What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-26 compared with 2024-04-26 · 105 added, 105 removed, 308 unchanged (41% of the section changed)

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("Oppenheimer") and Oppenheimer Asset Management Inc.

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.

As of June 30, 2024, we provided our services from 88 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 March 31, 2024, client assets under management ("AUM") totaled $46.6 billion.

At June 30, 2024, client assets under management ("AUM") totaled $47.5 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, 2024 totaled $124.9 billion.

Client assets under administration ("CAUA") as of June 30, 2024 totaled $126.0 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 March 31, 2024, the Company employed 2,951 employees (2,911 full-time and 40 part-time), of whom 936 were financial advisors.

At June 30, 2024, the Company employed 3,062 employees (2,932 full-time, 70 part-time and 60 summer interns), of whom 934 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 acquisition of 100% of a business or 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.

Recently our stock has experienced an unusual amount of volatility.

We are unaware of any reason or circumstance for such volatility.

Impact of Change in Short-term Interest Rates

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.

At both meetings in the second quarter of 2024, the Federal Reserve (the “FED”) unanimously decided to hold the target federal funds rate steady at 5.25% to 5.50% – representing seven consecutive meetings with no target rate change due to uncertainty towards achieving the FED’s 2% inflation objective.

The FED’s median forecast currently projects one rate decrease during 2024, though this is subject to change.

Potential decreases to the federal funds rate may result in reduced interest-based revenues although 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.

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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 hundreds of thousands displaced from their homes and many without food, water or electricity.

The war has displaced hundreds of thousands from their homes and many are now 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.

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EXECUTIVE SUMMARY

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.

The Firm was profitable for the second quarter of 2024 during a mostly favorable business environment.

During the quarter, continued investor interest in artificial intelligence ("AI") stocks allowed all major indices to reach fresh records, amid continuing concerns about high interest rates and weakening employment data.

Strong equity markets provided a backdrop for greater retail trading activity and drove our AUM to yet another new record, benefiting both our transaction driven revenues and AUM-based advisory fees.

The elevated interest rate environment resulted in improved interest revenue though the high interest rates also contributed to a significant decline in our FDIC sweep balances and related fees as clients sought higher returns elsewhere.

The environment was also less favorable for our investment banking business, which saw less capital market activity when compared to the prior quarter.

While we are somewhat disappointed in our earnings for the quarter, they were particularly impacted by the lack of follow through in underwriting revenue after a strong first quarter.

We continue to believe that our investment in senior personnel will pay off in future quarters as those markets strongly re-open.

Results from the Wealth Management business continue to be strong amidst the background of a very strong equity market.

The Company ended the quarter with a strong balance sheet and record book value per share levels.

We remain focused on both attracting new financial advisors and retaining existing advisors and in attracting qualified professionals to our investment banking platform and building our Equity and Fixed Income Groups in order to position us well for growth as we move into the second half of 2024.

RESULTS OF OPERATIONS

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.

The Company reported net income of $10.3 million or $0.99 basic earnings per share for the second quarter of 2024, compared with a net loss of $(9.4) million or $(0.85) per share for the second quarter of 2023.

Revenue for the second quarter of 2024 was $330.6 million, an increase of 8.0% , compared to revenue of $306.2 million for the second quarter of 2023.

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

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Non-compensation expense $ 93,997 $ 130,664 $ (36,667) (28.1)

Pre-tax Income $ 37,455 $ 19,049 $ 18,406 96.6

Income taxes provision $ 11,711 $ 4,585 $ 7,126 155.4

Net Income (1)

Pre-tax Income (Loss) $ 15,865 $ (11,699) $ 27,564 *

Income taxes provision (benefit) $ 5,599 $ (2,131) $ 7,730 *

Net Income (Loss) (1)

$ 10,266 $ (9,400) $ 19,666 *

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

• 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.

*Percentage not meaningful

• Increased revenue for the second quarter of 2024 was primarily driven by significantly higher advisory fees attributable to a rise in billable assets under management ("AUM") as well as improved investment banking and interest revenues.

• Assets under administration and under management were both at record levels at June 30, 2024, benefiting from market appreciation and positive net asset flows.

• Compensation expenses increased from the prior year quarter largely as a result of higher incentive compensation expenses, share-based compensation costs and 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.

• Book value and tangible book value per share reached new record highs as a result of 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 months ended March 31, 2024 and 2023:

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 six months ended June 30, 2024 and 2023:

(Expressed in thousands)

For the Three Months Ended March 31,

2024 2023 % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 % Change 2024 2023 % Change

Private Client $ 208,701 $ 201,245 3.7 $ 421,734 $ 404,666 4.2

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Total $ 15,865 $ (11,699) * $ 53,320 $ 7,350 *

*Percentage not meaningful

Private Client

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Pre-tax income of $55.5 million in the current quarter resulted in a pre-tax margin of 26.6%.

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.

Financial advisor headcount at the end of the current quarter was 934 compared to 964 at the end of the second quarter of 2023.

('000s unless otherwise indicated)

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Revenue $ 208,701 $ 201,245 $ 7,456 3.7

Retail commissions $ 52,794 $ 46,636 $ 6,158 13.2

Commissions $ 52,872 $ 45,377 $ 7,495 16.5

Advisory fee revenue $ 90,946 $ 78,811 $ 12,135 15.4

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• Retail commissions increased 16.5% 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

• Advisory fees increased 15.4% due to higher AUM during the billing period for the current quarter when compared to the second quarter of last year

• Bank deposit sweep income decreased $9.2 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

• Interest revenue decreased modestly from the prior year period due to lower stock borrow income

• Other revenue decreased from a year ago primarily due to smaller movements 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 18.0% from a year ago primarily due to higher production related and share-based compensation expenses

• Non-compensation expenses decreased 55.8% from a year ago primarily due to lower legal costs

Asset Management

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.

Asset Management reported revenue for the current quarter of $25.8 million, 16.3% higher compared with a year ago.

Pre-tax income was $8.7 million, an increase of 33.1% compared with the prior year period.

('000s unless otherwise indicated) 2Q-2024 2Q-2023 Change % Change

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*Percentage not meaningful

• 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

• Advisory fee revenue increased 18.2% from a year ago due to increased management fees resulting from the higher net value of billable AUM during the current quarter

• AUM increased to $47.5 billion at June 30, 2024, a new record high, which is the basis for advisory fee billings for July 2024

• The increase in AUM was comprised of higher asset values of $6.1 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 March 31, 2024:

• Compensation expenses were down 2.6% from a year ago primarily resulting from decreases in incentive compensation

• Non-compensation expenses were up 17.4% when compared to the prior year period mostly due to higher external portfolio management costs which are directly related to the increase in AUM

The following table provides a breakdown of the change in assets under management for the three months ended June 30, 2024:

(Expressed in millions)

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

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

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$ 46,583 $ 2,404 $ (2,313) $ 847 $ 47,521

(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.

(1) Traditional investments include Unified Managed Accounts, third party investment managers, mutual funds and/or exchange-traded funds (ETFs), and Oppenheimer financial adviser managed advisory programs, as well as Oppenheimer Asset Management taxable and tax-exempt portfolio management strategies.

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

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Public Pension Funds, Corporate Pension Funds, and Foundations and Endowments.

(3) Hedge funds represent single manager hedge fund strategies in areas including hedged equity,

technology and financial services, and multi-manager and multi-strategy fund of funds.

(4) Private equity funds represent private equity fund of funds including portfolios focused on natural resources and related assets.

(3) Hedge funds represent strategies in areas including global equities, fixed income, diversifying

strategies, credit, real estate and special opportunities

(4) Private equity funds represent single strategy, multi-strategy or direct investments in private investments across various sectors.

(5) The portfolio enhancement program sells uncovered, out-of-money puts and calls on the S&P 500 Index.

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Capital Markets reported revenue for the current quarter of $92.1 million, 15.8% higher when compared with 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.

Pre-tax loss was $21.8 million, compared with pre-tax loss of $14.1 million a year ago.

('000s) 2Q-2024 2Q-2023 Change % Change

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*Percentage not meaningful

• 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

• Advisory fees earned from investment banking activities increased 12.3% compared with a year ago due to higher M&A volumes

• Equity underwriting fees increased 104.6% 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

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

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

• Fixed income sales and trading revenue increased 22.3% compared with a year ago primarily due to an increase in trading income attributable to higher interest rates and volumes

• Compensation expenses increased 19.6% compared with a year ago primarily due to costs associated with opportunistic new hires and higher incentive compensation

• Non-compensation expenses were 25.5% higher than a year ago primarily due to an increase in interest expense in financing trading inventories

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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 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.

During the six months ended June 30, 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 March 31, 2024, total assets increased by 13.1% from December 31, 2023.

At June 30, 2024, total assets increased by 13.5% 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 March 31, 2024, the Company had bank call loans of $94.4 million compared to zero at December 31, 2023.

At June 30, 2024, the Company had bank call loans of $218.8 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 $383,296, respectively, at March 31, 2024.

and Oppenheimer Investments Asia Limited were $6.1 million and $384,170, respectively, at June 30, 2024.

The liquid assets at Oppenheimer Europe Ltd.

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On September 22, 2020, in a private offering, we issued $125.0 million aggregate principal amount of 5.50% Senior Secured Notes due 2025 (the "Unregistered Notes") under an indenture at an issue price of 100% of the principal amount.

Interest on the Unregistered Notes is payable semi-annually on April 1st and October 1st.

Interest on the Unregistered Notes was payable semi-annually on April 1st and October 1st.

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.

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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, 2024, $113.05 million aggregate principal amount of the Notes remains outstanding.

As of June 30, 2024, $113.05 million aggregate principal amount of the Notes remains outstanding.

The Notes first become callable at par in October 2024 and subject to the Company’s liquidity needs could be called.

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 Guarantor’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 Guarantors' 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 March 31, 2024 and for the three months ended March 31, 2024 for the Parent and Subsidiary Guarantors.

The following tables present the selected financial information as of June 30, 2024 and for the six months ended June 30, 2024 for the Parent and Subsidiary Guarantors.

(Expressed in thousands) As of

March 31, 2024

June 30, 2024

Total Assets $ 2,200,064

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Due To Non-Guarantor Subsidiary 6,119

For the Three Months Ended

March 31, 2024

For the Six Months Ended

June 30, 2024

Total Revenue $ 5,179

Pre-Tax Income (Loss) (201)

Net Income (Loss) (79)

Pre-Tax (Loss) (487)

Net (Loss) (92)

S&P’s Corporate Family rating and rating on the Notes is a 'BB-' with a stable outlook.

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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.

We issued $2.0 million in forgivable notes (which are inherently illiquid) to employees for the three months ended June 30, 2024 ($1.5 million for the three months ended June 30, 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 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).

At June 30, 2024, the Company had $218.8 million of bank call loans (zero at December 31, 2023).

The average daily bank loan outstanding for the three and six months ended June 30, 2024 was $148.7 million and $103.3 million, respectively ($77.8 million and $67.7 million for the three and six months ended June 30, 2023).

The largest daily bank loans outstanding for the three and six months ended June 30, 2024 were $258.7 million and $258.7 million, respectively ($153.3 million and $167.3 million for the three and six months ended June 30, 2023).

At June 30, 2024, securities loan balances totaled $247.2 million ($285.0 million at December 31, 2023 and $336.5 million at June 30, 2023).

The average daily securities loan balance outstanding for the three and six months ended June 30, 2024 were $286.7 million and $295.0 million, respectively ($362.9 million and $352.1 million for the three and six months ended June 30, 2023).

The largest daily stock loan balance for both of the three and six months ended June 30, 2024 was $336.0 million ($391.5 million for both of the three and six months ended June 30, 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.

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).

At June 30, 2024, the gross balances of reverse repurchase agreements and repurchase agreements were $27.6 million and $846.3 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended June 30, 2024 was $27.5 million and $845.9 million, respectively ($146.8 million and $501.8 million, respectively, for the three months ended June 30, 2023).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three months ended June 30, 2024 was $671.2 million and $976.8 million, respectively ($392.1 million and $782.1 million, respectively, for the three months ended June 30, 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 $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.

Certain policies which could provide additional liquidity if needed had a cash surrender value of $94.6 million as of June 30, 2024.

We regularly review our sources of liquidity and financing and conduct internal stress analyses 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.

Regulators are increasingly focused on liquidity management and we anticipate both new rules regarding the management of our day-to-day liquidity as well as increased regulatory scrutiny of the compliance with any such rules.

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 $112.7 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.

Should a disruption occur in our liquidity and financing sources, 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 $112.8 million principal outstanding, net of debt issuance costs as of June 30, 2024 under our Senior Secured Notes (due in 2025) and $172.6 million of operating lease obligations.

The Notes first become callable at par in October 2024, and subject to the Company’s liquidity needs could be called.

total cash requirement for interest expense related to the Notes and operating lease obligations is estimated to be approximately $9.2 million for the remainder of 2024.

(Expressed in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash used in operating activities $ (194,314) $ (150,811)

Cash used in investing activities (1,415) (9,179)

Cash provided by (used in) financing activities 78,132 7,033

Cash provided by financing activities 200,108 76,971

Net decrease in cash, cash equivalents and restricted cash $ 4,379 $ (83,019)

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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.

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.

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

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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.

There is no guarantee that the Company will be able to prevent any or all such attacks.

REGULATORY MATTERS AND DEVELOPMENTS

Regulation Best Interest (U.S.)

On June 5, 2019, the SEC adopted Regulation Best Interest (“Reg BI”) as Rule 15l-1 under the Exchange Act.

On June 5, 2019, the SEC adopted Regulation Best Interest (“Reg BI”) as Rule 151-1 under the Exchange Act.

Reg BI imposes a federal standard of conduct on registered broker-dealers and their associated persons when dealing with retail clients and requires that a broker-dealer and its representatives act in the best interest of clients and not place its own interests ahead of the customer’s interests.

Reg BI does not define the term “best interest” but instead sets forth four distinct obligations disclosure, care, conflict of interest and compliance that a broker-dealer must satisfy in each transaction.

Compliance with Reg BI became required on June 30, 2020.

In addition to adopting Reg BI, the SEC adopted rules (i) requiring broker-dealers and investment advisers to provide a written relationship summary to each client, and (ii) clarifying certain interpretations under the Investment Advisers Act of 1940 including but not limited to when a broker-dealer's activity is considered “solely incidental” to its broker-dealer business and is, therefore, not considered investment advisory activity (collectively, the “Reg BI Rules”).

Compliance with Reg BI became effective on June 30, 2020.

when a broker-dealer's activity is considered “solely incidental” to its broker-dealer business and is, therefore, not considered investment advisory activity (collectively, the “Reg BI Rules”).

Reg BI requires enhanced documentation for recommendations of securities transactions to broker-dealer retail clients as well as the cessation of certain practices and limitations on certain kinds of transactions previously conducted in the normal course of business.

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

As of March 31, 2024, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

As of June 30, 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

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

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.

(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 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.

and global economies including supply chain disruptions, and Federal, state and local governmental responses to the COVID-19 Pandemic.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

During the six months ended June 30, 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