What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-25 compared with 2024-07-26 · 126 added, 120 removed, 293 unchanged (46% of the section changed)

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("Oppenheimer") and Oppenheimer Asset Management Inc.

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.

As of September 30, 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 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 June 30, 2024, client assets under management ("AUM") totaled $47.5 billion.

At September 30, 2024, client assets under management ("AUM") totaled $49.1 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 June 30, 2024 totaled $126.0 billion.

Client assets under administration ("CAUA") as of September 30, 2024 totaled $129.8 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 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.

At September 30, 2024, the Company employed 2,993 employees (2,951 full-time, 41 part-time and 1 intern), of whom 928 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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The Company's long-term growth plan is to continue to expand existing offices by hiring experienced professionals as well as expand through the purchase of operating branch offices from other broker-dealers or the opening of new branch offices in attractive locations, and to continue to grow and develop the existing trading, investment banking, investment advisory and other divisions.

We recognize employee work habits have changed in a post-pandemic world.

As a result, we are continuously reviewing our physical footprint on lease renewals, and in many cases reducing office size and configuration.

We are committed to continuing to improve our capabilities to ensure compliance with industry regulations, support client service and expand our wealth management and capital markets capabilities.

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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 acquisition of 100% of a business or make minority private investments out of excess capital in allied or unrelated

In addition, the Company may from time to time make an 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 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.

After holding the target federal funds rate steady for nearly 14 months, the Federal Reserve (the “FED”) voted to cut rates by one half percent at its September 2024 meeting as their attention turned to addressing employment data, given the progress made on reducing underlying inflation in recent months.

Projections of the federal funds rate released by the FED in September indicate that the FED expects rate decreases through the end of 2024, with further reductions in the coming year.

Potential decreases to the federal funds rate may impact our interest-based 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.

Israel-Hamas War

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

Israel-Hamas War and Conflict with Hezbollah and Iran

On October 7, 2023, Hamas initiated an unprovoked invasion of Israel from the Gaza Strip, resulting in thousands of casualties.

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 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.

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

The war is now in its second year and has seen a significant escalation in a longstanding conflict between Israel and Hezbollah, the Lebanese-based militant group.

The conflict was further intensified by the direct entry of Iran, which launched a missile attack on Israel.

There remains a risk that these conflicts 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, these conflicts have not yet had a material impact on our business operations in Israel or elsewhere.

Impact of Hurricane Helene and Hurricane Milton

On September 26, 2024, Hurricane Helene ("Helene") made landfall in the Big Bend region of Florida and proceeded to cause widespread destruction across the southeastern United States for the next several days.

The storm resulted in hundreds of fatalities and caused billions of dollars in property damages, leaving many communities isolated and without power for weeks.

Helene was followed by Hurricane Milton ("Milton"), which caused widespread destruction across Florida.

Early estimates of damage from Milton exceed $60 billion.

While our offices in the impacted region remained closed throughout the storm, branch operations were largely unaffected given the back-up branch system we have in place as well as the ability of our key employees to work safely from a remote location.

The hurricanes did not cause significant damage to our branches in the region, most of which have now fully reopened.

Weather related incidents continue to increase and may cause disruptions to our normal business operations since they impact not only our employees, but also our clients.

EXECUTIVE SUMMARY

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.

The Firm delivered strong operating results for the third quarter of 2024 in a still-resilient economic environment.

During the third quarter of 2024, all major indices reached new highs, mostly spurred by the FED’s long-awaited decision to reduce the federal funds rate by one half percent with the view that lower borrowing costs will slow the uptick in unemployment without rekindling higher inflation.

Based on recent economic indicators, it appears that the U.S.

economy is headed for a soft landing, amidst continued growth in the economy as we move into 2025.

The continued outperformance of the equity markets aided our Wealth Management franchise by driving better than expected retail trading volumes and related commission revenues during what is typically a seasonally slower summer trading period.

The markets also propelled our AUM to our third consecutive record, resulting in higher asset-based advisory fees.

Additionally, higher average margin loans drove a meaningful improvement in our interest revenues from the prior year, though our interest sensitive sweep income was somewhat reduced due to lower average sweep balances.

Our investment banking revenues also rose due to an uptick in our advisory fees, particularly in our restructuring practice.

Equity underwriting fees were adversely impacted by lower issuance levels as we have seen economic uncertainty restrict issuances despite the general improvement in market breadth and market averages.

We believe that that Firm is well positioned to benefit as issuance volumes improve.

Our results drove yet another fresh record in our book value per share levels and provided us with the opportunity to further strengthen our balance sheet as we announced our plans to redeem all outstanding senior secured notes ($113.05 million) at their par amounts, and we retired the Notes on October 10, 2024.

Access to capital for expansion will continue to be available as needed.

RESULTS OF OPERATIONS

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.

The Company reported net income of $24.5 million or $2.38 basic earnings per share for the third quarter of 2024, compared with net income of $13.9 million or $1.32 per share for the third quarter of 2023.

Revenue for the third quarter of 2024 was $373.4 million, an increase of 19.4%, compared to revenue of $312.7 million for the third quarter of 2023.

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

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Non-compensation expense $ 100,047 $ 95,396 $ 4,651 4.9

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

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

Net Income (Loss) (1)

Pre-tax Income $ 35,370 $ 21,587 $ 13,783 63.8

Income tax provision $ 10,862 $ 7,808 $ 3,054 39.1

Net Income (1)

$ 24,508 $ 13,861 $ 10,647 76.8

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

*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.

• Increased revenue for the third quarter of 2024 was primarily driven by significantly higher advisory fees attributable to a rise in billable AUM, an increase in transaction-based commissions as well as improved investment banking and interest revenues.

• Announced plans to further strengthen balance sheet through the redemption of all outstanding Senior Secured Notes which occurred on October 10, 2024.

• Assets under administration and under management were both at record levels at September 30, 2024, benefiting from market appreciation.

• Compensation expenses increased from the prior year quarter largely as a result of higher incentive compensation expenses, deferred compensation and production-related expenses.

• Non-compensation expenses increased from the prior year quarter primarily due to higher interest and technology related expenses partially offset by lower legal costs.

• Total stockholders' equity, 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 and six months ended June 30, 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 nine months ended September 30, 2024 and 2023:

(Expressed in thousands)

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

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

2024 2023 % Change 2024 2023 % Change

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Total $ 35,370 $ 21,587 63.8 $ 88,690 $ 28,938 206.5

*Percentage not meaningful

Private Client

Private Client reported revenue for the current quarter of $208.7 million, 3.7% higher compared with a year ago mostly due to higher advisory fees driven by appreciation in AUM and an increase in commission revenue.

Private Client reported revenue for the current quarter of $218.8 million, 13.2% higher compared with a year ago mostly due to higher advisory fees driven by appreciation in AUM and an increase in commission revenue due to higher transactional volume.

Pre-tax income of $62.9 million in the current quarter resulted in a pre-tax margin of 28.8%.

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

Financial advisor headcount at the end of the current quarter was 928 compared to 946 at the end of the third quarter of 2023.

We saw improved adviser productivity throughout the period.

('000s unless otherwise indicated)

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• Retail commissions increased 23.6% from a year ago primarily due to higher retail trading activity.

• 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

• Advisory fees increased 13.8% 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 decreased $7.4 million from a year ago due to lower cash sweep balances.

• 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

• Interest revenue increased 14.5% from the prior year period due to higher interest earned from margin loans.

• 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 28.5% from a year ago primarily due to higher production related expenses and deferred compensation costs.

• Non-compensation expenses increased 4.5% from a year ago primarily due to higher interest expense.

Asset Management

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• Advisory fee revenue increased 8.9% 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 2.6% from a year ago primarily resulting from decreases in incentive compensation

• AUM increased to $49.1 billion at September 30, 2024, the third consecutive record high, which is the basis for advisory fee billings for October 2024.

• The increase in AUM was comprised of higher asset values of $9.4 billion on existing client holdings, partially offset by payments of $0.7 billion.

• Compensation expenses were up 18.1% from a year ago primarily resulting from increases in incentive compensation.

• Non-compensation expenses were up 12.2% 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:

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

(Expressed in millions)

For the Three Months Ended June 30, 2024

For the Three Months Ended September 30, 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 $124.0 million, 31.1% higher when compared with the prior year period.

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

Pre-tax loss was $6.1 million, compared with a pre-tax loss of $15.3 million a year ago.

('000s) 3Q-2024 3Q-2023 Change % Change

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*Percentage not meaningful

• 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

• Advisory fees earned from investment banking activities increased 82.2% compared with a year ago primarily due to higher restructuring-related transaction activity.

• Equity underwriting fees decreased 17.4% when compared with a year ago due to lower new issuance levels.

• 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

• Equities sales and trading revenue increase 7.5% compared with the prior year period mostly due to higher volumes.

• Fixed income sales and trading revenue increased 45.5% 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

• Compensation expenses increased 20.2% compared with a year ago largely due to costs associated with opportunistic new hires and higher incentive compensation.

• Non-compensation expenses were 15.3% 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, 2023.

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 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.

During the nine months ended September 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 June 30, 2024, total assets increased by 13.5% from December 31, 2023.

At September 30, 2024, total assets increased by 17.1% 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.

We finance our trading in government securities through the use of securities sold under repurchase agreements.

We met our longer-term capital needs through the issuance of the 5.50% Senior Secured Notes due 2025 (see "Senior Secured Notes" below).

Oppenheimer has arrangements with banks for borrowings on a fully collateralized basis.

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

At September 30, 2024, the Company had bank call loans of $206.7 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 $6.1 million and $384,170, respectively, at June 30, 2024.

and Oppenheimer Investments Asia Limited were $6.1 million and $386,133, respectively, at September 30, 2024.

The liquid assets at Oppenheimer Europe Ltd.

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Senior Secured Notes

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 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.

We did not receive any proceeds in the exchange offer.

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

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

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.

At September 30, 2024 the Company had $113.05 million outstanding in 5.50% Senior Secured Notes due in 2025 (the “Notes”).

On September 19, 2024, the Company issued a notice of redemption to the holders of its Notes stating that it intends to redeem all of the $113.05 million aggregate principal amount of the Notes outstanding on October 10, 2024.

The redemption price is equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest.

All of the Notes were redeemed on October 10, 2024 and none remain outstanding.

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

Viner International Co.

and Viner Finance Inc.

(together, the "Subsidiary Guarantors"), unless released as described below.

Each of the Subsidiary Guarantors is 100% owned by the Parent.

The Indenture for the Notes contains covenants with restrictions which are discussed in note 11.

The guarantees are senior secured obligations of each Subsidiary Guarantor.

The guarantees rank:

• effectively senior in right of payment to all unsecured and unsubordinated obligations of such guarantor, to the extent of the value of the collateral owned by such Subsidiary Guarantor (and, to the extent of any unsecured remainder after payment of the value of the collateral, rank equally in right of payment with such unsecured and unsubordinated indebtedness of such Subsidiary Guarantor);

• senior in right of payment to any subordinated debt of such guarantor;

• 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 Guarantors' obligations under the guarantee.

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

Each Subsidiary Guarantor will be automatically and unconditionally released and discharged upon the sale, exchange or transfer of the capital stock of a Subsidiary Guarantor and the Subsidiary Guarantor ceasing to be a direct or indirect subsidiary of the Parent if such sale does not constitute an asset sale under the Indenture for the Notes or does not constitute an asset sale effected in compliance with the asset sale and merger covenants of the Indenture for the Notes;

a Subsidiary Guarantor being dissolved or liquidated;

a Subsidiary Guarantor being designated unrestricted in compliance with the applicable provisions of the Notes;

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 June 30, 2024 and for the six months ended June 30, 2024 for the Parent and Subsidiary Guarantors.

(together, the "Subsidiary Guarantors").

The following tables present the required selected financial information as of September 30, 2024 and for the nine months ended September 30, 2024 for the Parent and Subsidiary Guarantors related to the previously outstanding Notes.

(Expressed in thousands) As of

June 30, 2024

September 30, 2024

Total Assets $ 2,312,705

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Due To Non-Guarantor Subsidiary 77,476

For the Six Months Ended

June 30, 2024

For the Nine Months Ended

September 30, 2024

Total Revenue $ 7,991

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Net (Loss) 344

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

Moody’s Corporate Family rating and the rating on the Notes is a “Ba3” with a stable outlook.

As of September 30, 2024, S&P’s Corporate Family rating and rating on the Notes was a 'BB-' with a stable outlook.

Moody’s Corporate Family rating and the rating on the Notes was a “Ba3” with a stable outlook.

Subsequent to our redemption of the Notes on October 10, 2024, at the Company's request, both S&P and Moody 's withdrew the above mentioned ratings.

For the most part, the Company's assets consist of cash and cash equivalents and assets that it can readily convert into cash.

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

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.

We issued $1.8 million in forgivable notes (which are inherently illiquid) to employees for the three months ended September 30, 2024 ($4.5 million for the three months ended September 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 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).

At September 30, 2024, the Company had $206.7 million of bank call loans (zero at December 31, 2023).

The average daily bank loan outstanding for the three and nine months ended September 30, 2024 was $235.0 million and $147.5 million, respectively ($43.8 million and $59.7 million for the three and nine months ended September 30, 2023).

The largest daily bank loans outstanding for both the three and nine months ended September 30, 2024 was $346.9 million ($112.2 million and $167.3 million for the three and nine months ended September 30, 2023, respectively).

At September 30, 2024, securities loan balances totaled $272.0 million ($285.0 million at December 31, 2023 and $292.9 million at September 30, 2023).

The average daily securities loan balances outstanding for the three and nine months ended September 30, 2024 were $299.6 million and $296.6 million, respectively ($314.3 million and $339.4 million for the three and nine months ended September 30, 2023, respectively).

The largest daily stock loan balance for both of the three and nine months ended September 30, 2024 was $375.5 million ($359.0 million and $391.5 million for the three and nine months ended September 30, 2023, respectively).

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 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).

At September 30, 2024, the gross balances of reverse repurchase agreements and repurchase agreements were $244.4 million and $1,009.5 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended September 30, 2024 was $233.0 million and $915.8 million, respectively ($48.2 million and $720.8 million, respectively, for the three months ended September 30, 2023).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three months ended September 30, 2024 was $569.1 million and $1,035.9 million, respectively ($227.1 million and $801.2 million, respectively, for the three months ended September 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 $94.6 million as of June 30, 2024.

Certain policies which could provide additional liquidity if needed had a cash surrender value of $98.1 million as of September 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.

Regulators are increasingly focused on liquidity management and we have seen increased regulatory scrutiny of liquidity management by our industry.

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.

Our primary long-term cash requirements related to $167.4 million of operating lease obligations.

The total cash requirement for interest expense related to operating lease obligations is estimated to be $3.0 million for the remainder of 2024.

(Expressed in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash used in operating activities $ (182,880) $ (84,226)

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(“NSCC”) as well as more stringent collateral arrangements with our bank lenders.

The recent reduction of the settlement cycle for security transactions in the U.S.

have substantially reduced settlement risks.

All such requirements have been and will be met in the ordinary course with available collateral.

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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.

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, and their financial affairs, as well as Company privileged information.

Our management is actively involved in the oversight of our cybersecurity risk management program.

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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"), which 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"), 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.

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

Like other U.S.

broker dealers, in May 2024 the Company began submitting client personal information to the Consolidated Audit Trail National Market System.

The CAT NMS is the world’s largest repository of securities transactions and client information and as a result, presents a significant cybersecurity threat to customer personally identifiable information.

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.

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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 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”).

Required compliance with Reg BI became effective 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”).

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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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.

On April 25, 2024, the DOL finalized a collection of regulatory changes in its ongoing quest to update the definition of a “fiduciary” under ERISA and Section 4975 of the Internal Revenue Code (the “2024 Fiduciary Rule”).

In finalizing the 2024 Fiduciary Rule, the DOL sought to confer ERISA fiduciary status on professional investment advisers and wealth managers, particularly with regard to participant-directed 401(k) plans and individual retirement accounts.

Along with the 2024 Fiduciary Rule, the DOL published amendments to a collection of prohibited transaction exemptions.

The 2024 Fiduciary Rule was set to become effective on September 23, 2024.

On July 25 and 26, 2024, the U.S.

District Court for the Eastern District of Texas and the U.S.

District Court for the Northern District of Texas, respectively, issued stays on the effective date of the fiduciary rulemaking package.

Both courts found that the challenges to the rulemaking package were likely to succeed on the merits because the rulemaking exceeds the DOL’s authority and is not consistent with the U.S.

Court of Appeals for the Fifth Circuit’s decision in Chamber of Commerce v.

Department of Labor, (5th Cir.

2018), which vacated the DOL’s 2016 fiduciary rulemaking.

Regulatory Environment

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

As of June 30, 2024, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

As of September 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.

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

(i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements that could affect the cost and method of doing business, (v) general economic conditions, both domestic and international, including inflation, 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.

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, the conflict with Hezbollah and Iran 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, (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) economic, market, political and social impact of, and uncertainty relating to, any catastrophic events, including pandemics, epidemics or other outbreaks of disease, climate-related risks such as natural disasters and extreme weather events.

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

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

During the nine months ended September 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