Siebert Financial Corp.

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Siebert Financial Corp.

885 Third Avenue
New York, New York 10022
U.S.A.
Telephone: (212) 644-2400
Toll Free: (800) 872-0711
Fax: (212) 486-2784
Web site: http://www.siebertnet.com

Public Company
Incorporated: 1969 as Muriel Siebert & Co., Inc.
Employees: 100
Sales: $25.7 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: SIEB
NAIC: 52231 Mortgage & Other Loan Brokers; 52311 Investment Banking & Securities Dealing; 52312 Securities Brokerage; 52392 Portfolio Management

Siebert Financial Corp. is the holding company for Muriel Siebert & Co., Inc., one of the largest discount brokerage firms in the United States. The firm, which has been in business and a member of the New York Stock Exchange longer than any other discount broker, also offers, uniquely among discount brokers, a wide variety of underwriting and investment banking services. The company believes that it is the largest woman-owned capital markets business enterprise in the United States. Muriel Siebert, the first female member of the New York Stock Exchange, held about 92 percent of the company’s common stock in 1998. When the price of the stock suddenly surged in early 1999, she became—briefly—Wall Street’s first woman billionaire.

Muriel Siebert & Co.: 1969–96

Cleveland-born Muriel (“Mickie”) Siebert dropped out of college after her father died and drove to New York City in a used Studebaker, where, claiming to have earned a degree, she secured a position as a research analyst trainee. Shuttling from one Wall Street firm to another during the next decade, she sought to advance her career and sidestep sex discrimination by such means as circulating her resume under the name “M.F. Siebert.”

Siebert had been a partner in three firms by 1967, when she decided to purchase a seat on the New York Stock Exchange because her male colleagues were being paid 50 to 100 percent more money than she. Nine men turned her down before one agreed to sponsor her, and the exchange refused to sell her a seat until she fulfilled the unprecedented condition of obtaining a bank letter promising to loan her $300,000 of the $445,000 price. Then she had to overcome the reluctance of banks to make such a loan without a corresponding commitment from the exchange. Of the more than 1,000 members, she remained the only woman for another ten years.

Siebert scored another “first” in 1969, when she formed the firm bearing her name, thus becoming the first woman to own and operate a brokerage firm that was a member of the New York Stock Exchange. Sex discrimination continued to hamper her career, however. Interviewed by Ed Leefeldt for Bloomberg Personal Magazine in 1994, she recalled that “We did a private placement for Ryder System in 1969, but when the company did a public underwriting in 1970, I wasn’t good enough for Salomon Brothers, the lead underwriter. Every underwriter was listed in alphabetical order on the ad except Siebert. We were at the bottom .. . even though I brought them the deal…. I’m proud to say that most of the firms that wouldn’t put their names under mine are no longer in business.”

Following legislation that put an end to mandatory fixed broker’s commissions, Siebert again rankled the establishment by offering discounted rates at the opening bell of trading on May 1, 1975, the day the law went into effect. In retaliation, the clearing house handling her company’s trades dropped the firm, forcing her to scramble to find another house or be expelled by the Securities and Exchange Commission. In 1977 Siebert placed her company in a blind trust so that she could take the post of superintendent of banking for the state of New York. She held this position until 1982, when she ran unsuccessfully for the Republican Party nomination for the U.S. Senate.

Siebert’s long vacation from active management of her firm cost her between $15 million to $20 million, she later calculated, because of bad decisions made in her absence. She hired new managers and, in 1985, purchased the discount brokerage operations of two bankrupt firms, raising her own company’s level of net commissions to $3 million a year. Muriel Siebert & Co., which now had about 50,000 accounts, began operating as a municipal bond underwriter in 1989. By 1992 the firm had entered the mortgage-backed-securities business with the help of the federal government’s Resolution Trust Corp., which had been mandated by law to include minority- and women-owned firms in its underwriting groups.

Muriel Siebert & Co. returned this favor by donating half of its underwriting commissions from new issues of municipal and corporate securities to charity. As a way to drum up new business, the firm made the same offer to the buyers of these securities, who could choose the beneficiaries. In the program’s first full year, 1991, Muriel Siebert & Co. gave $310,000 to more than 40 charities, and by 1997 the figure had reached almost $5 million. Its founder also established a philanthropic foundation for her own favorite charities.

By mid-1992 some 20 or so money management firms were taking part in the Siebert Entrepreneurial Philanthropic Plan. This high-minded initiative understandably did not win unanimous cheers from the financial community. One executive told Fred R. Bleakley of the Wall Street Journal, “We have enough pressures on profit margins from competition and risk-taking without our customers saying, ‘If Mickey Siebert’s firm can give half to charity, why can’t you?’” Siebert had no sympathy for this viewpoint, replying, “The money [in profits] downtown is vast, almost lewd.”

By early 1994 Muriel Siebert & Co. had a branch in Los Angeles as well as its base in New York City. That year the company opened a third office, in Boca Raton, Florida. It was, however, facing price competition from a new breed of su-perdiscounting brokers. In television ads, Muriel Siebert declared that its prices were “70% below Schwab’s” and “consistently less” than Fidelity Brokerage Services Inc. and Quick & Reilly, but at the same time warned the public to beware of “untested Johnny-come-latelies, with lowball rates, unexpected charges, and restrictions.”

Public Company: 1996–99

Muriel Siebert & Co. had about 80,000 active customers and a fourth branch, in Naples, Florida, by early 1996, when it went public by merging with publicly traded J. Michaels, Inc., a struggling furniture retailer with five stores. After the merger, J. Michaels liquidated its assets but took a small share in the newly formed Siebert Financial Corp. That year the company also entered municipal bond underwriting by acquiring the remnants of a dissolved minority-owned investment bank, Grigsby Brandford & Co., which became the Siebert, Brandford, Shank division of Siebert’s investment banking group. In 1998 this division became Siebert, Brandford, Shank & Co., L.L.C., a partnership 49 percent owned by Siebert.

Siebert Financial was still viewed as a minor player among discount brokers at this time, because it had no market-making operations, did not clear its own trades, and did not go online until late 1996. By early 1999, however, when the firm raised $7.2 million to expand its web site, Siebert was very much a major factor among the 130 or so online brokerage firms. By June 1999 the company was conducting 37 percent of its business through SiebertNet, compared to 16.5 percent during the first quarter of 1998.

After opening the year at $9 a share, Siebert Financial became a hot stock itself, rising as high as $70 a share on February 16, 1999. Since only two million shares were available to the public and 10.4 million shares were traded on a single day, this meant the average share changed hands five times during the day. Siebert was herself disturbed by the rollercoaster ride of her company’s stock, which on April 14th again briefly soared to $58 after being recommended on an online site, only to fall back to its previous level of $19. Interviewed by Gretchen Morgenson of the New York Times in August, she said, “There’s a lack of accountability in these chat rooms, and it’s necessary for the regulators to do something if these people move individual stocks.”

At a fee of only $14.95 per trade, Siebert Financial could only hope to make significant profits from online brokerage operations if it achieved economies of scale. Accordingly, Siebert and her new vice-chairman, Daniel Jacobson, were planning to acquire smaller discount brokerages. In 1997 the company purchased Stock Mart, the retail brokerage business of William O’Neil & Co. By mid-1999 the firm also had acquired the discount brokerage business of California’s Cowles & Sabol & Co. and had reached a tentative agreement to purchase Andrew Peck & Associates of Jersey City.

Siebert Financial Corp. in 1998

In 1998 Siebert Financial was providing discount brokerage and related services to more than 70,000 retail investor accounts, including online trading on the Internet site SiebertNet. This site offered free real-time quotes, a listing of current bond offerings, news, research, and investment-planning tools. Mo-bilebroker, an interactive palmtop service, enabled clients to make equity trades, receive confirmation, get real-time quotes and alerts, access account data, and send and receive e-mail, by two-way pager instead of a telephone or computer. Mar-ketphone allowed customers to trade by means of touchtone phones and to check balances and executions and receive realtime quotes, with automatic transfer to a live broker, if desired, or the use of a fax-on-demand feature to select a research report available 24 hours a day.

Company Perspectives:

It’s simple. We know what independent investors want and we ‘ve been exceeding their expectations for more than 30 years.

Siebert’s products and services also included no-fee, no-minimum check writing, a program for automatically reinvesting cash dividends and capital gains distributions, and retirement accounts (at no fee if in excess of $10,000) in more than 12,000 publicly traded securities and mutual funds. The company offered access to about 7,000 no-load mutual funds, of which about 1,000 came without transaction fees. Selectnet and Instinct gave customers access to extended trading hours. Per-formancefax allowed them to receive a comprehensive profit-and-loss analysis of their portfolios faxed each morning before the market opened. A Siebert Visa debit card was available, as was a VIP statement offering a more sophisticated view of account information, including an asset-allocation pie chart and a detailed income-summary section. Customer financing was available for margin accounts.

Siebert Financial’s Capital Markets division was principally engaged in investment banking and institutional equity-execution services. The company was offering the former to corporate and municipal clients, participating as an underwriter for taxable and tax-exempt debt. Since it began underwriting in 1989, the firm had co-managed more than $100 billion in municipal debt and had participated either as an underwriter and/or selling-group member in over 210 offerings, including corporate debt issuances totaling more than $137 billion.

Siebert Financial also was executing equity orders for about 400 institutional accounts through a network of up to 15 independent floor brokers strategically located on major exchanges. These clients included some of the largest pension funds, investment managers, and banks in the United States. The Siebert Real-Time List Execution system, designed and developed by inhouse professionals, enabled the company’s Capital Markets division to simultaneously manage an array of baskets for multiple clients while providing real-time analysis. This division was also participating in the secondary markets for municipal and U.S. Treasury securities and trading listed closed-end bond funds and certain other securities for its own account.

Siebert Financial maintained its corporate headquarters in midtown Manhattan. It had retail offices in Beverly Hills, California; Morristown, New Jersey; and Boca Raton, Naples, Palm Beach, and Surfside, Florida. Investment banking offices, including operations of Siebert, Brandford, Shank & Co., were in Chicago, Dallas, Detroit, Houston, Los Angeles, San Francisco,

and Seattle. All these facilities were being leased. Of the company’s revenues of $25.7 million in 1998, commissions and fees accounted for 75 percent; investment banking for 13 percent; trading profits for five percent; income from equity investees for five percent; and interest and dividends for two percent. Net income came to $4.3 million.

Principal Subsidiaries

Muriel Siebert & Co., Inc.; Siebert, Brandford, Shank & Co., L.L.C.

Principal Competitors

Ameritrade Holding Corp.; Charles Schwab & Co. Inc.; E*Trade Group, Inc.; FMR Corp.; National Discount Brokers Group; Quick & Reilly Group Inc.; TD Waterhouse Group.