S-1 1 tm2126636-10_s1.htm S-1 tm2126636-10_s1 - none - 45.9690156s
As filed with the Securities and Exchange Commission on January 19, 2022.
Registration No. 333-     
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Dynasty Financial Partners Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
7389
(Primary Standard Industrial
Classification Code Number)
87-2285565
(I.R.S. Employer
Identification Number)
200 Central Avenue, 15th Floor
St. Petersburg, Florida 33701
Telephone: (212) 373-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Jonathan Morris
Chief Legal and Governance Officer
200 Central Avenue, 15th Floor
St. Petersburg, Florida 33701
Telephone: (212) 373-1000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Mark J. Menting
Robert W. Downes
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
(212) 558-4000
Derek Dostal
Richard D. Truesdell, Jr.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE:
Title of Each Class of Securities to be Registered
Proposed Maximum
Aggregate
Offering Price(1)(2)
Amount of
Registration Fee
Class A common stock, par value $0.01 per share
$ 100,000,000 $ 9,270.00
(1)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)
Includes the offering price of shares of Class A common stock that may be sold if the underwriters exercise their option to purchase additional shares of Class A common stock from us.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is neither an offer to sell these securities nor a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED         , 2022
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         Shares
Class A Common Stock
This is an initial public offering of shares of Class A common stock of Dynasty Financial Partners Inc. We are offering        shares of Class A common stock.
Prior to this offering, there has been no public market for our Class A common stock. It is currently estimated that the initial public offering price per share of our Class A common stock will be between $     and $    . We have applied to list our Class A common stock on the NASDAQ Global Market under the symbol “DSTY.”
We intend to use a portion of the net proceeds of this offering to purchase common units of Dynasty Financial Partners, LLC from existing Dynasty Financial Partners, LLC unitholders, at a per-unit price equal to the per-share price paid by the underwriters for shares of the Class A common stock in this offering. We also intend to use a portion of the net proceeds from this offering to purchase newly issued common units from Dynasty Financial Partners, LLC, at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock in this offering. We expect Dynasty Financial Partners, LLC to use the proceeds for general corporate purposes. In connection with the reorganization transactions taking place contemporaneously with the closing of this offering, members of Dynasty Financial Partners, LLC holding certain Class Q profits interests units will exchange such profits interests units for shares of our Class A common stock.
We are an “emerging growth company” under the federal securities laws and, as such, are eligible for reduced public company reporting and other requirements.
See “Risk Factors” beginning on page 21 to read about risks you should consider before buying shares of the Class A common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Initial public offering price
$ $
Underwriting discounts and commissions(1)
$ $
Proceeds, before expenses, to Dynasty Financial Partners Inc.
$ $
(1)
See “Underwriting” for a description of all compensation to be paid to the underwriters.
At our request, Goldman Sachs & Co. LLC, a participating underwriter, has reserved for sale, at the initial public offering price, up to      % of the shares offered by this prospectus for sale to certain of our directors, officers, employees, business associates and related persons. If these persons purchase reserved shares it will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. For more information regarding the directed share program, see “Underwriting — Directed Share Program.”
To the extent that the underwriters sell more than           shares of Class A common stock, the underwriters have the option to purchase up to an additional           shares from us at the initial public offering price less the underwriting discount within   days of the date of this prospectus.
The underwriters expect to deliver the shares of Class A common stock against payment on or about        , 2022.
Joint Book-Running Managers
Goldman Sachs & Co. LLC
J.P. Morgan
Citigroup
RBC Capital Markets
Co-Managers
   D.A. Davidson & Co.
Keefe, Bruyette & Woods
A Stifel Company
Maxim Group LLC
Prospectus dated        , 2022.

 
TABLE OF CONTENTS
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F-1
 
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Through and including           , 2022 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
We are responsible for the information contained in this prospectus and in any free writing prospectus we may authorize to be delivered to you. We and the underwriters have not authorized anyone to give you any other information, and take no responsibility for any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock. Our business, financial condition, results of operations and prospects may have changed since the date set forth on the cover page of this prospectus.
Except where the context requires otherwise, in this prospectus:

“Dynasty,” the “company,” “we,” “us” and “our” refer to Dynasty Financial Partners Inc., a Delaware corporation, and, unless the context otherwise requires, its direct and indirect subsidiaries, and, for periods prior to this offering, “Dynasty,” the “company,” “we,” “us” and “our” refer to Dynasty Financial Partners, LLC and, unless the context otherwise requires, its direct and indirect subsidiaries; and

“Dynasty Financial Partners” refers to Dynasty Financial Partners, LLC, a limited liability company organized under the laws of the State of Delaware, and, unless the context otherwise requires, its direct and indirect subsidiaries.
Financial Statements and Basis of Presentation
This prospectus includes (x) audited consolidated statements of financial position of Dynasty Financial Partners, LLC as of December 31, 2020 and December 31, 2019 and consolidated statements of comprehensive income, statements of changes in members’ equity, and statements of cash flows of Dynasty Financial Partners, LLC for the years ended December 31, 2020 and December 31, 2019 and (y) the unaudited condensed statement of financial position of Dynasty Financial Partners, LLC as of September 30, 2021 and unaudited condensed statements of comprehensive income, unaudited condensed statements of changes in members’ equity, and unaudited condensed statements of cash flows of Dynasty Financial Partners, LLC for the nine months ended September 30, 2021 and September 30, 2020. This prospectus also includes the statement of financial position of Dynasty Financial Partners Inc., dated as of September 30, 2021. The other historical financial information of Dynasty Financial Partners Inc. has not been included in this prospectus as it is a newly incorporated entity, has no business transactions or activities to date and had nominal assets or liabilities during the periods presented in this prospectus. Following the completion of this offering, Dynasty Financial Partners Inc. will be a holding company and its sole material asset will be Class A units of Dynasty Financial Partners, LLC. All of our business has historically been and will continue to be conducted through Dynasty Financial Partners, LLC. The financial results of Dynasty Financial Partners, LLC will be consolidated in the financial statements of Dynasty Financial Partners Inc. following this offering.
Following the completion of this offering, we intend to include the financial statements of Dynasty Financial Partners Inc. and its consolidated subsidiaries in our periodic reports and other filings as required by applicable law and the rules and regulations of the SEC. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information.
Trademarks and Trade Names
We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks or trade names in this prospectus is not intended to, and does not, imply a relationship with, or endorsement or sponsorship by us. Solely for convenience,
 
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the trademarks, service marks and trade names referred to in this prospectus may appear without the
®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names.
Market and Industry Data
Certain information contained in “Summary” and “Business” is based on studies, analyses and surveys prepared by Cerulli Associates, Inc. (“Cerulli”) and other third-party sources. This prospectus includes industry and market data that we obtained from periodic industry publications, third-party studies and surveys, filings of public companies in our industry and internal company data. These sources include government and industry sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the industry and market data to be reliable as of the date of this prospectus, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein.
 
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SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our Class A common stock. You should read this entire prospectus carefully, including the “Risk Factors” section, our historical consolidated financial statements and the notes thereto, and unaudited pro forma consolidated financial information, each included elsewhere in this prospectus.
Overview
We believe we are a leading provider of technology-enabled wealth management solutions and business services for financial advisory firms primarily focused on serving high net worth (“HNW”) and ultra-high net worth (“UHNW”) clients. As defined by Cerulli, HNW clients are identified as those with $5 million or more investable assets and UHNW clients are identified as those with $20 million or more investable assets. We provide access to a comprehensive platform of software and technology tools, business services and holistic investment management capabilities through an open-architecture platform delivered via a suite of proprietary and third-party technologies integrated within the Dynasty Desktop. Our offerings give our advisory firm clients the freedom to address their clients’ needs in an objective and independent manner. Our technology, tools and services provide advisory firms the supported independence to launch their business, scale their operations and grow their firms — both organically and inorganically — while also allowing them to be more focused on and better-equipped to serve their clients.
The combination of our comprehensive and flexible offering has driven our rapid growth. Since adding our first client in 2011, we have grown to $68.0 billion in Period End Assets Under Administration (“Period End AUA”) as of September 30, 2021. Our Period End AUA increased by $11.7 billion, or 32%, from September 30, 2019 to September 30, 2020, and increased by $19.3 billion, or 40%, from September 30, 2020 to September 30, 2021. As of September 30, 2021, we partner with 46 financial advisory firms (“Network Partner Firms”) representing 292 financial advisors with an average assets under administration (“AUA’’) per advisor of $221 million.
We provide our Network Partner Firms a comprehensive suite of technology and business solutions that enable them to better serve their clients and run more efficient and higher-growth businesses. Highlights of our solutions include:

Core Services.   We provide Network Partner Firms the necessary technology solutions and business services to successfully serve their end-clients and grow their business. Our transition and consulting team provides business consulting to financial advisors and financial advisory firms at all stages of their business lifecycle — from advisors transitioning to independence, to long established independent advisory firms desiring to scale operations and accelerate growth. In addition, technology underpins the full suite of our Core Services offering and is the foundation of all of the individual components. We enable data-driven critical business processes through cloud-based advanced computing, advanced data management and analytics, data integrations, and cloud-based SaaS platforms. Our technology platform provides an integrated experience for the advisor, as well as important technology-driven efficiencies to their businesses. This is augmented by value-added services available to Network Partner Firms including finance, marketing, investments, compliance and practice management. Importantly, working with Dynasty also provides Network Partner Firms access to a community of like-minded entrepreneurs that come together to share ideas and best practices, including at events that we host such as our Annual Partners Summit and Annual Investment Forum.

Investment Platform.   Our Investment Platform includes our turnkey asset management platform (“TAMP”), which works in concert with our Core Services offering and integrates the research, tools, technology, manager access, operations, and compliance support that allows advisory firms to offer highly professional and scalable investment solutions to their clients. Our investment platform provides comprehensive support, whether advisors choose to manage their own portfolios, select recommended exchange traded funds or separately managed accounts, or outsource some or all aspects of their investment solution to Dynasty’s outsourced
 
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Chief Investment Officer capabilities. When an advisor chooses to use our Chief Investment Officer capabilities, the Company’s registered investment advisor Dynasty Wealth Management, LLC serves as an investment sub-adviser to the relevant Network Partner Firm by making investment decisions with respect to the Network Partner Firm’s client portfolios and provides execution services for the Network Partner Firm. Our Investment Platform is optimized to facilitate a smooth initial launch for new independent advisory firms.

Capital Strategies.   We offer our Network Partner Firms a range of financing solutions to help them expand, scale and grow their business. We provide financing in the form of loans, minority equity investments and revenue participation interests to our Network Partner Firms. These solutions are structured to provide a flexible menu of capital options for Network Partner Firms while providing appropriate protections and returns for Dynasty.
Our revenue model is primarily composed of fees that are recurring in nature. The primary components of our revenue are generated by our Core Services and Investment Platform offerings which typically charge asset-based fees on the AUA on these platforms, or in limited instances within our Core Services business line as a percentage of total revenue. The remainder of our revenues are generated by fixed fees associated with transition and consulting services and sponsorships of our client events, as well as interest income, revenue share or earnings shares related to our Capital Strategies.
In the nine months ended September 30, 2021, we generated total revenues of $49.2 million, net income of $10.6 million, adjusted EBITDA of $12.0 million, and adjusted net income of $11.2 million compared with $32.7 million, $2.9 million, $3.5 million, and $3.0 million for the nine months ended September 30, 2020, respectively.
In the year ended December 31, 2020, we generated total revenues of $46.2 million, net income of $4.8 million, adjusted EBITDA of $5.6 million, and adjusted net income of $5.0 million compared with $40.5 million, $1.0 million, $2.6 million, and $1.1 million for the year ended December 31, 2019, respectively.
Market Overview
We primarily serve fee-based, independent advisory firms who provide wealth management services to HNW and UHNW investors in the United States. The market for wealth advisory services in the United States is vast, with household net worth of $46.1 trillion as of December 31, 2019, and according to data from the Federal Reserve, total household net worth in the United States grew at a Compound Annual Growth Rate (“CAGR”) of 7.1% from 2010 to 2020.
Approximately 292,000 advisors managed $22.7 trillion of these assets as of December 31, 2019, according to a report by Cerulli, leaving substantial room for growth in Assets under Management (“AUM”). Advisors’ AUM grew at a 7.6% CAGR during the ten-year period ended December 31, 2019, according to Cerulli data.
We are focused on the highest growth areas within the wealth management sector — hybrid and independent registered investment advisors (“RIAs”). According to Cerulli data, the RIA channels experienced the largest increase in AUM over the 5 year period ended December 31, 2019; AUM at hybrid and independent RIAs grew at CAGRs of 12.2% and 10.4%, respectively.
We target both existing independent wealth management firms and advisory teams who are considering separating from their associated broker-dealer, in each case, that typically have an average AUA of $1,300 million or more. Within the latter group, we target both teams whose clients have outgrown the offerings and client-service levels of the broker-dealer environment and established teams at wirehouse broker-dealers who desire a greater level of independence and autonomy in how they engage with and service their clients. According to Cerulli data, total addressable market for breakaway advisors in terms of assets was $529 billion in 2019. The steady trend of large advisors breaking away has continued, with 33 breakaway transactions of firms with over $1 billion recorded in AUA in 2020. We have been able to capture this momentum in launching 22 breakaway advisor teams with over $500 million in AUA since 2015, 14 of which were over $1 billion in AUA.
 
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Our Competitive Strengths
For more than a decade, we have championed the benefits of independent wealth management for HNW and UHNW individuals and have contributed to the movement of assets from traditional brokerage channels to the independent channels of wealth management. We are a recognized industry leader and our platform and offering have won multiple awards in recent years. As of September 30, 2021, Network Partner Firms representing more than 292 advisors with $64.6 billion in Billable AUA rely on Dynasty to empower their independence. We believe the following factors drive our competitive strengths:

Deep Understanding of Our Clients:   Our firm is focused on meeting the needs of wealth advisory firms across their life cycle. This provides us with an in-depth understanding of the needs and challenges that our clients face and makes us well positioned to develop highly attractive products and solutions to meet their needs. This deep understanding has been built through not only our standalone operating history, but the longer-term experience of our management team. Our strong relationship with our clients is evidenced by an average client tenure of over four years.

Comprehensive Offering:   We provide a full suite of services and technology-enabled solutions that allow advisors to operate, scale and grow independent of the large firms they were captive to previously, enabling them to be more focused on the specialized needs of their clients. The comprehensive nature of our offering positions us to be the single-source service provider to our clients and significantly differentiates us from the disparate point solutions prevalent in the wealth management technology market.

Scale Provider:   We are able to leverage our size and breadth to invest in maintaining a compelling technology offering while being a partner of choice to third party solution providers to independent wealth firms. This also allows us to offer attractive enterprise-level pricing and customer service to our clients as well as access to products and solutions they may not be able to access on their own.

Modular Technology Solution:   Our technology offering has been designed to integrate with best-in-class providers of technology solutions for wealth managers, such as customer relationship management, performance reporting, and risk management software. We typically offer two to three options for any solution and are able to replace or add options as the landscape evolves and the technologies at the forefront shift. We continually solicit feedback from our clients on how to improve our technology stack. Because these solutions integrate with the Dynasty front-end platform, these changes can be implemented seamlessly with minimal impact to the end-client experience.

Entrepreneurial Culture:   We are entrepreneurs serving a community of entrepreneurs. Our platform is designed to empower advisors to become CEOs of their own independent firms. We do not take majority ownership positions or enter into majority revenue sharing arrangements with our partner firms, nor do we ever disincentivize our clients from continuing to grow their firms. This partnership approach results in a culture of independence that promotes entrepreneurship, empowering and incentivizing the owners of our partner firms to focus on growing their businesses and providing superior service to their end-clients.

Experienced and Committed Management Team:   We are led by industry experts who are committed to the future of the Dynasty network. Members of our management team and board of directors have extensive experience in wealth and asset management at both large broker-dealers and as independent advisors. In addition, key members of the management team have meaningful equity ownership in the company and are dedicated to its continued success.
Growth Strategy
Core elements of our growth strategy include:

Facilitate Existing Network Partner Firm Growth:   The success of our clients is our success. Our offerings help our clients grow their AUA both organically and inorganically. Our
 
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Network Partner Firms, utilizing our highly scalable technology platform and Capital Strategies offerings are also well positioned to participate in the significant consolidation taking place in the wealth management space. In fiscal years 2019 and 2020, our Network Partner Firms have executed 11 tuck-in acquisitions of advisory practices that collectively managed $6.5 billion in AUM at the time of acquisition. According to Cerulli data, as of December 31, 2019, the estimated addressable market for RIA acquisitions over the next 5-10 years was $2.8 trillion in assets, primarily driven by advisor retirements, which we believe will continue to drive growth at our Network Partner Firms and at Dynasty.

Onboard New Network Partner Firms:   The size of the hybrid and independent channels continues to increase, with AUM growing 12.2% and 10.4%, respectively over the 5 year period ended December 31, 2019, according to Cerulli data. We maintain an active effort to identify and onboard advisors who are contemplating separating from their broker-dealer affiliates, as well as RIAs who are considering changing service providers. In the year ended December 31, 2019, we added 7 new Network Partner Firms to our platform that comprised 22 advisors and $3.9 billion in AUA as of December 31, 2019. In the year ended December 31, 2020, we added 6 new Network Partner Firms that comprised 22 advisors and $2.3 billion in AUA as of December 31, 2020. In the nine months ended September 30, 2021, we added 4 new Network Partner Firms that comprised 22 advisors and $1.7 billion in AUA as of September 30, 2021. These 17 Network Partner Firms in total comprised 101 advisors and $15.4 billion in AUA as of September 30, 2021. We expect to add incremental AUA going forward from recently added Network Partner Firms which are not reflected in the September 30, 2021 AUA balance. On September 21, 2021 we added a Network Partner Firm, which had yet to transition material assets to our platform as of September 30, 2021. In addition, we added another Network Partner Firm in the month of November 2021. Combined these two Network Partner Firms managed approximately $2.6 billion prior to joining our platform and are currently in the process of transitioning assets.

Increase Network Partner Firms’ Use of Our Broader Capabilities:   As of September 30, 2020 and 2021, the percentage of our Billable AUA that utilize our Investment Platform was 45% and 47% respectively, and as of September 30, 2020 and 2021, 33% and 33% of our Network Partner Firms took advantage of our capital solutions, respectively. We continuously work to improve our offerings to gain wallet share from our existing partners.

Launch Additional Solutions:   We have a history of product innovation since our founding, and we continue to invest in our offerings to better assist advisory firms. An area of increasing focus for us is the generation and nurturing of end-client leads for our network of advisory firms.

Complementary Acquisitions:   In addition to our investments in our clients, we continually evaluate acquisition opportunities, particularly for further integrating select elements of our technology stack and supply chain that would enable us to better serve advisory firms and further integrate our offerings. We believe we are well positioned to execute accretive acquisitions given our ability to direct new solutions to our large group of Network Partner Firms.
Risk Factors
An investment in our Class A common stock involves substantial risks and uncertainties. These risks and uncertainties include, among others, the following:

Our revenue may fluctuate from period to period, which could cause our share price to fluctuate.

We derive a substantial portion of our revenue from the delivery of wealth management solutions to financial advisory firms serving HNW and UHNW clients in the financial advisory industry and our revenue could suffer if that industry experiences a downturn.

Changes in market and economic conditions could lower the value of assets on which we earn revenue and could decrease the demand for our wealth management solutions.
 
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Our results of operations are heavily dependent on the success of our Network Partner Firms, which are subject to increasing competitive risks, and our results of operations are subject to their operational disruptions or mismanagement.

Our success depends, in part, upon our ability to provide attractive opportunities to financial advisors seeking independence from traditional brokerages and wirehouses, and if we are not successful in attracting suitable financial advisors, it may have an adverse effect on the growth of our revenues and earnings.

Our growth strategy includes growing through making minority equity investments and providing revenue participation interests in our Network Partner Firms, each of which involve a number of risks.

We operate in an intensely competitive industry, with many firms competing for business from financial advisors on the basis of the quality and breadth of wealth management solutions, ability to innovate, reputation and the prices of services, among other factors, and this competition could hurt our financial performance.

We must continue to introduce new wealth management solutions, and enhancements thereon, to address our clients’ changing needs, market changes and technological developments, and a failure to do so could have a material adverse effect on our results of operations, financial condition or business.

If our reputation is harmed, our results of operations, financial condition or business could be materially adversely affected.

We rely on our key personnel for the stability and growth of our business and future success.

Our failure to successfully execute the transition of a Network Partner Firm from their existing platform to our platform in a timely and accurate manner could have a material adverse effect on our results of operations, financial condition or business.

We are exposed to data and cybersecurity risks that could result in data breaches and service interruptions, which could cause harm to our reputation or significant liability.

Our operations are subject to extensive government regulation, and compliance failures or regulatory action against us could adversely affect our results of operations, financial condition or business.

If we are not able to satisfy data protection, security, privacy and other government- and industry-specific requirements, laws or regulations, our results of operations, financial condition or business could be harmed.

If we fail to adequately obtain, maintain, protect, enforce or defend our intellectual property and proprietary rights, our competitive position could be impaired, our reputation could be harmed and we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.

If third parties infringe upon our intellectual property or if we were to infringe upon the intellectual property of third parties, we may expend significant resources enforcing or defending our rights or suffer competitive injury.

The duration of COVID-19 outbreak and its ultimate impact on our business remains uncertain.

Our internal reorganization may adversely affect our relationship with certain employees.

Certain existing holders of equity interests in Dynasty Financial Partners will collectively hold a substantial percentage of the voting power of our common stock.

We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations.

We may be required to register as an investment company under the Investment Company Act if an exclusion or safe harbor currently available to us is no longer available to us, and, as
 
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a result, we may become subject to regulatory action or third-party claims, which could have a material adverse effect on our business, results of operations and financial condition.
The foregoing is not a comprehensive list of the risks and uncertainties we face. Investors should carefully consider all of the information in this prospectus, including information under “Risk Factors,” prior to making an investment in our Class A common stock.
Our Structure and Reorganization
The diagram below depicts our organizational structure immediately after this offering and related transactions.
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(1)
Each share of Class B common stock will entitle its holder to five votes per share.
Following the transactions described below, we will conduct all of our business activities through our direct subsidiary, Dynasty Financial Partners, an intermediate holding company, and its subsidiaries. Net profits and net losses of Dynasty Financial Partners will be allocated, and distributions of profits will be made, approximately    % to us and    % to Dynasty Financial Management, LLC (or    % and    %, respectively, if the underwriters exercise their option to purchase additional shares in full), immediately after giving effect to the transactions described herein. See “Our Structure and Reorganization.”
Reorganization Transactions
We were incorporated in Delaware on August 16, 2021. We will enter into a series of transactions to reorganize our capital structure in connection with this offering. We refer throughout this prospectus to the transactions described below as the reorganization transactions or the reorganization. The reorganization transactions are designed to create a capital structure that preserves our ability to conduct our business through Dynasty Financial Partners (a limited liability company), while permitting us to raise additional capital and provide access to liquidity through a public company. Multiple classes of securities at the public company level are necessary to achieve these objectives and maintain a governance structure that resembles the current governance structure of Dynasty Financial Partners.
Common and Profits interests units.   The issued and outstanding membership interests in Dynasty Financial Partners currently consist of Class A, Class B and Class C capital interests and
 
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Class P and Q profits interests. Each Class B capital interest entitles its holder to five votes, whereas each Class A and C capital interest entitles its holder to one vote.
Revisions to Our Organization and Capitalization Structure.   Immediately prior to the consummation of this offering, Dynasty Merger Sub, LLC, an indirect wholly-owned subsidiary of Dynasty Financial Partners and direct wholly-owned subsidiary of Dynasty Financial Management, LLC, that we will form for the purpose of the merger, will merge with and into Dynasty Financial Partners, resulting in Dynasty and Dynasty Financial Management, LLC becoming the sole members of Dynasty Financial Partners immediately after the merger. As a result of the merger,

each unit of Class A or Class C capital interest in Dynasty Financial Partners will be converted into the right to receive (x) one common equity unit in Dynasty Financial Management, LLC and (y) one share of Class C common stock of Dynasty;

each unit of Class B capital interest in Dynasty Financial Partners will be converted into the right to receive (x) one common equity unit in Dynasty Financial Management, LLC and (y) one share of Class B common stock of Dynasty;

each unit of Class P profits interest in Dynasty Financial Partners will be converted into the right to receive (x) the appropriate conversion number of common equity units in Dynasty Financial Management, LLC based on the profits interests conversion formula below and (y) an equal number of shares of Class C common stock of Dynasty;

each unit of Class Q profits interest in Dynasty Financial Partners issued prior to January 1, 2021 held by a holder that does not hold any other Class A, B or C capital interest or Class P profits interest or Class Q profits interest issued after January 1, 2021(the “Qualified Pre-2021 Class Q Interests”) will be entitled to receive (x) the appropriate conversion number of shares of Class A common stock of Dynasty based on the profits interests conversion formula below and (y) an amount in cash from Dynasty Financial Partners equal to 15% of the gross IPO price (as defined below) over the threshold price of such Qualified Pre-2021 Class Q Interests. Any shares of Class A common stock and any corresponding cash amount issued in exchange for an unvested Qualified Pre-2021 Class Q Interest shall be subject to the same vesting schedule as the unvested Qualified Pre-2021 Class Q Interests from which they were converted; and

each unit of Class Q profits interest in Dynasty Financial Partners that is not a Qualified Pre-2021 Class Q Interest (the “Other Class Q Interests”) will be entitled to receive (x) the appropriate conversion number of common equity units in Dynasty Financial Management, LLC based on the profits interests conversion formula below; provided any common equity units in Dynasty Financial Management, LLC issued in exchange for an unvested Other Class Q Interest shall be subject to the same vesting schedule as the unvested Other Class Q Interests from which they were converted and (y) an equal number of shares of Class C common stock of Dynasty.
With respect to profits interests above, the “appropriate conversion number” is equal to the quotient of (1) the excess, if any, of (A) the public offering price per share of the Class A common stock of Dynasty in the IPO before any discounts or underwriting commissions (the “gross IPO price”) over (B) the threshold price of such unit of profits interest, divided by (2) the gross IPO price.
In addition, immediately prior to the consummation of this offering, the limited liability company agreement of Dynasty Financial Partners will be amended and restated to effect such reclassification and to appoint Dynasty as the sole managing member of Dynasty Financial Partners. As sole managing member, we will control Dynasty Financial Partners’ management. As a result, the financial results of Dynasty Financial Partners will be consolidated in our financial statements. Upon the consummation of this offering, Dynasty will use a portion of the net proceeds of this offering to purchase common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders (after such unitholders exercise their right to receive common units of Dynasty Financial partners from Dynasty Financial Management, LLC in exchange for such common equity units), and will use a portion of the net proceeds from this offering to purchase a number of newly issued common units from Dynasty Financial Partners.
 
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Dynasty Financial Partners will apply the net proceeds it receives as described under “Use of Proceeds.” We describe the terms of the amended and restated limited liability company agreement of Dynasty Financial Partners under “Our Structure and Reorganization — Offering Transactions — Third Amended and Restated Limited Liability Company Agreement of Dynasty Financial Partners.”
Following the first anniversary of the consummation of this offering, holders of common equity units in Dynasty Financial Management, LLC will have the right to receive from Dynasty Financial Management, LLC common units of Dynasty Financial Partners, which will be exchangeable for shares of our Class A common stock, subject to certain restrictions, as described under “Our Structure and Reorganization — Offering Transactions — Exchange Agreement.” We will not have any profits interests units after the consummation of this offering.
Capital Stock.   Immediately prior to the consummation of this offering, we also will amend and restate our certificate of incorporation to authorize three classes of common stock, Class A common stock, Class B common stock and Class C common stock. Our common stock will have the terms described below and, in more detail, under “Description of Capital Stock”:

Class A Common Stock.   We will issue shares of our Class A common stock to the public in this offering, and we intend to grant incentive stock options, nonqualified stock options and restricted stock units at the time of this offering to approximately      of our employees. An aggregate of        shares of Class A common stock underlie these awards. In addition, as part of the merger that is consummated immediately prior to the consummation of this offering, we will issue Class A common stock in exchange for certain Class Q profits interests units held by members of Dynasty Financial Partners. Each share of Class A common stock will entitle its holder to one vote and economic rights in Dynasty (including rights to dividends or distributions upon liquidation).

Class B Common Stock.   As part of the merger that is consummated immediately prior to the consummation of this offering, we will issue shares of our Class B common stock to certain holders of common units of Dynasty Financial Partners, which generally consist of our founders, in amounts equal to the number of common units that such holders hold at such time. Each share of our Class B common stock will entitle its holder to five votes per share but will have no economic rights in Dynasty (including no rights to dividends or distributions upon liquidation).

Class C Common Stock.   As part of the merger that is consummated immediately prior to the consummation of this offering, we will issue shares of our Class C common stock to certain holders of common units and profits interests units of Dynasty Financial Partners, which generally consist of initial outside investors, in amounts equal to the number of common units and the appropriate conversion number of profits interests that such holders hold at such time. Each share of Class C common stock will entitle its holder to one vote per share but will have no economic rights (including no rights to dividends or distributions upon liquidation).
Exchange Agreement.   Immediately prior to the consummation of this offering, we will enter into an exchange agreement which will provide certain exchange rights to holders of common units of Dynasty Financial Partners. Following the first anniversary of the consummation of this offering, subject to certain restrictions, each holder of Dynasty Financial Management, LLC will have the right to receive from Dynasty Financial Management, LLC common units of Dynasty Financial Partners, which such holders and certain permitted transferees will have the right to then exchange (together with an equal number of shares of our Class B or Class C common stock, as applicable) for shares of our Class A common stock on a one-for-one basis. As the holders of common equity units of Dynasty Financial Management, LLC exchange common units of Dynasty Financial Partners for shares of our Class A common stock, we will receive a number of common units of Dynasty Financial Partners equal to the number of shares of our Class A common stock that they receive, the holders’ common equity units of Dynasty Financial Management, LLC will be cancelled, and an equal number of shares of our Class B or Class C common stock, as applicable, will also be cancelled. See “Our Structure and Reorganization — Offering Transactions — Exchange Agreement” for more detailed information concerning the exchange rights, including a diagram that illustrates the exchange of common units of Dynasty Financial Partners for shares of our capital stock.
 
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Subject to certain restrictions, holders of substantially all of the common equity units of Dynasty Financial Management, LLC, including all of our executive officers, will have the right pursuant to the operating agreement of Dynasty Financial Management, LLC to receive from Dynasty Financial Management, LLC common units of Dynasty Financial Partners, which will be exchangeable for shares of our Class A common stock (or restricted shares of our Class A common stock, in the case of exchange of unvested units) following the first anniversary of the consummation of this offering.
Registration Rights Agreement.   In connection with this offering, we will enter into a registration rights agreement, pursuant to which holders of the shares of our Class A common stock issued upon exchange of their common units of Dynasty Financial Partners will have certain registration rights. See “Our Structure and Reorganization — Offering Transactions — Registration Rights Agreement” for a description of the registration rights agreement.
Tax Receivable Agreement.   Upon the closing of this offering, we will enter into a tax receivable agreement (the “Tax Receivable Agreement”), pursuant to which we generally will be required to pay to certain existing owners of Dynasty Financial Partners 85% of the applicable cash savings, if any, in U.S. federal and state income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after this offering as a result of (i) any step-up in tax basis in Dynasty Financial Partners’ assets resulting from (a) our purchase of common units of Dynasty Financial Partners for cash or the exchange of common units of Dynasty Financial Partners (along with the corresponding shares of our Class B or Class C common stock) for shares of our Class A common stock and (b) payments under the Tax Receivable Agreement, (ii) certain prior distributions by Dynasty Financial Partners and prior transfers or exchanges of limited liability company interests which resulted in tax basis adjustments to the assets of Dynasty Financial Partners and (iii) tax benefits related to imputed interest deemed to be paid by us as a result of the Tax Receivable Agreement. Under the Tax Receivable Agreement, we generally will retain the benefit of the remaining 15% of the applicable tax savings. See “Our Structure and Reorganization — Tax Receivable Agreement.”
Emerging Growth Company Status
We are an “emerging growth company” within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to comply with certain requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and will have the benefit of the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of these exemptions until we are no longer an emerging growth company.
In addition, Section 107 of the Jumpstart Our Business Startups Act (the “JOBS Act”) also provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Accordingly, this election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. When a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard, unless early adoption is permitted by the standard. As a result, our financial statements may not be comparable to the financial statements of companies that comply with new or revised accounting pronouncements as of public company effective dates.
For a description of the qualifications and other requirements applicable to emerging growth companies, please read “Risk Factors — Risks Related to the Offering and Our Class A Common Stock — For as long as we are an emerging growth company, we will not be required to comply with
 
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certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.”
Our Corporate Information
Our principal offices are located at 200 Central Avenue, 15th Floor, St. Petersburg, Florida 33701, and our telephone number is (212) 373-1000. Our internet site is www.dynastyfinancialpartners.com. Our website and the information contained therein or accessible through it are not incorporated into this prospectus or the registration statement of which it forms a part. The company was incorporated in Delaware on August 16, 2021.
“Dynasty,” the Dynasty design logo and other Dynasty tradenames and service marks in use generally and included in this prospectus are the property of Dynasty Financial Partners, Inc. and certain of our subsidiaries. Trade names, trademarks and service markets of other companies appearing in this prospectus are the property of the respective holders.
Recent Developments
2021 Investment Agreements
Subsequent to September 30, 2021, Dynasty Financial Partners entered into investment agreements with certain of the Network Partner Firms (“2021 Investment Agreements”), pursuant to which Dynasty Financial Partners acquired a minority equity interest in 5 Network Partner Firms and a revenue participation interest in 8 Network Partner Firms, the terms of which are described below.
As consideration for these post-September 30, 2021 investments, Dynasty Financial Partners paid $1.787 million in cash and issued $12.6 million in aggregate principal amount of notes (the “Exchangeable Notes”), which pay interest at a rate equal to the short-term applicable federal rate, to the Network Partner Firms that entered into 2021 Investment Agreements. At the holder’s option, the Exchangeable Notes are exchangeable into a number of shares of our Class A common stock equal to the principal amount of the relevant note divided by the public offering price of our Class A common stock. The Exchangeable Notes will be repaid in full, including interest, within the one-year anniversary after the issuance date if not exchanged by that date.
Minority Equity Investments
Dynasty Financial Partners also funded minority equity investments totaling $8,120 million (the “2021 Minority Equity Investment Agreements”) in exchange for a weighted average equity ownership interest of 12%. While these investments are outstanding, we have rights typical of a minority investor, which generally include access to books and records, access to capital proceeds in the event of a sale, tag along and drag along rights, certain consent rights, and a put right in instances of a material breach, default or bankruptcy.
Revenue Participation Interests
Similarly to previously issued revenue participation interests (“RPIs”), Dynasty Financial Partners funded RPI investments totaling $6,256 million in exchange for a contractual right to a percentage of each such Network Partner Firm’s revenue at a weighted average revenue share of 5% (the “2021 RPI Investment Agreements”). The terms of the newly issued revenue participation interests allow participating Network Partner Firms to repurchase the respective revenue participation interest after a certain period of time, which usually ranges from three to five years after the launch of their operations, by paying a make-whole amount to Dynasty Financial Partners.
In addition, the terms of the 2021 RPI Investment Agreements may, but do not always provide that the participation percentage will be adjusted on or near the one-year anniversary of the launch of the Network Partner Firm’s business to align with the actual revenue of the Network Partner Firm at that time.
Diligence Process
As part of the services engagement, Dynasty Financial Partners gains familiarity with each Network Partner Firm’s business and is able to assess the Network Partner Firm’s ability and capabilities
 
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to operate as an independent registered investment adviser, the potential need for capital and whether the Network Partner Firm would be interested in these new investment opportunities. Dynasty Financial Partners has offered to enter into investment agreements with such Network Partner Firms.
As with all other capital solutions we offer, Dynasty Financial Partners’ Capital Committee met and conducted due diligence that we deemed reasonable and appropriate for each Network Partner Firm that was considered for the 2021 Investment Agreements. Areas evaluated by the Capital Committee included revenue history, mix of business, compliance background, client concentration risk, key man risk, growth prospects and business strategy of the relevant Network Partner Firm.
Preliminary Unaudited Financial Results for the Quarter Ended December 31, 2021
We are in the process of finalizing our results for the quarter ended December 31, 2021. Set forth below are certain estimated preliminary unaudited financial results for the quarter and the year ended December 31, 2021. The estimated preliminary unaudited financial results set forth below are based only on currently available information as of the date of this prospectus. We have provided estimated ranges, rather than specific amounts, because these results are preliminary and subject to change. These ranges reflect our management’s best estimate of the impact of events during the quarter ended December 31, 2021. Our financial closing procedures for the quarter ended December 31, 2021 are not yet complete and, as a result, our final results upon completion of our closing procedures may vary from the estimated preliminary unaudited results set forth below. We expect to complete our financial statements for the quarter ended December 31, 2021 subsequent to the completion of this offering.
In addition, the estimated preliminary results set forth below are forward-looking statements and are not guarantees of future performance and may differ from actual results. See “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and our financial statements and related notes included in this Registration Statement for additional information regarding factors that could result in differences between the preliminary estimated ranges of certain of our financial results that are presented below and the actual financial results we will report. These estimates should not be viewed as a substitute for our full financial statements prepared in accordance with GAAP. Accordingly, you should not place undue reliance on these preliminary unaudited results. These preliminary unaudited results should be read together with “Risk Factors,” “Our Structure and Reorganization,” “Unaudited Pro Forma Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and the related notes included elsewhere in this prospectus.
Additionally, the estimates reported below include certain financial measures that are not required by, or presented in accordance with, GAAP. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. These non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for, net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance or liquidity. We may calculate or present these non-GAAP financial measures differently than other companies who report measures with the same or similar names, and as a result, the non-GAAP measures we report may not be comparable.
All of the estimated preliminary unaudited financial information set forth below has been prepared by and is the responsibility of Dynasty Financial Partner Inc.'s management and has not been audited, reviewed or compiled by our independent registered public accounting firm, PricewaterhouseCoopers LLP. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto.
 
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Set forth below are certain preliminary estimates for our results of operations for the quarter and year ended December 31, 2021, as compared to our historical results of operations for the corresponding periods ended December 31, 2020.
(in thousands)
Three Months ended
December 31,
2021
2021
2020
(estimated low)
(estimated high)
Net income
$    $    $ 1,898
Adjusted EBITDA(1)
$ $ $ 2,117
(1)
Adjusted EBITDA is a non-GAAP financial measure. For a definition of adjusted EBITDA and the reasons we believe adjusted EBITDA provides useful information to investors, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Operating Metrics — Non-GAAP Financial Measures.”
(in thousands)
Year ended
December 31,
2021
2021
2020
(estimated low)
(estimated high)
Net income
$    $    $ 4,838
Adjusted EBITDA(1)
$    $    $ 5,625
(1)
Adjusted EBITDA is a non-GAAP financial measure. For a definition of adjusted EBITDA and the reasons we believe adjusted EBITDA provides useful information to investors, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Operating Metrics — Non-GAAP Financial Measures.”
The following table presents a reconciliation from net income to adjusted EBITDA for each of the periods indicated:
(in thousands)
Three Months ended
December 31,
Year ended
December 31,
2021
2021
2020
2021
2021
2020
(estimated low)
(estimated high)
(estimated low)
(estimated high)
Net income
$    $    $ 1,898 $    $    $ 4,838
Provision for (benefit from) income tax
Interest expense
35
Amortization/depreciation
178 607
EBITDA
2,076 5,480
Share-based compensation(1)
41 145
IPO readiness(2)
Reorganization and integration costs(3)
Severance expense(4)
Adjusted EBITDA
$    $    $ 2,117 $    $    $ 5,625
(1)
“Share-based compensation” represents granted share-based compensation in the form of Class Q Profit Sharing Interests (which are incentive units) of Dynasty Financial Partners LLC, our operating company, to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its non-cash impact.
(2)
“IPO readiness” includes professional fees related to our preparation to become a public company. These expenses primarily include services for financial and human resources support, executive compensation assessments and other consulting services. Although these expenses did not occur in either 2019 or 2020, these expenses occurred in the three months and the year ended December 31, 2021, and may be incurred in future periods in advance of this offering. To the
 
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extent these expenses are incurred, they are expected to be non-recurring as they are limited to our public-company readiness preparation and do not includeongoing public-company compliance costs.
(3)
“Reorganization and integration costs” includes costs related to our functional reorganization within our Operations, Technology and Retirement functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.
(4)
“Severance expense” includes costs related to one-time severance expenses. Such costs were non-recurring.
Land Development Project
We, in conjunction with several other potential occupants, developers and third party investors, are pursuing the purchase and development of an approximately 2 acre parcel of land in downtown St. Petersburg, Florida for purposes of constructing and developing a Class-A mixed use building that would include office space that will serve as our headquarters and the headquarters of other financial services and data analytic firms, residential apartments with affordable housing options, retail space, space for an “Innovation Hub” and parking. The purchase price for the parcel of land is expected to be approximately $6.5 million dollars. Although we have taken a leading role in this project and would expect to become a significant tenant in the building in which we would expect to locate our headquarters, we will not be the principal source of financial backing for the project, would not expect to pay the full purchase price for the parcel of land and would not expect that the land and building associated with the project would be or become an asset on our consolidated balance sheet. At this time there are no binding agreements with respect to the foregoing and the undertaking is subject to satisfactory due diligence, permitting approval and City Council sign off on the redevelopment, among other contingencies. There are no assurances that any of the foregoing that is being pursued at this time will actually occur or occur as described above.
 
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THE OFFERING
Class A common stock offered by us
                 shares of Class A common stock.
Underwriters’ option to purchase additional shares of Class A common stock from us
                 shares of Class A common stock.
Class A common stock to be issued in exchange for certain Class Q profits interests held by members of Dynasty Financial Partners
                 shares of Class A common stock.
Class A common stock to be outstanding immediately after this offering
                 shares of Class A common stock (or                 shares of Class A common stock if the underwriters exercise their option to purchase additional shares of Class A common stock in full). If all units of Dynasty Financial Partners (other than those held by us) were exchanged for shares of our Class A common stock immediately after the reorganization,                 shares of Class A common stock (or                 shares of Class A common stock if the underwriters exercise their option to purchase additional shares of Class A common stock in full) would be outstanding immediately after this offering.
Class B common stock to be outstanding immediately after this offering
                 shares of Class B common stock. Shares of our Class B common stock have voting but no economic rights (including no rights to dividends or distributions upon liquidation) and will be issued to existing holders of our Class B common units, which generally consist of our founders, in an amount equal to the number of Class B common equity units of Dynasty Financial Management, LLC that they hold following the reorganization. When a common unit of Dynasty Financial Partners is exchanged by its holder for a share of Class A common stock, a share of Class B common stock held by such exchanging party will be cancelled. See “Our Structure and Reorganization — Offering Transactions — Exchange Agreement.”
Class C common stock to be outstanding immediately after this offering
                 shares of Class C common stock. Shares of our Class C common stock have voting but no economic rights (including no rights to dividends or distributions upon liquidation) and will be issued to existing holders of our Class A common units, Class P profits interests and certain of our Class Q profits interests in an amount equal to the number of common equity units of Dynasty Financial Management, LLC that they hold following the reorganization. When a common unit of Dynasty Financial Partners is exchanged by its holder for a share of Class A common stock, a share of Class C
 
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common stock held by such exchanging party will be cancelled. See “Our Structure and Reorganization — Offering Transactions — Exchange Agreement.”
Voting rights
Each share of our Class A common stock and Class C common stock will entitle its holder to one vote on all matters to be voted on by stockholders generally.
Each share of our Class B common stock will entitle its holder to five votes on all matters to be voted on by stockholders generally.
Immediately following the completion of this offering, because of our dual-class structure, Class B stockholders will be able to control matters submitted to stockholder vote even though they own significantly less than 50% of the shares of our outstanding common stock. Class B stockholders will continue to control matters submitted to stockholder vote so long as they collectively beneficially own 16.67% of the common shares outstanding. This concentrated control could discourage others from initiating any potential takeover or other change of control transaction that other stockholders may view as beneficial.
There is currently no agreement in place in which stockholders with more than 50% of the voting power have agreed to act together, and thus there is no “group” with more than 50% of the voting power for purposes of controlled company status.
Although we are not a controlled company, if we become a controlled company in the future, we may elect to rely on one or more exceptions under NASDAQ rules for a controlled company.
Use of proceeds
We estimate that our net proceeds from this offering, after deducting estimated underwriting discounts and commissions and estimated expenses of this offering and the reorganization payable by us, will be approximately $      million, or approximately $      million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, based on an assumed initial public offering price of $       per share (the midpoint of the price range set forth on the cover of this prospectus).
We intend to use $      million, or approximately $      million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, of the net proceeds from this offering to purchase newly issued common units from Dynasty Financial Partners, at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock in this offering.
We intend to use approximately $      million of the net proceeds from this offering to purchase common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders, at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock in this offering. Accordingly, we will not retain any of this portion of these proceeds.
 
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Additionally, we intend to cause Dynasty Financial Partners to use approximately $      million to pay the expenses incurred by us in connection with this offering and the reorganization transactions. We intend to cause Dynasty Financial Partners to use any remaining net proceeds to facilitate the growth of our existing business, to make strategic acquisitions of businesses that are complementary to our existing businesses and for other general corporate purposes. See “Use of Proceeds.”
Directed Share Program
At our request, Goldman Sachs & Co. LLC, a participating underwriter, has reserved for sale, at the initial public offering price, up to      % of the shares offered by this prospectus for sale to certain of our directors, officers, employees, business associates and related persons. If these persons purchase reserved shares it will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. For more information regarding the directed share program, see “Underwriting — Directed Share Program.”
Dividend policy
Upon the completion of this offering, we will have no material assets other than our membership interests in Dynasty Financial Partners and deferred tax assets. Accordingly, our ability to pay dividends will depend on distributions from Dynasty Financial Partners. We intend to cause Dynasty Financial Partners to make distributions to us with available cash generated from its subsidiaries’ operations in an amount sufficient to cover dividends we may declare. If Dynasty Financial Partners makes such distributions, the holders of its membership interests will be entitled to receive equivalent distributions on a pro rata basis.
The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors and may be discontinued at any time. In determining the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements and the amount of distributions to us from Dynasty Financial Partners.
We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. See “Dividend Policy and Dividends.”
NASDAQ symbol
“DSTY”
Risk Factors
The “Risk Factors” section included in this prospectus contains a discussion of factors that you should carefully consider before deciding to invest in shares of our Class A common stock.
 
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The number of shares of our Class A common stock to be outstanding after the completion of this offering excludes:

      shares of Class A common stock reserved for issuance upon exchange of common units of Dynasty Financial Partners;

      shares of Class A common stock reserved for issuance under the 2022 Omnibus Incentive Compensation Plan that we plan to adopt in connection with this offering (including        shares of Class A common stock underlying incentive stock options, nonqualified stock options and restricted stock units we intend to grant under our 2022 Omnibus Incentive Compensation Plan to certain of our employees, with such options exercisable at a per share price equal to the price of a share of Class A common stock in this offering).
Unless otherwise indicated, all information in this prospectus assumes:

no exercise of the underwriters’ option to purchase additional shares;

that the shares of Class A common stock to be sold in this offering are sold at the initial public offering price of $      per share, which is the midpoint of the range set forth on the cover of this prospectus; and

all of the holders of the Exchangeable Notes elect to exchange such notes, of which we had $      million in aggregate amount as of       , 2022 into       shares of our Class A common stock upon the completion of this offering, assuming a conversion price of $       (which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus), as if the notes had been outstanding and such conversion had occurred on January 1, 2020 (the “Note Conversion”). As part of the Note Conversion, Dynasty will pay interest accrued on the Exchangeable Notes to the holders of the notes at the time of the exchange.
 
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SUMMARY SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following tables set forth summary selected historical consolidated financial data of Dynasty Financial Partners as of the dates and for the periods indicated. The summary selected consolidated statements of operations data for the years ended December 31, 2020 and 2019, and the consolidated statements of financial condition data as of December 31, 2020 have been derived from Dynasty Financial Partners’ audited consolidated financial statements included elsewhere in this prospectus. The summary selected consolidated statements of comprehensive income data for the nine months ended September 30, 2021 and 2020, and the consolidated statement of financial position data as of September 30, 2021 have been derived from Dynasty Financial Partners’ unaudited condensed financial statements included elsewhere in this prospectus. In the opinion of the management, the unaudited condensed financial data for the interim periods included in this prospectus include all normal and recurring adjustments that we consider necessary for the fair statement of such data for the respective interim periods.
The consolidated financial statements do not reflect any changes that may occur in our operations and expenses as a result of the reorganization transactions or our initial public offering.
The selected unaudited pro forma consolidated financial data of Dynasty give effect to the transactions described under “Unaudited Pro Forma Consolidated Financial Information,” including the reorganization transactions and this offering.
You should read the following selected historical consolidated financial data of Dynasty Financial Partners and the unaudited pro forma financial information of Dynasty together with “Our Structure and Reorganization”, “Unaudited Pro Forma Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and the related notes included elsewhere in this prospectus.
Historical Dynasty
Financial Partners
Unaudited
Pro Forma Dynasty
Year Ended
December 31,
Nine Months Ended
September 30,
Year
Ended
December 31,
Nine Months
Ended
September 30,
2019
2020
2020
2021
2020
2021
(dollars in thousands except per share amounts)
Statement of Comprehensive Income Data:
Revenues
Asset-based
$  27,370 $  31,638 $  22,491 $  33,071
Transactional
3,534 2,265 1,520 2,378
Financing
2,916 3,071 2,211 3,393
Manager fees and other
6,658 9,226 6,503 10,327
Total revenues
40,478 46,200 32,725 49,169
Operating Expenses
Cost of services
20,850 21,784 15,792 21,470
Compensation and
benefits
12,032 13,720 10,013 11,637
General and
administration
5,967 5,200 3,581 4,999
Depreciation and amortization
592 607 429 591
Total operating expenses
39,441 41,311 29,815 38,697
Income from operations
1,037 4,889 2,910 10,472
Other (income) expense
Interest income
(10) (59) (28) (60)
Other (income) expense
2 110 (1) (50)
Total other (income) expense
(8) 51 (29) (110)
Net income and comprehensive income
$ 1,045 $ 4,838 $ 2,939 $ 10,582
 
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Historical Dynasty
Financial Partners
Unaudited
Pro Forma Dynasty
Year Ended
December 31,
Nine Months Ended
September 30,
Year
Ended
December 31,
Nine Months
Ended
September 30,
2019
2020
2020
2021
2020
2021
(dollars in thousands except per share amounts)
Less: Net income attributable to non-controlling interests
Net income attributable to Dynasty
Per Share Data:
Pro forma net income (loss) per share of Class A common stock:
Basic
Diluted
Historical Dynasty
Financial Partners
Unaudited
Pro Forma Dynasty
As of
December 31,
As of
September 30,
As of
December 31,
As of
September 30,
2019
2020
2021
2020
2021
(dollars in thousands)
Statement of Financial Position Data:
Cash and cash equivalents
$ 6,006 $  17,030 $  22,381
Total assets
 26,374 39,353 48,873
Total liabilities
15,297 11,121 14,990
Total equity (Members’ equity for Historical Dynasty Financial Partners)
11,077 28,232 33,883
Key Performance Metrics
In addition to financial measures presented in accordance with U.S. generally accepted accounting principles (“GAAP”), we regularly review the following key metrics to measure performance, identify trends, formulate financial projections, compensate our employees and monitor our business. While we believe that these metrics are useful in evaluating our business, other companies may not use similar metrics or may not calculate similarly titled metrics in a consistent manner.
Key metrics for the years ended December 31, 2020 and 2019 and for the nine months ended September 30, 2021 and 2020 include the following:
Historical Dynasty
Financial Partners
Unaudited
Pro Forma Dynasty
Year Ended
December 31,
Nine Months Ended
September 30,
Year
Ended
December 31,
Nine
Months
Ended
September
30,
2019
2020
2020
2021
2020
2021
Operational Metrics:
Beginning of Period AUA (millions of dollars)
$ 30,929 $ 37,274 $ 37,274 $ 53,388
Average Billable AUA (millions of dollars)(1)
$ 34,794 $ 43,326 $ 40,797 $ 60,062
Period End AUA (millions of dollars)
$ 37,274 $ 53,388 $ 48,752 $ 68,008
TAMP Beginning of Period AUA (millions of dollars)
$ 12,630 $ 18,693 $ 18,693 $ 23,887
Average TAMP Billable AUA (millions of dollars)(1)
$ 16,631 $ 19,930 $ 18,754 $ 28,537
TAMP Period End AUA (millions of dollars)
$ 18,693 $ 23,887 $ 21,306 $ 30,365
Network Partner Advisors (at period-end)
206 240 236 292
(1)
Average Billable AUA for each period presented is calculated by dividing the sum of Billable AUA for each quarter in the period presented by the number of quarters in such period. Average TAMP Billable AUA for each period presented is calculated by dividing the sum of TAMP Billable AUA for each quarter in the period presented by the number of quarters in such period.
 
19

 
Historical Dynasty
Financial Partners
Unaudited
Pro Forma Dynasty
Year Ended
December 31,
Nine Months Ended
September 30,
Year
Ended
December 31,
Nine Months
Ended
September 30,
2019
2020
2020
2021
2020
2021
Financial Metrics:
Total revenue (millions of dollars)
$  40.5 $  46.2 $  32.7 $  49.2
Revenue from Existing Network Platform Firms(1) (millions of dollars)
30.1 34.2 24.2 37.3
Revenue from New Network Platform Firms(2) (millions
of dollars)
3.7 2.8 2.0 1.6
Revenue from Manager Fees and Other (millions of dollars)
6.7 9.2 6.5 10.3
Total income from operations (millions of dollars)
$ 1.0 $ 4.9 $ 2.9 $ 10.5
Capital expenditures (millions of dollars)
$ 0.9 $ 1.1 $ 0.6 $ 0.7
(1)
Existing Network Platform Firms are Network Platform Firms that were part of our network prior to the period presented.
(2)
New Network Platform Firms are Network Platform Firms that were added to our network during the period presented.
Non-GAAP Financial Measures
Non-GAAP financial measures for the years ended December 31, 2020 and 2019 and for the nine months ended September 30, 2021 and 2020 include the following:
Historical Dynasty
Financial Partners
Unaudited
Pro Forma Dynasty
Year Ended
December 31,
Nine Months Ended
September 30,
Year
Ended
December 31,
Nine Months
Ended
September 30,
2019
2020
2020
2021
2020
2021
(dollars in thousands except per share amounts)
Non-GAAP financial measures:
Adjusted EBITDA (millions of dollars)(1)
$  2.7 $  5.6 $  3.5 $  12.0
Adjusted net income (millions of dollars)(2)
$  1.1 $  5.0 $  3.0 $  11.2
(1)
Adjusted EBITDA is a non-GAAP financial measure. For a definition of adjusted EBITDA, the reasons we believe adjusted EBITDA provides useful information to investors, and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Operating Metrics — Non-GAAP Financial Measures.”
(2)
Adjusted net income is a non-GAAP financial measure. For a definition of adjusted net income, the reasons we believe adjusted net income provides useful information to investors, and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Operating Metrics — Non-GAAP Financial Measures.”
 
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RISK FACTORS
Investing in our Class A common stock involves a significant degree of risk. Before investing in our Class A common stock, you should carefully consider the risks and uncertainties described below, along with the other information contained in this prospectus. The risks described below are those which we believe are currently the material risks we face, but are not the only risks facing us and our business prospects. Any of the risk factors described below and elsewhere in this prospectus could adversely affect our business, financial condition and results of operations. Additional risks and uncertainties not presently known to us or that we currently deem immaterial could adversely affect our business, financial condition and results of operations in the future. As a result, the trading price of our Class A common stock could decline and you may lose part or all of your investment.
Risks Related to Revenue Model and Market
Our revenue may fluctuate from period to period, which could cause our share price to fluctuate.
Our revenue may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following events, as well as other factors described elsewhere in this prospectus:

a downturn or slowdown in growth of the financial market assets or changes in the mix of assets on our platform, which may reduce the value of the assets under administration (“AUA”) with our Core Services or Billable AUA we charge an asset-based fee on, thereby impacting our revenue and cash flows;

a decline in revenues for one or more of our financial advisory firms (“Network Partner Firms”), which would reduce the revenue that we derive from fees charged to such Network Partner Firms based on their revenue or as a result of the investments we have made in such Network Partner Firms;

failure to obtain new clients or retain existing clients on our platform, or changes in the mix of clients on our platform;

failure to adequately obtain, maintain, protect, enforce or defend our proprietary technology and intellectual property rights;

a lowering of interest rates, which would directly and proportionately impact our spread-based revenue;

significant fluctuations in securities prices affecting the value of assets on our platform, including as a result of public health concerns or epidemics such as the novel coronavirus (“COVID-19”) pandemic;

negative public perception and reputation of the financial services industry, which would reduce demand for our wealth management solutions;

unanticipated changes in client investment preferences for lower-fee options impacting Network Partner Firms fees and thereby impacting our revenue;

downward pressure on fees we charge our Network Partner Firms from competitive forces, which would reduce our revenue;

changes in laws or regulations that could restrict our ability to offer certain wealth management solutions;

a decline in the number of management professionals in traditional brokerages and wirehouses planning a transition to independence due to market or other conditions;

failure by our Network Partner Firms to obtain new clients or retain their existing clients;

reduction in fee percentage or total fees for future periods, which may have a delayed impact on our results given that our asset-based fees are billed to Network Partner Firms in advance of each quarter;
 
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changes in our pricing policies or the pricing policies of our competitors to which we have to adapt; or

general domestic and international economic and political conditions that may decrease investor demand for financial advisors or investment services.
As a result of these and other factors, our results of operations for any quarterly or annual period may differ materially from our results of operations for any prior or future quarterly or annual period and should not be relied upon as indications of our future performance.
We derive a substantial portion of our revenue from the delivery of wealth management solutions to financial advisory firms serving high-net-worth and ultra-high-net-worth clients in the financial advisory industry and our revenue could suffer if that industry experiences a downturn.
We derive a substantial portion of our revenue from the delivery of wealth management solutions to financial advisory firms serving high net worth (“HNW”) and ultra-high net worth (“UHNW”) clients in the financial advisory industry and we are therefore subject to the risks affecting that industry. A decline or lack of growth in demand for financial advisory services would adversely affect the financial advisors who work with our Network Partner Firms and, in turn, our results of operations, financial condition or business. For example, the availability of free or low-cost investment information and resources, including research and information relating to publicly traded companies and mutual funds available on the Internet or on company websites, could lead to lower demand by investors for the services provided by financial advisory firms. In addition, demand for our wealth management solutions among financial advisory firms could decline for many reasons. Consolidation or limited growth in the financial advisory industry could reduce the number of financial advisors or financial advisory firms and their potential clients. Events that adversely affect financial advisors’ businesses, rates of growth or the numbers of clients they serve, including decreased demand for their products and services, adverse conditions in the markets or adverse economic conditions generally, could decrease demand for our wealth management solutions and thereby decrease our revenue. Any of the foregoing could have a material adverse effect on our results of operations, financial condition or business.
Our success depends, in part, upon our ability to provide attractive opportunities to financial advisors seeking independence from traditional brokerages and wirehouses.
Our ability to provide attractive opportunities to financial advisors seeking independence from traditional brokerages and wirehouses depends on our ability to offer more favorable opportunities than those provided by their current employers, many of which have substantially greater financial resources and may be able to entice their employees to stay with their firms. If we are not successful in attracting suitable financial advisors, it may have an adverse effect on the growth of our revenues and earnings. Market or other conditions could provide incentives for investment professionals to elect to remain with traditional brokerages and wirehouses, thereby adversely affecting the growth of our revenues and earnings.
Our clients may seek to negotiate a lower fee percentage, choose to use lower revenue products or cease using our services, which could limit the growth of our revenue or cause our revenue to decrease.
We derive a significant portion of our revenue from asset-based fees. We charge our Network Partner Firms a basis point fee for our Core Services that is based on the AUA or a percentage of revenue. We also bill our Network Partner Firms typically a basis point fee on AUA if they elect to use our Investment Platform. Our Network Partner Firms or their clients may seek to negotiate a lower asset-based fee percentage. In addition, our Network Partner Firms may elect to use products that generate lower revenue, which may result in lower total fees being paid to us. As competition among financial advisors and financial advisory firms increases, our Network Partner Firms may be required to lower the fees they charge to their clients, which could cause them to aggressively negotiate the fees we charge. Further, any reduction in asset-based fees could persist beyond the near term given the recurring quarterly nature of our asset-based fee arrangements. Any of these factors could result in a fluctuation
 
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or decline in our asset-based revenue, which would have a material adverse effect on our results of operations, financial condition or business.
Changes in market and economic conditions could lower the value of assets on which we earn revenue and could decrease the demand for our wealth management solutions.
Asset-based revenue and manager fees make up a significant portion of our revenue, representing 88% and 88% of our total revenue for the year ended December 31, 2020 and the nine months ended September 30, 2021, respectively. In addition, given our revenue model, we expect that asset-based revenue will continue to account for a significant percentage of our total revenue in the future. Financing revenue accounted for 7.2% and 6.9% of our total revenue for the year ended December 31, 2020 and the nine months ended September 30, 2021, respectively. Significant fluctuations in securities prices, as well as future potential increases in interest rates, may materially affect the value of the assets managed by our Network Partner Firms and may also influence financial advisor and investor decisions regarding whether to invest in, or maintain an investment in, one or more of our wealth management solutions. In addition, significant changes in investing patterns or large-scale withdrawal of investment funds could have an adverse effect on our business. The clients of our Network Partner Firms are generally free to change financial advisors or withdraw the funds they have invested with financial advisors. If such market fluctuation or changes in investing patterns led to less investment in the securities markets, our revenue and earnings derived from asset-based and spread-based revenue could be simultaneously materially adversely affected. Because many of our costs are fixed and, in general, our costs are less variable than our revenues, a reduction in asset-based revenue or spread-based revenue could have a material adverse effect on our results of operations, financial condition or business.
We provide our wealth management solutions to the financial services industry. The financial markets, and in turn the financial services industry, are affected by many factors, such as U.S. and foreign economic conditions and general trends in business and finance that are beyond our control, which could be adversely affected by changes in the equity or debt marketplaces, unanticipated changes in currency exchange rates, interest rates, inflation rates, the yield curve, financial crises, changes in regulation, war, terrorism, natural disasters and other factors that are difficult to predict. In the event that the U.S. or international financial markets suffer a severe or prolonged downturn, investments may lose value and investors may choose to withdraw assets from financial advisors and use the assets to pay expenses or transfer them to investments that they perceived to be more secure, such as bank deposits and Treasury securities. Any prolonged downturn in financial markets, or increased levels of asset withdrawals, could have a material adverse effect on our results of operations, financial condition or business.
Our results of operations are heavily dependent on the success of our Network Partner Firms.
Our results of operations are heavily dependent on the success of our Network Partner Firms, due to the significant portion of our revenue that is asset-based, as well as our investments in our Network Partner Firms, and our results of operations are subject to their operational disruptions or mismanagement.
As part of our Capital Strategies, we provide financing in the form of loans, minority equity investments and revenue participation interests to our Network Partner Firms. See “Business — Our Offerings” for more information on our Capital Strategies.
We rely on our Network Partner Firms to report their results to us on a monthly basis. We have implemented common general ledger, payroll and cash management systems that allow us to monitor the financial performance and overall operations of our partner firms. However, if our Network Partner Firms delay reporting results or informing us of negative business developments, we may not be able to address the situation on a timely basis, which could have an adverse effect on our results of operations and financial condition as a result of a decline in our asset-based revenue or a poor return on our financing offerings.
 
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In addition, upon the retirement or exit of a key employee, a Network Partner Firm’s business may be adversely affected. If we are not successful in facilitating succession planning of our Network Partner Firm or mitigating key-personnel risk, our results of operations and financial condition could be adversely affected.
Inadequate or inaccurate external and internal information, including budget and planning data, could lead to inaccurate financial forecasts and inappropriate financial decisions.
Our financial forecasts are dependent on estimates and assumptions regarding budget and planning data, market growth, financial performance, asset performance and advisor transitions and departures. Our financial projections are based on historical experience and on various other assumptions that our management believes to be reasonable under the circumstances and at the time they are made. However, if our external and internal information is inadequate, our actual results may differ materially from our forecasts and cause us to make inappropriate financial decisions. Any material variation between our financial forecasts and our actual results may also adversely affect our future profitability, stock price and stockholder confidence.
Key operating metrics and other estimates are subject to inherent challenges in measurement, may not provide an accurate indication of our future or expected results, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics.
We regularly review key operating metrics, including Beginning of Period AUA, Billable AUA, Period End AUA, Turnkey Asset Management Platform Beginning of Period AUA (“TAMP Beginning of Period AUA”), Turnkey Asset Management Platform Billable AUA (“TAMP Billable AUA”), Turnkey Asset Management Platform Period End AUA (“TAMP Period End AUA”) , network partner advisor count, adjusted EBITDA and adjusted net income to evaluate growth trends, measure our performance, and make strategic decisions. We rely on third parties that we have contracted with to provide us with accurate information relating to Beginning of Period AUA, Billable AUA, Period End AUA, TAMP Beginning of Period AUA, TAMP Billable AUA and TAMP Period End AUA , and such information could be misreported. In addition, our key metrics are calculated using such third party data and internal company data and our calculations have not been validated by an independent third party. While these numbers are based on what we currently believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in such measurements. If we fail to maintain an effective analytics platform, our key metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies.
We define Billable AUA as the assets that we administer on behalf of our Network Partner Firms as measured by the billing balances for the respective period end that utilize our Core Services. The balance for the period end is comprised of the beginning of quarter assets administered utilizing Core Services, plus any additions during the quarter and excludes market appreciation during the quarter. Billable AUA is a key operating metric we use in managing our business because for many of our services, we charge our clients an asset-based fee on their assets under administration. However, Billable AUA is not directly proportional to our asset-based revenue because the percentage fees we charge may vary across contracts and we may not charge any fee on a portion of AUA. In addition, we define Period End AUA as assets that we administer on behalf of our Network Partner Firms as measured by the end of period balances for the respective period end that utilize our Core Services. The balance for the period end is generally comprised of the end of quarter assets administered utilizing Core Services less any terminations at the end of the period; however a portion of the Period End AUA is calculated from the average assets for the trailing quarter and average assets for the trailing month. We measure Period End AUA in this way as we generally bill on asset balances quarterly in advance for each period and Period End AUA is the starting point for what the Billable AUA will be for the following quarterly period. However, the percentage fees we charge are in certain circumstances based on the revenue of the relevant Network Partner Firm, rather than the assets under administration of such Network Partner Firm. TAMP Billable AUA and TAMP Period End AUA have similar limitations.
As a result, Beginning of Period AUA, Billable AUA, Period End AUA, TAMP Beginning of Period AUA, TAMP Billable AUA and TAMP Period End AUA and our other key performance indicators may
 
24

 
not reflect our actual performance, and investors should consider these metrics in light of the assumptions used in calculating such metrics and limitations as a result thereof. In addition, investors should not place undue reliance on these metrics as an indicator of our future or expected results. Moreover, these metrics may differ from similarly titled metrics presented by other companies and may not be comparable to such other metrics. See the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations —” for additional information regarding our key performance indicators.
Our due diligence process may not reveal all facts that are relevant in connection with an equity investment or loan to our Network Partner Firms, which could subject us to unknown liabilities.
In connection with our financings of Network Partner Firms, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances and our experience applicable to such transactions. When conducting due diligence and making an assessment regarding a transaction, we evaluate important and complex business, financial, tax, accounting, legal and compliance issues. We have and will continue to rely on the resources available to us, including information provided by third parties. Our diligence efforts with respect to Network Partner Firms that are newly formed may be limited due to the short operating history of such firms.
The due diligence investigations that we have carried out or will carry out with respect to any financing may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating the transaction, which could subject us to unknown liabilities that could adversely affect our results of operations and financial condition.
Our growth strategy includes growing through making minority equity investments and providing revenue participation interests in our Network Partner Firms, which involve a number of risks.
We expect to grow our business by, among other things, making minority equity investments in our Network Partner Firms. Under our minority equity program, we typically purchase a minority equity position, typically 10% to 20%, in a Network Partner Firm. These investments are permanent in nature, entitling us to a pro rata percentage of the Network Partner Firm’s net income into perpetuity. Making minority equity investments involves a number of risks. They can be time-consuming and may divert management’s attention from day-to-day operations. Financing a minority equity investment could result in dilution from issuing equity securities or a weaker balance sheet from using cash or incurring debt.
Revenue participation interests and minority equity investments make us dependent on the success or failure of our Network Partner Firms for a portion of our revenue, and poor performance by one or more Network Partner Firms in which we have received revenue participation interests and in which we may invest may adversely affect our results of operations, financial condition or business. Also, in the future, we may not be able to secure, on terms we find acceptable, sufficient financing that may be required for any such investments.
In addition, if we are unsuccessful in completing additional revenue participation interests or minority equity investments or if such opportunities for expansion do not arise, our results of operations, financial condition or business could be materially adversely affected.
Renegotiation or termination of our service contracts with Network Partner Firms could have a material adverse effect on our results of operations, financial condition or business.
For the nine months ended September 30, 2021 and the years ended December 31, 2020 and 2019, revenues associated with our ten largest clients accounted for approximately 37%, 40% and 39% of our total revenues, respectively. We enter into service contracts with our Network Partner Firms typically for a fixed initial term following which either party may terminate on notice to the other party; the relevant notice period can vary from 60 days to 1 year. If a significant number of our most important clients were to renegotiate or terminate their contracts with us, our results of operations, financial condition or business could be materially adversely affected.
 
25

 
Lack of liquidity or access to capital could impair our business and financial condition.
We expend significant resources investing in our business, particularly with respect to our technology platforms. We also provide capital to our Network Partner Firms through our loan, minority investment programs and revenue participation interest programs. As a result, reduced levels of liquidity could have a significant negative effect on us. Some potential conditions that could negatively affect our liquidity include diminished access to debt or capital markets, unforeseen or increased cash or capital requirements, adverse legal settlements or judgments or illiquid or volatile markets.
The capital and credit markets continue to experience varying degrees of volatility and disruption. In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for businesses similar to ours. Such market conditions may limit our ability to generate fee and other market-related revenue to meet liquidity needs and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital or bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility.
In the event that our current resources are insufficient to satisfy our needs, we may need to rely on financing sources such as bank debt. The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity and the possibility that our stockholders, advisory firms or lenders could develop a negative perception of our long- or short-term financial prospects if the level of our business activity decreases due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating organizations take negative actions against us.
Risks Related to Competition and Industry
We operate in an intensely competitive industry, with many firms competing for business from financial advisors on the basis of the quality and breadth of wealth management solutions, ability to innovate, reputation and the prices of services, among other factors, and this competition could hurt our financial performance.
We compete with many different types of companies that vary in size and scope, including a broad range of firms that offer services to independent advisors, broker-dealers and RIAs who are not part of the Dynasty network of firms. There are also a growing number of firms that seek to emulate the Company’s business model. Other TAMP providers, custodians and independent broker-dealers typically offer one or more products or solutions that directly compete with our offerings, and the wealth management technology sector includes companies that offer solutions tailored to specific needs, such as regulatory compliance, practice management, marketing or technology solutions. In addition, some of our larger Network Partner Firms have developed or may develop the in-house capability to provide the one or more of the services they have retained us to perform.
Some of our competitors have greater name recognition or greater resources than we do, and may offer a broader range of services across more markets. These resources may allow our competitors to respond more quickly to new technologies or changes in demand for wealth management solutions, devote greater resources to developing and promoting their services and make more attractive offers to potential clients and strategic partners, which could hurt our financial performance.
We compete on a number of bases including the performance of our technology, the level of fees charged, the quality of our services, our reputation and position in the industry, our ability to adapt to technological developments or unforeseen market entrants and our ability to address the complex and changing needs of our clients. Our failure to successfully compete on the basis of any of these factors could result in a decline in market share, revenue and net income.
We expect competition to increase as other companies continue to evolve their offerings and as new companies enter our market. New companies entering our market may choose to offer internally-developed solutions at little or no additional cost to their end users by bundling them with their existing
 
26

 
applications and solutions. Increased competition is likely to result in pricing pressures, which could negatively impact our income from operations.
We must continue to introduce new wealth management solutions, and enhancements thereon, to address our clients’ changing needs, market changes and technological developments, and a failure to do so could have a material adverse effect on our results of operations, financial condition or business.
The market for our investment solutions and services is characterized by shifting client demands, evolving market practices and, for many of our investment solutions and services, rapid technological change, including an increased use of and reliance on web and social network properties. Changing client demands (including increased reliance on technology), new market practices or new technologies can render existing wealth management solutions obsolete and unmarketable. As a result, our future success will continue to depend upon our ability to develop and enhance wealth management solutions that address the future needs of our target markets and respond to technological and market changes. We may not be able to accurately estimate the impact of new wealth management solutions on our business or how their benefits will be perceived by our clients. Further, we may not be successful in developing, introducing and marketing our new wealth management solutions or enhancements on a timely and cost effective basis, or at all, and our new wealth management solutions and enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. Any of these factors could materially adversely affect our results of operations, financial condition or business.
Our Network Partner Firms are subject to increasing competitive risks.
Our Network Partner Firms are subject to increasing competitive risks due to a number of factors, including the following:

many competitors have greater financial, technical, marketing, name recognition and other resources and more personnel than our Network Partner Firms do;

potential competitors have a relatively low cost of entering the wealth management industry;

some competitors may invest according to different investment styles or in alternative asset classes that the markets may perceive as more attractive than the investment strategies our Network Partner Firms offer;

some competitors charge lower fees for their wealth management services than our Network Partner Firms do; and

some competitors may be able to engage in more widespread marketing activities or may have access to products and services to which our Network Partner Firms do not.
If our Network Partner Firms are unable to compete effectively, our results of operations and financial condition may be adversely affected.
Risks Related to Operating Our Business
If our reputation is harmed, our results of operations, financial condition or business could be materially adversely affected.
Our reputation, which depends on earning and maintaining the trust and confidence of our clients, is critical to our business. Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations, lawsuits initiated by our clients, employee misconduct, perceptions of conflicts of interest and rumors, claims against or regulatory matters involving a Network Partner Firm, among other developments, could substantially damage our reputation, even if they are baseless or satisfactorily addressed. Potential, perceived and actual conflicts of interest are inherent in our business activities and could give rise to client dissatisfaction or litigation. In addition, any perception that the quality of our wealth management solutions may not be the same or better than that of other providers can also damage our reputation.
 
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Any damage to our reputation could harm our ability to attract and retain Network Partner Firms, which could materially adversely affect our results of operations, financial condition or business.
We rely on our key personnel for the stability and growth of our business and future success.
We depend on the efforts of our executive officers, other management team members and employees. Our executive officers, and in particular our founder and Chief Executive Officer, play an important role in the stability and growth of our business, and our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of any key personnel could have a material adverse effect on our results of operations, financial condition or business.
Management, employee or third-party provider misconduct could expose us to significant legal liability and reputational harm.
We are vulnerable to reputational harm because we and our Network Partner Firms operate in an industry in which personal relationships, integrity and the confidence of clients are of critical importance. Our management team and employees, as well as the management teams and employees at our Network Partner Firms or our third-party service providers, could engage in misconduct that adversely affects our business. For example, if a member of management or an employee were to engage in illegal or suspicious activities, we or our Network Partner Firms could be subject to regulatory sanctions and we could suffer serious harm to our reputation (as a consequence of the negative perception resulting from such activities), our financial position or our Network Partner Firms’ client relationships and ability to attract new clients. Similarly, the misconduct of any of our Network Partner Firms could impact our overall reputation, increasing the likelihood of the other Network Partner Firms not renewing their agreements with us or making it less appealing for new firms to join our network in the future. In addition, certain of our third party providers may engage in illegal activities, which could result in disruptions to our platform or solutions, subject us to liability, fines, penalties, regulatory orders or reputational harm or require us to be involved in regulatory investigations. Further, our business and that of our Network Partner Firms often require that we deal with confidential information, personal information and other sensitive data. If management, employees or third-party providers were to improperly use or disclose this information, even if inadvertently, we or our Network Partner Firms could be subject to legal or regulatory investigations or action and suffer serious harm to our reputation, financial position and current and future business relationships or those of our Network Partner Firms. It is not always possible to deter misconduct, and the precautions we take to detect and prevent this activity may not always be effective. Misconduct by management, employees or third-party providers, or even unsubstantiated allegations of misconduct, could result in an adverse effect on our reputation and our business.
We could face liability or incur costs to remediate operational errors or to address possible client dissatisfaction.
Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in our operating systems, business disruptions and inadequacies or breaches in our internal control processes. We are reliant on the ability of our employees and systems to process large volumes of transactions often within short time frames. In the event of a breakdown or improper operation of systems, human error or improper action by employees, we could suffer financial loss, regulatory sanctions or damage to our reputation. In addition, there may be circumstances when our clients are dissatisfied with our investment solutions and services, even in the absence of an operational error. In such circumstances, we may elect to make payments or otherwise incur increased costs or lower revenue to maintain client relationships. In any of the foregoing circumstances, our results of operations, financial condition or business could be materially adversely affected.
We may be subject to liability for losses that result from a breach of our fiduciary duties.
Certain of our investment advisory services involve fiduciary obligations that require us to act in the best interests of our clients, and we may be sued and face liabilities or regulatory or enforcement actions for actual or claimed breaches of our fiduciary duties. Because we provide investment advisory
 
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services with respect to substantial assets, we could face substantial liability to our clients if it is determined that we have breached our fiduciary duties. In certain circumstances, we serve as a subadvisor to our Network Partner Firms and retain third-party investment money managers and strategists on their behalf. We are responsible for conducting due diligence on the investment solutions and strategies offered by such third parties with whom we subcontract, and a failure to adequately conduct due diligence could subject us to liability for misstatements or omissions contained in marketing and other materials describing the investment solutions and strategies offered by such third-party managers. As such, we may be included as a defendant in lawsuits against financial advisors, strategists and third-party investment money managers that involve claims of breaches of the duties of such persons, and we may face liabilities for the improper actions and/or omissions of such advisors and third-party investment money managers and strategists. In addition, we may face claims based on the results of our investment advisory services, even in the absence of a breach of our fiduciary duty. Such claims and liabilities could therefore have a material adverse effect on our results of operations, financial condition or business.
If our wealth management solutions fail to perform properly due to undetected errors or similar problems, our results of operations, financial condition or business could be materially adversely affected.
Wealth management solutions we develop or maintain may contain undetected errors or defects despite testing. Such errors can exist at any point in the life cycle of our wealth management solutions, but are typically found after introduction of new wealth management solutions or enhancements to existing wealth management solutions. We continually introduce new wealth management solutions and new versions of existing solutions. Our third-party providers, including asset managers whose products our clients access through our platform, could fail to detect errors or defects in the offered products that our clients use. Despite internal testing and testing by current and prospective clients, our current and future wealth management solutions may contain serious defects or malfunctions. If we detect any errors before release, we might be required to delay the release of new solutions for an extended period of time while we address the problem. We might not discover errors that affect our new or current wealth management solutions or enhancements until after they are deployed, and we may need to provide enhancements to correct such errors. Errors may occur that could have a material adverse effect on our results of operations, financial condition or business and could result in harm to our reputation, lost sales, delays in commercial release, third-party claims, contractual disputes, contract terminations or renegotiations or unexpected expenses and diversion of management and other resources to remedy errors. In addition, negative public perception and reputational damage caused by such claims would adversely affect our client relationships and our ability to enter into new contracts. Any of these problems could have a material adverse effect on our results of operations, financial condition or business.
Our failure to successfully execute the transition of a Network Partner Firm from their existing platform to our platform in a timely and accurate manner could have a material adverse effect on our results of operations, financial condition or business.
When we work with a new financial advisor leaving a financial institution or wirehouse, we assist them in the transition of client accounts and assets from the financial advisor’s existing platform to our platform. These transitions sometimes present significant technological, operational and legal challenges and can be time-consuming, and pose the risk of the financial advisor losing some of their existing clients. If we fail to successfully complete our transition in a timely and accurate manner, we may be required to expend more time and resources than anticipated, which could erode the profitability of the client relationship and result in the transition of fewer assets than projected. In addition, any such failure may harm our reputation and may cause advisors or their clients to move their assets off of our platform or make it less likely that prospective clients will commit to working with us in the future. Any of these risks could materially adversely affect our results of operations, financial condition or business.
Inadequacy or disruption of our disaster recovery plans and procedures in the event of a catastrophe could adversely affect our business.
We have made a significant investment in our infrastructure, and our operations are dependent on our ability to protect the continuity of our infrastructure against damage from catastrophe or natural
 
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disaster, breach of security, cyber-attack, loss of power, telecommunications failure or other natural or man-made events. Furthermore, because we are located in St. Petersburg, Florida, which is a hurricane-sensitive area, we are particularly susceptible to the risk of damage to, or total destruction of, our headquarters caused by a hurricane. A catastrophic event could have a direct negative impact on us by adversely affecting our Network Partner Firms, our employees or facilities, or an indirect impact on us by adversely affecting the financial markets or the overall economy. While we have implemented business continuity and disaster recovery plans and maintain business interruption insurance, it is impossible to fully anticipate and protect against all potential catastrophes. If our business continuity and disaster recovery plans and procedures were disrupted, inadequate or unsuccessful in the event of a catastrophe or cyber-attack, we could experience a material adverse interruption of our operations.
We serve financial advisory firms and their clients using third-party data centers and cloud services. While we have electronic access to the infrastructure and components of our platform that are hosted by third parties, we do not control the operation of these facilities. Consequently, we may be subject to service disruptions as well as failures to provide adequate support for reasons that are outside of our direct control. These data centers and cloud services are vulnerable to damage or interruption from a variety of sources, including earthquakes, floods, fires, power loss, system failures, cyber-attacks, physical or electronic break-ins, human error or interference (including by employees, former employees or contractors), and other catastrophic events, including regional or global health events such as the COVID-19 pandemic. Our data centers may also be subject to local administrative actions, changes to legal or permitting requirements and litigation to stop, limit or delay operations. Despite precautions taken at these facilities, such as disaster recovery and business continuity arrangements, the occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in interruptions or delays in our services, impede our ability to scale our operations or have other adverse impacts upon our business.
We are dependent on third-party service providers in our operations.
We use numerous third-party service providers in our operations for various accounting, custody, brokerage and trading, software and technology systems, compliance and other operational needs. A failure by a third-party service provider could expose us to an inability to provide contractual services to our clients in a timely manner. Additionally, if a third-party service provider is unable to provide these services, we may incur significant costs to either internalize some of these services or find a suitable alternative. We serve as the investment advisor for several of the products offered through our investment platform and use the services of investment subadvisors to manage many of these assets. A failure in the performance of our due diligence processes and controls related to the supervision and oversight of these firms in detecting and addressing conflicts of interest, fraudulent activity, data breaches and cyber-attacks, noncompliance with relevant securities and other laws could cause us to suffer financial loss, regulatory sanctions or damage to our reputation.
Moreover, while we perform diligence on our third-party service providers in an effort to ensure they operate in accordance with expectations, to the extent any significant deficiencies are uncovered, there may be few, or no, alternative service providers available. In addition, we may from time to time transfer key contracts from one third-party provider to another. Key contract transfers may be costly and complex, and expose us to heightened operational risks. Any failure to mitigate such risks could result in reputational harm, as well as financial losses.
We could face liability related to our storage and other processing of personal information about our users. Any real or perceived improper or unauthorized use of, disclosure of or access to such information could harm our reputation as a trusted brand, as well as have a material adverse effect on our business, operating results and financial conditions.
We and our third-party service providers obtain, maintain, store and process large amounts of sensitive and personal information, including information provided by and related to our users and their transactions. We face risks, including to our reputation as a trusted brand, in the handling and protection of this information, and these risks will increase as our business continues to expand. We store personal investment and financial information for clients of our Network Partner Firms, including
 
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portfolio holdings, on our systems or on servers of third parties we have contracted with. We could be subject to liability if we or our third-party service providers were to inappropriately disclose any personal information or if a third party was able to penetrate our or our third-party service providers’ network security or otherwise access or misappropriate any personal information or portfolio holdings. Any such disclosure, security incident or breach could subject us to claims for financial loss, impersonation or other similar fraud claims, claims under data protection laws, claims for other misuses of personal information, such as unauthorized marketing or unauthorized access to personal portfolio information, or indemnity claims by our clients for fines, penalties or other assessments arising from third-party claims. Further, any real or perceived defects, errors or vulnerabilities in our or our third-party service providers’ security systems could harm our reputation or adversely impact our business, financial position and results of operations.
We could face liability for certain information we provide, including information based on data we obtain from other parties.
We may be subject to claims for securities law violations, negligence, breach of fiduciary duties or other claims relating to the information we provide. For example, individuals may take legal action against us if they rely on information we have provided and it contains an error. In addition, we could be subject to claims based upon the content that is accessible from our website through links to other websites. Moreover, we could face liability based on inaccurate information provided to us by others. Defending any such claims could be expensive and time-consuming, and any such claim could materially adversely affect our results of operations, financial condition or business.
We are exposed to data and cybersecurity risks that could result in data breaches and service interruptions, which could cause harm to our reputation or significant liability.
Cybersecurity threats and attacks, privacy and security breaches, insider threats or other incidents and malicious internet-based activity continue to increase generally, evolve in nature and become more sophisticated. These cybersecurity challenges, including threats to our own information technology (“IT”) infrastructure or those of our third-party service providers, may take a variety of forms including stolen bank accounts, business email compromise, employee fraud, check fraud, counterfeiting, “phishing” or social engineering incidents, account takeover attacks, denial or degradation of service attacks, malware, ransomware, fraudulent payment, identity theft or cybersecurity attacks which could be initiated by individual or groups of hackers or sophisticated cyber criminals. The risk of unauthorized circumvention of our security measures or those of our third-party service providers or clients has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques involving the theft or misuse of personal and financial information. Because the techniques used by hackers change frequently, we may be unable to anticipate these techniques or implement adequate preventive measures. A failure to safeguard the integrity, confidentiality, availability and authenticity of personal information, client data and our proprietary data from cyber-attacks, unauthorized access, fraudulent activity (e.g., check “kiting” or fraud, wire fraud or other dishonest acts), data breaches and other security incidents that we, our third-party service providers or our clients may experience may lead to modification, compromise, corruption, disclosure, destruction, loss of availability or theft of confidential information, intellectual property, or critical and sensitive data pertaining to us, our clients or our end-user information (including personal information) and impair our ability to meet our clients’ requirements, or cause production downtimes and compromised data. As we increase our client base and our brand becomes more widely known and recognized, third parties may increasingly seek to compromise our security controls or gain unauthorized access to our sensitive corporate information or our third-party service providers’ sensitive and personal information. Information security risks have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties as well as nation-state and nation-state-supported actors. Additionally, geopolitical events and resulting government activity could lead to information security threats and attacks by affected jurisdictions and their sympathizers. Because of our position in the financial services industry, we believe that we are likely to continue to be a target of such threats and attacks.
 
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We have established a strategy designed to protect against threats and vulnerabilities containing preventive and detective controls including, but not limited to, firewalls, intrusion detection systems, computer forensics, vulnerability scanning, server hardening, penetration testing, anti-virus software, data leak prevention, encryption and centralized event correlation monitoring. Such protective measures, as well as additional measures that may be required to comply with rapidly evolving privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations, have and will continue to create uncertainty and cause us to incur substantial expenses.
Despite our efforts to ensure the integrity, confidentiality, availability, and authenticity of our proprietary systems and information, it is possible that we may not be able to anticipate or to implement effective preventive measures against all cyber threats. No security solution, strategy, or measures can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security incident. Additionally, our ability to monitor our third-party service providers’ data security is limited. An actual or perceived breach of our security systems or those of our third-party service providers may require notification under applicable data privacy regulations or contractual obligations.
Security incidents or disruptions of our proprietary systems or those of our service providers could also impact our ability to provide services to our clients, which could expose us to liability for damages which may not be covered by insurance, result in the loss of client business, damage our reputation, subject us to regulatory scrutiny or expose us to protracted and costly civil litigation. In addition, the failure to timely upgrade or maintain computer systems, software and networks as necessary could also make us or our third-party service providers susceptible to breaches and unauthorized access and misuse. Data security breaches may also result from non-technical means, for example, employee misconduct or human error. We may be required to expend significant additional resources to modify, investigate or remediate vulnerabilities or other exposures arising from data and cybersecurity risks. Data security breaches, acts of fraud involving our solutions or adverse findings in security audits or examinations could result in reputational damage to us, which could reduce the use and acceptance of our solutions, cause our clients to cease doing business with us or have a significant adverse impact on our revenue and future growth prospects. Furthermore, even if not directed at us specifically, attacks on other financial institutions could disrupt the overall functioning of the financial system or lead to additional regulation and oversight by federal and state agencies, which could impose new and costly compliance obligations.
Further, as the current COVID-19 pandemic continues to result in a significant number of people working from home, these cybersecurity risks may be heightened by an increased attack surface across our business and those of our partners and third-party service providers. We cannot guarantee that our efforts, or the efforts of those upon whom we rely and partner with, will be successful in preventing any such information security incidents or protecting sensitive and personal information that they obtain and process on our behalf.
Federal, state and international regulations may require us or our third-party service providers to notify governmental entities and individuals of data security incidents involving certain types of personal and sensitive information. Security compromises experienced by others in our industry, our third-party service providers or their customers or us may lead to public disclosures and widespread negative publicity. Any security compromise in our industry, whether actual or perceived, could erode client confidence in the effectiveness of our security measures, negatively impact our ability to attract new clients, cause existing clients to elect not to renew or expand their use of our services and products or subject us to third-party lawsuits, regulatory fines or other actions or liabilities, which could materially and adversely affect our business, operating results and financial condition.
In addition, some of our clients contractually require notification of data security compromises and include representations and warranties in their contracts with us that our products and services comply with certain legal and technical standards related to data security and privacy and meet certain service levels. In our contracts, a data security compromise or operational disruption impacting us or one of our critical third-party service providers, or system unavailability or damage due to other circumstances, may constitute a material breach and give rise to a client’s right to terminate their contract with us. In these circumstances, it may be difficult or impossible to cure such a breach in order
 
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to prevent clients from potentially terminating their contracts with us. Furthermore, although our contracts typically include limitations on our potential liability, we cannot ensure that such limitations of liability would be adequate or apply to data security compromises.
While we maintain cybersecurity insurance, our insurance may be insufficient or may not cover all liabilities incurred by such attacks. We also cannot be certain that our insurance coverage will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, litigation to pursue claims under our insurance policies or the occurrence of changes in our insurance policies could have a material adverse effect on our business, reputation, operating results and financial condition.
Our controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate and operational risks could adversely affect our reputation and financial condition.
We have adopted policies and procedures to identify, monitor and manage our operational risk. These policies and procedures, however, may not be fully effective. Some of our risk evaluation methods depend upon information provided by others and public information regarding markets, clients or other matters that are otherwise accessible by us. If our policies and procedures are not fully effective or we are not successful in capturing all risks to which we are or may be exposed, we may suffer harm to our reputation or be subject to litigation or regulatory actions that could have a material adverse effect on our business, results of operations or financial condition.
We may become subject to liability based on the use of our wealth management solutions by our clients.
Our wealth management solutions support the transition, operation and growth of our Network Partner Firms, which, in the aggregate, manage billions of dollars of assets. Our client agreements have provisions designed to limit our exposure to potential liability claims brought by our Network Partner Firms, their clients or other third parties based on the use of our wealth management solutions. However, these provisions have certain exceptions and could be invalidated by unfavorable judicial decisions or by federal, state, foreign or local laws. Use of our products as part of the investment process creates the risk that clients, or the parties whose assets are managed by our clients, may pursue claims against us for significant dollar amounts. Any such claim, even if the outcome were to be ultimately favorable to us, would involve a significant commitment of our management, personnel, financial and other resources and could have a negative impact on our reputation. Such claims and lawsuits could therefore have a material adverse effect on our results of operations, financial condition or business.
Furthermore, our clients may use our investment solutions and services together with software, data or products from other companies. As a result, when problems occur, it might be difficult to identify the source of the problem. Even when our investment solutions and services do not cause these problems, the existence of these errors might cause us to incur significant costs and divert the attention of our management and technical personnel, any of which could materially adversely affect our results of operations, financial condition or business.
The holders of our Exchangeable Notes may not elect to exchange the principal balance for shares of our Class A common stock, in which case we will be obligated to repay the principal balance and accrued interest on the respective Exchangeable Notes and we may not have the cash to fulfill our obligations.
Subsequent to September 30, 2021, we entered into the 2021 Investment Agreements pursuant to which we received minority equity interests and revenue participation interests in certain of the Network Partner Firms, and in return issued $12.6 million in aggregate principal amount of Exchangeable Notes, which pay interest at a rate equal to the short-term applicable federal rate. At the holder’s option, the Exchangeable Notes are exchangeable into a number of shares of our Class A common stock equal to the principal amount of the relevant note divided by the public offering price of our Class A common stock. Although we expect all the holders will exercise the option to convert the Exchangeable
 
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Notes into shares of our Class A common stock, in the event that a holder elects not to make such conversion, we will be obligated to repay the principal balance and accrued interest on the respective Exchangeable Note and we may not have the cash to fulfill our obligations.
In the event that any holders did not exercise their option to convert the Exchangeable Notes, our ability to repay the principal balance and accrued interests on the Exchangeable Notes depends on our financial condition and operating performance. We cannot provide assurance that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal of, and interest on, any existing or future indebtedness. If our cash flows and capital resources are insufficient to fund any future debt service obligations, we may be forced to reduce or delay investments and capital expenditures, seek additional capital or restructure or refinance such indebtedness, and we may not be able to pursue any of these options on commercially reasonable terms or at all. This could also result in us lowering or eliminating future undeclared dividend payments. Any such transactions could also involve significant expense and management attention.
Our insurance coverage may be inadequate or expensive.
We maintain voluntary and required insurance coverage, including, among others, general liability, property, director and officer, errors and omissions, network cybersecurity and privacy, employee practices liability, fidelity bond and fiduciary liability insurance and insurance required under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Recently in the insurance industry, premiums and deductible costs associated with certain insurance coverage have increased, and the number of insurers has decreased. While we endeavor to purchase coverage that is appropriate to our assessment of our risk, we are unable to predict with certainty the frequency, nature or magnitude of claims for direct or consequential damages. Our business may be negatively affected if in the future our insurance proves to be inadequate or unavailable. In addition, insurance claims may harm our reputation or divert management resources away from operating our business.
Risks Related to Regulatory and Legal Matters
We may be required to register as an investment company under the Investment Company Act if an exclusion or safe harbor currently available to us is no longer available to us, and, as a result, we may become subject to regulatory action or third-party claims, which could have a material adverse effect on our business, results of operations and financial condition.
We intend to conduct our operations so that we are not an investment company and not required to register as an investment company under the Investment Company Act of 1940, as amended, and the rules thereunder (the “Investment Company Act”). Section 3(a)(1)(C) of the Investment Company Act defines as an investment company any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. The Company’s primary business is serving as a provider of wealth management solutions and business services for financial advisory firms, and the Company has not held and will not hold itself out to be, nor has it been nor will it be, engaged primarily in the business of investing, reinvesting, owning, holding or trading in securities.
However, our revenue participation interest receivables and loan receivables could be considered investment securities within the meaning of Section 3(a)(2) of the Investment Company Act, and, if that is the case, the Company’s investment securities constituted a substantial percentage of the assets on its consolidated corporate GAAP balance sheet. While the investment securities on the Company’s balance sheet represent a small portion (less than 10%) of the fair value of the Company’s total assets on an unconsolidated fair value basis, if we are not permitted to fair value our other assets under the Investment Company Act, we could be deemed to be an investment company and, as a result, we may need to sell a portion of our revenue participation receivables and/or loan receivables, forego opportunities to buy minority equity interests that we would otherwise want to purchase and would be important to our business philosophy, acquire additional assets that we might not otherwise have acquired, or take other actions in order to avoid being an investment company. Moreover, if we were
 
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required to register as an investment company but failed to do so, we would be prohibited from engaging in our current business and criminal and civil actions could be brought against us, which would have a material adverse effect on the Company’s business, results of operations and financial condition. In addition, our contracts would be unenforceable unless a court required enforcement and a court could appoint a receiver to take control of our company and liquidate our business.
Our operations are subject to extensive government regulation, and compliance failures or regulatory action against us could adversely affect our results of operations, financial condition or business.
The financial services industry is among the most extensively regulated industries in the United States. We operate investment advisory and broker-dealer lines of business, each of which is subject to a specific and extensive regulatory scheme. In addition, we are subject to numerous laws and regulations of general application. It is very difficult to predict the future impact of the legislative and regulatory requirements affecting our business and our clients’ businesses.
One of our subsidiaries, Dynasty Wealth Management, LLC, is registered as an “investment advisor” with the SEC under the Advisers Act and is regulated thereunder. In addition, several of our investment advisory services are conducted pursuant to the non-exclusive safe harbor from the definition of an “investment company” provided under Rule 3a-4 under the Investment Company Act. If Rule 3a-4 were to cease to be available, or if the SEC were to modify the rule or its interpretation of how the rule is applied, our business could be adversely affected. The Advisers Act, Investment Company Act, together with related regulations and interpretations of the SEC and the Department of Labor, impose numerous obligations and restrictions on investment advisors, including requirements relating to the safekeeping of client funds and securities, recordkeeping, solicitation arrangements, conflicts of interest, limitations on advertising and receipt of performance fees, disclosure and reporting obligations, prohibitions on fraudulent activities, compliance program obligations, limitations on agency cross and principal transactions between an adviser and its advisory clients, restrictions on advisory contract assignments, privacy protection regulations, anti-corruption rules relating to investors associated with U.S. state or local governments, and other detailed operating requirements, as well as general fiduciary obligations.
One of our subsidiaries, Dynasty Securities, LLC, a limited purpose broker-dealer, is subject to regulatory restrictions and requirements imposed by applicable statutes, regulations and guidance in the jurisdictions in which we operate. U.S. government agencies and self-regulatory organizations, including relevant U.S. state securities commissions, are empowered to enforce the regulatory restrictions and requirements applicable to us and conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer from registration or membership. Dynasty Securities, LLC is registered with the SEC and with relevant state securities commissions and is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), a securities industry self-regulatory organization that supervises and regulates the conduct and activities of its members. As a registered broker-dealer, Dynasty Securities, LLC is examined from time to time by FINRA and is expected to operate within the scope of its membership agreement. These examinations include examinations of our management, compliance with its own policies and procedures and FINRA rules. Such rules are often subject to interpretation. If deficiencies are identified, FINRA has the ability to impose a fine, suspend or bar the firm from further activity. Dynasty Securities, LLC is subject to regulations which cover virtually all aspects of its business, including sales practices, anti-money laundering, handling of material non-public information, safeguarding data, recordkeeping, reporting and the conduct and qualifications of directors, officers, employees, representatives and other associated persons.
All of the foregoing laws and regulations are complex, evolving, unclear, duplicative, and in some cases inconsistent across various jurisdictions and we are required to expend significant resources in order to maintain our monitoring of, and compliance with, such laws and regulations. We continually develop improvements to our existing products and services as well as new products and services. Many of these improvements or new products and services may implicate regulations to which we may not already be subject or with which we may not have experience. Any failure on our part to comply
 
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with these and other applicable laws and regulations could result in decreasing the demand for these products and services, increasing our potential liability, increasing our costs, regulatory fines, suspensions of personnel or other sanctions, including revocation of our subsidiaries’ registrations as an investment advisor or broker-dealer, as the case may be, which could, among other things, require changes to our business practices and scope of operations or harm our reputation. Any of the foregoing could have a material adverse effect on our results of operations, financial condition or business.
We regularly rely on exemptions from various requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Advisers Act, the Investment Company Act and ERISA in conducting our activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we could become subject to regulatory action or third-party claims and our business could be materially and adversely affected. Changes to the laws or regulations applicable to us or to our clients could adversely affect our results of operations, financial condition or business.
We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC or other U.S. or foreign governmental regulatory authorities or self-regulatory organizations. In addition, we may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. Legislative or regulatory actions and any required changes to our business operations resulting from such legislation and regulations, as well as any deficiencies in our compliance with such legislation and regulation, could adversely affect our businesses.
It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any current proposals will become law, and it is difficult to predict how any changes or potential changes could affect our business. Changes to laws or regulations could increase our potential liability in connection with the solutions and services that we provide. The introduction of any new laws or regulations could make our ability to comply with applicable laws and regulations more difficult and expensive. Any of the foregoing could have an adverse effect on our results of operations, financial condition or business.
If we are not able to satisfy data protection, security, privacy and other government- and industry-specific requirements, laws or regulations, our results of operations, financial condition or business could be harmed.
Either as a result of direct regulation or obligations under client agreements, our business is required to comply with certain provisions of the Gramm-Leach-Bliley Act, related to the privacy of consumer information, and may be subject to other privacy and data security laws at the federal, state and international level because of the solutions we provide and where our Network Partner Firms conduct their business. Further, to the extent applicable, we must comply with additional privacy-related regulations including the Fair Credit Reporting Act of 1970, as amended by the 2003 Fair and Accurate Credit Transactions Act, Regulation S-P under the Gramm-Leach-Bliley Act and Regulation S-ID and may also be subject to new federal and state requirements in the future.
The data protection landscape is rapidly evolving, and we expect that there will continue to be new proposed laws, regulations and industry standards, and changes to and in the interpretation of existing laws, regulations and standards, concerning privacy, data protection, information security and telecommunications services. Interpretation and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact such future laws, regulations and standards, or changes to and in the interpretation of existing laws, regulations and standards, may have on our business, but they may result in greater public scrutiny and escalated levels of enforcement and sanctions, increased compliance costs, increased liabilities, restrictions on our operations or other adverse impacts upon our business. For example, evolving and changing definitions of personal information and personal data, especially related to the classification of IP addresses, machine identification, location data and other information, may limit or inhibit our ability to operate or expand our business, including limiting the sharing of data.
 
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Recently, the most rapid development in U.S. data privacy and security law has been at the state level, which may require us to modify our data processing practices and policies and may increase our compliance costs and potential liability. Many states in which we operate have laws that protect the privacy and security of sensitive and personal information. Certain U.S. state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than international, federal, or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, the California Consumer Privacy Act, or the CCPA, broadly defines personal information, gives California residents expanded privacy rights and protections, including the right to access and delete certain personal information, as well as the right to opt out of certain sales of personal information, and provides for civil penalties for violations and a private right of action for data breaches. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Additionally, a new California ballot initiative, the California Privacy Rights Act, or the CPRA, was passed in November 2020. Effective beginning on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding California residents’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. The interpretation and enforcement of the CCPA and many aspects of the CPRA remain unclear, and the effects of the CCPA and the CPRA potentially are significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and sanctions and litigation. There is also discussion in Congress of a new comprehensive federal data protection and privacy law to which we likely would be subject if it is enacted. Additionally, the Federal Trade Commission, or the FTC, and many state attorneys general have interpreted and are continuing to interpret federal and state consumer protection laws to impose standards for the online collection, use, dissemination, processing and security of data. Further, we are or may become subject to the EU General Data Protection Regulation and other international privacy and data protection laws and regulations, which further complicates our compliance efforts.
Many statutory requirements include obligations for companies to notify individuals of security breaches involving certain personal information, which could result from breaches experienced by us or our third-party service providers. For example, laws in all 50 U.S. states require businesses to provide notice to customers whose personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states have been frequently amending existing laws, requiring attention to changing regulatory requirements. In addition, we may be contractually required to notify clients, end-investors or other counterparties of a security breach. Although we may have contractual protections with our third-party service providers, any security breach, or actual or perceived non-compliance with privacy, data protection or security laws, regulations, standards, policies or contractual obligations, could harm our reputation and brand, expose us to potential liability and require us to expend significant resources on data security and in responding to any such incident or actual or perceived non-compliance. Any contractual protections we may have from our third-party service providers may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.
We make public statements about our use and disclosure of personal information through our privacy policy, information provided on our website and press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policy and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. In addition, from time to time, concerns may be expressed about whether our products and services compromise the privacy of clients and others. Even the perception, whether or not valid, of privacy concerns or any failure by us to comply with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders or other privacy or consumer protection-related laws and regulations applicable to us may harm our reputation, inhibit adoption of our products by current and future clients or adversely impact our ability to attract and retain workforce talent.
 
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Given the complexity of operationalizing data privacy and security laws and regulations to which we are subject, the maturity level of proposed compliance frameworks and the relative lack of guidance in the interpretation of the numerous requirements of the data privacy and security laws and regulations to which we are subject, we may not be able to respond quickly or effectively to regulatory, legislative and other developments, and these changes may in turn impair our ability to offer our existing or planned products and services or increase our cost of doing business. Although we are in the process of working to comply with applicable laws and regulations, industry standards, contractual obligations and other legal obligations, such laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. In addition, they may conflict with other requirements or legal obligations that apply to our business or the features and services that our Network Partner Firms and their clients expect from our products and services. As such, we cannot assure ongoing compliance with all such laws, regulations, standards and obligations. Any failure, or perceived failure, by us to adequately address privacy and security concerns, even if unfounded, or to comply with applicable laws, regulations and standards, or with employee, client and other data privacy and data security requirements pursuant to contract and our stated privacy notice(s), could result in investigations or proceedings against us by data protection authorities, governmental entities or others, including class action privacy litigation in certain jurisdictions, which could subject us to fines, civil or criminal liability, public censure, claims for damages by clients and other affected individuals, damage to our reputation and loss of goodwill (in relation to both existing and prospective clients), or we could be required to fundamentally change our business activities and practices, which may not be possible in a commercially reasonable manner, or at all. Any or all of these consequences could have a material adverse effect on our operations, financial performance and business.
Integrating wealth management professionals formerly employed at traditional brokerages and wirehouses onto our platform exposes us to litigation risk.
One of the core services we provide is assisting wealth management professionals formerly employed at traditional brokerages and wirehouses to become independent. Integrating these professionals onto our platform may expose us to the risk of legal actions alleging tortious interference, misappropriation of confidential information, or unfair competition claims. These risks are often difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time, even after an action has been commenced. We may incur significant legal expenses in defending against litigation commenced by a brokerage or wirehouse. Legal liability could have an adverse effect on our business, results of operations or financial condition or cause significant reputational harm to us.
Our application for a PPP Loan could in the future be determined to have been impermissible, which could result in damage to our reputation or adversely impact our business.
In April 2020, given the uncertainty caused by COVID-19 and related events we applied for and received proceeds of approximately $1.3 million from a loan under the Paycheck Protection Program (the “PPP Loan”), of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan had a term of two years, was unsecured, and was guaranteed by the U.S. Small Business Administration (the “SBA”). The PPP Loan carried a fixed interest rate of 1.00% per annum, with principal and interest payments deferred initially for a period of six months, which was later extended under the Paycheck Protection Program Flexibility Act of 2020. Under the CARES Act, we may have been eligible to apply for forgiveness of all loan proceeds used to pay payroll costs, rent, utilities, and other qualifying expenses, provided that we retained a certain number of employees and maintain compensation within certain regulatory parameters of the Paycheck Protection Program.
In applying for the PPP Loan, we were required to certify, among other things, that the then-current economic uncertainty made the PPP Loan necessary to support our ongoing operations and that we did not, together with our affiliates, then employ more than 500 employees. We made these certifications in good faith after analyzing, among other things, economic uncertainties created by the COVID-19 pandemic, including its impact on our Network Partner Firms and prospects and the global economy at large, and the potential impact on our business activity. We repaid the entire balance of the PPP Loan in July 2021.
 
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We believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan was consistent with the objectives of the PPP of the CARES Act. The certification regarding necessity described above did not at the time contain any objective criteria and continues to be subject to interpretation. If, despite our good-faith belief that we satisfied all eligibility requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to civil, criminal, and administrative penalties, despite the fact that we elected not to use any of the PPP Loan proceeds and repaid the entire balance of the PPP Loan, including accrued interest on July 30, 2021. Any violations or alleged violations may result in adverse publicity and damage to our reputation, a review or audit by the SBA or other government entity, or claims under the False Claims Act. These events could consume significant financial and management resources and could have a material adverse effect on our business, results of operations, and financial condition.
Risks Related to Intellectual Property
If we fail to adequately obtain, maintain, protect, enforce or defend our intellectual property and proprietary rights, our competitive position could be impaired, our reputation could be harmed and we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.
Our success depends in part on our proprietary technology and branding of the services we provide. We rely on a combination of copyright, trademark and trade secret laws, confidentiality, nondisclosure, non-interference and invention assignment agreements and other contractual and technical security measures to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate, may not afford complete protection and may not adequately permit us to gain or keep any competitive advantage or otherwise fail to prevent unauthorized use or disclosure of our confidential information, intellectual property or technology, and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property or technology. If we fail to successfully obtain, maintain, enforce, monitor, police or defend our intellectual property rights, or if we were to infringe, misappropriate or otherwise violate the intellectual property rights of others, our competitive position, operations, financial condition or business could suffer.
Various factors outside our control pose a threat to our intellectual property rights, as well as to our products, services and technologies. For example, it is possible that third parties, including our competitors, may obtain patents relating to technologies that overlap or compete with our technology. If third parties obtain patent protection with respect to such technologies, they may assert that our technology infringes their patents and seek to charge us a licensing fee or otherwise preclude the use of our technology or file suit against us. Any of our trademarks or other intellectual property rights may lapse, be abandoned, be challenged or circumvented by others or invalidated through administrative process or litigation. We also may allow certain of our registered intellectual property rights, or our pending applications for intellectual property rights, to lapse or to become abandoned if we determine that obtaining or maintaining the applicable registered intellectual property rights is not worthwhile. Despite our efforts to protect our intellectual property and proprietary rights, there can be no guarantee that such rights will be sufficient to protect against others offering products or services that are substantially similar to ours, independently developing similar products, duplicating any of our products, adopting trade names or domain names similar to ours, competing with our business or attempting to copy aspects of our technology and using information that we consider proprietary. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours.
We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy, reverse engineer or otherwise obtain and use our products, technology, systems, methods, processes, intellectual property and other
 
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information that we regard as proprietary to create products and services that compete with ours. We cannot be certain that we will be able to prevent unauthorized use of our products, technology, systems, methods and processes or infringement, misappropriation or other violation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as comprehensively as in the United States, if at all. In addition, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. Failure to obtain or maintain protection of our trade secrets or other proprietary information could harm our competitive position and materially and adversely affect our business, operating results and financial condition.
To protect our proprietary rights, we enter into invention assignment agreements with our employees who develop intellectual property on our behalf. However, these agreements may not be self-executing or sufficient in scope. Moreover, these agreements may not provide an adequate remedy in the event of a breach and we cannot assure you that our rights under such agreements will be enforceable. We cannot guarantee that we have entered into such agreements with each person or entity that may have developed intellectual property for us, including our technology and processes. Individuals that were involved in the development of intellectual property for us or who had access to our intellectual property but who are not subject to invention assignment agreements may make adverse ownership claims to our current and future intellectual property.
Effective trademark, service mark, trade secret and domain name protection is time-consuming and expensive. We may not be able to obtain protection for our technology and even if we are successful in obtaining effective trademark, service mark, trade secret and domain name protection, it is expensive to maintain these rights, both in terms of application and maintenance costs, and the time and cost required to defend our rights could be substantial. Moreover, our failure to develop and properly manage and protect new intellectual property could hurt our market position and business opportunities. We may be unable to obtain trademark protection for our products and brands, and our existing trademark registrations and applications, and any trademarks that may be used in the future, may not provide us with competitive advantages or distinguish our products and services from those of our competitors. We may not own registered trademarks for all trademarks and logos used in our business in the jurisdictions in which we operate or may operate in the future. In addition, our trademarks may be contested or found to be unenforceable, weak or invalid, and we may not be able to prevent third parties from infringing or otherwise violating them. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others, which could result in substantial costs and diversion of our resources. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are unenforceable. If we are unable to cost-effectively protect our intellectual property rights, our business would be harmed. If competitors are able to use our technology or develop proprietary technology similar to ours or competing technologies, our ability to compete effectively and our growth prospects would be adversely affected.
If third parties infringe upon our intellectual property, or if we were to infringe upon the intellectual property of third parties, we may expend significant resources enforcing or defending our rights or suffer competitive injury.
We may in the future become subject to and involved in lawsuits, disputes, legal proceedings or claims to protect or enforce our intellectual property rights, and we may be subject to claims by third parties that we have infringed, misappropriated or otherwise violated their intellectual property. Even if we believe that particular intellectual property-related claims are without merit in some instances, litigation may be necessary to determine the scope and validity of intellectual property or proprietary rights of others or to protect or enforce our intellectual property rights and protect our proprietary information against competitors or former employees. The ultimate outcome of any allegation is often uncertain and, regardless of the outcome, any litigation or claims brought by or against us, whether with or without merit, could result in substantial costs to us, the loss or compromise of our intellectual property and proprietary rights, subject us to significant liabilities and divert the attention of our management, and require us to, among other things, redesign or stop providing our products or services, pay substantial
 
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amounts to satisfy judgments or settle claims or lawsuits, pay substantial royalty or licensing fees, seek licenses on unfavorable terms, make changes to the investment services and solutions we offer or satisfy indemnification obligations that we have with certain parties with whom we have commercial relationships, any of which could harm our results of operations, financial condition or business.
We license certain trademark and web domain rights from third parties and may be subject to claims of infringement if such parties do not possess the necessary intellectual property rights. In addition, we may face additional risk of infringement or misappropriation claims if we hire an employee who possesses third-party proprietary information who decides to use such information in connection with our investment solutions, services or business processes without such third party’s authorization. Furthermore, third parties may in the future assert intellectual property infringement claims against our clients, which, in certain circumstances, we have agreed to indemnify.
Although we carry insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed. In addition, many companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them than we do.
Confidentiality agreements with employees, consultants and others may not adequately prevent disclosure of trade secrets and other proprietary information.
We have devoted substantial resources to the development of our proprietary technologies, investment solutions and services. To protect our proprietary rights, we enter into confidentiality, nondisclosure and non-interference agreements with our employees, consultants and independent contractors. These agreements may not be self-executing or sufficient in scope or effectively prevent unauthorized disclosure of confidential information or unauthorized parties from copying aspects of our technologies, investment solutions or products or obtaining and using information that we regard as proprietary. Moreover, these agreements may not provide an adequate remedy in the event of such unauthorized disclosures of confidential information and we cannot assure you that our rights under such agreements will be enforceable. We cannot guarantee that we have entered into such agreements with each person or entity that may have or have had access to our trade secrets or proprietary information or otherwise developed intellectual property for us, including our technology and processes. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Additionally, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting works of authorship know-how and inventions. The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality .Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could reduce any competitive advantage we have developed and cause us to lose customers or otherwise harm our business.
The use of “open source code” may expose us to additional risks and harm our intellectual property rights.
We rely on open source code to some extent to develop our products and support our internal systems and infrastructure. Some open source licenses contain requirements that those who distribute open source software as part of their own software product also make publicly available all or part of the source code for modifications or derivative works created based on the type of open source software they use, or grant other licenses to their intellectual property on unfavorable terms or at no cost, and we may be subject to such requirements. Additionally, if a third-party software provider has incorporated certain types of open source code into software we license from such third party for our products, we could, under certain circumstances, be required to disclose the source code for our products. While we monitor our use of open source code to attempt to avoid subjecting our products to conditions we do not intend, and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could occur, or could be claimed to have occurred, in part because open source license terms are
 
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often ambiguous. Moreover, we cannot assure you that our processes for controlling our use of open source software in our platform, products and services will be effective. This could harm our intellectual property position and have a material adverse effect on our results of operations, financial condition or business.
The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide, or distribute our platform, products or services related to, the open source software subject to those licenses. In addition, the public availability of such software may make it easier for others to compromise our platform. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate it into their products. Likewise, we could become subject to lawsuits and face claims from third parties claiming ownership of, or demanding release of, any open source software or derivative works that we have developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated products or services. Litigation could be costly for us to defend, have a negative effect on our business, operating results and financial condition or require us to devote additional research and development resources to change our products. If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, we could face infringement or other liability, or be required to seek costly licenses from third parties, to continue providing our offerings on terms that are not economically feasible, to re-engineer our platform (which could involve substantial time and resources), to discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating results and financial condition.
In addition to risks related to complying with applicable license requirements, a release of our proprietary code could also allow our competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of our competitive advantages. Furthermore, use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code. There is little legal precedent in this area and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could materially and adversely affect our business, operating results and financial condition.
Our business and platform depend in part on intellectual property and proprietary rights and technology licensed from or otherwise made available to us by third parties.
Much of our business and our platform rely on key technologies developed or licensed by third parties. These third-party components may become obsolete, defective or incompatible with future versions of our services, relationships with the third-party licensors or technology providers may deteriorate, or our agreements with the third-party licensors or technology providers may expire or be terminated. Additionally, some of these licenses or other grants of rights may not be available to us in the future on terms that are acceptable, or at all, or that allow our platform, products and services to remain competitive. Our inability to obtain licenses or rights on favorable terms could have a material and adverse effect on our business and results of operations. Furthermore, incorporating intellectual property or proprietary rights licensed from or otherwise made available to us by third parties on a non-exclusive basis in our products or services could limit our ability to protect the intellectual property and proprietary rights in our services and our ability to restrict third parties from developing, selling or otherwise providing similar or competitive technology using the same third-party intellectual property or proprietary rights.
We believe we have all the necessary licenses and other grants of rights from third parties to use technology and software that we do not own. A third party could, however, allege that we are infringing
 
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its rights, which may deter our ability to obtain licenses or other grants of rights on commercially reasonable terms from the third party, if at all, or cause the third party to commence litigation against us. Our failure to obtain necessary licenses or other rights, or litigation or claims arising out of intellectual property matters, may harm or restrict our business. Even if we were able to obtain a license or other grant of rights, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to or otherwise made available to us. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Any such litigation or the failure to obtain any necessary licenses or other rights could adversely impact our business, financial position, results of operations and liquidity.
Risks Related to COVID-19
The duration of COVID-19 outbreak and its ultimate impact on our business remains uncertain.
The transmission of COVID-19 and efforts to contain its spread have resulted in border closings and other travel restrictions and disruptions, disruptions to business operations, supply chains and client activity, event cancellations and restrictions, service cancellations and reductions, significant challenges in the healthcare industry and quarantines. These impacts and the uncertainty around the future impact of COVID-19, including the extent and duration of the impact on economies around the world, have caused significant volatility in the U.S. and global financial markets, which could impact our market correlated revenues and our Network Partner Firms’ investment strategies and revenues.
As a result of COVID-19, we temporarily closed our offices, implemented a remote working policy and, in 2020, rescheduled certain business development activities to later in the year due to the pandemic and associated market dynamics. Although currently there has been no significant impact to our business, the COVID-19 outbreak, and future pandemics, could negatively affect us and our Network Partner Firms. The COVID-19 pandemic may also have the effect of heightening many of the other risks described elsewhere in this prospectus.
Risks Related to Our Company and Our Organizational Structure
Our internal reorganization may adversely affect our relationship with certain employees.
Our performance is largely dependent on the efforts and motivation of our employees. One element of our partnership is an alignment of interests of employees with our goals through their ownership of common units in Dynasty Financial Partners. In connection with the reorganization transactions, the second limited liability company agreement of Dynasty Financial Partners will be amended and restated to reclassify the Class A, Class B and Class C capital interests as common units of Dynasty Financial Partners and, after the reorganization transactions, the current equity holders of Dynasty Financial Partners will hold common equity interests in Dynasty Financial Management, LLC, which in turn will hold common interests in Dynasty Financial Partners. Dynasty will use a portion of the net proceeds of this offering to purchase common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders, and members of Dynasty Financial Partners holding certain Class Q profits interests units will exchange their profits interests units for shares of our Class A common stock, effective upon the consummation of this offering. Many of these existing members, who will cease to be members of Dynasty Financial Partners or Dynasty Financial Management, LLC, are employees. Current and future employees may receive grants of restricted Class A common stock or stock options under the 2022 Omnibus Incentive Compensation Plan. The incentives to attract, retain and motivate employees provided by their ownership of Class A common stock and stock options or by future arrangements may not be as effective as the status as, or opportunity to become, a member in Dynasty Financial Partners or Dynasty Financial Management, LLC.
Our ability to pay taxes and expenses, including payments under the Tax Receivable Agreement, may be limited by our structure.
Upon the consummation of this offering, we will have no material assets other than our ownership of common units of Dynasty Financial Partners and deferred tax assets and will have no independent
 
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means of generating revenue. Dynasty Financial Partners will be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to U.S. federal income tax. Instead, taxable income will be allocated to holders of its common units, including us. Accordingly, we will incur income taxes on our proportionate share of any net taxable income of Dynasty Financial Partners. Under the terms of its third amended and restated limited liability company agreement, Dynasty Financial Partners will be obligated to make tax distributions to holders of its common units, including us. In addition to tax expenses, we also will incur expenses related to our operations, including expenses under the Tax Receivable Agreement, which we expect will be significant. We intend to cause Dynasty Financial Partners to make distributions in an amount sufficient to allow us to pay our taxes and operating expenses, including any payments due under the Tax Receivable Agreement. However, Dynasty Financial Partners’ ability to make such distributions will be subject to its and its subsidiaries’ operating results, cash requirements and financial condition, the applicable provisions of Delaware law that may limit the amount of funds available for distribution to its unitholders, its compliance with covenants and financial ratios related to existing or future indebtedness, its other agreements with third parties, as well as its obligation to make tax distributions to unitholders other than us under the terms of its third amended and restated limited liability company agreement. If, as a consequence of these various limitations and restrictions, we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds and thus our liquidity and financial condition could be materially adversely affected. Late payments generally will accrue interest at a rate equal to the Secured Overnight Financing Rate as reported by the Wall Street Journal (“SOFR”) plus 500 basis points until paid.
We will be required to pay holders of our Class B and Class C common stock for certain tax benefits we may claim, and we expect that the payments we will be required to make will be substantial.
Our purchase of common units of Dynasty Financial Partners in connection with this offering and future exchanges of common units of Dynasty Financial Partners for shares of our Class A common stock are expected to produce additional favorable tax attributes for us. When we acquire common units from existing unitholders, both the existing basis and the anticipated basis adjustments are likely to increase (for tax purposes) depreciation and amortization deductions allocable to us from Dynasty Financial Partners and therefore reduce the amount of income tax we would otherwise be required to pay in the future. This increase in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent the increased tax basis is allocated to those capital assets.
We will be a party to the Tax Receivable Agreement with other direct or indirect members of Dynasty Financial Partners (the “TRA Holders”) and Dynasty Financial Partners. The Tax Receivable Agreement will generally provide for the payment by us to the TRA Holders of 85% of the amount of the cash savings, if any, in U.S. federal and state income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after this offering as a result of (i) any step-up in tax basis in Dynasty Financial Partners’ assets resulting from (a) our purchase of common units of Dynasty Financial Partners for cash or the exchange of common units of Dynasty Financial Partners (along with the corresponding shares of our Class B or Class C common stock) for shares of our Class A common stock and (b) payments under this Tax Receivable Agreement, (ii) certain prior distributions by Dynasty Financial Partners and prior transfers or exchanges of limited liability company interests, which resulted in tax basis adjustments to the assets of Dynasty Financial Partners and (iii) tax benefits related to imputed interest deemed to be paid by us as a result of this Tax Receivable Agreement.
The payment obligation under the Tax Receivable Agreement is an obligation of Dynasty, not Dynasty Financial Partners, and we expect that the payments we will be required to make under the Tax Receivable Agreement will be substantial. Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the reduction in tax payments for us associated with (i) our purchase of common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders with a portion of the net proceeds of this offering and (ii) future exchanges of common units of Dynasty Financial Partners as described above would aggregate to approximately $        over 15 years from the date of this offering based on an assumed initial public offering price of $        per share of our Class A common stock (the midpoint of the price range set forth on the cover of this prospectus) and
 
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assuming all future exchanges would occur one year after this offering. Under such scenario we would be required to pay the other parties to the Tax Receivable Agreement 85% of such amount, or $       , over the 15-year period from the date of this offering. The actual amounts may materially differ from these hypothetical amounts, as potential future reductions in tax payments for us and Tax Receivable Agreement payments by us will be calculated using the market value of our Class A common stock at the time of exchange and the prevailing tax rates applicable to us over the life of the Tax Receivable Agreement and will be dependent on us generating sufficient future taxable income to realize the benefit. See “Our Structure and Reorganization — Tax Receivable Agreement.” Payments under the Tax Receivable Agreement are not conditioned on our existing owners’ continued ownership of us.
The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges by the holders of common units of Dynasty Financial Partners, the price of our Class A common stock at the time of the exchange, whether such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable as well as the portion of our payments under the Tax Receivable Agreement constituting imputed interest. Payments under the Tax Receivable Agreement are expected to give rise to certain additional tax benefits attributable to either further increases in basis or in the form of deductions for imputed interest, depending on the circumstances. Any such benefits are covered by the Tax Receivable Agreement and will increase the amounts due thereunder. In addition, the Tax Receivable Agreement will provide for interest, at a rate equal to SOFR plus 300 basis points, accrued from the due date (without extensions) of the corresponding tax return to the date of payment specified by the Tax Receivable Agreement.
In certain cases, payments under the Tax Receivable Agreement to our existing owners may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
The Tax Receivable Agreement provides that (i) upon certain mergers, asset sales, other forms of business combinations or other changes of control, (ii) in the event that we materially breach any of our material obligations under the agreement or (iii) if, at any time, we elect an early termination of the agreement, our (or our successor’s) obligations under the agreement (with respect to all common units of Dynasty Financial Partners, whether or not such common units have been exchanged or acquired before or after such transaction) would be based on certain assumptions. Those assumptions include that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the Tax Receivable Agreement. In the event we elect to terminate the Tax Receivable Agreement early or we materially breach a material obligation, our obligations under the agreement will accelerate. As a result, (i) we could be required to make payments under the Tax Receivable Agreement that are greater than or less than the specified percentage of the actual benefits we realize in respect of the tax attributes subject to the agreement and (ii) we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits, which payment may be made significantly in advance of the actual realization of such future benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement. If we were to elect to terminate the Tax Receivable Agreement immediately after this offering, based on an assumed initial public offering price of $       per share of our Class A common stock (the midpoint of the price range set forth on the cover of this prospectus) and a discount rate equal to the lesser of (i) 6.5% and (ii) SOFR plus 400 basis points, we estimate that we would be required to pay $      in the aggregate under the Tax Receivable Agreement. See “Our Structure and Reorganization — Tax Receivable Agreement.”
We will not be reimbursed for any payments made under the Tax Receivable Agreement in the event that any tax benefits are subsequently disallowed.
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we will determine. Although we are not aware of any issue that would cause the Internal Revenue Service (“IRS”) to challenge a tax basis increase or other tax attributes subject to the Tax Receivable
 
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Agreement, the TRA Holders will not reimburse us for any payments previously made under the Tax Receivable Agreement if any tax benefits that have given rise to payments under the Tax Receivable Agreement are subsequently disallowed, except that excess payments made to any TRA Holder will be netted against payments that would otherwise be made to such TRA Holder, if any, after our determination of such excess. As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could adversely affect our liquidity.
In certain circumstances, Dynasty Financial Partners will be required to make tax distributions to the Dynasty Financial Partners unitholders, including Dynasty, and the tax distributions that Dynasty Financial Partners will be required to make may be substantial. To the extent Dynasty receives tax distributions in excess of its tax liabilities and obligations to make payments under the Tax Receivable Agreement and retains such excess cash, the unitholders would benefit from such accumulated cash balances if they exercise their exchange right.
Pursuant to its third amended and restated limited liability company agreement, Dynasty Financial Partners will generally make pro rata cash distributions, or tax distributions, to the Dynasty Financial Partners unitholders, including Dynasty, in an amount generally intended to allow the Dynasty Financial Partners unitholders to satisfy their respective income tax liabilities with respect to their allocable shares of the income of Dynasty Financial Partners, based on certain assumptions and conventions, provided that the distribution will be sufficient to allow Dynasty to satisfy its actual tax liabilities and to make payments under the Tax Receivable Agreement that it will enter into with the TRA Holders in connection with the closing of this offering. Dynasty Financial Partners may make tax distributions to its existing owners or tax payments on their behalf before or shortly after the consummation of this offering with respect to the taxable income of Dynasty Financial Partners for the period ending on the date of such consummation. Tax distributions will be made pro rata based on ownership notwithstanding that, under applicable tax rules, Dynasty Financial Partners is required to allocate net taxable income disproportionately to its members in certain circumstances. As a result, Dynasty Financial Partners will be required to make tax distributions that, in the aggregate, will likely exceed the amount of taxes that Dynasty Financial Partners would have paid if it were taxed on its net income at the assumed rate. Moreover, tax distributions will be made based on the highest combined United States federal, state and local income tax rate to which an individual residing in the City and State of New York would be subject. This rate is expected to be significantly higher than the rate applicable to Dynasty. As a result, the tax distributions Dynasty Financial Partners will be required to make may be substantial, and may exceed (as a percentage of Dynasty Financial Partners’ income) the overall effective tax rate applicable to a similarly situated corporate taxpayer. The pro rata distribution amounts will also be increased to the extent necessary, if any, to ensure that the amount distributed to Dynasty is sufficient to enable Dynasty to pay its actual tax liabilities and any amounts payable under the Tax Receivable Agreement.
Funds used by Dynasty Financial Partners to satisfy its tax distribution obligations will not be available for reinvestment in our business.
As a result of potential differences in the amount of net taxable income allocable to Dynasty and to the other Dynasty Financial Partners unitholders, as well as the use of an assumed tax rate in calculating Dynasty Financial Partners’ tax distribution obligations, Dynasty may receive distributions significantly in excess of its tax liabilities and obligations to make payments under the Tax Receivable Agreement. If Dynasty retains such cash balances, the unitholders benefit from any value attributable to such accumulated cash balances as a result of their exercise of an exchange right. While our board may choose to distribute such cash balances as dividends on our Class A common stock, it will not be required to do so, and may in its sole discretion choose to use such excess cash for any purpose depending upon the facts and circumstances at the time of determination.
If Dynasty Financial Partners were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result, and Dynasty would not be able to recover payments previously made by it under the Tax Receivable Agreement even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.
A number of aspects of our structure depend on the classification of Dynasty Financial Partners as a partnership for U.S. federal income tax purposes. Subject to certain exceptions relating to the receipt
 
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of predominantly qualifying income for which we do not expect to qualify, a “publicly traded partnership” is taxable as a corporation for U.S. federal income tax purposes. The U.S. Treasury regulations provide that a “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, exchanges of Dynasty Financial Partners’ common units pursuant to an exchange right (or a call right) or other transfers of Dynasty Financial Partners’ common units could cause Dynasty Financial Partners to be treated as a publicly traded partnership. U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that exchanges or other transfers of Dynasty Financial Partners’ common units qualify for one or more such safe harbors. For example, we intend to limit the number of direct or indirect unitholders of Dynasty Financial Partners and the third amended and restated limited liability company agreement of Dynasty Financial Partners, which will be entered into in connection with the closing of this offering, will provide for limitations on the ability of unitholders of Dynasty Financial Partners to transfer their common units of Dynasty Financial Partners and will provide us, as managing member of Dynasty Financial Partners, with the right to impose limitations and restrictions (in addition to those already in place) on the ability of unitholders of Dynasty Financial Partners to exchange their Dynasty Financial Partners’ common units pursuant to an exchange right to the extent we believe it is necessary to ensure that Dynasty Financial Partners will continue to be treated as a partnership for U.S. federal income tax purposes.
If Dynasty Financial Partners were to become a publicly traded partnership, significant tax inefficiencies might result, including as a result of Dynasty’s inability to file a consolidated U.S. federal income tax return with Dynasty Financial Partners. In addition, Dynasty would no longer have the benefit of the increases in tax basis covered under the Tax Receivable Agreement, and Dynasty would not be able to recover any payments previously made under the Tax Receivable Agreement, even if the corresponding tax benefits (including any claimed increase in the tax basis of Dynasty Financial Partners’ assets) were subsequently determined to have been unavailable.
Risks Related to Our Class A Common Stock
The initial public offering price of our Class A common stock may not be indicative of the market price of our Class A common stock after this offering. In addition, an active, liquid and orderly trading market for our Class A common stock may not develop or be maintained, and our stock price may be volatile.
Prior to this offering, our Class A common stock was not traded on any market. An active, liquid and orderly trading market for our Class A common stock may not develop or be maintained after this offering. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders. If an active trading market does not develop, you may have difficulty selling your shares of Class A common stock at an attractive price, or at all. The market price of our Class A common stock could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our Class A common stock, you could lose a substantial part or all of your investment in our Class A common stock. The initial public offering price was negotiated between us and the representatives of the underwriters, based on numerous factors which we discuss in “Underwriting,” and may not be indicative of the market price of our Class A common stock after this offering. Consequently, you may not be able to sell shares of our Class A common stock at prices equal to or greater than the price paid by you in this offering.
The following factors could affect our stock price:

our financial performance;

quarterly variations in the rate of growth of our financial indicators, such as revenues;

the public reaction to our press releases, our other public announcements and our filings with the SEC;

strategic actions by our competitors;
 
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changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;

speculation in the press or investment community;

publication of research reports about us or the investment management industry, or the failure of securities analysts to cover our Class A common stock after this offering;

sales of our Class A common stock by us or other stockholders, or the perception that such sales may occur;

changes in accounting principles, policies, guidance, interpretations or standards;

additions or departures of key management personnel;

actions by our stockholders;

general market and economic conditions;

adverse publicity about the investment management industry generally, or particular scandals, specifically;

domestic and international economic, legal and regulatory factors unrelated to our performance; and

the realization of any risks described under this “Risk Factors” section.
The disparity in the voting rights among the classes of our capital stock may have a potential adverse effect on the price of our Class A common stock.
Each share of our Class A common stock and Class C common stock will entitle its holder to one vote on all matters to be voted on by stockholders generally, while each share of our Class B common stock will entitle its holder to five votes on all matters to be voted on by stockholders generally. The difference in voting rights could adversely affect the value of our Class A common stock by, for example, delaying or deferring a change of control or if investors view, or any potential future purchaser of our company views, the superior voting rights of the Class B common stock to have value.
Certain existing holders of equity interests in Dynasty Financial Partners will collectively hold a substantial percentage of the voting power of our common stock.
Holders of Class A common stock, Class B common stock and Class C common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or our amended and restated certificate of incorporation. Upon completion of this offering (assuming no exercise of the underwriters’ option to purchase additional shares), the existing holders of equity interests in Dynasty Financial Partners will own approximately       % of our Class A common stock (representing       % of the economic interest and       % of the voting power). The existing holders of equity interests in Dynasty Financial Partners will own 100% of our Class B common stock (representing 0% of the economic interest and       % of the voting power) and 100% of our Class C common stock (representing 0% of the economic interest and     % of the voting power). See “Principal Stockholders”.
Although these existing holders of equity interests in Dynasty Financial Partners are generally entitled to act separately in their own respective interests with respect to their stock in us, they will together have the ability to elect all of the members of our board of directors, and thereby to control our management and affairs. In addition, GF-Dynasty Holdings, LLC and Mr. Penney, two of our significant stockholders with less than 50% of our voting power, will enter into a voting agreement pursuant to which (i) they will be required to vote together with respect to any stockholder vote in such a manner as they may agree in writing, and for any matter upon which there is no written agreement between them, they will vote no or against such matter, or otherwise vote in such a manner so as to not authorize or support any action objected by either of them and (ii) GF-Dynasty Holdings, LLC will cause its director nominees to vote in favor of Mr. Penney as our CEO for so long as Mr. Penney is willing and able to serve as our CEO. The existing holders of equity interests in Dynasty Financial Partners, if voting in the same
 
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manner, will be able to determine the outcome of all matters requiring stockholder approval, including mergers and other material transactions, and will be able to cause or prevent a change in the composition of our board of directors or a change in control of our company that could deprive our stockholders of an opportunity to receive a premium for their shares of Class A common stock as part of a sale of our company. The existence of significant stockholders may also have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our company. Moreover, this concentration of stock ownership may also adversely affect the trading price of our Class A common stock to the extent investors perceive a disadvantage in owning stock of our company.
In addition, in connection with this offering, we and certain principal stockholder with less than 50% of our voting power will enter into a stockholder agreement with GF-Dynasty Holdings, LLC, the investment vehicle of one of our equity owners. GF-Dynasty Holdings, LLC will have the right to nominate at least one member of our board of directors, as well as additional directors based on the percentage of our common stock that it holds so long as it holds at least 10% of our Class A, B and C common stock on a combined basis. See “Certain Relationships and Related Party Transactions — Stockholder Agreement with GF-Dynasty Holdings, LLC.”
Under NASDAQ rules, a company of which more than 50% of the voting power is held by a person or group of persons acting together is considered a controlled company. Our stockholders do not currently have any agreement in place in which stockholders with more than 50% of the voting power have agreed to act together, and thus there is no “group” with more than 50% of the voting power for purposes of determining controlled company status.
Although we are not currently a controlled company, if we become a controlled company in the future, we may elect to rely on one or more exceptions under NASDAQ rules for a controlled company. Under NASDAQ rules, a controlled company may elect not to comply with certain corporate governance requirements, including the requirements that:

a majority of the board of directors consist of independent directors;

directors be selected or recommended for the Board’s selection by independent directors or a nominations committee comprised solely of independent directors; and

the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
The interests of our existing holders of equity interests in Dynasty Financial Partners, including members of our management team and board of directors, may differ from those of our public stockholders.
The existing holders of equity interest in Dynasty Financial Partners include members of our management team and members of our board of directors, and so long as they continue to serve in those positions or to control a significant amount of our common stock, they will continue to be able to strongly influence all matters requiring stockholder approval, regardless of whether or not other stockholders believe that a potential transaction is in their own best interests. In any of these matters, the interests of the existing holders of equity interests in Dynasty Financial Partners (including their interests, if any, as TRA Holders) may differ or conflict with the interests of our other stockholders. For example, these existing owners may have different tax positions from ours, which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and when Dynasty should terminate the Tax Receivable Agreement and accelerate its obligations thereunder; provided that any decision to terminate the Tax Receivable Agreement and accelerate the obligations thereunder would also require the approval of a majority of the disinterested directors of Dynasty. In addition, the structuring of future transactions may take into consideration these existing owners’ tax or other considerations even where no similar benefit would accrue to us. See “Certain Relationships and Related Party Transactions — Tax Receivable Agreement.”
 
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We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
In connection with the preparation of Dynasty Financial Partners, LLC’s consolidated financial statements, material weaknesses in its internal control over financial reporting were identified. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2020, our management has determined that the following control deficiencies constitute material weaknesses:

We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lack a sufficient complement of personnel with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately.

We did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to financial reporting.
These material weaknesses contributed to the following additional material weaknesses:

We did not design and maintain effective controls related to the period-end financial reporting process, including designing and maintaining formal accounting and IT policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures. Specifically, we did not design and maintain effective controls over the preparation and review of account reconciliations and journal entries, including maintaining appropriate segregation of duties. In addition, we did not design and maintain effective controls over the accuracy and validity of disbursements. Specifically, we did not design and maintain effective controls to verify vendor master data are appropriately updated and wire transfers are properly authorized.

We did not design and maintain effective controls over certain IT general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: (i) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel, (ii) program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately, (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored, and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.
These IT deficiencies did not result in a material misstatement to the financial statements, however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness.
 
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None of the material weaknesses resulted in material misstatements, however, they could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in material misstatements of our annual or interim financial statements that would not be prevented or detected.
We are in the process of planning and implementing a number of steps to enhance our internal control over financial reporting to address the underlying causes of the control deficiencies in order to remediate the material weaknesses. Our efforts to date include planning to: (i) design and implement formal accounting policies, procedures and controls supporting the Company’s period-end financial reporting process, including controls over the preparation and review of account reconciliations and journal entries, including maintaining appropriate segregation of duties, (ii) hire key personnel in the accounting department with technical accounting and financial reporting experience, and (iii) develop formal policies around IT general controls, and scheduled formal trainings prior to implementation of an IT general controls framework that addresses risks associated with user access rights and privileges, program change management, computer operations, and program development. We also intend to take steps to remediate the material weaknesses described above through hiring and continuously training additional qualified accounting and financial reporting personnel and developing a risk assessment framework to continuously evaluate and adjust as needed the design of existing controls and implementing new controls and processes to respond to changes in the sources of risks of material misstatement.
While we believe these efforts will improve our internal control over financial reporting and address the underlying causes of the material weaknesses, such material weaknesses will not be remediated until our remediation plan has been fully implemented and we have concluded that our controls are operating effectively for a sufficient period of time. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.
We are working to remediate the material weaknesses as efficiently and effectively as practicable, including to date having engaged additional technical accounting consulting resources and hired additional qualified accounting and financial reporting personnel. While we expect to implement efforts to address each of the identified weaknesses during 2022, we anticipate full remediation, implementation and testing of new procedures and controls could potentially extend beyond December 31, 2022. These remediation measures will be time consuming, will result in us incurring significant costs which we estimate could range from $400,000 to $800,000 annually, and will place significant demands on our financial and operational resources.
In addition, neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the rules and regulations of the SEC because no such evaluation has been required. Had we or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting, additional material weaknesses may have been identified. If we fail to remediate the material weaknesses in our internal control over financial reporting, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, we may be unable to accurately or timely report our financial condition or results of operations. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and our stock price could be adversely affected.
 
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Our certificate of incorporation and bylaws contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock.
Some provisions of our amended and restated certificate of incorporation and bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including:

providing that the authorized number of directors may be changed only by resolution of the board of directors;

providing that all vacancies in our board of directors may, except as otherwise be required, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

providing that our amended and restated certificate of incorporation and bylaws may be amended by the affirmative vote of the holders of at least two-thirds of our then-outstanding voting stock;

providing that our bylaws can be amended by the board of directors;

the disparity in the voting rights among the classes of our capital stock;

the right of the various classes of our capital stock to vote, as separate classes, on certain amendments to our amended and restated certificate of incorporation and certain fundamental transactions;

the ability of our board of directors to determine to issue shares of preferred stock and to determine the price and other terms of those shares, which could be used to thwart a takeover attempt;

advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us; and

the ability of our board of directors to adopt, amend and repeal our bylaws by majority vote, while such action by stockholders would require a super majority vote, which makes it more difficult for stockholders to change certain provisions described above.
In addition, payments due under the Tax Receivable Agreement will be based on certain assumptions following certain change of control events, which could serve as a disincentive to a potential acquirer of us. See “—Risks Related to Our Company and Our Organizational Structure—In certain cases, payments under the Tax Receivable Agreement to our existing owners may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.”
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our Class A common stock would be negatively impacted. If we obtain securities or industry analyst coverage, and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
 
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Our Amended and Restated Certificate of Incorporation will provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees, agents or trustees to us or our stockholders, (iii) any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”), our amended and restated certificate of incorporation or our bylaws or (iv) any action asserting a claim against us or any director or officer or other employee of ours that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. This provision does not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. In this regard, it is noted that our stockholders cannot waive our compliance with the federal securities laws and the rules and regulations thereunder, including as a result of our exclusive forum provisions.
Our amended and restated certificate of incorporation will further provide that unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the federal securities laws of the United States. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in this risk factor. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. In addition, a stockholder that is unable to bring a claim in the judicial forum that it finds favorable may be required to incur additional costs in the pursuit of actions which are subject to the choice of forum provision.
Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our results of operations and financial condition.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our amended and restated certificate of incorporation and bylaws to be adopted in connection with this offering will provide that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. Our bylaws will also permit us to purchase insurance on behalf of any officer, director, employee or other agent for any liability arising out of that person’s actions as our officer, director, employee or agent, regardless of whether Delaware law would permit indemnification. We intend to enter into indemnification agreements with each of our current and future directors and officers. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to us and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.
In addition, our amended and restated certificate of incorporation to be adopted in connection with this offering will limit the liability of our directors for monetary damages for breach of their fiduciary duty as directors, except for liability that cannot be eliminated under the DGCL. Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities:
 
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for any breach of their duty of loyalty to us or our stockholders;

for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

for unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under Section 174 of the DGCL; or

for any transaction from which the director derived an improper personal benefit.
The above limitations on liability and our indemnification obligations limit the personal liability of our directors and officers for monetary damages for breach of their fiduciary duty as directors by shifting the burden of such losses and expenses to us. Certain liabilities or expenses covered by our indemnification obligations may not be covered by our directors’ and officers’ liability insurance or the coverage limitation amounts may be exceeded. As a result, any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Investors in this offering will experience immediate and substantial dilution of $       per share.
Purchasers of our Class A common stock in this offering will experience immediate and substantial dilution in the net tangible book value per share of Class A common stock for accounting purposes. After giving effect to the sale of           shares of Class A common stock that we are offering at an assumed initial public offering price of $         per share (the midpoint of the range set forth on the cover of this prospectus), the entry into the 2021 Investment Agreements, the Note Conversion, deduction of underwriting discounts and estimated offering expenses payable by us and the use of the net proceeds as described under “Use of Proceeds” and assuming the full exchange of units described in “Dilution,” our pro forma, as adjusted net tangible book value (deficit) at September 30, 2021 would have been $         million, or $        per share of Class A common stock.
This represents an immediate increase in the net tangible book value of $       per share to our existing owners and immediate dilution (i.e., the difference between the offering price and the adjusted pro forma net tangible book value after this offering) to new investors purchasing shares of Class A common stock in this offering of $        per share. See “Dilution.”
We do not intend to pay dividends on our Class A common stock. Consequently, your only opportunity to achieve a return on your investment is if the price of our Class A common stock appreciates.
We do not plan to declare dividends on shares of our Class A common stock in the foreseeable future. Consequently, your only opportunity to achieve a return on your investment in us will be if you sell your shares of Class A common stock at a price greater than you paid for it. There is no guarantee that the price of our Class A common stock that will prevail in the market will ever exceed the price that you pay in this offering.
Future sales of our Class A common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
Unitholders of Dynasty Financial Management, LLC may receive shares of our Class A common stock pursuant to the exercise of exchange rights and then sell those shares of Class A common stock. Additionally, we have issued $         principal amount of Exchangeable Notes, exchangeable into         shares of Class A common stock (assuming an initial public offering price of $         per share, which is the midpoint of the range set forth on the cover of this prospectus) and may issue additional shares of Class A common stock or convertible securities in subsequent public offerings or as consideration for future acquisitions. The holders of the shares of Class A common stock issued in exchange for Exchangeable Notes will be subject to certain restrictions on the sale of their shares for one year after the closing of the offering; however, after such period, and subject to compliance with the
 
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Securities Act of 1933, as amended (the “Securities Act”) or exemptions therefrom, these persons may sell such shares into the public market. After the completion of this offering, we will have outstanding        shares of Class A common stock. This number includes          shares of Class A common stock that we are selling in this offering,         shares of Class A common stock that may be issued as a result of exchanges of our Exchangeable Notes (assuming an initial public offering price of $        per share, which is the midpoint of the range set forth on the cover of this prospectus) and          shares of Class A common stock that we may sell in this offering if the underwriters’ option to purchase additional shares is fully exercised, which may be resold immediately in the public market. Following the completion of this offering, former Class Q profits interests holders will own           shares of Class A common stock, representing approximately          % (or            % if the underwriters’ option to purchase additional shares is exercised in full) of our total outstanding Class A common stock. All such shares will be restricted from immediate resale under the federal securities laws and, in the case of a substantial number of the Class A shares, until the expiration of the underwriter “lock-up” period. See "Shares Eligible for Future Sale.” We expect that the unitholders will have rights under a registration rights agreement that will require us to effect the registration of their shares in certain circumstances, without being subject to the preceding limitations, no earlier than the expiration of the lock-up period contained in the lock-up agreements entered into in connection with the offering. We, Dynasty Financial Partners, Dynasty Financial Management, LLC and certain unitholders who receive common stock upon the consummation of this offering will, subject to certain exceptions, be subject to certain restrictions on the sale of their shares for six months after the date of this prospectus (or 18 months after the date of this prospectus in the case of our executive officers and directors); however, after such period, and subject to compliance with the Securities Act or exemptions therefrom, these persons may sell such shares into the public market. The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock available for sale after completion of this offering, or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also may make it more difficult for us to raise additional capital by selling equity securities in the future, at a time and price that we deem appropriate. See “Shares Eligible for Future Sale” and “Certain Relationships and Related Party Transactions — Registration Rights Agreement.”
In connection with this offering, we intend to file a registration statement with the SEC on Form S-8 providing for the registration of         shares of our Class A common stock issued or reserved for issuance under our equity incentive plan. We intend to grant incentive stock options, nonqualified stock options and restricted stock units at the time of this offering to approximately        of our employees under our equity incentive plan. An aggregate of shares of Class A common stock underlie these awards. Subject to the satisfaction of vesting conditions and the expiration of lock-up periods, shares registered under the registration statement on Form S-8 will be available for resale immediately in the public market without restriction.
We cannot predict the size of future issuances of our Class A common stock or securities convertible into Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock will have on the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A common stock.
We may seek to finance acquisitions of, revenue participation interests in or minority equity investments in Network Partner Firms by issuing equity securities that would dilute your ownership.
We may finance future acquisitions, revenue participation interests or minority equity investments through the issuance of equity securities, including common equity units of Dynasty Financial Management, LLC and our Class A common stock. Acquisitions, revenue participation interests or investments financed with the issuance of common equity units of Dynasty Financial Management, LLC and the corresponding issuance of common units of Dynasty Financial Partners could significantly reduce our percentage ownership of Dynasty Financial Partners. Furthermore, the new holders of common equity units of Dynasty Financial Management, LLC may receive common units of Dynasty
 
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Financial Partners from Dynasty Financial Management, LLC, which will be exchangeable into shares of our Class A common stock pursuant to the exercise of an exchange right, which may have a dilutive impact on your ownership interest. Acquisitions financed with the issuance of our Class A common stock could be dilutive to the share value and voting power of our existing Class A common stock, which could affect the market price of our Class A common stock.
The underwriters of this offering may waive or release parties to the lock-up agreements entered into in connection with this offering, which could adversely affect the price of our Class A common stock.
We, Dynasty Financial Partners, Dynasty Financial Management, LLC and a substantial number of the unitholders who receive common stock upon the consummation of this offering will, subject to certain exceptions, be subject to certain resale restrictions with respect to our Class A common stock, our Class B common stock, our Class C common stock, units in Dynasty Financial Partners or any securities convertible into or exercisable or exchangeable for such common stock or units for a period of 180 days from the date of this prospectus as a result of lockup agreements entered into with the underwriters. See “Certain Relationships and Related Party Transactions” and “Underwriting.” The representatives for the underwriters, at any time and without notice, may upon request release all or any portion of the shares of Class A common stock subject to the foregoing lock-up agreements. In addition, our board has adopted a policy by which, in each case subject to certain exceptions, our directors will be subject to certain resale restrictions with respect to such equity interests for 18 months, commencing on the date of this prospectus, our senior management will be subject to certain resale restrictions with respect to such equity interests for 12 months, commencing on the date of this prospectus, holders of our Exchangeable Notes will be subject to certain resale restrictions with respect to their Class A common shares for 12 months, commencing on the date of this prospectus and certain other employees will be subject to certain resale restrictions with respect to such equity interests for 90 days, commencing on the date of this prospectus. Our board may, at any time and without notice, upon request release all or any portion of the shares subject to this lock-up policy. If the restrictions under the lock-up agreements or our lock-up policy are waived, then such shares will be available for sale into the public markets, which could cause the market price of our Class A common stock to decline and impair our ability to raise capital.
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.
We are classified as an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things, (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, (ii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (iii) provide certain disclosure regarding executive compensation required of larger public companies, or (iv) hold nonbinding advisory votes on executive compensation. We will remain an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.07 billion (as adjusted for inflation pursuant to the SEC rules from time to time) or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.
To the extent that we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. We cannot predict whether investors will find our Class A common stock less attractive if we rely on these exemptions. If some investors find
 
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our Class A common stock to be less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.
The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”
Following the completion of this offering, we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our results of operations, financial condition or business.
As a public company, we will be subject to the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we implement and maintain effective disclosure controls and procedures and internal controls over financial reporting. To implement, maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business.
As an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and having the benefit of reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may also delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, as permitted by the JOBS Act.
Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the Securities and Exchange Commission (the “SEC”) following the date we are no longer an “emerging growth company” as defined in the JOBS Act.
When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.
Our management has limited experience managing a public company, and our current resources may not be sufficient to fulfill our public company obligations.
As a public company, we are subject to various regulatory requirements, including those of the SEC and NASDAQ. These requirements relate to, among other matters, record keeping, financial reporting and corporate governance. Our management team has limited experience in managing a public company, and our internal infrastructure may not be adequate to support our increased regulatory obligations. Further, we may be unable to hire, train or retain necessary staff and may initially be reliant on engaging outside consultants or professionals to overcome our lack of experience. Our business could be adversely affected if our internal infrastructure is inadequate, we are unable to engage outside consultants or are otherwise unable to fulfill our public company obligations.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “predict,” “project,” “potential,” “aim to,” “plan,” “intend,” “believe,” “continue,” “will,” “may,” “might,” “should,” “could,” “can,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. The forward-looking statements contained in this prospectus are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions.
We operate in a highly competitive, consumer and technology driven and rapidly changing business and various factors could adversely affect our business, financial condition or results of operations in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed under “Risk Factors” in this prospectus. In addition, important factors that could cause our actual results to differ materially from those in our forward-looking statements include:

Our revenue may fluctuate from period to period, which could cause our share price to fluctuate.

We derive a substantial portion of our revenue from the delivery of wealth management solutions to financial advisory firms serving high-net-worth and ultra-high-net-worth clients in the financial advisory industry and our revenue could suffer if that industry experiences a downturn.

Changes in market and economic conditions could lower the value of assets on which we earn revenue and could decrease the demand for our wealth management solutions.

Our results of operations are heavily dependent on the success of our Network Partner Firms, which are subject to increasing competitive risks, and our results of operations are subject to their operational disruptions or mismanagement.

Our success depends, in part, upon our ability to provide attractive opportunities to financial advisors seeking independence from traditional brokerages and wirehouses, and if we are not successful in attracting suitable financial advisors, it may have an adverse effect on the growth of our revenues and earnings.

Our growth strategy includes growing through making minority equity investments and providing revenue participation interests in our Network Partner Firms, which involve a number of risks.

We operate in an intensely competitive industry, with many firms competing for business from financial advisors on the basis of the quality and breadth of wealth management solutions, ability to innovate, reputation and the prices of services, among other factors, and this competition could hurt our financial performance.

We must continue to introduce new wealth management solutions, and enhancements thereon, to address our clients’ changing needs, market changes and technological developments, and a failure to do so could have a material adverse effect on our results of operations, financial condition or business.

If our reputation is harmed, our results of operations, financial condition or business could be materially adversely affected.

We rely on our key personnel for the stability and growth of our business and future success.
 
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Our failure to successfully execute the transition of a Network Partner Firm from its existing platform to our platform in a timely and accurate manner could have a material adverse effect on our results of operations, financial condition or business.

We are exposed to data and cybersecurity risks that could result in data breaches and service interruptions, which could cause harm to our reputation or significant liability.

Our operations are subject to extensive government regulation, and compliance failures or regulatory action against us could adversely affect our results of operations, financial condition or business.

If we are not able to satisfy data protection, security, privacy and other government- and industry-specific requirements, laws or regulations, our results of operations, financial condition or business could be harmed.

If we fail to adequately obtain, maintain, protect, enforce or defend our intellectual property and proprietary rights, our competitive position could be impaired, our reputation could be harmed and we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.

If third parties infringe upon our intellectual property or if we were to infringe upon the intellectual property of third parties, we may expend significant resources enforcing or defending our rights or suffer competitive injury.

The duration of the COVID-19 outbreak and its ultimate impact on our business remains uncertain.

Our internal reorganization may adversely affect our relationship with certain employees.

Certain existing holders of equity interests in Dynasty Financial Partners will collectively hold a substantial percentage of the voting power of our common stock.

We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations.
Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.
Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
 
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OUR STRUCTURE AND REORGANIZATION
Structure Prior to the Reorganization Transactions
The diagram below depicts the organizational structure of Dynasty Financial Partners before giving effect to this offering and the related reorganization transactions.
[MISSING IMAGE: tm2126636d1-fc_classbw.jpg]
Prior to the reorganization transactions described below, the equity interests in Dynasty Financial Partners consisted of Class A common units, Class B common units, Class C common units, Class P profits interests units and Class Q profits interests units. As of September 30, 2021, 61 investors (founders, outside investors and employees) held the Class A common units, 10 founders held the Class B common units, and 3 outside investors held the Class C common units. 14 current and former employees held the Class P profits interests units, and 68 current and former employees held the Class Q profits interests units.
Under the terms of Dynasty Financial Partners’ limited liability company agreement in effect prior to the reorganization transactions, the Class B common units entitled their holders to five votes per unit, whereas Class A and C common units entitled their holders to one vote per unit. The Class B common stock of Dynasty is intended to provide the former Class B unitholders with voting power following the reorganization transactions that will be similar to the voting rights they possessed prior to the reorganization.
Reorganization Transactions and Post-IPO Structure
The diagram below depicts our organizational structure immediately after the consummation of the reorganization transactions and this offering. Immediately prior to the consummation of this offering, Dynasty Merger Sub, LLC, an indirect wholly-owned subsidiary of Dynasty Financial Partners and direct wholly-owned subsidiary of Dynasty Financial Management, LLC, that we will form for the purpose of the merger, will merge with and into Dynasty Financial Partners, resulting in Dynasty and Dynasty Financial Management, LLC becoming the sole members of Dynasty Financial Partners immediately after the merger. As a result of the merger,

each unit of Class A or Class C capital interest in Dynasty Financial Partners will be converted into the right to receive (x) one common equity unit in Dynasty Financial Management, LLC and (y) one share of Class C common stock of Dynasty;
 
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each unit of Class B capital interest in Dynasty Financial Partners will be converted into the right to receive (x) one common equity unit in Dynasty Financial Management, LLC and (y) one share of Class B common stock of Dynasty;

each unit of Class P profits interest in Dynasty Financial Partners will be converted into the right to receive (x) the appropriate conversion number of common equity units in Dynasty Financial Management, LLC based on the profits interests conversion formula below and (y) an equal number of shares of Class C common stock of Dynasty;

each unit of Class Q profits interest in Dynasty Financial Partners issued prior to January 1, 2021 held by a holder that does not hold any other Class A, B or C capital interest, Class P profits interest, or Class Q profits interest issued after January 1, 2021 (the “Qualified Pre-2021 Class Q Interests”) will be entitled to receive (x) the appropriate conversion number of shares of Class A common stock of Dynasty based on the profits interests conversion formula below and (y) an amount in cash from Dynasty Financial Partners equal to 15% of the gross IPO price over the threshold price of such Qualified Pre-2021 Class Q Interests. Any shares of Class A common stock and any corresponding cash amount issued in exchange for an unvested Qualified Pre-2021 Class Q Interest shall be subject to the same vesting schedule as the unvested Qualified Pre-2021 Class Q Interests from which they were converted; and

each unit of Class Q profits interest in Dynasty Financial Partners that is not a Qualified Pre-2021 Class Q Interest (the “Other Class Q Interests”) will be entitled to receive (x) the appropriate conversion number of common equity units in Dynasty Financial Management, LLC based on the profits interests conversion formula below; provided any common equity units in Dynasty Financial Management, LLC issued in exchange for an unvested Other Class Q Interest shall be subject to the same vesting schedule as the unvested Other Class Q Interests from which they were converted and (y) an equal number of shares of Class C common stock of Dynasty.
With respect to profits interests above, the “appropriate conversion number” is equal to the quotient of (1) the excess, if any, of (A) the gross IPO price over (B) the threshold price of such unit of profits interest, divided by (2) the gross IPO price.
In addition, immediately prior to the consummation of this offering, the limited liability company agreement of Dynasty Financial Partners will be amended and restated to reflect the foregoing and to appoint Dynasty as the sole managing member of Dynasty Financial Partners. As sole managing member, we will control Dynasty Financial Partners’ management. As a result, the financial results of Dynasty Financial Partners will be consolidated in our financial statements. Upon the consummation of this offering, Dynasty will use a portion of the net proceeds of this offering to purchase common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders (after such unitholders exercise their right to receive common units of Dynasty Financial Partners from Dynasty Financial Management, LLC in exchange for such common equity units) and will use a portion of the net proceeds from this offering to purchase a number of newly issued common units from Dynasty Financial Partners. Dynasty Financial Partners will apply the net proceeds it receives as described under “Use of Proceeds.” We describe the terms of the amended and restated limited liability company agreement of Dynasty Financial Partners under “Our Structure and Reorganization — Offering Transactions — Third Amended and Restated Limited Liability Company Agreement of Dynasty Financial Partners.”
After the consummation of this offering, holders of common equity units of Dynasty Financial Management, LLC will have the right to exchange common units of Dynasty Financial Partners, subject to certain restrictions, for shares of our capital stock as described under “— Offering Transactions — Exchange Agreement.” The reorganization transactions are designed to create a capital structure that preserves our ability to conduct our business through Dynasty Financial Partners (a limited liability company), while permitting us to raise additional capital and provide access to liquidity through a public company. Multiple classes of securities at the public company level are necessary to achieve these objectives and maintain a governance structure that resembles the current governance structure of Dynasty Financial Partners.
 
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[MISSING IMAGE: tm2126636d10-fc_strucbw.jpg]
(1)
Each share of Class B common stock will entitle its holder to five votes per share.
Following the transactions described below, we will conduct all of our business activities through our direct subsidiary, Dynasty Financial Partners, an intermediate holding company, and its subsidiaries. Based on the ownership that will exist immediately after giving effect to the transactions described below, net profits and net losses of Dynasty Financial Partners will be allocated, and distributions of profits will be made, approximately     % to us and     % to Dynasty Financial Management, LLC (or       % and       %, respectively, if the underwriters exercise their option to purchase additional shares in full).
Dynasty
We were incorporated in Delaware on August 16, 2021. Immediately prior to the consummation of this offering, we will amend and restate our certificate of incorporation to authorize three classes of common stock, Class A common stock, Class B common stock and Class C common stock, as well as preferred stock. Our common stock will have the terms described below and, in more detail, under “Description of Capital Stock”:
Class A Common Stock.   We will issue shares of our Class A common stock to the public in this offering, and we intend to grant incentive stock options, nonqualified stock options and restricted stock units at the time of this offering to approximately      of our employees. An aggregate of shares of Class A common stock underlie these awards. In addition, as part of the reorganization that is consummated immediately prior to the consummation of this offering, members of Dynasty Financial Partners exchanging certain Class Q profits interests units will receive shares of our Class A common stock. The Class A common stock granted to such members will be subject to the same vesting requirements that applied to the profits interests exchanged. Each share of Class A common stock will entitle its holder to one vote and to economic rights (including rights to dividends or distributions upon liquidation). Following the first anniversary of this offering, subject to certain restrictions, each common unit of Dynasty Financial Partners held by a member of Dynasty Financial Management, LLC will be exchangeable for one share of our Class A common stock.
Class B Common Stock.   As part of the merger that is consummated immediately prior to the consummation of this offering, we will issue shares of our Class B common stock to certain holders of
 
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common units of Dynasty Financial Partners, which generally consist of the founders and certain early employees of Dynasty Financial Partners, in amounts equal to the number of common units that such holders hold at such time. Each share of our Class B common stock will entitle its holder to five votes per share but will have no economic rights in Dynasty (including no rights to dividends or distributions upon liquidation). A share of Class B common stock cannot be transferred except in connection with a transfer of the corresponding common unit of Dynasty Financial Partners.
After the reorganization transactions, each time the holder of a common unit of Dynasty Financial Partners exchanges such a unit for a share of our Class A common stock, we will automatically cancel a share of our Class B or Class C common stock held by such exchanging holder.
Class C Common Stock.   As part of the reorganization that is consummated immediately prior to the consummation of this offering, we will issue shares of our Class C common stock to certain holders of common units and profits interests of Dynasty Financial Partners, which generally consist of outside investors of Dynasty Financial Partners, in amounts equal to the number of common units and the appropriate conversion number of profits interests that such holders hold at such time. Each share of Class C common stock will entitle its holder to one vote per share but will have no economic rights in Dynasty (including no rights to dividends or distributions upon liquidation). A share of Class C common stock cannot be transferred except in connection with a transfer of the corresponding common unit of Dynasty Financial Partners.
After the reorganization transactions, each time the holder of a common unit of Dynasty Financial Partners exchanges such a unit for a share of our Class A common stock, we will automatically cancel a share of our Class B or Class C common stock held by such exchanging holder.
Dynasty Financial Partners
Upon consummation of this offering, we will conduct all of our business activities through our direct subsidiary, Dynasty Financial Partners, an intermediate holding company, and its subsidiaries.
Immediately prior to the consummation of this offering, the second amended and restated limited liability company agreement of Dynasty Financial Partners will be amended and restated to provide for a single class of common units and appoint Dynasty as the sole managing member. We will not have any profits interests units after the consummation of the offering.
Holders of common units will have certain voting rights as described under “— Offering Transactions — Third Amended and Restated Limited Liability Company Agreement of Dynasty Financial Partners — Voting Rights.” Except as described below under “Offering Transactions — Third Amended and Restated Limited Liability Company Agreement of Dynasty Financial Partners — Economic Rights of Members,” net profits and net losses and distributions of profits of Dynasty Financial Partners generally will be allocated and made to its members pro rata in accordance with the number of common units of Dynasty Financial Partners they hold. Distributions to members upon a liquidation of Dynasty Financial Partners will be made to its members pro rata in proportion to their capital account balances, subject to the claims of creditors and the rights of all members to their proportionate shares of undistributed profits. As described below under “— Offering Transactions — Amended and Restated Third Limited Liability Company Agreement of Dynasty Financial Partners — Economic Rights of Members,” deemed net gain and deemed net losses on revaluation events will be allocated to common units until the respective capital account balances (disregarding accrued and undistributed profits for these purposes) of each member are proportional to their respective percentage interest in the profits of Dynasty Financial Partners.
Upon the consummation of this offering, Dynasty will use a portion of the net proceeds it receives to purchase common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders (after such unitholders exercise their right to receive common units of Dynasty Financial Partners from Dynasty Financial Management, LLC in exchange for such common equity units of Dynasty Financial Management, LLC), and will use a portion of the net proceeds from this offering to purchase a number of newly issued common units from Dynasty Financial Partners. As a result of the
 
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reorganization transactions described above, the consummation of this offering and the application of the net proceeds therefrom:

Dynasty will hold (i)         common units representing approximately       % of the economic rights of Dynasty Financial Partners (or           common units representing approximately          % if the underwriters exercise in full their option to purchase additional shares), and (ii) sole control of its management, as the sole managing member of Dynasty Financial Partners. As a result, we will consolidate the financial results of Dynasty Financial Partners with our results and will record a non-controlling interest on our balance sheet for the economic interest in it held Dynasty Financial Management, LLC.

Dynasty Financial Management, LLC will hold             units, representing approximately        % of the economic rights of Dynasty Financial Partners (or      % if the underwriters exercise in full their option to purchase additional shares).

Through their holdings of our Class A common stock, public stockholders will collectively have approximately       % of the voting power in Dynasty (or approximately        % if the underwriters exercise in full their option to purchase additional shares).

Founders and current employees of Dynasty Financial Partners will collectively have approximately      % of the voting power in Dynasty (or approximately      % if the underwriters exercise in full their option to purchase additional shares), of which:

    % (or approximately      % if the underwriters exercise in full their option to purchase additional shares) will be held by current employees and founders of Dynasty Financial Partners through their holdings of our Class A and C common stock, and

    % (or approximately      % if the underwriters exercise in full their option to purchase additional shares) will be held by founders and certain employees of Dynasty Financial Partners through their holdings of our Class B common stock.

Through their holdings of our Class A and C common stock, the outside investors and employees will have approximately      % of the voting power in Dynasty (or approximately    % if the underwriters exercise in full their option to purchase additional shares).
The number of outstanding common units of Dynasty Financial Partners held by Dynasty Financial Management, LLC will equal the aggregate number of outstanding shares of our Class B common stock and Class C common stock. Following the first anniversary of this offering, subject to certain restrictions, holders of Dynasty Financial Management, LLC and certain permitted transferees will have the right to receive from Dynasty Financial Management, LLC common units of Dynasty Financial Partners, which will be exchangeable (together with an equal number of shares of Class B or Class C common stock, as applicable) for shares of our Class A common stock on a one-for-one basis. A common unit of Dynasty Financial Partners cannot be exchanged for a share of our Class A common stock without a share of our Class B common stock or Class C common stock, as applicable, being delivered together at the time of exchange, at which time we will automatically cancel such share of Class B common stock or Class C common stock.
Under the terms of its third amended and restated limited liability company agreement, Dynasty Financial Partners will be obligated to distribute to us and its other member cash payments for the purposes of funding tax obligations in respect of the taxable income and net capital gain that is allocated to us and them, respectively, as members of Dynasty Financial Partners. Tax distributions to a member will be made with respect to the taxable income or gain allocated to the member and will be based on the highest combined United States federal, state and local income tax rate to which an individual residing in the City and State of New York would be subject. The amounts available to Dynasty Financial Partners for distributions to us for the payment of dividends will be determined after Dynasty Financial Partners has made distributions for purposes of funding any such tax obligations. The determination to pay dividends, if any, to our Class A stockholders out of any distributions that we receive from Dynasty Financial Partners with respect to the common units we will hold will be made by our board of directors. If Dynasty Financial Partners makes such distributions, the other holder of its common units will be entitled to receive equivalent distributions on a pro rata basis.
 
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Offering Transactions
Exchange Agreement
We have entered into an exchange agreement with the individuals or entities that hold common units of Dynasty Financial Partners that will become effective immediately prior to the consummation of this offering. Following the first anniversary of this offering, subject to certain restrictions set forth in the exchange agreement (including those intended to ensure that Dynasty Financial Partners is not treated as a “publicly traded partnership” for U.S. federal income tax purposes), holders of Dynasty Financial Management, LLC common equity units will have the right to receive from Dynasty Financial Management, LLC common units of Dynasty Financial Partners, which such holders and certain permitted transferees will have the right to then exchange (together with an equal number of shares of Class B or Class C common stock, as applicable) for shares of our Class A common stock on a one-for-one basis. A common unit of Dynasty Financial Partners cannot be exchanged for a share of our Class A common stock without a share of our Class B common stock or Class C common stock, as applicable, being delivered together at the time of exchange, at which time we will automatically cancel such share of Class B common stock or Class C common stock.
The exchange agreement generally provides that holders of common equity units of Dynasty Financial Management, LLC will be permitted to exchange such units for common units of Dynasty Financial Partners in a number of circumstances that are generally based on, but in several respects are not identical to, the “safe harbors” contained in the U.S. Treasury Regulations dealing with publicly traded partnerships. In accordance with the terms of the exchange agreement, common units of Dynasty Financial Partners may be exchanged (i) in connection with a “block transfer” ​(as defined in Treasury Regulations Section 1.7704-1(e)(2)), (ii) on a specified date each fiscal quarter, (iii) in connection with a tender offer, share exchange offer, issuer bid, take-over bid, recapitalization or similar transaction with respect to our Class A common stock that is effected with the consent of our board of directors or in connection with certain mergers, consolidations or other business combinations (such exchanges to be contingent upon the consummation of the transaction) or (iv) if we permit the exchanges after determining (after consultation with our outside legal counsel and tax advisor) that Dynasty Financial Partners would not be treated as a “publicly traded partnership” under Section 7704 of the Code as a result of such exchanges. Additionally, in situations falling under romanette (iii) of the preceding sentence, our board of directors has the discretion to require each holder of common equity units of Dynasty Financial Management, LLC to exchange all such units held by such holder.
A holder may not exchange common units of Dynasty Financial Partners if we determine that such exchange would be prohibited by law or regulation or such exchange would not be permitted under any of the agreements with us to which the holder is then subject. In addition, we may impose additional restrictions on exchanges in certain circumstances that we reasonably determine to be necessary or advisable so that Dynasty Financial Partners is not treated as a “publicly traded partnership” under Section 7704 of the Code (other than the circumstances described in clauses (i), (iii) or (iv) of the paragraph above in the absence of a change of law). We also may waive restrictions on exchange in the exchange agreement.
As the holders of common units of Dynasty Financial Partners exchange such units for Class A common stock, we will receive a number of common units of Dynasty Financial Partners equal to the number of shares of our Class A common stock that they receive, and an equal number of common equity units of Dynasty Financial Management, LLC, and shares of our Class B or Class C common stock, as applicable, will be cancelled.
The diagram below illustrates the exchange of common units of Dynasty Financial Partners for shares of our capital stock and the issuance of common units of Dynasty Financial Partners to us as contemplated by the exchange agreement, the operating agreement of Dynasty Financial Management, LLC, and the third amended and restated limited liability company agreement of Dynasty Financial Partners.
 
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[MISSING IMAGE: tm2126636d1-fc_exchangebw.jpg]
(1)
Holders of Dynasty Financial Management, LLC common equity units must exercise their right to receive common units of Dynasty Financial Partners from Dynasty Financial Management, LLC in exchange for such common equity units prior to making the exchange depicted above.
Registration Rights
As part of the reorganization transactions, we will enter into a registration rights agreement. Pursuant to the registration rights agreement, promptly but no later than 30 days after at any time when we are eligible to use Form S-3, upon request of holders holding in the aggregate at least 20% of the registrable shares pursuant to the registration rights agreement, we will file a shelf registration statement, and we will use our reasonable best efforts to cause such shelf registration statement to be declared effective as promptly as reasonably practicable.
Demand Registration.   At any time after the 180th day of this offering, holders holding in the aggregate at least 20% of the registrable shares pursuant to the registration rights agreement will have demand registration rights, subject to certain restrictions and conditions. We are not required to effect a demand registration unless the aggregate gross proceeds expected to be received from the sale by the requesting holders equals or exceeds $50 million, except under certain conditions, and we are not required to support more than one demand registration in any rolling 90-day period, more than three demand registrations in any rolling 12-month period, or more than four demand registrations in total.
Piggyback registration rights.   At any time following this offering, the parties to the registration rights agreement will have piggyback registration rights, subject to certain marketing and other limitations, including limitations that the underwriters may impose on the number of shares included in the offering.
Indemnification and Expenses.   We will agree in the registration rights agreement to indemnify the participating holders against any losses or damages resulting from any untrue statement, or omission, of material fact in any registration statement, prospectus or free writing prospectus pursuant to which they may sell the shares of our Class A common stock that they receive upon exchange of common units of Dynasty Financial Partners, except to the extent such liability arose from the selling stockholder’s misstatement or omission of a material fact, and the participating holders have agreed to indemnify us against certain losses caused by their misstatements or omissions of a material fact relating to them to the extent caused by or contained in information furnished in writing by such stockholder.
We will pay all expenses incident to our performance of, or compliance with, any registration or marketing of securities pursuant to the registration rights agreement, including the reasonable and documented fees and expenses of one counsel for the selling stockholders. The selling stockholders will pay their respective portions of all underwriting discounts and commissions relating to the sale of their shares of our Class A common stock pursuant to the registration rights agreement.
Third Amended and Restated Limited Liability Company Agreement of Dynasty Financial Partners
As a result of the reorganization, we will conduct all of our business activities through our direct subsidiary, Dynasty Financial Partners, an intermediate holding company. The operations of Dynasty
 
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Financial Partners, and the rights and obligations of its members, will be set forth in a third amended and restated limited liability company agreement of Dynasty Financial Partners, a form of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The following is a description of the material terms of this agreement.
Governance.   We will serve as the sole managing member of Dynasty Financial Partners. As such, we will control its business and affairs and be responsible for the management of its business. We will also have the power to delegate certain of our management responsibilities in respect of Dynasty Financial Partners to officers, as determined by our board of directors. No other members of Dynasty Financial Partners, in their capacity as such, will have any authority or right to control the management of Dynasty Financial Partners or to bind it in connection with any matter.
Economic Rights of Members.   Dynasty Financial Partners will have common units. Net profits and net losses and distributions of profits of Dynasty Financial Partners will generally be allocated and made to members pro rata in accordance with the number of common units of Dynasty Financial Partners they hold.
The balance of each member’s capital account as a percentage of the aggregate capital account balances of all members will generally correspond to that member’s respective percentage interest in the profits of Dynasty Financial Partners, although initially Dynasty Financial Management, LLC may have a lower (and Dynasty, as the managing member, may have a correspondingly higher) capital account balance. Deemed net gain and deemed net losses on revaluation events will be allocated to common units until the respective capital account balances (disregarding accrued and undistributed profits for these purposes) of each member are proportional to their respective percentage interest in the profits of Dynasty Financial Partners.
Under the terms of its third amended and restated limited liability company agreement, Dynasty Financial Partners will be obligated to distribute to us and its other members cash payments for the purposes of funding tax obligations in respect of the taxable income and net capital gain that is allocated to us and them, respectively, as members of Dynasty Financial Partners. See “— Tax Consequences.”
Coordination of Dynasty and Dynasty Financial Partners.   In order to make a share of Class A common stock represent the same percentage economic interest, disregarding corporate-level taxes and payments with respect to the Tax Receivable Agreement, in Dynasty Financial Partners as a common unit of Dynasty Financial Partners, we will always hold a number of common units equal to the number of shares of Class A common stock issued and outstanding. In the future, when we issue a share of our Class A common stock for cash, we will promptly transfer the net proceeds we receive to Dynasty Financial Partners and Dynasty Financial Partners will issue to us a common unit for each share so issued. Any time we issue a share of our Class A common stock pursuant to our 2022 Omnibus Incentive Compensation Plan, we will contribute to Dynasty Financial Partners all of the proceeds that we receive (if any) and Dynasty Financial Partners will issue to us a common unit. In the event that we issue other classes or series of our equity securities, Dynasty Financial Partners or Dynasty Financial Management, LLC, as applicable, will issue an equal amount of equity securities of Dynasty Financial Partners with designations, preferences and other rights and terms that are substantially the same as our newly issued equity securities. Conversely, if we redeem, repurchase or otherwise acquire any shares of our Class A common stock (or our equity securities of other classes or series) for cash, Dynasty Financial Partners will, at substantially the same time as our transaction, redeem an equal number of common units (or its equity securities of the corresponding classes or series) held by us, upon the same terms and for the same price, as the shares of our Class A common stock (or our equity securities of such other classes or series) are redeemed, repurchased or otherwise acquired. Upon the forfeiture of any common equity unit of Dynasty Financial Management, LLC held by an employee as a result of applicable vesting provisions, the breach of any restrictive covenants in grant agreements, or otherwise, a corresponding unit of Dynasty Financial Partners held by Dynasty Financial Management, LLC will be automatically cancelled and a corresponding share of our Class B or Class C common stock will automatically be redeemed and cancelled by us.
We may, in the event that a tender offer, share exchange offer, issuer bid, take-over bid, recapitalization or similar transaction with respect to our Class A common stock is proposed by us or
 
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by a third party and approved by our board of directors or is otherwise effected with the consent of our board of directors, require each holder of common equity units of Dynasty Financial Management, LLC to exchange all such units for units of Dynasty Financial Partners and then exchange such units (together with an equal number of shares of Class B common stock or Class C common stock, as applicable) for shares of our Class A common stock. If our board elects to forego requiring such an exchange, each holder of common equity units of Dynasty Financial Management, LLC will be permitted to participate in such transaction by exchanging their units for units of Dynasty Financial Partners and then exchange such unit for shares of our Class A common stock contingent upon the consummation of the transaction.
Issuances and Transfers of Common Units.   We do not intend to cause Dynasty Financial Partners or Dynasty Financial Management, LLC to issue additional units after this offering other than common units of Dynasty Financial Partners to us in connection with exchanges of common equity units of Dynasty Financial Management, LLC for capital stock of Dynasty. Holders of the common equity units of Dynasty Financial Management, LLC may not transfer any such common units to any person unless he or she transfers an equal number of shares of our Class B common stock or Class C common stock to the same transferee. With certain exceptions for transfers by operation of law, the common equity units of Dynasty Financial Management, LLC will be transferable only to family members or certain estate planning vehicles of the transferor or in distributions by members that are business entities to any of their stockholders, members, affiliates or partners, unless the transferee’s business competes with our business. Our units of Dynasty Financial Partners are non-transferable.
Except with respect to certain transfers to estate planning vehicles or transfers by Mr. Penney to his wife upon his death, any holder who transfers a common unit paired with a share of Class B common stock will forfeit the Class B common stock at the time of the transfer, and we will issue an equal amount of Class C common stock to the transferee.
Amendments.   The third amended and restated limited liability company agreement may be amended only by a written instrument adopted by Dynasty, as the managing member, without the approval of the members. Notwithstanding the foregoing, no amendment may, directly or indirectly, (i) adversely affect a member in a manner different than its effect on all other members, unless approved by the unanimous consent of the members or (ii) subject a member to personal liability for any obligations of Dynasty Financial Partners without the consent of the affected member.
Additionally, Dynasty Financial Management, LLC will not consent to an amendment of the Dynasty Financial Partners third amended and restated limited liability company agreement, to the extent its consent is required as a member of Dynasty Financial Partners, unless such amendment is consented to by Dynasty, as the manager of Dynasty Financial Management, LLC, and holders of at least 67% of the outstanding membership units of Dynasty Financial Management, LLC voting together as a single class.
Indemnification and Exculpation.   Dynasty Financial Partners will indemnify us, as its current managing member, the former members of its board of managers, our officers and directors and its officers against any losses, damages, judgments, amounts paid in settlement, fines, penalties, taxes, costs or expenses (including attorney's fees and disbursements) incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or on behalf of Dynasty Financial Partners) arising as a result of the capacities in which they serve or served Dynasty Financial Partners, Dynasty, Dynasty Financial Managements, LLC or their subsidiaries, provided that no indemnified parties will be indemnified or reimbursed where the conduct of indemnified party has been finally determined to constitute willful misconduct, gross negligence, fraud or knowing violation of law.
In addition, Dynasty Financial Partners will pay the costs or expenses (including attorneys’ fees and disbursements) incurred by the indemnified parties in advance of a final disposition of such matters so long as the indemnified party undertakes to repay the expenses if the party is adjudicated not to be entitled to indemnification.
Tax Consequences
As the managing member of Dynasty Financial Partners, we will incur U.S. federal, state and local income taxes on our allocable share of any of its net taxable income. Under the terms of its third amended
 
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and restated limited liability company agreement, Dynasty Financial Partners will be obligated to distribute to us and its other members cash payments for the purpose of funding tax obligations in respect of the taxable income and net capital gain that is allocated to us and them, respectively, as members of Dynasty Financial Partners. These cash payments for the purpose of funding tax obligations will be treated as an advance on amounts otherwise distributable to us and other recipients of such cash payments. See “— Offering Transactions — Third Amended and Restated Limited Liability Company Agreement of Dynasty Financial Partners.”
Tax Receivable Agreement
Pursuant to the exchange agreement described above, from time to time we may be required to acquire common units of Dynasty Financial Partners from their holders upon an exchange for shares of our Class A common stock. Dynasty Financial Partners will have in place an election under Section 754 of the Code (a “Section 754 election”) in effect for its current taxable year in which (i) distributions from Dynasty Financial Partners were made and (ii) transfers and exchanges of units occurred, and intends to have such election in effect for future taxable years in which exchanges of common units occur. Pursuant to the Section 754 election, certain prior distributions on, and transfers and exchanges of, membership interests resulted in, and each future exchange of common units of Dynasty Financial Partners is expected to result in, an increase in the tax basis of tangible and intangible assets of Dynasty Financial Partners. When we acquire common units from existing unitholders, we expect that both the existing basis and the anticipated basis adjustments will increase (for tax purposes) depreciation and amortization deductions allocable to us from Dynasty Financial Partners and therefore reduce the amount of income tax we would otherwise be required to pay in the future. This increase in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent increased tax basis is allocated to those capital assets.
We will be a party to the Tax Receivable Agreement with Dynasty Financial Partners and the TRA Holders. The Tax Receivable Agreement will generally provide for the payment by us to each TRA Holder of 85% of the amount of the cash savings, if any, in U.S. federal and state income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after this offering as a result of (i) any step-up in tax basis in Dynasty Financial Partners’ assets resulting from (a) our purchase of common units of Dynasty Financial Partners for cash or the exchange of common units of Dynasty Financial Partners (along with the corresponding shares of our Class B or Class C common stock) for shares of our Class A common stock and (b) payments under this Tax Receivable Agreement, (ii) certain prior distributions by Dynasty Financial Partners and prior transfers or exchanges of limited liability company interests which resulted in tax basis adjustments to the assets of Dynasty Financial Partners and (iii) tax benefits related to imputed interest deemed to be paid by us as a result of this Tax Receivable Agreement.
For purposes of the Tax Receivable Agreement, cash savings in tax are calculated by comparing our actual income tax liability to the amount we would have been required to pay had we not been able to utilize any of the tax benefits subject to the Tax Receivable Agreement, unless certain assumptions apply, as discussed herein. The term of the Tax Receivable Agreement will commence upon the completion of this offering and will continue until all such tax benefits have been utilized or expired, unless we exercise our rights to terminate the Tax Receivable Agreement or payments under the Tax Receivable Agreement are accelerated in the event that we materially breach any of our material obligations under the Tax Receivable Agreement (as described below). The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges by the holders of common units of Dynasty Financial Partners, the price of our Class A common stock at the time of the exchange, whether such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable and the portion of our payments under the Tax Receivable Agreement constituting imputed interest.
The payment obligation under the Tax Receivable Agreement is an obligation of Dynasty, not Dynasty Financial Partners, and we expect that the payments we will be required to make under the Tax Receivable Agreement will be substantial. Assuming no material changes in the relevant tax law and
 
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that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the reduction in tax payments for us associated with (i) our purchase of common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders with a portion of the net proceeds of this offering and (ii) future exchanges of common units of Dynasty Financial Partners as described above would aggregate to approximately $      over 15 years from the date of this offering based on an assumed initial public offering price of $      per share of our Class A common stock (the midpoint of the price range set forth on the cover of this prospectus) and assuming all future exchanges would occur one year after this offering. Under such scenario we would be required to pay the other parties to the Tax Receivable Agreement 85% of such amount, or $      , over the 15-year period from the date of this offering. The actual amounts may materially differ from these hypothetical amounts, as potential future reductions in tax payments for us and Tax Receivable Agreement payments by us will be calculated using the market value of our Class A common stock at the time of exchange and the prevailing tax rates applicable to us over the life of the Tax Receivable Agreement and will be dependent on us generating sufficient future taxable income to realize the benefit. See “Our Structure and Reorganization — Tax Receivable Agreement.” Payments under the Tax Receivable Agreement are not conditioned on our existing owners’ continued ownership of us.
In addition, although we are not aware of any issue that would cause the IRS to challenge a tax basis increase or other tax attributes subject to the Tax Receivable Agreement, the TRA Holders will not reimburse us for any payments previously made under the Tax Receivable Agreement if any tax benefits that have given rise to payments under the Tax Receivable Agreement are subsequently disallowed, except that excess payments made to any TRA Holder will be netted against payments that would otherwise be made to such TRA Holder, if any, after our determination of such excess. As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could adversely affect our liquidity.
The Tax Receivable Agreement provides that (i) upon certain mergers, asset sales, other forms of business combinations or other changes of control, (ii) in the event that we materially breach any of our material obligations under the agreement or (iii) if, at any time, we elect an early termination of the agreement, our (or our successor’s) obligations under the agreement (with respect to all common units of Dynasty Financial Partners, whether or not such common units have been exchanged or acquired before or after such transaction) would be based on certain assumptions. Those assumptions include that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the Tax Receivable Agreement. In the event we elect to terminate the Tax Receivable Agreement early or we materially breach a material obligation, our obligations under the agreement will accelerate. As a result, (i) we could be required to make payments under the Tax Receivable Agreement that are greater than or less than the specified percentage of the actual benefits we realize in respect of the tax attributes subject to the agreement and (ii) we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits, which payment may be made significantly in advance of the actual realization of such future benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement. If we were to elect to terminate the Tax Receivable Agreement immediately after this offering, based on an assumed initial public offering price of $      per share of our Class A common stock (the midpoint of the price range set forth on the cover of this prospectus) and a discount rate equal to the lesser of (i) 6.5% and (ii) SOFR plus 400 basis points, we estimate that we would be required to pay $      in the aggregate under the Tax Receivable Agreement. See “Our Structure and Reorganization — Tax Receivable Agreement.”
Payments under the Tax Receivable Agreement, if any, will be made pro rata among all TRA Holders entitled to payments on an annual basis to the extent we have sufficient taxable income to utilize the increased depreciation and amortization charges. The availability of sufficient taxable income to utilize the increased depreciation and amortization expense will not be determined until such time as the financial results for the year in question are known and tax estimates prepared, which typically occurs within 90 days after the end of the applicable calendar year. We expect to make payments under the Tax Receivable Agreement, to the extent they are required, within 125 days after our federal
 
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income tax return is filed for each fiscal year. Interest on such payments will begin to accrue at a rate equal to SOFR plus 300 basis points from the due date (without extensions) of such tax return.
The impact that the Tax Receivable Agreement will have on our consolidated financial statements will be the establishment of a liability, which will be increased upon the exchanges of common units of Dynasty Financial Partners for our Class A common stock, representing 85% of the estimated future tax benefits, if any, relating to the increase in tax basis associated with the exchanges by holders of common units of Dynasty Financial Partners. Because the amount and timing of any payments will vary based on a number of factors (including the timing of exchanges by the holders of common units of Dynasty Financial Partners, the price of our Class A common stock at the time of the exchange, whether such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable as well as the portion of our payments under the Tax Receivable Agreement constituting imputed interest), depending upon the outcome of these factors, we may be obligated to make substantial payments pursuant to the Tax Receivable Agreement. In light of the numerous factors affecting our obligation to make such payments, however, the timing and amount of any such actual payments are not certain at this time.
Decisions made by our existing owners in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by an exchanging or selling existing owner under the Tax Receivable Agreement. For example, the earlier disposition of assets occurs following an exchange or acquisition transaction will generally accelerate payments under the Tax Receivable Agreement and increase the present value of such payments, and the disposition of assets before an exchange or acquisition transaction will increase an existing owner’s tax liability without giving rise to any rights of an existing owner to receive payments under the Tax Receivable Agreement.
Because of our structure, our ability to make payments under the Tax Receivable Agreement is dependent on the ability of Dynasty Financial Partners to make distributions to us. The ability of Dynasty Financial Partners to make such distributions will be subject to, among other things, its and its subsidiaries’ operating results, cash requirements and financial condition, the applicable provisions of Delaware law that may limit the amount of funds available for distribution to its unitholders, its compliance with covenants and financial ratios related to existing or future indebtedness, its other agreements with third parties, as well as its obligation to make tax distributions to unitholders other than us under the terms of its third amended and restated limited liability company agreement. Late payments generally will accrue interest at a rate equal to SOFR plus 500 basis points until paid.
 
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USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of shares of our Class A common stock in this offering will be approximately $      , based upon the initial public offering price of $      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ option to purchase additional shares of our Class A common stock from us is exercised in full, we estimate that the net proceeds to us would be approximately $      , after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our management will have broad discretion over the uses of the net proceeds in this offering.
A $1.00 increase or decrease in the assumed initial public offering price of our Class A common stock of $       per share would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $       , assuming that the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares of Class A common stock offered by us in this offering, as set forth on the cover page of this prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $      , assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use $      million, or approximately $      million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, of the net proceeds from this offering to purchase newly issued common units from Dynasty Financial Partners, at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock in this offering.
We intend to use approximately $      million of the net proceeds from this offering to purchase common units of Dynasty Financial Partners from existing Dynasty Financial Partners unitholders, at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock in this offering. Accordingly, we will not retain any of this portion of the proceeds.
Additionally, we intend to cause Dynasty Financial Partners to use approximately $      million of the remaining net proceeds to pay the expenses incurred by us in connection with this offering and the reorganization transactions.
We intend to cause Dynasty Financial Partners to use any remaining net proceeds to facilitate the growth of our existing businesses, to make strategic acquisitions of businesses that are complementary to our existing businesses and for other general corporate purposes.
 
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DIVIDEND POLICY AND DIVIDENDS
We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the growth of our business. If we decide to pay cash dividends in the future, the declaration and payment of such dividends will be at the sole discretion of our board of directors and may be discontinued at any time. In determining the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements, the amount of distributions to us from Dynasty Financial Partners and other factors that our board of directors may deem relevant. Because we are a holding company, our cash flow and ability to pay dividends depends upon the financial results and cash flows of our operating subsidiaries and the distribution or other payment of cash to us in the form of dividends or otherwise from Dynasty Financial Partners.
Holders of our Class B common stock and Class C common stock will not be entitled to any dividend payments from us since they have no economic interests in us.
 
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of September 30, 2021:

on an actual basis for Dynasty Financial Partners; and

on a pro forma basis giving effect to this offering and the related reorganization transactions, including our issuance and sale of shares of Class A common stock in this offering at an assumed initial public offering price of $      per share (which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus), the exchange of certain Class Q profits interests of Dynasty Financial Partners for our Class A common stock, the application of the net proceeds from this offering as described in “Use of Proceeds,” the entry into the 2021 Investment Agreements and the Note Conversion.
After the completion of this offering and the related reorganization transactions, as the sole managing member of Dynasty Financial Partners, we will control its business and affairs and, therefore, consolidate its financial results with ours. In light of Dynasty Financial Management, LLC’s      % limited liability company interest in Dynasty Financial Partners immediately after the reorganization and this offering, we will reflect its interest as a non-controlling interest in our consolidated financial statements. As a result, our net income, after excluding that non-controlling interest, will represent      % of Dynasty Financial Partners’ net income. Outstanding shares of our Class A common stock, through the common units of Dynasty Financial Partners we hold, will represent a      % interest in the net income of Dynasty Financial Partners. For more information on the pro forma impact of our reorganization, see “Unaudited Pro Forma Consolidated Financial Information.”
You should read the following table in conjunction with the consolidated financial statements and related notes, “Unaudited Pro Forma Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.
As of September 30, 2021
Actual Dynasty
Financial
Partners
Pro Forma
Dynasty(1)
(dollars in thousands)
Cash and cash equivalents
$ 22,381 $     
Equity:
Class A common stock, par value $0.01 per share,      shares authorized and no shares issued and outstanding, actual; and      shares authorized and shares issued and outstanding on a pro forma basis
Class B common stock, par value $0.01 per share,      shares authorized and no shares issued and outstanding, actual; and      shares authorized and shares issued and outstanding on a pro forma basis
Class C common stock, par value $0.01 per share,      shares authorized and no shares issued and outstanding, actual; and      shares authorized and shares issued and outstanding on a pro forma basis
Additional paid-in capital
Capital interest units (62,000,000 units authorized, 42,932,951 units outstanding, actual,          units outstanding on a pro forma basis)
40,677
Profits interests units (6,837,177 units authorized, 3,664,290 units outstanding, actual,          units outstanding on a pro forma basis)
(5,779)
 
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As of September 30, 2021
Actual Dynasty
Financial
Partners
Pro Forma
Dynasty(1)
(dollars in thousands)
(Accumulated deficit)/retained earnings
(1,015)
Non-controlling interests
Total equity
$ 33,883 $
Total capitalization
$ 33,883 $
(1)
A $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $      million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. An increase (decrease) of 1,000,000 shares from the expected number of shares of Class A common stock to be sold by us in this offering would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $      million, assuming the assumed initial public offering price per share (the midpoint of the price range set forth on the cover of this prospectus) remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.
The information in the table above excludes the effect of        shares of Class A common stock underlying incentive stock options, nonqualified stock options and restricted stock units we intend to grant under our 2022 Omnibus Incentive Compensation Plan to certain of our employees, with such options exercisable at a per share price equal to the price of a share of Class A common stock in this offering.
 
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DILUTION
Purchasers of our Class A common stock in this offering will experience immediate and substantial dilution in the net tangible book value per share of Class A common stock for accounting purposes. All calculations assume that 100% of the outstanding Dynasty Financial Partners common units and profits interests (assuming vesting of the unvested profits interests and an offering price at the midpoint of the range on the cover of this prospectus) have been exchanged for Class A common stock.
Our net tangible book value as of September 30, 2021, after giving pro forma effect to the reorganization transactions described under “Our Structure and Reorganization,” was approximately $      million, or $      per share of Class A common stock. Pro forma net tangible book value per share is determined by dividing our pro forma net tangible book value (tangible assets less total liabilities) by the total number of outstanding shares of Class A common stock that will be outstanding immediately prior to the closing of this offering, including giving effect to our internal reorganization.
After giving effect to the sale of shares of Class A common stock in this offering, entry into the 2021 Investment Agreements and the Note Conversion, and further assuming the receipt of the estimated net proceeds (assuming the midpoint of the price range set forth on the cover of this prospectus and after deducting the underwriting discount and estimated offering expenses payable by us), our adjusted pro forma net tangible book value as of September 30, 2021 would have been approximately $      million, or $      per share of Class A common stock. This represents an immediate increase in the net tangible book value of $       per share to our existing owners and immediate dilution (i.e., the difference between the offering price and the adjusted pro forma net tangible book value after this offering) to new investors purchasing shares of Class A common stock in this offering of $      per share.
The following table illustrates the per share dilution to new investors purchasing shares in this offering:
Assumed initial public offering price per share of Class A common stock (the midpoint of the range set forth on the cover of this prospectus)
$      
Pro forma net tangible book value (deficit) per share of Class A common stock as of September 30, 2021 (after giving effect to our internal reorganization)
$      
Increase per share of Class A common stock attributable to investors in this offering and the Note Conversion
$
Adjusted pro forma net tangible book value (deficit) per share of Class A common
stock (after giving effect to our internal reorganization, the Note Conversion and
this offering)
$
Dilution in pro forma net tangible book value (deficit) per share of Class A common
stock to investors in this offering
$
The information in the tables above excludes the effect of        shares of Class A common stock underlying incentive stock options, nonqualified stock options and restricted stock units we intend to grant under our 2022 Omnibus Incentive Compensation Plan to certain of our employees, with such options exercisable at a per share price equal to the price of a share of Class A common stock in this offering.
In addition, to the extent the underwriters’ option to purchase additional shares of Class A common stock from us is exercised, there will be further dilution to new investors.
The following table sets forth, on the same pro forma basis, as of September 30, 2021, the number of shares of Class A common stock purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing equity holders, by the new investors, assuming that the holders of all classes of LLC units of Dynasty Financial Partners have exchanged all of their units for shares of our Class A common stock and we have benefited from the resulting increase in tax basis:
 
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Shares purchased
Total consideration
Average price
Number
Percent
Amount
Percent
Per share
Existing stockholders
     
     % $            % $      
New investors
Total
%