12, 2009

/s/ Philip A. Pendergraft

Philip A. Pendergraft

Chief Executive Officer

and principal executive officer

EX-31.2

Exhibit 31.2

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin W. McAleer, certify that:

1.	I have reviewed this annual report on Form 10-K of Penson Worldwide, Inc;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this annual report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 12, 2009

/s/ Kevin W. McAleer

Kevin W. McAleer

Executive Vice President, Chief Financial Officer

and principal financial and accounting officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Penson Worldwide, Inc (the “Company”) on Form 10-K for the period ending December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip A. Pendergraft, Chief Executive Officer and principal executive officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 12, 2009

/s/ Philip A. Pendergraft

Philip A. Pendergraft

Chief Executive Officer

and principal executive officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Penson Worldwide, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin W. McAleer, Executive Vice President, Chief Financial Officer and principal financial and accounting officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 12, 2009

/s/ Kevin W. McAleer

Kevin W. McAleer

Executive Vice President, Chief Financial Officer

and principal financial and accounting officer