What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-10-27 · 139 added, 130 removed, 274 unchanged (50% of the section changed)

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("Oppenheimer") and Oppenheimer Asset Management Inc.

As of September 30, 2023, we provided our services from 92 offices in 25 states located throughout the United States and offices in Puerto Rico, Tel Aviv, Israel, Munich, Germany, Hong Kong, China, London, England, St.

As of March 31, 2024, we provided our services from 89 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, 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, 2023, client assets under management ("AUM") totaled $40.4 billion.

At March 31, 2024, client assets under management ("AUM") totaled $46.6 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 September 30, 2023 totaled $110.7 billion.

Client assets under administration ("CAUA") as of March 31, 2024 totaled $124.9 billion.

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

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Through OPY Credit Corp., we conduct our secondary trading activities related to the purchase and sale of loans, primarily on a riskless principal basis.

At September 30, 2023, the Company employed 2,956 employees (2,916 full-time, 36 part-time and 4 summer interns), of whom 946 were financial advisors.

At March 31, 2024, the Company employed 2,951 employees (2,911 full-time and 40 part-time), of whom 936 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.

We are increasingly creating and investing in private market opportunities on our own behalf and on behalf of qualified clients.

We are also focused on opportunities in our capital market businesses where we can employ experienced personnel and/or small units that will improve our ability to attract institutional clients in both equities and fixed income without significantly raising our risk profile.

We are continuously reviewing ways in which we can increase security around our data and our platform as the risks of cybercrime increase.

We are also focused on opportunities in our capital market businesses, including integrating new technology platforms to expand the suite of services offered to our clients and onboarding experienced personnel and/or small units that will improve our ability to attract institutional clients in both equities and fixed income without significantly raising our risk profile.

In investment banking, we are committed to growing our footprint by adding experienced bankers within our existing industry practices as well as new industry practices where we believe we can be successful.

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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 Change in Short-term Interest Rates

During the third quarter, the Federal Reserve (“FED”) continued at a slower pace and magnitude of rate increases in what we believe to be the final stages of its tightening cycle.

In response to inflation remaining above the FED’s 2% target coupled with strong job gains, the FED increased the Federal Funds rate by 25 basis points at its July 2023 meeting to a new target range of 5.25% to 5.50%, which is the highest level in 22 years.

After eleven meetings with a rate increase, the FED paused on further tightening actions at its September 2023 meeting, in light of an improved outlook on core inflation and a desire to proceed carefully given the uncertainty that exists around energy costs, labor strife and other potential headwinds including the geopolitical risks emanating from the wars in the Ukraine and now Israel.

The FED’s forecast currently projects one additional rate increase during 2023.

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

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

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

At its meetings in first quarter of 2024, the Federal Reserve (the “FED”) unanimously decided to hold the target federal funds rate steady at 5.25% to 5.50% – a 23-year high and the fifth consecutive meeting with no target rate change.

While the market generally expected that the FED would ease rates to some extent in 2024 given the strong performance of the U.S.

economy and low unemployment levels, the FED has held them at their current, more restrictive range since the outset of the year given higher than anticipated inflationary readings and the FED’s desire for inflation to return to its 2% long-term target.

The FED’s median forecast currently projects three rate decreases during 2024, though this is subject to change and the market believes that these restrictive conditions will likely continue.

Potential decreases to the federal funds rate may result in reduced interest-based revenues though any future federal funds rate increases may improve these revenues.

While decreases in interest rates will lower fees the Company earns from FDIC insured deposits of clients through a program offered by the Company, such decreases may be offset to a degree if the cash sweep balances increase as clients find fewer higher-yielding alternatives to deploy these balances.

Future rate decreases will also reduce the rates the Company charges on margin balances which will have a negative impact on our earnings.

2023 Israel-Hamas War

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Israel formally declared war on Hamas in response to the attack and initiated several military operations in an effort to clear militants from the area.

The war has triggered a humanitarian crisis, with thousands displaced from their homes and many without food, water or electricity.

The war has triggered a humanitarian crisis, with hundreds of thousands displaced from their homes and many without food, water or electricity.

There remains a risk that the conflict could expand into a wider regional war, which could have an adverse impact on the worldwide economy, financial markets and thus on our business.

At this time, the conflict has not yet had a material impact on our business operations in Israel.

“Dutch Auction” Tender Offer

On July 6, 2023, the Company completed its “Dutch Auction” tender offer.

A total of 437,183 shares of the Company's Class A Stock, par value $0.001 per share were properly tendered at a purchase price of $40.00 per share for an aggregate cost of approximately $17.49 million.

The purpose of the tender offer, among others, was to assure that sufficient liquidity existed for our stockholders that might have been required to sell shares of Class A Stock when they were removed from the Russell 2000 and 3000 indices at the end of June 2023.

At this time, the conflict has not yet had a material impact on our business operations in Israel or elsewhere.

EXECUTIVE SUMMARY

The profitable results for the quarter reflect improved performance across many of our businesses, owing to higher interest rates and increased market volumes emanating from a still resilient economy.

The rate of inflation continued to stabilize, while the labor market remained strong despite higher interest rates and labor unrest.

economy can perhaps yet achieve a “soft landing”.

The stronger economy, however, has led to a market expectation that the Federal Reserve will maintain "higher for longer" interest rates well into 2024 which, in conjunction with continued fighting in Ukraine and the new eruption of unparalleled violence in Israel and Gaza, has resulted in a pullback in most major equity indices.

Our Wealth Management business continued to benefit from recent macroeconomic conditions, with the elevated interest rate environment driving large increases in bank deposit sweep income and margin interest revenue compared to the prior year period.

Higher valuations in client portfolios and the addition of new client assets also resulted in meaningful improvements in advisory fees, though these were offset to some extent by the stock market retreat during the quarter and lower transaction-based fees due to subdued client activity.

Our Capital Markets business also generated strong results, with higher fixed income sales and trading and somewhat higher equities underwriting revenues offsetting lower M&A advisory fees.

We finished the quarter with a strong balance sheet and ample capital levels that will permit us to continue seeking investment opportunities across our businesses.

During the quarter, the Company completed its previously disclosed “Dutch auction” tender offer in which we repurchased 437,183 shares of our Class A non-voting common stock at a price of $40.00 per share.

During the quarter, the Company also purchased 168,904 shares (2%) of our Class A non-voting common stock at an average price of $38.30 per share in the open market under our share repurchase program.

This resulted in 10,289,233 shares of Class A non-voting common stock remaining outstanding, resulting in book value and tangible book value per share at record levels as of September 30, 2023.

The Firm registered outstanding operating results for the first quarter of 2024, reflecting the solid performance of our investment banking franchise amidst an improving capital market and strong results from our Wealth Management Business responding to the impact of rising equity markets.

Our overall performance was favorably impacted by improving macroeconomic conditions, highlighted by the continued rise of the equity markets with the S&P reaching record highs owing to positive economic data and expectations that the Federal Reserve will pivot to reducing rates in the second half of the year.

The stock market rally propelled assets under management within our Wealth Management business to all-time highs, which drove a large increase in AUM-based advisory fee revenue when compared with the prior year period.

We also saw encouraging signs of improvement in the capital raising environment, as our investment banking results were boosted by a meaningful uptick in the number of private placement and underwriting transactions in our pipeline that crystallized during the quarter.

The still-high interest rate environment boded well for our fixed income division, which saw continued strength within its sales and trading revenue largely due to higher volumes and increased volatility.

Higher rates also benefited several of our other interest-sensitive revenue streams, though we did see a pullback in FDIC sweep deposit balances which reduced these revenues.

The Company ended the quarter on a high note with record book value per share levels resulting from positive earnings and share repurchases.

Our strong balance sheet and ample capital levels have us well-positioned for growth and to continue providing value added investment services to our clients.

RESULTS OF OPERATIONS

The Company reported a net income of $13.9 million or $1.32 basic earnings per share for the third quarter of 2023, compared with net income of $4.5 million or $0.40 per share for the third quarter of 2022.

Revenue for the third quarter of 2023 was $312.7 million, an increase of 6.3% compared to revenue of $294.1 million for the third quarter of 2022.

The Company reported net income of $26.1 million or $2.50 basic earnings per share for the first quarter of 2024, compared with net income of $14.6 million or $1.32 per share for the first quarter of 2023.

Revenue for the first quarter of 2024 was $353.1 million, an increase of 9.8% compared to revenue of $321.7 million for the first quarter of 2023.

(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.

• Increased revenue for the third quarter of 2023 was primarily driven by a rise in interest sensitive income, including margin interest and bank deposit sweep income, as well as higher fixed income sales and trading and equities underwriting revenues.

• Assets under administration and under management were both at higher levels at September 30, 2023 when compared with the same period last year, benefiting from market appreciation and positive net asset flows.

• Non-compensation expenses decreased from the prior year quarter largely due to lower legal costs partially offset by higher interest expense.

• The Company completed its “Dutch Auction” tender offer, resulting in the repurchase of 437,183 shares of the Company's Class A non-voting common stock.

The Company also repurchased 168,904 shares of Class A Stock during the third quarter of 2023 under its previously announced share repurchase program, or approximately 2% of shares outstanding at year-end 2022.

• Book value and tangible book value per share reached new record highs as a result of positive earnings and share re-purchases.

• Increased revenue for the first quarter of 2024 was primarily driven by a significant improvement in private placement and underwriting-related fees generated by our investment banking business, higher advisory fees attributable to a rise in billable AUM as well as continued strength in fixed income sales and trading revenue.

• Assets under administration and under management were both at record levels at March 31, 2024, benefiting from market appreciation and positive net asset flows.

• Compensation expenses increased from the prior year quarter largely as a result of higher base salary expense associated with opportunistic new hires and inflationary pressures on wages in addition to higher production-related expenses.

• Non-compensation expenses decreased from the prior year quarter primarily due to lower legal costs partially offset by higher interest expense.

• Book value and tangible book value per share reached new record highs as a result of positive earnings and share repurchases.

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, 2023 and 2022:

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, 2024 and 2023:

(Expressed in thousands)

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

2023 2022 % Change 2023 2022 % Change

For the Three Months Ended March 31,

2024 2023 % Change

Private Client $ 213,033 $ 203,421 4.7

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Total $ 37,455 $ 19,049 96.6

*Percentage not meaningful

Private Client

Private Client reported revenue for the current quarter of $193.3 million, 8.2% higher when compared with the prior year period.

Pre-tax income was $65.2 million, compared with pre-tax income of $30.0 million in the prior year period.

Financial advisor headcount at the end of the current quarter was 946 compared to 985 at the end of the third quarter of 2022.

Private Client reported revenue for the current quarter of $213.0 million, 4.7% higher compared with a year ago mostly due to higher advisory fees driven by appreciation in AUM and an increase in commission revenue.

Pre-tax income of $68.2 million in the current quarter resulted in a pre-tax margin of 32.0%.

Financial advisor headcount at the end of the current quarter was 936 compared to 959 and 931 at the end of the first quarter of 2023 and fourth quarter of 2023, respectively.

('000s unless otherwise indicated)

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Cash Sweep Balances (billions) $ 3.2 $ 4.4 $ (1.2) (27.3)

• Retail commissions were reduced compared with the prior year quarter due to continued subdued retail trading activity.

• Advisory fees increased 6.0% from a year ago primarily due to higher AUM during the billing period for the current quarter when compared to the third quarter of last year.

• Bank deposit sweep income increased $6.5 million or 18.3% from a year ago due to higher short-term interest rates partially offset by lower cash sweep balances.

• Interest revenue increased 46.8% from a year ago due to higher short-term interest rates.

• Other revenue decreased from a year ago primarily due to lower Company-owned life insurance death benefit proceeds.

• Compensation expenses increased 5.5% from a year ago primarily due to higher production-related expenses and deferred compensation costs, partially offset by lower share-based compensation expenses.

• Retail commissions increased 13.2% from a year ago primarily due to higher retail trading activity

• Advisory fees increased 16.1% due to higher AUM during the billing period for the current quarter when compared to the first quarter of last year and increased net new client assets

• Bank deposit sweep income decreased $12.2 million from a year ago due to lower cash sweep balances

• Interest revenue was relatively flat with the prior year period

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

• Compensation expenses increased 14.8% from a year ago primarily due to higher production related expenses

• Non-compensation expenses decreased 33.7% from a year ago primarily due to lower legal costs

Asset Management

Asset Management reported revenue for the current quarter of $20.8 million, 16.2% lower when compared with the prior year period.

Pre-tax income was $5.0 million, a decrease of $3.4 million compared with the prior year period.

Asset Management reported revenue for the current quarter of $24.9 million, 4.0% higher when compared with the prior year period.

Pre-tax income was $7.6 million, an increase of $1.2 million compared with the prior year period.

('000s unless otherwise indicated) 1Q-2024 1Q-2023 Change % Change

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*Percentage not meaningful

• Advisory fees increased 1.6% from a year ago due to an increase in management fees resulting from the higher net value of billable AUM during the quarter.

• Other revenue decreased $4.4 million from a year ago due to a decrease in fair value of the positions held in private equity funds.

• AUM increased to $40.4 billion at September 30, 2023, which is the basis for advisory fee billings for October 2023.

• The increase in AUM was comprised of higher asset values of $4.4 billion on existing client holdings and a net contribution of $0.7 billion in new assets.

• Advisory fee revenue increased 8.4% from a year ago due to increased management fees resulting from the higher net value of billable AUM during the quarter and increased net new client assets

• Other revenue decreased $1.0 million from a year ago due to a decrease in the fair value of the positions held in private equity funds

• AUM increased to $46.6 billion at March 31, 2024, a new record high, which is the basis for advisory fee billings for April 2024

• The increase in AUM was comprised of higher asset values of $7.1 billion on existing client holdings and a net contribution of $0.2 billion in new client assets

• Compensation expenses were down 15.6% from a year ago which was due to decreases in incentive compensation

• Non-compensation expenses were up 10.2% when compared to the prior year period mostly due to higher external portfolio management costs which are directly related to the increase in billable AUM

The following table provides a breakdown of the change in assets under management for the three months ended September 30, 2023:

The following table provides a breakdown of the change in assets under management for the three months ended March 31, 2024:

(Expressed in millions)

For the Three Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

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

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Capital Markets reported revenue for the current quarter of $112.1 million, 24.1% higher when compared with the prior year period.

Pre-tax loss was $15.3 million, compared with pre-tax income of $2.4 million in the prior year period.

Pre-tax loss was $6.7 million, compared with pre-tax loss of $15.5 million in the prior year period.

('000s) 1Q-2024 1Q-2023 Change % Change

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Non-compensation $ 37,197 $ 28,963 $ 8,234 28.4

Pre-tax Income (Loss) $ (15,254) $ 2,401 $ (17,655) *

Pre-tax Loss $ (6,702) $ (15,477) $ 8,775 *

Compensation Ratio 72.8 % 85.1 % (1,230) (14.5)

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*Percentage not meaningful

• Advisory fees earned from investment banking activities decreased 38.5% compared with a year ago due to fewer M&A transactions.

• Equities underwriting fees increased 201.2% when compared with a year ago due to higher new issuance volumes and deal sizes.

• Fixed income underwriting fees were relatively flat with the prior year.

• Equities sales and trading revenue decreased 11.2% compared with a year ago due to reduced volumes as a result of lower market volatility.

• Fixed income sales and trading revenue increased by 48.9% compared with a year ago primarily due to an increase in trading income attributable to higher volatility and higher volumes.

• Compensation expenses increased 20.7% compared with a year ago primarily due to costs associated with opportunistic hiring and increased incentive compensation.

• Advisory fees earned from investment banking activities increased 14.1% compared with a year ago due to higher transaction volumes, particularly in the healthcare industry

• Equity underwriting fees increased 79.5% when compared with a year ago due to higher new issuance volumes

• Fixed income underwriting fees were modestly higher than the prior year

• Equities sales and trading revenue was relatively flat with the prior year

• Fixed income sales and trading revenue increased 53.9% compared with a year ago primarily due to an increase in trading income attributable to higher volumes and market volatility

• Compensation expenses increased 6.2% compared with a year ago primarily due to costs associated with opportunistic hiring and higher deferred compensation costs

• Non-compensation expenses were 28.4% higher than a year ago primarily due to an increase in interest expense in financing trading inventories

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The Company's accounting policies are essential to understanding and interpreting the financial results reported on the condensed consolidated financial statements.

The significant accounting policies used in the preparation of the Company's condensed consolidated financial statements are summarized in note 2 to those statements and the notes thereto found in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

The significant accounting policies used in the preparation of the Company's condensed consolidated financial statements are summarized in note 2 to those statements and the notes

thereto found in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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 nine months ended September 30, 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.

During the three months ended March 31, 2024, 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, 2023.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2023, total assets increased by 9.6% from December 31, 2022.

At March 31, 2024, total assets increased by 13.1% from December 31, 2023.

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, 2023, the Company had bank call loans of $56.2 million compared to zero at December 31, 2022.

At March 31, 2024, the Company had bank call loans of $94.4 million compared to zero at December 31, 2023.

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 $5.4 million and $383,083, respectively, at September 30, 2023.

and Oppenheimer Investments Asia Limited were $5.4 million and $383,296, respectively, at March 31, 2024.

The liquid assets at Oppenheimer Europe Ltd.

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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 remained 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 September 30, 2023, $113.05 million aggregate principal amount of the Notes remains outstanding.

As of March 31, 2024, $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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• secured on a first-priority basis by the collateral, subject to certain exceptions and permitted liens, and it is intended that pari passu lien indebtedness, if any, will be secured on an equal and ratable basis.

Each subsidiary guarantee is limited so that it does not constitute a fraudulent conveyance under applicable law, which may reduce the subsidiary’s obligations under the guarantee.

Each subsidiary guarantee is limited so that it does not constitute a fraudulent conveyance under applicable law, which may reduce the Subsidiary Guarantor’s obligations under the guarantee.

There are no externally imposed restrictions on transfers of assets between the Company and its subsidiaries.

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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 selected financial information as of September 30, 2023 and for the nine months ended September 30, 2023 for the Parent and Subsidiary Guarantors.

The following tables present the selected financial information as of March 31, 2024 and for the three months ended March 31, 2024 for the Parent and Subsidiary Guarantors.

(Expressed in thousands) As of

September 30, 2023

March 31, 2024

Total Assets $ 2,130,167

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Due To Non-Guarantor Subsidiary 72,244

For the Nine Months Ended

September 30, 2023

For the Three Months Ended

March 31, 2024

Total Revenue $ 2,612

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Our collateral maintenance policies and procedures are designed to limit our exposure to credit risk.

Securities owned are mainly comprised of actively trading readily marketable securities.

We issued $4.5 million in forgivable notes (which are inherently illiquid) to employees for the three months ended September 30, 2023 ($1.9 million for the three months ended September 30, 2022) as upfront or backend inducements to commence or continue employment as the case may be.

Securities owned are mainly comprised of actively traded readily marketable securities.

We issued $4.5 million in forgivable notes (which are inherently illiquid) to employees for the three months ended March 31, 2024 ($1.9 million for the three months ended March 31, 2023) 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, 2023, the Company had $56.2 million of bank call loans (zero at December 31, 2022).

The average daily bank loan outstanding for the three and nine months ended September 30, 2023 was $43.8 million and $59.7 million, respectively ($67.1 million and $88.5 million for the three and nine months ended September 30, 2022).

The largest daily bank loans outstanding for the three and nine months ended September 30, 2023 was $112.2 million and $167.3 million, respectively ($176.5 million and $226.6 million for the three and nine months ended September 30, 2022).

At September 30, 2023, securities loan balances totaled $292.9 million ($320.8 million at December 31, 2022 and $307.4 million at September 30, 2022).

The average daily securities loan balance outstanding for the three and nine months ended September 30, 2023 was $314.3 million and $339.4 million, respectively ($300.9 million and $291.6 for the three and nine months ended September 30, 2022).

The largest daily stock loan balance for the three and nine months ended September 30, 2023 were $359.0 million and $391.5 million, respectively ($339.2 million and $350.1 million for the three and nine months ended September 30, 2022).

At March 31, 2024, the Company had $94.4 million of bank call loans (zero at December 31, 2023).

The average daily bank loan outstanding for the three months ended March 31, 2024 was $57.8 million ($57.5 million for the three months ended March 31, 2023).

The largest daily bank loans outstanding for the three months ended March 31, 2024 was $164.9 million ($167.3 million for the three months ended March 31, 2023).

At March 31, 2024, securities loan balances totaled $298.0 million ($285.0 million at December 31, 2023 and $368.1 million at March 31, 2023).

The average daily securities loan balance outstanding for the three months ended March 31, 2024 was $303.4 million ($341.4 million for the three months ended March 31, 2023).

The largest daily stock loan balance for the three months ended March 31, 2024 was $335.7 million ($388.4 million for the three months ended March 31, 2023).

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

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Repurchase and reverse repurchase agreements are presented on a net-by-counterparty basis, when the repurchase and reverse repurchase agreements are executed with the same counterparty, have the same explicit settlement date, are executed in accordance with a master netting arrangement, the securities underlying the repurchase and reverse repurchase agreements exist in "book entry" form and certain other requirements are met.

Certain of our repurchase agreements and reverse repurchase agreements are carried at fair value as a result of the Company's fair value option election.

We elected the fair value option for those repurchase agreements and reverse repurchase agreements that do not settle overnight or have an open settlement date.

We have elected the fair value option for these instruments to more accurately reflect market and economic events in our earnings and to mitigate a potential imbalance in earnings caused by using different measurement attributes (i.e.

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

At September 30, 2023, 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, 2023, the gross balances of reverse repurchase agreements and repurchase agreements were $5.2 million and $685.2 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended September 30, 2023 was $48.2 million and $720.8 million, respectively ($250.2 million and $360.1 million, respectively, for the three months ended September 30, 2022).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three months ended September 30, 2023 was $227.1 million and $801.2 million, respectively ($526.7 million and $668.3 million, respectively, for the three months ended September 30, 2022).

At March 31, 2024, the gross balances of reverse repurchase agreements and repurchase agreements were $578.8 million and $861.1 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended March 31, 2024 was $122.9 million and $809.3 million, respectively ($179.0 million and $283.1 million, respectively, for the three months ended March 31, 2023).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three months ended March 31, 2024 was $578.4 million and $1.1 billion, respectively ($506.4 million and $634.9 million, respectively, for the three months ended March 31, 2023).

Liquidity Management

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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 $80.9 million as of September 30, 2023.

Certain policies which could provide additional liquidity if needed had a cash surrender value of $95.2 million as of March 31, 2024.

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.

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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 $112.6 million principal outstanding as of September 30, 2023 under our Senior Secured Notes (due in 2025) and $194.0 million of operating lease obligations.

Our primary long-term cash requirements include $112.7 million principal outstanding, net of debt issuance costs as of March 31, 2024 under our Senior Secured Notes (due in 2025) and $177.3 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 $13.9 million for the remainder of 2024.

(Expressed in thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash used in operating activities $ (79,048) $ (86,123)

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CYBERSECURITY

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 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 as well as hostilities in Israel have 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.

Requirements to submit client data to industry-wide databases increases the vulnerability of that data and the Company has no control over the protections afforded such data but continues to have exposure to its unwarranted release.

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

The Company has significantly increased the resources dedicated to this effort and believes that further increases may be required in the future in anticipation of increases in the sophistication and persistency of such attacks.

There can be no guarantee that our cybersecurity efforts will be successful in discovering or preventing a security breach.

Cybersecurity presents significant challenges to the business community in general, including to the financial services industry.

Increasingly, bad actors, both domestic and international, attempt to steal personal data and/or interrupt the normal functioning of businesses through accessing individuals' and companies' files and equipment connected to the internet.

Recent incidents have reflected the increasing sophistication of intruders and their intent to steal personally identifiable information as well as funds and securities.

These intruders sometimes use instructions that are seemingly from authorized parties but in fact, are from parties intent on attempting to steal.

In other instances these intruders attempt to bypass normal safeguards and disrupt or steal significant amounts of information and then either release it to the Internet or hold it for ransom.

Regulators are increasingly requiring companies to provide heightened levels of sophisticated defenses.

The Company maintains processes and systems with an aim to preventing any such attack from disrupting its services to clients as well as to prevent any loss of data concerning its clients, their financial affairs, as well as Company privileged information.

Our management is actively involved in the oversight of our cybersecurity risk management program, We have devoted significant financial and personnel resources to implement and maintain security measures to meet regulatory requirements and customer expectations.

We have incorporated cybersecurity processes to assess, identify and manage risks from cybersecurity threats into our overall risk assessment process.

The Company maintains a cybersecurity program that is designed to identify, protect from, detect, respond to, and recover from cybersecurity threats and risks, and protect the confidentiality, integrity, and availability of its information systems, including the information residing on such systems.

The National Institute of Standards and Technology Cybersecurity Framework helps the Company inform its cybersecurity agenda and prioritize its cybersecurity activities.

The Company takes a risk-based approach to cybersecurity, which begins with the identification and evaluation of cybersecurity risks or threats that could affect the Company’s operations, finances, legal or regulatory compliance, or reputation.

The Company has processes in place for assessing, identifying and managing material risks from cybersecurity threats along with risk assessment procedures designed to allow such processes to remain responsive to emerging risks.

Our processes include, but are not limited to, the following:

• we engage third-party cybersecurity firms and tools to assist with network monitoring, endpoint protection, vulnerability assessments and penetration testing;

• we engage cyber security consultants, auditors, and other third parties to assess and enhance our cybersecurity practices, such as to perform tabletop exercises and evaluate our cyber processes including an assessment of our incident response procedures.

Identified risks are formally tracked until mitigated or eliminated;

• we perform regular scanning of our systems to identify and resolve critical vulnerabilities;

• we provide periodic training and testing, including phishing tests, to help our employees understand cybersecurity risks and their responsibility in mitigating those risks;

• we insure against potential losses from cyber incidents by maintaining cybersecurity insurance.

We have a written incident response plan that identifies the steps to be taken in response to a cybersecurity incident that includes investigation, escalation and remediation provisions.

The incident response plan includes standard processes for reporting and escalating cybersecurity incidents to senior management.

We have processes to evaluate third party service providers and vendors that have access to sensitive systems and Company and customer data, which may include the use of cybersecurity questionnaires and due diligence procedures such as assessments of that service provider’s cybersecurity posture.

Management’s Role

Management has implemented risk management structures, policies and procedures, and manages our risk exposure on a day-to-day basis.

The Company has a dedicated cybersecurity organization within its technology department that focuses on current and emerging cybersecurity matters.

The Company’s cybersecurity function is led by the Company’s Chief Information Officer ("CIO") and the Company’s Chief Information Security Officer ("CISO"), who reports to the Company’s CIO.

The CIO and his direct reports, including the CISO, discuss action items related to risks at a standing monthly meeting.

The CISO and many members of his team have multiple decades of cybersecurity related experience.

Risk reporting is provided at monthly meetings of the Firm’s cross-business Cybersecurity Committee and periodic presentations to the Firm’s Risk Management Committee, at which many members of the Company’s senior management are present.

The CEO meets regularly with the CIO to discuss cybersecurity threats and existing and potentially new technology systems including those related to cybersecurity.

The CIO and CISO have a standing monthly meeting with the President and General Counsel to discuss potential vulnerabilities in the cyber environment.

The President formerly ran the Information Technology Department at the firm and as a result has significant systems experience including experience related to cybersecurity.

Board Oversight

The Board of Directors, both directly and through the Audit Committee, oversees Management’s responsibility of ensuring proper functioning of our cybersecurity risk management program.

In particular, the Audit Committee assists the Board in its oversight of management’s responsibility to assess, manage and mitigate cybersecurity risks.

The Audit Committee receives a cybersecurity update at each regular meeting of the Board covering cybersecurity risks, cybersecurity staffing and staff development including certifications and training.

These updates are given either in person by the CIO and CISO or in written presentations created by them.

As of the date of this filing, the Company has not identified any cybersecurity threats that have materially affected or are reasonably anticipated to have a material effect on the Company’s business strategy, results of operations or financial condition.

Although the Company has not experienced cybersecurity incidents that are individually, or in the aggregate, material, the Company has experienced cyberattacks in the past, which the Company believes have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company.

Given the continuing reports of cyber incidents in general, we believe that the Company will most likely continue to be a target of cybersecurity attacks by bad actors.

REGULATORY MATTERS AND DEVELOPMENTS

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Regulators have commenced in-depth reviews of the industry’s compliance with the requirements of Reg BI, including that of the Company.

On December 18, 2020, the DOL published its final prohibited transaction exemption (“PTE”) addressing investment advice for fiduciaries of ERISA plans and IRAs.

On December 18, 2020, the Department of Labor ("DOL") published its final prohibited transaction exemption (“PTE”) addressing investment advice for fiduciaries of ERISA plans and IRAs.

Similar to the proposal the DOL released in June of 2020, the final exemption takes a principles-based (rather than a prescriptive) approach to resolving conflicts that arise under ERISA when an investment advice fiduciary, its affiliate or a related party is paid certain types of compensation (such as commissions, trailing fees or revenue-sharing) or engages in certain principal transactions.

The final exemption should provide a new and more flexible approach to ERISA compliance for certain types of transactions, which financial

institutions may choose to utilize in place of other existing exemptions.

The final exemption should provide a new and more flexible approach to ERISA compliance for certain types of transactions, which financial institutions may choose to utilize in place of other existing exemptions.

Like the proposal (but in contrast to the precursor rule the DOL finalized in April 2016 that the U.S.

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The effective date for compliance with the PTE was February 1, 2022.

The Company believes many of the steps taken by the Company to achieve compliance with the Reg BI Rules will enable the Company to comply with the PTE.

The Company believes many of the steps taken by the Company to achieve compliance with the Reg BI Rules have enabled and will enable the Company to comply with the PTE.

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.

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

As of September 30, 2023, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

As of March 31, 2024, 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.

Other Regulatory Matters

Since August 2021, Oppenheimer has been responding to information requests from the SEC’s Division of Enforcement relating to a former Oppenheimer financial advisor and his relationship with registered investment adviser, Southport Capital and its affiliates.

On June 30, 2022, the Company received a "Wells Notice" from the SEC requesting that Oppenheimer make a written submission to the SEC to explain why Oppenheimer should not be charged with violations of Section 15c2-12 of the Exchange Act and Rule 15c2-12 thereunder as well as Municipal Securities Rulemaking Board Rules G-17 and G-27 in relation to its sales of municipal notes pursuant to an exemption from continuing disclosure contained in Rule 15c2-12.

On September 13, 2022, the SEC filed a complaint against Oppenheimer in the United States District Court for the Southern District of New York (the "Court") alleging that Oppenheimer violated Section 15B(c)(1) of the Exchange Act and Rule 15c2-12 thereunder as well as Municipal Securities Rulemaking Board Rules G-17 and G-27 for not having fully complied with the exemption from the continuing disclosure obligations under Rule 15c2-12.

The SEC asked the Court to enter an order enjoining Oppenheimer from violating the above referenced rules and requiring it to disgorge approximately $1.9 million plus interest.

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.

Subsequently, the Company received a similar information request from the Commodity Futures Trading Commission (“CFTC”).

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

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 customer reserve computation requirements, 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.

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

Subsequently, Oppenheimer received a similar information request from the Commodity Futures Trading Commission (“CFTC”).

On January 4, 2024, Oppenheimer submitted an Offer of Settlement to the SEC.

On February 9, 2024, the SEC issued an order (the “Order”) pursuant to which Oppenheimer will pay a fine in an amount of $12 million and agree to certain undertakings.

In addition to the Order Oppenheimer received a waiver of certain statutory disqualifications from the SEC.

On February 7, 2024, Oppenheimer submitted an Offer of Settlement to the CFTC.

On March 19, 2024, the CFTC issued an order pursuant to which Oppenheimer will pay a fine of $ 1 million and agree to certain undertakings.

FACTORS AFFECTING "FORWARD-LOOKING STATEMENTS"

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(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 the Israel-Hamas war and 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.

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 the Israel-Hamas war and related unrest in the Middle East and 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 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.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the nine months ended September 30, 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.

During the three months ended March 31, 2024, 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, 2023.

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