Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Note 9 – Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily-available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. The estimated fair values of these securities are based on quoted market prices provided by external pricing services.

Level III – Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation.

The following table presents the categorization of investments and certain other assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	Level I		Level II		Level III		Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)	$	—	$	38,445	$	—	$	38,445
Seed Capital Investments		8,894		2,212		—		11,106
Mutual Funds		11,081		—		—		11,081
Financial Instruments Owned and Pledged as Collateral at Fair Value		139,209		—		—		139,209
Total Assets Measured At Fair Value	$	159,184	$	40,657	$	—	$	199,841
	December 31, 2011
	Level I		Level II		Level III		Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)	$	—	$	106,951	$	—	$	106,951
Seed Capital Investments		9,150		2,540		—		11,690
Mutual Funds		8,938		—		—		8,938
Financial Instruments Owned and Pledged as Collateral at Fair Value		127,178		—		—		127,178
Total Assets Measured At Fair Value	$	145,266	$	109,491	$	—	$	254,757

(1) Includes $17,794 and $46,291 of municipal bonds and commercial paper classified within Cash and Cash Equivalents on the Unaudited Condensed Consolidated Statements of Financial Condition as of September 30, 2012 and December 31, 2011, respectively.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

The Company had no transfers between fair value levels during the three and nine months ended September 30, 2012 or the year ended December 31, 2011.

The carrying amount and estimated fair value of the Company’s financial instrument assets and liabilities which are not measured at fair value on the Unaudited Condensed Consolidated Statements of Financial Condition are listed in the tables below.

			September 30, 2012
	Carrying Amount		Estimated Fair Value
			Level I		Level II		Level III		Total
Financial Assets:
Cash and Cash Equivalents	$	144,547	$	144,547	$	—	$	—	$	144,547
Securities Purchased Under Agreements to Resell		973		—		973		—		973
Accounts Receivable		72,666		—		72,666		—		72,666
Receivable from Employees and Related Parties		5,539		—		5,539		—		5,539
Assets Segregated for Bank Regulatory Requirements		10,200		10,200		—		—		10,200
Financial Liabilities:
Accounts Payable and Accrued Expenses	$	16,278	$	—	$	16,278	$	—	$	16,278
Securities Sold Under Agreements to Repurchase		140,443		—		140,443		—		140,443
Payable to Employees and Related Parties		10,259		—		10,259		—		10,259
Notes Payable		100,933		—		135,184		—		135,184
			December 31, 2011
	Carrying Amount		Estimated Fair Value
			Level I		Level II		Level III		Total
Financial Assets:
Cash and Cash Equivalents	$	136,614	$	136,614	$	—	$	—	$	136,614
Securities Purchased Under Agreements to Resell		2,146		—		2,146		—		2,146
Accounts Receivable		52,060		—		52,060		—		52,060
Receivable from Employees and Related Parties		7,793		—		7,793		—		7,793
Assets Segregated for Bank Regulatory Requirements		10,200		10,200		—		—		10,200
Financial Liabilities:
Accounts Payable and Accrued Expenses	$	17,849	$	—	$	17,849	$	—	$	17,849
Securities Sold Under Agreements to Repurchase		129,577		—		129,577		—		129,577
Payable to Employees and Related Parties		12,647		—		12,647		—		12,647
Notes Payable		99,664		—		122,279		—		122,279

The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities:

The fair value of the Company’s Notes Payable is estimated based on a present value analysis utilizing aggregate market yields for similar financial instruments.

The carrying amounts reported on the Unaudited Condensed Consolidated Statements of Financial Condition for Cash, Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, Accounts Receivable, Receivables from Employees and Related Parties, Accounts Payable and Accrued Expenses, Payables to Employees and Related Parties and Assets Segregated for Bank Regulatory Requirements approximate fair value due to the short term nature of these items.