UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________
FORM 10-Q

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 2020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________to________
Commission File Number: 0-10200
________________________________________ 
seic-20200930_g1.jpg
________________________________________
SEI INVESTMENTS COMPANY
(Exact Name of Registrant as Specified in its Charter)
________________________________________ 
Pennsylvania23-1707341
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
1 Freedom Valley Drive,, Oaks,, Pennsylvania19456-1100 19456-1100
(Address of Principal Executive Offices) (Zip Code)
(610) (610) 676-1000
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareSEICThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer☐
Large accelerated filerxAccelerated filer
☐

Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ☐    No  x
The number of shares outstanding of the registrant’s common stock, as of the close of business on April 17,October 21, 2020:
Common Stock, $0.01 par value147,931,955144,569,885




SEI INVESTMENTS COMPANY
SEI INVESTMENTS COMPANY

TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1.Financial Statements.
2
Consolidated Balance Sheets (Unaudited) -- March 31,September 30, 2020 and December 31, 2019
2
Consolidated Statements of Operations (Unaudited) -- For the Three and Nine Months Ended March 31,September 30, 2020 and 2019
4
Consolidated Statements of Comprehensive Income (Unaudited) -- For the Three and Nine Months Ended March 31,September 30, 2020 and 2019
5
Consolidated Statements of Changes in Equity (Unaudited) -- For the Three and Nine Months Ended March 31,September 30, 2020 and 2019
6
Consolidated Condensed Statements of Cash Flows (Unaudited) -- For the ThreeNine Months Ended March 31,September 30, 2020 and 2019
78
Notes to Consolidated Financial Statements
89
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
2629
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
3944
Item 4.Controls and Procedures.
3944
PART II - OTHER INFORMATION
Item 1.Legal Proceedings.
4045
Item 1A.Risk Factors.
4246
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
4247
Item 6.Exhibits.
4247
Signatures
4348







1





PART I.        FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements.

SEI Investments Company
Consolidated Balance Sheets
(unaudited)
(In thousands, except par value)

March 31, 2020 December 31, 2019September 30, 2020December 31, 2019
Assets   Assets
Current Assets:   Current Assets:
Cash and cash equivalents$746,870
 $841,446
Cash and cash equivalents$767,698 $841,446 
Restricted cash3,101
 3,101
Restricted cash3,101 3,101 
Receivables from investment products51,612
 54,165
Receivables from investment products51,644 54,165 
Receivables, net of allowance for doubtful accounts of $1,281 and $1,201358,130
 340,358
Receivables, net of allowance for doubtful accounts of $1,310 and $1,201Receivables, net of allowance for doubtful accounts of $1,310 and $1,201378,170 340,358 
Securities owned31,420
 33,486
Securities owned35,820 33,486 
Other current assets42,017
 32,289
Other current assets38,475 32,289 
Total Current Assets1,233,150
 1,304,845
Total Current Assets1,274,908 1,304,845 
Property and Equipment, net of accumulated depreciation of $360,148 and $353,453173,255
 160,859
Property and Equipment, net of accumulated depreciation of $370,072 and $353,453Property and Equipment, net of accumulated depreciation of $370,072 and $353,453180,531 160,859 
Operating Lease Right-of-Use Assets41,383
 42,789
Operating Lease Right-of-Use Assets38,945 42,789 
Capitalized Software, net of accumulated amortization of $454,776 and $442,677290,427
 296,068
Capitalized Software, net of accumulated amortization of $479,159 and $442,677Capitalized Software, net of accumulated amortization of $479,159 and $442,677278,226 296,068 
Available for Sale and Equity Securities110,558
 116,917
Available for Sale and Equity Securities116,564 116,917 
Investments in Affiliated Funds, at fair value3,753
 5,988
Investments in Affiliated Funds, at fair value5,207 5,988 
Investment in Unconsolidated Affiliate45,285
 67,413
Investment in Unconsolidated Affiliate33,117 67,413 
Goodwill64,489
 64,489
Goodwill64,489 64,489 
Intangible Assets, net of accumulated amortization of $9,694 and $8,77327,066
 27,987
Intangible Assets, net of accumulated amortization of $11,536 and $8,773Intangible Assets, net of accumulated amortization of $11,536 and $8,77325,225 27,987 
Deferred Contract Costs32,760
 30,991
Deferred Contract Costs33,833 30,991 
Deferred Income Taxes2,603
 2,822
Deferred Income Taxes2,065 2,822 
Other Assets, net33,302
 30,202
Other Assets, net32,507 30,202 
Total Assets$2,058,031
 $2,151,370
Total Assets$2,085,617 $2,151,370 
The accompanying notes are an integral part of these consolidated financial statements.






2




SEI Investments Company
Consolidated Balance Sheets
(unaudited)
(In thousands, except par value)

March 31, 2020 December 31, 2019September 30, 2020December 31, 2019
Liabilities and Equity   Liabilities and Equity
Current Liabilities:   Current Liabilities:
Accounts payable$13,086
 $4,423
Accounts payable$13,038 $4,423 
Accrued liabilities179,772
 272,801
Accrued liabilities223,217 272,801 
Current portion of long-term operating lease liabilities8,715
 9,156
Current portion of long-term operating lease liabilities8,445 9,156 
Deferred revenue5,978
 7,185
Deferred revenue5,815 7,185 
Total Current Liabilities207,551
 293,565
Total Current Liabilities250,515 293,565 
Long-term Income Taxes Payable

803
 803
Long-term Income Taxes Payable803 803 
Deferred Income Taxes53,991
 55,722
Deferred Income Taxes47,578 55,722 
Long-term Operating Lease Liabilities37,008
 38,450
Long-term Operating Lease Liabilities34,768 38,450 
Other Long-term Liabilities24,412
 24,052
Other Long-term Liabilities22,520 24,052 
Total Liabilities323,765
 412,592
Total Liabilities356,184 412,592 
Commitments and Contingencies

 

Commitments and Contingencies
Shareholders' Equity:   Shareholders' Equity:
Common stock, $0.01 par value, 750,000 shares authorized; 147,903 and 149,745 shares issued and outstanding1,479
 1,497
Common stock, $0.01 par value, 750,000 shares authorized; 144,491 and 149,745 shares issued and outstandingCommon stock, $0.01 par value, 750,000 shares authorized; 144,491 and 149,745 shares issued and outstanding1,445 1,497 
Capital in excess of par value1,170,649
 1,158,900
Capital in excess of par value1,174,142 1,158,900 
Retained earnings597,486
 601,885
Retained earnings581,244 601,885 
Accumulated other comprehensive loss, net(35,348) (23,504)Accumulated other comprehensive loss, net(27,398)(23,504)
Total Shareholders' Equity1,734,266
 1,738,778
Total Shareholders' Equity1,729,433 1,738,778 
Total Liabilities and Shareholders' Equity$2,058,031
 $2,151,370
Total Liabilities and Shareholders' Equity$2,085,617 $2,151,370 
The accompanying notes are an integral part of these consolidated financial statements.




3





SEI Investments Company
Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)
 
Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
2020 2019 2020201920202019
Revenues:   Revenues:
Asset management, administration and distribution fees$331,853
 $313,944
Asset management, administration and distribution fees$339,609 $330,943 $992,039 $969,812 
Information processing and software servicing fees82,909
 86,876
Information processing and software servicing fees85,318 85,311 248,296 256,848 
Total revenues414,762
 400,820
Total revenues424,927 416,254 1,240,335 1,226,660 
Expenses:   Expenses:
Subadvisory, distribution and other asset management costs45,337
 43,805
Subadvisory, distribution and other asset management costs45,126 44,978 134,645 134,960 
Software royalties and other information processing costs7,447
 8,128
Software royalties and other information processing costs6,992 7,198 21,828 22,719 
Compensation, benefits and other personnel131,481
 130,335
Compensation, benefits and other personnel134,795 130,579 391,607 386,913 
Stock-based compensation6,929
 5,038
Stock-based compensation6,467 5,453 20,458 15,555 
Consulting, outsourcing and professional fees53,290
 50,206
Consulting, outsourcing and professional fees57,949 48,789 168,350 144,325 
Data processing and computer related22,704
 20,992
Data processing and computer related24,437 22,338 71,647 65,514 
Facilities, supplies and other costs16,796
 18,745
Facilities, supplies and other costs16,679 15,926 47,448 51,771 
Amortization13,077
 12,679
Amortization13,200 12,947 39,417 38,407 
Depreciation7,473
 7,331
Depreciation7,945 7,409 23,058 22,162 
Total expenses304,534
 297,259
Total expenses313,590 295,617 918,458 882,326 
Income from operations110,228
 103,561
Income from operations111,337 120,637 321,877 344,334 
Net (loss) gain from investments(3,989) 1,279
Net gain (loss) from investmentsNet gain (loss) from investments776 611 (1,310)2,121 
Interest and dividend income3,203
 4,257
Interest and dividend income1,009 4,167 5,582 12,737 
Interest expense(152) (157)Interest expense(153)(154)(456)(477)
Equity in earnings of unconsolidated affiliate29,907
 37,317
Equity in earnings of unconsolidated affiliate28,305 37,609 86,488 112,758 
Income before income taxes139,197
 146,257
Income before income taxes141,274 162,870 412,181 471,473 
Income taxes29,955
 32,276
Income taxes30,178 30,702 90,777 98,784 
Net income$109,242
 $113,981
Net income$111,096 $132,168 $321,404 $372,689 
Basic earnings per common share$0.73
 $0.74
Basic earnings per common share$0.76 $0.88 $2.18 $2.45 
Shares used to compute basic earnings per share149,468
 153,310
Shares used to compute basic earnings per share145,812 150,855 147,586 152,009 
Diluted earnings per common share$0.72
 $0.73
Diluted earnings per common share$0.75 $0.86 $2.14 $2.40 
Shares used to compute diluted earnings per share152,368
 156,541
Shares used to compute diluted earnings per share147,907 154,227 149,958 155,311 
Dividends declared per common shareDividends declared per common share$0 $0 $0.35 $0.33 
The accompanying notes are an integral part of these consolidated financial statements.




4





SEI Investments Company
Consolidated Statements of Comprehensive Income
(unaudited)
(In thousands)
 
 Three Months Ended March 31,
 2020 2019
Net income  $109,242
   $113,981
Other comprehensive (loss) income, net of tax:       
Foreign currency translation adjustments  (13,075)   3,397
Unrealized gain (loss) on investments:       
Unrealized gains (losses) during the period, net of income taxes of $(339) and $(240)1,131
   797
  
Less: reclassification adjustment for losses (gains) realized in net income, net of income taxes of $(28) and $(24)100
 1,231
 86
 883
Total other comprehensive (loss) income, net of tax  (11,844)   4,280
Comprehensive income  $97,398
   $118,261
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net income$111,096 $132,168 $321,404 $372,689 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments7,085 (5,207)(5,051)(4,687)
Unrealized (loss) gain on investments:
Unrealized (losses) gains during the period, net of income taxes of $154, $(27), $(218) and $(497)(542)71 702 1,633 
Reclassification adjustment for losses realized in net income, net of income taxes of $(63), $(23), $(126) and $(73)238 (304)96 167 455 1,157 274 1,907 
Total other comprehensive income (loss), net of tax6,781 (5,040)(3,894)(2,780)
Comprehensive income$117,877 $127,128 $317,510 $369,909 
The accompanying notes are an integral part of these consolidated financial statements.




5





SEI Investments Company
Consolidated Statements of Changes in Equity
(unaudited)
(In thousands)

Shares of Common StockCommon StockCapital In Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTotal Equity
For the Three Months Ended September 30, 2020
Balance, July 1, 2020146,445 $1,464 $1,174,411 $566,929 $(34,179)$1,708,625 
Net income— — — 111,096 — 111,096 
Other comprehensive income— — — — 6,781 6,781 
Purchase and retirement of common stock(2,110)(22)(11,939)(96,781)— (108,742)
Issuance of common stock under employee stock purchase plan26 1 1,152 — — 1,153 
Issuance of common stock upon exercise of stock options130 2 4,051 — — 4,053 
Stock-based compensation— — 6,467 — — 6,467 
Balance, September 30, 2020144,491 $1,445 $1,174,142 $581,244 $(27,398)$1,729,433 
 Shares of Common Stock Common Stock Capital In Excess of Par Value Retained Earnings Accumulated Other Comprehensive Loss Total Equity
 For the Three Months Ended March 31, 2020
Balance, January 1, 2020149,745
 $1,497
 $1,158,900
 $601,885
 $(23,504) $1,738,778
Net income—
 —
 —
 109,242
 —
 109,242
Other comprehensive loss—
 —
 —
 —
 (11,844) (11,844)
Purchase and retirement of common stock(2,433) (24) (13,767) (113,641) —
 (127,432)
Issuance of common stock under employee stock purchase plan21
 —
 1,106
 —
 —
 1,106
Issuance of common stock upon exercise of stock options570
 6
 17,481
 —
 —
 17,487
Stock-based compensation—
 —
 6,929
 —
 —
 6,929
Balance, March 31, 2020147,903
 $1,479
 $1,170,649
 $597,486
 $(35,348) $1,734,266

Shares of Common StockCommon StockCapital In Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTotal Equity
Shares of Common Stock Common Stock Capital In Excess of Par Value Retained Earnings Accumulated Other Comprehensive Loss Total EquityFor the Three Months Ended September 30, 2019
For the Three Months Ended March 31, 2019
Balance, January 1, 2019153,634
 $1,536
 $1,106,641
 $517,970
 $(33,000) $1,593,147
Balance, July 1, 2019Balance, July 1, 2019150,955 $1,509 $1,122,068 $541,664 $(30,740)$1,634,501 
Net income—
 —
 —
 113,981
 —
 113,981
Net income— — — 132,168 — 132,168 
Other comprehensive income—
 —
 —
 —
 4,280
 4,280
Other comprehensive lossOther comprehensive loss— — — — (5,040)(5,040)
Purchase and retirement of common stock(1,725) (17) (9,202) (79,570) —
 (88,789)Purchase and retirement of common stock(1,400)(15)(7,469)(73,883)— (81,367)
Issuance of common stock under employee stock purchase plan32
 —
 1,322
 —
 —
 1,322
Issuance of common stock under employee stock purchase plan21 1 998 — — 999 
Issuance of common stock upon exercise of stock options335
 4
 7,567
 —
 —
 7,571
Issuance of common stock upon exercise of stock options646 7 16,586 — — 16,593 
Stock-based compensation—
 —
 5,038
 —
 —
 5,038
Stock-based compensation— — 5,453 — — 5,453 
Balance, March 31, 2019152,276
 $1,523
 $1,111,366
 $552,381
 $(28,720) $1,636,550
Balance, September 30, 2019Balance, September 30, 2019150,222 $1,502 $1,137,636 $599,949 $(35,780)$1,703,307 
The accompanying notes are an integral part of these consolidated financial statements.







6



SEI Investments Company
Consolidated Statements of Changes in Equity
(unaudited)
(In thousands)
Shares of Common StockCommon StockCapital In Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTotal Equity
For the Nine Months Ended September 30, 2020
Balance, January 1, 2020149,745 $1,497 $1,158,900 $601,885 $(23,504)$1,738,778 
Net income— — — 321,404 — 321,404 
Other comprehensive loss— — — — (3,894)(3,894)
Purchase and retirement of common stock(6,185)(62)(34,999)(290,583)— (325,644)
Issuance of common stock under employee stock purchase plan73 1 3,400 — — 3,401 
Issuance of common stock upon exercise of stock options858 9 26,383 — — 26,392 
Stock-based compensation— — 20,458 — — 20,458 
Dividends declared ($0.35 per share)— — — (51,462)— (51,462)
Balance, September 30, 2020144,491 $1,445 $1,174,142 $581,244 $(27,398)$1,729,433 
Shares of Common StockCommon StockCapital In Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTotal Equity
For the Nine Months Ended September 30, 2019
Balance, January 1, 2019153,634 $1,536 $1,106,641 $517,970 $(33,000)$1,593,147 
Net income— — — 372,689 — 372,689 
Other comprehensive loss— — — — (2,780)(2,780)
Purchase and retirement of common stock(4,950)(50)(26,408)(240,726)— (267,184)
Issuance of common stock under employee stock purchase plan77 1 3,391 — — 3,392 
Issuance of common stock upon exercise of stock options1,461 15 38,457 — — 38,472 
Stock-based compensation— — 15,555 — — 15,555 
Dividends declared ($0.33 per share)— — — (49,984)— (49,984)
Balance, September 30, 2019150,222 $1,502 $1,137,636 $599,949 $(35,780)$1,703,307 
The accompanying notes are an integral part of these consolidated financial statements.





7

SEI Investments Company
Consolidated Condensed Statements of Cash Flows
(unaudited)
(In thousands)
Three Months Ended March 31, Nine Months Ended September 30,
2020 2019 20202019
Cash flows from operating activities:   Cash flows from operating activities:
Net income$109,242
 $113,981
Net income$321,404 $372,689 
Adjustments to reconcile net income to net cash provided by operating activities (See Note 1)(10,270) (54,082)Adjustments to reconcile net income to net cash provided by operating activities (See Note 1)75,120 8,846 
Net cash provided by operating activities98,972
 59,899
Net cash provided by operating activities396,524 381,535 
Cash flows from investing activities:   Cash flows from investing activities:
Additions to property and equipment(20,674) (7,317)Additions to property and equipment(43,113)(30,515)
Additions to capitalized software(6,458) (9,937)Additions to capitalized software(18,640)(26,821)
Purchases of marketable securities(29,407) (43,672)Purchases of marketable securities(114,407)(126,030)
Prepayments and maturities of marketable securities37,623
 45,200
Prepayments and maturities of marketable securities112,575 137,783 
Sales of marketable securities64
 —
Sales of marketable securities842 0 
Other investing activities1,500
 —
Other investing activities(1,500)2,538 
Net cash used in investing activities(17,352) (15,726)Net cash used in investing activities(64,243)(43,045)
Cash flows from financing activities:   Cash flows from financing activities:
Payment of contingent consideration(633) —
Payment of contingent consideration(633)0 
Purchase and retirement of common stock(130,558) (90,777)Purchase and retirement of common stock(327,079)(262,861)
Proceeds from issuance of common stock18,593
 8,893
Proceeds from issuance of common stock29,793 41,864 
Payment of dividends(52,452) (50,760)Payment of dividends(103,914)(100,745)
Net cash used in financing activities(165,050) (132,644)Net cash used in financing activities(401,833)(321,742)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,146) 3,272
Effect of exchange rate changes on cash, cash equivalents and restricted cash(4,196)(3,878)
Net decrease in cash, cash equivalents and restricted cash(94,576) (85,199)
Net (decrease) increase in cash, cash equivalents and restricted cashNet (decrease) increase in cash, cash equivalents and restricted cash(73,748)12,870 
Cash, cash equivalents and restricted cash, beginning of period844,547
 758,039
Cash, cash equivalents and restricted cash, beginning of period844,547 758,039 
Cash, cash equivalents and restricted cash, end of period$749,971
 $672,840
Cash, cash equivalents and restricted cash, end of period$770,799 $770,909 
   
Non-cash operating activities:   Non-cash operating activities:
Operating lease right-of-use assets and net lease liabilities recorded upon adoption of ASC 842$—
 $44,169
Operating lease right-of-use assets and net lease liabilities recorded upon adoption of ASC 842$0 $44,169 
The accompanying notes are an integral part of these consolidated financial statements.

7


8



Notes to Consolidated Financial Statements
(all figures are in thousands except share and per share data)
 
Note 1.    Summary of Significant Accounting Policies
Nature of Operations
SEI Investments Company (the Company), a Pennsylvania corporation, provides comprehensive platforms for investment processing, investment operations and investment management to wealth managers, financial institutions, financial advisors, investment managers, institutional investors and ultra-high-net-worth families in the United States, Canada, the United Kingdom, continental Europe and various other locations throughout the world.
Investment processing platforms consist of application and business process outsourcing services, professional services and transaction-based services. Revenues from investment processing platforms are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.
Investment operations platforms consist of outsourcing services including fund and investment accounting, administration, reconciliation, investor servicing and client reporting. Revenues from investment operations platforms are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.
Investment management platforms consists of investment products including mutual funds, collective investment products, alternative investment portfolios and separately managed accounts. The Company serves as the administrator and investment advisor for many of these products. Revenues from investment management platforms are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain financial information and accompanying note disclosure normally included in the Company’s Annual Report on Form 10-K have been condensed or omitted. The interim financial information is unaudited but reflects all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of financial position of the Company as of March 31,September 30, 2020, the results of operations for the three and nine months ended March 31,September 30, 2020 and 2019, and cash flows for the three-monthsnine-months ended March 31,September 30, 2020 and 2019. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The Company adopted the requirements of Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Accounting Standards Codification (ASC) 326)) (ASU 2016-13) and subsequent amendments ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (ASU 2019-04) and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (ASU 2019-11) on January 1, 2020. ASU 2016-13 and the related amendments are hereafter referred to as ASC 326. ASC 326 requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. The Company owns mortgage-backed securities issued by the Government National Mortgage Association (GNMA), a federal agency of the U.S. government classified as Available-for-sale debt securities which qualify for the zero credit risk allowance. The Company's U.S. Treasury and other U.S. government agency securities classified as Securities owned are outside the scope of ASC 326. There was no impact to the Company's disclosures related to its marketable securities from the implementation of ASC 326.
In accordance with ASC 326, the Company evaluated its receivable balances for credit risk based upon the source of revenue, its ability to collect fees directly from investment products or directly from assets in the client's account, a review of actual historical credit losses, and the potential for expected credit loss from its current client base. The Company has no meaningful historical credit loss data and a very limited amount of losses pertaining directly to a client's inability to satisfy its receivable balance even during periods of economic distress. The credit loss reserve recognized by the Company through the implementation of ASC 326 during the threenine months ended March 31,September 30, 2020 was immaterial.
The Company also adopted the requirements of ASU 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04) on January 1, 2020. The adoption of ASU 2017-04 did not have a material impact on the Company's consolidated financial statements and related disclosures.
With the exception of the adoption of ASC 326 and ASU 2017-04, there have been no other significant changes in significant accounting policies during the threenine months ended March 31,September 30, 2020 as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

8


9


Variable Interest Entities
The Company or its affiliates have created numerous investment products for its clients in various types of legal entity structures. The Company serves as the Manager, Administrator and Distributor for these investment products and may also serve as the Trustee for some of the investment products. The Company receives asset management, distribution, administration and custodial fees for these services. Clients are the equity investors and participate in proportion to their ownership percentage in the net income or loss and net capital gains or losses of the products, and, on liquidation, will participate in proportion to their ownership percentage in the remaining net assets of the products after satisfaction of outstanding liabilities.
The Company has concluded that it is not the primary beneficiary of the entities and, therefore, is not required to consolidate any of the pooled investment vehicles for which it receives asset management, distribution, administration and custodial fees under the VIE model. The entities either do not meet the definition of a VIE or the Company does not hold a variable interest in the entities. The entities either qualify for the money market scope exception, or are entities in which the Company’s asset management, distribution, administration and custodial fees are commensurate with the services provided and include fair terms and conditions, or are entities that are limited partnerships which have substantive kick-out rights. The Company acts as a fiduciary and does not hold any other interests other than insignificant seed money investments in the pooled investment vehicles. For this reason, the Company also concluded that it is not required to consolidate the pooled investment vehicles under the voting interest entity model.
The Company is a party to expense limitation agreements with certain SEI-sponsored money market funds subject to Rule 2a-7 of the Investment Company Act of 1940 which establish a maximum level of ordinary operating expenses incurred by the fund in any fiscal year including, but not limited to, fees of the administrator or its affiliates. Under the terms of these agreements, the Company waived $6,641$8,575 and $7,905$6,390 in fees during the three months ended March 31,September 30, 2020 and 2019, respectively. During the nine months ended September 30, 2020 and 2019, the Company waived $24,930 and $21,091, respectively, in fees.
Revenue Recognition
Revenue is recognized when the transfer of control of promised goods or services under the terms of a contract with customers are satisfied in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those promised goods or services. Certain portions of the Company’s revenues involve a third party in providing goods or services to its customers. In such circumstances, the Company must determine whether the nature of its promise to the customer is to provide the underlying goods or services (the Company is the principal in the transaction and reports the transaction gross) or to arrange for a third party to provide the underlying goods or services (the entity is the agent in the transaction and reports the transaction net). See Note 13 for related disclosures regarding revenue recognition.
Cash and Cash Equivalents
Cash and cash equivalents includes $278,514$305,382 and $414,581 at March 31,September 30, 2020 and December 31, 2019, respectively, primarily invested in SEI-sponsored open-ended money market mutual funds. The SEI-sponsored mutual funds are Level 1 assets.
Restricted Cash
Restricted cash includes $3,000 at March 31,September 30, 2020 and December 31, 2019 segregated for regulatory purposes related to trade-execution services conducted by SEI Investments (Europe) Limited. Restricted cash also includes $101 at March 31,September 30, 2020 and December 31, 2019 segregated in special reserve accounts for the benefit of customers of the Company’s broker-dealer subsidiary, SEI Investments Distribution Co. (SIDCO), in accordance with certain rules established by the Securities and Exchange Commission (SEC) for broker-dealers.
Capitalized Software
The Company capitalized $6,458$18,640 and $9,937$26,821 of software development costs during the threenine months ended March 31,September 30, 2020 and 2019, respectively. The Company's software development costs primarily relate to significant enhancements to the SEI Wealth PlatformSM (SWP). The Company capitalized $6,229$17,208 and $9,739$26,029 of software development costs for significant enhancements to SWP during the threenine months ended March 31,September 30, 2020 and 2019, respectively. As of March 31,September 30, 2020, the net book value of SWP was $274,885$264,085. The net book value includes $58,149$63,066 of capitalized software development costs in-progress associated with future releases of SWP. Capitalized software development costs in-progress associated with future releases of SWP were $55,332 as of December 31, 2019. SWP has a weighted average remaining life of 8.48.5 years. Amortization expense for SWP was $10,797$32,576 and $10,399$31,567 during the threenine months ended March 31,September 30, 2020 and 2019, respectively.

9


10


Earnings per Share
The calculations of basic and diluted earnings per share for the three and nine months ended March 31,September 30, 2020 and 2019 are:
 Three Months Ended March 31,
 2020 2019
Net income$109,242
 $113,981
Shares used to compute basic earnings per common share149,468,000
 153,310,000
Dilutive effect of stock options2,900,000
 3,231,000
Shares used to compute diluted earnings per common share152,368,000
 156,541,000
Basic earnings per common share$0.73
 $0.74
Diluted earnings per common share$0.72
 $0.73

 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net income$111,096 $132,168 $321,404 $372,689 
Shares used to compute basic earnings per common share145,812,000 150,855,000 147,586,000 152,009,000 
Dilutive effect of stock options2,095,000 3,372,000 2,372,000 3,302,000 
Shares used to compute diluted earnings per common share147,907,000 154,227,000 149,958,000 155,311,000 
Basic earnings per common share$0.76 $0.88 $2.18 $2.45 
Diluted earnings per common share$0.75 $0.86 $2.14 $2.40 
During the three months ended March 31,September 30, 2020 and 2019, employee stock options to purchase 7,408,0008,813,000 and 6,323,0006,239,000 shares of common stock with an average exercise price of $58.76$57.98 and $54.81,$54.91, respectively, were outstanding but not included in the computation of diluted earnings per common share. During the nine months ended September 30, 2020 and 2019, employee stock options to purchase 8,342,000 and 6,269,000 shares of common stock with an average exercise price of $58.18 and $54.84, respectively, were outstanding but not included in the computation of diluted earnings per common share. These options for the three and nine month periods were not included in the computation of diluted earnings per common share because either the performance conditions have not been satisfied or would not have been satisfied if the reporting date was the end of the contingency period or the options' exercise price was greater than the average market price of the Company’s common stock and the effect on diluted earnings per common share would have been anti-dilutive.
New Accounting Pronouncements
In December 2019, the FASBFinancial Accounting Standards Board (FASB) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in the first quarter of 2021. The Company is currently evaluatingdoes not believe the impactadoption of adopting ASU 2019-12 will have a material impact on its consolidated financial statements and related disclosures.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation.

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11


Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company considers investment instruments purchased with an original maturity of three months or less to be cash equivalents.
The following table provides the details of the adjustments to reconcile net income to net cash provided by operating activities for the threenine months ended March 31:September 30:
20202019
Net income$321,404 $372,689 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation23,058 22,162 
Amortization39,417 38,407 
Equity in earnings of unconsolidated affiliate(86,488)(112,758)
Distributions received from unconsolidated affiliate119,821 123,663 
Stock-based compensation20,458 15,555 
Provision for losses on receivables109 593 
Deferred income tax expense(7,731)(1,405)
Net loss (gain) from investments1,310 (2,121)
Change in other long-term liabilities(4,442)2,077 
Change in other assets(965)(56)
Contract costs capitalized, net of amortization(2,842)(4,499)
Other(1,053)(721)
Change in current assets and liabilities
(Increase) decrease in
Receivables from investment products2,521 (2,271)
Receivables(37,921)(34,589)
Other current assets(6,186)729 
(Decrease) increase in
Accounts payable8,615 (2,208)
Accrued liabilities8,809 (34,087)
Deferred revenue(1,370)375 
Total adjustments75,120 8,846 
Net cash provided by operating activities$396,524 $381,535 
 2020 2019
Net income$109,242
 $113,981
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation7,473
 7,331
Amortization13,077
 12,679
Equity in earnings of unconsolidated affiliate(29,907) (37,317)
Distributions received from unconsolidated affiliate52,036
 33,237
Stock-based compensation6,929
 5,038
Provision for losses on receivables80
 (85)
Deferred income tax expense(1,879) (984)
Net loss (gain) from investments3,989
 (1,279)
Change in other long-term liabilities360
 277
Change in other assets(4,658) 1,334
Contract costs capitalized, net of amortization(1,769) (138)
Other(1,612) (63)
Change in current assets and liabilities   
(Increase) decrease in   
Receivables from investment products2,553
 (2,693)
Receivables(17,852) (18,304)
Other current assets(9,728) 574
(Decrease) increase in   
Accounts payable8,663
 (5,678)
Accrued liabilities(36,818) (47,836)
Deferred revenue(1,207) (175)
Total adjustments(10,270) (54,082)
Net cash provided by operating activities$98,972
 $59,899


Note 2.    Investment in Unconsolidated Affiliate
LSV Asset Management
The Company has an investment in LSV Asset Management (LSV), a registered investment advisor that provides investment advisory services primarily to institutions, including pension plans and investment companies. LSV is currently an investment sub-advisor for a limited number of SEI-sponsored investment products. The Company's partnership interest in LSV as of March 31,September 30, 2020 was 38.9%38.8%. The Company accounts for its interest in LSV using the equity method because of its less than 50% ownership. The Company’s interest in the net assets of LSV is reflected in Investment in unconsolidated affiliate on the accompanying Consolidated Balance Sheets and its interest in the earnings of LSV is reflected in Equity in earnings of unconsolidated affiliate on the accompanying Consolidated Statements of Operations.
At March 31,September 30, 2020, the Company’s total investment in LSV was $45,285.$33,117. The Company receives partnership distributions from LSV on a quarterly basis. The Company received partnership distributions from LSV of $52,036$119,821 and $33,237$123,663 in the threenine months ended March 31,September 30, 2020 and 2019, respectively. As such, the Company considers these distribution payments as returns on investment rather than returns of the Company's original investment in LSV and has therefore classified the associated cash inflows as an operating activity on the Consolidated Statements of Cash Flows.




12

The Company’s proportionate share in the earnings of LSV was $29,907$28,305 and $37,317$37,609 during the three months ended March 31,September 30, 2020 and 2019, respectively.

11




 During the nine months ended September 30, 2020 and 2019, the Company's proportionate share in the earnings of LSV was $86,488 and $112,758, respectively.
These tables contain condensed financial information of LSV:
Condensed Statement of Operations Three Months Ended March 31,
  2020 2019
Revenues $99,996
 $120,915
Net income 76,897
 95,948

Condensed Statement of OperationsThree Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Revenues$94,902 $121,232 $289,546 $365,164 
Net income70,440 96,699 220,184 289,918 

Condensed Balance Sheets

 March 31, 2020 December 31, 2019
Current assets $113,926
 $144,547
Non-current assets 4,769
 5,048
Total assets $118,695
 $149,595
     
Current liabilities $42,631
 $46,828
Non-current liabilities 5,153
 5,326
Partners’ capital 70,911
 97,441
Total liabilities and partners’ capital $118,695
 $149,595

Condensed Balance SheetsSeptember 30, 2020December 31, 2019
Current assets$105,712 $144,547 
Non-current assets4,484 5,048 
Total assets$110,196 $149,595 
Current liabilities$65,197 $46,828 
Non-current liabilities4,802 5,326 
Partners’ capital40,197 97,441 
Total liabilities and partners’ capital$110,196 $149,595 
On April 1, 2020, LSV provided an interest in the partnership to select key employees which reduced the ownership percentage of each existing partner on a pro-rata basis. As a result, the Company's total partnership interest in LSV was reduced slightly to approximately 38.8% from approximately 38.9% to approximately 38.8%.

Note 3.    Composition of Certain Financial Statement Captions
Receivables
Receivables on the accompanying Consolidated Balance Sheets consist of: 
 March 31, 2020 December 31, 2019
Trade receivables$87,126
 $86,043
Fees earned, not billed256,280
 240,239
Other receivables16,005
 15,277
 359,411
 341,559
Less: Allowance for doubtful accounts(1,281) (1,201)
 $358,130
 $340,358

September 30, 2020December 31, 2019
Trade receivables$106,316 $86,043 
Fees earned, not billed259,942 240,239 
Other receivables13,222 15,277 
379,480 341,559 
Less: Allowance for doubtful accounts(1,310)(1,201)
$378,170 $340,358 
Fees earned, not billed represents receivables from contracts with customers earned but unbilled and results from timing differences between services provided and contractual billing schedules. These billing schedules generally provide for fees to be billed on a quarterly basis. In addition, certain fees earned from investment operations services are calculated based on assets under administration that have an extended valuation process. Billings to these clients occur once the asset valuation processes are completed.
Receivables from investment products on the accompanying Consolidated Balance Sheets primarily represent fees receivable for distribution, investment advisory, and administration services to various regulated investment companies and other investment products sponsored by SEI.


12




13


Property and Equipment
Property and Equipment on the accompanying Consolidated Balance Sheets consists of:
 March 31, 2020 December 31, 2019
Buildings$162,891
 $162,882
Equipment131,660
 123,945
Land10,830
 10,830
Purchased software144,342
 143,705
Furniture and fixtures19,902
 18,835
Leasehold improvements19,695
 20,700
Construction in progress44,083
 33,415
 533,403
 514,312
Less: Accumulated depreciation(360,148) (353,453)
Property and Equipment, net$173,255
 $160,859

September 30, 2020December 31, 2019
Buildings$162,999 $162,882 
Equipment134,827 123,945 
Land10,830 10,830 
Purchased software145,110 143,705 
Furniture and fixtures20,726 18,835 
Leasehold improvements20,712 20,700 
Construction in progress55,399 33,415 
550,603 514,312 
Less: Accumulated depreciation(370,072)(353,453)
Property and Equipment, net$180,531 $160,859 
The Company recognized $7,473$23,058 and $7,331$22,162 in depreciation expense related to property and equipment for the threenine months ended March 31,September 30, 2020 and 2019, respectively.
Deferred Contract Costs
Deferred contract costs, which primarily consist of deferred sales commissions, were $32,760$33,833 and $30,991 as of March 31,September 30, 2020 and December 31, 2019, respectively. The Company deferred expenses related to contract costs of $2,997$2,521 and $1,126$4,575 during the three months ended March 31,September 30, 2020 and 2019, respectively. During the nine months ended September 30, 2020 and 2019, the Company deferred expenses related to contract costs of $7,270 and $7,673, respectively. Amortization expense related to deferred contract costs were $1,228$4,428 and $988$3,174 during the threenine months ended March 31,September 30, 2020 and 2019, respectively, and are included in Compensation, benefits and other personnel on the accompanying Consolidated Statements of Operations. There was 0 impairment loss in relation to deferred contract costs during the threenine months ended March 31,September 30, 2020.
Accrued Liabilities
Accrued liabilities on the accompanying Consolidated Balance Sheets consist of: 
September 30, 2020December 31, 2019
Accrued employee compensation$75,745 $96,991 
Accrued employee benefits and other personnel13,870 9,222 
Accrued consulting, outsourcing and professional fees31,167 28,610 
Accrued sub-advisory, distribution and other asset management fees54,157 46,245 
Accrued dividend payable0 52,452 
Other accrued liabilities48,278 39,281 
Total accrued liabilities$223,217 $272,801 
 March 31, 2020 December 31, 2019
Accrued employee compensation$33,519
 $96,991
Accrued consulting, outsourcing and professional fees32,444
 28,610
Accrued sub-advisory, distribution and other asset management fees48,478
 46,245
Accrued dividend payable—
 52,452
Accrued income taxes23,663
 2,010
Other accrued liabilities41,668
 46,493
Total accrued liabilities$179,772
 $272,801


Note 4.    Fair Value Measurements
The fair value of the Company’s financial assets and liabilities, except for the Company's investment funds sponsored by LSV, is determined in accordance with the fair value hierarchy. The fair value of the Company’s Level 1 financial assets consist mainly of investments in open-ended mutual funds that are quoted daily. Level 2 financial assets consist of GNMA mortgage-backed securities held by the Company's wholly-owned limited purpose federal thrift subsidiary, SEI Private Trust Company (SPTC), Federal Home Loan Bank (FHLB) and other U.S. government agency short-term notes held by SIDCO. The financial assets held by SIDCO were purchased as part of a cash management program requiring only short term, top-tier investment grade government and corporate securities. The financial assets held by SPTC are debt securities issued by GNMA and are backed by the full faith and credit of the U.S. government. These securities were purchased for the sole purpose of satisfying applicable regulatory requirements and have maturity dates which range from 2023 to 2041.
The fair value of the Company's investment funds sponsored by LSV is measured using the net asset value per share (NAV) as a practical expedient. The NAVs of the funds are calculated by the funds' independent custodian and are derived




14

from the fair values of the underlying investments as of the reporting date. The funds allow for investor redemptions at the

13




end of each calendar month. This investment has not been classified in the fair value hierarchy but is presented in the tables below to permit reconciliation to the amounts presented on the accompanying Consolidated Balance Sheets.
The valuation of the Company's Level 2 financial assets held by SIDCO and SPTC are based upon securities pricing policies and procedures utilized by third-party pricing vendors.
The pricing policies and procedures applied for our Level 1 and Level 2 financial assets during the threenine months ended March 31,September 30, 2020 were consistent with those as described in our Annual Report on Form 10-K at December 31, 2019. The Company had no Level 3 financial assets at March 31,September 30, 2020 or December 31, 2019 that were required to be measured at fair value on a recurring basis. The Company's Level 3 financial liabilities at March 31,September 30, 2020 and December 31, 2019 consist entirely of the estimated contingent consideration resulting from an acquisition (See Note 12). The fair value of the contingent consideration was determined using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model include expected revenues, expected volatility, risk-free rate and other factors. There were no transfers of financial assets between levels within the fair value hierarchy during the threenine months ended March 31,September 30, 2020.
The fair value of certain financial assets of the Company was determined using the following inputs:
 Fair Value Measurements at the End of the Reporting Period Using
AssetsSeptember 30, 2020Quoted Prices
in
Active  Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)
Equity securities$11,093 $11,093 $0 
Available-for-sale debt securities105,471 0 105,471 
Fixed-income securities owned35,820 0 35,820 
Investment funds sponsored by LSV (1)5,207 
$157,591 $11,093 $141,291 
    Fair Value Measurements at the End of the Reporting Period Using
Assets March 31, 2020 
Quoted Prices
in
Active  Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
Equity securities $10,033
 $10,033
 $—
Available-for-sale debt securities 100,525
 —
 100,525
Fixed-income securities owned 31,420
 —
 31,420
Investment funds sponsored by LSV (1) 3,753
    
  $145,731
 $10,033
 $131,945

    Fair Value Measurements at the End of the Reporting Period Using
Assets December 31, 2019 
Quoted Prices
in
Active  Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
Equity securities $12,119
 $12,119
 $—
Available-for-sale debt securities 104,798
 —
 104,798
Fixed-income securities owned 33,486
 —
 33,486
Investment funds sponsored by LSV (1) 5,988
    
  $156,391
 $12,119
 $138,284

 Fair Value Measurements at the End of the Reporting Period Using
AssetsDecember 31, 2019Quoted Prices
in
Active  Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)
Equity securities$12,119 $12,119 $0 
Available-for-sale debt securities104,798 0 104,798 
Fixed-income securities owned33,486 0 33,486 
Investment funds sponsored by LSV (1)5,988 
$156,391 $12,119 $138,284 
(1) The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the accompanying Consolidated Balance Sheets (See Note 5).


14




15


Note 5.    Marketable Securities
The Company's marketable securities include investments in money market funds and commercial paper classified as cash equivalents, available-for-sale debt securities, investments in SEI-sponsored and non-SEI-sponsored mutual funds, equities, investments in funds sponsored by LSV and securities owned by SIDCO.
Cash Equivalents
The Company's investments in money market funds and commercial paper classified as cash equivalents had a fair value of $425,697$412,663 and $543,765 at March 31,September 30, 2020 and December 31, 2019, respectively. There were no0 material unrealized or realized gains or losses from these investments during the threenine months ended March 31,September 30, 2020 and 2019. The Company's investments in money market funds and commercial paper are Level 1 assets.
Available for Sale and Equity Securities
Available For Sale and Equity Securities on the accompanying Consolidated Balance Sheets consist of: 
 At September 30, 2020
 Cost
Amount		Gross
Unrealized
Gains		Gross
Unrealized
(Losses)		Fair
Value
Available-for-sale debt securities$103,365 $2,106 $0 $105,471 
SEI-sponsored mutual funds6,793 63 (277)6,579 
Equities and other mutual funds3,605 909 0 4,514 
$113,763 $3,078 $(277)$116,564 
 At March 31, 2020
 
Cost
Amount
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Fair
Value
Available-for-sale debt securities$98,322
 $2,203
 $—
 $100,525
SEI-sponsored mutual funds7,508
 —
 (1,126) 6,382
Equities and other mutual funds3,595
 56
 —
 3,651
 $109,425
 $2,259
 $(1,126) $110,558
 At December 31, 2019
 
Cost
Amount
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Fair
Value
Available-for-sale debt securities$104,193
 $605
 $—
 $104,798
SEI-sponsored mutual funds7,564
 125
 (39) 7,650
Equities and other mutual funds3,637
 832
 —
 4,469
 $115,394
 $1,562
 $(39) $116,917

 At December 31, 2019
 Cost
Amount		Gross
Unrealized
Gains		Gross
Unrealized
(Losses)		Fair
Value
Available-for-sale debt securities$104,193 $605 $0 $104,798 
SEI-sponsored mutual funds7,564 125 (39)7,650 
Equities and other mutual funds3,637 832 0 4,469 
$115,394 $1,562 $(39)$116,917 
Net unrealized gains at March 31,September 30, 2020 of the Company's available-for-sale debt securities were $1,696$1,622 (net of income tax expense of $507)$484). Net unrealized gains at December 31, 2019 of the Company's available-for-sale debt securities were $465 (net of income tax benefitexpense of $140). These net unrealized gains are reported as a separate component of Accumulated other comprehensive loss on the accompanying Consolidated Balance Sheets.
There were gross realized losses of $128$582 and $109$347 from available-for-sale debt securities during the threenine months ended March 31,September 30, 2020 and 2019, respectively. There were no0 gross realized gains from available-for-sale debt securities during the threenine months ended March 31,September 30, 2020 and 2019. Realized losses from available-for-sale debt securities, including amounts reclassified from accumulated comprehensive loss, are reflected in Net gain (loss) gain from investments on the accompanying Consolidated Statements of Operations.
There were gross realized gains of $189$254 and gross realized losses of $235$250 from mutual funds and equities during the threenine months ended March 31,September 30, 2020. During the three months ended March 31, 2019, there were gross realized gains of $43Gains and gross realized losses of $3 from mutual funds and equities.equities during the nine months ended September 30, 2019 were immaterial. Gains and losses from mutual funds and equities are reflected in Net gain (loss) gain from investments on the accompanying Consolidated Statements of Operations.
Investments in Affiliated Funds
The Company has an investment in funds sponsored by LSV. The Company records this investment on the accompanying Consolidated Balance Sheets at fair value. Unrealized gains and losses from the change in fair value of these funds are recognized in Net gain (loss) from investments on the accompanying Consolidated Statements of Operations.
The investment primarily consists of U.S. dollar denominated funds that invest primarily in securities of Canadian, Australian and Japanese companies as well as various other global securities. The underlying securities held by the funds are translated into U.S. dollars within the funds. The funds had a fair value of $3,753$5,207 and $5,988 at March 31,September 30, 2020 and December 31, 2019, respectively. The Company recognized unrealized lossesgains of $2,235$458 and $452$99 during the three months ended March 31,September 30, 2020 and 2019, respectively, from the change in fair value of the funds. The Company recognized unrealized losses of $781 and unrealized gains of $646 during the nine months ended September 30, 2020 and 2019, respectively, from the change in fair value of the funds.

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Securities Owned
The Company’s broker-dealer subsidiary, SIDCO, has investments in U.S. government agency securities with maturity dates less than one year. These investments are reflected as Securities owned on the accompanying Consolidated Balance Sheets. Due to specialized accounting practices applicable to investments by broker-dealers, the securities are reported at fair value and changes in fair value are recorded in current period earnings. The securities had a fair value of $31,420$35,820 and $33,486 at March 31,September 30, 2020 and December 31, 2019, respectively. There were no0 material net gains or losses related to the securities during the three and nine months ended March 31,September 30, 2020 and 2019.

Note 6.    Line of Credit
The Company has a five-year $300,000 Credit Agreement (the Credit Facility) with Wells Fargo Bank, National Association, and a syndicate of other lenders. The Credit Facility is scheduled to expire in June 2021, at which time any aggregate principal amount of loans outstanding becomes payable in full. Any borrowings made under the Credit Facility will accrue interest at rates that, at the Company's option, are based on a base rate (the Base Rate) plus a premium that can range from 0.25% to 1.00% or the London InterBank Offered Rate (LIBOR) plus a premium that can range from 1.25% to 2.00% depending on the Company’s Leverage Ratio (a ratio of consolidated indebtedness to consolidated EBITDA for the four4 preceding fiscal quarters, all as defined in the related agreement). The Base Rate is defined as the highest of a) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, b) the prime commercial lending rate of Wells Fargo, c) the applicable LIBOR plus 1.00%, or d) 0%. The Company also pays quarterly commitment fees based on the unused portion of the Credit Facility. The quarterly fees for the Credit Facility can range from 0.15% of the amount of the unused portion to 0.30%, depending on the Company’s Leverage Ratio. Certain wholly-owned subsidiaries of the Company have guaranteed the obligations of the Company under the agreement. The aggregate amount of the Credit Facility may be increased by an additional $100,000 under certain conditions set forth in the agreement. The Company may issue up to $15,000 in letters of credit under the terms of the Credit Facility. The Company pays a periodic commission fee of 1.25% plus a fronting fee of 0.175% of the aggregate face amount of the outstanding letters of credit issued under the Credit Facility.
The Credit Facility contains covenants that restrict the ability of the Company to engage in mergers, consolidations, asset sales, investments, transactions with affiliates other than wholly-owned subsidiaries, or to incur liens or other indebtedness including contingent obligations or guarantees, as defined in the agreement. In the event of a default under the Credit Facility, the Company would also be restricted from paying dividends on, or repurchasing its common stock without the approval of the lenders. Upon the occurrence of certain financial or economic events, significant corporate events, or certain other events of default constituting an event of default under the Credit Facility, all loans outstanding may be declared immediately due and payable and all commitments under the agreement may be terminated.
As of March 31,September 30, 2020, the Company had outstanding letters of credit of $11,553 under the Credit Facility. These letters of credit were issued primarily for the expansion of the Company's headquarters and are scheduled to expire during the remainder of 2020. The amount of the Credit Facility that is available for general corporate purposes as of March 31,September 30, 2020 was $288,447.
The Company was in compliance with all covenants of the Credit Facility during the threenine months ended March 31,September 30, 2020.

Note 7.    Shareholders’ Equity
Stock-Based Compensation
The Company has only non-qualified stock options outstanding under its equity compensation plans. All outstanding stock options have performance-based vesting provisions specific to each option grant that tie the vesting of the applicable stock options to the Company’s financial performance. The Company’s stock options vest at a rate of 50% when a specified financial vesting target is achieved, and the remaining 50% when a second, higher specified financial vesting target is achieved. Options do not vest due to the passage of time but solely as a result of achievement of the financial vesting targets. Options granted in December 2017 and thereafter include a service condition which requires a minimum two or four year waiting period from the grant date along with the attainment of the applicable financial vesting target. The targets are measured annually on December 31. The amount of stock-based compensation expense recognized in the period is based upon management’s estimate of when the financial vesting targets may be achieved. Any change in management’s estimate could result in the remaining amount of stock-based compensation expense to be accelerated, spread out over a longer period, or reversed. This may cause volatility in the recognition of stock-based compensation expense in future periods and could materially affect the Company’s earnings.

16




17


The Company recognized stock-based compensation expense in its Consolidated Financial Statements in the three and nine months ended March 31,September 30, 2020 and 2019, respectively, as follows: 
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Stock-based compensation expense$6,467 $5,453 $20,458 $15,555 
Less: Deferred tax benefit(1,229)(1,042)(3,932)(2,959)
Stock-based compensation expense, net of tax$5,238 $4,411 $16,526 $12,596 
 Three Months Ended March 31,
 2020 2019
Stock-based compensation expense$6,929
 $5,038
Less: Deferred tax benefit(1,381) (946)
Stock-based compensation expense, net of tax$5,548
 $4,092
In September 2020, the Company revised its estimate of when some vesting targets are expected to be achieved which resulted in the amount of stock-based compensation expense to be spread out over a longer period than its initial estimate made at December 31, 2019. This change in management's estimate did not result in a material change to the Company's stock-based compensation expense recognized during the three or nine month periods ended September 30, 2020.
As of March 31,September 30, 2020, there was approximately $66,934$59,056 of unrecognized compensation cost remaining related to unvested employee stock options that management expects will vest and is being amortized.
The Company issues new common shares associated with the exercise of stock options. The total intrinsic value of options exercised during the threenine months ended March 31,September 30, 2020 was $18,687.$25,788. The total options exercisable as of March 31,September 30, 2020 had an intrinsic value of $81,585.$96,715. The total intrinsic value for options exercisable is calculated as the difference between the market value of the Company’s common stock as of March 31,September 30, 2020 and the weighted average exercise price of the options. The market value of the Company’s common stock as of March 31,September 30, 2020 was $46.34$50.72 as reported by the Nasdaq Stock Market, LLC. The weighted average exercise price of the options exercisable as of March 31,September 30, 2020 was $37.85.$38.11. Total options that were outstanding as of March 31,September 30, 2020 were 15,055,000.14,767,000. Total options that were exercisable as of March 31,September 30, 2020 were 7,647,000.7,352,000.
Common Stock Buyback
The Company’s Board of Directors, under multiple authorizations, has authorized the repurchase of the Company’s common stock on the open market or through private transactions. The Company purchased 2,433,0006,185,000 shares at a total cost of $127,432$325,644 during the threenine months ended March 31,September 30, 2020, which reduced the total shares outstanding of common stock. The cost of stock purchases during the period includes the cost of certain transactions that settled in the following quarter. As of September 30, 2020, the Company had approximately $41,885 of authorization remaining for the purchase of common stock under the program. On March 18,October 20, 2020 the Company's Board of Directors approved an increase in the stock repurchase program by an additional $250,000. As of March 31, 2020,$250,000, increasing the Company hadavailable authorization to approximately $240,097 of authorization remaining for the purchase of common stock under the program.$291,885.
The Company immediately retires its common stock when purchased. Upon retirement, the Company reduces Capital in excess of par value for the average capital per share outstanding and the remainder is charged against Retained earnings. If the Company reduces its Retained earnings to zero, any subsequent purchases of common stock will be charged entirely to Capital in excess of par value.

Cash Dividend
On June 3, 2020, the Board of Directors declared a cash dividend of $0.35 per share on the Company's common stock, which was paid on June 23, 2020, to shareholders of record on June 15, 2020. Cash dividends declared during the nine months ended September 30, 2020 and 2019 were $51,462 and $49,984, respectively.





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Note 8.    Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss, net of tax, are as follows: 
Foreign
Currency
Translation
Adjustments
Unrealized
Gains (Losses)
on Investments		Accumulated Other Comprehensive Loss
Balance, January 1, 2020$(23,969)$465 $(23,504)
Other comprehensive loss before reclassifications(5,051)702 (4,349)
Amounts reclassified from accumulated other comprehensive loss0 455 455 
Net current-period other comprehensive loss(5,051)1,157 (3,894)
Balance, September 30, 2020$(29,020)$1,622 $(27,398)
 
Foreign
Currency
Translation
Adjustments
 
Unrealized
Gains (Losses)
on Investments
 Accumulated Other Comprehensive Loss
Balance, January 1, 2020$(23,969) $465
 $(23,504)
      
Other comprehensive loss before reclassifications(13,075) 1,131
 (11,944)
Amounts reclassified from accumulated other comprehensive loss—
 100
 100
Net current-period other comprehensive loss(13,075) 1,231
 (11,844)
      
Balance, March 31, 2020$(37,044) $1,696
 $(35,348)


Note 9.    Business Segment Information
The Company’s reportable business segments are:
Private Banks – provides outsourced investment processing and investment management platforms to banks and trust institutions, independent wealth advisers and financial advisors worldwide;

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Investment Advisors – provides investment management and investment processing platforms to affluent investors through a network of independent registered investment advisors, financial planners and other investment professionals in the United States;
Institutional Investors – provides investment management and administrative outsourcing platforms to retirement plan sponsors, healthcare systems, higher education and other not-for-profit organizations worldwide;
Investment Managers – provides investment operations outsourcing platforms to fund companies, banking institutions, traditional and non-traditional investment managers worldwide and family offices in the United States; and
Investments in New Businesses – focuses on providing investment management solutions to ultra-high-net-worth families residing in the United States; developing internet-based investment services; developing network and data protection services; modularizing larger technology platforms into stand-alone components; entering new markets; and conducting other research and development activities.
The information in the following tables is derived from the Company’s internal financial reporting used for corporate management purposes. There are no inter-segment revenues for the three and nine months ended March 31,September 30, 2020 and 2019. Management evaluates Company assets on a consolidated basis during interim periods. The accounting policies of the reportable business segments are the same as those described in Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The following tables highlight certain financial information about each of the Company’s business segments for the three months ended March 31,September 30, 2020 and 2019:
Private
Banks
Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
 For the Three Months Ended September 30, 2020
Revenues$114,792 $103,189 $79,583 $123,846 $3,517 $424,927 
Expenses113,066 51,519 37,812 79,838 13,315 295,550 
Operating profit (loss)$1,726 $51,670 $41,771 $44,008 $(9,798)$129,377 
Private
Banks
 
Investment
Advisors
 
Institutional
Investors
 
Investment
Managers
 
Investments
In New
Businesses
 TotalPrivate
Banks		Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
For the Three Months Ended March 31, 2020 For the Three Months Ended September 30, 2019
Revenues$113,221
 $102,321
 $79,203
 $116,629
 $3,388
 $414,762
Revenues$117,250 $103,033 $80,337 $112,186 $3,448 $416,254 
Expenses110,653
 52,432
 38,267
 74,289
 10,910
 286,551
Expenses110,788 51,509 37,268 71,889 7,926 279,380 
Operating profit (loss)$2,568
 $49,889
 $40,936
 $42,340
 $(7,522) $128,211
Operating profit (loss)$6,462 $51,524 $43,069 $40,297 $(4,478)$136,874 
 
Private
Banks
 
Investment
Advisors
 
Institutional
Investors
 
Investment
Managers
 
Investments
In New
Businesses
 Total
 For the Three Months Ended March 31, 2019
Revenues$118,259
 $94,761
 $80,113
 $104,649
 $3,038
 $400,820
Expenses110,962
 52,502
 38,754
 69,066
 5,940
 277,224
Operating profit (loss)$7,297
 $42,259
 $41,359
 $35,583
 $(2,902) $123,596


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A reconciliation of the total operating profit reported for the business segments to income from operations in the Consolidated Statements of Operations for the three months ended March 31,September 30, 2020 and 2019 is as follows:
 2020 2019
Total operating profit from segments$128,211
 $123,596
Corporate overhead expenses(17,983) (20,035)
Income from operations$110,228
 $103,561

20202019
Total operating profit from segments$129,377 $136,874 
Corporate overhead expenses(18,040)(16,237)
Income from operations$111,337 $120,637 
The following tables provide additional information for the three months ended March 31,September 30, 2020 and 2019 pertaining to our business segments:
Capital Expenditures (1) Depreciation Capital Expenditures (1)Depreciation
2020 2019 2020 2019 2020201920202019
Private Banks$9,925
 $8,461
 $3,882
 $3,549
Private Banks$7,652 $8,018 $4,222 $3,640 
Investment Advisors5,390
 3,947
 1,151
 1,179
Investment Advisors3,234 4,468 1,255 1,162 
Institutional Investors1,358
 871
 302
 405
Institutional Investors698 1,070 298 393 
Investment Managers9,032
 3,349
 1,812
 1,771
Investment Managers2,776 5,311 1,818 1,793 
Investments in New Businesses418
 241
 70
 91
Investments in New Businesses144 379 97 101 
Total from business segments$26,123
 $16,869
 $7,217
 $6,995
Total from business segments$14,504 $19,246 $7,690 $7,089 
Corporate overhead997
 385
 256
 336
Corporate overhead274 663 255 320 
$27,120
 $17,254
 $7,473
 $7,331
$14,778 $19,909 $7,945 $7,409 
(1) Capital expenditures include additions to property and equipment and capitalized software.
 Amortization
 20202019
Private Banks$7,505 $7,322 
Investment Advisors2,683 2,609 
Institutional Investors426 440 
Investment Managers2,343 2,334 
Investments in New Businesses186 185 
Total from business segments$13,143 $12,890 
Corporate overhead57 57 
$13,200 $12,947 
 Amortization
 2020 2019
Private Banks$7,421
 $7,141
Investment Advisors2,652
 2,523
Institutional Investors427
 433
Investment Managers2,335
 2,339
Investments in New Businesses185
 185
Total from business segments$13,020
 $12,621
Corporate overhead57
 58
 $13,077
 $12,679
The following tables highlight certain financial information about each of the Company’s business segments for the nine months ended September 30, 2020 and 2019:
Private
Banks		Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
 For the Nine Months Ended September 30, 2020
Revenues$335,739 $299,218 $235,309 $359,815 $10,254 $1,240,335 
Expenses331,442 154,100 113,016 228,795 37,691 865,044 
Operating profit (loss)$4,297 $145,118 $122,293 $131,020 $(27,437)$375,291 
Private
Banks		Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
 For the Nine Months Ended September 30, 2019
Revenues$351,601 $297,916 $241,559 $326,037 $9,547 $1,226,660 
Expenses329,540 154,569 115,383 209,326 20,663 829,481 
Operating profit (loss)$22,061 $143,347 $126,176 $116,711 $(11,116)$397,179 




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A reconciliation of the total operating profit reported for the business segments to income from operations in the Consolidated Statements of Operations for the nine months ended September 30, 2020 and 2019 is as follows:
20202019
Total operating profit from segments$375,291 $397,179 
Corporate overhead expenses(53,414)(52,845)
Income from operations$321,877 $344,334 
The following tables provide additional information for the nine months ended September 30, 2020 and 2019 pertaining to our business segments:
 Capital Expenditures (1)Depreciation
 2020201920202019
Private Banks$24,211 $25,240 $12,069 $10,774 
Investment Advisors12,427 12,973 3,578 3,506 
Institutional Investors3,085 2,990 901 1,212 
Investment Managers19,067 13,535 5,499 5,384 
Investments in New Businesses894 964 243 302 
Total from business segments$59,684 $55,702 $22,290 $21,178 
Corporate Overhead2,069 1,634 768 984 
$61,753 $57,336 $23,058 $22,162 
(1) Capital expenditures include additions to property and equipment and capitalized software.
 Amortization
 20202019
Private Banks$22,390 $21,680 
Investment Advisors7,999 7,682 
Institutional Investors1,280 1,300 
Investment Managers7,020 7,019 
Investments in New Businesses556 555 
Total from business segments$39,245 $38,236 
Corporate Overhead172 171 
$39,417 $38,407 

Note 10.    Income Taxes
The gross liability for unrecognized tax benefits at March 31,September 30, 2020 and December 31, 2019 was $16,207$16,348 and $15,356, respectively, exclusive of interest and penalties, of which $16,133$16,104 and $15,194 would affect the effective tax rate if the Company were to recognize the tax benefit.
The Company classifies interest and penalties on unrecognized tax benefits as income tax expense. As of March 31,September 30, 2020 and December 31, 2019, the combined amount of accrued interest and penalties related to tax positions taken on tax returns was $2,200$2,212 and $1,962, respectively.

September 30, 2020December 31, 2019
Gross liability for unrecognized tax benefits, exclusive of interest and penalties$16,348 $15,356 
Interest and penalties on unrecognized benefits2,212 1,962 
Total gross uncertain tax positions$18,560 $17,318 
Amount included in Current liabilities$3,986 $4,896 
Amount included in Other long-term liabilities14,574 12,422 
$18,560 $17,318 
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 March 31, 2020 December 31, 2019
Gross liability for unrecognized tax benefits, exclusive of interest and penalties$16,207
 $15,356
Interest and penalties on unrecognized benefits2,200
 1,962
Total gross uncertain tax positions$18,407
 $17,318
Amount included in Current liabilities$4,950
 $4,896
Amount included in Other long-term liabilities13,457
 12,422
 $18,407
 $17,318




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The Company's effective income tax rate for the three and nine months ended March 31,September 30, 2020 and 2019 differs from the federal income tax statutory rate due to the following:
  Three Months Ended March 31,
  2020 2019
Statutory rate 21.0 % 21.0 %
State taxes, net of federal tax benefit 3.1
 2.6
Foreign tax expense and tax rate differential (0.1) (0.1)
Tax benefit from stock option exercises (2.2) (1.1)
Other, net (0.3) (0.3)
  21.5 % 22.1 %

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Statutory rate21.0 %21.0 %21.0 %21.0 %
State taxes, net of federal tax benefit3.3 2.6 3.2 2.6 
Foreign tax expense and tax rate differential(0.2)(0.3)(0.1)(0.2)
Tax benefit from stock option exercises(0.4)(2.2)(1.0)(1.5)
Expiration of the statute of limitations(1.3)(1.2)(0.5)(0.4)
Provision-to-return adjustment(0.4)(0.6)(0.1)(0.2)
Other, net(0.6)(0.4)(0.5)(0.3)
21.4 %18.9 %22.0 %21.0 %
The decreaseincrease in the Company's effective tax rate for the three and nine months ended March 31,September 30, 2020 was primarily due to increaseddecreased tax benefits related to the higherlower volume of stock option exercises asin 2020 compared to the three months ended March 31, 2019.prior year periods as well as an increase in the state effective tax rate.
The Company files income tax returns in the United States on a consolidated basis and in many U.S. state and foreign jurisdictions. The Company is subject to examination of income tax returns by the Internal Revenue Service (IRS) and other domestic and foreign tax authorities. The Company is no longer subject to U.S. federal income tax examination for years before 20162017 and is no longer subject to state, local or foreign income tax examinations by authorities for years before 2015.
The Company estimates it will recognize $4,950$3,986 of gross unrecognized tax benefits. This amount is expected to be paid within one year or to be removed at the expiration of the statute of limitations and resolution of income tax audits and is netted against the current payable account. These unrecognized tax benefits are related to tax positions taken on certain federal, state, and foreign tax returns. However, the timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. While it is reasonably possible that some issues under examination could be resolved in the next twelve months, based upon the current facts and circumstances, the Company cannot reasonably estimate the timing of such resolution or the total range of potential changes as it relates to the current unrecognized tax benefits that are recorded as part of the Company’s financial statements.

Note 11.    Commitments and Contingencies
In the ordinary course of business, the Company from time to time enters into contracts containing indemnification obligations of the Company. These obligations may require the Company to make payments to another party upon the occurrence of certain events including the failure by the Company to meet its performance obligations under the contract. These contractual indemnification provisions are often standard contractual terms of the nature customarily found in the type of contracts entered into by the Company. In many cases, there are no stated or notional amounts included in the indemnification provisions. There are no amounts reflected on the Consolidated Balance Sheets as of March 31,September 30, 2020 and December 31, 2019 related to these indemnifications.
Stanford Trust Company Litigation
SEI has been named in 7 lawsuits filed in Louisiana courts; 4 of the cases also name SPTC as a defendant. The underlying allegations in all actions relate to the purported role of SPTC in providing back-office services to Stanford Trust Company. The complaints allege that SEI and SPTC participated in some manner in the sale of “certificates of deposit” issued by Stanford International Bank so as to be a “seller” of the certificates of deposit for purposes of primary liability under the Louisiana Securities Law or so as to be secondarily liable under that statute for sales of certificates of deposit made by Stanford Trust Company. NaN of the actions also include claims for violations of the Louisiana Racketeering Act

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and possibly conspiracy, and a third also asserts claims of negligence, breach of contract, breach of fiduciary duty, violations of the uniform fiduciaries law, negligent misrepresentation, detrimental reliance, violations of the Louisiana Racketeering Act, and conspiracy.
The procedural status of the 7 cases varies. The Lillie case, filed originally in the 19th Judicial District Court for the Parish of East Baton Rouge, was brought as a class action and is procedurally the most advanced of the cases. SEI and SPTC filed exceptions, which the Court granted in part, dismissing claims under the Louisiana Unfair Trade Practices Act




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and permitting the claims under the Louisiana Securities Law to go forward. On March 11, 2013, newly-added insurance carrier defendants removed the case to the United States District Court for the Middle District of Louisiana. On August 7, 2013, the Judicial Panel on Multidistrict Litigation transferred the matter to the Northern District of Texas where MDL 2099, In re: Stanford Entities Securities Litigation (“the Stanford MDL”), is pending. On September 22, 2015, the District Court on the motion of SEI and SPTC dismissed plaintiffs’ claims for primary liability under Section 714(A) of the Louisiana Securities Law, but declined to dismiss plaintiffs’ claims for secondary liability under Section 714(B) of the Louisiana Securities Law based on the allegations pled by plaintiffs. On November 4, 2015, the District Court granted SEI and SPTC's motion to dismiss plaintiffs' claims under Section 712(D) of the Louisiana Securities Law. Consequently, the only claims of plaintiffs remaining in Lillie are plaintiffs' claims for secondary liability against SEI and SPTC under Section 714(B) of the Louisiana Securities Law. On May 2, 2016, the District Court certified the class as being "all persons for whom Stanford Trust Company purchased or renewed Stanford Investment Bank Limited certificates of deposit in Louisiana between January 1, 2007 and February 13, 2009". Notice of the pendency of the class action was mailed to potential class members on October 4, 2016.
On December 1, 2016, a group of plaintiffs who opted out of the Lillie class filed a complaint against SEI and SPTC in the United States District Court in the Middle District of Louisiana (“Ahders Complaint”), alleging claims essentially the same as those in Lillie. In January 2017, the Judicial Panel on Multidistrict Litigation transferred the Ahders proceeding to the Northern District of Texas and the Stanford MDL. During February 2017, SEI and SPTC filed their response to the Ahders Complaint, and in March 2017 the District Court for the Northern District of Texas approved the stipulated dismissal of all claims in this Complaint predicated on Section 712(D) or Section 714(A) of the Louisiana Securities Law. In both cases, as a result of the proceedings in the Northern District of Texas, only the plaintiffs’ secondary liability claims under Section 714(B) of the Louisiana Securities Law remain. Limited discovery and motions practice have occurred, including SEI and SPTC’s filing of a dispositive summary judgment motion in the Lillie proceeding. On January 31, 2019, the Judicial Panel on Multidistrict Litigation remanded the Lillie and Ahders proceedings to the Middle District of Louisiana.
With respect to the Lillie proceeding, on July 9, 2019, the District Court issued an order granting SEI’s Summary Judgment Motion to dismiss the remaining Section 714(B) claim and denying Plaintiffs’ Motion for Continuance of SEI and SPTC’s Motion for Summary Judgment pursuant to Rule 56(d). On July 17, 2019, Plaintiffs filed a Motion for Reconsideration and/or New Trial. The Court denied Plaintiffs’ Motion for Reconsideration and/or New Trial and entered a Final Judgment in favor of SEI and SPTC on August 15, 2019. On August 27, 2019, Plaintiffs-Appellants filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit of the District Court's dismissal of the Lillie matter. On November 20, 2019, Plaintiffs-Appellants filed a Motion in Support of the Notice of Appeal. On January 17, 2020, SEI and SPTC timely filed their brief in opposition to the Plaintiffs-Appellants' motion for appeal. On February 7, 2020, Plaintiffs-AppellantsPlaintiffs- Appellants filed their reply brief.The parties are currently waiting for oral argument to be scheduled.
With respect to the Ahders proceeding, on July 16, 2019, SEI and SPTC filed a Motion for Summary Judgment pursuant to Rule 56(d) to have the remaining Section 714(B) claim dismissed. On January 24, 2020, the District Court issued an order granting SEI’s Summary Judgment Motion to dismiss the remaining Section 714(B) claim. On March 17, 2020, Plaintiffs-Appellants filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit of the District Court's dismissal of the Ahders matter. Similar to the Lillie matter, all motions and briefs in support of the parties’ positions have been filed and the parties are currently waiting for oral argument to be scheduled.
Another case, filed in the 23rd Judicial District Court for the Parish of Ascension, also was removed to federal court and transferred by the Judicial Panel on Multidistrict Litigation to the Northern District of Texas and the Stanford MDL. The schedule for responding to that Complaint has not yet been established.
NaN additional cases remain in the Parish of East Baton Rouge. Plaintiffs filed petitions in 2010 and have granted SEI and SPTC indefinite extensions to respond. No material activity has taken place since.
In 2 additional cases, filed in East Baton Rouge and brought by the same counsel who filed the Lillie action, virtually all of the litigation to date has involved motions practice and appellate litigation regarding the existence of federal subject matter jurisdiction under the federal Securities Litigation Uniform Standards Act (SLUSA). The matters were removed to the United States District Court for the Northern District of Texas and consolidated. The court then dismissed the action under SLUSA. The Court of Appeals for the Fifth Circuit reversed that order, and the Supreme Court of the United States affirmed the Court of Appeals judgment on February 26, 2014. The matters were remanded to state court and no material activity has taken place since that date.

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While the outcome of this litigation remains uncertain, SEI and SPTC believe that they have valid defenses to plaintiffs' claims and intend to defend the lawsuits vigorously. Because of uncertainty in the make-up of the Lillie class, the specific theories of liability that may survive a motion for summary judgment or other dispositive motion, the relative lack of discovery regarding damages, causation, mitigation and other aspects that may ultimately bear upon loss, the Company is not reasonably able to provide an estimate of loss, if any, with respect to the foregoing lawsuits.
SEI Capital Accumulation Plan Litigation

On September 28, 2018, a class action complaint was filed in the United States District Court for the Eastern District of Pennsylvania by Gordon Stevens, individually and as the representative of similarly situated persons, and on behalf of the SEI Capital Accumulation Plan (the “Plan”) naming the Company and its affiliated and/or related entities SEI Investments Management Corporation, SEI Capital Accumulation Plan Design Committee, SEI Capital Accumulation Plan Investment Committee, SEI Capital Accumulation Plan Administration Committee, and John Does 1-30 as defendants (the “Stevens Complaint”). The Stevens Compliant seeks unspecified damages for defendants’ breach of fiduciary duties under ERISA with respect to selecting and monitoring the Plan’s investment options and by retaining affiliated investment products in the Plan.
Although SEI believes its defenses against the plaintiff’s allegations were valid, the Company agreed to settle this matter in the very early stages of the litigation in order to avoid the high cost of protracted class-action litigation and internal distractions such cases bring. On March 3, 2020, the Court issued its Approval Order approving the settlement agreement. The financial impact of the settlement agreement is not material to the Company.

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SS&C Advent Matter
On February 28, 2020, SEI Global Services, Inc. ("SGSI"), a wholly-owned subsidiary of the Company, filed a complaint under seal in the United States District Court for the Eastern District of Pennsylvania against SS&C Advent ("Advent") and SS&C Technologies Holdings, Inc. ("SS&C") alleging that SS&C and Advent breached the terms of the contract between the parties and asking the Court to hold SS&C and Advent to their bargained-for obligations (the "Advent Matter"). In addition to Breach of Contract, the complaint also includes counts for Declaratory Judgment, Tortious Interference with Existing and Prospective Contractual Relations, Violation of the New York General Business Law Section 349, Violations of Section 2 of the Sherman Antitrust Act, Promissory Estoppel and Breach of the Covenant of Good Faith and Fair Dealing. SGSI seeks various forms of relief, including declaratory judgment, specific performance under the contract, and monetary damages, including treble damages and attorney’s fees. Additionally, on February 28, 2020, SGSI
Following various procedural actions, including an amendment of the Company’s complaint to include additional breach of contract claims, SS&C and Advent filed a related Motionmotion to File Complaint Under Seal (the "Under Seal Motion") requesting thatdismiss the Advent Matter complaint be maintained under seal andCompany’s compliant.The oral argument regarding the motion to dismiss has occurred. The Court has not a matter of public record.
On March 3, 2020, prior to any motions being filed by any ofyet issued its judgment in the parties, the Court denied SGSI’s Under Seal Motion. The complaint became a matter of public record on April 15, 2020.matter.
SEI does not believe that it will have to change providers under the current terms of its contract with SS&C or Advent and that the process of litigating its rights under this contract may be a multi-year process. Consequently, SEI does not believe that the Advent Matter will create any consequence to the services it provides to its clients in the near term. SEI believes that it has alternatives available to it that will enable it to continue to provide currently provided services to its clients in all material respects in the unlikely event that there ultimately is a negative outcome in the Advent Matter.
SEI believes it has a strong basis for proving the actions it alleges in the Advent Matter and looks forward to the opportunity to assert its rights under contract. SEI expects the financial impact of litigating the Advent Matter to be immaterial.
Other Matters
The Company is also a party to various other actions and claims arising in the normal course of business that the Company does not believe are material. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position or the manner in which the Company conducts its business. Currently, the Company does not believe the amount of losses associated with these matters can be estimated. While the Company does not believe that the amount of such losses will, when liquidated or estimable, be material to its financial position, the assumptions may be incorrect and any such loss could have a material adverse effect on the Company's results of operations or the manner in which the Company conducts its business in the period(s) during which the underlying matters are resolved.


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Note 12.    Goodwill and Intangible Assets
On April 2, 2018, the Company acquired all ownership interests of Huntington Steele, LLC (Huntington Steele). The total purchase price was allocated to Huntington Steele’s net tangible and intangible assets based upon their estimated fair values at the date of purchase. The excess purchase price over the value of the identifiable intangible assets was recorded as goodwill. The total amount of goodwill from this transaction amounted to $11,499 and is included on the accompanying Consolidated Balance Sheets. The total purchase price for Huntington Steele included a contingent purchase price payable to the sellers upon the attainment of specified financial measures determined at various intervals occurring between 2019 and 2023. The Company made payments of $433 and $633 during 2019 and the threenine months ended March 31,September 30, 2020, respectively, to the sellers and recorded a fair value adjustment related to the contingent consideration. As of March 31,September 30, 2020, the fair valuecurrent portion of the contingent consideration of $10,955$3,577 is included in Accrued liabilities on the accompanying Balance Sheet. The long-term portion of the contingent consideration of $8,045 is included in Other long-term liabilities on the accompanying Balance Sheet.
In July 2017, the Company acquired all ownership interests of Archway Technology Partners, LLC, Archway Finance & Operations, Inc. and Keystone Capital Holdings, LLC (collectively, Archway), a provider of operating technologies and services to the family office industry. The total purchase price was allocated to Archway’s net tangible and intangible assets based upon their estimated fair values at the date of purchase. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. The total amount of goodwill from this transaction amounted to $52,990 and is included on the accompanying Consolidated Balance Sheets.
There were 0 changes to the Company's goodwill during the threenine months ended March 31,September 30, 2020.
The Company recognized $921$2,763 of amortization expense related to the intangible assets acquired through the acquisitions of Huntington Steele and Archway during the threenine months ended March 31,September 30, 2020 and 2019.





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Note 13.    Revenues from Contracts with Customers
The Company’s principal sources of revenues are: (1) asset management, administration and distribution fees primarily earned based upon a contractual percentage of net assets under management or administration; and (2) information processing and software servicing fees that are either recurring and primarily earned based upon the number of trust accounts being serviced or a percentage of the total average daily market value of the clients' assets processed on the Company's platforms, or non-recurring and based upon project-oriented contractual agreements related to client implementations.
Disaggregation of Revenue
The following tables provide additional information pertaining to our revenues disaggregated by major product line and primary geographic market based on the location of the use of the products or services for each of the Company’s business segments for the three months ended March 31,September 30, 2020 and 2019:

Private
Banks
Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
Major Product Lines:For the Three Months Ended September 30, 2020
Investment management fees from pooled investment products$32,256 $68,287 $13,417 $180 $356 $114,496 
Investment management fees from investment management agreements421 29,761 65,811 0 3,041 99,034 
Investment operations fees446 0 0 113,037 0 113,483 
Investment processing fees - PaaS47,393 0 0 0 0 47,393 
Investment processing fees - SaaS27,567 0 0 3,479 0 31,046 
Professional services fees5,663 0 0 2,016 0 7,679 
Account fees and other1,046 5,141 355 5,134 120 11,796 
Total revenues$114,792 $103,189 $79,583 $123,846 $3,517 $424,927 
Primary Geographic Markets:
United States$74,633 $103,189 $62,699 $116,196 $3,517 $360,234 
United Kingdom25,234 0 12,930 0 0 38,164 
Canada10,596 0 1,298 0 0 11,894 
Ireland4,329 0 2,526 7,650 0 14,505 
Other0 0 130 0 0 130 
Total revenues$114,792 $103,189 $79,583 $123,846 $3,517 $424,927 
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Private
Banks		Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
Major Product Lines:For the Three Months Ended September 30, 2019
Investment management fees from pooled investment products$34,074 $72,150 $13,602 $161 $323 $120,310 
Investment management fees from investment management agreements314 26,240 66,373 0 3,099 96,026 
Investment operations fees434 0 0 102,543 0 102,977 
Investment processing fees - PaaS43,462 0 0 0 0 43,462 
Investment processing fees - SaaS34,018 0 0 2,789 0 36,807 
Professional services fees3,533 0 0 1,398 0 4,931 
Account fees and other1,415 4,643 362 5,295 26 11,741 
Total revenues$117,250 $103,033 $80,337 $112,186 $3,448 $416,254 
Primary Geographic Markets:
United States$76,864 $103,033 $63,405 $104,859 $3,448 $351,609 
United Kingdom24,604 0 12,717 0 0 37,321 
Canada10,985 0 1,743 0 0 12,728 
Ireland4,797 0 2,310 7,327 0 14,434 
Other0 0 162 0 0 162 
Total revenues$117,250 $103,033 $80,337 $112,186 $3,448 $416,254 
 
Private
Banks
 
Investment
Advisors
 
Institutional
Investors
 
Investment
Managers
 
Investments
In New
Businesses
 Total
Major Product Lines:For the Three Months Ended March 31, 2020
Investment management fees from pooled investment products$32,844
 $70,180
 $13,317
 $193
 $359
 $116,893
Investment management fees from investment management agreements347
 27,420
 65,710
 —
 2,963
 96,440
Investment operations fees475
 —
 —
 106,201
 —
 106,676
Investment processing fees - PaaS46,153
 —
 —
 —
 —
 46,153
Investment processing fees - SaaS29,169
 —
 —
 3,251
 —
 32,420
Professional services fees2,715
 —
 —
 1,274
 —
 3,989
Account fees and other1,518
 4,721
 176
 5,710
 66
 12,191
Total revenues$113,221
 $102,321
 $79,203
 $116,629
 $3,388
 $414,762
            
Primary Geographic Markets:           
United States$74,014
 $102,321
 $62,089
 $108,443
 $3,388
 $350,255
United Kingdom24,359
 —
 12,824
 —
 —
 37,183
Canada10,401
 —
 1,598
 —
 —
 11,999
Ireland4,447
 —
 2,530
 8,186
 —
 15,163
Other—
 —
 162
 —
 —
 162
Total revenues$113,221
 $102,321
 $79,203
 $116,629
 $3,388
 $414,762

 
Private
Banks
 
Investment
Advisors
 
Institutional
Investors
 
Investment
Managers
 
Investments
In New
Businesses
 Total
Major Product Lines:For the Three Months Ended March 31, 2019
Investment management fees from pooled investment products$32,973
 $66,623
 $13,661
 $205
 $309
 $113,771
Investment management fees from investment management agreements702
 23,838
 66,171
 —
 2,698
 93,409
Investment operations fees376
 —
 —
 94,867
 —
 95,243
Investment processing fees - PaaS43,911
 —
 —
 —
 —
 43,911
Investment processing fees - SaaS34,708
 —
 —
 2,549
 —
 37,257
Professional services fees3,777
 —
 —
 1,417
 —
 5,194
Account fees and other1,812
 4,300
 281
 5,611
 31
 12,035
Total revenues$118,259
 $94,761
 $80,113
 $104,649
 $3,038
 $400,820
            
Primary Geographic Markets:           
United States$77,454
 $94,761
 $62,325
 $98,058
 $3,038
 $335,636
United Kingdom25,350
 —
 13,466
 —
 —
 38,816
Canada10,660
 —
 1,727
 —
 —
 12,387
Ireland4,795
 —
 2,311
 6,591
 —
 13,697
Other—
 —
 284
 —
 —
 284
Total revenues$118,259
 $94,761
 $80,113
 $104,649
 $3,038
 $400,820

The following tables provide additional information pertaining to our revenues disaggregated by major product line and primary geographic market based on the location of the use of the products or services for each of the Company’s business segments for the nine months ended September 30, 2020 and 2019:
Private
Banks		Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
Major Product Lines:For the Nine Months Ended September 30, 2020
Investment management fees from pooled investment products$95,407 $200,718 $39,628 $536 $1,063 $337,352 
Investment management fees from investment management agreements1,060 83,726 194,445 0 8,912 288,143 
Investment operations fees1,359 0 0 328,316 0 329,675 
Investment processing fees - PaaS137,737 0 0 0 0 137,737 
Investment processing fees - SaaS84,783 0 0 10,122 0 94,905 
Professional services fees11,535 — 0 4,674 0 16,209 
Account fees and other3,858 14,774 1,236 16,167 279 36,314 
Total revenues$335,739 $299,218 $235,309 $359,815 $10,254 $1,240,335 
Primary Geographic Markets:
United States$220,254 $299,218 $185,202 $335,776 $10,254 $1,050,704 
United Kingdom71,938 0 38,034 0 0 109,972 
Canada30,723 0 4,327 0 0 35,050 
Ireland12,824 0 7,321 24,039 0 44,184 
Other0 0 425 0 0 425 
Total revenues$335,739 $299,218 $235,309 $359,815 $10,254 $1,240,335 


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Private
Banks		Investment
Advisors		Institutional
Investors		Investment
Managers		Investments
In New
Businesses		Total
Major Product Lines:For the Nine Months Ended September 30, 2019
Investment management fees from pooled investment products$100,498 $208,860 $41,062 $550 $957 $351,927 
Investment management fees from investment management agreements1,299 75,526 199,620 0 8,510 284,955 
Investment operations fees1,172 0 0 297,342 0 298,514 
Investment processing fees - PaaS130,529 0 0 0 0 130,529 
Investment processing fees - SaaS103,502 0 0 7,931 0 111,433 
Professional services fees9,896 0 0 4,363 0 14,259 
Account fees and other4,705 13,530 877 15,851 80 35,043 
Total revenues$351,601 $297,916 $241,559 $326,037 $9,547 $1,226,660 
Primary Geographic Markets:
United States$229,207 $297,916 $189,383 $304,711 $9,547 $1,030,764 
United Kingdom75,649 0 39,323 0 0 114,972 
Canada32,527 0 5,178 0 0 37,705 
Ireland14,218 0 6,977 21,326 0 42,521 
Other0 0 698 0 0 698 
Total revenues$351,601 $297,916 $241,559 $326,037 $9,547 $1,226,660 
Investment management fees from pooled investment products - Revenues associated with clients' assets invested in Company-sponsored pooled investment products. Contractual fees are stated as a percentage of the average market value of assets under management and collected on a monthly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.
Investment management fees from investment management agreements - Revenues based on assets of clients of the Institutional Investors segment primarily invested in Company-sponsored products. Each client is charged an investment management fee that is stated as a percentage of the average market value of all assets under management. The client is billed directly on a quarterly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.
Revenues associated with the separately managed account program offered to clients of the Investment Advisors segment through registered investment advisors located throughout the United States. The contractual fee is stated as a percentage of the average market value of all assets invested in the separately managed account and collected on a quarterly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.
Investment operations fees - Revenues earned from accounting and administrative services, distribution support services and regulatory and compliance services to investment management firms and family offices. The Company contracts directly with the investment management firm or family office. The contractual fees are stated as a percentage of net assets under administration and billed when asset valuations are finalized. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.
Investment processing fees - Platform as a Service - Revenues associated with clients that outsource their entire investment operation and back-office processing functions. Through the use of the Company's proprietary platforms, the Company assumes all back-office investment processing services including investment processing, custody and safekeeping of assets, income collections, securities settlement and other related trust activities. The contractual fee is based on a monthly fee plus additional fees determined on a per-account or per-transaction basis. Contractual fees can also be stated as a percentage of the value of assets processed on the Company's platforms each month as long as the fee is in excess of a monthly contractual minimum. The client is billed directly on a monthly basis. Revenues are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.




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Investment processing fees - Software as a Service - Revenues associated with clients that outsource investment processing technology software and computer processing by accessing our proprietary software and data center remotely but retain responsibility for all investment operations, client administration and other back-office trust operations. The contractual fee is based on a monthly fee plus additional fees determined on a per-account or per-transaction basis. The client is billed directly on a monthly basis. Revenues are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.
Professional services fees - Revenues associated with the business services migration for investment processing clients of the Private Banks segment and investment operations clients of the Investment Managers segment. In addition, Professional services include other services such as business transformation consulting. Typically, fees are stated as a contractual fixed fee. The client is billed directly and fees are collected according to the terms of the agreement.
Account fees and other - Revenues associated with custody account servicing, account terminations, reimbursements received for out-of-pocket expenses, and other fees for the provision of ancillary services.
Revenue is recognized by the Company when the performance obligations are satisfied and transfer of control to the client is completed. The majority of the Company’s performance obligations are satisfied and control is transferred to the client continuously. Therefore, revenue is recognized on a monthly basis. The amount of revenue recognized reflects the amount of consideration expected to be received by the Company in exchange for satisfied performance obligations.
The Company does not disclose the value of unsatisfied performance obligations as the majority of its contracts relate to: 1) contracts with an original term of one year or less; 2) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed; and 3) contracts that are based on the value of assets under management or administration.


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28



Item 2.    Management’sManagement��s Discussion and Analysis of Financial Condition and Results of Operations.
(In thousands, except asset balances and per share data)
This discussion reviews and analyzes the consolidated financial condition, the consolidated results of operations and other key factors that may affect future performance. This discussion should be read in conjunction with the Consolidated Financial Statements, the Notes to the Consolidated Financial Statements and the Annual Report on Form 10-K for the year ended December 31, 2019.

Overview
Consolidated Summary
SEI is a leading global provider of technology-driven wealth and investment management solutions. We deliver comprehensive platforms, services and infrastructure – encompassing investment processing, investment operations and investment management – to help wealth managers, financial advisors, investment managers, institutional and private investors create and manage wealth. Investment processing fees are earned as either monthly fees for contracted services including computer processing services, software licenses and investment operations services, as well as transaction-based fees for providing securities valuation and trade-execution. A portion of investment processing fees are earnedor as a percentage of the market value of our clients' assets processed on our platforms. Investment operations and investment management fees are earned as a percentage of assets under management, administration or advised assets.assets (See Note 13 to the Consolidated Financial Statements for more information pertaining to our revenues). As of March 31,September 30, 2020, through our subsidiaries and partnerships in which we have a significant interest, we manage, advise or administer $920.2 billion$1.1 trillion in hedge, private equity, mutual fund and pooled or separately managed assets, including $283.4$330.2 billion in assets under management and $632.3$754.5 billion in client assets under administration. Our affiliate, LSV Asset Management (LSV), manages $70.9$82.1 billion of assets which are included as assets under management.
Our Condensed Consolidated Statements of Operations for the three and nine months ended March 31,September 30, 2020 and 2019 were:
Three Months Ended March 31, Percent Change* Three Months Ended September 30,Percent Change*Nine Months Ended September 30,Percent Change*
2020 2019  2020201920202019Percent Change*
Revenues$414,762
 $400,820
 3%Revenues$424,927 $416,254 2%$1,240,335 $1,226,660 1%
Expenses304,534
 297,259
 2%Expenses313,590 295,617 6%918,458 882,326 4%
Income from operations110,228
 103,561
 6%Income from operations111,337 120,637 (8)%321,877 344,334 (7)%
Net (loss) gain from investments(3,989) 1,279
 NM
Net gain (loss) from investmentsNet gain (loss) from investments776 611 27%(1,310)2,121 NM
Interest income, net of interest expense3,051
 4,100
 (26)%Interest income, net of interest expense856 4,013 (79)%5,126 12,260 (58)%
Equity in earnings from unconsolidated affiliate29,907
 37,317
 (20)%Equity in earnings from unconsolidated affiliate28,305 37,609 (25)%86,488 112,758 (23)%
Income before income taxes139,197
 146,257
 (5)%Income before income taxes141,274 162,870 (13)%412,181 471,473 (13)%
Income taxes29,955
 32,276
 (7)%Income taxes30,178 30,702 (2)%90,777 98,784 (8)%
Net income109,242
 113,981
 (4)%Net income111,096 132,168 (16)%321,404 372,689 (14)%
Diluted earnings per common share$0.72
 $0.73
 (1)%Diluted earnings per common share$0.75 $0.86 (13)%$2.14 $2.40 (11)%
* Variances noted "NM" indicate the percent change is not meaningful.
The following items had a significant impact on our financial results for the three and nine months ended March 31,September 30, 2020 and 2019:
•Revenue from Asset management, administration and distribution fees increased primarily from higher average assets under administration from market appreciation and positive cash flows from new and existing clients during 2019 and early 2020. The sharp market volatility occurring during March 2020 negatively impacted our revenues from assets under management and partially offset our revenue growth.in the Investment Managers segment. Our average assets under administration increased $85.0$73.1 billion, or 14%12%, to $679.2$697.0 billion in the first threenine months of 2020 as compared to $594.2$623.9 billion during the first threenine months of 2019.
•Our average assets under management, excluding LSV, increased $14.0$8.4 billion to $237.2$236.7 billion in the first threenine months of 2020 as compared to $223.2$228.3 billion during the first threenine months of 2019. The increase was primarily due to market appreciation from the strong recovery of capital markets during the third quarter 2020 from the downturn caused by the emergence of the COVID-19 pandemic.
•Information processing and software servicing fees in our Private Banks segment decreased by $4.7$10.8 million during the first threenine months of 2020 due to decreased non-recurring fees and previously announced client losses.
•Our proportionate share in the earnings of LSV decreased to $29.9$86.5 million in the first threenine months of 2020 as compared to $37.3$112.8 million in the first threenine months of 2019 due to lower assets under management from negative cash flows from existing clients, negative markets during March 2020market volatility caused by the COVID-19 pandemic and client losses.

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29


•We continue to invest in new business opportunities such as our One SEI strategy and IT Services offering. The majority of these costs are recorded in the Investments in New Businesses segment and are included in Consulting, outsourcing and professional fees on the accompanying Consolidated Statements of Operations.
•Our operating expenses in our Investment Managers segment increased primarily due to higher personnel costs to service new clients.
•Travel and promotional-related expenses declined by $11.9 million during the first nine months of 2020 as our sales and client relationship personnel adapted to COVID-19 restrictions.
•We capitalized $6.2$17.2 million in the first threenine months of 2020 for the SEI Wealth Platform as compared to $9.7$26.0 million in the first threenine months of 2019. Amortization expense related to SWP increased to $10.8$32.6 million during the first threenine months of 2020 as compared to $10.4$31.6 million during the first threenine months of 2019.
•Our effective tax rate during the firstthird quarter of 2020 was 21.5%21.4% as compared to 22.1%18.9% during the third quarter of 2019. Our tax rate was 22.0% during the first quarternine months of 2020 as compared to 21.0% during the first nine months of 2019. The declineincrease in our tax rate for both periods was primarily due to increasedan increase in our state effective tax rate. Our third quarter 2020 tax rate was also impacted by decreased tax benefits associated with stock option exercises.
•We continued our stock repurchase program during 2020 and purchased 2.46.2 million shares for $127.4$325.6 million in the threenine month period.

Impact to our revenues due toof COVID-19 and Other Events
The occurrence of unforeseen or catastrophic events, including the emergence of a pandemic or other widespread health emergency (oror concerns over the possibility of such an emergency),emergency, could create economic and financial disruptions, and could lead to operational difficulties that could impair our ability to manage our business. In December 2019, a novel strain of coronavirus (COVID-19) was identified in Wuhan, China. Since that time, it hasCOVID-19 quickly spread globally, leading the World Health Organization to declare the COVID-19 virus outbreak a global pandemic in March 2020. Since that time, governmental authorities have implemented numerous and varying measures to stall the spread and ameliorate the impact of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place and safer-at-home orders, business shutdowns and closures, and have also implemented multi-step policies with the goal of re-opening domestic and global markets. Certain jurisdictions have begun re-opening only to return to restrictions in the face of increases in new COVID-19 cases. Recent developments include the phased re-opening of domestic and global markets to varying degrees.
In March 2020, we executed upon our business resiliency and contingency plans. To date, our remote capabilities have proven to be effective during the disruption caused by the COVID-19 pandemic with almost the entire workforce working remotely, with only a very limited number of on-site activities in our operational offices continuing to be performed.
ToWe continue to closely monitor the extent that critical government or infrastructure functions upon which we rely are suspended, or in the event we are unable to have personnel onsite in our operational offices for an extended period, we would need to seek alternative arrangements to mitigate those issues. This could impair our ability to provide a number of services to our clients.
We are closely monitoring thedomestic and international landscape for changes in governmental measures both in the United States and in the locations where we rely on critical outsourced services, including India. Each location is interpreting ‘essential services’ somewhat differently and the restrictions on staff attending worksites are particularly stringent in India. We are closely monitoring our outsourced partners in India to assess and manage the impact of the current lockdown and we have executed plans to triage and prioritize offshore work for repatriation to our onshore locations. We have experienced very limited service disruption and there has not been a material impact on our operations to date.
services. We continue to be in regular contact with regulators, clients and vendors to confirm the measures taken to continue operating during this crisis, taking into consideration the latest announcements from state and federal authorities. We are also in continuous communication with our workforce to provide for the health and welfare of our employees working remotely and have implemented a return plan that is available for review on our website for those employees working in our operational offices. Currently, we have approximately 250 employees that routinely work out of our offices world-wide. We will monitor the ability of these individuals to work as safely as possible at our offices and make adjustments to the number of on-site personnel (either increases or decreases) accordingly. We expect that the individual circumstances of our employees regarding school, childcare, care-giving and underlying health concerns will significantly impact our ability to return staff to their primary office locations.
The majority of our revenues are based on the value of assets invested in investment products that we manage or administer which are affected by changes in the capital markets and the portfolio strategy of our clients or their customers. The market volatility occurring in March 2020 in response to measures taken to contain the spread of the COVID-19 virus negatively impacted our asset-based fee revenues and partially offset our revenue growth. Additionally, changes in the portfolio strategy of our clients or their customers in response to the market volatility resulted in asset flows into our lower margin liquidity products and negatively impacted our earnings.
TheWhile we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols designed to mitigate the potentially negative impact of COVID-19 to our employees and our business, the extent to which the spread of the COVID-19 virus impactsimpact of the pandemic on our business and financial condition, and results of operations will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions




30

that have been taken, or may be taken in the future, developments. Shouldin response to the COVID-19 virus growpandemic, the extent that critical public and private infrastructure functions upon which we rely are suspended and changes in scope or intensifyinvestor and consumer behavior in severity, or ifresponse to the current measures taken by national and local authorities to contain the effects of COVID-19 are prolonged, thepandemic. The resulting market conditions may continue to adversely affect our revenues and earnings derived from assets under management and administration.

On May 17, 2020, M.J. Brunner (Brunner), one of our third-party developers/vendors that provides development services and application management for two of our client applications, experienced a ransomware attack. We are aware that certain client data was illegally accessed and revealed by cybercriminal(s). The applications themselves were not compromised by this attack. We take our clients’ security very seriously, and we continue to work with Brunner, the FBI and our impacted clients to understand the extent to which SEI’s or our clients’ data has been exposed. We are also working with the appropriate parties with respect to notification and remediation protocols. The root cause of the attack was not predicated on vulnerability within SEI’s network, and neither SEI’s network nor operations were compromised, attacked or otherwise affected as part of this incident. While there were direct and indirect expenses associated with the incident in the second and third quarters of 2020, and we expect there will continue to be costs associated with the incident going-forward, it is not expected these will be material. We note that several regulatory bodies who routinely review our operations, including the Securities and Exchange Commission (SEC) and the United States Federal Financial Institutions Examination Council (FFIEC), have requested information with respect to, and are investigating the facts and circumstances surrounding, the ransomware attack on Brunner. We have begun producing documents and information to these bodies regarding this matter. We expect to continue to engage in discussions with these bodies and that we may be contacted by, engage with and provide information to additional governmental or regulatory bodies or authorities.

On July 1, 2020, one of our storage arrays supported by our third party vendor, Dell-EMC, failed due to the operation of an application deployed by the vendor as part of our production infrastructure. As a consequence of the hardware failure, transactional activities on our platforms were extremely limited on July 1st and 2nd. All systems are currently on-line and 100% functional. This event was not caused by a third-party actor. While there were direct and indirect expenses in the quarter, and we expect there will continue to be costs associated with the outage going-forward, it is not expected these will be material. In response to the outage, we have launched a project internally, that will be supported by third-party experts, to identify tactical and strategic improvements that we should make across our enterprise technology footprint, including a review and improvement of our technical and operational resiliency plans and capabilities. We expect that this work will lead to recommendations that will result in additional investments of capital in hardware, software and personnel. We expect these costs will include both new investments as well as a reprioritization of current spend. Currently, we are not able to fully-estimate the total amount of additional expense as this will be part of an ongoing strategy around recovery and resiliency.


27




31



Ending Asset Balances
(In millions)
 As of March 31, Percent Change
 2020 2019 
Private Banks:     
Equity and fixed-income programs$21,160
 $22,369
 (5)%
Collective trust fund programs5
 4
 25%
Liquidity funds4,143
 3,753
 10%
Total assets under management$25,308
 $26,126
 (3)%
Client assets under administration21,497
 22,886
 (6)%
Total assets$46,805
 $49,012
 (5)%
Investment Advisors:     
Equity and fixed-income programs$54,856
 $61,277
 (10)%
Collective trust fund programs2
 5
 (60)%
Liquidity funds5,969
 4,362
 37%
Total assets under management$60,827
 $65,644
 (7)%
Institutional Investors:     
Equity and fixed-income programs$72,399
 $82,578
 (12)%
Collective trust fund programs94
 79
 19%
Liquidity funds3,672
 2,529
 45%
Total assets under management$76,165
 $85,186
 (11)%
Client assets under advisement3,406
 3,694
 (8)%
Total assets$79,571
 $88,880
 (10)%
Investment Managers:     
Equity and fixed-income programs$—
 $—
 NM
Collective trust fund programs48,226
 49,232
 (2)%
Liquidity funds392
 704
 (44)%
Total assets under management$48,618
 $49,936
 (3)%
Client assets under administration (A)610,794
 585,997
 4%
Total assets$659,412
 $635,933
 4%
Investments in New Businesses:     
Equity and fixed-income programs$1,484
 $1,466
 1%
Liquidity funds152
 218
 (30)%
Total assets under management$1,636
 $1,684
 (3)%
Client assets under advisement1,056
 729
 45%
Total assets$2,692
 $2,413
 12%
LSV:     
Equity and fixed-income programs (B)$70,851
 $103,163
 (31)%
Total:     
Equity and fixed-income programs (C)$220,750
 $270,853
 (18)%
Collective trust fund programs48,327
 49,320
 (2)%
Liquidity funds14,328
 11,566
 24%
Total assets under management$283,405
 $331,739
 (15)%
Client assets under advisement4,462
 4,423
 1%
Client assets under administration (D)632,291
 608,883
 4%
Total assets under management, advisement and administration$920,158
 $945,045
 (3)%

 As of September 30,Percent Change
 20202019
Private Banks:
Equity and fixed-income programs$23,499 $22,580 4%
Collective trust fund programs6 4 50%
Liquidity funds3,718 3,695 1%
Total assets under management$27,223 $26,279 4%
Client assets under administration24,174 23,985 1%
Total assets$51,397 $50,264 2%
Investment Advisors:
Equity and fixed-income programs$65,581 $65,059 1%
Collective trust fund programs3 4 (25)%
Liquidity funds3,866 2,673 45%
Total assets under management$69,450 $67,736 3%
Institutional Investors:
Equity and fixed-income programs$83,846 $82,659 1%
Collective trust fund programs101 81 25%
Liquidity funds2,096 2,290 (8)%
Total assets under management$86,043 $85,030 1%
Client assets under advisement3,618 4,467 (19)%
Total assets$89,661 $89,497 —%
Investment Managers:
Collective trust fund programs$63,277 $53,169 19%
Liquidity funds389 477 (18)%
Total assets under management$63,666 $53,646 19%
Client assets under administration (A)730,369 637,986 14%
Total assets$794,035 $691,632 15%
Investments in New Businesses:
Equity and fixed-income programs$1,572 $1,621 (3)%
Liquidity funds169 132 28%
Total assets under management$1,741 $1,753 (1)%
Client assets under advisement1,179 825 43%
Total assets$2,920 $2,578 13%
LSV:
Equity and fixed-income programs (B)$82,051 $100,295 (18)%
Total:
Equity and fixed-income programs (C)$256,549 $272,214 (6)%
Collective trust fund programs63,387 53,258 19%
Liquidity funds10,238 9,267 10%
Total assets under management$330,174 $334,739 (1)%
Client assets under advisement4,797 5,292 (9)%
Client assets under administration (D)754,543 661,971 14%
Total assets under management, advisement and administration$1,089,514 $1,002,002 9%
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32


(A)Client assets under administration in the Investment Managers segment include $51.1 billion of assets that are at fee levels below our normal full service assets (as of September 30, 2020).
(A)Client assets under administration in the Investment Managers segment include $50.4 billion of assets that are at fee levels below our normal full service assets (as of March 31, 2020).
(B)Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. The ending value of these assets as of March 31, 2020 was $1.3 billion.
(C)Equity and fixed-income programs include $8.4 billion of assets invested in various asset allocation funds at March 31, 2020.
(D)In addition to the numbers presented, SEI also administers an additional $11.5 billion in Funds of Funds assets (as of March 31,
(B)    Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. The ending value of these assets as of September 30, 2020 was $1.6 billion.
(C)    Equity and fixed-income programs include $7.5 billion of assets invested in various asset allocation funds at September 30, 2020.
(D)    In addition to the numbers presented, SEI also administers an additional $11.5 billion in Funds of Funds assets (as of September 30, 2020) on which SEI does not earn an administration fee.

29




33


Average Asset Balances
(In millions)
 Three Months Ended March 31, Percent Change
 2020 2019 
Private Banks:     
Equity and fixed-income programs$24,657
 $21,831
 13%
Collective trust fund programs4
 4
 —%
Liquidity funds3,581
 3,706
 (3)%
Total assets under management$28,242
 $25,541
 11%
Client assets under administration24,840
 22,098
 12%
Total assets$53,082
 $47,639
 11%
Investment Advisors:     
Equity and fixed-income programs$64,933
 $58,732
 11%
Collective trust fund programs3
 5
 (40)%
Liquidity funds3,284
 5,298
 (38)%
Total assets under management$68,220
 $64,035
 7%
Institutional Investors:     
Equity and fixed-income programs$79,926
 $81,725
 (2)%
Collective trust fund programs86
 79
 9%
Liquidity funds2,342
 2,375
 (1)%
Total assets under management$82,354
 $84,179
 (2)%
Client assets under advisement3,760
 3,494
 8%
Total assets$86,114
 $87,673
 (2)%
Investment Managers:     
Equity and fixed-income programs$—
 $—
 NM
Collective trust fund programs55,952
 47,322
 18%
Liquidity funds617
 559
 10%
Total assets under management$56,569
 $47,881
 18%
Client assets under administration (A)654,386
 572,065
 14%
Total assets$710,955
 $619,946
 15%
Investments in New Businesses:     
Equity and fixed-income programs$1,663
 $1,394
 19%
Liquidity funds168
 202
 (17)%
Total assets under management$1,831
 $1,596
 15%
Client assets under advisement1,222
 708
 73%
Total assets$3,053
 $2,304
 33%
LSV:     
Equity and fixed-income programs (B)$88,059
 $104,517
 (16)%
Total:     
Equity and fixed-income programs (C)$259,238
 $268,199
 (3)%
Collective trust fund programs56,045
 47,410
 18%
Liquidity funds9,992
 12,140
 (18)%
Total assets under management$325,275
 $327,749
 (1)%
Client assets under advisement4,982
 4,202
 19%
Client assets under administration (D)679,226
 594,163
 14%
Total assets under management, advisement and administration$1,009,483
 $926,114
 9%

 Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent Change
 2020201920202019
Private Banks:
Equity and fixed-income programs$23,740 $22,432 6%$23,542 $22,117 6%
Collective trust fund programs7 4 75%5 4 25%
Liquidity funds3,948 3,625 9%3,965 3,573 11%
Total assets under management$27,695 $26,061 6%$27,512 $25,694 7%
Client assets under administration25,295 23,717 7%24,651 22,980 7%
Total assets$52,990 $49,778 6%$52,163 $48,674 7%
Investment Advisors:
Equity and fixed-income programs$64,479 $64,761 —%$62,280 $61,971 —%
Collective trust fund programs3 5 (40)%3 5 (40)%
Liquidity funds4,569 2,580 77%4,925 3,781 30%
Total assets under management$69,051 $67,346 3%$67,208 $65,757 2%
Institutional Investors:
Equity and fixed-income programs$82,830 $82,398 1%$79,931 $82,240 (3)%
Collective trust fund programs102 80 28%96 79 22%
Liquidity funds2,120 2,287 (7)%2,313 2,335 (1)%
Total assets under management$85,052 $84,765 —%$82,340 $84,654 (3)%
Client assets under advisement3,565 3,797 (6)%3,562 3,644 (2)%
Total assets$88,617 $88,562 —%$85,902 $88,298 (3)%
Investment Managers:
Collective trust fund programs$62,028 $52,587 18%$57,347 $50,006 15%
Liquidity funds565 460 23%555 505 10%
Total assets under management$62,593 $53,047 18%$57,902 $50,511 15%
Client assets under administration (A)713,528 630,328 13%672,309 600,967 12%
Total assets$776,121 $683,375 14%$730,211 $651,478 12%
Investments in New Businesses:
Equity and fixed-income programs$1,560 $1,609 (3)%$1,564 $1,480 6%
Liquidity funds180 142 27%177 174 2%
Total assets under management$1,740 $1,751 (1)%$1,741 $1,654 5%
Client assets under advisement1,206 842 43%1,192 822 45%
Total assets$2,946 $2,593 14%$2,933 $2,476 18%
LSV:
Equity and fixed-income programs (B)$83,536 $100,094 (17)%$83,997 $102,510 (18)%
Total:
Equity and fixed-income programs (C)$256,145 $271,294 (6)%$251,314 $270,318 (7)%
Collective trust fund programs62,140 52,676 18%57,451 50,094 15%
Liquidity funds11,382 9,094 25%11,935 10,368 15%
Total assets under management$329,667 $333,064 (1)%$320,700 $330,780 (3)%
Client assets under advisement4,771 4,639 3%4,754 4,466 6%
Client assets under administration (D)738,823 654,045 13%696,960 623,947 12%
Total assets under management, advisement and administration$1,073,261 $991,748 8%$1,022,414 $959,193 7%
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34


(A)    Average client assets under administration in the Investment Managers segment for the three months ended September 30, 2020 include $50.4 billion that are at fee levels below our normal full service assets.
(A)Average client assets under administration in the Investment Managers segment for the three months ended March 31, 2020 include $49.8 billion that are at fee levels below our normal full service assets.
(B)Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. The average value of these assets for the three months ended March 31, 2020 was $1.9 billion.
(C)Equity and fixed-income programs include $7.0 billion of average assets invested in various asset allocation funds for the three months ended March 31, 2020.
(D)In addition to the numbers presented, SEI also administers an additional $11.5 billion of average assets in Funds of Funds assets for the three months ended March 31, 2020 on which SEI does not earn an administration fee.
(B)    Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. The average value of these assets for the three months ended September 30, 2020 was $1.6 billion.
(C)    Equity and fixed-income programs include $7.5 billion of average assets invested in various asset allocation funds for the three months ended September 30, 2020.
(D)    In addition to the numbers presented, SEI also administers an additional $11.4 billion of average assets in Funds of Funds assets for the three months ended September 30, 2020 on which SEI does not earn an administration fee.
In the preceding tables, assets under management are total assets of our clients or their customers invested in our equity and fixed-income investment programs, collective trust fund programs, and liquidity funds for which we provide asset management services through our subsidiaries and partnerships in which we have a significant interest. Assets under advisement include assets for which we provide advisory services through a subsidiary to the accounts but do not manage the underlying assets. Assets under administration include total assets of our clients or their customers for which we provide administrative services, including client fund balances for which we provide administration and/or distribution services through our subsidiaries and partnerships in which we have a significant interest. The assets presented in the preceding tables do not include assets processed on SWP and are not included in the accompanying Consolidated Balance Sheets because we do not own them.

Business Segments
Revenues, Expenses and Operating Profit (Loss) for our business segments for the three and nine months ended March 31,September 30, 2020 compared to the three and nine months ended March 31,September 30, 2019 were as follows:
Three Months Ended March 31, 
Percent
Change
 Three Months Ended September 30,Percent
Change		Nine Months Ended September 30,Percent
Change
2020 2019  2020201920202019Percent
Change
Private Banks:    Private Banks:
Revenues$113,221
 $118,259
 (4)%Revenues$114,792 $117,250 (2)%$335,739 $351,601 (5)%
Expenses110,653
 110,962
 —%Expenses113,066 110,788 2%331,442 329,540 1%
Operating Profit$2,568
 $7,297
 (65)%Operating Profit$1,726 $6,462 (73)%$4,297 $22,061 (81)%
Operating Margin2% 6% Operating Margin2 %6 %1 %6 %
Investment Advisors:    Investment Advisors:
Revenues$102,321
 $94,761
 8%Revenues$103,189 $103,033 —%$299,218 $297,916 —%
Expenses52,432
 52,502
 —%Expenses51,519 51,509 —%154,100 154,569 —%
Operating Profit$49,889
 $42,259
 18%Operating Profit$51,670 $51,524 —%$145,118 $143,347 1%
Operating Margin49% 45% Operating Margin50 %50 %48 %48 %
Institutional Investors:    Institutional Investors:
Revenues$79,203
 $80,113
 (1)%Revenues$79,583 $80,337 (1)%$235,309 $241,559 (3)%
Expenses38,267
 38,754
 (1)%Expenses37,812 37,268 1%113,016 115,383 (2)%
Operating Profit$40,936
 $41,359
 (1)%Operating Profit$41,771 $43,069 (3)%$122,293 $126,176 (3)%
Operating Margin52% 52% Operating Margin52 %54 %52 %52 %
Investment Managers:    Investment Managers:
Revenues$116,629
 $104,649
 11%Revenues$123,846 $112,186 10%$359,815 $326,037 10%
Expenses74,289
 69,066
 8%Expenses79,838 71,889 11%228,795 209,326 9%
Operating Profit$42,340
 $35,583
 19%Operating Profit$44,008 $40,297 9%$131,020 $116,711 12%
Operating Margin36% 34% Operating Margin36 %36 %36 %36 %
Investments in New Businesses:    Investments in New Businesses:
Revenues$3,388
 $3,038
 12%Revenues$3,517 $3,448 2%$10,254 $9,547 7%
Expenses10,910
 5,940
 84%Expenses13,315 7,926 68%37,691 20,663 82%
Operating Loss$(7,522) $(2,902) NMOperating Loss$(9,798)$(4,478)NM$(27,437)$(11,116)NM
For additional information pertaining to our business segments, see Note 9 to the Consolidated Financial Statements.

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35


Private Banks
Three Months Ended March 31, 
Percent
Change
 Three Months Ended September 30,Percent
Change		Nine Months Ended September 30,Percent
Change
2020 2019  2020201920202019Percent
Change
Revenues:    Revenues:
Information processing and software servicing fees$79,633
 $84,302
 (6)%Information processing and software servicing fees$81,811 $82,503 (1)%$238,099 $248,850 (4)%
Asset management, administration & distribution fees33,588
 33,957
 (1)%Asset management, administration & distribution fees32,981 34,747 (5)%97,640 102,751 (5)%
Total revenues$113,221
 $118,259
 (4)%Total revenues$114,792 $117,250 (2)%$335,739 $351,601 (5)%
Revenues decreased $5.0$2.5 million, or 4%2%, in the three month period and decreased $15.9 million, or 5%, in the nine month period ended September 30, 2020 and were primarily affected by:
•Decreased investment processing fees from the loss of clients offset by new client conversions and growth from existing clients; and
•Decreased investment management fees from existing international clients due to negative cash flows and the significant market volatility during March 2020.2020; and
•Lower recurring investment processing fees earned on our mutual fund trading solution; partially offset by
•Increased investment processing fees from new SWP client conversions and growth from existing SWP clients.
Operating margins decreased to 2% compared to 6% in the three month period and decreased to 1% compared to 6% in the nine month period. Operating income decreased by $4.7 million, or 65%73%, in the three month period and decreased $17.8 million, or 81%, in the nine month period and was primarily affected by:
•A decrease in revenues; and
•Increased costs, mainly personnel and consulting costs, related to maintenance, support and client migrations to SWP.SWP; partially offset by
•Decreased direct expenses associated with decreased investment management fees from existing international clients; and
•Decreased promotion and travel costs due to COVID-19 restrictions.

Investment Advisors
Three Months Ended March 31, 
Percent
Change
 Three Months Ended September 30,Percent
Change		Nine Months Ended September 30,Percent
Change
2020 2019  2020201920202019Percent
Change
Revenues:    Revenues:
Investment management fees-SEI fund programs$70,180
 $66,623
 5%Investment management fees-SEI fund programs$68,287 $72,150 (5)%$200,718 $208,860 (4)%
Separately managed account fees27,420
 23,838
 15%Separately managed account fees29,761 26,240 13%83,726 75,526 11%
Other fees4,721
 4,300
 10%Other fees5,141 4,643 11%14,774 13,530 9%
Total revenues$102,321
 $94,761
 8%Total revenues$103,189 $103,033 —%$299,218 $297,916 —%
Revenues increased $7.6 million, or 8%slightly in the three and nine month periodperiods ended September 30, 2020 and were primarily affected by:
Increased investment management fees from market appreciation during 2019 and early 2020; and
•Increased separately managed account program fees from positive cash flows into SEI’s strategistnew and existing SEI-sponsored programs; partially offset by
•The negative impact to investment management fees from the significant market volatility during March 2020, negative2020; and
•Negative cash flows from mutual funds and a decrease in average basis points earned on assets due to client-directed shifts into liquidity products and SEI's ETF program.assets.




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Operating margin increased to 49% compared to 45% in the three month period. Operating income increased $7.6 million, or 18%,remained at 50% in the three month period and 48% in the nine month period. Operating income increased slightly in the three and nine month periods and was primarily affected by:
•An increase in revenues;revenues in the nine month period;
•Decreased costs mainly personnel and consulting costs, relatedassociated with accounts formerly processed on TRUST 3000® due to maintenance, support and client migrations to SWP; and
•Decreased promotion and travel costs due to COVID-19 restrictions; partially offset by
•
Decreased costs associated with accounts formerly processed on TRUST 3000® due to client migrations to SWP; partially offset by
Increased direct expenses associated with increased assets into our investment products.


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Institutional Investors
Revenues decreased $900 thousand, or 1%,slightly in the three month period and decreased $6.3 million, or 3%, in the nine month period ended September 30, 2020 and were primarily affected by:
•Defined benefit client losses, mainly resulting from acquisitions and plan curtailments; and
•The negative impact to investment management fees from negative marketsthe significant market volatility during March 2020; partially offset by
•Asset funding from new sales of our investment management platforms; and
Increased investment management fees from market appreciation during 2019 and early 2020.platforms.
Operating margin decreased to 52% compared to 54% in the three month period and remained at 52% in the threenine month period. Operating income decreased slightly$1.3 million, or 3%, in the three month period and decreased $3.9 million, or 3%, in the nine month period and was primarily affected by:
•A decrease in revenues; partially offset by
•Decreased direct expenses associated with investment management fees.fees; and
•Decreased travel costs due to COVID-19 restrictions.

Investment Managers
Revenues increased $12.0$11.7 million, or 11%10%, in the three month period and increased $33.8 million, or 10%, in the nine month period ended September 30, 2020 and were primarily affected by:
•Positive cash flows into alternative, traditional and separately managed account offerings from new and existing clients; partially offset by
•The impact of negative markets during March 2020impact to assets under administration;administration from the significant market volatility during 2020; and
•Client losses and fund closures.
Operating margin remained at 36% in the three and nine month periods. Operating income increased to 36% compared to 34%$3.7 million, or 9%, in the three month period. Operating incomeperiod and increased $6.8$14.3 million, or 19%12%, in the threenine month period and was primarily affected by:
•An increase in revenues; and
•Decreased promotion and travel costs due to COVID-19 restrictions; partially offset by
•Increased costs associated with new business, primarily personnel expenses and third-party vendor costs; and
•Increased non-capitalized investment spending, mainly consulting costs.

Other
Corporate overhead expenses
Corporate overhead expenses primarily consist of general and administrative expenses and other costs not directly attributable to a reportable business segment. Corporate overhead expenses were $18.0 million and $20.0$16.2 million in the three months ended March 31,September 30, 2020 and 2019, respectively, and $53.4 million and $52.8 million in the nine months ended September 30, 2020, respectively. The decreaseincrease in corporate overhead expenses during the three and nine month periods is primarily due to a decreasean increase in non-recurring personnel-related costs.personnel costs and increased professional fees related to our initiative to identify tactical and strategic improvements to our operational resiliency plans and capabilities.




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Other income and expense
Other income and expense items on the accompanying Consolidated Statements of Operations consists of: 
Three Months Ended September 30,Nine Months Ended September 30,
Three Months Ended March 31, 2020201920202019
2020
2019
Net (loss) gain from investments$(3,989) $1,279
Net gain (loss) from investmentsNet gain (loss) from investments$776 $611 $(1,310)$2,121 
Interest and dividend income3,203
 4,257
Interest and dividend income1,009 4,167 5,582 12,737 
Interest expense(152) (157)Interest expense(153)(154)(456)(477)
Equity in earnings of unconsolidated affiliate29,907
 37,317
Equity in earnings of unconsolidated affiliate28,305 37,609 86,488 112,758 
Total other income and expense items, net$28,969
 $42,696
Total other income and expense items, net$29,937 $42,233 $90,304 $127,139 
Net gain (loss) gain from investments
Net lossesgains from investments in the three months ended March 31,September 30, 2020 were primarily due to unrealized gains recorded in current earnings related to LSV-sponsored investment funds and Company-sponsored mutual funds from market appreciation. Net loss from investments in the nine months ended September 30, 2020 were primarily due to unrealized losses recorded in current earnings related to LSV-sponsored investment funds and Company-sponsored mutual funds from the market volatility in March 2020caused by the COVID-19 pandemic (See Note 5).
Interest and dividend income
Interest and dividend income is earned based upon the amount of cash that is invested daily. The decrease in interest and dividend income in the three and nine months ended March 31,September 30, 2020 was due to an overall decline in interest rates.

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Equity in earnings of unconsolidated affiliate
Equity in earnings of unconsolidated affiliate reflects our less than 50% ownership in LSV. As of March 31,September 30, 2020, our total partnership interest in LSV was 38.9%38.8%. The table below presents the revenues and net income of LSV and our proportionate share in LSV's earnings.
Three Months Ended March 31, Percent ChangeThree Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent Change
2020 2019  2020201920202019Percent Change
Revenues of LSV$99,996
 $120,915
 (17)%Revenues of LSV$94,902 $121,232 (22)%$289,546 $365,164 (21)%
Net income of LSV76,897
 95,948
 (20)%Net income of LSV70,440 96,699 (27)%220,184 289,918 (24)%
    
SEI's proportionate share in earnings of LSV$29,907
 $37,317
 (20)%SEI's proportionate share in earnings of LSV$28,305 $37,609 (25)%$86,488 $112,758 (23)%
The decline in our earnings from LSV in the three and nine months ended March 31,September 30, 2020 was due to lower assets under management from negative cash flows from existing clients, the market volatility during March 2020 and client losses. Average assets under management by LSV decreased $16.4$18.5 billion to $88.1$84.0 billion during the threenine months ended March 31,September 30, 2020 as compared to $104.5$102.5 billion during the threenine months ended March 31,September 30, 2019, a decrease of 16%18%.
Income Taxes
Our effective income tax rates for the three and nine months ended March 31,September 30, 2020 and 2019 differs from the federal income tax statutory rate due to the following:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Statutory rate21.0 %21.0 %21.0 %21.0 %
State taxes, net of federal tax benefit3.3 2.6 3.2 2.6 
Foreign tax expense and tax rate differential(0.2)(0.3)(0.1)(0.2)
Tax benefit from stock option exercises(0.4)(2.2)(1.0)(1.5)
Expiration of the statute of limitations(1.3)(1.2)(0.5)(0.4)
Provision-to-return adjustment(0.4)(0.6)(0.1)(0.2)
Other, net(0.6)(0.4)(0.5)(0.3)
21.4 %18.9 %22.0 %21.0 %




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 Three Months Ended March 31,
 2020 2019
Statutory rate21.0 % 21.0 %
State taxes, net of federal tax benefit3.1
 2.6
Foreign tax expense and tax rate differential(0.1) (0.1)
Tax benefit from stock option exercises(2.2) (1.1)
Other, net(0.3) (0.3)
 21.5 % 22.1 %

The decreaseincrease in our tax rate for both periods was primarily due to an increase in our state effective tax rate. Our third quarter 2020 tax rate was also impacted by decreased tax benefits associated with stock option exercises. We expect our state effective tax rate for the three months ended March 31,full year 2020 was primarily due to increased tax benefits due to a higher volume of stock option exercise activitybe at the approximate level as compared to the prior year period.our third quarter 2020 rate.
Stock-Based Compensation
We recognized $6.9$20.5 million and $5.0$15.6 million in stock-based compensation expense during the threenine months ended March 31,September 30, 2020 and 2019, respectively. The amount of stock-based compensation expense we recognize is based upon our estimate of when financial vesting targets may be achieved. Any change in our estimate could result in the amount of stock-based compensation expense to be accelerated, spread out over a longer period, or reversed. This may cause volatility in the recognition of stock-based compensation expense in future periods and could materially affect our earnings. In September 2020, we revised our estimate of when some vesting targets are expected to be achieved which resulted in the amount of stock-based compensation expense to be spread out over a longer period than our initial estimate made at December 31, 2019. This change in management's estimate did not result in a material change to our stock-based compensation expense recognized during the three or nine month periods ended September 30, 2020; however, we do expect the impact to be reflected during the fourth quarter of 2020 and into 2021.
Fair Value Measurements
The fair value of our financial assets and liabilities, except for the investment funds sponsored by LSV, is determined in accordance with the fair value hierarchy. The fair value of the investment funds sponsored by LSV is measured using the net asset value per share (NAV) as a practical expedient. The fair value of all other financial assets are determined using Level 1 or Level 2 inputs and consist mainly of investments in equity or fixed-income mutual funds that are quoted daily and Government National Mortgage Association (GNMA) and other U.S. government agency securities that are single issuer pools that are valued based on current market data of similar assets. The Company's Level 3 financial liabilities at March 31,September 30, 2020 and December 31, 2019 consist entirely of the estimated contingent consideration resulting from an acquisition (See Note 12 to the Consolidated Financial Statements). We did not have any other financial liabilities at March 31,September 30, 2020 or December 31, 2019 that were required to be measured at fair value on a recurring basis (See Note 4 to the Consolidated Financial Statements).

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Regulatory Matters
Like many firms operating within the financial services industry, we are experiencing a difficult and increasingly complex regulatory environment across our markets.markets and the geographies in which we operate. Our current scale and reach as a provider to the financial services industry, the introduction and implementation of new platforms for our financial services industry clients, the increased regulatory oversight of the financial services industry generally, new laws and regulations affecting the financial services industry and ever-changing regulatory interpretations of existing laws and regulations, and a greater propensity of regulators to pursue enforcement actions and other sanctions against regulated entities, have made this an increasingly challenging and costly regulatory environment in which to operate.
SEI and our regulated subsidiaries have undergone or been scheduled to undergo a range of periodic or thematic reviews, examinations or investigations by numerous regulatory authorities around the world, including the Office of the Comptroller of the Currency, the Securities and Exchange Commission,SEC, the Financial Industry Regulatory Authority, Inc., the Financial Conduct Authority of the United Kingdom, the Central Bank of Ireland and others. These regulatory activities typically result in the identification of matters or practices to be addressed by us or our subsidiaries and, in certain circumstances, the regulatory authorities require remediation activities or pursue enforcement proceedings against us or our subsidiaries. From time to time, the regulators in different jurisdictions will elevate their level of scrutiny of our operations as our business expands or is deemed critical to the operations of the relevant financial markets. As described under the caption “Regulatory Considerations” in our Annual Report on Form 10-K, the range of possible sanctions that are available to regulatory authorities include limitations on our ability to engage in business for specified periods of time, the revocation of registration, censures and fines. The direct and indirect costs of responding to these regulatory activities, implementation of any remediation actions, and of complying with new or modified regulations or guidance, as well as the potential financial costs and potential reputational impact against us of any enforcement proceedings or findings that might result, is uncertain but could have a material adverse impact on our operating results or financial position.




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Liquidity and Capital Resources 
Three Months Ended March 31, Nine Months Ended September 30,
2020 2019 20202019
Net cash provided by operating activities$98,972
 $59,899
Net cash provided by operating activities$396,524 $381,535 
Net cash used in investing activities(17,352) (15,726)Net cash used in investing activities(64,243)(43,045)
Net cash used in financing activities(165,050) (132,644)Net cash used in financing activities(401,833)(321,742)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,146) 3,272
Effect of exchange rate changes on cash, cash equivalents and restricted cash(4,196)(3,878)
Net decrease in cash, cash equivalents and restricted cash(94,576) (85,199)
Net (decrease) increase in cash, cash equivalents and restricted cashNet (decrease) increase in cash, cash equivalents and restricted cash(73,748)12,870 
Cash, cash equivalents and restricted cash, beginning of period844,547
 758,039
Cash, cash equivalents and restricted cash, beginning of period844,547 758,039 
Cash, cash equivalents and restricted cash, end of period$749,971
 $672,840
Cash, cash equivalents and restricted cash, end of period$770,799 $770,909 
Cash requirements and liquidity needs are primarily funded through our cash flow from operations and our capacity for additional borrowing. At March 31,September 30, 2020, our unused sources of liquidity consisted of cash and cash equivalents and the amount available under our credit facility.
Our credit facility provides for borrowings of up to $300.0 million and is scheduled to expire in June 2021 (See Note 6 to the Consolidated Financial Statements). As of April 17,October 21, 2020, we had outstanding letters of credit of $11.6 million which reduced our amount available under the credit facility to $288.4 million. These letters of credit were primarily issued for the expansion of our corporate headquarters and are due to expire in late 2020.
The availability of the credit facility is subject to compliance with certain covenants set forth in the agreement. The credit facility contains covenants which restrict our ability to engage in mergers, consolidations, asset sales, investments, transactions with affiliates other than wholly-owned subsidiaries, or to incur liens or other indebtedness including contingent obligations or guarantees, as defined in the agreement. In the event of a default under the credit facility, we would also be restricted from paying dividends on, or repurchasing, our common stock. Currently, our ability to borrow from the credit facility is not limited by any covenant of the agreement. Our credit facility is provided through Wells Fargo Bank, National Association, and a syndicate of other well-established financial institutions. As of April 17,October 21, 2020, we are not aware of any issues related to the ability of the lenders to honor the borrowing terms in our credit facility agreement.
Our credit facility contains terms that utilize the London InterBank Offered Rate (LIBOR) as a potential component of the interest rate to be applied to the borrowings we may undertake under the agreement (See Note 6 to the Consolidated Financial Statements). We are currently monitoring the actions of LIBOR’s regulator and the implementation of alternative

35




reference rates in advance of the expected discontinuation of LIBOR after 2021 to determine any potential impact to our current credit facility and negotiations for subsequent borrowing agreements.
The majority of our excess cash reserves are primarily placed in accounts located in the United States that invest entirely in SEI-sponsored money market mutual funds denominated in the U.S. dollar. We also utilize demand deposit accounts or money market accounts at several well-established financial institutions located in the United States. Accounts used to manage these excess cash reserves do not impose any restrictions or limitations that would prevent us from being able to access such cash amounts immediately. As of April 17,October 21, 2020, the amount of cash and cash equivalents considered free and immediately accessible for other general corporate purposes was $354.5$392.1 million.
Our cash and cash equivalents include accounts managed by our subsidiaries that are used in their operations or to cover specific business and regulatory requirements. The availability of this cash for other purposes beyond the operations of these subsidiaries may be limited. We therefore do not include accounts of our foreign subsidiaries in our calculation of free and immediately accessible cash for other general corporate purposes. A portion of the undistributed earnings of our foreign subsidiaries are deemed repatriated. Any subsequent transfer of available cash related to the repatriated earnings of our foreign subsidiaries could significantly increase our free and immediately accessible cash.
Cash flows from operations increased $39.1$15.0 million in the first threenine months of 2020 compared to the first threenine months of 2019 primarily from higher distribution payments received from our unconsolidated affiliate, LSV, and the positive impact from the change in our working capital accounts.accounts due to the timing of expense payments and higher distribution payments received from our unconsolidated affiliate, LSV. The increase was partially offset by the decline in our net income.




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Net cash used in investing activities includes:
•Purchases, sales and maturities of marketable securities. Our purchases, sales and maturities of marketable securities in the first threenine months of 2020 and 2019 were as follows:
Three Months Ended March 31,Nine Months Ended September 30,
2020 201920202019
Purchases$(29,407) $(43,672)Purchases$(114,407)$(126,030)
Sales and maturities37,687
 45,200
Sales and maturities113,417 137,783 
Net investing activities from marketable securities$8,280
 $1,528
Net investing activities from marketable securities$(990)$11,753 
•
The capitalization of costs incurred in developing computer software. We capitalized $6.5 million of software development costs in the first three months of 2020 as compared to $9.9 million in the first three
•The capitalization of costs incurred in developing computer software. We capitalized $18.6 million of software development costs in the first nine months of 2020 as compared to $26.8 million in the first nine months of 2019. The majority of our software development costs are related to significant enhancements for the expanded functionality of the SEI Wealth Platform.
•Capital expenditures. Our capital expenditures in the first nine months of 2020 were $43.1 million as compared to $30.5 million in the first nine months of 2019. Our expenditures in 2020 and 2019 primarily include purchased software, equipment for our data center operations and the expansion of our corporate headquarters which is scheduled to be completed in the fourth quarter 2020. Total expenditures related to the expansion during the fourth quarter are expected to be approximately $5.0 million. We are currently evaluating improvements to our information technology infrastructure which, if implemented, will result in additional capital outlays for purchased software and equipment for our data center operations.
•
Capital expenditures. Our capital expenditures in the first three months of 2020 were $20.7 million as compared to $7.3 million in the first three months of 2019. Our expenditures in 2020 and 2019 primarily include purchased software, equipment for our data center operations and the expansion of our corporate headquarters which is scheduled to be completed during the fourth quarter 2020. Total expenditures related to the expansion for the remainder of 2020 are expected to be approximately $15.1 million. Prolonged work restrictions due to the COVID-19 virus outbreak may delay the planned completion date.
Net cash used in financing activities includes:
•
The repurchase of our common stock. Our Board of Directors has authorized the repurchase of our common stock through multiple authorizations. Currently, there is no expiration date for our common stock repurchase program. We had total capital outlays of $130.6 million during the first three months of 2020 and $90.8 million during the first three months of 2019 for the repurchase of our common stock.
•
Proceeds from the issuance of our common stock. We received $18.6 million in proceeds from the issuance of our common stock during the first three months of 2020 as compared to $8.9 million during the first three months of 2019. The increase in proceeds is primarily attributable to a higher level of stock option exercise activity.
•
Dividend payments. Cash dividends paid were $52.5 million in the first three months of 2020 as compared to $50.8 million in the first three
•The repurchase of our common stock. Our Board of Directors has authorized the repurchase of our common stock through multiple authorizations. Currently, there is no expiration date for our common stock repurchase program. We had total capital outlays of $327.1 million during the first nine months of 2020 and $262.9 million during the first nine months of 2019 for the repurchase of our common stock.
•Proceeds from the issuance of our common stock. We received $29.8 million in proceeds from the issuance of our common stock during the first nine months of 2020 as compared to $41.9 million during the first nine months of 2019. The decline in proceeds is primarily attributable to a lower level of stock option exercise activity.
•Dividend payments. Cash dividends paid were $103.9 million in the first nine months of 2020 as compared to $100.7 million in the first nine months of 2019.
We believe our operating cash flow, available borrowing capacity, and existing cash and cash equivalents should provide adequate funds for ongoing operations; continued investment in new products and equipment; our common stock repurchase program expansion of our corporate headquarters and future dividend payments.

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Forward-Looking Information and Risk Factors
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information contained in this discussion is or may be considered forward-looking. Forward-looking statements relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates and assumptions that involve certain risks and uncertainties, many of which are beyond our control or are subject to change. Although we believe our assumptions are reasonable, they could be inaccurate. Our actual future revenues and income could differ materially from our expected results. We have no obligation to publicly update or revise any forward-looking statements.
Among the risks and uncertainties which may affect our future operations, strategies, financial results or other developments are those risks described in our latest Annual Report on Form 10-K in Part I, Item 1A. These risks include the following:
•changes in capital markets that may affect our revenues and earnings;
•product development risk;
•risk of failure by a third-party service provider;
•data and cyber security risks;
•operational risks associated with the processing of investment transactions;
•systems and technology risks;
•pricing pressure from increased competition, disruptive technology and poor investment performance;




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•the affect on our earnings and cashflows from the performance of LSV Asset Management;
•third party pricing services for the valuation of securities invested in our investment products;
•external factors affecting the fiduciary management market;
•the affect of extensive governmental regulation;
•litigation and regulatory examinations and investigations;
•our ability to capture the expected value from acquisitions, divestitures, joint ventures, minority stakes or strategic alliances;
•increased costs and regulatory risks from the growth of our business;
•fiduciary or other legal liability for client losses from our investment management operations;
•consolidation within our target markets;
•our ability to receive dividends or other payments in needed amounts from our subsidiaries;
•the exit by the United Kingdom from the European Union;
•third party approval of our investment products with advisors affiliated with independent broker-dealers or other networks;
•the effectiveness of our business, risk management and business continuity strategies, models and processes;
•financial and non-financial covenants which may restrict our ability to manage liquidity needs;
•changes in, or interpretation of, accounting principles or tax rules and regulations;
•fluctuations in foreign currency exchange rates;
•fluctuations in interest rates affecting the value of our fixed-income investment securities;
•our ability to hire and retain qualified employees;
•the competence and integrity of our employees and third-parties;
•stockholder activism efforts;
•retention of executive officers and senior management personnel; and
•unforeseen or catastrophic events, including the emergence of pandemic, terrorist attacks, extreme weather events or other natural disasters.
We conduct our operations through many regulated wholly-owned subsidiaries. These subsidiaries are:
•SEI Investments Distribution Co., or SIDCO, a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority, Inc., or FINRA;
•SEI Investments Management Corporation, or SIMC, an investment advisor registered with the SEC under the Investment Advisers Act of 1940 and with the Commodity Futures Trading Commission, or CFTC, under the Commodity Exchange Act;

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•SEI Private Trust Company, or SPTC, a limited purpose federal thrift chartered and regulated by the Office of the Comptroller of the Currency;
•SEI Trust Company, or STC, a Pennsylvania trust company, regulated by the Pennsylvania Department of Banking and Securities;
•SEI Investments (Europe) Limited, or SIEL, an investment manager and financial institution subject to regulation by the Financial Conduct Authority of the United Kingdom;
•SEI Investments Canada Company, or SEI Canada, an investment fund manager that has various other capacities that is regulated by the Ontario Securities Commission and various provincial authorities;
•SEI Investments Global, Limited, or SIGL, a management company for Undertakings for Collective Investment in Transferable Securities, or UCITS, and for Alternative Investment Funds, or AIFs, that is regulated primarily by the Central Bank of Ireland, or CBI;
•SEI Investments - Global Fund Services, Ltd., or GFSL, an authorized provider of administration services for Irish and non-Irish collective investment schemes that is regulated by the CBI; and
•SEI Investments - Depositary and Custodial Services (Ireland) Limited, or D&C, an authorized provider of depositary and custodial services that is regulated by the CBI.
In addition to the regulatory authorities listed above, our subsidiaries are subject to the jurisdiction of regulatory authorities in other foreign countries. In addition to our wholly-owned subsidiaries, we also own a minority interest of approximately 38.938.8 percent in LSV, which is also an investment advisor registered with the SEC.




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The Company, its regulated subsidiaries, their regulated services and solutions and their customers are all subject to extensive legislation, regulation and supervision that recently has been subject to, and continues to experience, significant change and increased regulatory activity. These changes and regulatory activities could have a material adverse effect on us and our clients.
The various governmental agencies and self-regulatory authorities that regulate or supervise the Company and its subsidiaries have broad administrative powers. In the event of a failure to comply with laws, regulations and requirements of these agencies and authorities, the possible business process changes required or sanctions that may be imposed include the suspension of individual employees, limitations on our ability to engage in business for specified periods of time, the revocation of applicable registration as a broker-dealer, investment advisor or other regulated entity, and, as the case may be, censures and fines. Additionally, certain securities and banking laws applicable to us and our subsidiaries provide for certain private rights of action that could give rise to civil litigation. Any litigation could have significant financial and non-financial consequences including monetary judgments and the requirement to take action or limit activities that could ultimately affect our business.
Governmental scrutiny from regulators, legislative bodies and law enforcement agencies with respect to matters relating to our regulated subsidiaries and their activities, services and solutions, our business practices, our past actions and other matters has increased dramatically in the past several years. Responding to these examinations, investigations, actions and lawsuits, regardless of the ultimate outcome of the proceeding, is time consuming and expensive and can divert the time and effort of our senior management from our business. Penalties, fines and changes to business processes sought by regulatory authorities have increased substantially over the last several years, and certain regulators have been more likely in recent years to commence enforcement actions or to advance or support legislation targeted at the financial services industry. We continue to be subject to inquiries from examinations and investigations by supervisory and enforcement divisions of regulatory authorities and expect this to continue in the future. We believe this is also the case with many of our regulated clients. Governmental scrutiny and legal and enforcement proceedings can also have a negative impact on our reputation, our relationship with clients and prospective clients, and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.
We are subject to the USA PATRIOT Act of 2001, which contains anti-money laundering and financial transparency laws and requires implementation of regulations applicable to financial services companies, including standards for verifying client identification and monitoring client transactions and detecting and reporting suspicious activities. Anti-money laundering laws outside the United States contain similar requirements. We offer investment and banking solutions that also are subject to regulation by the federal and state securities and banking authorities, as well as foreign regulatory authorities, where applicable. Existing or future regulations that affect these solutions could lead to a reduction in sales of these solutions or require modifications of these solutions.
Compliance with existing and future regulations and responding to and complying with recent increased regulatory activity affecting broker-dealers, investment advisors, investment companies, financial institutions and their service providers

38




could have a significant impact on us. We periodically undergo regulatory examinations and respond to regulatory inquiries and document requests. In addition, recent and continuing legislative activity in the United States and in other jurisdictions (including the European Union and the United Kingdom) have made and continue to make extensive changes to the laws regulating financial services firms. As a result of these examinations, inquiries and requests, as a result of increased civil litigation activity, and as a result of these new laws and regulations, we engage legal counsel and other subject matter experts, review our compliance procedures, solution and service offerings, and business operations, and make changes as we deem necessary or as may be required by the applicable authority. These additional activities and required changes may result in increased expense or may reduce revenues.
Our bank clients are subject to supervision by federal, state and foreign banking and financial services authorities concerning the manner in which such clients purchase and receive our products and services. Our plan sponsor clients and our subsidiaries providing services to those clients are subject to supervision by the Department of Labor and compliance with employee benefit regulations. Investment advisor and broker-dealer clients are regulated by the SEC, state securities authorities, or FINRA. Existing or future regulations applicable to our clients may affect our clients’ purchase of our products and services.
In addition, see the discussion of governmental regulations in Item 1A “Risk Factors” in our latest Annual Report on Form 10-K for a description of the risks that proposed regulatory changes may present for our business.





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Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
Information required by this item is set forth under the captions "Our revenues and earnings are affected by changes in capital markets" and "Changes in interest rates may affect the value of our fixed-income investment securities" in Item 1A "Risk Factors" and under the caption "Sensitivity of our revenues and earnings to capital market fluctuations and client portfolio strategy" in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2019. There have been no material changes to this information as it is disclosed in our Annual Report on Form 10-K for 2019.

Item 4.    Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are effective in ensuring that information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
(b) Change in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended March 31,September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings.
Stanford Trust Company Litigation
SEI has been named in seven lawsuits filed in Louisiana courts; four of the cases also name SPTC as a defendant. The underlying allegations in all actions relate to the purported role of SPTC in providing back-office services to Stanford Trust Company. The complaints allege that SEI and SPTC participated in some manner in the sale of “certificates of deposit” issued by Stanford International Bank so as to be a “seller” of the certificates of deposit for purposes of primary liability under the Louisiana Securities Law or so as to be secondarily liable under that statute for sales of certificates of deposit made by Stanford Trust Company. Two of the actions also include claims for violations of the Louisiana Racketeering Act and possibly conspiracy, and a third also asserts claims of negligence, breach of contract, breach of fiduciary duty, violations of the uniform fiduciaries law, negligent misrepresentation, detrimental reliance, violations of the Louisiana Racketeering Act, and conspiracy.
The procedural status of the seven cases varies. The Lillie case, filed originally in the 19th Judicial District Court for the Parish of East Baton Rouge, was brought as a class action and is procedurally the most advanced of the cases. SEI and SPTC filed exceptions, which the Court granted in part, dismissing claims under the Louisiana Unfair Trade Practices Act and permitting the claims under the Louisiana Securities Law to go forward. On March 11, 2013, newly-added insurance carrier defendants removed the case to the United States District Court for the Middle District of Louisiana. On August 7, 2013, the Judicial Panel on Multidistrict Litigation transferred the matter to the Northern District of Texas where MDL 2099, In re: Stanford Entities Securities Litigation (“the Stanford MDL”), is pending. On September 22, 2015, the District Court on the motion of SEI and SPTC dismissed plaintiffs’ claims for primary liability under Section 714(A) of the Louisiana Securities Law, but declined to dismiss plaintiffs’ claims for secondary liability under Section 714(B) of the Louisiana Securities Law based on the allegations pled by plaintiffs. On November 4, 2015, the District Court granted SEI and SPTC's motion to dismiss plaintiffs' claims under Section 712(D) of the Louisiana Securities Law. Consequently, the only claims of plaintiffs remaining in Lillie are plaintiffs' claims for secondary liability against SEI and SPTC under Section 714(B) of the Louisiana Securities Law. On May 2, 2016, the District Court certified the class as being "all persons for whom Stanford Trust Company purchased or renewed Stanford Investment Bank Limited certificates of deposit in Louisiana between January 1, 2007 and February 13, 2009". Notice of the pendency of the class action was mailed to potential class members on October 4, 2016.
On December 1, 2016, a group of plaintiffs who opted out of the Lillie class filed a complaint against SEI and SPTC in the United States District Court in the Middle District of Louisiana (“Ahders Complaint”), alleging claims essentially the same as those in Lillie. In January 2017, the Judicial Panel on Multidistrict Litigation transferred the Ahders proceeding to the Northern District of Texas and the Stanford MDL. During February 2017, SEI and SPTC filed their response to the Ahders Complaint, and in March 2017 the District Court for the Northern District of Texas approved the stipulated dismissal of all claims in this Complaint predicated on Section 712(D) or Section 714(A) of the Louisiana Securities Law. In both cases, as a result of the proceedings in the Northern District of Texas, only the plaintiffs’ secondary liability claims under Section 714(B) of the Louisiana Securities Law remain. Limited discovery and motions practice have occurred, including SEI and SPTC’s filing of a dispositive summary judgment motion in the Lillie proceeding. On January 31, 2019, the Judicial Panel on Multidistrict Litigation remanded the Lillie and Ahders proceedings to the Middle District of Louisiana.
With respect to the Lillie proceeding, on July 9, 2019, the District Court issued an order granting SEI’s Summary Judgment Motion to dismiss the remaining Section 714(B) claim and denying Plaintiffs’ Motion for Continuance of SEI and SPTC’s Motion for Summary Judgment pursuant to Rule 56(d). On July 17, 2019, Plaintiffs filed a Motion for Reconsideration and/or New Trial. The Court denied Plaintiffs’ Motion for Reconsideration and/or New Trial and entered a Final Judgment in favor of SEI and SPTC on August 15, 2019. On August 27, 2019, Plaintiffs-Appellants filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit of the District Court's dismissal of the Lillie matter. On November 20, 2019, Plaintiffs-Appellants filed a Motion in Support of the Notice of Appeal. On January 17, 2020, SEI and SPTC timely filed their brief in opposition to the Plaintiffs-Appellants' motion for appeal. On February 7, 2020, Plaintiffs-AppellantsPlaintiffs- Appellants filed their reply brief.The parties are currently waiting for oral argument to be scheduled.
With respect to the Ahders proceeding, on July 16, 2019, SEI and SPTC filed a Motion for Summary Judgment pursuant to Rule 56(d) to have the remaining Section 714(B) claim dismissed. On January 24, 2020, the District Court issued an order granting SEI’s Summary Judgment Motion to dismiss the remaining Section 714(B) claim. On March 17, 2020, Plaintiffs-Appellants filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit of the District Court's dismissal of the Ahders matter.

 Similar to the Lillie matter, all motions and briefs in support of the parties’ positions have been filed and the parties are currently waiting for oral argument to be scheduled.
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Another case, filed in the 23rd Judicial District Court for the Parish of Ascension, also was removed to federal court and transferred by the Judicial Panel on Multidistrict Litigation to the Northern District of Texas and the Stanford MDL. The schedule for responding to that Complaint has not yet been established.
Two additional cases remain in the Parish of East Baton Rouge. Plaintiffs filed petitions in 2010 and have granted SEI and SPTC indefinite extensions to respond. No material activity has taken place since.
In two additional cases, filed in East Baton Rouge and brought by the same counsel who filed the Lillie action, virtually all of the litigation to date has involved motions practice and appellate litigation regarding the existence of federal subject matter jurisdiction under the federal Securities Litigation Uniform Standards Act (SLUSA). The matters were removed to the United States District Court for the Northern District of Texas and consolidated. The court then dismissed the action under SLUSA. The Court of Appeals for the Fifth Circuit reversed that order, and the Supreme Court of the United States affirmed the Court of Appeals judgment on February 26, 2014. The matters were remanded to state court and no material activity has taken place since that date.
While the outcome of this litigation remains uncertain, SEI and SPTC believe that they have valid defenses to plaintiffs' claims and intend to defend the lawsuits vigorously. Because of uncertainty in the make-up of the Lillie class, the specific theories of liability that may survive a motion for summary judgment or other dispositive motion, the relative lack of discovery regarding damages, causation, mitigation and other aspects that may ultimately bear upon loss, the Company is not reasonably able to provide an estimate of loss, if any, with respect to the foregoing lawsuits.
SEI Capital Accumulation Plan Litigation
On September 28, 2018, a class action complaint was filed in the United States District Court for the Eastern District of Pennsylvania by Gordon Stevens, individually and as the representative of similarly situated persons, and on behalf of the SEI Capital Accumulation Plan (the “Plan”) naming the Company and its affiliated and/or related entities SEI Investments Management Corporation, SEI Capital Accumulation Plan Design Committee, SEI Capital Accumulation Plan Investment Committee, SEI Capital Accumulation Plan Administration Committee, and John Does 1-30 as defendants (the “Stevens Complaint”). The Stevens Compliant seeks unspecified damages for defendants’ breach of fiduciary duties under ERISA with respect to selecting and monitoring the Plan’s investment options and by retaining affiliated investment products in the Plan.
Although SEI believes its defenses against the plaintiff’s allegations were valid, the Company agreed to settle this matter in the very early stages of the litigation in order to avoid the high cost of protracted class-action litigation and internal distractions such cases bring. On March 3, 2020, the Court issued its Approval Order approving the settlement agreement. The financial impact of the settlement agreement is not material to the Company.
SS&C Advent Matter
On February 28, 2020, SEI Global Services, Inc. ("SGSI"), a wholly-owned subsidiary of the Company, filed a complaint under seal in the United States District Court for the Eastern District of Pennsylvania against SS&C Advent ("Advent") and SS&C Technologies Holdings, Inc. ("SS&C") alleging that SS&C and Advent breached the terms of the contract between the parties and asking the Court to hold SS&C and Advent to their bargained-for obligations (the "Advent Matter"). In addition to Breach of Contract, the complaint also includes counts for Declaratory Judgment, Tortious Interference with Existing and Prospective Contractual Relations, Violation of the New York General Business Law Section 349, Violations of Section 2 of the Sherman Antitrust Act, Promissory Estoppel and Breach of the Covenant of Good Faith and Fair Dealing. SGSI seeks various forms of relief, including declaratory judgment, specific performance under the contract, and monetary damages, including treble damages and attorney’s fees. Additionally, on February 28, 2020, SGSI
Following various procedural actions, including an amendment of the Company’s complaint to include additional breach of contract claims, SS&C and Advent filed a related Motionmotion to File Complaint Under Seal (the "Under Seal Motion") requesting thatdismiss the Advent Matter complaint be maintained under seal andCompany’s compliant.The oral argument regarding the motion to dismiss has occurred. The Court has not a matter of public record.
On March 3, 2020, prior to any motions being filed by any ofyet issued its judgment in the parties, the Court denied SGSI’s Under Seal Motion. The complaint became a matter of public record on April 15, 2020.matter.
SEI does not believe that it will have to change providers under the current terms of its contract with SS&C or Advent and that the process of litigating its rights under this contract may be a multi-year process. Consequently, SEI does not believe that the Advent Matter will create any consequence to the services it provides to its clients in the near term. SEI believes that it has alternatives available to it that will enable it to continue to provide currently provided services to its clients in all material respects in the unlikely event that there ultimately is a negative outcome in the Advent Matter.
SEI believes it has a strong basis for proving the actions it alleges in the Advent Matter and looks forward to the opportunity to assert its rights under contract. SEI expects the financial impact of litigating the Advent Matter to be immaterial.

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Other Matters
The Company is also a party to various other actions and claims arising in the normal course of business that the Company does not believe are material. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position or the manner in which the Company conducts its business. Currently, the Company does not believe the amount of losses associated with these matters can be estimated. While the Company does not believe that the amount of such losses will, when liquidated or estimable, be material to its financial position, the assumptions may be incorrect and any such loss could have a material adverse effect on the Company's results of operations or the manner in which the Company conducts its business in the period(s) during which the underlying matters are resolved.

Item 1A.     Risk Factors.
Information regarding risk factors appears in Part I – Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for 2019.





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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

(e)Our Board of Directors has authorized the repurchase of up to $0.004 billion worth of our common stock through multiple authorizations. Currently, there is no expiration date for our common stock repurchase program. On March 18, 2020, our Board of Directors approved an increase in the stock repurchase program by an additional $250 million.
(e)    Our Board of Directors has authorized the repurchase of up to $4.428 billion worth of our common stock through multiple authorizations. Currently, there is no expiration date for our common stock repurchase program. On October 20, 2020, our Board of Directors approved an increase in the stock repurchase program by an additional $250.0 million, increasing the available authorization to approximately $291.9 million.
Information regarding the repurchase of common stock during the three months ended March 31,September 30, 2020 is as follows:
PeriodTotal Number
of Shares
Purchased		Average
Price Paid
per Share		Total Number of
Shares Purchased as
Part of Publicly
Announced Program		Approximate Dollar
Value of Shares that
May Yet Be
Purchased
Under the Program
July 2020250,000 $51.65 250,000 $240,097,000 
August 2020775,000 52.89 775,000 208,710,000 
September 20201,085,000 50.54 1,085,000 150,627,000 
Total2,110,000 $51.54 2,110,000 

Period
Total Number
of Shares
Purchased
 
Average
Price Paid
per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Program
 
Approximate Dollar
Value of Shares that
May Yet Be
Purchased
Under the Program
January 2020—
 $—
 —
 $117,530,000
February 2020781,000
 64.55
 781,000
 67,123,000
March 20201,652,000
 46.62
 1,652,000
 240,097,000
Total2,433,000
 $52.37
 2,433,000
  

Item 6.    Exhibits.
The following is a list of exhibits filed as part of the Form 10-Q. 
31.1
31.2
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99.1
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SEI INVESTMENTS COMPANY
Date:October 26, 2020April 28, 2020By:By:
/s/ Dennis J. McGonigle

Dennis J. McGonigle
Chief Financial Officer


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