Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2014

The Company has been engaged in a lengthy and intensive evaluation of potential strategic alternatives in order to preserve and maximize stockholder value. The Board of Directors and the Company, together with its external advisors, devoted substantial time and effort to identifying and pursuing strategic opportunities to further enhance stockholder value and reduce risk. However, at a meeting of the Board of Directors on March 12, 2014, the Board of Directors concluded that no strategic alternative that had been identified to date would yield any opportunities viewed by the Board of Directors as reasonably likely to provide greater realizable value, or a greater reduction in risk, to stockholders than the complete dissolution and liquidation of the Company.

At this meeting, the Board of Directors determined that it is advisable and in the best interests of the Company and our stockholders for the Company to dissolve, liquidate and distribute to stockholders its available assets. At a meeting on April 4, 2014, the Board of Directors confirmed its determination that it is advisable and in the best interests of the Company and its stockholders for the Company to dissolve, approved and declared advisable the dissolution and liquidation of the Company, approved and adopted the Plan of Dissolution and recommended approval of the Plan of Dissolution to its stockholders. At the Company’s 2014 Annual Meeting, the Company’s stockholders will be asked to approve the voluntary dissolution and liquidation of the Company pursuant to the Plan of Dissolution. The Company’s proxy materials filed with the Securities and Exchange Commission provides further information regarding these matters discussed above.

If the dissolution and liquidation of the Company pursuant to the Plan of Dissolution is approved by the Company’s stockholders, the Company plans to file a Certificate of Dissolution with the Delaware Secretary of State no sooner than seven days, and likely no later than 45 days, thereafter, cease all of the Company’s business activities except those related to winding up and liquidating the Company’s business and to preserve the value of its assets, complete the liquidation of its remaining assets, satisfy or make provision for its remaining claims and obligations in accordance with Delaware law, and make distributions to its stockholders of available liquidation proceeds, if any. This is expected to be a multi-year process.

In addition, if the Company’s stockholders approve the dissolution and liquidation of the Company pursuant to the Plan of Dissolution, the Company will also initiate a process to delist its common stock from the NASDAQ Global Market. However, the Company has limited control over its continued listing status, and NASDAQ may decide to delist the Company at any time. A delisting would limit trading activity and liquidity in the Company’s common stock, among other matters.

The Company’s planned dissolution and liquidation of the Company pursuant to the Plan of Dissolution could be abandoned by the Company’s Board of Directors for any reason, including if a more attractive transaction became available to the Company, prior to the filing of the Certificate of Dissolution.

Discontinuation of Operations and Appointment of Capstone Advisory Group, LLC

The Company has no meaningful revenue-producing operations. During the second quarter of 2013, the Company discontinued operations in its MBS & Rates (including RangeMark Financial Services (“RangeMark”)) and Credit Products divisions (together, “Fixed Income” or the “Fixed Income businesses”) as well as, later in the quarter, its Investment Banking division. Exiting these businesses impacted approximately 150 employees. The Company’s residential mortgage lending operations, conducted through its subsidiary ClearPoint Funding, Inc. (“ClearPoint”) was discontinued, and the business sold to Homeward Residential, Inc. (“Homeward”) in February 2013 (the “Homeward Transaction”). As of May 9, 2014, the Company had 10 employees.

On May 31, 2013, the Company entered into an engagement agreement with Capstone Advisory Group, LLC (“Capstone”) and Mr. Christopher J. Kearns, an Executive Director of Capstone and member of the firm. In connection with this agreement, the Board of Directors appointed Mr. Kearns as the Company’s Chief Restructuring Officer and Chief Executive Officer. Under the terms of this agreement, Capstone was and continues to be engaged in providing a number of services to the Company related to overseeing the operations of the Company, has assisted with an exploration of strategic alternatives and is assisting with the execution of our selected course of action.

Going Concern and Basis of Presentation

As noted above, the Company’s Board of Directors approved a dissolution and liquidation of the Company, pursuant to its Plan of Dissolution, which is subject to stockholder approval. If this proposal is approved by the Company’s stockholders, the Company intends to distribute to its stockholders all available cash other than as may be required to pay or make reasonable provision for known and potential claims and obligations of the Company. The dissolution proposal also contemplates a further, orderly wind-up of the Company’s business and operations and the filing of a Certificate of Dissolution, among other matters. All of these factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

These financial statements have been prepared on a going concern basis, as required by accounting principles generally accepted in the United States of America (“GAAP”). A liquidation basis of accounting is only appropriate to the extent liquidation is imminent. In order to meet this criteria, among other factors, the plan for dissolving the Company, which would be followed by liquidation must be approved by the person or persons with the authority to make such a plan effective, which in this instance, is the Company’s stockholders. If the plan of dissolution is approved by Company stockholders at the Company’s 2014 Annual Stockholders Meeting, currently scheduled for May 29, 2014, the Company would then prospectively prepare its financial statements on a liquidation basis of accounting.

Reclassifications

Certain amounts in the prior period have been reclassified to conform to the current year presentation with no impact to previously reported net loss or stockholders’ equity. This includes the prior period results of the Investment Banking, MBS & Rates and Credit Products divisions, which were reported as discontinued operations, beginning in the second quarter of 2013. Refer to Notes 15 and 16 herein for additional information.

Certain items which have previously been reported within the Company’s Other segment have been reclassified as discontinued operations for the prior three-month period ending March 31, 2013 as follows:

	March 31,
(In thousands of dollars)	2013
Items reclassified as discontinued operations
Revenue
Net interest income	$	632
Total revenues:	632
Expenses
Compensation expense	1,520
Professional fees	388
Occupancy expense	591
Goodwill and intangible asset impairment	—		(1)
Communications and data processing	165
Other	157
Total expenses:	2,821

Net items reclassified to discontinued operations	$	2,189

(1) Impairment of intangible assets of $0.6 million for the three months ended March 31, 2013, recognized in connection with the Company’s exits from ClearPoint is recorded as restructuring expense and included within discontinued operations (Note 15 and Note 16).

Reverse Stock Split

On May 30, 2013, the Company implemented a reverse stock split of its shares of common stock at a ratio of 1-for-20. As a consequence of the reverse stock split, every 20 shares of the Company’s outstanding common stock were combined into one share, without any change to the par value per share. All prior year share and share-related information herein has been adjusted, to the extent necessary, to reflect this reverse stock split.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11 “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). Current GAAP does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The objective of ASU 2013-11 is to eliminate diversity in practice. ASU 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes would result from the disallowance of tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements.

In April 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-07 “Presentation of Financial Statements (Topic 205)” (“ASU 2013-07”). The objective of ASU 2013-07 is to clarify when an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. ASU 2013-07 requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). ASU 2013-07 requires financial statements prepared using the liquidation basis of accounting to present relevant information about the entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under GAAP but that it expects to either sell in liquidation or use in settling liabilities. An entity should recognize and measure its liabilities in accordance with GAAP that otherwise applies to those liabilities. The entity should not anticipate that it will be legally released from being the primary obligor under those liabilities, either judicially or by creditor(s). The entity is also required to accrue and separately present the costs that it expects to incur and the income it expects to earn during the expected duration of the liquidation, including any costs associated with sale or settlement of those assets and liabilities. ASU 2013-07 also requires disclosure about an entity’s plan for liquidation, the methods and significant assumptions used to measure assets and liabilities, the type and amount of costs and income accrued, and the expected duration of the liquidation process. This guidance is effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The adoption of ASU 2013-07 did not affect the Company’s financial statements, as the Company’s proposed dissolution and liquidation, discussed above, requires the affirmative vote from the holders of a majority of its outstanding stock. Therefore liquidation is not imminent. Refer to “Going Concern and Basis of Presentation” above for additional information.

- Definition

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

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