Item 1. Business
ITEM 1. BUSINESS.
INFORMATION REGARDING COHEN & COMPANY INC.
Overview
We are a Maryland corporation that incorporated on October 6, 2003. We are a financial services company specializing in an expanding range of capital markets and asset management services. Our business segments are Capital Markets, Asset Management, and Principal Investing. Our Capital Markets business segment consists of fixed income sales, trading, gestation repo financing, new issue placements in corporate and securitized products, underwriting, and advisory services, operating primarily through our subsidiaries, JVB in the United States (the “U.S.”) and CCFESA in Europe. A division of JVB, Cohen & Company Capital Markets (“CCM”) is our full-service boutique investment bank that focuses on mergers and acquisitions (“M&A”), capital markets, and SPAC advisory services. Our Capital Markets business segment also includes investment returns on financial instruments that we have received as consideration for advisory, underwriting, and new issue placement services provided by CCM. Our Asset Management business segment manages assets through investment vehicles, such as collateralized debt obligations (“CDOs”), managed accounts, joint ventures, and investment funds (collectively, “Investment Vehicles”). As of December 31, 2024, we had approximately $2.3 billion of assets under management (“AUM”) in primarily fixed income assets in a variety of asset classes including U.S. and European bank and insurance trust preferred securities (“TruPS”), debt issued by small and medium sized European, U.S., and Bermudian insurance and reinsurance companies, equity interests of SPACs and their sponsor entities, and commercial real estate loans. Our Principal Investing business segment is comprised primarily of investments we hold related to our SPAC franchise and investments that we have made for the purpose of earning an investment return rather than investments made to support our trading or other capital markets business activity.
Capital Markets
Our Capital Markets business segment consists primarily of fixed income sales, trading, gestation repo financing, new issue placements in corporate and securitized products, underwriting, and advisory services operating primarily through our subsidiaries, JVB in the U.S. and CCFESA in Europe. JVB is our sole operating U.S. broker-dealer, under our JVB Holdings subsidiary, and is a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Industry Protection Corporation (“SIPC”). CCFESA is regulated by the ACPR. Our Capital Markets business segment also includes investment returns on financial instruments that we have received as consideration for advisory, underwriting, and new issue placement services provided by CCM.
CCM was established in 2021 as a division of JVB to address the coverage gaps and structural shortfalls at leading investment banks. CCM is a boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory services. CCM is one of the most active SPAC advisors on Wall Street with differentiated and inventive products for clients. In addition, we are growing our team of investment banking professionals with experience in a number of emerging growth verticals and continue to expand offerings for our clients. We are a lead advisor on the majority of the transactions we advise, showcasing an ability to navigate complex transactions and volatile markets. As of December 31, 2024, CCM had 21 investment banking professionals with substantial industry and capital markets experience.
Our fixed income sales and trading group provides trade execution to corporate investors, institutional investors, mortgage originators, and other smaller broker-dealers. We specialize in a variety of products, including but not limited to: corporate bonds and loans, asset-backed securities (“ABS”), mortgage backed securities (“MBS”), residential mortgage-backed securities (“RMBS”), collateralized bond obligations (“CBOs”), collateralized mortgage obligations (“CMOs”), municipal securities, to-be-announced securities (“TBAs”) and other forward agency MBS contracts, Small Business Administration loans ("SBA loans"), U.S. government bonds, U.S. government agency securities, brokered deposits and certificates of deposit (“CDs”) for small banks, and hybrid capital of financial institutions including whole loans and other structured financial instruments.
In 2012, we established a trading desk for “to-be-announced” securities, or TBAs, as part of our mortgage group. TBAs are forward mortgage-backed securities with exact collateral that remains unknown until just prior to the trade settlement, although the characteristics of the collateral are known. The forward collateral types are exclusively issued by U.S. government agencies, such as the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Government National Mortgage Association (“Ginnie Mae”). One objective of our mortgage group is to provide capital markets execution services to small and middle market institutional mortgage originators that hedge their mortgage pipelines. In addition to providing credit for MBS trading lines and execution services, our mortgage group offers trading of specified pools and financing for qualified originators. Our mortgage group offers a range of solutions for institutional clients seeking to enhance their mortgage pipeline execution and overall portfolio profitability. In addition, our mortgage group acts as an intermediary between borrowers and lenders of short-term funds and provides funding for various inventory positions using repurchase agreements.
In addition, JVB operates a gestation repo financing program. In general, JVB lends money to a counterparty after obtaining collateral securities from that counterparty via a reverse repurchase agreement. JVB also borrows money from another counterparty using the same collateral securities via a repurchase agreement. JVB seeks to earn net interest margin on these transactions. Gestation repo involves entering into repurchase and reverse repurchase agreements where the underlying collateral security represents a pool of newly issued mortgage loans. The borrowers (the reverse repurchase agreement counterparties) are generally mortgage originators. The lenders (the repurchase agreement counterparties) are a diverse group of counterparties comprised of banks, insurance companies, and other financial institutions. Gestation trades can be structured in two ways: (i) on balance sheet trades and (ii) agency trades. For on balance sheet trades, JVB borrows from one counterparty and lends to another on a principal basis and earns net interest margin. For agency trades, JVB receives a fee (which is paid by the borrower and is a function of the reverse repo notional amount), while the borrower and lender transact with each other directly.
From 2017 through 2021, we also operated a matched book general collateral funding (“GCF”) repo business as a full netting member of the Fixed Income Clearing Corporation’s (“FICC”) Government Services Division. Primarily due to reduced spreads in the repo market for GCF collateral, we exited the GCF business in 2021.
Our Capital Markets business segment generates revenue through the following activities: (1) trading activities, which include execution and brokerage services, gestation repo, riskless trading activities as well as gains and losses (unrealized and realized), and income and expense earned on securities classified as trading, (2) new issue and advisory revenue comprised of (a) origination fees for newly created financial instruments originated by us, (b) revenue from advisory services, (c) underwriting, and (d) new issue revenue associated with arranging and placing the issuance of newly created financial instruments, and (3) any investment returns on financial instruments that we have acquired or received as consideration for services provided by CCM. Our Capital Markets business segment has offices in Boca Raton (Florida), Memphis (Tennessee), Menlo Park (California), New York City (New York), Paris (France), and Philadelphia (Pennsylvania).
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Trades in our Capital Markets business segment can be either “riskless” or risk-based. Riskless trades are transacted with a customer order in hand, resulting in limited risk to us. Risk-based trades involve us owning the securities and thus placing our capital at risk. Such risk-based trading activity may include the use of leverage. We believe that the prudent use of capital to facilitate client orders increases trading volume and profitability. Any gains or losses on trading securities that we have classified as investments-trading are recorded in our Capital Markets business segment. In addition, any gains or losses on trading securities that we have classified as other investments, at fair value, which were acquired or received as consideration for services provided by CCM, are recorded in our Capital Markets business segment. Whereas any gains or losses on securities that we have classified as other investments, at fair value, which were not received as consideration for services provided by CCM, are recorded in our Principal Investing business segment.
From time to time, CCM receives financial instruments as consideration for advisory, underwriting, and new issue placement services provided. We generally record the fair value of the investment consideration as new issue and advisory revenue at the time it is received, and record subsequent gains and losses, including periodic mark-to-market unrealized gains and losses, as principal transactions revenue, which remain in the Capital Markets segment. A description of our investment portfolio can be found under the heading "Principal Investing" below, reflecting the value as of December 31, 2024 of the financial instruments that CCM has acquired or received as consideration for services provided.
Our commercial real estate lending platform (“CRE Opportunities” or "CREO"), which operates outside of JVB, was created in 2021 with a primary focus on multi-family transitional loans and a team of professionals with extensive origination, underwriting, and securitization experience in the commercial real estate market.
Asset Management
Our Asset Management business segment manages and services assets within a variety of Investment Vehicles. We earn management fees for our ongoing asset management services provided to these Investment Vehicles, which may include fees both senior and subordinate to the securities issued by the Investment Vehicles. Management fees are based on the value of the AUM or the investment performance of the vehicle, or both. As of December 31, 2024, we had $2.3 billion in AUM. AUM equals the sum of the net asset value (“NAV”) or gross assets of the Investment Vehicles we manage based on whichever measurement serves as the basis for the calculation of our management fees. Beginning in November 2023, we earn an annual servicing fee on the notional amount of the loans owned by the CREO JV and, from that point, the notional amount of these loans has been included in our AUM. Our calculation of AUM may differ from the calculations of other asset managers and, as a result, this measure may not be comparable to similar measures presented by other asset managers. This definition of AUM is not necessarily identical to any definition of AUM that may be used in our management agreements. We do not receive management fees for assets managed within our SPAC Series Funds. See discussion below.
As of December 31, 2024, we had four subsidiaries that act as managers to our Investment Vehicles. Two of these subsidiaries, Cohen & Company Financial Management, LLC (“CCFM”) and Dekania Capital Management, LLC (“DCM”), are registered investment advisors under the Investment Advisers Act of 1940 (the “Investment Advisers Act”). CCFESA is based in France and regulated by the ACPR. Cohen CREO LLC, which is not a registered investment advisor, provides services for the assets of the CREO JV.
Subsidiary
Product Line
CCFM
SPAC Fund, SPAC Series Funds, Alesco CDOs
DCM
U.S. Insurance JV, Dekania Europe CDOs
CCFESA
PriDe Funds and other managed accounts.
Cohen CREO LLC
CREO JV
The table below shows changes in our AUM by product line for the last five years.
ASSETS UNDER MANAGEMENT
(Dollars in Millions)
As of December 31,
2024
2023
2022
2021
2020
PriDe Funds and Other Managed Accounts
$
855
$
865
$
813
$
721
$
587
U.S. Insurance JV
154
166
122
142
48
CREO JV
309
296
-
-
-
SPAC Fund
-
-
81
125
53
SPAC Series Funds
41
35
47
130
24
Non-CDO Investment Vehicles
1,359
1,362
1,063
1,118
712
Alesco CDOs
862
884
946
1,099
1,890
Dekania Europe CDOs.
104
111
107
141
167
Total CDO AUM
966
995
1,053
1,240
2,057
Total AUM
$
2,325
$
2,357
$
2,116
$
2,358
$
2,769
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A description of Investment Vehicles that were under management as of December 31, 2024 is set forth below.
PriDe Funds and Other Managed Accounts. In July 2014, we became the investment advisor of a newly created French investment fund with total commitments of €238 million, an initial investment period of two years (which was later extended by two years), and a maturity date of July 2026 (which was later extended until July 2028). This fund was fully invested in December 2017. In January 2017, the second vintage Investment Vehicles in the series of these funds closed with total commitments of €203.5 million, an initial investment period of three years (which was later extended by two years), and a maturity date of January 2032. These Investment Vehicles were fully invested in July 2021. In July 2020, the third vintage Investment Vehicles in the series of these funds closed with total commitments of €375.5 million, an initial investment period of three years (which was later extended by two years), and a maturity date of July 2035. In November 2024, the fourth vintage Investment Vehicles in the series of these funds closed with total commitments of €337 million, an initial investment period of three years, and a maturity date of November 2037. This series of Investment Vehicles is referred to in this Annual Report on Form 10-K as the “PriDe Funds.” The PriDe Funds earn investment returns by investing in a diversified portfolio of debt securities issued by small and medium sized European and Bermudian insurance companies that have limited access to capital markets. CCFESA earns investment advisor regular fees and investment advisor performance fees depending on the level of returns achieved. We have not made an investment, nor do we expect to make any investment, in the PriDe Funds. In addition, we provide investment management or advisory services to a number of separately managed accounts owned by family offices, high net worth individuals, and asset managers. The investment focus of the separately managed accounts is on CDO, collateralized loan obligations ("CLO") notes, and debt instruments where our professionals have relevant expertise. For the services provided to these managed accounts, we are paid gross annual base management or advisory fees of approximately 1.5% plus a gross annual performance fee of 20% of cash-on-cash returns in excess of an 8% hurdle. There is also an early redemption fee if any of the clients were to terminate their arrangement within the first five years of the relationship. AUM of the PriDe Funds and other managed accounts was $855.3 million as of December 31, 2024.
U.S. Insurance JV . In May 2018, we committed to invest up to $3.0 million in a newly formed joint venture (the “U.S. Insurance JV”) with an outside investor. The U.S. Insurance JV was formed for the purposes of investing in debt issued by small and medium sized U.S. and Bermudian insurance and reinsurance companies and is managed by DCM. We were required to invest 4.5% of the total equity of the U.S. Insurance JV with an absolute limit of $3.0 million. As of December 31, 2024, the NAV of the U.S. Insurance JV was $151.6 million, we had fulfilled our investment commitment, and our investment in the U.S. Insurance JV was valued at $2.8 million. In addition, the insurance company debt that will be funded by the U.S. Insurance JV may be originated by us and there may be origination fees earned in connection with such transactions. We also earn management fees as manager of the U.S. Insurance JV. We are entitled to a quarterly base management fee, an annual incentive fee (if certain return hurdles are met), and an additional incentive fee upon the liquidation of the portfolio (if certain return hurdles are met).
CREO JV. In September 2021, we committed to invest up to $15.0 million of equity into a newly formed joint venture (the “CREO JV”) with an outside investor that committed to invest approximately $435.0 million of equity into the CREO JV. We are required to invest 7.5% of the total equity of the CREO JV with a maximum investment of $15.0 million. As of December 31, 2024, the NAV of the CREO JV was $85.8 million, we had invested $4.9 million of our $15.0 million investment commitment, and our investment in the CREO JV was valued at $6.4 million. The CREO JV is managed by us. The CREO JV was formed for the purposes of investing in primarily multi-family commercial real estate mortgage-backed loans collateralized by mostly transitional commercial real estate mortgage-backed loans. “CRE CLO” means any pooling of commercial real estate mortgage-backed loans into a collateralized loan obligation. The commercial real estate loans that are funded by the CREO JV may be originated by us and we may earn origination fees in connection with such transactions. In addition, we may earn structuring fees in connection with structuring and consummating a CRE CLO consisting of a pooling of commercial real estate loans. Any origination fees or structuring fees earned by us will be in our Capital Markets segment. We will also earn management fees as manager of any CRE CLOs based on the value of the assets consolidated into a CRE CLO (calculated in accordance with the terms of such CRE CLO), payable from the proceeds generated by and in accordance with the distribution waterfall of such CRE CLO. The CREO JV has a repurchase facility to finance its assets until they can be securitized into CRE CLOs. Through December 31, 2024, we had not yet structured or consummated a CRE CLO and, accordingly, had not earned any management fees as manager of any CRE CLO. In November 2023, we began earning an annual portfolio servicing fee on the notional amount of loans owned by the CREO JV, which is equal to 0.25%. Once we have earned aggregate portfolio servicing fees of $1.5 million, the annual percentage will drop to 0.10%. From November 2023 through 2024, we have earned $0.8 million from the CREO portfolio servicing fee.
SPAC Fund . In 2018, we invested in and became the investment manager and general partner of a newly formed fund structure that was created for the purpose of investing primarily in the equity interests of SPACs and, in certain circumstances, SPAC sponsor entities including SPACs sponsored by us, our affiliates, and third parties (the “SPAC Fund”). Prior to March 31, 2023, the general partner of the SPAC Fund (“Vellar GP”) had an investment in the SPAC Fund, had the potential to earn incentive fees, and had not consolidated the SPAC Fund. Effective April 1, 2023, all of the investors in the SPAC Fund, other than the Vellar GP, redeemed all of their interests in the SPAC Fund. As a result, effective April 1, 2023, the Vellar GP became the sole owner of, and began consolidating, the SPAC Fund. We owned a one-third interest in the Vellar GP, and effective April 1, 2023, we began consolidating the SPAC Fund as well. CCFM was the manager of the SPAC Fund and was entitled to a quarterly base management fee based on a percentage of the NAV of the SPAC Fund until April 1, 2023. In February 2025, we sold our one-third interest in the Vellar GP and going forward will no longer consolidate the Vellar GP or have any interest in the Vellar GP or the SPAC Fund. See note 31 to our consolidated financial statements included in this Annual Report on Form 10-K.
SPAC Series Funds. As a complement to the SPAC Fund, we established and became the managing member and investment manager to two newly formed umbrella limited liability companies (the “SPAC Series Funds”) that issue a separate series for each investment portfolio, which typically consists of investments in the sponsor entities of individual SPACs. The investing activity of the SPAC Series Funds includes purchasing interests in the placement units of certain SPAC sponsor entities that, in addition to placement units, entitle the SPAC Series Funds to certain amounts of founder shares, for a nominal purchase price. The number of founder shares allocated to the SPAC Series Funds is not finally determined until the related business combination (if any) is completed by the applicable SPAC. The amount of founder shares allocable to each SPAC Series Fund is subject to change for two main reasons. First, if a business combination is not completed by the applicable SPAC within the allowed timeframe, the SPAC Series Funds will forfeit all the founder shares allocated to them for that particular SPAC. Second, even if a business combination by the applicable SPAC is completed, the economic terms of the combination are subject to negotiation between the target company and that SPAC. In many cases, the total amount of founder shares to which the sponsor entities are entitled will be reduced as part of these negotiations. In these cases, any allocation to the SPAC Series Funds will also be reduced. Although we do not charge a management fee for most of the SPAC Series Funds, nor do we earn a performance fee from most of the SPAC Series Funds, we and certain of our employees receive a portion of the allocations of founder shares, for a nominal purchase price, from the SPAC sponsor entities in which the SPAC Series Funds invest. As of December 31, 2024, the SPAC Series Funds had issued limited liability company interests and invested in 13 SPAC sponsor entities, and the aggregated total net asset carrying value of the remaining SPAC Series Funds was $41.9 million. As of December 31, 2024, our investment in the SPAC Series Funds was carried at $1.9 million. As of December 31, 2024, in our capacity as the asset manager of the SPAC Series Funds, we received and still hold an allocation of 1.7 million founder shares, for a nominal purchase price, from six different SPAC sponsor entities that have not completed any business combinations. These allocations will be worthless if the underlying SPACs fail to complete their business combination and liquidate. Furthermore, even if a business combination is completed, the founder shares allocable to us may be adjusted significantly downward based on final negotiation with the business combination counterparty. See below for a description of our Principal Investments as of December 31, 2024.
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CDOs . As of December 31, 2024, we managed five Alesco CDOs and two Dekania Europe CDOs, which were initially securitized during 2004 to 2007. A CDO is a form of borrowing secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization, which means that the lenders are actually investing in notes secured by the assets. In the event of a default, the lender will have recourse only to the assets securing the loan. These structures can hold different types of securities, but as of December 31, 2024, our only remaining CDOs under management were backed by U.S. and European bank and insurance TruPS and subordinated debt. In general, our Alesco and Dekania Europe deals have the following terms. We receive senior and subordinate management fees. On the Alesco CDOs, we can be removed as manager without cause if 66.7% of the rated note holders voting separately by class and 66.7% of the equity holders vote to remove us, or if 75% of the most senior note holders vote to remove us when certain over-collateralization ratios fall below 100%. We can be removed as manager for cause if a majority of the controlling class of note holders or a majority of equity holders vote to remove us. “Cause” includes unremedied violations of the collateral management agreement or indenture, defaults attributable to certain actions of the manager, misrepresentations or fraud, criminal activity, bankruptcy, insolvency or dissolution. There was a non-call period for the equity holders, which ranged from three to six years. Once this non-call period expires, a majority of the equity holders can trigger an optional redemption as long as the liquidation of the collateral generates sufficient proceeds to pay all principal and accrued interest on the rated notes and all expenses. In ten years after the closing, an auction call will be triggered if the rated notes have not been redeemed in full. In an auction call redemption, an appointee will conduct an auction of the collateral, which will only be executed if the highest bid results in sufficient proceeds to pay all principal and accrued interest on the rated notes and all expenses. If the auction is not successfully completed, all residual interest that would normally be distributed to equity holders will be sequentially applied to reduce the principal of the rated notes. Any failure of an over-collateralization coverage test redirects interest to paying down notes until compliance is restored. The securities mature up to 30 years from closing. An event of default will occur if certain over-collateralization ratios drop below 100%. While an event of default exists, a majority of the senior note holders can declare the principal and accrued and unpaid interest immediately due and payable. All of the Alesco and Dekania Europe CDOs that we manage have reached their auction call redemption features, which means the portfolio of collateral for each CDO is subject to an auction on either a quarterly or bi-annual basis. If an auction is successful, the management contract related to such CDO will be terminated in connection with the liquidation of the CDO and we will lose the related management fees.
In addition, we have historically received revenue shares from certain asset management businesses that we initially sponsored or owned, and subsequently sold or spun-off. A description of our only remaining asset management revenue share as of December 31, 2024 is set forth below.
Infrastructure Finance Business . On March 12, 2012, we entered into an agreement with unrelated third parties whereby we agreed to assist in the establishment of an international infrastructure finance business (“IIFC”). As consideration for our assistance in establishing IIFC, we received 8.0% of certain revenues of the manager of IIFC through October 31, 2021, and effective November 1, 2021, we receive 7.35% of certain revenues of the manager of IIFC. The IIFC revenue share arrangement expires when we have earned a cumulative $20 million in revenue share payments or with the dissolution of IIFC’s management company. In 2024, we earned $2.6 million from the IIFC revenue share. From inception through 2024, we have earned $8.2 million.
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Principal Investing
Our Principal Investing business segment has historically been comprised of investments in the Investment Vehicles we manage, as well as investments in certain other structured products, and the related gains and losses that they generate. In 2014, we refocused our Principal Investing portfolio on products that we do not manage for the purpose of earning an investment return. More recently, capitalizing on our SPAC expertise, we have become active in multiple aspects of the SPAC market, including as a sponsor, asset manager, and investor, and as a result we hold various investments related to our SPAC franchise.
A SPAC is a shell corporation formed for the sole purpose of raising investment capital through an initial public offering (“IPO”), which is then used to acquire or merge with one or more unspecified businesses to be identified after the IPO. SPACs are formed and sponsored by experienced business executives who are confident that their reputation and experience will help them identify a profitable company to acquire or with which to merge. The sponsors of the applicable SPAC generally provide the starting capital for that SPAC and such sponsors stand to benefit from a sizeable stake in the post-business combination acquired or merged company (assuming a business combination is consummated by the SPAC that they sponsor). The capital raised in the SPAC’s IPO is placed in an interest-bearing trust account and cannot be disbursed except to complete a business combination or to return the money to investors (if the SPAC does not complete a business combination within the required time period and must be liquidated.) A SPAC generally has approximately two years to complete a deal. In return for the capital invested by investors in the SPAC IPO, investors typically receive units in the SPAC, with each unit often comprising a share of common stock and a warrant (or fraction thereof) to purchase more stock at a later date. The purchase price per unit of the securities is typically $10.00. After a SPAC’s IPO, the pre-IPO units of the SPAC become separable into shares of common stock and warrants. The purpose of the warrant is to provide investors with additional compensation for investing in the SPAC. The warrants generally become exercisable either 30 days after the completion of a business combination or twelve months after the IPO. The fair market value of the target company must be at least 80% (but generally much more) of the SPAC’s trust assets. Upon successful completion of a business combination, the sponsors will profit from their stake in the post-business combination acquired or merged company, while the investors receive an equity interest according to their respective investment amounts The founders of the SPAC generally purchase founder shares at the initiation of the SPAC, paying nominal consideration for the number of shares that, based on recent transactions, results in or around a 20% to 25% ownership stake in the outstanding shares after the completion of the IPO.
Since 2018, we have sponsored three SPACs. Our first sponsored SPAC, Insurance Acquisition Corp. (“Insurance SPAC”), completed its $150.7 million IPO in March 2019, entered into a merger agreement in June 2020, and completed its business combination in October 2020 with Shift Technologies, Inc. (“Shift”), a car-buying e-commerce platform. Our second sponsored SPAC, INSU Acquisition Corp. II (“Insurance SPAC II”), completed its $250 million IPO in September 2020 and entered into a merger agreement in November 2020 with Metromile, Inc., a digital insurance platform and pay-by-mile auto insurer (“MetroMile”), which closed on February 9, 2021. Subsequently, MetroMile was acquired by Lemonade, Inc. (NYSE:LMND) (“Lemonade”). Our third sponsored SPAC, INSU Acquisition Corp. III (“Insurance SPAC III”), completed its $218 million IPO in December 2020 and was liquidated in December 2022 without completing a business combination within the required timeframe.
Subject to changes in the overall SPAC market, which are evolving rapidly, we may continue to grow our SPAC franchise and capitalize on opportunities in the space. In addition to our sponsored SPACs, we receive founder shares and purchase placement units and IPO units in various SPACs sponsored by third parties and affiliates, through our SPAC Series Funds and our Principal Investing portfolio. The amount of founder shares allocated to us is not finally determined until the related business combination is completed. The amount of founder shares allocable to us is subject to change for two main reasons. First, if a business combination is not completed by the applicable SPAC within the allowed time frame, we will forfeit all the founder shares allocated to us for that particular SPAC. Second, even if a business combination is completed by the applicable SPAC, the economic terms of the combination are subject to negotiation between the target company and that SPAC. In many cases, the total amount of founder shares to which the sponsor entities are entitled will be reduced as part of these negotiations. In these cases, any allocation of founder shares to us will also be reduced.
We invest in SPAC sponsor entities that we do not consolidate because we are not the managing member of such sponsor entity or otherwise do not have the power to direct the sponsor entity's most important activities. In these cases, we treat our investment in the SPAC sponsor entity as an equity method investment. Furthermore, because of the difficulty of determining the fair value of such an investment during the applicable SPAC's pre-business combination period, we generally have not elected the fair value option. If a SPAC completes a business combination and we have an equity method investment in the associated sponsor entity, the sponsor entity will record income equal to the difference between the fair value of the restricted and unrestricted shares it receives and the carrying value of its equity method investment in the SPAC. We will recognize our share of this gain as income from equity method affiliates. The sponsor entity will continue to mark its investment in the SPAC to market after the business combination and we will recognize our share of the change in fair value as income or loss from equity method affiliates. Once the sponsor entity distributes to us our share of the SPAC shares it owns, we will reclassify our investment from investment in equity method affiliates to other investments, at fair value as we will then hold the SPAC shares directly (rather than through an equity method investee). We will then record principal transactions income and loss until the SPAC shares themselves are liquidated.
Through Vellar GP, we have also engaged in several transactions known as “share forward arrangements” (“SFAs”). In a typical SFA transaction, we acquire an interest in a publicly traded company (referred to as the “SFA Counterparty”) through open market purchases, direct acquisitions from the SFA Counterparty, or a combination thereof. These interests can take the form of unrestricted common shares, restricted common shares, equity derivatives, or fair value receivables. Upon acquiring these interests, we enter into an SFA derivative arrangement with the SFA Counterparty. In cases where we acquire our interests in the SFA Counterparty through open market purchases, the SFA generally requires an up-front payment to us from the SFA Counterparty. The amount of this up-front payment equals the cost we paid for our interests in the SFA Counterparty, less a shortfall amount in certain cases. To fund the shortfall portion of the initial investment, we will utilize available cash on hand or available financing. The SFA stipulates that we must make a payment to the SFA Counterparty on or subsequent to a certain maturity date. Depending on the terms of the SFA, this payment may be made in cash, by returning the interests we acquire in the SFA Counterparty, or through a combination of both. In some cases, the SFA requires the payment to be made exclusively in cash. Importantly, the SFA does not obligate us to hold the interests that we acquired in the SFA Counterparty. Following the execution of the SFA, we are free to sell the interests we acquired in the SFA Counterparty (assuming the interests themselves are not restricted from transfer). Additionally, SFAs generally include a feature whereby if we hold the interests we acquired in the SFA Counterparty until maturity or another agreed-upon date, we become eligible to receive an additional payment from the SFA Counterparty, either in cash or in additional interests in the SFA Counterparty. Such a payment is known as the “Maturity Consideration.” Furthermore, SFAs usually include a provision allowing us to terminate the SFA, either in whole or in part, before its maturity by making an agreed-upon payment based on an amount defined in the SFA (the “Reset Price”). The Reset Price may either remain fixed throughout the term of the SFA, or fluctuate based on certain calculations within the SFA. SFAs also impose various obligations on the SFA Counterparty, which may include registering a predetermined number of the interests in the SFA Counterparty (subject to the SFA) with the SEC, maintaining the listing of the SFA Counterparty securities on a national exchange, and/or that the closing price of the SFA Counterparty’s shares on the public exchange does not fall below a predetermined price for a specific period of time. If any of these SFA Counterparty obligations are breached or not satisfied, we may have the right to terminate the SFA and accelerate the payment of the Maturity Consideration upon termination. The SFAs provide the right of set off in the case of Maturity Consideration, thereby allowing us to keep the interests we hold in the SFA Counterparty and offset the Maturity Consideration we are owed following termination of the applicable SFA. On February 25, 2025, we sold all of our interests in Vellar GP and do not anticipate engaging in additional SFA transactions in the foreseeable future.
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As of December 31, 2024, our investment portfolio included other investments, at fair value, which were valued at $35.3 million, and investments in equity method affiliates, which were carried at $23.4 million, net of other investments sold, not yet purchased, which were valued at $1.7 million, and the related non-convertible non-controlling interests, which were valued at $11.5 million. Any financial instruments that CCM receives as consideration for services provided are included in the Capital Markets segment, while all other financial instruments are included in the Principal Investing segment; financial instruments from both our Capital Markets and Principal Investing segments are shown in the chart below. In addition, several of the positions listed below are subject to trading restrictions or are warrants, units, or notes that are convertible into publicly traded equity.
A description of our investments as of December 31, 2024 is set forth below.
Inv in Equity
Other Inv
Non-Convertible,
Net
($000s)
Other Investments at Fair Value
Method
Sold, Not Yet
Non-Controlling
Investment
12/31/24
Investments
Ticker
CCM
Other
Total
Affiliates
Purchased
Interest
Value
Share Price
Post-Business Combination SPACs -
Abpro Corporation
ABP
$
358
$
-
358
$
-
$
-
$
-
$
358
$
1.79
Baird Medical Investment Holdings Limited
BDMD
380
-
380
-
-
-
380
7.60
Brand Engagement Network, Inc.
BNAI
950
189
1,139
-
-
(844
)
295
0.97
Captivision Inc.
CAPT
1,753
-
1,753
-
-
-
1,753
0.71
Critical Metals Corp.
CRML
137
3,006
3,143
454
-
(1,607
)
1,990
6.79
Crown LNG Holdings Limited
CGBS
1,224
-
1,224
-
-
-
1,224
0.40
Murano Global Investments Plc
MRNO
-
-
-
15,876
-
(7,569
)
8,307
10.24
Payoneer Global Inc.
PAYO
-
2,850
2,850
-
-
-
2,850
10.04
Rezolve Limited
RZLV
7,563
1,888
9,451
1,224
(1,121
)
(164
)
9,390
3.82
Veea Inc.
VEEA
1,037
-
1,037
-
-
-
1,037
3.81
Vellar - SPVs
NA
-
470
470
-
(470
)
(827
)
(827
)
NA
ZoomCar Holdings, Inc. (convertible note and shares)
ZCAR
1,565
-
1,565
146
-
-
1,711
1.81
Other
NA
139
298
437
5
(60
)
(451
)
(69
)
NA
Subtotal
15,106
8,701
23,807
17,705
(1,651
)
(11,462
)
28,399
Pre-Business Combination SPACs -
Chenghe Acquisition II Co.
CHEB
183
-
183
-
-
-
183
10.21
Dynamix Corporation (warrants)
DYNXW
388
-
388
-
-
-
388
0.28
FACT II Acquisition Corp (units)
FACTU
621
-
621
-
-
-
621
9.98
Melar Acquisition Corp I
MACI
138
-
138
-
-
-
138
10.06
Other
NA
257
-
257
-
-
-
257
NA
Subtotal
1,587
-
1,587
-
-
-
1,587
Other Investments -
CREO JV
NA
-
6,432
6,432
-
-
-
6,432
NA
Dutch Real Estate
NA
-
-
-
5,105
-
-
5,105
NA
U.S. Insurance JV
NA
-
2,825
2,825
-
-
-
2,825
NA
Other
NA
73
538
611
621
-
-
1,232
NA
Subtotal
73
9,795
9,868
5,725
-
-
15,593
Total Investment Portfolio
$
16,766
$
18,496
$
35,262
$
23,430
$
(1,651
)
$
(11,462
)
$
45,579
Investment in Post-Business Combination SPACs. These are investments in publicly traded companies that were issued in connection with business combinations with SPACs. A significant portion of this equity was received as consideration for services provided by CCM. The portion that is not related to CCM consideration, is related to allocations of founder shares to us, for a nominal purchase price, from the SPAC sponsor entities in which the SPAC Series Funds invested. An investment in post-business combination SPACs is classified as other investments, at fair value after we receive our allocation of the post-business combination publicly traded company shares. During the period between the closing of the business combination and receiving our allocation of shares in the post-business combination publicly traded company, an investment in post-business combination SPACs is classified as an investment in equity method affiliates, representing an investment in the sponsor of the SPAC, entitling us to an eventual allocation of post-business combination public company shares. As of December 31, 2024, our investment in the public equity of post-business combination SPACs was valued at $23.8 million as a component of other investments, at fair value, $15.1 million of which was received as consideration for services provided by CCM, and our investment in the sponsors entitling us to public equity of post-business combination SPACs had a carrying value of $17.7 million as a component of investment in equity method affiliates. As of December 31, 2024, these investments had offsetting liabilities that were valued at $1.7 million as a component of other investments sold, not yet purchased, and $11.5 million as a component of non-convertible non-controlling interests, representing the portion of the investment that we do not ultimately own. Certain of the shares are subject to restrictions on transfer until threshold trading prices are met. See notes 4 and 9 to our consolidated financial statements included in this Annual Report on Form 10-K.
Investment in Pre-Business Combination SPACs. These are investments in publicly traded pre-business combination SPACs, which are primarily shares received as consideration for CCM acting as underwriter in the IPOs of SPACs or performing other advisory services. As of December 31, 2024, our investment in the public equity of pre-business combination SPACs was valued at $1.6 million as a component of other investments, at fair value.
Investment in CREO JV. In September 2021, we co-established and committed to invest up to $15.0 million in the CREO JV. As of December 31, 2024, we had invested $4.9 million of our $15.0 million investment commitment, our investment in the CREO JV was valued at $6.4 million, which was included as a component of other investments, at fair value in our consolidated balance sheet, and the NAV of the CREO JV was $85.8 million.
Investment in Dutch Real Estate. In December 2019, we acquired a 45% interest in CK Capital Partners B.V. (“CK Capital”), a private company incorporated in the Netherlands, which provides asset and investment advisory services relating to real estate holdings, as well as a 10% interest in a related real estate holding company. In December 2021, we invested an additional $2.4 million in the related real estate holding company. As of December 31, 2024, our investment in these Dutch real estate entities was carried at $5.1 million, $0.4 million in CK Capital and $4.7 million in the real estate holding company, which was included as a component of investment in equity method affiliates in our consolidated balance sheet.
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Investment in U.S. Insurance JV. During 2018, we co-established and committed to invest up to $3.0 million in the U.S. Insurance JV. As of December 31, 2024, we had fulfilled our investment commitment, our investment in the U.S. Insurance JV was valued at $2.8 million, which was included as a component of other investments, at fair value in our consolidated balance sheet, and the NAV of the U.S. Insurance JV was $151.6 million.
Investment in Other Securities. We have invested in various original issuance securities that we have originated and certain other securities that we have not originated including private equity, public equity, and real estate loans. As of December 31, 2024, our investments in these other securities were valued at $0.6 million, which was included as a component of other investments, at fair value, and $0.6 million, which was included as a component of investment in equity method affiliates, in our consolidated balance sheet.
Employees
As of December 31, 2024, we employed a total of 113 full-time professionals and support staff. This number includes 76 employees of our JVB subsidiary, six employees of our CRE Opportunities group, five employees of our Principal Investing business segment, eight employees of our U.S. Asset Management business segment, five employees of our European Asset Management business segment, and 13 employees of our executive and support services group. We consider our employee relations to be good and believe that our compensation and employee benefits are competitive with those offered by other financial services firms that we compete with for personnel. None of our employees is subject to any collective bargaining agreements. Our core asset is our professionals, their intellectual capital, and their dedication to providing the highest quality services to our clients. Prior to joining us, members of our management team held positions with other leading financial services firms, accounting firms, law firms, investment firms, or other public companies. Lester R. Brafman, Daniel G. Cohen, and Joseph W. Pooler, Jr. are our executive operating officers, and biographical information relating to each of these officers is incorporated by reference in “Part III — Item 10 — Directors, Executive Officers and Corporate Governance” to the Company’s Proxy Statement, to be filed in connection with the Company’s 2025 Annual Meeting of Stockholders.
Competition
All areas of our business are intensely competitive, and we expect them to remain so. We believe that the principal factors affecting competition in our business include the economic environment, the quality and price of our products and services, our client relationships, our reputation, our market focus, and the ability of our professionals.
Our competitors are other public and private investment banks, brokerage firms, merchant banks, financial advisory firms, and asset managers. We compete globally and on a regional, product, and niche basis. Many of our competitors have substantially greater capital and resources than we do and offer a broader range of financial products and services. Certain of these competitors continue to raise additional amounts of capital to pursue business strategies that may be similar to ours. Some of these competitors may also have access to liquidity sources that are not available to us, which may pose challenges for us with respect to investment opportunities. In addition, some of these competitors may have higher risk tolerances or make different risk assessments than we do, allowing them to consider a wider variety of investments and establish broader business relationships.
There has been substantial consolidation and convergence among companies in the financial services industry, including among many of our former competitors. In particular, a number of large commercial banks have established or acquired broker-dealers or have merged with other financial institutions. Many of these firms have the ability to offer a wider range of products than we offer, including loans, deposit taking, and insurance. Many of these firms also offer more comprehensive investment banking services, which may enhance their competitive position. They also have the ability to support investment banking and securities products with commercial banking and other financial services revenue in an effort to gain market share, which could result in pricing pressure in our business. This trend toward consolidation and convergence has significantly increased the capital base and geographic reach of our competitors.
Competition is intense for the recruitment and retention of experienced and qualified professionals. The success of our business and our ability to continue to compete effectively will depend significantly upon our continued ability to retain and motivate our existing professionals and attract new professionals. We compete, among other factors, on the level and nature of compensation and long-term incentives, workplace culture, and opportunities for professional and personal development for our employees. Our ability to continue to compete effectively in our businesses will depend upon our ability to attract new employees and retain and motivate our existing employees, in each case, at appropriate compensation levels. See “Item 1A — Risk Factors."
Regulation
Certain of our subsidiaries, in the ordinary course of their business, are subject to extensive regulation by government and self-regulatory organizations both in the U.S. and abroad. As a matter of public policy, these regulatory bodies are responsible for safeguarding the integrity of the securities and other financial markets. The regulations promulgated by these regulatory bodies are designed primarily to protect the interests of the investing public generally, and thus cannot be expected to protect or further the interests of our company or our stockholders and may have the effect of limiting or curtailing our activities, including activities that might be profitable.
As of December 31, 2024, our regulated subsidiaries include: JVB, a U.S. registered broker-dealer regulated by FINRA and subject to oversight by the U.S. Securities and Exchange Commission (the “SEC”); CCFESA, a French company regulated by the French Prudential Supervision and Resolution Authority ( Autorit é de Contr ô le Prudentiel et de R é solution , the “ACPR”); and CCFM and DCM, each of which is a registered investment adviser regulated by the SEC under the Investment Advisers Act. Since our inception, our businesses have been operated within a legal and regulatory framework that is constantly developing and changing, requiring us to be able to monitor and comply with a broad range of legal and regulatory developments that affect our activities.
Certain of our businesses are also subject to compliance with laws and regulations of U.S. federal and state governments, foreign governments, their respective agencies and/or various self-regulatory organizations or exchanges relating to, among other things, the privacy of client information and any failure to comply with these regulations could expose us to liability and/or reputational damage. Additional legislation, changes in rules promulgated by financial authorities and self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules, either in the U.S. or abroad, may directly affect our mode of operation and profitability.
The U.S. and foreign government agencies and self-regulatory organizations, as well as state securities commissions in the U.S., are empowered to conduct periodic examinations and initiate administrative proceedings that can result in censures, fines, the issuances of cease-and-desist orders, and/or the suspension or expulsion of a broker-dealers or their directors, officers, or employees. See “Item 1A — Risk Factors” beginning on page 16.
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U.S. Regulation . As of December 31, 2024, JVB was registered as a broker-dealer with the SEC and was a member of and regulated by FINRA. JVB is subject to the regulations of FINRA and industry standards of practice that cover many aspects of its business, including initial licensing requirements, sales and trading practices, relationships with customers (including the handling of cash and margin accounts), capital structure, capital requirements, record-keeping and reporting procedures, experience and training requirements for certain employees, and supervision of the conduct of affiliated persons, including JVB's directors, officers, and employees. FINRA has the power to expel, fine, and otherwise discipline member firms and their employees for violations of these rules and regulations. JVB is also registered as a broker-dealer in certain U.S. states, requiring it to comply with the laws, rules, and regulations of each state in which JVB is registered. Each state may revoke the registration to conduct a securities business in that state and may fine or otherwise discipline broker-dealers and their employees for failure to comply with such state’s laws, rules, and regulations.
The SEC, FINRA, and various other regulatory agencies within and outside of the U.S. have stringent rules and regulations with respect to the maintenance of specific levels of net capital by regulated entities. Generally, a broker-dealer’s net capital is net worth plus qualified subordinated debt less deductions for certain types of assets. The net capital rule under the Exchange Act requires that at least a minimum part of a broker-dealer’s assets be maintained in a relatively liquid form. The SEC and FINRA impose rules that require notification when net capital falls below certain predefined criteria. These rules also dictate the ratio of debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances. If a firm fails to maintain the required net capital, it may be subject to suspension or revocation of registration by the applicable regulatory agency, and suspension or expulsion by these regulators could ultimately lead to a firm’s liquidation. Additionally, the net capital rule under the Exchange Act and certain FINRA rules impose requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC and FINRA for certain capital withdrawals.
If these net capital rules are changed or expanded, or if there is an unusually large charge against our net capital, our operations that require the intensive use of capital would be limited. A large operating loss or charge against our net capital could adversely affect our ability to expand or even maintain current levels of business, which could have a material adverse effect on our business and financial condition.
Our investment adviser subsidiaries, CCFM and DCM, are registered with the SEC as investment advisers and are subject to the rules and regulations of the Investment Advisers Act. The Investment Advisers Act imposes numerous obligations on registered investment advisers including record-keeping, operational and marketing requirements, disclosure obligations, limitations on principal transactions between an adviser and its affiliates and advisory clients, and prohibitions on fraudulent activities. The SEC is authorized to institute proceedings and impose sanctions for violations of the Investment Advisers Act, ranging from fines and censure to termination of an investment adviser’s registration. Investment advisers are also subject to certain state securities laws and regulations.
We are also subject to the USA PATRIOT Act of 2001 (the “Patriot Act”), which imposes obligations regarding the prevention and detection of money-laundering activities, including the establishment of customer due diligence, customer verification, and other compliance policies and procedures. These regulations require certain disclosures by, and restrict the activities of, broker-dealers, among others. Failure to comply with these new requirements may result in monetary, regulatory and, in the case of the Patriot Act, criminal penalties.
In July 2010, the federal government passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Dodd-Frank Act has significantly restructured and intensified regulation in the financial services industry, with provisions that have created a systemic risk oversight body ( i.e. , the Financial Stability Oversight Council), expanded the authority of existing regulators, increased regulation of and restrictions on OTC derivatives markets and transactions, broadened the reporting and regulation of executive compensation, expanded the standards for market participants in dealing with clients and customers, and provided for the regulation of fiduciary duties owed by municipal advisors or conduit borrowers of municipal securities. In addition, Section 619 of the Dodd-Frank Act (known as the “Volker Rule”) and section 716 of the Dodd-Frank Act (known as the “swaps push-out rule”) limit proprietary trading of certain securities and swaps by certain banking entities. Although we are not a banking entity and are not otherwise subject to these rules, some of our clients and many of our counterparties are banks or entities affiliated with banks and will be subject to these restrictions. These sections of the Dodd-Frank Act and the regulations that are adopted to implement them could negatively affect the swaps and securities markets by reducing their depth and liquidity and thereby affect pricing in these markets. To date, we have adapted successfully to the applicable legislative and regulatory requirements of Dodd-Frank. However, the Dodd-Frank Act as a whole and the intensified regulatory environment will likely alter certain business practices and change the competitive landscape of the financial services industry, which may have an adverse effect on our business, financial condition, and results of operations.
In June 2018, in response to the uncertainty surrounding Brexit, we created a new subsidiary, Cohen & Company Financial (Europe) Limited (“CCFEL”) in Ireland, for the purpose of seeking to become regulated to perform asset management and capital markets activities in Ireland and the European Union. In April 2019, CCFEL received authorization from the CBI under the European Union (Markets in Financial Instruments) Regulations 2017 to provide Financial Instruments. The services for which CCFEL received authorization include the receipt and transmission of orders in relation to Financial Instruments, the execution of orders on behalf of clients, portfolio management, investment advice and investment research, and financial analysis. In addition, CCFEL applied for approval of a French branch, which approval was granted by the CBI and the branch was authorized by the French regulators in April 2019. Following authorization of the French branch of CCFEL, various contracts originally entered into by Cohen & Company Financial Limited (“CCFL”), formerly regulated by the Financial Conduct Authority in the United Kingdom, were novated to the French branch of CCFEL. The novation of contracts was completed on July 1, 2019. In order to finalize our Brexit plans and to increase the efficiency of our activity in Europe (and as all the regulated activity of CCFEL was carried out by its French branch), we created a new subsidiary, CCFESA, in France in 2021, for the purpose of taking over our regulated European activities under one regulated entity. In October 2021, CCFESA received authorization from the ACPR to act as an Investment Firm under the European Union (Markets in Financial Instruments) Regulations 2017 to provide Financial Instruments. The services for which CCFESA received authorization include the receipt and transmission of orders in relation to Financial Instruments, the execution of orders on behalf of clients, portfolio management, investment advice and investment research, and financial analysis. Following authorization of CCFESA, various contracts originally entered into by CCFL and CCFEL were novated to CCFESA. The novation of contracts was completed on November 1, 2021. Further to such novation, both CCFL and CCFEL stopped carrying out any regulated activity and have been liquidated.
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French Regulation. Our French subsidiary, Cohen & Company Financial (Europe) S.A. (“CCFESA”) is an investment services provider authorized and regulated by the French Prudential Supervision and Resolution Authority ( Autorit é de Contr ô le Prudentiel et de R é solution , the “ACPR”). CCFESA is subject to the ACPR’s rules and guidance, but also to the rules of the French Financial Markets Authority ( Autorit é des March é s Financiers , the “AMF”) and the relevant provisions of the French Monetary and Financial Code and the AMF’s general regulations. CCFESA’s license by the ACPR covers the following activities: (1) order reception and transmission for third parties; (2) order execution for third parties; (3) investment advice; and (4) portfolio management for third parties; it can also carry out research and financial analysis. An overview of key aspects of France’s regulatory regime, which apply to CCFESA, is set out below.
Ongoing regulatory obligations . As a French regulated entity, CCFESA is subject to ongoing regulatory obligations, which cover the following wide-ranging aspects of its business. The ACPR sets conditions that all French authorized investment firms, including CCFESA, must satisfy in order to become and remain authorized by the ACPR. These relate to the firm’s initial capital and appropriate financial resources for the proposed activities, the identity and status of direct and indirect shareholders, a management that has the knowledge, experience and fitness of investment firms and is located in France and has a program of operations for each of the proposed services approved by the AMF.
CCFESA is expected to comply with the ACPR’s regulatory frameworks. Consequently, the ACPR imposes overarching responsibilities on the directors and senior management of a regulated firm. Key requirements in this context include the need to have adequate systems and controls in relation to: (1) senior management arrangements and general organizational requirements; (2) compliance, internal audit, and financial crime prevention; (3) outsourcing; (4) record keeping; (5) risk management; and (6) managing conflicts of interest.
CCFESA permitted activity is to deal only with eligible counterparties and professional clients as defined under Schedule 2 of the MIFID II Regulations in relation to the regulated activities it conducts. The level with which CCFESA must comply is dependent on the categorization of its clients, which should be considered in the context of the regulated activity being performed. These rules include requirements relating to the type and level of information that must be provided to clients before business is conducted with or for them, the regulation of financial promotions, procedures for entering into client agreements, obligations relating to the suitability and appropriateness of investments, and rules about managing investments and reporting to clients.
Reporting . All authorized firms in France are required to report to the ACPR and to the AMF on a periodic basis. CCFESA’s reporting requirements are based on the scope of its license. The ACPR will use the information submitted by CCFESA to monitor it on an ongoing basis. There are also high-level reporting obligations, whereby CCFESA is required to engage with the AMF in an open and co-operative way and to disclose appropriately anything relating to its activity and which would affect its business plan, activity or any relevant information submitted to the regulators in the context of its license application.
Enforcement powers . The ACPR has a wide range of disciplinary and enforcement tools that it can use should a regulated firm fail to comply with its regulatory obligations. However, this primary jurisdiction does not exclude that of the AMF with regard more specifically to any failure by persons placed under its supervision (and therefore within investment firms) to fulfill their professional obligations. In addition, the AMF has the option of delegating its power of control, in particular to market operators and clearing houses and to the ACPR. For its part, the ACPR can also delegate its power of control, in particular to the AMF.
A wide range of tools can be used to take action against regulated entities and/or individuals which fall short of our expected standards of behavior including:
● issuance of a warning;
● issuance of a rebuke;
● prohibition, for a maximum period of 10 years, from carrying out certain operations and any other limitations in the exercise of its activity;
● temporary suspension or compulsory resignation, for a maximum period of 10 years, of one or more managers, with or without the appointment of a provisional administrator;
● partial or total withdrawal of approval or removal from the list of authorized persons, with or without the appointment of a liquidator;
● temporary or definitive withdrawal of the professional card, temporary ban on trading for their own account, temporary or definitive ban on the exercise of all or part of the activities or the exercise of management functions within the relevant entity; and
● imposition of a fine.
With regard to the pecuniary sanctions which may be imposed by the ACPR and/or the AMF instead of or in addition to the aforementioned sanctions, such fines cannot exceed 100 million euros (or ten times the amount of the benefit derived from such breach if this can be determined) or 15% of net annual turnover for breaches specifically referred to in the French Monetary and Financial Code (article L621-9). Fines issued against individuals under the authority or acting on behalf of an investment firm cannot exceed 15 million euros (or ten times the amount of the benefit derived from the breach if this can be determined).
In addition to the general sanctions regime as described above, a specific regime is provided for breaches of the provisions of the Capital Requirement (CRR) Regulation and the Capital Requirement Directive IV (CRD), which establish in particular the capital and liquidity requirements, as well as the rules of governance to which investment firms are subject.
Financial Resources . As part of the firm regulatory requirements under the ACPR it must maintain adequate financial resources as set out in the European Union Regulation (EU) 2019/2033, also known as the Investment Firms Regulation (IFR), and Directive (EU) 2019/2034, also known as the Investment Firms Directive (IFD). The IFR and the IFD apply to investment firms deemed sufficiently small and non-interconnected (so called “class 3” firms). Class 3 firms are subject to less stringent financial requirements; specifically, the capital requirement for a class 3 firm is equal to the higher of (1) €75,000 of permanent minimum capital requirement (PMR) or (2) a quarter of its fixed overhead measured on the basis of the previous year’s activity. CCFESA is classified as a class 3 firm and is subject to a base regulatory tangible capital requirement of €621,000.
In addition, this base capital will be reviewed on an annual basis. The Company's capital will also be reviewed in the event of a material change in the Company's business since the preceding year.
Anti-money Laundering Requirements . A French financial institution is subject to additional client acceptance requirements, which stem from anti-money laundering and terrorist financing legislation that requires a firm to identify its clients before conducting business with or for them and to retain appropriate documentary evidence of this process. Relevant anti-money laundering legislation in France is derived from EU Directives and more particularly EU Directive 2015/849 of 20 May 2015 (also known as the “Fourth Directive”) and EU Directive 2018/843 of 30 May 2018 (also known as the “Fifth Directive”). The fight against money laundering and terrorist financing (AML-CFT) is one of the AMF’s main supervisory priorities. The ACPR is also responsible for protecting the customers of the supervised institutions and ensuring the fight against money laundering and the financing of terrorism. It also has resolution powers.
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The obligations derived from the Fourth Directive were implemented into the French Monetary and Financial Code (refer to articles L561-1 and L561-50) and include:
● risk assessment;
● identification and verification of the identity of clients and their beneficial owners;
● due diligence measures upon entry and throughout the business relation;
● obligation to file suspicious transaction reports to TRACFIN;
● internal audit and reporting to the AMF; and
● implementation of asset freezing measures.
The Fifth Directive was implemented into French law at the beginning of 2020. It sets out a series of measures to fight against terrorist financing more effectively and guarantee improved transparency of financial transactions.
Changes in Existing Laws and Rules . Additional legislation and regulations, changes in rules promulgated by the government regulatory bodies, or changes in the interpretation or enforcement of laws and regulations may directly affect the manner of our operation, our net capital requirements, or our profitability. In addition, any expansion of our activities into new areas may subject us to additional regulatory requirements that could adversely affect our business, reputation, and results of operations.
The AML package, a new body of regulations to combat money laundering and the financing of terrorism (AML/CFT), was published on June 19, 2024. It consists of one directive, the 6th Anti-Money Laundering Directive (hereafter “AMLD6”), and two regulations, one concerning the creation of the new European AML-FT authority - known by the acronym “AMLA” - and the other relating to the requirements that supervised entities must meet to protect the European Union's internal market against BC-FT risks. As part of the AMLA package, the 6th Anti-Money Laundering Directive aims to improve the organization of national AML/CFT systems by establishing clear rules for national authorities, notably in terms of cooperation between Financial Intelligence Units (FIUs) and national supervisors. The main contributions of this new directive concern the centralization and harmonization of information required for financial investigations, in particular bank account information and information on beneficial owners.
European Regulation 2022/2554 of December 14, 2022 on the digital operational resilience of the financial sector (DORA) came into force on January 17, 2025. The requirements of this regulation apply, with certain exceptions, to all entities in the financial sector and concern:
● IT risk management;
● incident reporting;
● resilience testing; and
● management of third-party risk borne by IT service providers.
Available Information
On our internet website address at www.cohenandcompany.com , we make available, free of charge, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and any amendments to those reports that we file or furnish pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such information with, or furnish such information to, the SEC. Copies of such reports and other information are also available at no charge to any person who requests them at Cohen & Company, Attention: Investor Relations, 2929 Arch Street, Suite 1703, Philadelphia, PA 19104-2870 (Telephone: (215) 701-8952).
Our filings can also be obtained for free on the SEC’s Internet site at http://www.sec.gov . The reference to our website address does not constitute incorporation by reference of the information contained on our website in this filing or in other filings with the SEC, and the information contained on our website is not part of this filing.
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