SIEBERT FINANCIAL CORP Commitments Disclosure

20. Commitments, Contingencies and Other

 

Legal and Regulatory Matters

 

In the normal course of business, the Company may be subject to various proceedings and claims arising from its business activities, including lawsuits, arbitration claims and regulatory matters. The Company is also involved in other reviews, investigations and proceedings by governmental and self-regulatory organizations regarding the business, which may result in adverse judgments, settlements, fines, penalties, injunctions and other relief. In many cases, however, it is inherently difficult to determine whether any loss is probable or reasonably possible or to estimate the amount or range of any potential loss, particularly where proceedings may be in relatively early stages. In the Company’s opinion, based on currently available information, the ultimate resolution of current matters will not have a material adverse impact on the Company’s financial position and results of operations as of December 31, 2025. However, resolution of one or more of these matters may have a material effect on the results of operations in any future period, depending upon the ultimate resolution of those matters and depending upon the level of income for such period.

 

Overnight Financing

 

As of both December 31, 2025 and 2024, MSCO had an available line of credit for short term overnight demand borrowings with BMO Harris of up to $25 million. As of those dates, MSCO had no outstanding loan balances with BMO Harris and there were no commitment fees or other restrictions on the line of credit. The Company utilizes customer or firm securities as a pledge for short-term borrowing needs.

 

The interest expense for this credit line was $3,000 and $5,000 for the years ended December 31, 2025 and 2024, respectively. There were commitment fees of $12,000 and $0 associated with the utilization of this credit line for the years ended December 31, 2025 and 2024, respectively.

 

BMO Credit Agreement

 

On November 22, 2024, MSCO entered into a Credit Agreement (the “BMO Credit Agreement”) with BMO Bank N.A. (“BMO”), a national banking association. The BMO Credit Agreement provides for a revolving credit facility of up to $20,000,000. The Company may use any borrowings under the BMO Credit Agreement to finance NSCC Deposit Requirements (other than an Adequate Assurance Deposit) and withdrawals from a Reserve Account. As part of the agreement, the MSCO entered into a Parent Guaranty agreement with Siebert guaranteeing repayment of any debt issued to MSCO. Effective November 22, 2025, MSCO renewed the BMO Credit Agreement with BMO until November 20, 2026.

 

Borrowings under the BMO Credit Agreement bears interest on the outstanding daily balance at a rate of interest per annum equal 2.5% plus the greater of: (a) Term SOFR for such day plus 0.11448% and (b) Federal Funds Target Range – Upper Limit and (c) 0.25%. The annual commitment fee is equal to one half of one percent (0.50%) of the average daily unused portion of the commitment of $20,000,000. The BMO Credit Agreement contains customary affirmative covenants and negative covenants and requires MSCO maintain minimum total regulatory capital of $45,000,000, excess net capital of 20,000,000, assets to total regulatory capital ratio of not more than 5.0 to 1.0, and a minimum liquidity ratio of not less than 1.0. The Company was in compliance with the requirements of the BMO credit agreement as of December 31, 2025.

 

There was no interest expense for the BMO Credit Agreement for the year ended December 31, 2025 or 2024. There were commitment fees of $163,000 and $3,000 for the years ended December 31, 2025 and 2024, respectively.

 

EWB Credit Agreement

 

On August 15, 2024, the Company entered into a Loan and Security Agreement (the “EWB Credit Agreement”) with East West Bank (“EWB”), a California banking corporation, dated as of July 29, 2024. The EWB Credit Agreement provides for a revolving credit facility of up to $20,000,000. The maturity date of the EWB Credit Agreement is July 29, 2027. The Company may use any borrowings under the EWB Credit Agreement for acquisitions, stock buybacks, and for general corporate purposes in an amount not to exceed $10,000,000. Obligations under the EWB Credit Agreement are guaranteed by John J. Gebbia, the Company’s Chief Executive Officer, Gloria E. Gebbia, a Director of the Company, and John J. Gebbia and Gloria E. Gebbia, as co-trustees of the John and Gloria Living Trust. As of December 31, 2025, and 2024, $5 million and $0 was outstanding related to the EWB Credit Agreement. The interest expense for this credit line was $41,000 and $0 for the years ended December 31, 2025 and 2024, respectively.

 

Borrowings under the EWB Credit Agreement bear interest on the outstanding daily balance at a rate of interest per annum equal to the greater of: (a) the one-month Term Secured Overnight Financing Rate (“Term SOFR”), as administered by CME Group Benchmark Administration plus 3.15% and (b) 7.50%. The origination fee is equal to one half of one percent (0.50%) of the $20,000,000 revolver cap. The EWB Credit Agreement contains customary affirmative covenants and negative covenants and requires the Company to maintain a minimum debt service coverage ratio of not less than 1.35:1.00 and minimum net capital of $43,000,000.

Shelf Registration Statement and At the Market Offering

 

On May 30, 2025, the Company filed a shelf registration statement on Form S-3 that was declared effective by the SEC on June 9, 2025 for the potential offering, issuance and sale of up to $100.0 million of our common stock, preferred stock, warrants to purchase the Company’s common stock and/or preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some of these securities. On June 27, 2025, the Company entered into a Sales Agreement (“Sales Agreement”) with its subsidiary, MSCO, and Ladenburg Thalmann & Co. Inc., as agents, under which the Company may offer and sell, through or to the agents, shares of its common stock having an aggregate offering price of up to $50.0 million, from time to time. Accordingly, the Company has utilized $50 million of the $100 million capacity under the shelf registration statement.

 

For the year ended December 31, 2025, the Company did not sell any shares pursuant to this Sales Agreement. For the year ended December 31, 2025, the Company incurred approximately $310,000 in legal and audit fees related to the shelf registration statement and Sales Agreement.

 

As of the filing of this Report, the Company will be subject to General Instruction I.B.6 of Form S-3 known as the “baby shelf rules.” Under the baby shelf rules, the aggregate market value of securities the Company can sell through primary public offerings of securities in any 12-month period using the Company’s registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of its common stock held by non-affiliates. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling shares of its common stock using Form S-3, including under the Sales Agreement, so long as the Company’s public float is less than $75 million.

 

NFS Contract

 

Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of the arrangement through July 31, 2025, and NFS’s fees are offset against MSCO’s revenues on a monthly basis.

 

Effective September 29, 2025, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of the arrangement for an additional five-year period commencing on September 26, 2025 and ending October 1, 2030. If the Company chooses to exit this agreement before the end of the contract term, the Company is under the obligation to pay an early termination fee upon occurrence pursuant to the table below:

 

Date of Termination		Early Termination Fee
Prior to October 2, 2026		$	10,000,000
Prior to October 2, 2027		$	8,000,000
Prior to October 2, 2028		$	6,000,000
Prior to October 2, 2029		$	5,000,000
Prior to October 2, 2030		$	4,000,000

 

For the year ended December 31, 2025, and 2024, there has been no expense recognized for any early termination fees. The Company believes that it is unlikely it will have to make material payments related to early termination fees and has not recorded any contingent liability in the financial statements related to this arrangement.

 

General Contingencies

 

In the normal course of its business, the Company indemnifies and guarantees certain service providers against specified potential losses in connection with their acting as an agent of, or providing services to, the Company. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for these indemnifications.

The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for these indemnifications.

 

The Company is self-insured with respect to employee health claims. The Company maintains stop-loss insurance for certain risks and has a health claim reinsurance limit capped at approximately $65,000 per employee as of December 31, 2025.

 

The estimated liability for self-insurance claims is initially recorded in the year in which the event of loss occurs and may be subsequently adjusted based upon new information and cost estimates. Reserves for losses represent estimates of reported losses and estimates of incurred but not reported losses based on past and current experience. Actual claims paid and settled may differ, perhaps significantly, from the provision for losses. This adds uncertainty to the estimated reserves for losses. Accordingly, it is at least possible that the ultimate settlement of losses may vary significantly from the amounts included in the consolidated financial statements.

 

As part of this plan, the Company recognized expenses of $907,000 and $1,086,000 for the years ended December 31, 2025 and 2024, respectively. The Company had an accrual of $71,000 and $76,000 as of December 31, 2025 and 2024, respectively, which represents the estimate of future expenses to be recognized for claims incurred during the period.

 

The Company believes that its present insurance coverage and reserves are sufficient to cover currently estimated exposures, but there can be no assurance that the Company will not incur liabilities in excess of recorded reserves or in excess of its insurance limits.