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What changed in Freedom Holding Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Freedom Holding Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+855 added−770 removedSource: 10-K (2024-06-14) vs 10-K (2023-08-04)

Top changes in Freedom Holding Corp.'s 2024 10-K

855 paragraphs added · 770 removed · 523 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

163 edited+88 added−63 removed73 unchanged
Biggest changeFreedom EU complies with the requirements and/or obligations implemented by the following laws and regulations under the applicable legal framework: • Directive 2014/65/EU of the European Parliament and of the Council of May 15, 2014 on Markets in Financial Instruments and amending Directive 2002/92/EC and Directive 2011/61/EU. • Cyprus Investment Services and Activities and Regulated Markets Law of 2017 (The Law 87(I)/2017) regarding the provision of investment services, the exercise of investment activities and the operation of regulated markets (the “Investment Services and Activities and Regulated Markets Law 2017”). • ESMA Final Report (ESMA35-42-1227) on the European Commission mandate on certain aspects relating to retail investor protection as of April 29, 2022. 22 Table of Contents Freedom EU follows the European Securities and Markets Authority (ESMA), European Union Directive 2014/65/EU (the Markets in Financial Instruments Directive or "MiFID II"), European Commission, European Central Bank, Central Bank of Cyprus and CySEC circulars requirements to ensure its compliance with the foregoing regulatory acts.
Biggest changeFreedom EU complies with the requirements and/or obligations implemented by the following laws and regulations under the applicable legal framework: • Directive 2014/65/EU of the European Parliament and of the Council of May 15, 2014 on Markets in Financial Instruments and amending Directive 2002/92/EC and Directive 2011/61/EU. • Cyprus Investment Services and Activities and Regulated Markets Law of 2017 (The Law 87(I)/2017) regarding the provision of investment services, the exercise of investment activities and the operation of regulated markets (the “Investment Services and Activities and Regulated Markets Law 2017”). • Directive of 2020 of CySEC for the Prevention and Suppression of Money Laundering and Terrorist Financing • ESMA Final Report (ESMA35-42-1227) on the European Commission mandate on certain aspects relating to retail investor protection as of April 29, 2022.
For more information regarding our transactions with FST Belize, see " Related Party Transactions With FST Belize " in " Management's Discussion and Analysis of Financial Condition and Results of Operations " in Part II Item 7 of this annual report.
For more information regarding our transactions with FST Belize, see " Related Party Transactions" in " Management's Discussion and Analysis of Financial Condition and Results of Operations " in Part II Item 7 of this annual report.
Capital Markets/ Investment Banking Services Our capital markets/investment banking business consists of investment banking professionals in Kazakhstan, Uzbekistan and the United States who provide strategic advisory services and capital markets products. Our investment banking team focuses on multiple sectors including consumer and business services, energy, financial institutions, real estate, technology, media and communications.
Our investment banking business consists of investment banking professionals in Kazakhstan, Uzbekistan and the United States who provide strategic advisory services and capital markets products. Our investment banking team focuses on multiple sectors including consumer and business services, energy, financial institutions, real estate, technology, media and communications.
The Law of the Republic of Cyprus L. 87(I)/2017 regarding the provision of investment services, the exercise of investment activities and the operation of regulated markets (as amended) (the "Cyprus Securities Market Law") is the main law regulating broker dealer, portfolio management activities in Cyprus. The Cyprus Securities Market Law is a local implementation in Cyprus of MiFID II.
The Law of the Republic of Cyprus L. 87(I)/2017 regarding the provision of investment services, the exercise of investment activities and the operation of regulated markets (as amended) (the "Cyprus Securities Market Law") is the main law regulating broker dealer, portfolio management activities in Cyprus. The Cyprus Securities Market Law is a local implementation of MiFID II in Cyprus.
U.S. Regulation U.S. Securities Market Regulation Our U.S. subsidiary PrimeEx is registered as a securities broker dealer with the SEC, is a member of various self-regulatory organizations ("SROs") and securities exchanges, including being a "Blue Line" broker dealer on the floor of the NYSE.
Regulation U.S. Securities Market Regulation Our U.S. subsidiary PrimeEx is registered as a securities broker dealer with the SEC, is a member of various self-regulatory organizations ("SROs") and securities exchanges, including being a "Blue Line" broker dealer on the floor of the NYSE.
Our compliance begins with customer onboarding where we employ robust know-your-customer, anti-money-laundering and countering terrorist financing (AML/CTF) and sanctions screening platform using various world-class third-party data providers in a system that is integrated with our trading platform. Customer sanctions screening is done daily and individual financial transactions are reviewed according to multiple risk parameters.
Our compliance begins with customer onboarding where we employ robust know-your-customer, anti-money-laundering and countering terrorist financing (AML/CTF) and sanctions screening platforms using various world-class third-party data providers in a system that is integrated with our trading platform. Customer sanctions screening is done daily and individual financial transactions are reviewed according to multiple risk parameters.
Generally, all financial institutions (including companies performing insurance activities) in Kazakhstan are required to be licensed and regulated by the ARDFM. The Law of the Republic of Kazakhstan No. 126-II "On Insurance Activities", dated December 18, 2000 (as amended) (the "Insurance Law"), is the main law regulating the insurance sector in Kazakhstan.
Generally, all financial institutions (including companies performing insurance activities) in Kazakhstan are required to be licensed and are then regulated by the ARDFM. The Law of the Republic of Kazakhstan No. 126-II "On Insurance Activities", dated December 18, 2000 (as amended) (the "Insurance Law"), is the main law regulating the insurance sector in Kazakhstan.
Our investment policies generally require that the securities we acquire are investment grade and limit the amount of our credit exposure to any one issuer or customer. • Aspire for excellence in governance, transparency and regulatory compliance.
Our investment policies generally require that the securities we acquire are investment grade and limit the amount of our credit exposure to any one issuer or customer. • Aspire to excellence in governance, transparency and regulatory compliance.
Freedom KZ currently holds the following licenses: • No. 3.2.238/15 dated October 2, 2018 (initially issued on March 21, 2007) for performance of activity on the securities market, particularly (i) broker-dealer activity with the right to maintain customer accounts as a nominal holder, and (ii) portfolio management without the right to attract voluntary pension contributions; and • No. 4.3.12 dated February 4, 2020 (initially issued on April 4, 2019) for performance of exchange operations with foreign currency, except for exchange operations with foreign cash.
Freedom KZ currently holds the following licenses: • No. 3.2.238/15 dated October 2, 2018 (initially issued on March 21, 2007) for performance of activity on the securities market, particularly (i) broker-dealer activity with the right to maintain customer accounts as a nominal holder, and (ii) portfolio management without the right to attract voluntary pension contributions; and • Banking license No. 4.3.12 dated February 4, 2020 (initially issued on April 4, 2019) for performance of exchange operations with foreign currency, except for exchange operations with foreign cash.
It establishes a framework for MiFID II investment services such as broker dealer, investment advice, portfolio management activities, dealing on own account, registration and licensing requirements, and the regulation of such activities by CySEC.
It establishes a framework for MiFID II investment services such as broker dealer, investment advice, portfolio management activities, dealing on own account, CIF registration and licensing requirements, and the regulation of such activities by CySEC.
AFSA-A-LA-2020-0019 issued by the AFSA on May 20, 2020 to carry out the following regulated activities: • dealing in investments as principal; • dealing in investments as agent; • managing investments; • advising on investments; and • arranging deals in investments.
AFSA-A-LA-2020-0019 issued by the AFSA on May 20, 2020 to carry out the following major regulated activities: • dealing in investments as principal; • dealing in investments as agent; • managing investments; • advising on investments; and • arranging deals in investments.
We are committed to further expanding our digital ecosystem going forward by integrating our online and mobile brokerage services, banking offerings, insurance products, payment processing systems, and online commercial ticketing services.
We are committed to further expanding our digital fintech ecosystem going forward by integrating our online and mobile brokerage services, banking offerings, insurance products, payment processing systems, and online commercial ticketing services.
As of March 31, 2023, we, through our subsidiaries, held: brokerage licenses in Kazakhstan issued by the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market (the "ARDFM") and the Astana Financial Services Authority (the "AFSA"), in Cyprus issued by the Cyprus Securities and Exchange Commission ("CySEC"), in the United States issued by FINRA, in Armenia issued by the Central Bank of Armenia, and in Uzbekistan issued by the Ministry of Finance of the Republic of Uzbekistan; a foreign currency operations license in Kazakhstan issued by the ARDFM; a banking license in Kazakhstan issued by the ARDFM; insurance licenses (general and life) in Kazakhstan issued by the ARDFM; and payment services licenses in Kazakhstan, Uzbekistan and Kyrgyzstan.
As of March 31, 2024, we, through our subsidiaries, held: brokerage licenses in Kazakhstan issued by the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market (the "ARDFM") and the Astana Financial Services Authority (the "AFSA"), in Cyprus issued by the Cyprus Securities and Exchange Commission ("CySEC"), in the United States issued by FINRA, in Armenia issued by the Central Bank of Armenia, and in Uzbekistan issued by the Ministry of Finance of the Republic of Uzbekistan; a foreign currency operations license in Kazakhstan issued by the ARDFM; a banking license in Kazakhstan issued by the ARDFM; insurance licenses (general and life) in Kazakhstan issued by the ARDFM; and payment services licenses in Kazakhstan, Uzbekistan and Kyrgyzstan.
Brokerage commissions are charged on investment products in accordance with a schedule we have formulated that aligns with local practices. We provide our brokerage customers with access to the U.S. stock markets, and a significant amount of our brokerage business relates to trading in U.S.-exchange listed and OTC securities by our brokerage customers.
Brokerage commissions are charged on investment products in accordance with a schedule that aligns with local practices. We provide our brokerage customers with access to the U.S. stock markets, and a significant amount of our brokerage business relates to trading in U.S.-exchange listed and OTC securities by our brokerage customers.
Anti-Money Laundering, Anti-Terrorism Funding and Economic Sanctions Laws Anti-money laundering laws, financial record-keeping and reporting laws, and similar legislation and regulations in the jurisdictions where our subsidiaries operate, as well as certain exchanges and self-regulatory organizations impose a variety of rules that require registered broker-dealers to "know your customer" and monitor their customers' transactions for potentially suspicious activities.
Anti-Money Laundering, Anti-Terrorism Funding and Economic Sanctions Laws Anti-money laundering laws, financial record-keeping and reporting laws, and similar legislation and regulations in the jurisdictions where our subsidiaries operate, as well as certain stock exchanges and self-regulatory organizations, impose a variety of rules that require registered broker-dealers to meet "know your customer" requirements and monitor their customers' transactions for potentially suspicious activities.
We are continuing to implement increased uniformity across our subsidiaries to address business operations continuity and expertise by pursuing a standard for business continuity consistent with the standards of ISO 22301 Societal security – Business continuity management systems. HUMAN CAPITAL Our multinational operations, particularly in countries with integrated multi-ethnic cultures, create a naturally ethnically diverse workforce.
We are continuing to implement increased uniformity across our subsidiaries to address business operations continuity and expertise by pursuing business continuity efforts consistent with the standards of ISO 22301 Societal security – Business continuity management systems. HUMAN CAPITAL Our multinational operations, particularly in countries with integrated multi-ethnic cultures, create a naturally ethnically diverse workforce.
Our recent organic growth has been driven by expansion of our network of retail financial advisers and increases in the volume of analysts' reports made available to our customer base, as well as significantly increased trading volume and customer activity stemming from government and bank interventions that have resulted in increased market volatility and economic uncertainty.
Our recent organic growth has been driven by expansion of 6 Table of Contents our network of retail financial advisers and increases in the volume of analysts' reports made available to our customer base, as well as significantly increased trading volume and customer activity stemming from government and bank interventions that have resulted in increased market volatility and economic uncertainty.
By connecting to the Paybox platform digital payment aggregator, customers can accept payments from buyers using a wide range of payment methods, including bank cards, online banking, electronic money, and more. Freedom Pay LLP also develops customized solutions for banks, catering to their specific needs and expanding our network of partners.
By connecting to the Paybox platform digital payment aggregator, customers can accept payments from buyers using a wide range of payment methods, including bank cards, online banking, electronic money, and more. Paybox also develops customized solutions for banks, catering to their specific needs and expanding our network of partners.
Violations of securities, banking, sanctions, anti-money laundering and financing of terrorism laws, rules and regulations could subject us and our employees to a broad range of disciplinary actions including imposition of fines and 20 Table of Contents sanctions, other remedial actions, such as cease and desist orders, removal from managerial positions, loss of licensing, and civil and criminal proceedings.
Violations of securities, banking, sanctions, anti-money laundering and financing of terrorism laws, rules and regulations could subject us and our employees to a broad range of disciplinary actions including imposition of fines and sanctions, other remedial actions, such as cease and desist orders, removal from managerial positions, loss of licensing, and civil and criminal proceedings.
Freepay is a card with a credit limit of the equivalent of approximately $3.3 million, which can be used by customers for personal expenses including making purchases in installments or on credit.
Freepay is a card with a credit limit of the equivalent of approximately $3,300, which can be used by customers for personal expenses including making purchases in installments or on credit.
At the beginning of the 2023 calendar year, we launched the digital business loan, which allows small businesses to obtain a loan in as little as one day and without physical delivery of documents.
At the beginning of the 2024 calendar year, we launched the digital business loan, which allows small businesses to obtain a loan in as little as one day and without physical delivery of documents.
Information Technology FRHC's business model places heavy reliance on information technology to offer customers a seamless digital experience, meet their diverse needs, and ensure stringent adherence to regulatory requirements and information security standards.
INFORMATION TECHNOLOGY Our business model places heavy reliance on information technology to offer customers a seamless digital experience, meet their diverse needs, and ensure stringent adherence to regulatory requirements and information security standards.
(formerly FFIN Brokerage Services, Inc.) ("FST Belize"), a corporation registered in and licensed as a broker dealer in Belize, to provide brokerage services to customers seeking to purchase or trade securities in the international securities markets. FST Belize is 100% owned by Timur Turlov and is not part of our group of companies.
(formerly FFIN Brokerage Services, Inc.) ("FST 5 Table of Contents Belize"), a corporation registered in and licensed as a broker dealer in Belize, to provide brokerage services to customers seeking to purchase or trade securities in the international securities markets. FST Belize is 100% owned by Timur Turlov and is not part of our group of companies.
Pursuant to these intergovernmental agreements, our subsidiaries in the relevant countries which are financial institutions are required to obtain customer documentation associated with the indicia of the relevant customer's U.S. tax residency status, as well as related account information, and to report it accordingly.
Pursuant to these 22 Table of Contents intergovernmental agreements, our subsidiaries in the relevant countries which are financial institutions are required to obtain customer documentation associated with the indicia of the relevant customer's U.S. tax residency status, as well as related account information, and to report it accordingly.
Retail Brokerage We offer full-service retail brokerage services covering a broad array of investment alternatives including exchange-traded and over-the-counter corporate equity and debt securities, money market instruments, exchange traded options and futures contracts, government bonds, and mutual funds. A substantial portion of our revenue is derived from commissions from customers through accounts with transaction-based pricing.
We offer full-service retail brokerage services covering a broad array of investment alternatives including exchange-traded and over-the-counter corporate equity and debt securities, money market instruments, derivatives, government bonds, and mutual funds. A substantial portion of our revenue is derived from commissions from customers through accounts with transaction-based pricing.
The securities, banking, payment services and insurance business activities of our subsidiaries are subject to extensive regulation and oversight by the stock exchanges, central/national banks, governmental and self-regulatory authorities in the foreign jurisdictions where we 19 Table of Contents conduct business activities.
The securities, banking, payment services and insurance business activities of our subsidiaries are subject to extensive regulation and oversight by the stock exchanges, central/national banks, governmental and self-regulatory authorities in the foreign jurisdictions where we conduct business activities.
One of our key digital products is the Paybox payment platform, which we acquired as part of our acquisition of Paybox Technologies LLP (now called Freedom Pay LLP) and its subsidiaries in February 2023. The Paybox platform is a dynamic payment system services aggregation field project.
One of our key digital products is the Paybox payment platform, which we acquired as part of our acquisition of Paybox Technologies LLP (now called Freedom Technologies LLP) and its subsidiaries in February 2023. The Paybox platform is a dynamic payment system services project.
We are subject to the reporting requirements of the Exchange Act. Reports filed with or furnished to the SEC pursuant to the Exchange Act, including annual and quarterly reports, are available free of charge, through our website. We make them available on our website as soon as reasonably possible after we file them with the SEC.
Reports filed with or furnished to the SEC pursuant to the Exchange Act, including annual and quarterly reports, are available free of charge, through our website. We make them available on our website as soon as reasonably possible after we file them with the SEC.
All documents are signed using biometrics, without the need for an electronic digital signature, and the loan proceeds are transferred to a corporate card, which is automatically opened in the name of the client during the loan process.
All documents are signed using biometrics, without the need for an electronic digital signature, and the loan proceeds are transferred to a corporate card, which is automatically opened in the name of 10 Table of Contents the client during the loan process.
In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. Effective intellectual property protection may not be available in all jurisdictions in which we offer our services.
In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. Effective intellectual property protection may not be 17 Table of Contents available in all jurisdictions in which we offer our services.
In January 2022, PrimeEx received regulatory approval from FINRA to conduct investment banking and equity capital markets business. Such business is conducted under the name Freedom Capital Markets. 23 Table of Contents Foreign Corrupt Practices Act In the United States, the 1970 Foreign Corrupt Practices Act, or FCPA, broadly prohibits foreign bribery and mandates recordkeeping and accounting practices.
In January 2022, PrimeEx received regulatory approval from FINRA to conduct investment banking and equity capital markets business. Such business is conducted under the name Freedom Capital Markets. Foreign Corrupt Practices Act In the United States, the 1970 Foreign Corrupt Practices Act, or FCPA, broadly prohibits foreign bribery and mandates recordkeeping and accounting practices.
Significant Recent Milestones On September 26, 2019 FRHC’s shares were approved for listing on Nasdaq and the shares began trading on Nasdaq on October 15, 2019.
Significant Historical Milestones On September 26, 2019 FRHC's shares were approved for listing on Nasdaq and the shares began trading on Nasdaq on October 15, 2019.
In accordance with the Cross-Border Correspondent Relationship Agreement, Freedom EU conducts on a regular basis random checks of trades received from FST Belize, whereby it is able to obtain information on, and conduct customer checks on, the beneficial owners who are the beneficiaries of the relevant trades.
In accordance with the Cross-Border Correspondent Relationship Agreement, Freedom EU conducted on a regular basis random checks of trades received from FST Belize, whereby it was able to obtain information on, and conduct customer checks on, the beneficial owners who are the beneficiaries of the relevant trades.
External Social Projects We make an effort to support and contribute to sports, culture and education in the communities in which we operate through various forms of financing, including charity and sponsorship activities. We recognize the social responsibility of businesses and seek to create a positive impact on the regions where we operate.
External Social Projects We endeavor to support and contribute to sports, culture, and education in the communities in which we operate through various forms of financing, including charity and sponsorship activities. We recognize the social responsibility of businesses and seek to create a positive impact on the regions where we operate.
Data Privacy and Cyber Security As part of our business, we routinely receive sensitive and confidential information from our clients. We also collect personal information from our prospective and current employees, as permitted by employment laws and regulations.
Data Privacy and Cybersecurity As part of our business, we routinely receive sensitive and confidential information from our clients. We also collect personal information from our prospective and current employees, as permitted by employment laws and regulations.
We believe incorporating the offerings of these insurance companies with our existing brokerage and banking product and service lines, along with our developing fintech ecosystem in Kazakhstan, will allow us to create a significant sustainable competitive advantage in Kazakhstan as an integrated, efficient and convenient single-source for financial services.
We believe incorporating the offerings of these insurance companies with our existing brokerage and banking product and service lines, along with our developing fintech ecosystem in Kazakhstan, will allow us to create a significant sustainable competitive advantage in Kazakhstan as an integrated, efficient and convenient single source for financial services. • Freedom Life . Freedom Life was established in 2014.
These programs facilitate employee movement both vertically and horizontally within our company, as well as enable employees to participate in cross-department projects, working groups, competitions, conferences, and other collective events that expose employees to other departmental functions. We teach practical job skills that yield job satisfaction for our employees, and by extension, strong company performance.
These programs facilitate employee movement both vertically and horizontally within our company, as well as enable employees to participate in cross-department projects, working groups, competitions, conferences, and other collective events that expose employees to other departmental functions. We teach practical job skills with a view to providing job satisfaction for our employees, and by extension, strong company performance.
These laws include the data privacy and security frameworks in the European Union and the United Kingdom, each entitled the General Data Protection Regulations, Kazakhstan's Law on Personal Data and Its Protection, Information Technologies and Information Protection, as well as the laws of a number of states of the United States.
These laws include the data privacy and security frameworks in the European Union and the United Kingdom, each entitled the General Data Protection Regulations, Kazakhstan's Law on Personal Data and Its Protection, Information Technologies and Information Protection, as well as the laws of a number of states of the United States and SEC cybersecurity disclosure rules.
Freedom EU currently holds licenses in Cyprus and the EU for conducting investment services, including: • reception and transmission of orders in relation to one or more financial instruments; • execution of orders on behalf of clients; • dealing on own account; • provision of investment advice; and • provision of portfolio management services, as well as the following ancillary services: • safekeeping and administration of financial instruments, including custodianship and related services; • granting credits or loans to one or more financial instruments, where the firm granting the credit or loan is involved in the transaction; • foreign exchange services where these are connected to the provision of investment services; and • investment research and financial analysis or other forms.
Freedom EU currently holds licenses in Cyprus and the EU for conducting investment services, including: • reception and transmission of orders in relation to one or more financial instruments indicated in our license; • execution of orders on behalf of clients; • dealing on own account; • provision of investment advice; and • provision of portfolio management services, as well as the following ancillary services: • safekeeping and administration of financial instruments, including custodianship and related services; • granting credits or loans to one or more financial instruments, where the firm granting the credit or loan is involved in the transaction; • foreign exchange services where these are connected to the provision of investment services; and • investment research and financial analysis or other forms. 21 Table of Contents U.S.
We leverage competitive advantages we have developed, including our extensive experience in providing investors in our core markets with access to the U.S. and European securities markets, our ability to deliver high quality analytical information and our focus on providing convenient, high tech user-friendly access to our services and the markets.
We seek to compete by leveraging the competitive advantages we have developed, including our extensive experience in providing investors in our core markets with access to the U.S. and European securities markets, our ability to deliver high quality analytical information and our focus on providing convenient, high tech user-friendly access to our services and the markets.
In June 2023 Freedom Finance KZ underwrote a placement of two-year gender ESG bonds issued by MFO OnlineKazFinance JSC (Solva) listed on the KASE in the total amount of the equivalent of $14 million (based on the exchange rate as of the date of issuance).
Green Bonds and Social Bonds Underwriting In June 2023 Freedom KZ underwrote a placement of two-year gender ESG bonds issued by MFO OnlineKazFinance JSC (Solva) listed on the KASE in the total amount of the equivalent of $14 million (based on the exchange rate as of the date of issuance).
Freedom Bank KZ is a member of the Damu Fund, a Kazakhstan state program, which provides entrepreneurs with the opportunity to receive a loan to develop their business at a reduced rate, and such loans can be applied for online with our digital business loan. During fiscal 2023, 3,487 digital business loans were issued.
Freedom Bank KZ is a member of the Damu Fund, a Kazakhstan state program, which provides entrepreneurs with the opportunity to receive a loan to develop their business at a reduced rate, and such loans can be applied for online with our digital business loan. During fiscal 2024, 20,153 digital business loans were issued.
As a licensed Kazakhstan broker, Freedom KZ is 25 Table of Contents obliged to maintain segregated accounting of its own and customers' assets.
As a licensed Kazakhstan broker, Freedom KZ is obliged to maintain segregated accounting of its own and customers' assets.
A "payment organization" is defined in the Law on Payments as being a Kazakhstan limited liability partnership which is registered with the NBK and whose activities are associated with rendering payment services.
A "payment organization" is defined by the Law on Payments Kazakhstan limited liability partnership which is registered as a payment organization with the NBK and which activities are associated with rendering payment services.
For installment or credit purchases, the client does not have to obtain a card in advance, but instead the card is issued automatically when a purchase is made through our partner network. During fiscal 2023, 275,882 Freepay cards were issued. • Freedom card . The Freedom card is a multi-currency payment card for any purchases around the world.
For installment or credit purchases, the client does not have to obtain a card in advance, but instead the card is issued automatically when a purchase is made through our partner network. During fiscal 2024, 139,549 new Freepay cards were issued. ◦ Freedom card . The Freedom card is a multi-currency payment card for any purchases around the world.
Further, we may be unable to obtain protection for our intellectual property in the future, which could materially harm our business, financial condition, results of operations and prospects. REGULATORY OVERSIGHT We operate in highly regulated industries across several legal jurisdictions.
Further, we may be unable to obtain protection for our intellectual property in the future, which could materially harm our business, financial condition, results of operations and prospects. REGULATION We operate in highly regulated industries across a number of legal jurisdictions.
The department is responsible for establishing compliance controls, policies and procedures to support subsidiary compliance officers and their staff and in-house attorneys in various jurisdictions to discharge compliance obligations under local regulatory 6 Table of Contents requirements.
The department is responsible for establishing compliance controls, policies and procedures to support subsidiary compliance officers and their staff and in-house attorneys in various jurisdictions to discharge our obligations under local regulatory requirements.
Our investment banking activities are concentrated in Kazakhstan and Uzbekistan where commercial banks are currently focusing their financing activities on large enterprises or state-owned enterprises. In these countries, commercial lending sources also impose loan structures and debt covenants that preclude many companies from participating. This has created growing interest in and demand for our services.
In Kazakhstan and Uzbekistan, commercial banks are currently focusing their financing activities on large or state-owned enterprises, and commercial lending sources impose loan structures and debt covenants that preclude many companies from obtaining such lending. This has created growing interest in and demand for our investment banking services in those countries.
Under our U.S. sanctions compliance policies and procedures, we, and in certain instances our subsidiaries, might be prohibited from engaging in transactions involving any individual, entity, country, region or government that is subject to such sanctions.
Under our global sanctions compliance policies and procedures, we and our U.S. subsidiaries and, in certain circumstances, our non-U.S. subsidiaries may be prohibited from engaging in transactions involving any individual, entity, country, region or government that is subject to such sanctions.
As of 11 Table of Contents March 31, 2023, we had approximately 52,000 active accounts, as compared to 53,000 and 32,000 active accounts as of March 31, 2022 and 2021, respectively. We define "active accounts" as those from which at least one transaction occurred in the quarter prior to the date of calculation.
As of March 31, 2024, we had approximately 96,000 active accounts, as compared to 52,000 and 53,000 active accounts as of March 31, 2023 and 2022, respectively. We define "active accounts" as those from which at least one transaction occurred in the quarter prior to the date of calculation.
Customers are provided online tools and retail locations to establish accounts and conduct securities trading on transaction-based pricing. We market our services through a number of channels, including telemarketing, training seminars and investment conferences, print and online advertising using social media, mobile app and search engine optimization activities.
Customers can establish accounts and conduct securities trading with transaction-based pricing both through on-line tools and at retail locations. We market our brokerage services through a number of channels, including telemarketing, training seminars and investment conferences, print and online advertising using social media, mobile app and search engine optimization activities.
(now a dormant company), Freedom EU, and Freedom RU and its wholly owned subsidiary, Freedom KZ. These acquisitions closed in several stages from November 2015 to November 2017 as required audits and regulatory approvals were received. At the completion of the acquisitions, Timur Turlov was our controlling shareholder.
(now a dormant company), Freedom Finance Europe Limited ("Freedom EU"), and LLC Investment Company Freedom Finance (“Freedom RU”) and its wholly owned subsidiary, Freedom Finance JSC ("Freedom KZ"). These acquisitions closed in several stages from November 2015 to November 2017 as required audits and regulatory approvals were received. At the completion of the acquisitions, Timur Turlov was our controlling shareholder.
For additional information regarding information security see " Risks Related to Information Technology and Cyber Security " in " Risk Factors " in Part I Item 1A of this annual report.
For additional information regarding information security see " Risks Related to Information Technology and Cybersecurity " in " Risk Factors " in Part I Item 1A, and "Regulation" in "Business" in Part I Item 1 of this annual report.
Kazakhstan has a two-tier banking system, with the NBK comprising the first tier and 21 Table of Contents all other commercial banks comprising the second tier (with the exception of the Development Bank of Kazakhstan, which as a state development bank has a special status and belongs to neither tier).
Kazakhstan has a two-tier banking system, with the NBK comprising the first tier and all other commercial banks comprising the second tier (with the exception of the Development Bank of Kazakhstan, which as a state development bank has a special status and belongs to neither tier and Eurasian Development Bank which is an intergovernmental bank).
We continue to grow organically, benefiting from favorable market and economic conditions in most regions where we operate.
We continue to grow organically, benefiting from favorable market and economic conditions in many of the regions where we operate.
Compliance with minimum capital requirements could limit our expansion into activities and operations that require significant capital. Minimum capital requirements could also restrict the ability of our subsidiaries to transfer funds among themselves and FRHC.
Our subsidiaries are also subject to rules and regulations regarding liquidity ratios. Compliance with minimum capital requirements could limit our expansion into activities and operations that require significant capital. Minimum capital requirements could also restrict the ability of our subsidiaries to transfer funds among themselves and FRHC.
At the same time, our business continuity plans have little impact if a failure occurs from disruption of third-party service providers that cannot be replaced in a reasonable time by another provider due to uniqueness or special services, such as stock exchanges, depositories, clearing houses, clearing firms or other financial intermediaries used to facilitate our securities transactions.
At the same time, our 14 Table of Contents business continuity plans may be insufficient if a failure occurs from disruption of third-party service providers that cannot be replaced in a reasonable time by another provider due to uniqueness or special services, such as stock exchanges, depositories, clearing houses, clearing firms or other financial intermediaries used to facilitate our securities transactions, as well as identity verification and KYC service providers.
As noted above, we may use the assets within the omnibus accounts to finance, lend, provide credit or provide debt financing or otherwise use and direct the order or manner of assets for financing of other clients of ours.
We may use the assets within the omnibus accounts to finance, lend, provide credit or provide debt financing or otherwise use and direct the order or manner of assets for financing of other clients of ours. See " Margin Lending " below. • Margin lending.
As of March 31, 2023, Freedom Life's market share in the Kazakhstan life insurance market was 8% based on gross written premiums for life insurance, and it held an approximately 46% market share in the Kazakhstan voluntary life-related accident insurance market, in each case according to the National Bank of Kazakhstan.
As of March 31, 2024, Freedom Life's market share in the Kazakhstan life insurance market was 12% based on gross written premiums for life insurance, and it held an approximately 56% market share in the Kazakhstan voluntary life-related accident insurance market, in each case according to the NBK. • Freedom Insurance.
According to Global data (https://www.globaldata.com/) for calendar 2022, Freedom Pay's share of electronic payments in the Kazakhstan market is 30%. This acquisition allowed our bank to become the largest acquiring bank in Kazakhstan enhances our product offering and expands our geographic footprint.
According to Global Data, for the calendar year 2022, Freedom Technologies' share of electronic payments in the Kazakhstan market was 30%. This acquisition allowed our bank to become the largest acquiring bank in Kazakhstan, enhances our product offering and expands our geographic footprint.
We have a presence in Kazakhstan, Ukraine, Uzbekistan, Kyrgyzstan, Cyprus, Germany, the United Kingdom, Greece, Spain, France, Poland, the United States, Turkey, Armenia, Azerbaijan, and the United Arab Emirates. We divested our Russian subsidiaries in February 2023. Our subsidiaries in the United States include broker dealer registered with the SEC and the Financial Industry Regulatory Authority ("FINRA") .
We have a presence in Armenia, Austria, Azerbaijan, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Kazakhstan, Kyrgyzstan, Netherlands, Poland, Spain, the United Arab Emirates, the United Kingdom, the United States, Turkey and Uzbekistan. Our subsidiaries in the United States include a broker-dealer that is registered with the SEC and the Financial Industry Regulatory Authority ("FINRA").
At our subsidiary Freedom Bank KZ, Refinitiv is integrated with the Colvir banking system. The Refinitiv database is used during the onboarding and ongoing processes, by checking clients. It contains information on individuals and legal entities from more than 715 lists submitted by international and national security agencies and law enforcement agencies.
The Refinitiv database is used during the onboarding and ongoing processes, by checking clients. It contains information on individuals and legal entities from more than 715 lists submitted by international and national security agencies and law enforcement agencies.
Freedom Insurance Freedom Insurance operates in the "general insurance" industry, was established in 2009 and was acquired by Timur Turlov in 2019. Freedom Insurance is the leader in online insurance in Kazakhstan and offers various general insurance products in property (including automobile), casualty, civil liability, personal insurance and reinsurance.
Freedom Insurance operates in the "general insurance" industry and is the leader in online insurance in Kazakhstan and offers various general insurance products in property (including automobile), casualty, civil liability, personal insurance and reinsurance.
Nevertheless we do not have direct access to such institutional clients' underlying customers or screening systems. See " Our measures to prevent money laundering, terrorist financing, and sanctions violations may not be completely effective. " in " Risk Factors " in Part I Item 7A of this annual report.
Nevertheless we do not have direct access to such institutional clients' underlying customers or screening systems. See " Our measures to prevent money laundering, terrorist financing, and sanctions violations may not be completely effective.
The proceeds from the placement of these bonds are being used to actively support women in the business environment, aiming to expand their opportunities and reduce gender inequality. The MFO produces digital loan products that finance micro and small businesses of women entrepreneurs. INFORMATION SECURITY Information security, with a particular focus on cyber security, is a high priority for us.
The proceeds from the placement of these bonds are being used to actively support women in the business environment, aiming to expand their opportunities and reduce gender inequality. The MFO produces digital loan products that finance micro and small businesses of women entrepreneurs.
At the customer's election the Invest card can be a digital card or a plastic card. During fiscal 2023 approximately 26,869 limited Invest cards were issued to customers. • Deposit card . The deposit card is a card that combines the features of deposit and debit cards.
At the customer's election the Invest card can be a digital card or a plastic card. During fiscal 2024 approximately 24,141 new Invest cards were issued to customers. ◦ Deposit card . The deposit card combines the features of deposit and debit cards.
Additionally, our U.S. subsidiary, PrimeEx, operates under its own U.S. sanctions compliance policies and procedures, which governs its own sanctions compliance activities with its institutional customers and with other group companies.
Additionally, our U.S. subsidiary, PrimeEx, operates under its own U.S. sanctions compliance policies and procedures, which govern its own sanctions compliance activities with its institutional customers and with other group companies. We are committed to compliance with all applicable economic sanctions.
Our business has grown rapidly in recent years. We are pursuing a strategy to become a leader in the financial services industry, serving individuals and institutions desiring enhanced market access to international capital markets using state of the art technology platforms for their brokerage and banking needs. Our principal executive office is in Almaty, Kazakhstan.
We are pursuing a strategy to become a leader in the financial services industry, serving individuals and institutions desiring enhanced market access to international capital markets using state of the art technology platforms for their brokerage and other financial services needs.
To support sustainable growth of the Freedom ecosystem, our information technology is focused on continuous development that empowers business users with technology that accelerates the time-to-market for digital products while enhancing predictability. We seek to harmonize technology governance approaches across all of our companies and centralize key IT processes.
To support sustainable development and growth of a digital fintech ecosystem, we focus on the continuous development of our information technology systems in order to empower business users with accelerated time-to-market for digital products while enhancing predictability. We seek to harmonize technology governance approaches across all of our businesses and centralize key IT processes.
The order flow from these accounts represents transactions of underlying customers of the relevant institutions, which are executed by the relevant institutions through their omnibus accounts with us.
In addition, we maintain omnibus brokerage accounts for certain other institutional brokerage clients. The order flow from these accounts represents transactions of underlying customers of the relevant institutions, which are executed by the relevant institutions through their omnibus accounts with us.
In addition to expansion of our business in our core markets, we have recently expanded our area of operations to include new countries including Uzbekistan, Azerbaijan, Armenia, the UAE, Germany, the United Kingdom, Greece, Spain, France and Poland. We expect to continue to expand into additional countries. • Adhere to conservative risk management principles .
In addition to expansion of our business in our core markets, we have recently expanded our area of operations to include new countries including Armenia, Austria, Azerbaijan, Belgium, Bulgaria, France, Germany, Greece, Italy, Netherlands, Poland, Spain, the UAE, the United Kingdom and Uzbekistan.
BUSINESS CONTINUITY PLAN We identify business continuity as the capability to continue the delivery of services to our customers, employees and various business partners and counterparties at acceptable predefined levels following a disruption that may occur in one or more business activities and/or in one or more operating locations due to local, national, regional or worldwide disasters, including pandemics, such as Covid-19, and social unrest and wars, such as the Russia-Ukraine conflict or due to failure of one or more components of information technology infrastructure, including proprietary or self-developed information systems, databases, software and hardware that we operate to provide such service. 16 Table of Contents Since our operations are conducted through our subsidiary companies in different geographic locations, our business continuity plans are developed, tested and managed locally by our subsidiaries to cover key business areas, provide contingency plans for IT infrastructure and communication to employees, customers and counterparties.
BUSINESS CONTINUITY PLAN We seek to ensure our ability to continue the delivery of services to our customers, employees and various business partners and counterparties at acceptable predefined levels following a disruption that may occur in one or more business activities and/or in one or more operating locations due to local, national, regional or worldwide disasters, including pandemics, such as Covid-19, and social unrest and wars, such as the Russia-Ukraine conflict, or due to failure of one or more components of information technology infrastructure, including proprietary or self-developed information systems, databases, software and hardware that we operate to provide such services.
We believe we have a regional competitive advantage with our clients because we are a U.S. corporation subject to the governance and disclosure requirements imposed upon SEC-registered companies trading on the Nasdaq Capital Market. We strive to be a trusted participant in the regulatory framework in each jurisdiction in which we operate.
In addition to complying with local requirements in each market in which we operate, we believe we have a competitive advantage with our clients in many regions because we are a U.S. corporation subject to the governance and disclosure requirements applicable to SEC-registered companies trading on the Nasdaq Capital Market.
On May 17, 2022 we completed the acquisition of two insurance companies, Freedom Life and Freedom Insurance. These two companies were 100% controlled by the Company's chief executive officer, chairman and majority shareholder, Timur Turlov. In February 2023 we completed the divestiture of our Russian subsidiaries.
On May 17, 2022 we completed the acquisition of two insurance companies, Freedom Finance Life JSC ("Freedom Life") and Freedom Finance Insurance JSC ("Freedom Insurance"). These two companies had been 100% controlled by the Company's chief executive officer, chairman and majority shareholder, Timur Turlov, at the time of the acquisition.
As of March 31, 2023, we owned approximately 10 registered trademarks in the United Kingdom, approximately 8 registered trademarks in Cyprus, approximately 5 registered trademarks in Kazakhstan and approximately 3 registered trademarks in Germany. Our flagship technology product is our proprietary Tradernet software platform.
As of March 31, 2024, we owned approximately 15 registered trademarks in Cyprus, 13 in Kazakhstan, seven in the United Kingdom, seven in Germany, two in Azerbaijan and one in Uzbekistan. Our flagship technology product is our proprietary Tradernet software platform.
The card is tied to a deposit account, and when debit transactions are made the money is debited from the deposit account. Clients have the opportunity to save simultaneously in tenge, US dollars, euros and Russian rubles. During fiscal 2023, 99,051 deposit cards were issued. • Freepay .
The card is tied to a deposit account, and when debit transactions are made the money is debited from the deposit account. Clients have the opportunity to save simultaneously in seven currencies. During fiscal 2024, 182,583 new deposit cards were issued. ◦ Freepay .
We focus on development of our compliance control, operations, and internal audit activities to ensure each compliance activity meets our risk management standards and industry standards. OUR REGIONAL SEGMENTS We conduct our business through a number of subsidiaries, organized into four regional segments.
We focus on the development of our compliance control, operations, and internal audit activities to ensure each compliance activity meets our risk management standards and industry standards. PRODUCTS AND SERVICES Our business is organized into four segments: Brokerage, Banking, Insurance and Other.
The FCPA requires that we establish and maintain an effective compliance program to ensure compliance with U.S. law. Failure to comply with the FCPA can result in substantial fines and other sanctions.
The FCPA requires that we establish and maintain an effective compliance program to ensure compliance with U.S. law. Failure to comply with the FCPA can result in substantial fines and other sanctions. Foreign Account Tax Compliance Act The 2010 Foreign Account Tax Compliance Act ("FATCA") was enacted in the U.S. to target non-compliance by U.S. taxpayers using foreign accounts.
On August 27, 2022, we acquired 100% of JSC Insurance Company "London-Almaty" ("London-Almaty"), a Kazakhstan insurance company, and on December 19, 2022, and this company was merged into Freedom Insurance.
On August 27, 2022, we acquired 100% of JSC Insurance Company "London-Almaty" ("London-Almaty"), a Kazakhstan insurance company, and on December 19, 2022, this company was merged into Freedom Insurance. 11 Table of Contents In our Insurance segment we also conduct proprietary securities trading activities.
We prioritize delivering a seamless and integrated digital experience across all our products, ensuring user-friendly interfaces, robust security measures, and efficient workflows. We have recently expanded our digital product portfolio with the acquisition of Ticketon Events LLP ("Ticketon"), the largest online ticket sales company in Kazakhstan, actively working to create an e-commerce infrastructure in the field of culture and sports.
We have recently expanded our digital product portfolio with the acquisition of Ticketon Events LLP ("Ticketon"), the largest online ticket sales company in Kazakhstan, actively working to create an e-commerce infrastructure in the field of culture and sports.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business and Operations : • Our relatively limited operational history has coincided with sustained market growth which may not be predictive of future operating results. • We may not be able to manage our growth effectively. • We anticipate that acquisitions will continue to play a key role in our growth strategy, but we may be unable to identify, acquire, close or integrate acquisition targets successfully. • We rely on our relationship with FST Belize for a significant percentage of our revenue, which exposes us to a number of risks. • Competition in the markets in which we operate may result in a decrease in our market share and/or profitability. • We could suffer significant losses from credit exposure. • Our ability to meet our obligations, and the cost of funds to do so, depend on our ability to access identified sources of liquidity at a reasonable cost. • We may need to raise additional capital, and we cannot be sure that additional financing will be available or available on attractive terms. • Reduction in our credit ratings or an increase in our credit spreads could adversely affect our business, liquidity and cost of funding. • Our investments expose us to a significant risk of capital loss. • We are dependent upon our relationships with third-party U.S.-registered securities broker-dealer and clearing firms to receive and transmit securities and funds internationally. • We may suffer significant loss from changes in the KASE's requirements related to the discount coefficients on the securities in securities repurchase transactions. • Our modeling and assumptions used in assessing risks in our insurance business may differ materially from actual r esults . • In our insurance business, we may not be able to obtain reinsurance at required levels or prices, or otherwise collect on reinsurance, which could increase our exposure or limit our ability to write new policies. • We are dependent on our executive management team, particularly Timur Turlov, and our ability to hire and retain skilled personnel. • Extraordinary events beyond our control could negatively impact our business. • The Covid-19 has impacted and could continue to impact the global economy, global financial markets and our business, financial condition, and results of operations.
Biggest changeRisks Related to Our Business and Operations : • Our relatively limited operational history has coincided with sustained market growth, which may not be predictive of future operating results. • We may not be able to manage our growth effectively. • We anticipate that acquisitions will continue to play a key role in our growth strategy, but we may be unable to identify, acquire, complete or integrate acquisition targets successfully. • We have engaged in related party transactions and arrangements, which exposes us to a number of risks. • Competition in the markets in which we operate may result in a decrease in our market share and/or profitability. • We plan to incur losses in our new telecommunications and media businesses. • We may be unable to implement our digital fintech ecosystem strategy successfully. • We could suffer significant losses from credit exposure. • Our revenues are concentrated in certain customers and products, which may materially adversely affect our business, results of operations, financial condition and cash flows. • Risks related to our business relationships with third-party broker-dealers, clearing firms and market makers could result in reduced profitability, increased compliance costs, regulatory violations and negative publicity. • We are subject to potential losses as a result of our clearing and execution activities. • A breakdown or interruption in our operational systems or processes may adversely affect our reputation, customers, clients, business activities, operational outcomes, and financial stability. • Our ability to meet our obligations, and the cost of funds to do so, depend on our ability to access identified sources of liquidity at a reasonable cost. • We may need to raise additional capital, and we cannot be sure that additional financing will be available or available on attractive terms. 25 Table of Contents • Reductions in our credit ratings or an increase in our credit spreads could adversely affect our business, liquidity and cost of funding. • Our investments expose us to a significant risk of capital loss. • We may suffer significant loss from changes in the KASE's requirements related to the discount coefficients on the securities in securities repurchase transactions. • Our risk management framework may not be effective in mitigating risks and/or losses to us. • Our modeling and assumptions used in assessing risks in our business may differ materially from actual r esults . • In our insurance business, we may not be able to obtain reinsurance at required levels or prices, or otherwise collect on reinsurance, which could increase our exposure or limit our ability to write new policies. • We are dependent on our executive management team, particularly Timur Turlov, and our ability to hire and retain skilled personnel. • Extraordinary events beyond our control could negatively impact our business. • Possible future pandemics may impact the global economy, global financial markets and our business, financial condition, results of operations and cash flows. • Our financial results depend on interest rate volatility. • We are exposed to foreign currency fluctuation risks. • Damage to our reputation could harm our business.
Non-compliance with these laws may result in criminal or civil penalties, which could result in a material adverse effect on our business, financial condition, result of operations and cash flows. A failure by our subsidiaries to meet capital adequacy and liquidity requirements could affect our operations and financial condition.
Non-compliance with these laws may result in criminal or civil penalties, which could result in a material adverse effect on our business, financial condition, result of operations and cash flows. A failure by our subsidiaries to meet capital adequacy and liquidity requirements could affect our operations, financial condition and cash flows.
We believe that the interventions from banks and governments in response to the Covid-19 and the increase in the amount of time people spent at home during the pandemic led to an increase in the opening of investment accounts and investing in securities worldwide.
We believe that the interventions from banks and governments in response to the Covid-19 pandemic and the increase in the amount of time people spent at home during the pandemic led to an increase in the opening of investment accounts and investing in securities worldwide.
Weaknesses in the global economy, or a future external economic crisis, may have a negative effect on economies or investors' confidence in the markets where we operate. Such developments could have a material adverse effect on our business, financial condition, cash flows and results of operations. Kazakhstan's economy is vulnerable to internal political and social unrest.
Weaknesses in the global economy, or a future external economic crisis, may have a negative effect on economies or investors' confidence in the markets where we operate. Such developments could have a material adverse effect on our business, financial condition, results of operations and cash flows. Kazakhstan's economy is vulnerable to internal political and social unrest.
Among the factors that could affect our stock price are: • the Russia-Ukraine conflict and related sanctions and their direct and indirect effects; • geopolitical and civil unrest in any of the markets in which we operate; • planned or completed acquisitions or disposals; • pandemic and epidemic disease; • investigations, lawsuits, enforcement actions, and other claims by third parties or governmental authorities; • new regulatory pronouncements and changes in regulatory guidelines; • actual or anticipated fluctuations in our quarterly operating results; • changes in market valuations or earnings of similar companies; • any future sales of our common stock or other securities; • material breaches of regulations by our employees; • changes in securities analysts' estimates of our financial performance or lack of research coverage and reports by industry analysts; • domestic and international economic factors unrelated to our performance; • announcements by us of significant impairment charges; 51 Table of Contents • investor perception of us and our industry; • announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships; and • speculation in the press or investment community.
Among the factors that could affect our stock price are: • the Russia-Ukraine conflict and related sanctions and their direct and indirect effects; • geopolitical and civil unrest in any of the markets in which we operate; • planned or completed acquisitions or disposals; • investigations, lawsuits, enforcement actions, and other claims by third parties or governmental authorities; • new regulatory pronouncements and changes in regulatory guidelines; • actual or anticipated fluctuations in our quarterly operating results; • changes in market valuations or earnings of similar companies; 50 Table of Contents • any future sales of our common stock or other securities; • material breaches of regulations by our employees; • changes in securities analysts' estimates of our financial performance or lack of research coverage and reports by industry analysts; • domestic and international economic factors unrelated to our performance; • pandemic and epidemic disease; • announcements by us of significant impairment charges; • investor perception of us and our industry; • announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships; and • speculation in the press or investment community.
Investors in emerging markets should be aware that these markets are subject to greater risk than more mature markets, including in some cases significant political, economic and legal risks, including: • difficulties in enforcing legal rights; • corruption in certain countries; • economic volatility and sustained economic downturns; • restrictive changes in securities brokerage, financial services and banking laws; • differing and sometimes conflicting legal and regulatory regimes; • unpredictable, uncertain and potentially adverse changes to tax regimes; • difficulties in developing, staffing, and simultaneously managing a number of international operations; • risks related to government regulation; • uncertain protection and enforcement of our intellectual property rights; 44 Table of Contents • uncertain and changing judicial and regulatory environments and requirements; • currency exchange rate fluctuations and currency exchange controls; • procuring adequate insurance; and • political or social unrest, including domestic protests such as occurred in Kazakhstan in January 2022 and international conflicts, such as the Russia-Ukraine conflict.
Investors in emerging markets should be aware that these markets are subject to greater risk than more mature markets, including in some cases significant political, economic and legal risks, including: • difficulties in enforcing legal rights; • corruption in certain countries; • economic volatility and sustained economic downturns; • restrictive changes in securities brokerage, financial services and banking laws; • differing and sometimes conflicting legal and regulatory regimes; • unpredictable, uncertain and potentially adverse changes to tax regimes; 38 Table of Contents • difficulties in developing, staffing, and simultaneously managing a number of international operations; • risks related to government regulation; • uncertain protection and enforcement of our intellectual property rights; • uncertain and changing judicial and regulatory environments and requirements; • currency exchange rate fluctuations and currency exchange controls; • procuring adequate insurance; and • political or social unrest, including domestic protests such as occurred in Kazakhstan in January 2022 and international conflicts, such as the Russia-Ukraine conflict.
Turlov and our Ukrainian subsidiary on the list is not justified and we have been actively appealing the decision, there can be no assurance as to when they will be removed from the list, if at all. While our Ukrainian subsidiary is not material in the context of our overall group, the inclusion of Mr.
Turlov and our former Ukrainian subsidiary on the list is not justified and we have been actively appealing the decision, there can be no assurance as to when they will be removed from the list, if at all. While our former Ukrainian subsidiary is not material in the context of our overall group, the inclusion of Mr.
Risks Related to Our Corporate Structure and Internal Operations : • As a diversified holding company with few operations of its own, FRHC is reliant on the operations of our subsidiaries to fund holding company operations. • As a "controlled company" under Nasdaq rules, we qualify for exemptions from certain corporate governance requirements that may adversely affect our stock price. • The interests of our controlling shareholder may conflict with those of other shareholders. • Civil liability may be difficult or impossible to enforce against us. • We have identified material weaknesses in our internal control over financial reporting and may identify material weaknesses in the future or otherwise fail to establish and maintain effective internal control over financial reporting, which could have a material adverse effect on our business and stock price.
Risks Related to Our Corporate Structure and Internal Operations : • As a diversified holding company with few operations of its own, FRHC is reliant on the operations of our subsidiaries to fund its holding company operations. • As a "controlled company" under Nasdaq rules, we qualify for exemptions from certain corporate governance requirements that may adversely affect our stock price. • The interests of our controlling shareholder may conflict with those of other shareholders. • Civil liability may be difficult or impossible to enforce against us. • We have identified material weaknesses in our internal control over financial reporting in the past, and we may identify material weaknesses in the future or fail to establish and maintain effective internal control over financial reporting, which could have a material adverse effect on our business and stock price.
The functional currencies of our subsidiaries include the Kazakhstan tenge, the euro, the Ukrainian hryvnia, the Uzbekistan som, the Kyrgyzstan som, the Azerbaijan manat, the Armenian dram, the British pound sterling and the United Arab Emirates dirham. For financial reporting purposes, those currencies are translated into U.S. dollars as the reporting currency.
The functional currencies of our subsidiaries include the Kazakhstan tenge, the Euro, the Ukrainian hryvnia, the Uzbekistan sum, the Kyrgyzstan som, the Azerbaijan manat, the Armenian dram, the British pound sterling and the United Arab Emirates dirham. For financial reporting purposes, those currencies are translated into U.S. dollars as the reporting currency.
From time to time, we have been, and in the future may be, subject to investigations, audits, inspections and subpoenas, as well as regulatory proceedings and fines and penalties brought by regulators. We are subject to regulation from numerous regulators, which include, but are not limited to, the AFSA, the ARDFM, CySEC and the SEC.
From time to time, we have been, and in the future may be, subject to investigations, audits, inspections and subpoenas, as well as regulatory proceedings and fines and penalties brought by regulators. We are subject to regulation from numerous regulators, which include, but are not limited to, the NBK, the AFSA, the ARDFM, CySEC and the SEC.
As a condition to maintaining our licenses to conduct brokerage and banking activities, some of our subsidiaries must meet ongoing capital and liquidity standards, which are subject to evolving rules and qualitative judgments by government regulators regarding the adequacy of their capital and internal assessment of their capital needs.
As a condition to maintaining our licenses to conduct brokerage, insurance and banking activities, some of our subsidiaries must meet ongoing capital and liquidity standards, which are subject to evolving rules and qualitative judgments by government regulators regarding the adequacy of their capital and internal assessment of their capital needs.
Risks Related to Legal and Regulatory Matters: • We are subject to extensive regulation, and the failure to comply with laws and regulations could subject us to monetary penalties or sanctions. • Financial services firms have been subject to increased regulatory scrutiny increasing the risk of financial liability and reputational harm resulting from adverse regulatory actions. • As a U.S. public company listed in Nasdaq we have substantial regulatory reporting obligations. • We are subject to risks related to anti-corruption laws in effect in the United States and the non-U.S. jurisdictions where we conduct business. • A failure by our subsidiaries to meet capital adequacy and liquidity requirements could affect our operations and financial condition. • The countries in which we operate have changing regulatory regimes, regulatory policies, and interpretations. • Our measures to prevent money laundering, terrorist financing, and sanctions violations may not be completely effective. • If we violate securities laws, or are involved in litigation in connection with a violation, our reputation and results of operations may be adversely affected. • We are subject to risks related to potential litigation.
Risks Related to Legal and Regulatory Matters: • We are subject to extensive regulation, and the failure to comply with laws and regulations could subject us to monetary penalties or sanctions. • Financial services firms have been subject to increased regulatory scrutiny increasing the risk of financial liability and reputational harm resulting from adverse regulatory actions. • As a U.S. public company listed on Nasdaq we have substantial regulatory reporting obligations. • We are subject to risks related to anti-corruption laws in effect in the United States and the non-U.S. jurisdictions where we conduct business. • A failure by our subsidiaries to meet capital adequacy and liquidity requirements could affect our operations, financial condition and cash flows. • The countries in which we operate have changing regulatory regimes, regulatory policies, and interpretations. • Our measures to prevent money laundering and terrorist financing violations may not be completely effective. • If we violate securities laws, or are involved in litigation in connection with a violation, our reputation and results of operations may be adversely affected. • We are subject to risks related to potential litigation.
Section 404 of the Sarbanes-Oxley Act requires management to provide an annual management report on the effectiveness of internal control over financial reporting. Additionally, we are required to have our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.
Section 404 of the Sarbanes-Oxley Act requires management to provide an annual report on the effectiveness of internal control over financial reporting. Additionally, we are required to have our independent registered public accounting firm report on the effectiveness of our internal control over financial reporting.
Application of the MLI could potentially limit tax benefits granted under the double tax treaties of Cyprus and Kazakhstan. Frequent tax law changes in regions where we conduct operations could adversely affect our business and the value of investments.
Application of the MLI could potentially limit tax benefits granted under the double tax treaties of Cyprus, Kazakhstan and Armenia. Frequent tax law changes in regions where we conduct operations could adversely affect our business and the value of investments .
Turlov and our Ukrainian subsidiary on this list could materially adversely affect our relationships with counterparties and regulators in other jurisdictions and as a result could restrict our ability to conduct our business and carry out our business strategy.
Turlov and our former Ukrainian subsidiary on this list could materially adversely affect our relationships with counterparties and regulators in other jurisdictions and as a result could restrict our ability to conduct our business and carry out our business strategy.
In addition, changes to laws, rules and regulations or changes in the enforcement of existing laws, rules or regulations, could: • limit the lines of business we conduct; • require us to reduce our ownership stake in a subsidiary; • compel us to terminate certain lines of business in affected jurisdictions; • require us to reduce our investment position in a particular instrument; • result in material cost increases including our cost of capital; • otherwise adversely affect our ability to compete effectively with other institutions that are not similarly impacted; • require us to modify existing business practices; • force us to relocate operations or personnel; 33 Table of Contents • require us to invest significant management attention and resources and legal costs to evaluate and make necessary changes to our compliance, risk management, treasury and operations functions; • make it uneconomical for us to provide certain services in particular countries; and • influence how we manage our capital and liquidity.
In addition, changes to laws, rules and regulations or changes in the enforcement of existing laws, rules or regulations, could: • limit the lines of business we conduct; • require us to reduce our ownership stake in a subsidiary; • compel us to terminate certain lines of business in affected jurisdictions; • require us to reduce our investment position in a particular instrument; • result in material cost increases including our cost of capital; • otherwise adversely affect our ability to compete effectively with other institutions that are not similarly impacted; • require us to modify existing business practices; • force us to relocate operations or personnel; • require us to invest significant management attention and resources and legal costs to evaluate and make necessary changes to our compliance, risk management, treasury and operations functions; • make it uneconomical for us to provide certain services in particular countries; and • influence how we manage our capital and liquidity.
Damage to or the loss of our relationships with the U.S. registered securities broker-dealer and clearing firm on which we currently rely could impair our ability to continue to provide our customers access to the U.S. markets at the volumes and in the manner they are accustomed to and could result in higher transaction costs for us or our customers, any of which could have a material adverse impact on our business, results of operations, and financial condition.
Damage to or the loss of our relationships with the U.S. registered securities broker-dealer and clearing firm on which we currently rely could impair our ability to continue to provide our customers access to the U.S. markets at the volumes and in the manner they are accustomed to and could result in higher transaction costs for us or our customers, any of which could have a material adverse impact on our business, results of operations, financial condition and cash flows.
Risk Related to our Business and Operations Our relatively limited operational history has coincided with sustained market growth which may not be predictive of future operating results. Our legacy brokerage operations were merged into our holding company, which is a Nevada-incorporated company, in several stages between November 2015 and 2017, and we have grown rapidly over the last several years.
Risks Related to our Business and Operations Our relatively limited operational history has coincided with sustained market growth, which may not be predictive of future operating results. Our legacy brokerage operations were merged into our holding company, which is a Nevada-incorporated company, in several stages between November 2015 and 2017, and we have grown rapidly over the last several years.
If Covid-19 or another highly infectious or contagious disease continues to spread, if the response to contain it is unsuccessful, or if there are adverse changes in political conditions or social unrest as a result of the response, we may experience adverse effects on our business, financial condition, liquidity, results of operations and cash flows.
If Covid-19 or another highly infectious or contagious disease continues to spread, if the response to contain it is unsuccessful, or if there are adverse changes in political conditions or social unrest as a result of the response, we could experience adverse effects on our business, financial condition, liquidity, results of operations and cash flows.
Although this growth has been sustained over several years, our operational life has been relatively limited compared to longer term market and macroeconomic cycles. Our operating history has coincided with a period of general growth in the U.S. equity markets, as well as growth in the financial services and technology industries in which we operate.
Although we have sustained growth over several years, our operational life has been relatively limited compared to longer-term market and macroeconomic cycles. Our operating history has coincided with a period of general growth in the U.S. equity markets, as well as growth in the financial services and technology industries in which we operate.
The infrastructure upon which our operations and IT systems depend, including electrical communications and internet, and transportation and other services, are vulnerable to damage or disruptions from events outside our control, 42 Table of Contents including natural disasters, military conflicts, power, telecommunications and internet unavailability or outages, terrorist acts, riots, government shutdown orders, changes in government regulation, equipment or system failures or an inability to access or operate such equipment or systems, human error or intentional wrongdoings, cyber-attacks or any other types of information technology security threats.
The infrastructure upon which our operations and IT systems depend, including electrical communications and internet, and transportation and other services, are vulnerable to damage or disruptions from events outside our control, including natural disasters, military conflicts, power, telecommunications and internet unavailability or outages, terrorist acts, riots, government shutdown orders, changes in government regulation, equipment or system failures or an inability to access or operate such equipment or systems, human error or intentional wrongdoings, cyber attacks or any other types of information technology security threats.
Any litigation of this type brought against us could result in substantial costs and a diversion of our management's attention and resources, which could materially and adversely affect our business, financial condition, and results of operations. Future offerings of securities which would rank senior to our common stock may adversely affect the market price of our common stock.
Any litigation of this type brought against us could result in substantial costs and a diversion of our management's attention and resources, which could materially and adversely affect our business, financial condition, results of operations and cash flows. Future offerings of securities which would rank senior to our common stock may adversely affect the market price of our common stock.
Taxation Risks Related to Our International Operations : • Global anti-offshore measures could adversely impact our business. • Frequent tax law changes in the regions where we conduct operations could affect our business in and the value of our investments. • Kazakhstan transfer pricing legislation may require pricing adjustments and impose additional tax liabilities. • Uncertainties and ongoing changes in Kazakhstan's tax regime may have an adverse impact on our business. • Changes in regulations related to taxes on stock transfers and other financial transactions could reduce the volume of market transactions and impact our business..
Taxation Risks Related to Our International Operations : 26 Table of Contents • Global anti-offshore measures could adversely impact our business. • Frequent tax law changes in regions where we conduct operations could adversely affect our business and the value of investments. • Kazakhstan transfer pricing legislation may require pricing adjustments and impose additional tax liabilities. • Uncertainties and ongoing changes in Kazakhstan's tax regime may have an adverse impact on our business. • Changes in regulations related to taxes on stock transfers and other financial transactions could reduce the volume of market transactions and impact our business.
Under Nasdaq rules, a company of which more than 50% of the voting power is held by one individual is a "controlled company" and may elect not to comply with certain corporate governance standards, including the requirements that: • a majority of its board of directors consist of independent directors; • its nominating and corporate governance committee and compensation committee be composed entirely of independent directors; • each committee have a written charter addressing such committee's purpose and responsibilities; and • an annual evaluation of the nominating and corporate governance committee and compensation committee be performed.
Under Nasdaq rules, a company of which more than 50% of the voting power is held by one individual is a "controlled company" and may elect not to comply with certain corporate governance standards, including the requirements that: • a majority of its board of directors consist of independent directors; • its nominating and corporate governance committee and compensation committee be composed entirely of independent directors; 48 Table of Contents • each committee have a written charter addressing such committee's purpose and responsibilities; and • an annual evaluation of the nominating and corporate governance committee and compensation committee be performed.
The amount of risk to which we are exposed from the margin lending we extend to our customers and from short sale transactions by our customers is potentially unlimited and not quantifiable as the risk is dependent upon analysis of a potential significant and undeterminable rise or fall in stock prices.
The amount of risk to which we are exposed from the margin lending we extend to our customers and from short sale transactions by our customers is potentially unlimited and not quantifiable as the risk is dependent upon analysis of a potential significant and undeterminable increase or fall in stock prices.
Our inability to recover from reinsurers, for any reason, could have a material effect on our results of operations, financial condition and business prospects. We are dependent on our executive management team, particularly Timur Turlov, and our ability to hire and retain skilled personnel.
Our inability to recover from reinsurers, for any reason, could have a material effect on our results of operations, financial condition, cash flows and business prospects. We are dependent on our executive management team, particularly Timur Turlov, and our ability to hire and retain skilled personnel.
More generally, substantial property and equipment loss, and disruption in operations as well as any defects in our systems or those of third parties or other difficulties could expose us to liability and materially adversely impact our business, financial condition and results of operations.
More generally, substantial property and equipment loss, and disruption in operations as well as any defects in our systems or those of third parties or other difficulties could expose us to liability and materially adversely impact our business, financial condition, results of operations and cash flows.
If we are unable to develop, adapt to, access or acquire technology that meets or exceeds industry standards on a timely and cost-effective basis, which could materially and adversely impact our business, financial condition and results of operations.
If we are unable to develop, adapt to, access or acquire technology that meets or exceeds industry standards on a timely and cost-effective basis, which could materially and adversely impact our business, financial condition, results of operations and cash flows.
To the extent there is heightened competition among Kazakhstan banks for retail customer deposits, this competition may increase the cost of procuring new deposits and/or retaining existing deposits, and otherwise negatively affect our ability to grow our deposit base.
To the extent there is heightened competition among Kazakh banks for retail customer deposits, this competition may increase the cost of procuring new deposits and/or retaining existing deposits, and otherwise negatively affect our ability to grow our deposit base.
We currently utilize an exemption to allow Timur Turlov to sit on our nominating and corporate governance committee. The charters for each of our board committees provides for annual performance evaluations. Currently we have a majority of independent directors on our board of directors.
We currently utilize an exemption to allow Timur Turlov to sit on our nominating and corporate governance committee. The charters for each of our board committees provide for annual performance evaluations. Currently we have a majority of independent directors on our board of directors.
We have identified material weaknesses in our internal control over financial reporting and may identify material weaknesses in the future or otherwise fail to establish and maintain effective internal control over financial reporting, which could have a material adverse effect on our business and stock price.
We have identified material weaknesses in our internal control over financial reporting in the past, and we may identify material weaknesses in the future or fail to establish and maintain effective internal control over financial reporting, which could have a material adverse effect on our business and stock price.
Although our subsidiaries have implemented cyber security strategies for mitigating these risks, we cannot be sure that our network and information technology systems will not be subject to such issues, or, if they are, that we will be able to maintain the integrity of our customers' and employees' data or that malware or other technical or operational issues will not disrupt our network or systems and cause significant harm to our operations.
Although our subsidiaries have implemented cybersecurity strategies for mitigating these risks, we cannot be sure that our network and information technology systems will not be subject to such issues, or, if they are, that we will be able to maintain the integrity of our customers' and employees' data or that malware or other technical or operational issues will not disrupt our network or systems and cause significant harm to our operations.
In addition, decreases in the credit rating of Freedom KZ, or FRHC as its owner, may affect Freedom KZ's brokerage license and impose certain requirements on FRHC as its owner with respect to Freedom KZ's investment portfolio management capacity.
In addition, decreases in the credit rating of Freedom KZ, or FRHC as its owner, may affect Freedom KZ's brokerage license and impose certain requirements on Freedom Holding Corp. as its owner with respect to Freedom KZ's investment portfolio management capacity.
The Convention on Mutual Administrative Assistance in Tax Matters developed by the Council of Europe and the OECD in 1988 and amended by Protocol in 2010 has now been signed by 141 jurisdictions (including Kazakhstan, Cyprus and Russia).
The Convention on Mutual Administrative Assistance in Tax Matters developed by the Council of Europe and the OECD in 1988 and amended by Protocol in 2010 has now been signed by 141 jurisdictions (including Kazakhstan, Armenia and Cyprus).
Damage to or the loss of our relationships with these U.S. registered securities broker-dealer and clearing firms could also impair our ability to continue to offer such services to our customers which could have a material adverse impact on our business, results of operations, financial condition and cash flows.
Damage to or the loss of our relationships with these U.S. registered securities broker-dealer and clearing firms could also impair our ability to continue to offer such services to our customers which 45 Table of Contents could have a material adverse impact on our business, results of operations, financial condition and cash flows.
A rise in interest rates could negatively impact us if we hold securities that have an inverse relationship with interest rates or where market conditions or the competitive environment induces us to raise our interest rates or replace deposits with higher cost funding sources without offsetting increases in yields on interest-earning assets.
An increase in interest rates could negatively impact us if we hold securities that have an inverse relationship with interest rates or where market conditions or the competitive environment induces us to raise our interest rates or replace deposits with higher cost funding sources without offsetting increases in yields on interest-earning assets.
We are also exposed to credit risk when our customers execute transactions, such as short sales of options and equities that can expose them to risk beyond their invested capital.
We are also exposed to credit risk when our customers execute transactions, such as short sales of equities that can expose them to risk beyond their invested capital.
Risks Related to Information Technology and Cyber Security Our brokerage, financial services, and banking operations are highly dependent on the continued and proper functioning of our information technology systems. Our brokerage, financial services and banking businesses are highly dependent on processing, on a daily basis, a large number of communications and increasingly complex transactions across diverse markets, in various languages.
Risks Related to Information Technology and Cybersecurity Our operations are highly dependent on the continued and proper functioning of our information technology systems. Our brokerage, financial services and banking businesses are highly dependent on processing, on a daily basis, a large number of communications and increasingly complex transactions across diverse markets, in various languages.
Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many different aspects of financial services, including, but not limited to, the authority to fine us and to grant, cancel, restrict or otherwise impose conditions on the right to continue operating particular businesses.
Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many different aspects of financial services, including, but not limited to, the authority to fine us and to grant, cancel, 40 Table of Contents restrict or otherwise impose conditions on the right to continue operating particular businesses.
If we do not succeed in engaging and retaining skilled employees and other personnel or if we experience a loss of such personnel, we may be unable to meet our objectives and, as a result, our business may suffer. 40 Table of Contents Extraordinary events beyond our control could negatively impact our business.
If we do not succeed in engaging and retaining skilled employees and other personnel or if we experience a loss of such personnel, we may be unable to meet our objectives and, as a result, our business may suffer. Extraordinary events beyond our control could negatively impact our business.
These pose increasingly complex compliance challenges, which may increase compliance costs, and compliance failures could result in significant fines, penalties and liability. We have previously experienced cyber security incidents which breached our information systems, but these were contained by our response teams and generated negligible impacts.
These pose increasingly complex compliance challenges, which may increase compliance costs, and compliance failures could result in significant fines, penalties and liability. We have previously experienced cybersecurity incidents which breached our information systems, but these were contained by our response teams and generated negligible impacts.
This convention requires competent authorities of jurisdictions-signatories to participate in the exchange of information that is foreseeably relevant for the administration or enforcement of their domestic laws concerning taxes. In 2016 Russia (and in 2018 Kazakhstan) joined the Standard for Automatic Exchange of Financial Account Information (Common Reporting Standard) (the "CRS").
This convention requires competent authorities of jurisdictions-signatories to participate in the exchange of information that is foreseeably relevant for the administration or enforcement of their domestic laws concerning taxes. In 2018 Kazakhstan joined the Standard for Automatic Exchange of Financial Account Information (Common Reporting Standard) (the "CRS").
Our internal policies and those of our 32 Table of Contents subsidiaries provide for training and compliance with all applicable anti-corruption laws and regulations. Despite our training and compliance programs, it is possible that our employees, agents or independent contractors may cause us or a subsidiary to violate applicable laws.
Our internal policies and those of our subsidiaries provide for training and compliance with all applicable anti-corruption laws and regulations. Despite our training and compliance programs, it is possible that our employees, agents or independent contractors may cause us or a subsidiary to violate applicable laws.
This risk is inherent in our operations and can be heightened by a number of factors, including an over-reliance 37 Table of Contents on a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation and major disasters.
This risk is inherent in our operations and can be heightened by a number of factors, including an over-reliance on a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation and major disasters.
As a result of shutdowns (or restrictions on access to) the internet and the state of emergency declared by the president of Kazakhstan, our Kazakhstan subsidiaries, along with other financial institutions in Kazakhstan, were unable to conduct operations or operated with limited functionality during the unrest.
As a result of shutdowns (or restrictions on access to) the internet and the state of emergency declared by the president of Kazakhstan, our Kazakhstan subsidiaries, along with other financial institutions in 39 Table of Contents Kazakhstan, were unable to conduct operations or operated with limited functionality during the unrest.
In addition, our operations are conducted almost entirely through our subsidiaries. As such, to the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of such dividends.
In addition, our operations are conducted almost entirely through our subsidiaries. As such, to 51 Table of Contents the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of such dividends.
Although financial markets have rebounded from the significant declines experienced during the early stages of the Covid-19 outbreak, signs of underlying economic weakness persist, including elevated levels of market volatility, high unemployment, lack of consumer confidence, depressed levels of business activity in certain sectors, and increased cyber security, information security and operational risks resulting from expansion of remote work.
Although financial markets have rebounded from the significant declines experienced during the Covid-19 outbreak, signs of underlying economic weakness persist, including elevated levels of market volatility, high unemployment, lack of consumer confidence, depressed levels of business activity in certain sectors, and increased cybersecurity, information security and operational risks resulting from expansion of remote work.
The countries in which we operate have differing, and sometimes conflicting, regulatory regimes governing the delivery of financial services in each country, the transfer of funds to and from such countries, and other aspects of the broker-dealer, finance, investment, banking, and insurance industries.
The countries in which we operate have changing regulatory regimes, regulatory policies, and interpretations . The countries in which we operate have differing, and sometimes conflicting, regulatory regimes governing the delivery of financial services in each country, the transfer of funds to and from such countries, and other aspects of the broker-dealer, finance, investment, banking, and insurance industries.
If, based upon these models, forecasts or other factors, we misprice our products or fail to correctly estimate the associated risks, our business, results of operations, financial condition and cash flows may be materially adversely affected.
If, based upon these models, forecasts or other factors, we misprice our products or fail to correctly 34 Table of Contents estimate the associated risks, our business, results of operations, financial condition and cash flows may be materially adversely affected.
While we have agreements with such institutional clients in which they have agreed to comply with AML/CTF controls that are applicable to brokers in the U.S. and EU, and we tested their frameworks and systems by regular risk-based sampling and have access to their underlying customer records for purposes of compliance monitoring, we do not have direct access to such institutional clients' underlying customers or screening systems and as a result we cannot provide assurance that the beneficial owners who are the beneficiaries of trades being carried out through such omnibus accounts are conducting trades in compliance with applicable AML/CTF laws.
While we have agreements with such institutional clients in which they have agreed to comply with AML/CTF controls that are applicable to brokers in the U.S. and EU, and we test their frameworks and systems by regular risk-based sampling and have access to their underlying customer records for purposes of compliance monitoring, because we do not have direct access to such institutional clients' underlying customers or screening systems, we cannot provide assurance that the beneficial owners who are the beneficiaries of trades being carried out through such omnibus accounts are conducting trades in compliance with applicable AML/CTF laws.
For example, during the transition to the new calendar year 2023, Freedom Bank KZ experienced a technical failure in processing transactions on its MultiInvest cards, as a result of which it incurred losses of approximately $3 million.
For example, during the transition from the calendar year 2022 to the calendar year 2023, Freedom Bank KZ experienced a technical failure in processing transactions on its MultiInvest cards, as a result of which it incurred losses of approximately $3 million.
These communications and transactions are accomplished primarily through electronic information technology systems ("IT") that are comprised of a wide array of computer systems, software, server and network hardware, internet connectivity and underlying infrastructure that enable them to function.
These communications and transactions are accomplished primarily through electronic information technology systems 43 Table of Contents ("IT") that are comprised of a wide array of computer systems, software, server and network hardware, internet connectivity and underlying infrastructure that enable them to function.
If we violate securities laws, or are involved in litigation in connection with a violation, our reputation and results of operations may be adversely affected. 34 Table of Contents Many aspects of our business involve substantial risks of liability.
If we violate securities laws, or are involved in litigation in connection with a violation, our reputation and results of operations may be adversely affected. Many aspects of our business involve substantial risks of liability.
To reduce the negative impact of sanctions and other actions related to the Russia-Ukraine conflict on the Kazakhstan economy, the NBK raised the base rate from 10.25% to 16.75% per annum. The base rate was increased to produce a rise in deposit rates to levels needed to compensate for increased depreciation and inflation risks.
To reduce the negative impact of sanctions and other actions related to the Russia-Ukraine conflict on the Kazakhstan economy, the NBK raised the base rate from 10.25% to 16.75% per annum. The base rate was increased to produce an increase in deposit rates to levels needed to compensate for increased depreciation and inflation risks.
The companies in which we invest may concentrate on markets which are or may be disproportionately impacted by pressures in the sectors on which they focus, and their existing business operations or investment strategies may not perform as projected. As a result, we may suffer losses from our investment activities.
The companies in which we invest may concentrate on markets which are or may be disproportionately impacted by pressures in the sectors on which they focus, and their existing business operations or investment strategies may not perform as 33 Table of Contents projected. As a result, we may suffer losses from our investment activities.
As a minimum standard, the MLI implements a principal purposes test, under which treaty benefits are disallowed if one of the principal purposes of the transaction or the structure was to obtain a tax benefit. The MLI was ratified by Cyprus on January 22, 2020 and by Kazakhstan on February 20, 2020.
As a minimum standard, the MLI implements a principal purposes test, under which treaty benefits are disallowed if one of the principal purposes of the transaction or the structure was to obtain a tax benefit. The MLI was ratified by Cyprus on January 22, 2020, by Kazakhstan on February 20, 2020 and by Armenia on September 25, 2023.
Many of the requirements imposed by these regulations are designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with us. New regulations may result in enhanced standards of duty on broker-dealers in their dealings with their clients.
Many of the requirements imposed by these regulations are designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with us. New regulations may result in enhanced standards of duty on our subsidiaries in their dealings with their clients.
As a result of these uncertainties, the availability of these new tax exemptions to us is currently unclear. Another tax risk we face is associated with "corporate tax residency" in Kazakhstan.
As a result of these uncertainties, the availability of these new tax exemptions to us is currently unclear. 47 Table of Contents Another tax risk we face is associated with "corporate tax residency" in Kazakhstan.
However, we cannot assure that such measures will continue to adequately protect our business in the event of future transitions of our workforce to remote working, as remote working environments may be less secure and more susceptible to cyber security threats.
However, we cannot assure that such measures will continue to adequately protect our business in the event of future transitions of our workforce to remote working, as remote working environments may be less secure and more susceptible to IT and cybersecurity threats.
Timur Turlov, our chief executive officer and chairman of our board, beneficially owns 71.1% of our outstanding common stock. He currently has voting control of FRHC and can control the outcome of matters submitted to stockholders for approval. In addition, Mr.
Timur Turlov, our chief executive officer and chairman of our board, beneficially owns 69.9% of our outstanding common stock. He currently has voting control of FRHC and can control the outcome of matters submitted to stockholders for approval. In addition, Mr.
In particular, there is a risk that corporate and financial institution counterparties may seek to reduce their credit exposures to banks and other financial institutions, which may cause funding from these sources to no longer be available.
In 32 Table of Contents particular, there is a risk that corporate and financial institution counterparties may seek to reduce their credit exposures to banks and other financial institutions, which may cause funding from these sources to no longer be available.
For example, the 48 Table of Contents current U.S. presidential administration has proposed tax policy ideas that if enacted would, among other things, increase the corporate tax rate and the U.S. tax rate on Global Intangible Low Taxed Income ("GILTI").
For example, the current U.S. presidential administration has proposed tax policy ideas that if enacted would, among other things, increase the corporate tax rate and the U.S. tax rate on Global Intangible Low Taxed Income ("GILTI").
Suspicious transactions must be reported on a daily basis to the relevant authorities. We comply with applicable anti-money-laundering and anti-terrorist-financing laws and regulations. Our anti-money-laundering measures are based on relevant legislation.
Suspicious transactions must be reported on a daily basis to the relevant authorities. We comply with applicable 42 Table of Contents anti-money-laundering and anti-terrorist-financing laws and regulations. Our anti-money-laundering measures are based on relevant legislation.
Laws, regulations and rules or other obligations to which we are subject include but are not limited to those concerning securities brokerage, commercial banking, insurance services, payment services, securities trading, investment banking, granting of credit, deposit taking, margin lending, foreign currency exchange, data protection and privacy, cross-border and domestic money transmission, cyber security, fraud detection, antitrust and competition, consumer protection, U.S. and non-U.S. sanctions regimes, anti-money laundering and counter-terrorist financing.
Laws, regulations and rules or other obligations to which we are subject include but are not limited to those concerning securities brokerage, retail and commercial banking, insurance services, payment services, securities trading, underwriting and market-making, granting of credit, deposit taking, margin lending, foreign currency exchange, data protection and privacy, cross-border and domestic money transmission, cybersecurity, fraud detection, antitrust and competition, consumer protection, U.S. and non-U.S. sanctions regimes, anti-money laundering and counter-terrorist financing.
U.S. economic sanctions also include “secondary” sanctions that make certain activities of non-U.S. companies sanctionable under U.S. statutes such as the Countering America’s Adversaries Through Sanctions Act (CAATSA). These sanctions are administered by OFAC and/or the U.S. Department of State.
U.S. economic sanctions also include “secondary” sanctions that make certain activities of non-U.S. persons sanctionable under U.S. statutes such as the Countering America’s Adversaries Through Sanctions Act (CAATSA) or the U.S. President’s executive orders. These sanctions are administered by OFAC and/or the U.S. Department of State.
Our computer systems, software, and networks may be vulnerable to unauthorized access, computer viruses, spyware or other malicious code, and other evolving cyber security threats.
Our computer systems, software, and networks may be vulnerable to unauthorized access, computer viruses, spyware or other malicious code, and other evolving cybersecurity threats.
Although neither FRHC nor any of its group companies is the subject of any sanctions imposed by the United States, the European Union or the United Kingdom, and we have divested our Russian subsidiaries, sanctions related to Russia could adversely impact our business.
Although neither FRHC nor any of its group companies is the subject of any sanctions imposed by the United States, the European Union or the United Kingdom, and we have divested our Russian subsidiaries, the effects of the Russia-Ukraine conflict could adversely impact our business.
Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results of operations on a timely and accurate basis. If our financial statements are inaccurate, investors may not have a complete understanding of our operations and we could face the risk of stockholder litigation.
Failure to maintain effective internal control over financial reporting by us going forward could adversely impact our ability to report our financial position, results of operations and cash flows on a timely and accurate basis. If our financial statements are inaccurate, investors may not have a complete understanding of our operations and we could face the risk of stockholder litigation.
Enforcement officials generally interpret anti-corruption laws to prohibit, among other things, improper payments to government officials such as those of the ARDFM, CySEC, FINRA, the Federal Financial Supervisory Authority of Germany ("BaFIN") the Center for Coordination and Development of Securities Market of the Republic of Uzbekistan and the National Commission on Securities and Stock Market of Ukraine, which are the principal regulatory bodies that control and monitor our operations in the respective countries in which we operate.
Enforcement officials generally interpret anti-corruption laws to prohibit, among other things, improper payments to government officials such as those of the ARDFM, the NBK, AFSA, CySEC, FINRA, the Federal Financial Supervisory Authority of Germany ("BaFIN"), the National Agency for Prospective Projects (NAPP) in Uzbekistan and the National Commission on Securities and Stock Market of Ukraine, which are the principal regulatory bodies that control and monitor our operations in the respective countries in which we operate.
Many of the firms with which we compete are larger, provide additional and more diversified services and products, provide access to more international markets, and have greater technical, and financial resources.
Many of the firms with which we currently compete, or will compete in the future, are larger, provide additional and more diversified services and products, provide access to more international markets, and have greater technical, and financial resources.
However, during fiscal 2023 the value of the tenge largely stabilized and appreciated by 3.1% against the U.S. dollar. Kazakhstan and other countries remain vulnerable to external shocks and the economic performance of their trading partners.
However, during fiscal 2024 the value of the tenge largely stabilized and appreciated by approximately 4% against the U.S. dollar. Kazakhstan and other countries remain vulnerable to external shocks and the economic performance of their trading partners.
The risk of noncompliance may arise in connection with international transactions conducted in U.S. dollars, transfers to or from U.S. bank accounts, or dealings with U.S. broker-dealers. We maintain omnibus brokerage accounts for several institutional clients, including FST Belize and certain Russian institutions.
The risk of noncompliance may arise in connection with international transactions conducted in U.S. dollars, transfers to or from U.S. bank accounts, or dealings with U.S. broker-dealers. We maintain omnibus brokerage accounts for several institutional clients.
Because we have employees in a number of locations in Kazakhstan, Ukraine, Uzbekistan, Kyrgyzstan, Azerbaijan, Germany, Spain, Greece, France, the UAE, the UK, the U.S. and Cyprus, all of whom need to work and communicate as an integrated team, the functionality of the infrastructure affects our ability to conduct business.
Because we have employees in a number of locations in Kazakhstan, Uzbekistan, Kyrgyzstan, Turkey, Azerbaijan, Germany, Spain, Greece, France, Poland, Bulgaria, Austria, Italy, Netherlands, Belgium, Armenia, the UAE, the UK, the U.S. and Cyprus, all of whom need to work and communicate as an integrated team, the functionality of the infrastructure affects our ability to conduct business.
Risks Related to Information Technology and Cyber Security : • Our brokerage, financial services, and banking operations are highly dependent on the continued and proper functioning of our information technology systems. 27 Table of Contents • We interact with large volumes of sensitive data that exposes us to IT breach and other data security risks and liabilities. • The infrastructure on which our IT systems depend is subject to events that could interrupt our ability to operate. • Failure of third-party systems and operations on which we rely could adversely affect our business. • To remain competitive, we must keep pace with rapid technological change.
Risks Related to Information Technology and Cybersecurity : • Our operations are highly dependent on the continued and proper functioning of our information technology systems. • We interact with large volumes of sensitive data that exposes us to IT breach and other data security risks and liabilities. • The infrastructure on which our IT systems depend is subject to events that could interrupt our ability to operate. • Failure or compromise of third-party systems operations or security could adversely affect our business and expose us to data breaches and cyber attacks. • To remain competitive, we must keep pace with rapid technological change.
We therefore have not experienced any prolonged downturn or slowdown in macroeconomic or industry growth or any significant downturn in U.S. equity markets and cannot assure that we will be able to respond effectively to any such downturn or slowdown in the future. As such, our recent growth should not be considered indicative of our future performance.
We therefore have not experienced any prolonged downturn or slowdown in macroeconomic or industry growth or any significant downturn in U.S. equity markets and cannot assure that we will be able to respond effectively to any such downturn or slowdown in the future.
In addition, the large extent of our related party transactions with FST Belize could have an adverse our relationships with applicable regulators.
In addition, the large extent of our related party transactions in the past with FST Belize could have an adverse effect on our relationships with applicable regulators and on our reputation.
We operate through subsidiaries in Kazakhstan, Ukraine, Kyrgyzstan, Uzbekistan, Azerbaijan, Armenia, the EU, the UAE, the U.S., Germany, and Cyprus including representative offices of our Cyprus broker in Greece, France and Spain.
We operate through subsidiaries in Kazakhstan, Kyrgyzstan, Uzbekistan, Azerbaijan, Armenia, Turkey, the EU, the UAE, the U.S., Germany, and Cyprus including representative offices of our Cyprus broker in Austria, Bulgaria, Greece, France, Spain, Italy, Poland and Netherlands.
In connection with such errors, we concluded that there is a material weakness due to deficiency in one of the principles associated with the Control Environment component of the COSO framework, specifically relating to a lack of a sufficient complement of qualified technical accounting and financial reporting personnel to perform control activities in support of preparing the financial statements in accordance with U.S.
Management identified a material weakness due to a deficiency in one of the principles associated with the Control Environment component of the COSO framework, specifically relating to a lack of a sufficient complement of qualified technical accounting and financial reporting personnel to perform control activities in support of preparing the financial statements in accordance with U.S. GAAP.
We have experienced and expect to continue to experience interruptions and delays in service from time to time. Furthermore, we depend on hardware and software suppliers for prompt delivery, installation and service of servers and other equipment to deliver our services.
We have experienced and expect to continue to experience interruptions and delays in service from time to time. Furthermore, we depend on hardware and software suppliers for prompt delivery, installation and service of servers and other equipment to deliver our services. Use of third-party systems and vendors creates additional potential vulnerabilities.
Our investments are subject to price fluctuations as a result of changes in the financial markets' assessment of credit quality. Loss in securities value can negatively affect our financial performance and earnings if our management determines that such securities are other-than-temporarily-impaired ("OTTI"). The evaluation of whether OTTI exists is a matter of judgment, which includes the assessment of several factors.
Loss in securities value can negatively affect our financial performance and earnings if our management determines that such securities are other-than-temporarily-impaired ("OTTI"). The evaluation of whether OTTI exists is a matter of judgment, which includes the assessment of several factors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur total aggregate leased square footage is approximately 416,600 square feet (38,700 square meters). In our Central Asia and Eastern Europe segment we own 16 buildings consisting of approximately 118,370 square feet. As of March 31, 2023, the area of leased offices in our Central Asia and Eastern Europe segment was 371,920 square feet.
Biggest changeAs of March 31, 2024, the area of leased offices in our Other segment was 254,598 square feet. In our Brokerage segment we own 2 buildings consisting of approximately 74,907 square feet. As of March 31, 2024, the area of leased offices in our Brokerage segment was 195,094 square feet.
For additional information regarding our office lease commitments see Note 28 " Leases " in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.
For additional information regarding our office lease commitments see Note 27 "Leases " in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.
On May 10, 2023, our subsidiary Freedom EU signed a contract for the construction of Elysium Tower, a building in Limassol, Cyprus, which is planned to be a new office building for our Freedom EU subsidiary. We do not own any properties in our United States segment.
On May 10, 2023, our subsidiary Freedom EU signed a contract for the construction of Elysium Tower, a building in Limassol, Cyprus, which is planned to be a new office building for our Freedom EU subsidiary.
Item 2. Properties We lease and own a number of properties across our four geographic segments, through which we conduct our operations. 52 Table of Contents We currently lease office space for 158 retail, executive, administrative and operational facilities in Kazakhstan, the United States, Ukraine, Cyprus, Germany, Spain, France, Greece, Armenia, Uzbekistan, Kyrgyzstan and Azerbaijan.
Item 2. Properties We lease and own a number of properties across our business segments: Brokerage, Banking, Insurance, and Other, through which we conduct our operations. We currently lease office space for 265 retail, executive, administrative and operational facilities in Kazakhstan, Cyprus, Uzbekistan, Azerbaijan, Armenia, the United States, Turkey, Germany, Spain, France, Greece and Kyrgyzstan.
Our principal property in our Europe segment is our office building located at Christaki Kranou 20, Freedom Tower, 5th floor, 4041 Limassol, Cyprus with an area of 854 square meters (approximately 9,190 square feet), which we own. As of March 31, 2023, the aggregate area of leased offices in our Europe segment was 22,062 square feet.
Our principal property in our Brokerage segment is our office building located at Christaki Kranou 20, Freedom Tower, 5th floor, 4041 Limassol, Cyprus with an area of 6,959 square meters (approximately 74,906 square feet), which we own.
Our Central Asia and Eastern Europe segment properties include our principal executive offices, which are located at "Esentai Tower" BC, Floor 7, 77/7 Al Farabi Ave. Almaty, Kazakhstan 050040, and which are leased.
Our Insurance and Bank segment properties include our principal executive offices, which are located at "Esentai Tower" BC, Floor 7, 77/7 Al Farabi Ave., Almaty, Kazakhstan 050040, and which are leased. In our Other segment we own two buildings consisting of approximately 83,014 square feet.
As of March 31, 2023, the area of leased offices in our United States segment, which consisted of our offices located at 40 Wall Street, 57th and 58th floor, New York, was 15,250 square feet. We do not own any properties in our Middle East / Caucasus segment.
Also, we rent our offices in the United States, which are located at 40 Wall Street, 57th and 58th floor, New York, and comprise 15,250 square feet. We consider our properties to be in good condition.
Removed
As of March 31, 2023, the area of leased offices in our Middle East / Caucasus segment was 7,366 square feet. We consider our properties to be in good condition.
Added
Our total aggregate leased square footage is approximately 562,380 square feet. We own 20 buildings consisting of an aggregate of approximately 287,913 square feet, in Kazakhstan and Cyprus.
Added
In our Insurance and Bank segments collectively, as of March 31, 2024, we owned 16 buildings consisting of approximately 129,992 square feet and we leased offices consisting of an aggregate of 112,688 square feet.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe do not believe that the outcome of this litigation could be material to our financial condition. Item 4. Mine Safety Disclosures Not applicable. 54 Table of Contents PART II
Biggest changeWe are currently in settlement discussions with the Estate. We do not believe that the outcome of this legal action could be material to our financial condition. Item 4. Mine Safety Disclosures Not applicable. 54 Table of Contents PART II
On October 21, 2022, in accordance with an order entered into by the Third Judicial District Court of Salt Lake County, we deposited an amount of $8.4 million into the registry of the court, representing the amount of cash distributions 53 Table of Contents claimed by the Estate. The Company continues to deny any and all liability in this matter.
On October 21, 2022, in accordance with an order entered into by the Third Judicial District Court of Salt Lake County, we deposited an amount of $8.4 million into the registry of the court, representing the amount of cash distributions claimed by the Estate. The Company continues to deny any and all liability in this matter.
Compliance and trading problems that are reported to federal, state and provincial regulators, exchanges or other self-regulatory organizations by dissatisfied customers are investigated by such regulatory bodies, and, if pursued by such regulatory body or such customers, may rise to the level of arbitration or disciplinary action.
Compliance and trading problems that are reported to federal, state and provincial regulators, exchanges or other self-regulatory organizations by dissatisfied customers are investigated by such regulatory bodies, and, if pursued by such regulatory body or such customers, may increase to the 53 Table of Contents level of arbitration or disciplinary action.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock price performance shown in the graph and table below is not necessarily indicative of, nor is it intended to forecast, the future performance of our common stock. 55 Table of Contents 3/18 3/19 3/20 3/21 3/22 3/23 Freedom Holding Corp. 100 128 209 785 876 1,066 S&P 500 100 107 107 150 172 156 S&P 500 Diversified Financials 100 94 83 133 159 139 The performance graph and table shall not be deemed "soliciting material" or to be "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act.
Biggest changeThe stock price performance shown in the graph and table below is not necessarily indicative of, nor is it intended to forecast, the future performance of our common stock 55 Table of Contents 3/19 3/20 3/21 3/22 3/23 3/24 Freedom Holding Corp. 100 163 613 685 826 811 S&P 500 100 91 140 160 145 185 S&P 500 Diversified Financials 100 89 142 170 148 188 The performance graph and table shall not be deemed "soliciting material" or to be "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act.
Recent Sales of Unregistered Equity Securities During fiscal 2023, we did not sell any unregistered shares of our equity securities. Issuer Repurchases of Equity Securities We did not repurchase any equity securities of the Company during fiscal 2023. Item 6. [Reserved]
Recent Sales of Unregistered Equity Securities During fiscal 2024, we did not sell any unregistered shares of our equity securities. Issuer Repurchases of Equity Securities We did not repurchase any equity securities of the Company during fiscal 2024. Item 6. [Reserved]
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from March 31, 2018 to March 31, 2023. The comparisons shown in the graph and table below are based upon historical data.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from March 31, 2019 to March 31, 2024. The comparisons shown in the graph and table below are based upon historical data.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Capital Market under the symbol "FRHC". Our common stock also trades on the KASE under the symbol "US_FRHC" and on the SPB Exchange under the symbol "FRHC".
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Capital Market under the symbol "FRHC". Our common stock also trades on the KASE under the symbol "US_FRHC". Holders As of May 13, 2024, we had approxima tely 479 shareh olders of record.
Removed
Holders As of August 1, 2023, we had approxima tely 429 shareh olders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeInterest income The following table sets forth information regarding our revenue from interest income for the fiscal years presented: Year ended March, 31 2023 2022 (Recasted) Amount Change % Change 2021 (Recasted) Amount Change % Change Interest income on margin lending $ 34,558 $ 14,164 $ 20,394 144 % $ 3,163 $ 11,001 348 % Interest income on trading securities 178,288 78,327 99,961 128 % 21,913 56,414 257 % Interest income on loans to customers 43,486 4,617 38,869 842 % 384 4,233 1,102 % Interest income on available-for-sale securities 27,003 22,437 4,566 20 % 11,238 11,199 100 % Interest income on cash and cash equivalents and restricted cash 9,836 1,658 8,178 493 % 1,630 28 2 % Interest income from dividends 1,524 406 1,118 275 % 146 260 178 % Total interest income 294,695 121,609 173,086 142 % 38,474 83,135 216 % The following table sets out the components of our interest income as a percentage of total interest income, net for the fiscal years presented: Year ended March 31, 2023 2022 (Recasted) 2021 (Recasted) (as a % of total interest income) Interest income on margin lending 12 % 12 % 8 % Interest income on trading securities 60 % 64 % 57 % Interest income on loans to customers 15 % 4 % 1 % Interest income on available-for-sale securities 9 % 19 % 30 % Interest income on cash and cash equivalents and restricted cash 3 % 1 % 4 % Interest income from dividends 1 % — — Total interest income 100 % 100 % 100 % For fiscal 2023, interest income was $294.7 million, representing an increase of $173.1 million, or 142%, compared to fiscal 2022.
Biggest changeInterest income The following table sets forth information regarding our revenue from interest income for the fiscal years presented: Year ended March, 31 2024 2023 Amount Change % Change 2022 (Recasted) Amount Change % Change Interest income on trading securities $ 426,428 $ 178,288 $ 248,140 139 % $ 78,327 $ 99,961 128 % Interest income on loans to customers 176,539 43,486 133,053 306 % 4,617 38,869 842 % Interest income on margin loans to customers 175,571 34,558 141,013 408 % 14,164 20,394 144 % Interest income on available-for-sale securities 32,821 27,003 5,818 22 % 22,437 4,566 20 % Interest income on reverse repurchase agreements and amounts due from banks 16,865 9,836 7,029 71 % 1,658 8,178 493 % Other interest income — 1,524 (1,524) (100) % 406 1,118 275 % Total interest income $ 828,224 $ 294,695 $ 533,529 181 % $ 121,609 $ 173,086 142 % The following table sets out the components of our interest income as a percentage of total interest income, net for the fiscal years presented: Year ended March 31, 2024 2023 2022 (Recasted) (as a % of total interest income) Interest income on trading securities 51.5 % 60.5 % 64.4 % Interest income on loans to customers 21.3 % 14.8 % 3.8 % Interest income on margin loans to customers 21.2 % 11.7 % 11.6 % Interest income on available-for-sale securities 4.0 % 9.2 % 18.5 % Interest income on reverse repurchase agreements and amounts due from banks 2.0 % 3.3 % 1.4 % Other interest income — % 0.5 % 0.3 % Total interest income 100 % 100 % 100 % Interest income for the fiscal year ended March 31, 2024, was $828.2 million, an increase of $533.5 million or 181% compared to $294.7 million for the fiscal year ended March 31, 2023.
This discussion contains certain forward- 56 Table of Contents looking statements that involve known and unknown risks, uncertainties, and other factors as described under the heading "Special Note About Forward-Looking Information" in this annual report. Actual results could differ materially from those projected in any forward-looking statements.
This discussion contains certain forward-looking statements that involve known and unknown risks, uncertainties, and other factors as described under the heading "Special Note About Forward-Looking Information" in this annual report. Actual results could differ materially 56 Table of Contents from those projected in any forward-looking statements.
We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future. INDEBTEDNESS Short-term Securities Repurchase Arrangements . Our short-term financing is primarily obtained through securities repurchase arrangements conducted through stock exchanges.
We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any cash dividends on common stock in the foreseeable future. Indebtedness Short-term Our short-term financing is primarily obtained through securities repurchase arrangements conducted through stock exchanges.
Freedom UA's brokerage license was suspended for a period of five years and its assets frozen by the Ukrainian authorities following its inclusion on the sanctions list. The lists of companies and individuals sanctioned included both Freedom UA and Timur Turlov, in his personal capacity. In addition, the list included two former Russian subsidiaries, which have since been divested.
Freedom UA's brokerage license was suspended for a period of five years and its assets frozen by the Ukrainian authorities following its inclusion on the sanctions list. The lists of companies and individuals sanctioned included both Freedom UA and Timur Turlov, in his personal capacity. In addition, the list included our two former Russian subsidiaries, which have since been divested.
Interest Expense Interest expense includes the expenses associated with our short-term and long-term financing, which consist of interest on securities repurchase agreement obligations, customer accounts and deposits, debt securities issued, and loans received. Payroll and bonuses Payroll and bonuses represent the costs incurred by a company in compensating its employees for their services and providing performance-based incentives.
Interest Expense Interest expense includes the expenses associated with our short-term and long-term financing, which consist of interest on securities repurchase agreement obligations, customer accounts and deposits, debt securities issued, and loans received. Payroll and Bonus Payroll and bonuses represent the costs incurred by a company in compensating its employees for their services and providing performance-based incentives.
Although we operate with levels of net capital and capital adequacy substantially greater than the minimum established thresholds, in the event we were to fail to maintain minimum net capital or capital adequacy levels, we may be subject to fines and penalties, suspension of operations, revocation of licensure and disqualification of our management from working in the industry.
Although we operate with levels of net capital and capital adequacy substantially greater than the minimum established thresholds, in the event we fail to maintain minimum net capital or capital adequacy, we may be subject to fines and penalties, suspension of operations, revocation of licensure and disqualification of our management from working in the industry.
Professional services Professional services represents the costs associated with engaging external experts and consultants. Stock compensation expense Stock compensation expense represents the cost associated with issuing stock grants to employees and executives as part of their compensation packages. Advertising expense Advertising expense represents a component of operating expenses.
Professional Services Professional services represent the costs associated with engaging external experts and consultants. Stock Compensation Expense Stock compensation expense represents the cost associated with issuing stock grants to employees and executives as part of their compensation packages. Advertising Expense Advertising expense represents a component of operating expenses.
Net gain/(loss) on foreign exchange operations For the fiscal year ended March 31, 2023, we realized a net gain on foreign exchange operations of $52.2 million compared to a net gain of $3.8 million for the fiscal year ended March 31, 2022.
For the fiscal year ended March 31, 2023, we realized a net gain on foreign exchange operations of $52.2 million compared to a net gain of $3.8 million for the fiscal year ended March 31, 2022.
Deferred tax assets and liabilities are measured using enacted tax rates applicable to the differences that are expected to affect taxable income. We periodically evaluate the likelihood of tax assessments based on current and prior years' examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits are established in accordance with the relevant accounting guidance.
Deferred tax assets and liabilities are measured using enacted tax rates applicable to the differences that are expected to affect taxable income. We periodically evaluate and establish the likelihood of tax assessments based on current and prior years' examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits in accordance with the relevant accounting guidance.
For additional information regarding these risks and uncertainties, see the disclosure under the heading "Risk Factors" in Part I Item 1A of this annual report. This discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources for fiscal 2023, 2022 and 2021.
For additional information regarding these risks and uncertainties, see the disclosure under the heading "Risk Factors" in Part I Item 1A of this annual report. This discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources for fiscal 2024, 2023 and 2022.
We maintain a majority of our tangible assets in cash and securities that are readily convertible to cash, including governmental and quasi-governmental debt and highly liquid corporate equities and debt. Our financial instruments and other inventory positions are stated at fair value and should generally be readily marketable in most market conditions.
We maintain a majority of our tangible assets in cash and securities that are readily convertible to cash, including governmental and quasi-governmental debt and highly liquid corporate equities and debt. Our financial instruments and other asset positions are stated at fair value and should generally be readily marketable in most market conditions.
Foreign Currency Translation Adjustments, Net of Tax The functional currencies of our operating subsidiaries are the Kazakhstan tenge, the euro, the U.S. dollar, the Ukrainian hryvnia, the Uzbekistan som, Kyrgyzstani som, the Azerbaijani manat, the Armenian dram, the British pound sterling and the United Arab Emirates dirham. Our reporting currency is the U.S. dollar. Pursuant to U.S.
Foreign Currency Translation Adjustments, Net of Tax The functional currencies of our operating subsidiaries are the Kazakhstan tenge, the euro, the U.S. dollar, the Uzbekistan som, Kyrgyzstani som, the Azerbaijani manat, the Armenian dram, the British pound sterling and the United Arab Emirates dirham. Our reporting currency is the U.S. dollar. Pursuant to U.S.
Inclusion of insurance companies under the pooling of interest method due to being under common control As of May 17, 2022, the Company's financials include the acquisition of two insurance companies in Kazakhstan: Freedom Life, a life insurance company, and Freedom Insurance, a direct insurance carrier excluding life, health, and medical coverage.
Inclusion of insurance companies under the pooling of interest method due to being under common control As of May 17, 2022, the Company's financials included the acquisition of two insurance companies in Kazakhstan: Freedom Life, a life insurance company, and Freedom Insurance, a direct insurance carrier excluding life, health, and medical coverage.
Our transactions with FST Belize are performed in the ordinary course of our brokerage and banking businesses and such transactions are made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with similarly situated unaffiliated third parties.
Our transactions with FST Belize were performed in the ordinary course of our brokerage and banking businesses and such transactions were made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with similarly situated unaffiliated third parties.
Other than the tariff rates stipulated in the Variation Agreement dated February 25, 2020 entered into between Freedom EU and FST Belize, including the General Terms and Conditions of Business, which sets out the specific terms and conditions of the relationship between Freedom EU and FST Belize, there are no other contractual agreements or other implicit arrangements between the two parties that provide FRHC the power to control the operations of FST Belize.
Other than the tariff rates stipulated in the Variation Agreement dated February 25, 2020 entered into between Freedom EU and FST Belize, including the General Terms and Conditions of Business, which sets out the specific terms and conditions of the 86 Table of Contents relationship between Freedom EU and FST Belize, there are no other contractual agreements or other implicit arrangements between the two parties that provide FRHC the power to control the operations of FST Belize.
For additional information regarding our transactions with FST Belize, see Note 25 " Related Party Transactions " in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.
For additional information regarding our transactions with FST Belize, see Note 24 "Related Party Transactions " in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.
The increase was primarily attributable to a $17.2 million or 128%, increase in other insurance expenses, which are mainly represented by redemption amounts under the pension annuity upon termination of the contract, a $9.3 million, or 82%, increase in expenses for claims for the year ended March 31, 2023, and a $570 thousand, or 59% increase in claims paid, reinsurers share as compared to the year ended March 31, 2022, in each case due to the expansion of our insurance operations between the two periods.
The increase was primarily attributable to a $17.2 million or 128%, increase in other insurance expenses, which are mainly represented by redemption amounts under the pension annuity upon termination of the contract, a $9.3 million, or 82%, increase in expenses for claims for the year ended March 31, 2023, and a $0.6 million, or 59% increase in claims paid, reinsurers share as compared to the year ended March 31, 2022, in each case due to the expansion of our insurance operations between the two periods.
In our acquisitions, we have also recognized goodwill at the amount by which the purchase price paid exceeds the fair value of the net assets acquired. Our ongoing accounting for goodwill and the tangible and intangible assets acquired requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment.
In our acquisitions, we have also recognized goodwill at the amount by which the purchase price paid exceeds the fair value of the net assets acquired. 85 Table of Contents Our ongoing accounting for goodwill and the tangible and intangible assets acquired requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment.
Turlov and was not acquired by our company as part of the reverse acquisition transaction .
Turlov and was not acquired by our company as part of our reverse acquisition transaction.
The two companies are under common control with the Company since the dates when they were acquired by Timur Turlov. The financial results, operating performance, and liquidity discussed herein explicitly include two insurance companies abovementioned and prior periods have been recasted accordingly.
The two companies are under common control with the Company since the dates when they were acquired by Timur Turlov. The financial results, operating performance, and liquidity discussed herein explicitly include two insurance companies above-mentioned and prior periods have been recasted accordingly.
The Russian government has issued countersanctions as a defensive measure targeted at "unfriendly states" which include the U.S. and most countries that have imposed sanctions on Russia, as well as imposed restrictions on currency transactions of its own citizens.
The Russian government has issued countersanctions as a defensive measure targeted at "unfriendly states" which include the United States and most countries that have imposed sanctions on Russia, as well as imposed restrictions on currency transactions of its own citizens.
Our loans issued increased by $733.8 million or 794%, from $92.4 million as of March 31, 2022 to $826.3 million as of March 31, 2023.
Our loans to customers increased by $733.8 million, or 794%, from $92.4 million as of March 31, 2022 to $826.3 million as of March 31, 2023.
Consolidation of Freedom Securities Trading Inc . We have assessed whether we should consolidate FST Belize under the variable interest entity (“VIE”) accounting method or the voting interest method ("VOE") . In July 2014, prior to our reverse acquisition transaction, Timur Turlov founded FST Belize, a Belize-based broker dealer. FST Belize is solely owned by Mr.
Consolidation of FST Belize We have assessed whether we should consolidate FST Belize under the variable interest entity (“VIE”) accounting method or the voting interest method ("VOE"). In July 2014, prior to our reverse acquisition transaction, Timur Turlov founded FST Belize, a Belize-based broker dealer. FST Belize is solely owned by Mr.
Insurance Underwriting Income Life insurance premiums are recognized as revenue when due; accident and health insurance premiums are recognized as revenue over the premium paying period and property; and casualty insurance premiums are recognized as revenue over the period of the contract in proportion to the amount of insurance protection provided.
Insurance Underwriting Income 63 Table of Contents Life insurance premiums are recognized as revenue when due; accident and health insurance premiums are recognized as revenue over the premium paying period and property; and casualty insurance premiums are recognized as revenue over the period of the contract in proportion to the amount of insurance protection provided.
Deferred acquisition costs (“DAC”) for traditional life insurance and long-duration health insurance are amortized over the estimated 63 Table of Contents premium-paying period of the related policies. DAC for property insurance, accident insurance and health insurance is amortized over the effective period of the related insurance policies.
Deferred acquisition costs (“DAC”) for traditional life insurance and long-duration health insurance are amortized over the estimated premium-paying period of the related policies. DAC for property insurance, accident insurance and health insurance is amortized over the effective period of the related insurance policies.
Interest income on trading securities consists of interest earned from investments in debt securities and dividends earned on equity securities held in our proprietary trading account. Net Gain/(Loss) on Trading Securities Net gain/(loss) on trading securities reflects the change in value of the securities held in our proprietary trading portfolio during the relevant period.
Interest income on trading securities consists of interest earned from investments in debt securities held in our proprietary trading account. Net Gain/(Loss) on Trading Securities Net gain/(loss) on trading securities reflects the change in value of the securities held in our proprietary trading portfolio during the relevant period.
Despite decrease in our net income before income tax by $127.8 million, as a result of the increase in our effective tax rate, our income tax expense increased by $4.2 million for fiscal 2023.
Despite decrease in our 77 Table of Contents net income before income tax by $127.8 million, as a result of the increase in our effective tax rate, our income tax expense increased by $4.2 million for fiscal 2023.
Income taxes We are subject to income taxes in both the United States and numerous non-U.S. jurisdictions. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. Significant judgement is required in determining the provision for income tax.
Income taxes We are subject to income taxes in both the United States and numerous foreign jurisdictions. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. Significant judgement is required in determining the provision for income tax.
There are many transactions and 79 Table of Contents calculations for which the ultimate tax determination is uncertain. As a result, actual future tax consequences relating to uncertain tax positions may be materially different than our determinations or estimates.
There are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, actual future tax consequences relating to uncertain tax positions may be materially different than our determinations or estimates.
In addition, in fiscal 2023 we accrued a one-off provision expense for restricted brokerage customers' cash, cash and cash equivalents and loans issued which was held with a Ukrainian bank due to the Russia-Ukraine conflict.
Additionally, in fiscal 2023, we accrued a one-off provision expense for restricted brokerage customers' cash, cash equivalents, and loans issued, which were held with a Ukrainian bank due to the Russia-Ukraine conflict.
Our processes and accounting policies for evaluating impairments are further described in Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements contained in Part II Item 8 of our annual report. As of March 31, 2023, the Company had goodwill of $14.2 million.
Our processes and accounting policies for evaluating impairments are further described in Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements contained in Part II Item 8 of our annual report. As of March 31, 2024, the Company had goodwill of $52.6 million.
Our business has grown rapidly in recent years. We are pursuing a strategy to become a leader in the financial services industry, serving individuals and institutions desiring enhanced market access to international capital markets using state of the art technology platforms for their brokerage and banking needs. Our principal executive office is in Almaty, Kazakhstan.
We are pursuing a strategy to become a leader in the financial services industry, serving individuals and institutions desiring enhanced market access to international capital markets using state of the art technology platforms for their brokerage and banking needs. Our principal executive office is in Almaty, Kazakhstan.
In response to the Russia-Ukraine conflict, numerous governments, including those of the U.S., the UE and the United Kingdom have imposed an extensive range of additional economic sanctions on Russia, certain financial institutions, business enterprises, and key persons in Russia or deemed to be enabling the Russia-Ukraine conflict.
In response to the Russia-Ukraine conflict, numerous governments, including those of the United States, the EU and the United Kingdom have imposed an extensive range of additional economic sanctions on Russia, certain financial institutions, business enterprises, and key persons in Russia or deemed to be enabling the Russia-Ukraine conflict.
Retail brokerage service fee and commission income as a percentage of our total fee and commission income was 88% , 95% and 95% in the fiscal years ended March 31, 2023, 2022 and 2021, respectively. 62 Table of Contents Interest Income We earn interest income from trading securities, margin lending, reverse repurchase transactions, and loans to customers.
Retail brokerage service fee and commission income as a percentage of our total fee and commission income was 76% , 88% and 95% in the fiscal years ended March 31, 2024, 2023 and 2022, respectively. Interest Income We earn interest income from trading securities, margin lending, reverse repurchase transactions, and loans to customers.
It includes liquid assets possessed after deducting securities repurchase agreement obligations. As at March 31, 2023 and 2022, we had total liabilities of $4.3 billion and $2.7 billion, respectively, including customer liabilities of $1.9 billion and $765.6 million, respectively.
It includes liquid assets possessed after deducting securities repurchase agreement obligations. As at March 31, 2024 and 2023, we had total liabilities of $7.1 billion and $4.3 billion, respectively, including customer liabilities of $2.3 billion and $1.9 billion, respectively.
There were increases in fee and commission expense from bank services of $3.8 million and agency fees expenses of $11.1 million, which were offset by a decrease in brokerage commissions expense by $34.2 million due to using a new prime broker in fiscal 2023, as a result of which we had a different composition of order flow transactions, which were charged at lower rates than in fiscal 2022.
There were increases in fee and commission expense from bank services of $3.8 million and agency fees expenses of $11.1 million, which were offset by a decrease in brokerage commissions expense by $34.2 million due to our change to a new prime broker in Europe during fiscal 2023, as a result of which, for part of fiscal 2023, we had a different composition of order flow transactions, which were charged at lower rates than we paid in fiscal 2022.
We have a presence in Kazakhstan, Ukraine, Uzbekistan, Kyrgyzstan, Cyprus, Germany, the United Kingdom, Greece, Spain, France, Poland, the United States, Turkey, Armenia, Azerbaijan, and the United Arab Emirates. We divested our Russian subsidiaries in February 2023. Our subsidiaries in the United States include an SEC- and FINRA-registered broker dealer.
We have a presence in Kazakhstan, Uzbekistan, Kyrgyzstan, Cyprus, Germany, the United Kingdom, Greece, Spain, France, Poland, Austria, Bulgaria, Italy, Netherlands, Belgium, the United States, Turkey, Armenia, Azerbaijan, and the United Arab Emirates. We divested our Russian subsidiaries in February 2023. Our subsidiaries in the United States include an SEC- and FINRA-registered broker dealer.
Fee and commission income as a percentage of our total revenue was 41%, 49% and 62% in the fiscal years ended March 31, 2023, 2022 and 2021, respectively.
Fee and commission income as a percentage of our total revenue was 27%, 41% and 49% in the fiscal years ended , March 31, 2024, 2023 and 2022 respectively.
Foreign currency translation adjustments, net of tax Due to the appreciation of the Russian ruble by 5% against the U.S. dollar and appreciation of the Kazakhstan tenge by 4.4% against the U.S. dollar at fiscal 2023 year-end as compared to fiscal 2022 year-end, we realized a foreign currency translation loss of $5.2 million for fiscal year 2023, as compared to a foreign currency translation loss of $20.6 million for fiscal year 2022.
Due to the appreciation of the Russian ruble by 5% against the U.S. dollar and appreciation of the Kazakhstan tenge by 4.4% against the U.S. dollar at March 31, 2023 as compared to March 31, 2022, we realized a foreign currency translation loss of $5.2 million for fiscal year 2023, as compared to a foreign currency translation loss of $20.6 million for fiscal year 2022.
Other than the Ukrainian sanctions described above, none of FRHC, nor our group companies, nor any of our current directors or senior management, is a target of sanctions imposed by the United States, the European Union or the United Kingdom.
Other than the Ukrainian sanctions described above, none of FRHC, nor any of our group companies, nor any of our current directors or senior management, is a target of sanctions imposed by the United States, the EU or the UK.
We recognize deferred tax liabilities and assets based on the difference between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse.
We recognize deferred tax liabilities and assets based on the difference between the Consolidated Balance Sheet and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse.
The increase in interest income was primarily attributable to an increase in interest income from trading securities, which was the result of an increase in the total size of our trading portfolio between the two fiscal years and an increase in the amount of bonds we held as a percentage of our total trading portfolio between the two fiscal years.
The increase in interest income was primarily attributable to an increase in interest income from trading securities of $100.0 million, or 128%, which was in turn the result of an increase in the total size of our trading portfolio between the two fiscal years and an increase in the amount of bonds we held as a percentage of our total trading portfolio between the two fiscal years.
Fee and Commission Income Fee and commission income consists principally of brokerage fees from customer trading, related banking services, and fees for underwriting, market making and consulting services. A substantial portion of our revenue is derived from commissions from customers through accounts with transaction-based pricing.
Fee and Commission Income Fee and commission income consists principally of fees and commissions from brokerage customer trading, banking services, payment processing services and underwriting and market making activities. A substantial portion of our revenue is derived from commissions from customers through accounts with transaction-based pricing.
Market and Economic Conditions Performance in the financial services industry is heavily influenced by the overall strength of economic conditions and financial market activity, which generally have a direct and material impact on our results of operations and financial condition.
Each of these factors is discussed in more detail below. Market and Economic Conditions Performance in the financial services industry is heavily influenced by the overall strength of economic conditions and financial market activity, which generally have a direct and material impact on our results of operations and financial condition.
The increase in interest expense was primarily attributable to a $100.4 million, or 172%, increase in interest expense on short-term financing through securities repurchase agreements due to an increase in the volume of such financing conducted by us in fiscal 2023, and a $24 million, or 147%, increase in interest on customer deposits.
The increase in interest expense was primarily attributable to a $100.4 million, or 172%, increase in interest expense on short-term financing through securities repurchase agreements due to an increase in the volume of such financing we conducted in fiscal 2023.
Provision for impairment losses We recognized provision for impairment losses in the amount of $29.1 million for fiscal 2023 , as compared to provision for impairment losses of $2.5 million for fiscal 2022. The increase was primarily attributable to growth of the loan portfolio of Freedom Bank KZ, as the majority of provisions is accrued on loan products.
For fiscal 2023, we recognized an allowance for credit losses in the amount of $29.1 million, compared to an allowance for credit losses of $2.5 million for fiscal 2022. The increase was primarily attributable to the growth of the loan portfolio of Freedom Bank KZ, as the majority of allowances are accrued on loan products.
We use repurchase arrangements, among other things, to finance our inventory positions. As of March 31, 2023, $1.5 billion, or 63% of the trading securities held in our proprietary trading account were subject to securities repurchase obligations compared to $834.8 million, or 72% as of March 31, 2022.
We use repurchase arrangements, among other things, to finance our liquidity positions. As of March 31, 2024, $2.8 billion, or 75% of the trading securities held in our proprietary trading account were subject to securities repurchase obligations compared to $1.5 billion, or 63% as of March 31, 2023.
The acquisition method requires us to make significant estimates and assumptions, especially at the acquisition date as we allocate the purchase price to the estimated fair values of acquired tangible and intangible assets and the liabilities assumed.
Goodwill We have accounted for our acquisitions using the acquisition method of accounting. The acquisition method requires us to make significant estimates and assumptions, especially at the acquisition date as we allocate the purchase price to the estimated fair values of acquired tangible and intangible assets and the liabilities assumed.
After careful consideration of the needs of our employees, customers and shareholders and the best interests of our company, shortly after the onset of the Russia-Ukraine conflict we decided to divest our Russian subsidiaries, Freedom RU and Freedom Bank RU.
After careful consideration of the needs of our employees, customers and shareholders and the best interests of our company, shortly after the onset of the Russia-Ukraine conflict we decided to divest our Russian subsidiaries, Freedom RU and Freedom Bank RU. In February 2023, we divested our Russian subsidiaries, including all of their offices and employees.
Net income As a result of the foregoing factors, for fiscal 2023 we had net income of $205.6 million as compared to $220.9 million for fiscal 2022, a decrease of 7%, and for fiscal 2022 we had net income of $220.9 million as compared to $150.3 million for fiscal 2021, an increase of 47%.
Net income As a result of the foregoing factors, for fiscal 2024 we had net income of $375.0 million as compared to $205.6 million for fiscal 2023, an increase of 82%, and for fiscal 2023 we had net income of $205.6 million as compared to $220.9 million for fiscal 2022, a decrease of 7%.
At March 31, 2023, the aggregate net capital requirements of our subsidiaries was $61.6 million. Each of our subsidiaries that is subject to net capital or capital adequacy requirements exceeded the minimum required amount at March 31, 2023.
Each of our subsidiaries that is subject to net capital or capital adequacy requirements exceeded the minimum required amount at March 31, 2024.
Net loss on derivatives For the fiscal year ended March 31, 2023, we realized net loss on derivatives of $64.8 million compared to a realized net gain of $946 thousand and $86 thousand for the fiscal years ended March 31, 2022 and 2021.
For the fiscal year ended March 31, 2023, we realized a net loss on derivatives of $64.8 million compared to a realized net gain of $0.9 million for the fiscal year ended March 31, 2022.
As of March 31, 2022, our Russian subsidiaries had 43 offices and branches and 1,717 employees. These offices and employees were divested by us as of February 2023. Despite the divestiture of these subsidiaries, the scale of our overall business has increased from fiscal 2022 to fiscal 2023.
As of March 31, 2022, our Russian subsidiaries had 43 offices and branches and 1,717 employees. Despite the divestiture of these subsidiaries, the scale of our overall business increased from fiscal 2022 to fiscal 2023. As of March 31, 2022, our total number of employees was 1,704 and our total number of offices was 66.
Acquisitions and divestitures may have a material effect on our business and financial results. For additional information see Note 1 " Description of Business " and Note 32 " Segment Information " in the notes to our consolidated financial statements contained in Part II Item 8 and " Business " in Part I Item 1 of this annual report.
For additional information see Note 1 " Description of Business " and Note 30 " Segment Information " in the notes to our consolidated financial statements contained in Part II Item 8 and " Business " in Part I Item 1 of this annual report.
Related Party Transactions with FST Belize During the fiscal years ended March 31, 2023, 2022 and 2021, the Company engaged in various related party transactions, a substantial amount of which were conducted with Freedom Securities Trading Inc. (formerly known as FFIN Brokerage Services, Inc.) (“FST Belize”), a corporation registered in and licensed as a broker dealer in Belize.
Related Party Transactions During the fiscal years ended March 31, 2024, 2023 and 2022, the Company engaged in various related party transactions, a substantial amount of which were conducted with FST Belize, a corporation registered in and licensed as a broker dealer in Belize.
Even before the Russia-Ukraine conflict began in February 2022, our clients were required to conform to strict anti-money laundering regulations and to undergo regular sanctions screening to assure us that they were subject to U.S., EU or UK sanctions that would restrict our ability to do business with them or require us to take regulatory compliance actions in response to their activities.
See "Regulation" in "Business" in Part I Item 1 of this annual report. 59 Table of Contents Even before the Russia-Ukraine conflict began in February 2022, our clients were required to conform to strict anti-money laundering regulations and to undergo ongoing sanctions screening to assure us that they were not subject to United States, EU or UK sanctions that would restrict our ability to do business with them or require us to take regulatory compliance actions in response to their activities.
By comparison, at March 31, 2022, we had cash and cash equivalents of $225.5 million, of which $19.9 million, or 9%, were subject to reverse repurchase agreements.
By comparison, at March 31, 2023, we had cash and cash equivalents of $581.4 million, of which $29.8 million, or 5%, were subject to reverse repurchase agreements.
Historically, a large portion of our trading volume has been derived from individuals and institutions in Russia, through accounts at our Russian subsidiaries and through non-Russian accounts, including indirectly through accounts held with FST Belize.
Historically, a large portion of our revenues was derived from individuals and institutions in Russia, through accounts at our Russian subsidiaries, through accounts at our non-Russian subsidiaries, and indirectly through accounts held by Russian customers of FST Belize.
The increase was attributable to consulting services provided in connection with the acquisition of new companies and general expansion of our business and operations. In fiscal 2022, we had professional services expense of $12.7 million, an increase of $8.3 million or 186%, compared to professional services expense of $4.4 million for fiscal 2021.
For fiscal 2023, our professional services expense was $17.0 million, representing an increase by $4.3 million or 34% compared to $12.7 million for fiscal 2022. The increase was mainly attributable to increased expenses for consulting services provided in connection with the acquisition of new companies and the general development and expansion of our business and operations.
In 2021 Timur Turlov was on this list and still had Russian citizenship (in the appendix to the presidential decree there is a reference to Timur Turlov’s Russian citizenship. We note that, prior to June 2022, Timur Turlov was a Russian citizen. As from June 2022, Mr. Turlov renounced his Russian citizenship and is now a citizen of Kazakhstan.
We note that all persons on the Russian list of Forbes entrepreneurs for 2021 were included. In 2021 Mr. Turlov was on this Forbes list and still had Russian citizenship (in the appendix to the presidential decree there is a reference to Mr. Turlov’s Russian citizenship. We note that, prior to June 2022, Mr. Turlov was a Russian citizen.
As the result, management has continued to assess for any modifications or reconsideration events. 80 Table of Contents Recent Accounting Pronouncements For details of applicable new accounting standards, see " Recent accounting pronouncements " in Note 2 " Summary of Significant Accounting Policies " in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.
RECENT ACCOUNTING PRONOUNCEMENTS For details of applicable new accounting standards, see " Recent accounting pronouncements " in Note 2 " Summary of Significant Accounting Policies " in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.
The following sets out certain information regarding our assets as of the dates presented: As of March 31, 2023 2022 (Recasted) Cash and cash equivalents (1) $ 581,417 $ 225,464 Trading securities $ 2,412,556 $ 1,158,377 Total assets $ 5,084,558 $ 3,230,347 Net liquid assets (2) $ 1,852,886 $ 691,276 (1) Of the $581.4 million in cash and cash equivalents we held at March 31, 2023, $29.8 million, or approximately 5%, were subject to reverse repurchase agreements.
The following sets out certain information regarding our assets as of the dates presented: As of March 31, 2024 2023 Cash and cash equivalents (1) $ 545,084 $ 581,417 Trading securities $ 3,688,620 $ 2,412,556 Total assets $ 8,301,930 $ 5,084,558 Net liquid assets (2) $ 3,137,383 $ 1,852,886 (1) Of the $545.1 million in cash and cash equivalents we held at March 31, 2024, $135.0 million, or approximately 25%, were subject to reverse repurchase agreements.
The key factors affecting our business and the results of operations include, in particular: the effects of the Russia-Ukraine conflict, market and economic conditions, the growth of retail brokerage activity in our key markets, acquisitions and divestitures, our transactions with our affiliate FST Belize, governmental policies and the impact of Covid-19.
The key factors affecting our business and the results of operations include, in particular: market and economic conditions, the growth of retail brokerage activity in our key markets, the effects of the Russia-Ukraine conflict, acquisitions and divestitures, the entry into new business areas and markets, our transactions with related parties, our arrangements with market maker customers and governmental policies.
Our operations that require the intensive use of capital would be limited to the extent necessary to meet all our regulatory requirements. 78 Table of Contents Over the past several years, we have pursued an aggressive growth strategy both through acquisitions and organic growth efforts.
Our subsidiaries are also subject to various other rules and regulations, including liquidity and capital 84 Table of Contents adequacy ratios. Our operations that require the intensive use of capital are limited to the extent necessary to meet our regulatory requirements. Over the past several years, we have pursued an aggressive growth strategy both through acquisitions and organic growth efforts.
For fiscal 2023, we sold securities for a realized net gain of $37.2 million. This realized gain was offset by a realized net loss of $73.4 million, which was attributable to shares in the SPB Exchange that we sold in fiscal 2023, resulting in realized net loss of $36.2 million.
This realized gain was offset by a realized net loss of $73.4 million, which was attributable to shares in the SPB Exchange that we sold in fiscal 2023, resulting in realized net loss of $36.2 million. Similarly, securities positions we continued to hold as of March 31, 2023, had appreciated by $56.5 million as compared to March 31, 2022.
We recognized income attributable to non-controlling interest of $446.0 thousand for fiscal 2023 as compared to a net loss attributable to non-controlling interest of $6.6 million for fiscal 2022.
Net loss attributable to non-controlling interest was $0.6 million for fiscal 2024, as compared to net income of $0.4 million for fiscal 2023, and net loss of $6.6 million for fiscal 2022.
The increases were offset in part by a $4.2 million, or 14%, decrease in expenses for insurance reserve between the two fiscal years. 70 Table of Contents For fiscal 2022, we had a $2.0 million, or 4%, increase in insurance claims incurred, net of reinsurance, as compared to the fiscal year ended March 31, 2021.
The increases were offset in part by a $0.6 million, or 150%, decrease in in claims paid, reinsurers share between the two fiscal years. For fiscal 2023, we had a $22.9 million, or 42%, increase in insurance claims incurred, net of reinsurance, as compared to the fiscal year ended March 31, 2022.
Summary of Results of Operations The key highlights of our consolidated results for fiscal 2023 were as follows: • We had total revenues, net of $795.7 million for fiscal 2023, as compared to $689.8 million and $346.9 million for fiscal 2022 and fiscal 2021, respectively.
Summary of Results of Operations The highlights of our consolidated results for fiscal 2024 are as follows: • We had total revenues, net of $1,635.1 million for fiscal 2024, as compared to $795.7 million for fiscal 2023, respectively.
Payroll and bonuses In the fiscal year 2023, the Company had payroll and bonuses expense of $81.8 million, representing an increase of $35.5 million or 77% compared to payroll and bonuses expense of $46.3 million in fiscal 2022.
The increase was attributable to the expansion of our operations generally and in particular the expansion of our workforce through hiring and acquisitions. In fiscal 2023, we had payroll and bonuses expense of $81.8 million, representing an increase of $35.5 million or 77% compared to payroll and bonuses expense of $46.3 million in fiscal 2022.
The economies of Russia, Ukraine and the surrounding region, the global economy generally and the Company specifically have been adversely affected by the conflict.
The war is ongoing, and it is difficult to predict how long it will last. The economies of Russia, Ukraine and the surrounding region, the global economy generally and the Company specifically have been adversely affected by the conflict.
The net cash used in operating activities in fiscal 2023 was primarily attributable to net cash outflows attributable to increases in trading securities and increases in margin lending, brokerage and other receivables, which increases were offset in part by an increase in brokerage customer liabilities over that period, which resulted from the increase in the number of customer accounts at our Freedom Global subsidiary.
Net cash used in operating activities in each of fiscal 2024 and fiscal 2023 was attributable to net cash outflows from increases in trading securities and increases in margin lending, brokerage and other receivables, which increases were offset in part primarily by an increase margin lending and trade payables.
Year ended March 31, 2023 2022 (Recasted) 2021 (Recasted) (as a % of total fee and commission income) Brokerage services 88 % 95 % 95 % Bank services 5 % 2 % — % Underwriting and market-making services 4 % 2 % 3 % Other fee and commission income 3 % 1 % 2 % Total fee and commission income 100 % 100 % 100 % For fiscal 2023 fee and commission income was $327.2 million, a decrease of $8.0 million, or 2%, as compared to fee and commission income of $335.2 million for fiscal 2022.
Year ended March 31, 2024 2023 2022 (Recasted) (as a % of total fee and commission income) Brokerage services 76 % 88 % 95 % Commission income from payment processing 9 % 2 % — % Bank services 6 % 5 % 2 % Underwriting and market-making services 4 % 4 % 2 % Other fee and commission income 5 % 1 % 1 % Total fee and commission income 100 % 100 % 100 % Fee and commission income for the fiscal year ended March 31, 2024, amounted to $440.3 million, reflecting an increase of $113.1 million or 35% compared to $327.2 million in the fiscal year ended March 31, 2023.
As a result, such subsidiaries may be restricted in their ability to transfer cash between different jurisdictions and to FRHC. Additionally, transfers of cash between international jurisdictions may have adverse tax consequences that could discourage such transfers. These minimum net capital and capital adequacy requirements range from approximately $2 thousand to $22 million and fluctuate depending on various factors.
As a result, such subsidiaries may be restricted in their ability to transfer cash between different jurisdictions and to FRHC. Additionally, transfers of cash between international jurisdictions may have adverse tax consequences that could discourage such transfers.
The increase in the scale of our operations between the two fiscal years, despite the divestment of our Russian subsidiaries, is attributable to our growth during fiscal 2023 through several acquisitions.
As of March 31, 2023, the number of employees increased to 3,689 and the number of our offices increased to 126. The increase in the scale of our operations between the two fiscal years, despite the divestment of our Russian subsidiaries, was mainly attributable to our growth during fiscal 2023 through several acquisitions.
The operating results for any period are not necessarily indicative of the results that may be expected for any future period. Key Factors Affecting Our Results of Operations Our operations have been, and may continue to be, affected by certain key factors as well as certain historical events and actions.
Key Factors Affecting Our Results of Operations Our operations have been, and may continue to be, affected by certain key factors as well as certain historical events.
The change was primarily attributable to our subsidiary, Freedom Bank KZ, which realized net loss of $65 million for the fiscal year ended March 31, 2023. Freedom Bank KZ entered into currency swaps mainly through KASE and MOEX to diversify its funding sources.
The change was primarily attributable to our subsidiary, Freedom Bank KZ, which realized net loss of $65.3 million for the fiscal year ended March 31, 2023 in connection with currency swaps entered into to diversify its funding sources. 71 Table of Contents Expense The following table sets forth information regarding our total expense for the periods presented.
Following are the accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results. Allowance for accounts receivable Allowance for accounts receivable is a valuation allowance for probable incurred credit losses.
Following are the accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results. Allowance for credit losses The Company has recently adopted a new accounting standard, ASC 326 - Current Expected Credit Losses (CECL), effective April 1, 2023.
Net Cash Flows From Financing Activities Net cash from financing activities for fiscal year 2023, consisted principally of bank customer deposits in the amount of $1.0 billion due to the growth of banking activity in the Central Asia and Eastern Europe segment, proceeds from securities repurchase agreement obligations in the amount of $637.4 million, mortgage loans sold to JSC Kazakhstan Sustainability Fund as the Program Operator, net of repurchase, under the state mortgage program "7-20-25" in the amount 77 Table of Contents of $420.9 million, proceeds from the issuance, net of repurchase, of debt securities in the amount of $22.6 million, and proceeds from capital contributions of $677.0 thousand.
Net cash from financing activities for fiscal 2024, consisted principally of proceeds from securities repurchase agreement obligations in the amount of $1,191.2 million, bank customer deposits received in the amount of $217.6 million due to the growth of banking activity, mortgage loans sold to JSC Kazakhstan Sustainability Fund as the Program Operator, net of repurchase, under the state mortgage program "7-20-25" in the amount of $60.2 million, proceeds from the issuance, net of repurchase, of debt securities in the amount of $206.3 million and proceeds from loans received of $2.5 million.
Year ended March 31, 2023 2022 (Recasted) 2021 (Recasted) Fee and commission expense 12 % 26 % 36 % Interest expense 37 % 24 % 12 % Insurance claims incurred, net of reinsurance 14 % 17 % 27 % Payroll and bonuses 15 % 14 % 12 % Professional services 3 % 4 % 2 % Stock compensation expense 2 % 2 % — % Advertising expense 3 % 4 % 4 % 69 Table of Contents General and administrative expense 11 % 7 % 6 % Provision for impairment losses 5 % 1 % 1 % Other (income)/expense, net (1) % 1 % 1 % Total expense 100 % 100 % 100 % For fiscal 2023 we incurred total expense of $559.8 million, a 72% increase as compared to total expense of $326.1 million for fiscal 2022.
Year ended March 31, 2024 2023 2022 (Recasted) Fee and commission expense 12 % 12 % 26 % Interest expense 42 % 37 % 24 % Insurance claims incurred, net of reinsurance 12 % 14 % 17 % Payroll and bonuses 15 % 15 % 14 % Professional services 3 % 3 % 4 % Stock compensation expense 2 % 2 % 2 % Advertising expense 3 % 2 % 4 % General and administrative expense 10 % 11 % 7 % Allowance for expected credit losses 2 % 5 % 1 % Other (income)/expense, net (1) % (1) % 1 % Total expense 100 % 100 % 100 % 72 Table of Contents Fee and commission expense The following table sets forth information regarding our fee and commission expense for the periods presented.
We have been in continuous negotiations with the presidential administration of Ukraine seeking to have Freedom UA and Mr. Turlov removed from the sanctions list. In addition, we have contributed approximately $11.7 million to humanitarian relief efforts in Ukraine through charitable funds.
As from June 2022, Mr. Turlov renounced his Russian citizenship and is now a citizen of Kazakhstan. We have made a series of efforts seeking to have Freedom UA and Mr. Turlov removed from the sanctions list. In addition, we have contributed approximately $11.7 million to humanitarian relief efforts in Ukraine through charitable funds.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe table below presents the current credit ratings of issuers of securities in our portfolio as of March 31, 2023 and 2022: March 31, 2023 >BB Not rated Total Corporate equity $ 58,511 $ 503 $ 6,727 $ 65,741 Corporate debt 1,167,769 92,279 9,831 1,269,879 Non-U.S. sovereign debt 1,018,255 11,216 386 1,029,857 U.S. sovereign debt 45,022 — — 45,022 Exchange traded notes — — 2,057 2,057 Total $ 2,289,557 $ 103,998 $ 19,001 $ 2,412,556 March 31, 2022 >BB Not rated Total Corporate equity $ 25,480 $ 2,952 $ 43,922 $ 72,354 Corporate debt $ 660,246 $ 50,760 $ 1,128 $ 712,134 Non-U.S. sovereign debt 313,838 45,557 1,175 360,570 U.S. sovereign debt 10,435 — — 10,435 Exchange traded notes — 89 2,795 2,884 Total $ 1,009,999 $ 99,358 $ 49,020 $ 1,158,377 Margin lending receivables risk We extend margin loans to our customers.
Biggest changeThe table below presents the current credit ratings of issuers of securities in our proprietary portfolio as of March 31, 2024 and 2023: March 31, 2024 >BB Not rated Total Non-U.S. sovereign debt $ 2,399,328 $ 9,258 $ 540 $ 2,409,126 Corporate debt 988,374 99,627 20,869 1,108,870 Corporate equity 88,787 855 36,461 126,103 U.S. sovereign debt 43,173 — — 43,173 Exchange traded notes 57 — 1,291 1,348 Total $ 3,519,719 $ 109,740 $ 59,161 $ 3,688,620 March 31, 2023 >BB Not rated Total Corporate debt $ 1,167,769 $ 92,279 $ 9,831 $ 1,269,879 Non-U.S. sovereign debt 1,018,255 11,216 386 1,029,857 Corporate equity 58,511 503 6,727 65,741 U.S. sovereign debt 45,022 — — 45,022 Exchange traded notes — — 2,057 2,057 Total $ 2,289,557 $ 103,998 $ 19,001 $ 2,412,556 88 Table of Contents Margin lending receivables risk We extend margin loans to our customers.
Our credit exposure is to a great extent mitigated by our policy of automatically evaluating each account throughout the trading day and closing out positions automatically for accounts that are found to be under-margined.
Our credit exposure is to a great extent mitigated by our policy of automatically evaluating each account throughout the trading day and closing out positions for accounts that are found to be under-margined.
For more information regarding the financial impact to our operations from the Russia-Ukraine conflict for the fiscal year ended March 31, 2023 please refer to " Russia-Ukraine conflict " section in " Management's Discussion and Analysis of Financial Condition and Results of Operations " in Part II Item 7 and Note 32 " Segment Reporting " in the notes to our consolidated financial statements in Part II Item 8 of this annual report.
For more information regarding the financial impact to our operations from the Russia-Ukraine conflict for the fiscal year ended March 31, 2023 please refer to " Russia-Ukraine Conflict " section in " Management's Discussion and Analysis of Financial Condition and Results of Operations " in Part II Item 7 and Note 30 " Segment Reporting " in the notes to our consolidated financial statements in Part II Item 8 of this annual report.
We must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes. Country Risk The Russia-Ukraine conflict has led to disruptions in financial markets that has negatively impacted the global economy and created significant uncertainty.
We must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes. Geopolitical Risk The Russia-Ukraine conflict has led to disruptions in financial markets that has negatively impacted the global economy and created significant uncertainty.
We are also exposed to credit risk when our customers execute transactions, such as short sales of options and equities that can expose them to risk beyond their invested capital. We expect this kind of exposure to increase with the growth of our overall business.
We are also exposed to credit risk when our customers execute transactions, such as short sales of equities that can expose them to risk beyond their invested capital. We expect this kind of exposure to increase with the growth of our overall business.
Interest Rate Risk Our exposure to changes in interest rates relates primarily to our investment portfolio and outstanding debt. While we are exposed to global interest rate fluctuations, we are most sensitive to fluctuations in interest rates in Kazakhstan. Changes in interest rates in Kazakhstan may have significant effect on the fair value of our securities.
Interest Rate Risk Our exposure to changes in interest rates relates primarily to our investment portfolio and outstanding debt. While we are exposed to global interest rate fluctuations, we are most sensitive to fluctuations in interest rates in Kazakhstan. Changes in interest rates in Kazakhstan may have significant effect on the fair value of securities on our balance sheet.
Operational Risk Operational risk generally refers to the risk of loss, or damage to our reputation, resulting from inadequate or failed operations or external events, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes including cyber security incidents.
Operational Risk Operational risk generally refers to the risk of loss, or damage to our reputation, resulting from inadequate or failed operations or external events, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes including cybersecurity incidents.
To the extent inflation result in rising interest rates and has adverse impacts upon securities markets, it may adversely affect our results of operations and financial condition. 84 Table of Contents
To the extent inflation result in rising interest rates and has adverse impacts upon securities markets, it may adversely affect our results of operations and financial condition. 90 Table of Contents
We attempt to manage the risk of loss inherent in our equity securities portfolio through 81 Table of Contents diversification and by placing limits on individual and total equity instruments we hold. Reports on our equity portfolio are submitted to our management on a regular basis.
We attempt to manage the risk of loss inherent in our equity securities portfolio through diversification and by placing limits on individual and total equity instruments we hold. Reports on our equity portfolio are submitted to our management on a regular basis.
The Russia-Ukraine conflict has resulted in the imposition by many countries of economic sanctions and export controls against certain Russian industries, companies and individuals. In response, 83 Table of Contents Russia has implemented its own countermeasures against countries, businesses and investors deemed "unfriendly".
The Russia-Ukraine conflict has resulted in the imposition by many countries of economic sanctions and export controls against certain Russian industries, companies and individuals. In response, Russia has implemented its own countermeasures against countries, businesses and investors deemed "unfriendly".
The continuation or escalation of the Russia-Ukraine conflict or other hostilities presents heightened risks relating to cyberattacks, supply chain disruptions, higher interest rates and greater frequency and volume of failures to settle securities transactions, as well as increase financial market volatility.
The continuation or escalation of the Russia-Ukraine conflict or other hostilities presents heightened risks relating to cyber attacks, supply chain disruptions, higher interest rates and greater frequency and volume of failures to settle securities transactions, as well as increased financial market volatility.
Legal and regulatory risk includes the risk of non-compliance with applicable legal and regulatory requirements and damage to our reputation as a result of failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities.
Legal and regulatory risk includes the risk of non-compliance with applicable legal and regulatory requirements and damage to our reputation as a result of failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. Legal and compliance risk includes compliance with AML, terrorist financing, anti-corruption and sanctions rules and regulations.
It also includes compliance with AML, terrorist financing, anti-corruption and sanctions rules and regulations. We have established and continue to enhance procedures designed to ensure compliance with applicable statutory and regulatory requirements, such as public company reporting obligations, regulatory net capital and capital adequacy requirements, sales and trading practices, potential conflicts of interest, anti-money laundering, privacy, sanctions and recordkeeping.
We have established and continue to enhance procedures designed to ensure compliance with applicable statutory and regulatory requirements, such as public company reporting obligations, regulatory net capital and capital adequacy requirements, sales and trading practices, potential conflicts of interest, anti-money laundering, privacy, sanctions and recordkeeping.
We may also enter into foreign currency forward, swap and option contracts with financial institutions to mitigate foreign currency exposures associated with certain existing assets and liabilities, firmly committed transactions and forecasted future cash flows.
We may also enter into foreign currency forward, swap and option contracts with financial institutions to mitigate foreign currency exposures associated with certain existing assets and liabilities, firmly committed transactions and forecasted future cash flows. As mentioned before, our main market is Kazakhstan.
As of March 31, 2023, and 2022, our exposure to equity investments at fair value was $65.7 million and $72.4 million, respectively.
As of March 31, 2024, and 2023, our exposure to equity investments at fair value was $126.1 million and $65.7 million, respectively.
For a description of related risks, see the information under the heading " Risks Related to Information Technology and Cyber Security " in " Risk Factors " in Part I Item 1A of this annual report.
For a description of related risks, see the information under the headings "Risks Related to our Business and Operations" and " Risks Related to Information Technology and Cybersecurity " in " Risk Factors " in Part I Item 1A of this annual report.
Our investment policies and strategy are focused on preservation of capital and supporting our liquidity requirements. We typically invest in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investment policies generally require securities to be investment grade and limit the amount of credit exposure to any one issuer.
Our investment policies and strategies are focused on preservation of capital and supporting our liquidity requirements. We typically invest in highly rated securities, with the primary objective of minimizing the potential risk of principal loss.
As of March 31, 2023, we had $361.7 million in margin lending receivables from our customers, a significant portion of which was due from FST Belize. 82 Table of Contents The amount of risk to which we are exposed from the margin lending we extend to our customers and from short sale transactions by our customers is unlimited and not quantifiable as the risk is dependent upon analysis of a potential significant and undeterminable rise or fall in stock prices.
The amount of risk to which we are exposed from the margin lending we extend to our customers and from short sale transactions by our customers is unlimited and not quantifiable as the risk is dependent upon analysis of a potential significant and undeterminable increase or fall in stock prices.
An analysis of the March 31, 2023 and 2022, balance sheets estimates that a decrease of 10% on the equity price would have reduced the value of the equity securities or instrument we held by approximately $6.6 million and $7.2 million, respectively.
Based on an analysis of the March 31, 2024 and 2023 (not including assets held for sale) balance sheets we estimate that a decrease of 10% in the equity price would have reduced the value of the equity securities or instruments we held by approximately $12.6 million and $6.6 million, respectively.
Based on investment positions as of March 31, 2023 and 2022, a hypothetical 100 basis point increase in interest rates across all maturities would have resulted in $80.9 million and $55.2 million incremental decline in the fair market value of the portfolio, respectively. Such losses would only be realized if we sold the investments prior to maturity.
Based on investment positions as of March 31, 2024 and 2023 (not including assets held for sale), a hypothetical 100 basis point increase in interest rates across all maturities would have resulted in $128.9 million and $80.9 million incremental decline in the fair market value of the portfolio, respectively.
Such non-compliance could result in the imposition of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, or loss to reputation that we may suffer as a result of compliance failures. These risks include contractual and commercial risk, such as the risk that a counterparty's performance obligations will be unenforceable.
If we are found to have violated any applicable laws, rules or regulations, this could result in the imposition of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, or loss to reputation that we may suffer as a result of compliance failures.
Credit Risk Credit risk refers to the risk of loss arising when a borrower or counterparty does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through the brokerage services we offer. We incur credit risk in a number of areas, including margin lending.
Credit Risk Credit risk refers to the risk of loss arising when a borrower or counterparty does not meet its financial obligations to us. We are exposed to credit risk through our products and assets, such as loans issued, marginal lending, derivatives, debt securities, reverse repurchase agreements, and trading account assets.
An analysis of our March 31, 2023 and 2022, balance sheets estimates the net impact of a 10% percent adverse change in the value of the U.S. dollar relative to all other currencies, would have resulted in an decrease of net income before income tax in the amount of $88.7 million and increase of $282.0 thousand, respectively.
Because Kazakhstan's economy is highly dependent on oil exports, any significant decrease in oil prices lead to a devaluation of local currency, which can lose up to 17% quarterly (during COVID-19 outbreak) of its value relative to the U.S. dollar. 87 Table of Contents Based on an analysis of our March 31, 2024 and 2023 (not including assets held for sale) balance sheets we estimate that the net impact of a 10% adverse change in the value of the U.S. dollar relative to all other currencies would have resulted in an increase of income before income tax in the amount of $121.5 million and decrease of $88.7 million, respectively.
A hypothetical 100 basis point decrease in interest rates across all maturities would have resulted in a $87.0 million and $61.0 million incremental rise in the fair market value of the portfolio, respectively. Foreign Currency Exchange Risk We have a presence in Kazakhstan, Cyprus, Ukraine, Uzbekistan, Germany, Kyrgyzstan, the United States, Azerbaijan, Armenia and the United Kingdom.
Such losses would only be realized if we sold the investments prior to maturity. A hypothetical 100 basis point decrease in interest rates across all maturities would have resulted in a $138.3 million and $87.0 million incremental increase in the fair market value of the portfolio (not including assets held for sale), respectively.
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We also incur credit risk in connection with the securities in our proprietary portfolio.
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Our investment policies generally require securities to be investment grade and limit the amount of credit exposure to any one issuer with the exception of government and quasi-government entities.
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Foreign Currency Exchange Risk We have a presence in Kazakhstan, Uzbekistan, Kyrgyzstan, Cyprus, Germany, the United Kingdom, Greece, Spain, France, Poland, Austria, Bulgaria, Belgium, Italy, Netherlands, the United States, Turkey, Armenia, Azerbaijan, and the United Arab Emirates.
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As of March 31, 2024, we had $1,635.4 million in margin lending receivables from our customers, none of which was due from FST Belize.
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It also includes contractual and commercial risk, such as the risk that a counterparty's performance obligations will be unenforceable. From time to time, we have been, and in the future may be, subject to investigations, audits, inspections and subpoenas, as well as regulatory proceedings and fines and penalties brought by regulators.
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We are subject to regulation 89 Table of Contents from numerous regulators, which include, but are not limited to, the AFSA, the ARDFM, CySEC, OFAC and the SEC. We have received various inquiries and formal requests for information on various matters from certain regulators, with which we have cooperated and will continue to do so.

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