What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-28 compared with 2022-10-28 · 135 added, 129 removed, 281 unchanged (48% of the section changed)

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("Oppenheimer") and Oppenheimer Asset Management Inc.

As of September 30, 2022, we provided our services from 91 offices in 25 states located throughout the United States and offices in Tel Aviv, Israel, Hong Kong, China, London, England, St.

Helier, Isle of Jersey, Munich, Germany and Geneva, Switzerland.

Client assets under administration ("CAUA") as of September 30, 2022 totaled $100.3 billion.

As of March 31, 2023, we provided our services from 92 offices in 25 states located throughout the United States and offices in Puerto Rico, Tel Aviv, Israel, Hong Kong, China, London, England, St.

Helier, Isle of Jersey, Munich, Germany, Portugal and Geneva, Switzerland.

The Company provides investment advisory services through OAM and Oppenheimer Investment Management LLC ("OIM") and Oppenheimer's financial advisor directed programs.

At September 30, 2022, client assets under management ("AUM") totaled $35.3 billion.

At March 31, 2023, client assets under management ("AUM") totaled $39.3 billion.

AUM includes the total market value of client investments in discretionary and non-discretionary advisory programs as well as the net asset value of private placements of alternative investments offered by and held by clients of the firm.

Client assets under administration ("CAUA") as of March 31, 2023 totaled $108.9 billion.

CAUA includes AUM and the other assets for which the firm provides services.

We also provide trust services and products through Oppenheimer Trust Company of Delaware and discount brokerage services through Freedom Investments, Inc.

Through OPY Credit Corp., we offer syndication as well as trading of issued syndicated corporate loans.

At September 30, 2022, the Company employed 2,938 employees (2,889 full-time and 49 part-time), of whom 985 were financial advisors.

Through OPY Credit Corp., from time to time we may offer syndication as well as trading of issued syndicated corporate loans.

At March 31, 2023, the Company employed 2,916 employees (2,876 full-time and 40 part-time), of whom 959 were financial advisors.

We are focused on growing our private client and asset management businesses through strategic additions of experienced financial advisors in our existing branch system and employment of experienced money management personnel in our asset management business as well as deploying our capital for expansion through targeted acquisitions.

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We review potential acquisition opportunities from time to time with the aim of fulfilling the Company's strategic goals, while evaluating and managing our existing businesses.

In addition, the Company may from time to time make minority private investments out of excess capital in allied or unrelated businesses with the goal of either syndicating the investment to eligible clients or retaining ownership because we believe them to be an attractive investment.

In addition, the Company may from

time to time make minority private investments out of excess capital in allied or unrelated businesses with the goal of either syndicating the investment to eligible clients or retaining ownership because we believe them to be an attractive investment.

Impact of Interest Rates

The Federal Reserve ("FED") increased the federal funds rate by 300 basiss point during the first nine months of 2022, with half of that increase occurring during the three months ended September 30, 2022.

Since inflation remains at elevated levels, it is likely that the federal funds rate will continue to increase in the coming months from the low levels of recent years.

In addition, the FED has begun to reduce its balance sheet as it allows maturing bonds to runoff without re-investing the proceeds.

The increases in the federal funds rate will be favorable to the Company’s interest-based revenues.

These changes in policy by the FED are intended to reduce inflation and are also likely to reduce economic activity possibly leading to a recession.

Such increases, while bringing down inflationary pressures may also prove detrimental to economic activity and thereby to financial markets in general.

The impact of rate increases seems likely to increase volatility in financial markets, decrease the value of fixed income investments and negatively impact equity share prices while reducing revenues the Company derives from commissions and from fees based on the value of client assets managed by the Company.

However, increases in interest rates will increase fees the Company earns from FDIC-insured deposits of clients through a program offered by the Company.

During the first quarter of 2023, the Federal Reserve ("FED") remained committed to tightening monetary policy as a means of combating inflation.

While modest decreases in key inflationary measures such as the Consumer Price Index demonstrated that the rate increases implemented throughout 2022 were beginning to have their intended impact, unexpectedly strong job growth and consumer spending data led the FED to conclude that further short-term rate increases were necessary.

As a result, the FED increased the Federal funds rate by 50 basis point to a target range of 4.75% to 5.00% during the three months ended March 31, 2023.

However, the smaller nature (25 basis point) of both first quarter 2023 rate increases balances the FED’s intention not to ‘over-tighten,’ while also acknowledging that a contraction in bank lending in light of the Silicon Valley Bank and Signature Bank failures will likely help ease inflation.

As a result of the banking failures, the FED has signaled that it will proceed with both prudence and patience in determining whether additional rate increases are warranted when it meets in May 2023.

The unexpected failure of two commercial banks (Silicon Valley Bank and Signature Bank) during the quarter, resulted from the rapid increase in interest rates during 2022 and the consequential impact on the value of fixed income investments by these banks and many others.

The increases in rates, which are intended to reduce inflation, are also likely to reduce economic activity possibly leading to a recession in the coming months.

These factors have already reduced customer confidence and are likely to continue to reduce discretionary spending, increase volatility in financial markets, and reduce revenues the Company derives from commissions and possibly from fees based on the value of client assets managed by the Company should equity prices decline.

The increases in the Federal funds rate are favorable to the Company's interest-based revenue.

However, increases in interest rates will increase fees the Company earns from FDIC-insured deposits of clients through a program offered by the Company, though such increases may be offset to some extent if the cash sweep balances decrease as clients seek higher-yielding investments.

These rate increases will also increase the rates the Company charges on margin balances and have a positive impact on our earnings.

In February 2022, without provocation, Russia invaded Ukraine.

The war has lasted longer than previously anticipated, and it seems likely it will last for an extended period of time as the Ukrainians continue to be more successful than initially expected at turning back Russian forces and as NATO countries supply the Ukrainians with armaments and supplies.

The war has lasted longer than previously anticipated, and it seems likely it will last for an extended period of time as the Ukrainians continue to be more successful than initially expected at turning back Russian forces and as NATO and other countries supply the Ukrainians with armaments and supplies.

The European Union and the United States have imposed broad-based sanctions and impounded financial assets of Russia, its companies and various notable Russian individuals.

The impact of the sanctions has been to increase the price of hydrocarbons and the costs of various agricultural products produced by both Russia and Ukraine.

In addition, the disruption of supplies for those products has further increased inflationary pressures in Europe as well as the rest of the world and in addition has led to significant cutbacks in economic activity due to anticipated shortages of natural gas in the coming winter period due to actions taken by Russia and OPEC.

The impact of the sanctions initially was to significantly increase the price of hydrocarbons and the cost of various agricultural products produced by both Russia and Ukraine.

In addition, the disruption of supplies for those products has further increased inflationary pressures in Europe as well as the rest of the world and has led to significant cutbacks in economic activity due to anticipated shortages of natural gas in the winter period due to actions taken by Russia and OPEC.

It has also had the indirect effect of lowering consumer confidence and consumer spending in Europe, all of which could have an adverse impact on financial markets in Europe as well as the U.S.

and, thus on our business.

Inflation Reduction Act of 2022

On August 16, 2022, President Biden signed H.R.

5376, commonly referred to as the Inflation Reduction Act (the "IRA"), into law, which includes an excise tax on stock buybacks, a new alternative minimum tax and significant tax incentives for energy and climate initiatives, among other provisions.

Effective for repurchases occurring after December 31, 2022, the IRA imposes a nondeductible 1% excise tax on the net value of certain stock that is repurchased during the tax year.

The value of stock repurchases subject to the tax is reduced by the value of any stock issued during the tax year.

Additionally, effective for tax years beginning after December 31, 2022, the IRA imposes a 15% corporate alternative minimum tax on companies with adjusted financial statement income exceeding $1 billion over a three-year period.

While we are currently assessing the impact of the IRA’s provisions, we do not expect it to have a material impact on the Company’s financial statements although future buybacks by the Company occurring after December 31, 2022 may be subject to the 1% excise tax.

CORONAVIRUS DISEASE 2019 ("COVID-19 PANDEMIC")

However, that impact has largely abated and the equity markets have performed quite well in early 2023 as they continue to try to discern the likely direction of the world economy as it is impacted by these crosscurrents.

COVID-19 PANDEMIC

The Company continues to monitor the effects of the COVID-19 pandemic both on a national level as well as regionally and locally and is responding accordingly.

In early March 2020, the Company executed on its Business Continuity Plan whereby the vast majority of our employees began to work remotely with only "essential" employees reporting to our offices.

We accomplished this by significantly expanding the use of technology infrastructure that facilitates remote operations.

Our ability to avoid significant business disruptions is reliant on the continued ability to support our employees that continue to work remotely.

To date, there have been no significant disruptions to our business or control processes as a result of this dispersion of employees.

While the direct impact of the virus has been substantially reduced, many employees from our home office and branch locations continue to work remotely.

In recent months, we have seen increased attendance at the workplace as local regulations have been loosened, hospital visits reduced and a larger portion of the population vaccinated.

There can be no assurance at this time that these improvements will continue and we continue to closely monitor the situation.

An increased numbers of employees have returned to offices in recent weeks and months but we continue to maintain flexible work arrangements for our employees in keeping with the change in expectations and work habits that have developed during the past several years.

To date, there have been no significant disruptions to our business or control processes as a result of COVID.

Since the direct impact of the virus has been substantially reduced, we have seen increased attendance at the workplace as local regulations have been loosened, hospital visits reduced and a larger portion of the population vaccinated.

The aftermath of the pandemic has continued to produce lower office attendance than pre-pandemic and had an ongoing impact on attitudes surrounding work-life balance.

Some employees from our home office and branch locations continue to work remotely at least part of each week but the efforts continue to encourage office attendance.

There can be no assurance at this time that improvements in attendance will continue and we continue to closely monitor the long term impact and to adjust our office footprints as real estate leases expire.

EXECUTIVE SUMMARY

The results for the quarter were significantly impacted by an adverse arbitration decision, but we were able to deliver profitable results reflecting the diversity and general health of our business.

Volatile market conditions and emerging economic headwinds reduced valuations in both equity and fixed income markets.

The high rate of inflation resulted in the Federal Reserve raising interest rates at the fastest speed in over 40 years with multiple 75 basis point increases during the quarter.

Our Wealth Management business saw a benefit from the higher interest rate environment, as income from our FDIC-insured bank deposit program and interest income on margin loans were markedly greater than the prior year although this was offset to some extent by lower activity levels and lower valuations in client portfolios which drive fee income.

The macroeconomic environment drove all major equity indices into bear market territory during the third quarter.

The declining valuations negatively impacted our advisory fee revenues.

The volatile markets also led to a marked slowdown in equity IPOs and secondary offerings and a significant decline in capital markets income.

Investment banking advisory fees, while lower than the record Q3 results recorded in 2021, picked up considerably from the second quarter.

The Company maintains a strong balance sheet with near record regulatory capital despite the volatile market environment and the impact of an adverse arbitration decision.

The Company took advantage of the lower level of its share price to purchase 413,052 shares (3%) of its Class A non-voting common stock at an average price of $33.86 per share in the open market under its share repurchase program resulting in 10,874,990 Class A non-voting common shares outstanding at September 30, 2022.

We remain confident in the resiliency of our business and our ability to continue to provide essential investment services to our clients.

The profitable results for the quarter reflect our ability to continue supporting and advising our clients and prudently managing our business in all types of markets.

Due to a combination of macroeconomic factors and turmoil within the

regional banking industry, the equity and fixed income markets were volatile during the first quarter of the year.

Convinced that Federal Reserve ("FED") tightening would soon end, the equity markets rallied to start the year.

However, unexpected bank failures created large uninsured bank deposit withdrawals at certain regional banks that led to the fear of a broader bank contagion.

Early action by the regulators to provide liquidity to banks seems to have dramatically slowed the move of funds into money market funds and short-term government securities.

While the Company did not have any direct exposures to the failed institutions, the events caused a reaction in equity and fixed income markets, impacted portfolio turnover and our transaction-based revenues.

Rising interest rates and fear of a recession significantly limited issuers' access to capital, resulting in markedly lower investment banking revenues associated with new equity issuances and secondary offerings.

Strong M&A advisory fees and trading revenues offset some of the weakness seen in the IPO market.

Our Wealth Management business continues to perform well, as its revenue mix has benefited from the rising interest rate environment.

Income from our FDIC-insured bank deposit program and interest income on margin loans approached record quarterly levels as a result of the FED’s 50 basis point rate increase during the quarter.

These revenue increases were partially offset by lower valuations in client portfolios, which drove decreased fee income.

Despite the volatility and market stress seen in the first quarter, the Company continues to maintain a strong balance sheet with capital near its historic highs and ample levels of liquidity.

During the first quarter, the Company took advantage of the lower level of its share price to purchase 95,055 shares (approximately 1%) of its Class A non-voting common stock at an average price of $38.79 per share in the open market under its share repurchase program.

This resulted in 10,975,723 shares of Class A non-voting common stock remaining outstanding at March 31, 2023.

We remain confident in the resiliency of our platform and our ability to provide essential investment services to our clients.

RESULTS OF OPERATIONS

The Company reported net income of $4.5 million or $0.40 basic earnings per share for the third quarter of 2022, compared with net income of $26.3 million or $2.07 basic earnings per share for the third quarter of 2021.

Revenue for the third quarter of 2022 was $294.1 million, a decrease of 6.7% compared to revenue of $315.3 million for the third quarter of 2021.

The Company reported net income of $14.6 million or $1.32 basic earnings per share for the first quarter of 2023, compared with net income of $9.3 million or $0.75 basic earnings per share for the first quarter of 2022.

Revenue for the first quarter of 2023 was $321.7 million, an increase of 20.9% compared to revenue of $266.0 million for the first quarter of 2022.

(Expressed in thousands, except Per Share Amounts or otherwise indicated)

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(2) Represents book value less goodwill and intangible assets divided by number of shares outstanding.

• Gross revenue, net income, and earnings per share for the third quarter of 2022 reflected the positive impact of the rising rate environment on our interest-sensitive revenues offset by lower activity levels and valuations in client portfolios and fewer underwriting and M&A transactions.

• Client assets under administration and under management were both at reduced levels at September 30, 2022, down from the second quarter of 2022 as well as the same period last year.

• Increased revenues in the Private Client segment are largely attributed to bank deposit sweep income, which exceeded the related revenue recorded during all of 2021 due to higher short-term interest rates.

• Non-compensation expenses increased from the prior year quarter, reflecting the impact of an adverse arbitration decision in September 2022, which has since been appealed.

• The Company repurchased 413,052 shares of Class A non-voting common stock during the third quarter of 2022 under its previously announced buy-back plan or 3% of shares outstanding at year-end 2021, bringing the total shares purchased under the plan during the first 9 months of 2022 to 1,675,595.

• Book value and tangible book value per share reached record levels at September 30, 2022 largely as a result of share buy-backs.

• Gross revenue, net income, and earnings per share for the first quarter of 2023 primarily reflected increases in our interest sensitive revenues, growth in M&A advisory fees and stronger sales and trading revenues partially offset by lower activity levels and valuations in client portfolios.

• Assets under administration and under management were both at reduced levels at March 31, 2023 when compared with the same period last year.

• Non-compensation expenses increased from the prior year quarter largely due to higher interest expense and legal costs.

• Near record revenues in the Private Client segment are largely attributed to higher bank deposit sweep income and margin interest revenue, which benefited from higher short-term interest rates.

• The Company repurchased 95,055 shares of Class A non-voting common stock during the first quarter of 2023 under its previously announced share repurchase program, or approximately 1% of shares outstanding at year-end 2022.

• Book value and tangible book value per share increased from the prior year period largely as a result of share repurchases and positive earnings.

BUSINESS SEGMENTS

The table below presents information about the reported revenue and pre-tax income (loss) of the Company's reportable business segments for the three and nine months ended September 30, 2022 and 2021:

The table below presents information about the reported revenue and pre-tax income (loss) of the Company's reportable business segments for the three months ended March 31, 2023 and 2022:

(Expressed in thousands)

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2022 2021 % Change 2022 2021 % Change

For the Three Months Ended March 31,

2023 2022 % Change

Private Client $ 203,421 $ 150,847 34.9

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Private Client

Private Client reported revenue for the current quarter of $178.6 million, 11.0% higher when compared with the previous year.

Pre-tax income was $30.0 million, a decrease of 19.9% compared with the prior year quarter.

Financial advisor headcount at the end of the current quarter was 985 compared to 1,003 at the end of the third quarter of 2021.

Private Client reported revenue for the current quarter of $203.4 million, 34.9% higher compared with a year ago mostly due to an increase in bank deposit sweep income and margin interest income driven by higher short-term interest rates.

Pre-tax income of $54.5 million in the current quarter resulted in a pre-tax profit margin of 26.8%.

Financial advisor headcount at the end of the current quarter was 959 compared to 993 at the end of the first quarter of 2022.

('000s, except Financial advisor headcount or otherwise indicated)

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Cash Sweep Balances (billions) $ 4.4 $ 8.1 $ (3.7) (45.7)

• Retail commissions decreased 8.7% from a year ago due to a decrease in client activity compared to the significantly elevated levels from a year ago.

• Advisory fees decreased 13.1% from a year ago primarily due to the impact of lower equity and fixed income valuations on assets under administration.

*Percentage not meaningful

• Retail commissions decreased 9.8% from a year ago primarily due to lower client activity in volatile markets.

• Advisory fees decreased 13.5% due to lower valuations of assets under management.

• Bank deposit sweep income increased $44.6 million from a year ago due to higher short-term interest rates.

• Interest revenue increased 89.8% from a year ago due to higher short-term interest rates and higher average margin balances.

• Other revenue decreased from a year ago primarily due to decreases in the cash surrender value of Company-owned life insurance policies.

• Compensation expenses decreased 10.2% from a year ago primarily due to decreased production, and decreased share-based and deferred compensation costs.

• Non-compensation expenses increased $35.2 million from a year ago primarily due to the impact of an adverse arbitration decision.

• Interest revenue approached a record high and increased 152.6% from a year ago due to higher short-term interest rates.

• Other revenue increased primarily due to increases in the cash surrender value of Company-owned life insurance policies , which fluctuates based on changes in fair value of the policies' underlying investments.

• Compensation expenses decreased 4.8% from a year ago primarily due to decreased production.

• Non-compensation expenses increased 100.7% from a year ago primarily due to higher interest expense and legal costs.

Asset Management

Asset Management reported revenue for the current quarter of $24.9 million, 7.5% lower when compared with the prior year.

Asset Management reported revenue for the current quarter of $24.0 million, 11.6% lower compared with a year ago.

Pre-tax income was $6.5 million, a decrease of 31.6% compared with the prior year period.

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AUM (billions) $ 39.3 $ 42.7 $ (3.4) (8.0)

• Advisory fee revenue decreased 7.5% from a year ago due to the lower net value of assets under management, partially offset by incentive fees earned during the third quarter of 2022.

• AUM were at reduced l evels of $35.3 billion at September 30, 2022, which is the basis for advisory fee billings for October 2022.

• Advisory fee revenue decreased 11.7% due to reduced management fees resulting from the lower net value of assets under management.

• AUM were at reduced l evels of $39.3 billion at March 31, 2023, which is the basis for advisory fee billings for April 2023.

• The decrease in AUM was comprised of lower asset values of $3.1 billion on existing client holdings and a net distribution of assets of $0.3 billion.

• Compensation expenses were up 9.5% from a year ago primarily due to increases in fixed and discretionary compensation.

• Non-compensation expenses were down 13.3% when compared to the prior year period due to lower portfolio manager expenses in line with the decrease in AUM.

The following table provides a breakdown of the change in assets under management for the three months ended September 30, 2022:

• Compensation expenses were up 7.5% from a year ago which was primarily related to increases in incentive compensation.

• Non-compensation expenses were down 6.6% when compared to the prior year period mostly due to lower external portfolio management costs which is directly related to the decrease in AUM, partially offset by higher travel-related expenses.

The following table provides a breakdown of the change in assets under management for the three months ended March 31, 2023:

(Expressed in millions)

For the Three Months Ended September 30, 2022

Balance Appreciation

(Depreciation) Ending

Fund Type Contributions Redemptions/Profit Distribution

For the Three Months Ended March 31, 2023

Fund Type Beginning Balance Contributions Redemptions/Profit Distribution Appreciation (Depreciation) Ending Balance

Traditional (1)

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$ 36,793 $ 2,518 $ (1,791) $ 1,784 $ 39,304

(1) Traditional investments include third party advisory programs, Oppenheimer financial adviser managed advisory programs and Oppenheimer Asset Management taxable and tax-exempt portfolio management strategies.

(1) Traditional investments include first party advisory programs, Oppenheimer financial adviser managed advisory programs and Oppenheimer Asset Management taxable and tax-exempt portfolio management strategies.

(2) Institutional fixed income provides solutions to institutional investors including:

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Capital Markets

Capital Markets reported revenue for the current quarter of $90.9 million, 29.3% lower when compared with the prior year period.

Pre-tax income was $2.4 million compared with pre-tax income of $17.9 million in the prior year period.

Capital Markets reported revenue for the current quarter of $90.3 million, 6.2% higher when compared with the prior year period.

Pre-tax loss was $15.5 million compared with pre-tax income of $1.2 million a year ago.

('000s) 1Q-2023 1Q-2022 Change % Change

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Non-compensation $ 28,963 $ 23,662 $ 5,301 22.4

Pre-tax Income $ 2,401 $ 17,888 $ (15,487) (86.6)

Pre-tax Income (Loss) $ (15,477) $ 1,166 $ (16,643) *

Compensation Ratio 85.1 % 70.8 % 1,430 20.2

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Pre-tax Margin (17.1) % 1.4 % (18.5) % *

• Advisory fees earned from investment banking activities decreased 43.5% compared with a year ago due to an industry-wide decrease in deal volumes.

• Equity underwriting fees decreased 80.8% compared with a year ago due to a significant decrease in equity IPOs and secondary offerings, including SPAC issuances.

• Fixed income underwriting fees were down 32.8% compared with a year ago primarily driven by a decrease in issuances of public finance and emerging market debt during the third quarter of 2022.

• Equities sales and trading revenue increased 13.0% compared with a year ago due to a marked increase in volatility resulting in increased volumes in the equities market compared to the levels in the prior year period.

• Fixed income sales and trading revenue increased by 18.3% compared with a year ago primarily due to an increase in trading income attributable to higher trading volumes.

• Compensation expenses decreased 26.0% compared with a year ago primarily due to decreased incentive compensation.

• Non-compensation expenses were 3.0% lower than a year ago due to a decrease in underwriting expenses, partially offset by an increase in business travel and entertainment expenses.

*Percentage not meaningful

• Advisory fees earned from investment banking activities increased 27.5% compared with a year ago due to an increase in M&A transactions.

• Equity underwriting fees decreased 34.6% compared with a year ago due to a continued market slowdown in equity IPOs and secondary offerings, including SPAC issuances.

• Fixed income underwriting fees were down 54.9% compared with a year ago primarily driven by lower deal volumes during the first quarter of 2023.

• Equities sales and trading revenue decreased 11.8% compared with a year ago due to reduced volumes in the equities market compared to the levels in the prior year period.

• Fixed income sales and trading revenues increased 38.4% compared with a year ago primarily due to both an increase in trading income attributable to wider spreads and also increased activity due to high volatility during the period.

• Compensation expenses increased 27.5% compared with a year ago primarily due to opportunistic hiring and increased incentive compensation.

• Non-compensation expenses were 22.4% higher than a year ago primarily due to an increase in interest expense in financing inventories.

CRITICAL ACCOUNTING POLICIES

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Certain of those policies are considered to be particularly important to the presentation of the Company's financial results because they require management to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain.

During the three months ended September 30, 2022, there were no material changes to matters discussed under the heading "Critical Accounting Polices" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

During the three months ended March 31, 2023, there were no material changes to matters discussed under the heading "Critical Accounting Polices" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2022, total assets decreased by 6.2% from December 31, 2021.

At March 31, 2023, total assets increased by 7.6% from December 31, 2022.

The Company satisfies its need for short-term financing from internally generated funds and collateralized and uncollateralized borrowings, consisting primarily of bank call loans, stock loans, and uncommitted lines of credit.

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The amount of Oppenheimer's bank borrowings fluctuates in response to changes in the level of the Company's securities inventories and customer margin debt, changes in notes receivable from employees, investment in furniture, equipment and leasehold improvements, and changes in stock loan balances and financing through repurchase agreements.

At September 30, 2022, the Company had bank call loans of $53.6 million compared to $69.5 million at December 31, 2021.

At March 31, 2023, the Company had bank call loans of $19.3 million compared to zero at December 31, 2022.

The Company also has some availability of short-term bank financing on an unsecured basis.

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The regulatory capital requirements for Oppenheimer Europe Ltd.

and Oppenheimer Investments Asia Limited were $5.2 million and $382,163, respectively, at September 30, 2022.

and Oppenheimer Investments Asia Limited were $5.1 million and $382,172, respectively, at March 31, 2023.

The liquid assets at Oppenheimer Europe Ltd.

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We used the net proceeds from the offering of the Unregistered Notes, along with cash on hand, to redeem in full our 6.75% Senior Secured Notes due July 1, 2022 in the principal amount of $150.0 million (the Company held $1.4 million in treasury for a net outstanding amount of $148.6 million), and pay all related fees and expenses related thereto.

On November 23, 2020, we completed an exchange offer in which we exchanged 99.8% of our Unregistered Notes for a like principal amount of notes with identical terms (the "Notes"), except that such new notes have been registered under the Securities Act.

On November 23, 2020, we completed an exchange offer in which we exchanged 99.8% of our Unregistered Notes for a like principal

amount of notes with identical terms (the "Notes"), except that such new Notes have been registered under the Securities Act.

We did not receive any proceeds in the exchange offer.

See note 11 to the condensed consolidated financial statements appearing in Item 1 for further discussion .

During the fourth quarter of 2022, the Company repurchased and subsequently cancelled $10.95 million of the Notes, recognizing a small extinguishment gain.

As of December 31, 2022, $114.05 million aggregate principal amount of the Notes remains outstanding.

During the first quarter of 2023, the Company repurchased and subsequently cancelled $1.0 million of the Notes, recognizing a small extinguishment gain.

As of March 31, 2023, $113.05 million aggregate principal amount of the Notes remains outstanding.

The Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by E.A.

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or the exercise by the Parent of its legal defeasance option or covenant defeasance option or the discharge of the Parent's obligations under the indenture for the Notes in accordance with the terms of such indenture.

The following tables present the results of operations for the nine months ended September 30, 2022 and the balance sheet at September 30, 2022 for the Parent and Subsidiary Guarantors.

The following tables present the results of operations for the three months ended March 31, 2023 and the balance sheet at March 31, 2023 for the Parent and Subsidiary Guarantors.

(Expressed in thousands) As of

September 30, 2022

March 31, 2023

Total Assets $ 2,057,254

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Due To Non-Guarantor Subsidiary 11,628

For the Nine Months Ended

September 30, 2022

For the Three Months Ended

March 31, 2023

Total Revenue $ 2,661

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Securities owned, with the exception of the ARS, are mainly comprised of actively trading readily marketable securities.

We issued $1.9 million in forgivable notes (which are inherently illiquid) to employees for the three months ended September 30, 2022 ($6.2 million for the three months ended September 30, 2021) as upfront or backend inducements to commence or continue employment as the case may be.

We issued $10.8 million in forgivable notes (which are inherently illiquid) to employees for the three months ended March 31, 2023 ($7.7 million for the three months ended March 31, 2022) as upfront or backend inducements to commence or continue employment as the case may be.

The amount of funds allocated to such inducements will vary with hiring activity.

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Bank call loans are generally payable on demand and bear interest at various rates.

At September 30, 2022, the Company had $53.6 million of bank call loans ($69.5 million at December 31, 2021).

The average daily bank loan outstanding for the three and nine months ended September 30, 2022 was $67.1 million and $88.50 million, respectively ($76.0 million and $80.1 million for the three and nine months ended September 30, 2021).

The largest daily bank loans outstanding for the three and nine months ended September 30, 2022 was $176.5 million and $226.6 million ($227.7 million for both of the three and nine months ended September 30, 2021).

At September 30, 2022, securities loan balances totaled $307.4 million ($244.2 million at December 31, 2021 and $286.2 million at September 30, 2021).

The average daily securities loan balance outstanding for the three and nine months ended September 30, 2022 was $300.9 million and $291.6 million, respectively ($296.9 million and $280.3 million for the three and nine months ended September 30, 2021).

The largest daily stock loan balance for the three and nine months ended September 30, 2022 was $339.2 million and $350.1 million, respectively ($320.6 million for both of the three and nine months ended September 30, 2021).

At March 31, 2023, the Company had $19.3 million of bank call loans (zero at December 31, 2022).

The average daily bank loan outstanding for the three months ended March 31, 2023 was $57.5 million ($87.1 million for the three months ended March 31, 2022).

The largest daily bank loans outstanding for the three months ended March 31, 2023 was $167.3 million ($190.2 million for the three months ended March 31, 2022).

At March 31, 2023, securities loan balances totaled $368.1 million ($320.8 million at December 31, 2022 and $300.3 million at March 31, 2022).

The average daily securities loan balance outstanding for the three months ended March 31, 2023 was $341.4 million ($304.1 million for the three months ended March 31, 2022).

The largest daily stock loan balance for the three months ended March 31, 2023 was $388.4 million ($350.1 million for both of the three months ended March 31, 2022).

We finance our government trading operations through the use of securities purchased under reverse repurchase agreements and repurchase agreements.

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fair value versus carrying value) for certain assets and liabilities.

At September 30, 2022, we did not have any repurchase agreements and reverse repurchase agreements that did not settle overnight or have an open settlement date.

At September 30, 2022, the gross balances of reverse repurchase agreements and repurchase agreements were $195.1 million and $479.2 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended September 30, 2022 was $250.2 million and $360.1 million, respectively ($134.9 million and $289.9 million, respectively, for the three months ended September 30, 2021).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three months ended September 30, 2022 was $526.7 million and $668.3 million, respectively ($423.9 million and $441.1 million, respectively, for the three months ended September 30, 2021).

At March 31, 2023, we did not have any repurchase agreements and reverse repurchase agreements that did not settle overnight or have an open settlement date.

At March 31, 2023, the gross balances of reverse repurchase agreements and repurchase agreements were $30.1 million and $310.5 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended March 31, 2023 was $179.0 million and $283.1 million, respectively ($132.4 million and $443.5 million, respectively, for the three months ended March 31, 2022).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three months ended March 31, 2023 was $506.4 million and $634.9 million, respectively ($462.5 million and $644.1 million, respectively, for the three months ended March 31, 2022).

Liquidity Management

We manage our liquidity to meet our current obligations and upcoming liquidity needs as well as to ensure compliance with regulatory requirements.

Our liquidity needs may be affected by market conditions, increased inventory positions, business expansion and other unanticipated occurrences.

Our liquidity needs may be affected by market conditions, increased inventory positions,

business expansion and other unanticipated occurrences.

In the event that existing financial resources do not satisfy our liquidity needs, we may have to seek additional external financing.

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We have Company-owned life insurance policies which are utilized to fund certain non-qualified deferred compensation plans.

Certain policies which could provide additional liquidity if needed had a cash surrender value of $71.6 million as of September 30, 2022.

Certain policies which could provide additional liquidity if needed had a cash surrender value of $79.1 million as of March 31, 2023.

We regularly review our sources of liquidity and financing and conduct internal stress analysis to determine the impact on the Company of events that could remove sources of liquidity or financing and to plan actions the Company could take in the case of such an eventuality.

Our reviews have resulted in plans that we believe would result in a reduction of assets through liquidation that would significantly reduce the Company's need for external financing.

Our primary long-term cash requirements include $124.3 million principal outstanding as of September 30, 2022 under our Senior Secured Notes (due in 2025) and $189.3 million of operating lease obligations.

The total cash requirement for interest expense related to the Notes and operating lease obligations is estimated to be approximately $4.9 million for the 2022 year.

Recent bank failures did not result in reducing the availability of funding or any disruption in the Company’s business.

Should such disruption occur in the future we have plans that we believe would result in a reduction of assets through liquidation that would significantly reduce the Company's need for external financing.

Our primary long-term cash requirements include $112.5 million principal outstanding as of March 31, 2023 under our Senior Secured Notes (due in 2025) and $193.4 million of operating lease obligations.

The total cash requirement for interest expense related to the Notes and operating lease obligations is estimated to be approximately $14.2 million for the remainder of 2023.

(Expressed in thousands)

For the Nine Months Ended September 30,

Cash (used in)/provided by operating activities $ (83,104) $ 135,188

For the Three Months Ended March 31,

Cash used in operating activities $ (86,123) $ (152,146)

Cash used in investing activities (2,976) (2,490)

Cash used in financing activities (83,126) (24,281)

Net (decrease)/increase in cash, cash equivalents and restricted cash $ (176,666) $ 105,395

Cash provided by/(used in) financing activities 7,033 (11,654)

Net decrease in cash, cash equivalents and restricted cash $ (82,066) $ (166,290)

Management believes that funds from operations, combined with our capital base and available credit facilities, are sufficient for our liquidity needs for the foreseeable future.

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For many years, we have sought to maintain the security of our clients' data, limit access to our data processing environment, and protect our data processing facilities.

See "Risk Factors — Cybersecurity – Security breaches of our technology systems, or those of our clients or other third-party vendors we rely on, could subject us to significant liability and harm our reputation" as further described in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

See "Risk Factors — Cybersecurity – Security breaches of our technology systems, or those of our clients or other first-party vendors we rely on, could subject us to significant liability and harm our reputation" as further described in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Recent examples of vulnerabilities of other companies and the government that have resulted in loss of client data and fraudulent activities by both domestic and foreign actors have caused us to continuously review our security policies and procedures and to take additional actions to protect our network and our information.

The commencement of hostilities between Ukraine and Russia has resulted in increased attacks on the infrastructure of data processing facilities around the world and heightened awareness of potential vulnerabilities including those of the Company.

Given the importance of the protection of client data, regulators have developed increased oversight of cybersecurity planning and protections that broker-dealers and other financial service providers have implemented.

Such planning and protection are subject to the SEC's and FINRA's oversight and examination on a periodic or targeted basis.

We expect that regulatory oversight will intensify, as a result of publicly announced data breaches by other organizations involving tens of millions of items of personally identifiable information.

We expect that regulatory oversight will intensify, as a result of publicly announced data breaches by other organizations involving

tens of millions of items of personally identifiable information.

We continue to implement protections and adopt procedures to address the risks posed by the current information technology environment.

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The Company implemented certain additional processes to accompany the actions taken to comply with the Reg BI Rules in order to ensure full compliance with the PTE.

In 2021, the SEC adopted reforms under the Investment Advisers Act of 1940 to modernize rules that govern investment adviser advertisements and payments to solicitors.

The amendments create a single rule (“Marketing Rule”) that replaced the previous regulatory guidance.

Registered investment advisers like Oppenheimer (OPCO) and Oppenheimer Asset Management (OAM) and their employees need to comply with the new rule beginning on November 4, 2022.

The SEC Marketing Rule is designed to regulate adviser’s marketing communications to their prospects and clients.

The Rule prohibits misleading advertisements and creates specific requirements for the presentation of performance data to clients and prospects.

The Rule defines an advertisement as any direct or indirect communication between an FA and a client or prospect regarding advisory services such as OPCO and OAM’s advisory programs or investments in private funds such as many of the hedge funds offered on the OAM hedge fund platform.

The Company has updated its policies and implemented certain processes in order to comply with the Marketing Rule.

Regulatory Environment

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Oppenheimer and many of its affiliates are each subject to various regulatory capital requirements.

As of September 30, 2022, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

As of March 31, 2023, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

See note 15 to the condensed consolidated financial statements in Item 1 for further information on regulatory capital requirements.

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The Company believes such claim to be without merit and intends to vigorously defend itself against any such claim.

On November 18, 2022, the Company received an information request from the SEC requesting information relating to the use of text messaging and similar forms of electronic communications by employees of the Company and whether those communications were properly retained by the Company as part of its records preservation requirements relating to the broker-dealer or investment adviser business activities of the Company.

The Company has submitted multiple responses to the information request and continues to cooperate with the SEC inquiry.

The SEC has under consideration a number of rules that are believed will change the operation of the equity markets and may disrupt and/or remove liquidity from the markets as well as significant rule proposals relating to cybersecurity, climate change and investment advisory custodial practices.

The Company continues to monitor these developments and cannot currently determine what, if any, impact they may have on its business.

FACTORS AFFECTING "FORWARD-LOOKING STATEMENTS"

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These risks and uncertainties, many of which are beyond the Company’s control, include, but are not limited to:

(i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements that could affect the cost and method of doing business, (v) general economic conditions, both domestic and international, including inflation and changes in consumer confidence and spending, (vi) competition from existing financial institutions, new entrants and other participants in the securities markets and financial services industry, (vii) potential cybersecurity threats and attacks, (viii) legal developments affecting the litigation experience of the securities industry and the Company, (ix) changes in foreign, federal and state tax laws that could affect the popularity of products sold by the Company or impose taxes on securities transactions, (x) the adoption and implementation of the SEC’s “Regulation Best Interest” and other regulations adopted in recent years, (xi) war, terrorist acts and nuclear confrontation as well as political unrest, including events relating to Russia's invasion of Ukraine and related Western sanctions, (xii) the Company’s ability to achieve its business plan, (xiii) the effects of the economy on the Company’s ability to find and maintain financing options and liquidity, (xiv) credit, operational, legal and regulatory risks, (xv) risks related to foreign operations, including those in the United Kingdom which may be affected by Britain’s January 2020 exit from the EU (“Brexit”) and economic uncertainty in the UK, EU and elsewhere, (xvi) the effect of technological innovation on the financial services industry and securities business, (xvii) risks related to election results, Congressional gridlock, political and social unrest, government shutdowns and investigations, trade wars, changes in or uncertainty surrounding regulation, and the potential for default by the U.S.

(i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements that could affect the cost and method of doing business, (v) general economic conditions, both domestic and international, including inflation, recession, and changes in consumer confidence and spending, (vi) competition from existing financial institutions, new entrants and other participants in the securities markets and financial services industry, (vii) potential cybersecurity threats and attacks, (viii) legal developments affecting the litigation experience of the securities industry and the Company, (ix) changes in foreign, federal and state tax laws that could affect the popularity of products sold by the Company or impose taxes on securities transactions, (x) the adoption and implementation of the SEC’s “Regulation Best Interest” and other regulations adopted in recent years, (xi) war, terrorist acts and nuclear confrontation as well as political unrest, including events relating to Russia's invasion of Ukraine and related Western sanctions, (xii) the Company’s ability to achieve its business plan, (xiii) the effects of the economy on the Company’s ability to find and maintain financing options and liquidity, (xiv) credit, operational, legal and regulatory risks, (xv) risks related to foreign operations, including those in the United Kingdom which may be affected by Britain’s January 2020 exit from the EU (“Brexit”) and economic uncertainty in the UK, EU and elsewhere, (xvi) the effect of technological innovation on the financial services industry and securities business, (xvii) risks related to election results, Congressional gridlock, political and social unrest, government shutdowns and investigations, trade wars, bank failures, changes in or uncertainty surrounding regulation, and the potential for default by the U.S.

government on the nation's debt, (xviii) risks related to changes in capital requirements under international standards that may cause banks to back away from providing funding to the securities industry, and (xix) risks related to the severity and duration of the COVID-19 Pandemic, the COVID-19 Pandemic’s impact on the U.S.

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There can be no assurance that the Company has correctly or completely identified and assessed all of the factors affecting the Company's business.

See “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

See “Risk Factors” in Part I, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and Annual Report on Form 10-K for the year ended December 31, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the nine months ended September 30, 2022, there were no material changes to the information contained in Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

During the three months ended March 31, 2023, there were no material changes to the information contained in Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis