SOUNDVIEW TECHNOLOGY GROUP INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-26225
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SOUNDVIEW TECHNOLOGY GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 13-3900397
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation
or Organization)

1700 E. PUTNAM AVENUE OLD GREENWICH, CT 06870
(Address of Principal Executive (Zip Code)
Offices)

Registrant's telephone number, including area code (203) 321-7000
Securities Registered Pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None None

Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS)
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes / /

The market value of the Common Stock held by non-affiliates of the
registrant was $169,554,453 based on the last reported sale price of the
Registrant's Common Stock on the Nasdaq National Market as of the close of
business on February 28, 2002. For purposes of this response, the registrant has
assumed that its directors, executive officers and beneficial owners of 5% or
more of its common equity are affiliates of the registrant.

As of February 28, 2002, there were 110,662,571 shares of the Registrant's
Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the Proxy Statement for the 2002 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after the end of the Company's fiscal year ended December 31, 2001 are
incorporated by reference into Part III of this Form 10-K.

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SOUNDVIEW TECHNOLOGY GROUP, INC.
2001 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

2

Certain statements in this Form 10-K that are not historical facts
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements preceded by, followed by,
or that include the words "expect," "expected," "will," "may," "intend,"
"anticipate," "believe," and "should", involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements, or those of the industry in which we operate, to be materially
different from any expected future results, performance or achievements
expressed or implied in these forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
economic factors that affect the market for capital raising, including initial
public offerings and those factors discussed in the section of this form 10-K
entitled "Risk Factors" (see page 8) and our periodic reports filed from time to
time with the Securities & Exchange Commission.

On January 31, 2000, Wit Capital Group, Inc. completed a merger with
SoundView Technology Group, Inc. ("STG"). From June 2000 to August 2001, the
combined company operated as Wit SoundView Group, Inc. and in August 2001, the
combined company changed its name to SoundView Technology Group, Inc. All
references to "SoundView", the "Company", "us", "our", and "we" refer to the
combined company and its subsidiaries subsequent to January 31, 2000. All
references to "STG" refer to operations of STG prior to its merger with Wit
Capital Group, Inc.

PART I

ITEM 1. BUSINESS

We are a technology-focused, research driven investment banking firm that
provides services to an institutional and issuer client base.

We are committed to serving our global institutional investor client base
through our industry-focused research, sales and trading functions. Our client
base includes technology investors around the world. We make markets in over 240
NASDAQ listed stocks and are active traders in technology focused NYSE-listed
equities.

We offer investment banking services to a wide array of technology clients
from start-ups to industry leaders. We seek to be involved in every aspect of
the capital raising process, whether through venture capital investing or public
or private equity financing. We advise our clients in a variety of areas ranging
from business strategy to mergers and acquisitions.

RESEARCH

Our proprietary research is fundamental to our business. The majority of our
analysts have specific, relevant industry experience or have engineering or
scientific degrees. We believe our informed perspective and the quality of our
analysis has distinguished us among our peers and earned us the recognition of
corporate clients as well as top institutional investors who rely on our
research for daily investment insight.

Our research universe is narrowly segmented to enable in-depth analysis of
the secular and cyclical trends within each individual sector. Our research
professionals maintain close relationships with key industry participants in
each of those sectors. These key participants include public and private
technology companies, venture capital and institutional investors, technical
experts and professional service providers.

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We currently provide research coverage for over 230 companies. Our research
universe is comprised of the following technology industry groups and segments:

We currently employ over 35 research professionals. In order to achieve the
depth of coverage required to maintain our technology research product, we often
recruit specific industry and technical experience and train the analysts in
financial analysis disciplines. This specialization enables our analysts to
produce focused analysis that distinguishes them as experts in their respective
fields. Our analysts work closely with our investment banking professionals to
identify those companies that will evolve as leaders in their industries. It is
with these companies that we seek to develop long-term relationships helping to
manage their capital raising activities and offering strategic advice.

To further educate our research analysts, we have a continuing strategic
partnership with the Gartner Group that provides our employees with access to
Gartner research as well as direct access to Gartner research analysts. This
relationship further enhances our research product through the surveys which are
conducted at conferences organized by Gartner. In addition, we have a strategic
relationship with the Giga Information Group, Inc. that provides our employees
with access to their analysts, their customers for survey purposes, and
participation in their research meetings on a non-exclusive basis.

We hold an annual Technology Outlook Conference which has become a leading
venue for the top technology companies to present their stories to hundreds of
technology focused institutional investors in their industries. In 2001, a total
of 79 public companies made presentations to approximately 150 of the senior
investment professionals at approximately 110 institutions. In addition to this
conference, we sponsor industry specific conferences in the photonics,
semiconductor, software and storage sectors and in other areas.

BROKERAGE

We offer our institutional clients a variety of sales and trading services.
We are able to leverage our expertise in the technology sector through a sales
force with a comprehensive understanding of the complex and diverse technologies
at the heart of technology focused investing. Our market-making operations are a
source of liquidity to large institutional traders. We currently employ over 70
institutional sales and trading professionals operating out of our offices in
Old Greenwich and San Francisco. In March 2002, we announced the opening of an
office in Boston to better penetrate the Boston market and provide closer
coverage to our Boston based institutional clients. For the year ended
December 31, 2001, revenue from our institutional brokerage operations totaled
$128.9 million.

Bear Stearns & Co. clears our institutional customer transactions on a fully
disclosed basis. Clearing services for our customers include the confirmation,
receipt, execution, settlement and delivery functions involved in securities
transactions, as well as safekeeping of customers' securities and assets and
certain customer record keeping, data processing and reporting functions. We
continue to increase our trade processing capabilities to better facilitate the
clearing of trades we execute for our customers.

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Under our separate agreements with Bear Stearns, we pay clearing and
execution fees according to a schedule. In addition, the agreements require Bear
Stearns to share with us interest revenue earned in connection with margin and
stock borrowing balances kept by our customers and also provide us fees on
balances maintained by these customers with selected money market funds. We must
indemnify Bear Stearns for, among other things, any loss or expense due to the
failure of customers to: (1) pay for securities purchased by them, (2) promptly
deliver securities sold by them, (3) deposit sufficient collateral to support
their borrowing when requested by the clearing firm, and (4) remit excessive
disbursements of funds or any other valid charges imposed by the clearing firm.

INVESTMENT BANKING

SoundView is a manager of public and private securities offerings as well as
a strategic advisor for technology leaders. With over 35 bankers, our investment
banking team focuses its knowledge of technology companies to counsel our
clients throughout the various stages of their lifecycle. Revenues attributable
to investment banking activities totaled $29.4 million for the year ending
December 31, 2001.

Our team of investment banking professionals have broad abilities to perform
traditional investment banking functions such as deal selection and origination,
due diligence, valuation, and deal structuring. Our investment bankers, research
personnel, executive officers and investors have strong relationships with
corporate issuers, venture capitalists and other influential persons and
entities in the financial services sector. In addition, our senior investment
banking professionals have a long history of working with technology companies.

Our investment banking services are generally focused on the same sectors
followed by our research analysts. We provide an array of investment banking
services including public underwriting, mergers and acquisitions and strategic
advisory services and private equity.

PUBLIC UNDERWRITING

SoundView is a manager of initial public and follow-on offerings for
technology companies. We believe we have a competitive advantage that arises
from our relationships, research, trading and distribution capabilities.
Revenues attributable to public underwriting totaled $9.9 million for the year
ending December 31, 2001.

We offer issuers in-depth institutional research written by our research
analysts that draws on their personal industry experience as well as proprietary
information sources. This research is disseminated by our technology specialist
sales force whose knowledge of the sector and institutional penetration makes us
a manager with a proven track record of outselling our competitors and placing
shares with knowledgeable institutions.

We also operate an extensive market-making operation to support our
investment banking and institutional brokerage services. Currently we are
market-makers in over 240 technology companies and our trading and sales trading
teams currently comprises 40 professionals.

MERGERS AND ACQUISITIONS AND STRATEGIC ADVISORY SERVICES

In addition to our capital raising services, we have developed an M&A and
Strategic Advisory Group which works closely with clients helping them to grow
and develop their businesses. We offer our clients the following types of
advisory services:

- Executing mergers, acquisitions and divestitures

- Identifying and building strategic partnerships and strategies

- Providing valuation work

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These activities compliment our public and private equity businesses and
allow us to offer a mix of investment banking services to our clients during the
course of their development. Revenues attributable to M&A and Strategic Advisory
services totaled $16.7 million for the year ending December 31, 2001.

PRIVATE EQUITY

We assist private and public corporate issuers, as well as investment funds,
in raising private capital. Our private equity group focuses on raising equity
capital from traditional institutional and venture capital sources and strategic
investors. Revenues attributable to private equity services totaled
$2.9 million for the year ending December 31, 2001.

VENTURE CAPITAL GROUP

Our Venture Capital Group emphasizes investments in technology businesses
and maintains a particular focus on e-commerce companies, Internet enabling
technologies, Internet infrastructure and products and services that enhance
digital businesses. Our venture capital funds allow investors to pool their
resources and gain access to a quality of deal flow traditionally available to
proprietary funds backed by large institutions.

Our Venture Capital Group currently manages Wit VC Fund I, LP and a series
of four funds collectively known as Dawntreader Fund II. Wit VC Fund I LP raised
approximately $39.5 million in August 1999 from high net worth individuals and
invests in second and later stage companies. Dawntreader Fund II raised
approximately $270 million in February and March 2000. It invests in early
stage, second stage, and later stage companies. The investors in Dawntreader
Fund II include publicly traded corporations, institutional investors, and high
net worth individuals.

Our venture capital funds enable us to further take advantage of our
expertise in technology, e-commerce and the Internet. The development of these
funds created new investment opportunities for our high net worth individual,
corporate and institutional clients and created a wider range of capital raising
opportunities for corporate issuers.

COMPETITION

The financial services industry is highly competitive and we expect
competition to intensify in the near future. We encounter direct competition
primarily from established investment banking firms. We compete with some of
these firms on a national basis and with others on a regional basis. Our
competitors include large and well established Wall Street firms. General
financial success within the securities industry will attract additional
competitors for us, such as banks, insurance companies and providers of online
financial and information services.

In recent years there has been a significant consolidation in the financial
services industry. Commercial banks and other financial institutions have
acquired or established investment banking and broker-dealer affiliates and have
begun offering financial services to individuals traditionally offered by
securities firms. These firms have the ability to offer a wide range of
products, including lending, deposit taking, insurance, brokerage, investment
management and investment banking services. This may enhance their competitive
position by attracting and retaining customers through the convenience of
one-stop shopping. They also have the ability to support investment banking and
securities products with commercial banking, insurance and other financial
service revenue in an effort to gain market share.

Our principal competitors in connection with our investment banking and
brokerage activities are traditional investment banking firms. Many of our
competitors are significantly larger and more diversified than we are and have
significantly greater financial, technical, marketing, research, professional
personnel and other resources than we do. Some of our competitors also offer a
wider

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range of products and services than we do and have greater name recognition,
more established reputations and more extensive client and customer bases. These
competitors may be able to respond more quickly to new or changing
opportunities, technologies and customer requirements due to their superior
systems capabilities. They may also be better able to undertake more extensive
promotional activities, offer more attractive terms to customers, clients and
employees and adopt more aggressive pricing policies compared to our firm.

Competition is also intense for the attraction and retention of highly
qualified employees in the securities industry. Our ability to compete
effectively in our businesses will depend on our ability to attract new
employees and retain and motivate our existing employees.

REGULATION

REGULATION OF THE SECURITIES INDUSTRY AND BROKER-DEALERS. Our business is
subject to extensive regulation applicable to the securities industry in the
United States and elsewhere. As a matter of public policy, regulatory bodies in
the United States and rest of the world are charged with safeguarding the
integrity of the securities and other financial markets and with protecting the
interests of customers participating in those markets. In the United States, the
Securities and Exchange Commission, or SEC, is the federal agency responsible
for the administration of the federal securities laws. We are registered as a
broker-dealer with the SEC and in all 50 states, the District of Columbia and
Puerto Rico. We are also a member of the NASD, a self-regulatory body to which
all broker-dealers belong. Certain self-regulatory organizations, such as the
NASD, adopt rules and examine broker-dealers and require strict compliance with
their rules and regulations. The SEC, self-regulatory organizations and state
securities commissions may conduct administrative proceedings which can result
in censure, fine, the issuance of cease-and-desist orders or the suspension or
expulsion of a broker-dealer, its officers or employees. The SEC and
self-regulatory organization rules cover many aspects of a broker-dealer's
business, including capital structure and withdrawals, sales methods, trade
practices among broker-dealers, use and safekeeping of customers' funds and
securities, record-keeping, the financing of customers' purchases, broker-dealer
and employee registration and the conduct of directors, officers and employees.

On October 26, 2001, President Bush signed the USA Patriot Act, aimed at
giving the government new powers in the war on terrorism. Title III of the new
legislation, the International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001, imposes significant new anti-money laundering
requirements on all financial institutions, including domestic banks and
domestic operations of foreign banks, broker-dealers, futures commissions
merchants and investment companies.

EFFECT OF NET CAPITAL REQUIREMENTS. As a registered broker-dealer and
member of the NASD, we are subject to the Uniform Net Capital Rule under the
Exchange Act. The Uniform Net Capital Rule specifies the minimum level of net
capital a broker-dealer must maintain and also requires that at least a minimum
part of its assets be kept in relatively liquid form. As of December 31, 2001,
our broker-dealer subsidiary, SoundView Technology Corporation, was required to
maintain minimum net capital of $552,500 and had total net capital of
$105,199,341 which was $104,646,841 in excess of the minimum amount required.

The SEC and the NASD impose rules that require notification when net capital
falls below certain predefined levels, dictate the ratio of debt to equity in
the regulatory capital composition of a broker-dealer and constrain the ability
of a broker-dealer to expand its business under certain circumstances.
Additionally, the Uniform Net Capital Rule and the NASD rules impose certain
requirements that may have the effect of prohibiting a broker-dealer from
distributing or withdrawing capital and requiring prior notice to the SEC and
the NASD for certain withdrawals of capital. Because our principal asset will be
the ownership of stock in our broker-dealer subsidiary, these rules governing
net capital and restrictions on withdrawals of funds could operate to prevent us
from meeting our financial obligations on a timely basis.

7

CHANGES IN EXISTING LAWS AND RULES. Additional legislation or regulation,
changes in existing laws and rules or changes in the interpretation or
enforcement of existing laws and rules, either in the United States or
elsewhere, may directly affect our mode of operation and our profitability.

EMPLOYEES

We believe that one of our strengths is the quality and dedication of our
people and the shared sense of being part of a team. We strive to maintain a
work environment that fosters professionalism, excellence, diversity and
cooperation among our employees. We also believe that our employees should have
an equity stake in the firm. As of December 31, 2001, we had approximately 305
employees who, as a group, own approximately 25% of the equity of our company on
a fully-diluted basis. In March 2002, in light of the current economic
environment, we completed a business review which reduced our employee base to
approximately 240.

RISK FACTORS

We may publish forward-looking statements relating to our results of
operations, anticipated financial performance, business prospects and similar
matters. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, we note that a variety of factors could cause our actual results
and experience to differ materially from the anticipated results or other
expectations expressed in these forward-looking statements. These factors
include the following:

WE FOCUS ON THE TECHNOLOGY SECTOR OF THE ECONOMY WHICH IS CURRENTLY EXPERIENCING
UNFAVORABLE MARKET CONDITIONS.

As a technology focused investment banking firm, our business is limited to
this sector and generally does not include other industries. As a result, many
of our investment bankers, securities analysts and other professional staff do
not have wide experience or recognition in more traditional business sectors.
Currently, technology companies which do not have strong revenues and earnings
are operating in an inhospitable economic climate, with the result that their
stock prices are severely depressed and they do not have ready access to either
the capital markets or to private sources of funding. As a result, the demand
for our expertise with technology has been reduced. We continue to believe that
our technology focus makes us more valuable to the companies in this sector and
have no present plans to diversify our investment banking business into other
areas.

8

REVENUES AND PROFITS OF INVESTMENT BANKING FIRMS TEND TO SUFFER DURING ECONOMIC
SLOWDOWNS AND PERIODS OF MARKET UNCERTAINTY.

Generating revenues from investment banking activities is largely dependent
upon prevailing economic and market conditions. This is because investment
banking revenue is largely based on fees and commissions generated from
financial advisory assignments and capital raising activities, including public
equity underwriting. When the financial markets are volatile, interest rates are
rising or corporate profitability is static or falling, corporate clients are
generally unable or unwilling to access the capital markets or, except as
necessary, to pursue acquisitions and other significant transactions that
generate investment banking fees. As a result, our revenues and profitability as
well as those of other investment banks will generally suffer during economic
downturns or periods of market volatility. Since the spring of 2000, we have
been operating in a period of decline and uncertainty in the financial markets.
Companies in many sectors of the economy, including technology, have been
experiencing a period of difficulty characterized by falling revenues and
diminished profitability or increased losses. Circumstances such as these lead
to a reduction in investment banking assignments, with the result that the
revenues and profits of investment banks will be adversely affected. As a result
of the continuing market uncertainty, it is not clear when the public equity
markets will re-open on terms acceptable to prospective technology issuers and
when we will experience a related increase in revenue from public equity
offerings.

AS THE ECONOMIC SLOWDOWN CONTINUES, WE FACE INCREASED COMPETITION FROM LARGER
INVESTMENT BANKING FIRMS.

Larger, more established investment banking firms had previously not been
willing to underwrite or advise on smaller investment banking transactions.
However, as the economic slowdown continues we have seen increased competition
for mandates from these firms. As there are only a limited number of
transactions for which we can currently compete, this trend could have an
adverse effect on our investment banking revenue. Many of our competitors are
significantly larger and more diversified than we are and have significantly
greater financial, technical, marketing, research, professional personnel and
other resources than we do.

OUR SUCCESS IS DEPENDENT ON OUR KEY PERSONNEL WHOM WE MAY NOT BE ABLE TO RETAIN,
AND WE MAY NOT BE ABLE TO HIRE ENOUGH ADDITIONAL QUALIFIED PERSONNEL TO MEET OUR
NEEDS.

Our business requires the employment of highly skilled personnel. The
recruitment and retention of experienced investment banking professionals are
particularly important to our performance and success. The loss of the services
of any of our key personnel or the inability to recruit and retain experienced
sales, trading, research and investment banking professionals in the future
could have a material adverse effect on our business, financial condition and
operating results. Our continued ability to compete effectively in our business
depends on our ability to attract and retain the quality personnel our
operations and development require and competition for such personnel is
intense.

WE ENGAGE IN MARKET-MAKING ACTIVITIES, WHICH SUBJECT US TO INCREASED RISKS THAT
COULD BE HARMFUL TO OUR BUSINESS.

We currently make markets in over 240 technology stocks. Market-making may
result in unpredictable earnings or losses. If we begin to make markets in more
volatile securities, we may not be able to manage the risks involved with our
market-making activities. In addition, recently enacted regulations require
securities traded in the Nasdaq Stock Market to trade in decimals instead of
fractions. The effect of these regulations has been to decrease the spreads
between bid and ask prices, which has made the execution of trades and
market-making activities less profitable and has led to increased competition
among market makers. If there is any further decline in the spreads that market-
makers receive in trading equity securities, our business, financial condition
and operating results may be materially adversely affected.

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WE MAY INCUR LOSSES AND LIABILITIES IN THE COURSE OF BUSINESS WHICH COULD PROVE
COSTLY TO DEFEND OR RESOLVE.

Participation in securities underwritings involves significant economic and
legal risks. Economic risks include incurring losses if we are unable to resell
the securities we committed to purchase, if we are forced to liquidate our
commitment at less than the price at which we purchased the securities from the
issuer or if we are forced to retain significant position concentrations in
individual securities due to market conditions. We intend to be active in the
underwriting of initial public offerings and follow-on offerings of the
securities of emerging and mid-size growth companies, which often involves a
high degree of risk and volatility. Legal risks include potential liability
under federal and state securities and other laws for allegedly false or
misleading statements made in connection with such securities offerings and
other transactions. Substantial legal liability or a regulatory action against
us could cause us to incur significant expenses and could have a material
adverse effect on our financial position, investment banking business, and
reputation.

WE HAVE LONG TERM LEASE OBLIGATIONS FOR MORE SPACE THAN WE CURRENTLY NEED.

We have long-term leases for a significantly larger amount of space than we
currently foresee having the need for given current staffing levels. We are
actively trying to sublet this excess space. If we are unable to sublet this
space, we will continue to be obligated to pay rent for space we are not
occupying and the amounts could be material. We have recorded reserves to
provide for the difference between our rental rates and the current market rates
available in the cities in which we rent space. To the extent we are unable to
sublease the space in the time frame we have estimated or lease rates continue
to decrease, we may record additional reserves in future periods.

MANAGEMENT OF THE COMPANY

The following table sets forth certain information concerning each of the
executive officers of the Company:

The following table sets forth the principal occupation of each of the
directors of the Company:

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ITEM 2. PROPERTIES

Our principal executive offices are located in Old Greenwich, Connecticut
where we lease 79,000 square feet and the term of this lease expires in
July 2006. Additionally we operate a 53,600 square foot lease in San Francisco
which will expire in May 2011. We also lease 24,000 square feet of office space
in Stamford, Connecticut which expires in March 2003 and 31,500 square feet of
office space in New York City which expires in November 2006. Additionally, we
lease approximately 20,000 square feet in London which expires in
September 2010. Recently, we have entered into a lease for 3,800 square feet of
office space in Boston, Massachusetts which expires in April 2007.

ITEM 3. LEGAL PROCEEDINGS

We are currently subject to claims and legal proceedings arising in the
normal course of our business. We do not believe that the resolution of such
legal proceedings should have a material adverse effect on us.

On June 28, 1999, certain of the customers of Wit Capital Corporation, our
wholly owned subsidiary, filed a purported class action lawsuit in the Superior
Court of the State of Delaware in and for New Castle County styled ARTHUR E.
BENNING, SR., ET AL. v. WIT CAPITAL GROUP, INC. AND WIT CAPITAL CORPORATION. The
seven count complaint charges Wit Capital with (1) breach of contract for
alleged failure to comply with the "anti-flipping policy" contained in the
account agreement with Wit Capital customers;(2) breach of the implied covenant
of good faith and fair dealing by allegedly violating the anti-flipping policy
and alleged failure to "maintain adequate computer, communications, personnel,
accounting, bookkeeping, and/or other support systems and facilities";
(3) fraud by reason of the fact that Wit Capital allegedly violated its own
anti-flipping policy and our alleged first-come/first-served policy in
connection with IPOs; (4) negligent misrepresentation in its method of
allocation of participation in IPOs; (5) breach of fiduciary duty as a broker;
(6) negligence in handling accounts; and (7) violation of Delaware's Consumer
Fraud Act. On January 10, 2001, the court issued an opinion denying plaintiffs'
motion for class certification, and on February 15, 2001 entered an order
dismissing the action of the named parties as individual defendants in light of
the arbitration provision in the plaintiffs' customer agreements. In
March 2001, the plaintiffs appealed the order and opinion of the Superior Court
denying class certification. In November 2001, the Supreme Court of Delaware
reversed the decision of the lower court's denial of class status on the basis
that the trial judge did not allow enough discovery to determine if the
necessary elements to decide class status were present. We intend to continue to
defend the lawsuit vigorously. We do not believe that this lawsuit should have a
material adverse effect on us.

On May 15, 2000, certain of Wit Capital's customers filed a purported class
action lawsuit in the Circuit Court of Cook County Illinois styled JOSEPH YOUNES
AND ROSANNE T. YOUNES v. WIT CAPITAL CORPORATION. The five count complaint
charges Wit Capital with (1) breach of contract for alleged failure to provide
"continuous, reliable trading services"; (2) breach of fiduciary duty and unjust
enrichment by reason of the fact that Wit Capital allegedly failed to disclose
material facts concerning its system capacity and technical capabilities and
allegedly failed to "incorporate the latest technological advances" into its
systems relating to customer account access and order placement; (3) fraud by
reason of the fact that Wit Capital allegedly falsely represented its technical
capabilities relating to access to its services; (4) violation of the Illinois
Consumer Fraud Act; and (5) "negligent/ intentional tort" by reason of Wit
Capital's alleged failure to provide, upgrade and maintain systems to enable
customer order placement. Wit Capital removed the action to the U.S. District
Court for the Northern District of Illinois, and plaintiffs, after denial of a
motion to remand the case back to state court, amended its complaint to plead a
violation of the antifraud provision of the federal securities laws. On
January 5, 2001, the U.S. District Court granted Wit Capital's motion to
dismiss, granting leave for plaintiffs to replead their complaint. Plaintiffs
amended the complaint, and Wit Capital moved to dismiss. Plaintiffs then moved
to reconsider the denial of the motion to remand. In October 2001,

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plaintiffs' motion to remand back to state court was granted. We intend to
continue to defend the lawsuit vigorously and have filed a motion to dismiss the
complaint in state court. We do not believe that this lawsuit should have a
material adverse effect on us.

Our Company or one or more of our subsidiaries has been named as a defendant
in a number of shareholder class action lawsuits filed in the U.S. District
Court for the Southern District of New York. Specifically, STG, SoundView
Technology Corporation, Wit Capital and E*OFFERING Corp. (which has been merged
into SoundView Technology Corporation), were named as defendants in lawsuits
involving at least thirty issuers of IPO shares in which one or more of the
Company's subsidiaries served as an underwriter in the offering. The defendants
in these lawsuits typically include the issuer and executive officers of the
issuer, as well as the lead underwriter and co-managing underwriters of the
offering (the latter two, the "underwriter defendants"). The lawsuits generally
allege, in relevant part, that underwriter defendants received excessive and
undisclosed commissions in exchange for directing IPO share allocations to
brokerage customers willing to pay such commissions. In addition, the suits
allege that underwriter defendants also allocated shares to the same, or other,
brokerage customers that agreed to purchase shares in the aftermarket at
pre-determined prices. As a result, the allegations continue, each issuer's
offering prospectus misstated underwriting compensation paid to the bankers in
the form of undisclosed commissions and the opportunity to profit from holding
or disposing of shares from underwriting allotment purchases in an artificial
aftermarket price environment. The lawsuits typically allege violations by the
underwriter defendants of Sections 11 and 12(a)(2) of the Securities Act and
Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. In some
cases, violations of the antitrust laws are also alleged. Although the Company
has been named in some instances in more than one lawsuit relating to a single
issuer, it is anticipated that the lawsuits will be consolidated into a single
matter for each issuer after the courts have selected lead class counsel. The
lawsuits seek rescission or rescissionary damages, damages (including treble
damages in those cases where antitrust violations are alleged) and prejudgment
and post-judgment interest. In addition, issuers that have been named as
defendants in these actions have asserted a right to indemnification from the
underwriters. We intend to defend the lawsuits vigorously. We do not believe the
lawsuits should have a material adverse effect on us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has traded on the Nasdaq National Market under the symbol
"SNDV" since August 20, 2001. Prior to August 20, 2001 our common stock traded
under the symbol "WITC". The following table sets forth the range of high and
low sales prices reported on the Nasdaq National Market for the periods
indicated.

12

The closing sale price of the Company's common stock on February 28, 2002
was $2.50. The number of holders of record of the Company's common stock as of
that date was 687. The number of stockholders of record does not reflect the
actual number of individual or institutional stockholders of the Company as
certain shares are held in the name of nominees.

We have never declared or paid cash dividends on our common stock. We do not
anticipate paying cash dividends on our common stock in the foreseeable future.

On January 22, 2001, our Board of Directors approved a 2 million share
repurchase of our common stock which was effected through market and private
transactions, and was completed on May 15, 2001 at an average cost of $2.73 per
share. Most recently, on April 19, 2001 our Board of Directors approved an
additional 5 million share repurchase of which we have repurchased 3.2 million
shares as of December 31, 2001 at an average cost of $1.85 per share.

On August 20, 2001, in connection with the termination of our Strategic
Alliance Agreement with E*TRADE Group, Inc. and the execution of a new
Relationship Agreement with E*TRADE, E*TRADE returned to us 9.3 million shares
of common stock and 3.8 million warrants to purchase common stock.

On October 17, 2001, the Company repurchased approximately 1.5 million
shares of our common stock from two executive officers and a managing director
of our Company at a per share cost of $2.14.

In December 2001, we repurchased approximately 6.1 million of our class B
common shares from the Goldman Sachs Group, Inc. at a cost of $1.71 per share.

RECENT SALES OF UNREGISTERED SECURITIES

None.

ITEM 6. SELECTED FINANCIAL DATA

The following summary selected financial data for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 has been derived from SoundView's
consolidated financial statements, which have been audited by Arthur Andersen
LLP, independent public accountants, and for which the years ended December 31,
2001, 2000 and 1999 are included elsewhere in this Annual Report on Form 10-K.
All per share and weighted average share information has been adjusted to
reflect a 7 for 10 reverse stock split effected June 2, 1999. The selected
financial data should be read in conjunction with the consolidated financial
statements and related notes thereto and with Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations", which are
included elsewhere in this Annual Report on Form 10-K.

13

SOUNDVIEW TECHNOLOGY GROUP, INC.
STATEMENT OF OPERATIONS DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read with the consolidated financial
statements of SoundView Technology Group, Inc. and subsidiaries and related
notes thereto and Item 6, "Selected Financial Data" appearing elsewhere in this
report.

CRITICAL ACCOUNTING POLICIES

A summary of our accounting policies is set forth in Note 3 to the
consolidated financial statements. In our view, the policies that involve the
most subjective judgments are set forth below.

As of December 31, 2001, we hold approximately $25.5 million in private
equity investments and in investment funds in which the majority of the
underlying investments are in privately held companies. We carry our investments
at fair value, with the accompanying gains and losses reflected in our results
of operations. The determination of fair value requires management to make
estimates based on available information including the company's earnings,
sales, operating developments and recent transactions in the company's
securities. Our determination of fair value may not necessarily represent the
amounts that might ultimately be realized, since such amounts depend on future
circumstances and cannot be determined until the investments are actually
liquidated. We may recognize additional future losses related to our investment
portfolio based on specific circumstances surrounding an individual investment
or if market conditions decline further in certain sectors.

We record a loss reserve for our obligations under certain of our operating
leases for unoccupied office space when estimated future sublease income is not
expected to cover the lease obligation for the remainder of the lease term. At
December 31, 2001, we had recorded a loss reserve of $11.5 million related to
our lease commitment for an unused portion of our office space in San Francisco,
California. Thus far, we have been unsuccessful at negotiating a sublease for
the space. In March 2002, as a result of the reduction in headcount, we have
decided to further consolidate our office space to increase the likelihood of
sublease for the unoccupied portion. Accordingly, at present, we may record an
additional loss reserve in the first quarter of 2002 consisting of our lease
commitment for the estimated time frame for sublease and the market loss on the
additional unused office space over the life of the lease. As we assess market
conditions and other factors existing in 2002 regarding the demand for office
space in New York, Stamford and the U.K., we will determine if additional
adjustments to the loss reserve are necessary in relation to the planned
subleases of our office space in those locations.

The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes", which requires the recognition of deferred tax assets and
liabilities at tax rates expected to be in effect when these balances reverse.
Future tax benefits attributable to temporary differences are recognized to the
extent that realization of such benefits is more likely than not. As of
December 31, 2001, we have recorded $45.8 million in deferred tax assets related
primarily to net operating loss carryforwards. We have not established a
valuation allowance against these deferred tax assets as management believes it
is more likely than not that such tax benefits will be utilized against future
taxable income. However if market conditions remain unfavorable and we continue
to operate in a taxable loss position through fiscal 2002, we will reassess the
need for a valuation allowance against part or all of the deferred tax assets.

15

Based on the balances of our deferred tax assets and liabilities at
December 31, 2001, the valuation allowance would approximate $40.4 million.

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142"). SFAS No. 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets acquired individually or with a
group of other assets (but not those acquired in a business combination) at
acquisition. The statement provides that assets which have indefinite useful
lives will not be amortized, but rather will be tested at least annually for
impairment and establishes specific guidelines for the testing of such assets.
SFAS No. 142 allows for intangible assets with finite useful lives to continue
to be amortized over their useful lives, but provides that those lives will no
longer be limited to 40 years. The provisions of SFAS No. 142 are effective for
fiscal years beginning after December 15, 2001. Accordingly, beginning in
January 2002, we will cease amortizing the remaining carrying value of the
goodwill and tradename intangible assets related to the merger with STG, both of
which have indefinite useful lives, and the amortization expense for these items
will no longer be included in our computations of earnings per share. The
goodwill and tradename intangible assets, with carrying values at December 31,
2001 of $183.3 million and $2.2 million, respectively, are currently amortized
at a rate of $10.1 million annually. As of December 31, 2001, we have not yet
determined if we will incur any impairment charges resulting from the adoption
of SFAS No. 142.

OVERVIEW AND BUSINESS

On January 31, 2000, Wit Capital Group, Inc. completed a merger with
SoundView Technology Group, Inc. ("STG"). From June 2000 to August 2001, the
combined company operated as Wit SoundView Group, Inc. and in August 2001, the
combined company changed its name to SoundView Technology Group, Inc. All
references to "SoundView", the "Company", "us", "our", and "we" refer to the
combined company and its subsidiaries subsequent to January 31, 2000. All
references to "STG" refer to operations of STG prior to its merger with Wit
Capital Group, Inc.

SoundView Technology Group, Inc. was incorporated on March 27, 1996 and
commenced operations in September 1997. The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries, SoundView
Technology Corporation ("STC", formerly Wit SoundView Corporation), Wit Capital
Corporation ("WCC"), SoundView Technology Group PLC ("STGE", formerly Wit
SoundView Europe Group PLC), SoundView Asset Management, Inc. and SoundView
Ventures Corp. (formerly Wit SoundView Ventures Corp.)

SoundView is a research driven, technology-focused investment banking firm.
SoundView produces comprehensive sell-side research on over 230 technology
companies. Our brokerage operations provide a variety of sales and trading
services to institutional investors. We leverage our technology expertise
through a sales force which has a comprehensive understanding of the complex and
diverse technologies involved in technology-focused investing. Our investment
banking services include public offerings, M&A advisory and private equity
placements. Our venture capital operation has established and currently manages
a number of venture capital funds that provide investors with the opportunity to
participate in technology and Internet related investments.

CURRENT MARKET ENVIRONMENT

As an investment banking firm, our business and operations are affected by
the U.S. and global economic environment and market conditions. The trends in
the equity markets, and in particular the market for technology companies,
significantly influence the strength of our business operations. We continue to
operate under conditions that are unfavorable to potential public equity
issuers, which commenced in 2000 and worsened in 2001 as a result of continuing
uncertainty regarding the extent of the economic slowdown and the events of
September 11, 2001. In 2002, the markets have been affected

16

by the concerns surrounding the collapse of the Enron Corporation in a way that
has further slowed investment banking activity.

The events of September 11, 2001 resulted in the closure of the U.S. Stock
Markets for 4 days during which time we earned no revenue from our brokerage
operations. However, once the markets reopened our brokerage revenue returned to
levels we were experiencing in 2001 prior to September 11. As a result of the
continuing market uncertainty, it is not clear when the public equity markets
will re-open on terms acceptable to prospective technology issuers and when we
will experience a related increase in revenue from public equity offerings. We
continue to advise on private equity financings as well as merger and
acquisition activity, but are still experiencing a slowdown in these areas.

Our results of operations prior to January 31, 2000, reflect only the
results of Wit Capital Group, Inc. (predecessor to SoundView Technology
Group, Inc.). As a result of the merger with STG on January 31, 2000, we believe
that our results of operations from 1999 are not indicative of the results for
any future period. The financial information presented and discussed below and
elsewhere in this document includes the results of the merger with STG beginning
January 31, 2000, the closing date of that merger and the results of the merger
with E*OFFERING Corp. ("E*OFFERING") beginning October 16, 2000, the closing
date of that merger. Additionally, on February 16, 2001, we acquired a
controlling interest in STGE through the purchase of additional shares of common
stock. Accordingly, beginning on that date, the results of the operations of
STGE have been consolidated with ours.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

REVENUES

Total revenues for the year ended December 31, 2001 were $163.8 million,
compared to $375.5 million for the year ended December 31, 2000 and
$48.6 million for the year ended December 31, 1999. This represents a 56%
decrease in total reported revenues from 2000 to 2001, primarily attributable to
a decrease in investment banking revenue and, to a lesser extent, a decrease in
brokerage revenue, write-downs on private equity investments and a decrease in
asset management fees. Comparing 1999 to 2000, revenues increased 672% primarily
as a result of our merger with STG in January 2000 and the related contributions
of its investment banking and institutional brokerage operations.

Investment banking revenue for the year ended December 31, 2001 was
$29.4 million, compared to $200.2 million for the year ended December 31, 2000
and $30.3 million for the year ended December 31, 1999. Investment banking
revenue is primarily derived from the public offering of equity securities, and
also from mergers and acquisitions and strategic advisory services and private
equity offerings. The 85% decrease in investment banking revenue in 2001 as
compared to 2000 is attributable to unfavorable issuing conditions for
technology companies, which includes lower market valuations and general market
and economic uncertainty. The 562% increase in investment banking revenue from
1999 to 2000 is attributable to the merger with STG in January 2000 as well as
increased economics in public offerings in which we participated in 2000 and an
increased contribution from our mergers and acquisitions advisory services.

During 2001 we participated in a total of 16 securities offerings, 3 as
co-manager and 13 as syndicate member, as compared with 2000 when we
participated in 139 public securities offerings, 72 as co-manager and 67 as
syndicate member. In 1999 we participated in 128 public securities offerings, 57
as co-manager and 71 as syndicate member. We participated in 11 less offerings
in 1999 compared with 2000, but our level of investment banking revenue in 1999
reflects that we were typically receiving a lower economic percentage of the
total revenue in those transactions. For the year ended December 31, 2001, our
mergers and acquisitions and financial advisory group advised on 14 transactions
with a combined value of over $2.2 billion, compared with the year ended
December 31, 2000 when we

17

advised on 17 mergers and acquisitions and financial advisory transactions with
a combined value of over $8 billion. So long as the stability of the public
equity markets remains uncertain and mergers and acquisitions activity remains
slow, we do not expect that investment banking revenue will increase
significantly from levels achieved in 2001 and could decrease from 2001 levels.

Brokerage revenue for the year ended December 31, 2001 was $128.9 million,
compared to $154.9 million for the year ended December 31, 2000 and
$7.1 million for the year ended December 31, 1999. During 2001, brokerage
revenue is comprised solely of amounts attributable to our institutional
brokerage operations compared to the year ended December 31, 2000 when our
institutional operations contributed $146.5 million, and we earned revenues from
our retail online brokerage operations of $8.4 million. Comparing 2001 to 2000,
and excluding commissions of approximately $7 million earned on September 20,
2001 (a day that we specifically earmarked for donation to the WTC relief
efforts) brokerage revenue related to our institutional operations decreased 21%
as a result of lower trading revenue derived from our market making operations.
As a result of the move to decimal trading in the Nasdaq Stock Market, which
began for all stocks in April 2001, narrowing bid-ask spreads and smaller price
increments are being experienced and are resulting in a decrease in trading
revenue earned from our market making operations. To compensate for the
narrowing of bid ask spreads, in April 2001, we began charging commissions on
certain Nasdaq trades. As more firms start charging commissions on Nasdaq
trades, we believe clients will be more willing to pay these commissions, and we
believe these commissions will begin to offset the decrease we have experienced
in this revenue. Comparing the year ended December 31, 2000 to 1999, brokerage
revenues increased 2,086% as a result of the contribution of our institutional
brokerage operations, which became part of our operations as a result of our
merger with STG in January 2000, as compared with 1999 when all of our brokerage
revenue was derived solely from our retail online brokerage operations.

Interest and investment income for the year ended December 31, 2001 was
$10.2 million, compared to $12.3 million for the year ended December 31, 2000
and $4.7 million for the year ended December 31, 1999. We earn interest income
from the investment of cash balances raised through financing activities until
the funds are used in our business. Our average monthly cash balance was
$185.2 million for 2001 compared to $197.3 million in 2000, and $93.5 million in
1999. Our interest and investment income decreased 17% in 2001 from 2000 as a
result of a lower average monthly cash balance and earning a lower interest rate
on our interest bearing balances. Our interest and investment income increased
160% from 1999 to 2000, reflecting the positive cash contribution from our
operating activities. It is our current policy to pay bonuses and other
compensation related payments to employees on a semi-annual basis. Accordingly,
our cash balance and the related interest income decreased once such payments
were made subsequent to December 31, 2001.

Asset management fees for the year ended December 31, 2001 were
$8.0 million compared to $11.4 million for the year ended December 31, 2000 and
$377,000 for the year ended December 31, 1999. For 2001, this revenue is derived
primarily from management fees from our series of venture capital funds and from
incentive royalties from hedge funds that were formerly managed by STG.
Comparing asset management fees earned in the years ended December 31, 2001 and
2000, the 30% decrease in 2001 is attributable primarily to a reduction in the
incentive royalties as well as the absence of syndication fees that were
received in 2000 related to the organization of the Dawntreader Fund II series
of venture capital funds. In 1999, $377,000 in management fee income was derived
from the closing of Wit VC Fund I, LP in late 1999, with which we commenced our
venture capital operations. In the future, we may establish new venture capital
funds and are exploring new opportunities to apply our technology expertise in
the asset management sector.

Gain (loss) on investments for the year ended December 31, 2001 was a loss
of $12.9 million, compared to a loss of $3.2 million for the year ended
December 31, 2000 and a gain of $6.0 million for the year ended December 31,
1999. For the years ended December 31, 2001 and 2000, the 300%

18

increase in this loss primarily consists of losses from investment partnerships
focused on the technology sector and a decline in the value of the Company's
contributions to leveraged employee investment funds. As of December 31, 2001,
we hold approximately $25.5 million in private equity investments and in
investment funds in which the underlying investments are in privately held
companies. We carry our investments at fair value, which requires management to
make estimates based on available information, which do not necessarily
represent the amounts that might ultimately be realized, since such amounts
depend on future circumstances and cannot be determined until the investments
are actually liquidated. Actual results could differ from those estimates and
the differences could be material. We may recognize additional future losses
related to our investment portfolio based on specific circumstances surrounding
an individual investment or if market conditions decline further in certain
sectors.

For the year ended December 31, 1999, the gain on investments represents the
value of common stock warrants received from one client company for which we
provided investment banking services.

Other income for the year ended December 31, 2001 was $0 compared to a loss
of $155,000 for the year ended December 31, 2000 and income of $139,000 for the
year ended December 31, 1999. For the year ended December 31, 2000 other income
consists of an adjustment to reduce estimated advertising revenue related to the
sale of banner advertisements on our website. For the year ended December 31,
1999, this income consists of advertising revenue earned from the sale of banner
space on our website.

EXPENSES

Compensation and benefits expense for the year ended December 31, 2001 was
$122.0 million, compared to $215.3 million for the year ended December 31, 2000
and $39.0 million for the year ended December 31, 1999. Compensation and
benefits expense consists of salaries, bonuses, amortization of restricted stock
awards and other benefits paid or provided to the Company's employees. The 43%
decrease in compensation and benefits expense from 2000 to 2001 primarily
relates to lower incentive compensation accrued on lower revenues and a decrease
in personnel from 450 as of December 31, 2000 to 305 as of December 31, 2001.
The 452% increase in compensation and benefits expense from 1999 to 2000
primarily relates to an increase in headcount as of December 31, 1999 from 241
to 450 as of December 31, 2000 and increased incentive compensation accrued on a
higher revenue base. Although our headcount has fluctuated during the past three
years, the decrease in headcount in 2001 resulted primarily from staff
reductions due to market conditions and the consolidation of our New York and
Stamford offices into one office location in Old Greenwich, Connecticut. The 87%
increase in our employee base during fiscal 2000 was attributable to the mergers
with STG and E*OFFERING, offset by a reduction in staff employed in our online
brokerage operations, which we discontinued in 2000. In March 2002, management
decreased the size of its combined U.S. and U.K. employee base to approximately
240 employees as a result of the continued uncertainty surrounding the U.S. and
European economic environment.

Compensation and benefits expense as a percentage of total revenues was 74%
for the year ended December 31, 2001 compared to 57% for the year ended
December 31, 2000, and 80% for the year ended December 31, 1999. Comparing 2001
with 2000, the increase in compensation expense as a percentage of total
revenues is primarily attributable to salary expense for employees, which
represented 24% of total revenues in 2001 as compared with 11% in 2000.
Additionally, cash and stock based severance charges related to staff reductions
in the year ended December 31, 2001, of $13.2 million, accounted for 8% of total
revenues for 2001.

Amortization of intangible assets and goodwill increased to $41.3 million
for the year ended December 31, 2001 from $25.2 million for the year ended
December 31, 2000 and $0 for the year ended December 31, 1999. This expense
relates to the amortization of intangible assets and goodwill related to mergers
with STG and E*OFFERING. The merger with STG, completed on January 31,

19

2000, resulted in approximately $275 million in intangible assets and goodwill,
which, during 2000 and 2001, was expensed on a straight-line basis over various
periods ranging from 3 to 20 years. The merger with E*OFFERING, which was
completed on October 16, 2000, resulted in approximately $304 million in
intangible assets and goodwill, which, during 2001, was amortized on a
straight-line basis over 5 and 7 years, respectively. However, the carrying
values of goodwill and intangible assets related to the merger with E*OFFERING
were reduced in June 2001 as a result of an impairment charge, discussed below.
The remaining intangible asset balance related to the strategic alliance between
the Company and E*TRADE was reduced to zero in the third quarter of 2001
pursuant to a restructuring of the strategic alliance with E*TRADE, which
resulted in a return of stock previously issued to E*TRADE. Accordingly our
results of operations for the year ended December 31, 2001 include 3 to
6 months of amortization expense related to the E*OFFERING intangible assets and
goodwill, in excess of the expense in 2000.

As a result of the impairment charge discussed below and strategic alliance
restructuring, as of December 31, 2001 the remaining balance of intangible
assets and goodwill is all related to the merger with STG. In January 2002, upon
adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" (see "New
Accounting Pronouncements") we will cease amortization of the goodwill and
tradename intangible assets, with carrying values at December 31, 2001 of
$180.7 million and $2.2 million, respectively, which are currently amortized at
a rate of $10.1 million annually. Accordingly, based on the balances and
amortization period of the remaining amortizable intangible assets at
December 31, 2001 and an additional write-off of an intangible asset in
March 2002 (see Note 20 to the financial statements) we expect amortization
expense to decrease to approximately $5.1 million on an annualized basis in
2002. As of December 31, 2001, we have not yet determined if we will incur any
impairment charges resulting from the adoption of SFAS No. 142.

For the year ended December 31, 2001, impairment of intangible and other
assets was $260.9 million. Management reviews intangible and other assets
whenever circumstances indicate the carrying amount of an asset may not be
recoverable. In the second and third quarters of 2001, we recorded an impairment
loss of $11.2 million related to our investment in Wit Capital Japan based on
our estimate of the total proceeds to be received upon the planned sale of our
interest in the entity which was completed in November 2001. Additionally,
during June 2001, in light of current economic environment and market
conditions, we performed an evaluation of our enterprise value to make a
determination as to whether the recorded amounts of goodwill and intangible
assets acquired in the mergers with STG and E*OFFERING were potentially
impaired. As a result of this analysis, we determined that an adjustment was
required to reduce the carrying value of goodwill and other intangible assets to
their estimated fair value. After evaluating the projected future cash flows
related to the merger with E*OFFERING, it was determined that the goodwill and
the strategic alliance agreement related to this merger were impaired. As a
result, we recorded an impairment charge of $249.7 million in 2001. The charge
was comprised of a write-off of the carrying values of the goodwill and the
strategic alliance agreement of $195.4 million and $54.3 million, respectively,
based upon a valuation of discounted future cash flows, to adjust both assets to
their estimated fair values.

Brokerage and clearance expense for the year ended December 31, 2001 was
$21.1 million, compared to $25.5 million for the year ended December 31, 2000
and $5.3 million for the year ended December 31, 1999. This expense primarily
consists of fees paid to independent floor brokers on the New York Stock
Exchange for the execution of institutional customer agency trades, as well as
amounts paid to our clearing broker for processing and clearing customers'
trades. The 17% decrease in brokerage and clearance expense for the year ended
December 31, 2001 compared to December 31, 2000 resulted from decreased
brokerage revenue and the elimination of expenses related to our online
brokerage operations. Brokerage and clearance expense increased 378% from 1999
to 2000 due to the addition of our institutional brokerage operations to our
business as a result of the merger with STG. We expect our brokerage and
clearance expense to fluctuate to the extent we experience an increase or
decrease in related commission revenue.

20

Data processing and communications expense for the year ended December 31,
2001 was $11.4 million, compared to $9.6 million for the year ended
December 31, 2000 and $3.4 million for the year ended December 31, 1999. Data
processing and communications expense includes costs related to market data
services, transaction processing and telephone and other communication charges.
Comparing the year ended December 31, 2001 to the year ended December 31, 2000
and likewise, 2000 to 1999, these expenses have increased 19% and 178%
respectively, as a result of the merger with STG and the related addition of our
institutional brokerage operations. We are currently in the process of
consolidating the various market data service contracts as part of an ongoing
cost reduction effort, and expect the related expenses to decrease once the
consolidation is complete.

Marketing and business development expense for the year ended December 31,
2001 was $11.4 million, compared to $15.7 million for the year ended
December 31, 2000 and $2.6 million for the year ended December 31, 1999. For the
years ended December 31, 2001 and 2000, marketing and business development
expense consists primarily of travel, entertainment and costs associated with
hosting our technology-focused conferences. Marketing and business development
expense in 1999 primarily consisted of travel, entertainment and other costs
associated with developing our investment banking business. The 27% decrease
from 2000 to 2001 is attributable to a decrease in advertising costs incurred in
2000 as well as a decrease in travel and entertainment expenses resulting from
the market slowdown and to a lesser extent, the related reduction in headcount.
The 506% increase from 1999 to 2000 is attributable to the merger with STG and
the addition of conference costs and additional personnel. In the future, we
would expect these expenses to fluctuate to the extent we modify our marketing
efforts in response to the changing business environment and market conditions.

Occupancy expense for the year ended December 31, 2001 was $12.9 million,
compared to $5.2 million for the year ended December 31, 2000 and $1.1 million
for the year ended December 31, 1999. Occupancy expense includes costs related
to leasing office space in Old Greenwich, New York, Stamford, San Francisco and
London. The 149% increase from 2000 to 2001 was attributable to the merger with
E*OFFERING from which we obtained an additional larger office in San Francisco
combined with the subsequent consolidation of three locations in San Francisco
and two locations on the east coast. The 367% increase from 1999 to 2000, was a
result of adding an office in Stamford as a result of the merger with STG and
adding two additional, larger offices in San Francisco as a result of the
mergers with STG and E*OFFERING. During 2001, as we reduced headcount we took
steps to consolidate our east coast operations into one location in Old
Greenwich, Connecticut as well as consolidate our space in San Francisco. As we
finalize these plans, we expect occupancy expense to decrease from 2001 levels.

Depreciation and amortization expense for the year ended December 31, 2001
was $10.8 million, compared to $6.9 million for the year ended December 31, 2000
and $1.6 million for the year ended December 31, 1999. Depreciation and
amortization consists primarily of depreciation and amortization of furniture,
equipment and leasehold improvements and amortization of computer software. The
increases in depreciation and amortization expense of 57% comparing 2001 with
2000, and 328% comparing 2000 with 1999, reflect the increased investments we
have made in technology, equipment and facilities as well as the additional
facilities and equipment acquired in the mergers with STG and E*OFFERING.

Professional services expense for the year ended December 31, 2001 was
$8.3 million, compared to $9.2 million for the year ended December 31, 2000 and
$5.0 million for the year ended December 31, 1999. Professional services expense
includes legal, consulting, accounting, and recruiting fees and the costs
related to our strategic relationships with the Gartner Group and the Giga
Group, which allow us access to their products and services. The 10% decrease
from 2000 to 2001 is attributable to fewer consultants' fees, offset by an
increase in costs incurred in connection with defending ourselves in litigation.
This expense increased 86% from 1999 to 2000 due to the merger with STG and the
addition of costs associated with our relationships with the Gartner Group and
the Giga Group.

21

Technology development expense for the year ended December 31, 2001 was
$1.9 million, compared to $5.8 million for the year ended December 31, 2000 and
$2.8 million for the year ended December 31, 1999. Comparing the year ended
December 31, 2001 to the year ended December 31, 2000, this expense decreased
67% primarily as a result of the discontinuance of our online brokerage
operations, offset by continued development and enhancements to our technology
infrastructure. Comparing the year ended December 31, 2000 to the year ended
December 31, 1999, this expense increased 109% as a result of development costs
in 2000 associated with an online brokerage platform and an online auction
system for secondary and follow-on offerings, as well as from continued
development and enhancements to our technology infrastructure.

For the year ended December 31, 2000, we recorded an expense of
approximately $11.6 million related to the transfer of our online retail
brokerage accounts to E*TRADE and the corresponding discontinuance of our retail
brokerage operations. This charge included a payment to WCC's clearing agent to
terminate its contract, an accrual for severance payments to be made to certain
employees whose services would no longer be required, and an expense for all
brokerage related assets that we would not employ in our business in the future.

For the year ended December 31, 2000, we wrote-off computer software and
equipment totaling $1.3 million, a decrease from $5.6 million for the year ended
December 31, 1999. In December 1999, in light of the rapidly changing
environment for after-hours trading and alternative trading systems we
wrote-down the majority of computer software and hardware that we had developed
or purchased to operate a planned after hours trading system. We estimated the
fair value of the assets remaining by determining which assets were utilizable
in other areas of the business as well as estimating the potential future cash
inflows that might be received from the sale or licensing of part or all of the
developed technology. In the first quarter of 2000, as a result of information
that became available to us regarding redeployment of the remaining assets, we
wrote-off an additional $1.3 million of capitalized costs representing our
estimate of the impairment in the value of the remaining assets.

Loss from the consolidation of office space was $21.8 million for the year
ended December 31, 2001. This loss relates to the write off of leasehold
improvements, furniture and equipment primarily related to our relocation from
New York and Stamford to our new Old Greenwich location of $9.4 million and the
establishment of a reserve of $12.4 million related to our lease commitment for
an unused portion of our office space in San Francisco, California. Thus far, we
have been unsuccessful at negotiating a sublease for the space. In March 2002,
as a result of the reduction in headcount, we have decided to further
consolidate our office space to increase the likelihood of sublease for the
unoccupied portion. Accordingly, at present, we may record an additional loss
reserve in the first quarter of 2002 consisting of our lease commitment for the
estimated time frame for sublease and the market loss on the additional unused
office space over the life of the lease. As we assess market conditions and
other factors existing in 2002 regarding the demand for office space in New
York, Stamford and the U.K., we will determine if additional adjustments to the
loss reserve are necessary in relation to the planned subleases of our office
space in those locations.

The Company recorded a charge of approximately $6.2 million for the year
ended December 31, 2001 related to the restructuring of STGE's operations. This
charge primarily includes severance and other costs associated with downsizing
and re-focusing STGE's operations. STGE's current operations focus on providing
technology focused research to the Company's U.S. institutional clients and
providing limited investment banking services to European clients. In
March 2002, we purchased from Cazenove & Co. Ltd. its interest in STGE for
nominal consideration and we decided to cease formal operations in the U.K. and
fold its business operations into ours. We expect to incur additional losses
associated with these actions in the first quarter of 2002.

Other expenses for the year ended December 31, 2001 were $11.0 million,
compared to $8.2 million for the year ended December 31, 2000 and $2.5 million
for the year ended December 31, 1999. Other expenses includes costs for office
supplies, insurance, subscriptions, registrations and other

22

general administrative expenses. Comparing 2001 to 2000, the 34% increase in
other expenses related primarily to the donation of net commissions earned on
September 20, 2001 of approximately $6 million (gross commissions of $7 million
earned less clearing and execution costs) to the World Trade Center relief
efforts offset by a decrease in general and administrative costs through an
ongoing expense reduction effort. Comparing 2000 to 1999, other expenses
increased 222% primarily as a result of the mergers with STG and E*OFFERING.

OTHER

For the year ended December 31, 2001, we recorded a gain on strategic
investment of $1.5 million related to proceeds received from our investments in
enba plc and Wit Capital Japan ("WCJ") of $1.2 million and $357,000,
respectively, compared to a loss of $13.7 million related to our investment in
enba recorded in 2000. In March of 2000, pursuant to a joint venture agreement
related to the formation of STGE, we exchanged 1,878,596 million of our shares
for 189,748 shares of enba and recorded the value of our investment in enba at
approximately $31 million, based on the market value of the shares exchanged.
During the latter part of 2000, the parties to the joint venture agreement had
been negotiating an unwinding of enba's participation in the joint venture, and
in light of these negotiations, we recorded a loss on our investment in enba to
reduce its carrying value to $17.3 million, equal to our estimate of the fair
value of the shares as of December 31, 2000. For the year ended December 31,
2001, these amounts consist of additional amounts received related to our
investments in enba and WCJ.

Equity in net loss of affiliates and minority interest totaled $8.4 million
for the year ended December 31, 2001, $20.1 million for the year ended
December 31, 2000 and $560,000 for the year ended December 31, 1999. Equity in
net loss of affiliates represents our proportional share of the losses incurred
by WCJ and STGE (prior to acquiring a controlling interest in STGE in
February 2001) based on our ownership interest in each entity. Minority interest
in the earnings of STGE represents recognition of the 18% interest in that
entity held by Cazenove. Comparing 1999 with 2000, equity in net loss of
affiliates increased 3,483%, as both entities had commenced limited operations
in 1999, as compared to 2000, when both WCJ and STGE spent the majority of the
year hiring staff, building an infrastructure and incurring other costs related
to preparing to commence operations. Comparing 2000 to 2001, this loss decreased
48% as a result of incurring only nine months of losses related to our
investment in WCJ and as a result of acquiring an 82% interest in STGE in
February 2001, and therefore consolidating its results of operations with our
own. In the third quarter of 2001, we wrote down the value of our investment in
WCJ based on the expected proceeds from the planned sale of our investment,
which was completed in November 2001. This loss of approximately $11.2 million
was recorded as an impairment charge, and reduced the carrying value of our
investment to its fair value. On February 16, 2001, we participated in a rights
offering to purchase additional shares in STGE for an aggregate purchase price
of approximately $8.2 million, increasing our ownership percentage to a
controlling interest of approximately 82%. On March 15, 2002, the Company
acquired Cazenove & Co.'s interest in STGE, for a nominal amount, increasing the
Company's ownership interest in STGE to 99.9%. Accordingly, 99.9% of the results
of operations of STGE will be consolidated with ours commencing March 15, 2002.
Additionally, during the first quarter of 2002, the Company formalized a plan to
fold the remaining operations of STGE into its U.S. operations, and a loss
related to this decision will be recorded in the first quarter.

For the year ended December 31, 2001, we recorded an income tax benefit of
$51.3 million compared to $24.1 million income tax expense for the year ended
December 31, 2000 and $0 for the year ended December 31, 1999. We record a
provision or benefit for income taxes based on our estimated taxable income and
periodically assess the need for valuation allowances based on our estimation of
future taxable earnings. Our effective tax rate differs from the federal
statutory rate as a result of certain non-deductible expenses, primarily
goodwill, and state and local income taxes. As of December 31, 2001, we have
recorded $45.8 million in deferred tax assets related primarily to net

23

operating loss carryforwards. We have not established a valuation allowance
against these deferred tax assets as management believes it is more likely than
not that such tax benefits will be utilized against future taxable income.
However if market conditions remain unfavorable and we continue to operate in a
taxable loss position through fiscal 2002, we will reassess the need for a
valuation allowance against part or all of the deferred tax assets. Based on the
balances of our deferred tax assets and liabilities at December 31, 2001, the
valuation allowance would approximate $40.4 million.

LIQUIDITY AND CAPITAL RESOURCES

From 1996 to mid 1999, we satisfied our cash requirements primarily through
private placements of common stock and convertible preferred stock. During
June 1999 we completed an initial public offering of our common stock in which
we issued 8,740,000 shares at $9.00 per share. We received $72.8 million in cash
proceeds, net of underwriting discounts and offering costs, from the offering
and an approximate $57.0 million from private placements of our equity in that
year. In January 2000, we completed the merger with STG and in fiscal 2000 we
experienced positive cash flow from our operating activities. As of
December 31, 2001, we had a balance of $181 million in cash and cash
equivalents, which was reduced to approximately $154 million after year end
bonus payments. We do not currently anticipate any capital expenditures or
investments in 2002 that would bring our cash balance significantly below its
current level. Additionally, in March 2002 we undertook a business review
focused on reducing our cost structure in an effort to generate positive cash
flow from operations over the last 9 months of 2002 in varying market
conditions.

Net cash provided by operating activities was $13.5 million for the year
ended December 31, 2001, $68.6 million for the year ended December 31, 2000,
compared to net cash used in operating activities of $8.9 million for the year
ended December 31, 1999. Cash provided by operating activities for the year
ended December 31, 2001 was primarily from a net loss of $332.7 million, offset
by non-cash adjustments of $311.3 million, a net decrease in operating
liabilities of $98.2 million, a cumulative translation adjustment of
$2.5 million, and a decrease in operating assets of $135.6 million. Cash
provided by operating activities for the year ended December 31, 2000 was
primarily from a net loss of $22.0 million, non-cash adjustments of
$97.7 million, a net increase in operating assets of $62.5 million, offset by a
net increase in operating liabilities of $55.4 million. Cash used in operating
activities for the year ended December 31, 1999 was primarily from a net loss of
$20.9 million, non-cash adjustments of $8.1 million, an increase in operating
assets of $13.6 million that was offset by a net increase in operating
liabilities of $17.5 million.

Net cash provided by operations could be negatively impacted by a number of
factors, including potential losses on private equity investments, including the
venture capital and employee investment funds, in which the underlying
investments are in privately held companies. We carry our investments,
approximately $25.5 million as of December 31, 2001, at fair value which
requires management to make estimates based on available information, which do
not necessarily represent the amounts that might ultimately be realized, since
such amounts depend on future circumstances and cannot be determined until the
investments are actually liquidated. Actual results could differ from those
estimates and the differences could be material. We may recognize additional
future losses related to our investment portfolio based on specific
circumstances surrounding an individual investment or if market conditions
decline further in certain sectors.

24

Net cash used in investing activities was $16.2 million for the year ended
December 31, 2001, compared to net cash provided by investing activities of
$67.0 million for the year ended December 31, 2000 and net cash used in
investing activities of $129.3 million for the year ended December 31, 1999. Net
cash used in investing activities for the year ended December 31, 2001 was
primarily for purchases of computer software and furniture, equipment and
leasehold improvements of $20.0 million, offset by cash received in the
acquisition of STGE and the sale of WCJ of $3.2 million. Net cash provided by
investing activities for the year ended December 31, 2000 was primarily from
sales of short-term investments of $146.1 million offset by purchases of
short-term investments of $43.7 million, the acquisition of STG for
$6.8 million (net of cash received), an additional investment in WCJ of
$18.9 million and purchases of computer software and furniture, equipment and
leasehold improvements of $10.0 million. Net cash used in investing activities
for the year ended December 31, 1999 was primarily for an investment in STGE of
$5.6 million, net purchases of short-term investments of $108.6 million,
purchases of furniture, equipment and leasehold improvements of $6.6 million and
purchases and development of computer software of $8.4 million.

Net cash used in financing activities was $18.2 million for the year ended
December 31, 2001, compared to net cash provided by financing activities of
$36.7 million for the year ended December 31, 2000 and $132.5 million for the
year ended December 31, 1999. Net cash used in financing activities for the year
ended December 31, 2001 was primarily the result of $12.2 million in repurchases
of our common stock through our repurchase program and $10.3 million in
repurchases of our Class B common stock from The Goldman Sachs Group, Inc.,
offset by proceeds from employee stock option exercises of $3.6 million and note
repayments of approximately $700,000. For the year ended December 31, 2000, net
cash provided by financing activities resulted primarily from issuances of
common stock totaling $46.1 million which consists primarily of employee stock
option exercises and the sale of 2 million shares of our common stock to each of
E*TRADE and certain affiliates of General Atlantic Partners, offset by
$12.1 million in repurchases of our common stock through our repurchase program.
For the year ended December 31, 1999, cash provided by financing activities
resulted primarily from net proceeds of $72.8 million received from the initial
public offering of our common stock and from $24.9 million in net proceeds
received from the issuance of our Series E preferred stock, subsequently
converted into Class B common stock, and the sale of warrants to The Goldman
Sachs Group, Inc. and from $31.5 million received from issuances of our
Series D preferred stock, now common stock, in private placements.

COMMITMENTS

We currently have several noncancelable operating leases covering office
space in New York, Old Greenwich and Stamford, Connecticut, San Francisco,
California and London. The leases include scheduled rent increases and have
various expirations ranging from 2001 to 2011. Future lease commitments over
that period total approximately $76.6 million and are detailed in the table
below.

The Company is obligated under three noncancelable leases for office space
that it does not occupy. Included in the table below are commitments one of
those leases in San Francisco, California totaling $8.5 million, however
sublease payments for the life of the lease totaling $9.0 million are not
included as an offset to the future minimum payments. Also included in the table
below are future commitments of $18.4 million related to another lease in San
Francisco, California and a lease in Stamford, Connecticut. As of December 31,
2001, we have recorded $12.5 million in reserves for the decline in market value
of these leases which we are currently attempting to sublet. To the extent that

25

we are unsuccessful, or if our sublessees default, we will be responsible in
future periods for the payments shown below.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142"). SFAS No. 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets acquired individually or with a
group of other assets (but not those acquired in a business combination) at
acquisition. The statement provides that assets which have indefinite useful
lives will not be amortized, but rather will be tested at least annually for
impairment and establishes specific guidelines for the testing of such assets.
SFAS No. 142 allows for intangible assets with finite useful lives to continue
to be amortized over their useful lives, but provides that those lives will no
longer be limited to 40 years. The provisions of SFAS No. 142 are effective for
fiscal years beginning after December 15, 2001. Accordingly, beginning in
January 2002, we will cease amortizing the remaining carrying value of the
goodwill and tradename intangible assets related to the merger with STG, both of
which have indefinite useful lives, and the amortization expense for these items
will no longer be included in our computations of earnings per share. The
goodwill and tradename intangible assets, with carrying values at December 31,
2001 of $180.7 million and $2.2 million, respectively, are currently amortized
at a rate of $10.1 million annually. As of December 31, 2001, we have not yet
determined if we will incur any impairment charges resulting from the adoption
of SFAS No. 142.

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 is effective for fiscal years beginning after December 15,
2001. The Company does not believe the implementation of SFAS No. 144 will have
a material impact on the Company's consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary risk exposures are market risk (particularly equity price),
credit risk and legal risk. Market risk refers to the risk that a change in the
level of equity prices, interest rates or other factors could result in trading
losses or negatively impact the market for equity issuance. Credit and legal
risk refers to the risk that a counterparty to a transaction might fail to
perform under its contractual commitment resulting in our incurring losses. Our
risk management focuses on the trading of securities, extension of credit to
counterparties and investment banking activities, as well as the monitoring of
trading levels with institutional customers. We monitor these risks daily
through a number of control procedures in order to identify and evaluate the
various risks to which our Company is exposed.

26

MARKET RISK

We may act as a principal to facilitate customer-related transactions in
financial instruments, which exposes the firm to market risks. We make markets
in over 240 equity securities. To facilitate this business, we maintain
securities inventories to facilitate customer transactions. Our management
believes its practice of monitoring market risk very closely and we believe that
our risk management results in a carefully controlled exposure to market
volatility that should reduce our exposure to earnings volatility. Managing
market risk exposure includes limiting firm commitments by position level both
long and short for all securities traded and limiting the type of trades that
can occur in each inventory account.

We seek to manage daily risk exposure in our inventory accounts by requiring
various levels of management review of these accounts. The primary purpose of
risk management is to participate in the establishment of position limits, as
well as to monitor both the buy and sell activity in the firm's trading
accounts. Trading activities may result in the creation of inventory positions.
Position and exposure reports indicating both long and short position are
prepared, distributed and reviewed each day. These reports enable us to monitor
inventory levels, monitor daily trading results by stock and trader, as well as
review inventory aging, pricing and concentration.

We invest our excess cash in money market funds and in enhanced income funds
which include short-term obligations issued by the U.S. Government and its
agencies and in high-quality corporate issuers. Our investments in enhanced
income funds exposes us to market risk for changes in interest rates. We have
established investment guidelines that specify credit quality requirements as
well as diversification requirements by issuer and type of security. We do not
hold derivative financial instruments in our investment portfolio.

CREDIT RISK

Our exposure to credit risk arises from the possibility that a counterparty
to a transaction might fail to perform under its contractual commitment,
resulting in our incurring losses. Credit risk related to various financing
activities is reduced by the industry practice of obtaining and maintaining
possession and control of collateral which is accomplished with established
arrangements with the clearing broker. Along with our clearing broker, we manage
the credit exposure relating to our trading activities by monitoring the credit
worthiness of counterparties requesting additional collateral when deemed
necessary and limiting the amount and duration of exposure to individual
counterparties.

LEGAL RISK

Legal risk includes the risk of non-compliance with applicable legal and
regulatory requirements and the risk that a counterparty's performance
obligations will be unenforceable. We are generally subject to extensive
regulation in the different jurisdictions in which we conduct business. We have
established legal standards and procedures that are designed to ensure
compliance with all applicable statutory and regulatory requirements. We have
also established procedures that are designed to monitor compliance with senior
management's policies relating to conduct, ethics and business practices. In
connection with our business, we have various procedures that address issues
such as regulatory capital requirements, trading and sales practices,
supervision, and record keeping. We have also established certain procedures to
mitigate the risk that a counterparty's performance obligations will be
unenforceable, including consideration of counterparty legal authority and
capacity, adequacy or legal documentation, the permissibility of a transaction
under applicable law and whether applicable bankruptcy or insolvency laws limit
or alter contractual remedies.

27

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SOUNDVIEW TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Index to Consolidated Financial Statements.................. F-1
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Financial Condition as of
December 31, 2001 and 2000................................ F-3
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999.......................... F-4
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2001, 2000 and 1999...... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.......................... F-8
Notes to Consolidated Financial Statements.................. F-10
Schedule to Consolidated Financial Statements............... F-24
Notes to Schedule to Consolidated Financial Statements...... F-31

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

28

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information called for by Item 10 will be set forth under the caption
"Election of Directors" in the Company's 2001 Proxy Statement, which will be
filed not later than 120 days after the end of the Company's fiscal year ended
December 31, 2001 and which is incorporated herein by this reference.

ITEM 11. EXECUTIVE COMPENSATION

Information called for by Item 11 will be set forth under the caption
"Executive Compensation" in the Company's 2001 Proxy Statement, which will be
filed not later than 120 days after the end of the Company's fiscal year ended
December 31, 2001 and which is incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information called for by Item 12 will be set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Company's 2001 Proxy Statement, which will be filed not later than 120 days
after the end of the Company's fiscal year ended December 31, 2001 and which is
incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information called for by Item 13 will be set forth under the caption
"Certain Relationships and Related Transactions" in the Company's 2001 Proxy
Statement, which will be filed not later than 120 days after the end of the
Company's fiscal year ended December 31, 2001 and which is incorporated herein
by this reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report on Form 10-K:

1. FINANCIAL STATEMENTS OF SOUNDVIEW TECHNOLOGY GROUP, INC.

The following consolidated financial statements of SoundView Technology
Group, Inc, and subsidiaries and the related notes thereto are filed as a part
of this report pursuant to Item 8, beginning on page F-1:

Report of Independent Public Accountants
Consolidated Statements of Financial Condition as of
December 31, 2001 and 2000
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
Schedule to Consolidated Financial Statements
Notes to Schedule to Consolidated Financial Statements

2. Financial Statement Schedules and Information

All financial statement schedules and information required by Item 14(a)(2)
have been omitted because they are inapplicable or because the required
information has been included in the consolidated financial statements or notes
thereto.

29

3. Exhibits

The following exhibits are filed as part of this report as required by Item
601 of Regulation S-K. The exhibits designed by an asterisk are management
contracts and compensatory plans and arrangements required to be filed as
exhibits to this report.

3.3 Certificate of Ownership and Merger merging SoundView
Technology Group, Inc. into Wit SoundView Group, Inc.
(Incorporated by reference to Exhibit 3.3 to the quarterly
report on Form 10-Q of SoundView Technology Group, Inc. for
the period ended September 30, 2001)

10.1* Stock Incentive Plan of SoundView Technology Group, Inc. as
amended October 17, 2001 (Incorporated by reference to
Exhibit 10.1 to the quarterly report on Form 10-Q of
SoundView Technology Group, Inc. for the period ended
September 30, 2001).

10.7* Amendment to Employment Agreement between Soundview
Technology Group, Inc. and Robert H. Lessin dated
October 22, 2001 (Incorporated by reference to Exhibit 10.7
to the quarterly report on Form 10-Q of SoundView Technology
Group, Inc. for the period ended September 30, 2001).

10.8* Separation Agreement with Russell Crabs dated August 22,
2001 (Incorporated by reference to Exhibit 10.14 to the
periodic report on Form 8-K of SoundView Technology
Group, Inc. dated September 14, 2001).

10.9 Standstill Agreement, dated as of December 4, 2001, by and
between SoundView Technology Group, Inc., General Atlantic
Partners, LLC, General Atlantic Partners 61, L.P and GAP
Coinvestment Partners, L.P.

21.1 List of subsidiaries of SoundView Technology Group, Inc.

23.1 Consent of Arthur Andersen LLP with regard to the financial
statements of SoundView Technology Group, Inc.

24.1 Powers of Attorney (included on signature page).

99.1 Letter to Commission Pursuant to Temporary Note 3T

(b) Reports on Form 8-K

On June 5, 2001, the Company filed a current report on Form 8-K filing the
audited financial statements of E*OFFERING Corp. and subsidiary as of and for
the year ended September 30, 2000 and as of September 30, 1999 and for the
period from November 13, 1998 (Inception) to September 30, 1999 and filing pro
forma condensed combined financial information for the year ended December 31,
2000.

On August 14, 2001, the Company filed a current report on Form 8-K
disclosing certain risk factors associated with the Company's business and
operations.

On August 29, 2001, the Company filed a current report on Form 8-K
describing the terms of the Company's termination of its Strategic Alliance
Agreement with E*TRADE Group, Inc. and its new Relationship Agreement.

On November 16, 2001, the Company filed a current report on Form 8-K
describing the terms of the Company's Separation Agreement with Russell Crabs.

On December 5, 2001, the Company filed a current report on Form 8-K
describing the terms of the Company's repurchase of its Class B Common Stock
from The Goldman Sachs Group, Inc. and the terms of the Company's Standstill
Agreement with General Atlantic Partners LLC and certain of its affiliates.

30

(C) SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in the City of New
York, the State of New York, on the 28th day of March 2001.

SOUNDVIEW TECHNOLOGY GROUP, INC.

By: /s/ MARK F. LOEHR
-----------------------------------------
Mark F. Loehr
CHIEF EXECUTIVE OFFICER

By: /s/ JENNIFER M. FLEISSNER
--