Concentrations of Credit and Liquidity Risk

12 Months Ended

Dec. 31, 2012

Concentrations of Credit and Liquidity Risk

Concentrations of Credit and Liquidity Risk

NOTE 23. Concentrations of Credit and Liquidity Risk

Risks Related to ClearPoint and Other Related Matters

        ClearPoint was subject to liquidity risk concentrations, as ClearPoint relied on a limited number of investors to purchase its originated mortgage loans and only two lenders to finance these activities. On February 14, 2013, the Company entered into the Homeward Transaction, an agreement to sell substantially all of ClearPoint's assets to Homeward. This transaction closed on February 22, 2013. Refer to Note 29 herein for additional information. As a result, the Company is no longer at risk to liquidity concentrations of ClearPoint.

Risks Related to the Company's Broker-Dealer Operations

        Concentrations of credit risk can be affected by changes in political, industry, or economic factors. The Company's most significant industry credit concentration is with financial institutions. Financial institutions include other brokers and dealers, commercial banks, finance companies, insurance companies and investment companies. This concentration arises in the normal course of the Company's brokerage, trading, financing, and underwriting activities. To reduce the potential for concentration of risk, credit exposures are monitored in light of changing counterparty and market conditions.

        The Company may also purchase securities that are individually significant positions within its inventory. Should the Company find it necessary to sell such a security, it may not be able to realize the full carrying value of the security due to the significance of the position sold.

        The majority of securities transactions of customers of the Company's broker-dealer subsidiary, Gleacher Securities, are cleared through a third party under clearing agreement. Under this agreement, transactions are deemed to be either receive versus payment, delivery versus payment or cash transactions. In addition, the Company's inventory is financed principally by our clearing broker and, to a lesser extent, through repurchase agreements.

        Refer to Note 19 herein within the section labeled "Other" for additional information regarding credit risks of the Company.