15. COMMITMENTS AND CONTINGENCIES
The Company may be involved in legal proceedings in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance.
On October 12, 2011, Harry Friedman filed a complaint with the Nassau County Court, State of New York, Index Number 11-014606 against the Company, as a shareholder of GACC, Josh Winkler, as an officer of GACC and JSM Capital Holding Corp. and Broad Sword Holdings, LLC, as majority shareholders of GACC. The complaint seeks a recovery on several counts resulting from the purported wrongful termination of Plaintiff and lack of Notice by Global Arena Capital Corp. The Company is of the opinion that the charges alleged in the complaint are without merit and will be discounted or dismissed against the Company. However, the Company cannot provide assurance that the outcome of this matter will not have a material effect on the Company’s financial condition or results of operations.
The Company is engaged in providing a broad range of investment services to a diverse group of retail and institutional clientele. Counterparties to the Company’s business activities include broker-dealers and clearing organizations, banks and other financial institutions. The Company uses clearing brokers to process transactions and maintain customer accounts on a fee basis, and the Company permits the clearing firms to extend credit to its clientele secured by cash and securities in the client’s account. The Company’s exposure to credit risk associated with the non-performance by its customers and counterparties in fulfilling their contractual obligations can be directly impacted by volatile or illiquid trading markets, which may impair the ability of customers and counterparties to satisfy their obligations to the Company. The Company has agreed to indemnify the clearing brokers on a limited basis for losses it incurs while extending credit to the Company’s clients.
It is the Company’s policy to review, as necessary, the credit standing of its customers and each counterparty. Amounts due from customers that are considered uncollectible by the clearing broker are charged back to the Company by the clearing broker when such amounts become determinable. Upon notification of a charge back, such amounts, in total or in part, are then either (i) collected from the customers, (ii) charged to the broker initiating the transaction, and/or (iii) charged as an expense in the accompanying statement of operations, based on the particular facts and circumstances.
The maximum potential amount for future payments that the Company could be required to pay under this indemnification cannot be estimated. However, the Company believes that it is unlikely it will have to make any material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for this indemnification.