DEF: Siebert Financial Seeks Shareholder Approval for Equity Plan Expansion

Siebert Financial Corp. announces its 2025 Annual Meeting to vote on director elections, an expanded equity incentive plan, executive compensation, and auditor ratification.

Summary

• The Annual Meeting of Shareholders will be held virtually on November 18, 2025, at 1:00 p.m. Eastern Daylight Time.
• Shareholders will vote on the election of seven directors, including new nominee Lewis W. Solimene, Jr., who is expected to chair the Audit Committee.
• A key proposal is the amendment and restatement of the 2021 Equity Incentive Plan to increase the number of shares available for issuance from 3,000,000 to 5,000,000.
• An advisory (non-binding) vote on named executive compensation for 2024 is also on the agenda.
• Shareholders will ratify the appointment of Crowe LLP as the independent registered public accounting firm for fiscal 2025, following Baker Tilly Virchow Krause, LLP's resignation in May 2024.
• Net income increased to $13,286,000 in 2024 from $7,826,000 in 2023.
• Total Shareholder Return (TSR) was $37.93 in 2024, a significant improvement from $(27.59) in 2023 (based on a $100 initial investment on December 31, 2021).

Sentiment

Score: 7

Explanation: The company reported strong financial performance with increased net income and positive TSR in 2024. However, there are notable governance concerns, including a material weakness in internal controls, significant related party transactions, and substantial increases in executive compensation, which temper the overall positive financial results. The proposed equity plan expansion, while common, also introduces potential dilution.

Positives

• Net income significantly increased to $13,286,000 in 2024 from $7,826,000 in 2023.
• Total Shareholder Return (TSR) showed a positive trend, moving from $(27.59) in 2023 to $37.93 in 2024.
• The nomination of Lewis W. Solimene, Jr., an audit committee financial expert, is expected to strengthen the Audit Committee's oversight.
• The company has adopted a compensation recovery (clawback) policy in compliance with Nasdaq rules, enhancing corporate governance.
• An insider trading policy is in place, designed to promote compliance with insider trading laws and discourage hedging.

Negatives

• A material weakness in internal controls related to user access controls for financial applications, data, and programs was previously reported for the year ended December 31, 2023.
• Executive compensation for John J. Gebbia increased substantially from $612,000 in 2023 to $1,310,000 in 2024.
• The proposed increase in the equity incentive plan shares to 5,000,000 represents an approximate 10% total overhang, potentially diluting existing shareholders.
• Several related party transactions are disclosed, including significant compensation to Gebbia family members ($3,742,000 in 2024) and the acquisition of Gebbia Media, LLC from family members.

Risks

• Risks related to securities market volatility and the securities industry.
• Lower price levels in the securities markets.
• Intense competition in the brokerage industry.
• Extensive government regulation.
• Net capital requirements.
• Customers' failure to pay.
• An increase in volume on systems or other events which could cause them to malfunction.
• Reliance on information processing and communications systems.
• Continuing changes in technology.
• Dependence on the ability to attract and retain key personnel.
• The ability of the principal shareholder (Gebbia family) to control many key decisions.
• The potential that there may be no public market for common stock (though listed on Nasdaq, this is a general risk factor).
• Dilution from the proposed increase in shares available under the 2021 Equity Incentive Plan.

Future Outlook

The company anticipates that the additional 2,000,000 shares requested for the Amended 2021 Equity Incentive Plan will last between 2-3 years, based on historic grant rates and current share price. The Compensation Committee will consider the outcome of the non-binding advisory vote on executive compensation when making future compensation decisions.

Management Comments

• We believe that the approval of the Amended 2021 Equity Incentive Plan is essential to our continued success, enabling us to attract and retain high-quality talent and align employee interests with shareholders.
• Equity awards are a competitive necessity and are essential to recruiting and retaining highly qualified key employees who help the Company meet its goals, as well as rewarding and encouraging current employees.

Industry Context

The filing reflects standard corporate governance practices within the financial services and brokerage industry, including the use of equity incentive plans to attract and retain talent in a competitive environment. The emphasis on risk oversight by the Board and the adoption of a clawback policy align with broader industry trends towards enhanced corporate accountability and compliance with regulatory requirements like Dodd-Frank and Nasdaq rules. The company operates in an industry characterized by securities market volatility, intense competition, and extensive government regulation.

Management Changes

Corporate Governance

Related Party Transactions

• KCA (managed by Director Gloria E. Gebbia) incurred $40,000 in expenses for payroll and 401(k) plan services in 2023 (agreement terminated January 1, 2024).
• KCA passed through a $60,000 cost for the use of the Muriel Siebert & Co., LLC and Siebert names to the Company in both 2024 and 2023.
• Park Wilshire Companies, Inc. (PW), a company subsidiary where David J. Gebbia (son of John J. and Gloria E. Gebbia) is President, generated $98,000 and $124,000 in revenue from related parties in 2024 and 2023, respectively.
• The three sons of Gloria E. Gebbia and John J. Gebbia (John M. Gebbia, Richard Gebbia, and David J. Gebbia) received aggregate compensation of $3,742,000 in 2024 and $2,776,000 in 2023 for executive positions in subsidiaries.
• Gloria E. Gebbia issued a warrant to BCW Securities LLC on May 22, 2023, to purchase 403,780 shares of common stock at $2.15 per share, related to Kakaopay's investment.
• The Company leases its Omaha, Nebraska branch office from the Gebbia Sullivan County Land Trust (a Gebbia Family trustee) for $60,000 annually in both 2024 and 2023.
• John J. Gebbia and Gloria E. Gebbia, along with the John and Gloria Living Trust, are guaranteeing the Company's obligations under a Credit Agreement entered into on August 15, 2024.
• The Company acquired 100% of Gebbia Media, LLC, a music and entertainment company, on August 12, 2024, from John J. Gebbia, Gloria E. Gebbia, and David Gebbia.

Stakeholder Impact

• **Shareholders**: Potential dilution from the expanded equity incentive plan (10% total overhang). Increased net income and positive TSR in 2024 could be beneficial. The advisory vote on executive compensation provides a mechanism for shareholder input. Related party transactions and internal control weaknesses could be areas of concern.
• **Employees**: The expanded equity incentive plan aims to attract and retain high-quality talent and align their interests with the company's long-term success.
• **Management**: Executive compensation saw significant increases for named executive officers. The clawback policy introduces accountability for incentive-based compensation.
• **Customers/Clients**: The clearing agreement with RISE and services provided to Kakaopay Securities Corp. indicate ongoing business relationships and service offerings.
• **Regulatory Bodies**: Compliance with SEC and Nasdaq rules is a continuous focus, as evidenced by the auditor change and the material weakness disclosure.

Next Steps

• Shareholders to vote on the election of seven directors at the Annual Meeting on November 18, 2025.
• Shareholders to vote on the approval of the amendment and restatement of the 2021 Equity Incentive Plan.
• Shareholders to cast an advisory (non-binding) vote on named executive compensation.
• Shareholders to ratify the appointment of Crowe LLP as the independent registered public accounting firm for fiscal 2025.
• The Compensation Committee will consider the outcome of the advisory vote on executive compensation when making future decisions.
• The Audit Committee will consider the outcome of the vote on auditor ratification when making future decisions regarding the appointment of an independent registered public accounting firm.

Key Dates

Recommendation

While Siebert Financial Corp. demonstrated improved financial performance in 2024 with increased net income and a positive Total Shareholder Return, several factors warrant a 'hold' recommendation. The proposed expansion of the equity incentive plan, while intended for talent retention, introduces potential shareholder dilution. Significant related party transactions and a previously identified material weakness in internal controls raise corporate governance concerns. The substantial increase in executive compensation, despite improved performance, may also be viewed critically. A seasoned investor would likely monitor the resolution of the internal control weakness, the impact of the equity plan, and the ongoing related party dealings before considering a stronger position.

Keywords

Siebert Financial Corp., SIEB, Proxy Statement, Annual Meeting, Director Election, Equity Incentive Plan, Executive Compensation, Auditor Ratification, Corporate Governance, Financial Services, Brokerage Industry, SEC Filing, Shareholder Vote, Related Party Transactions, Internal Controls