UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20212022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-34516
Cowen Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
27-0423711
(I.R.S. Employer
Identification No.)
599 Lexington Avenue
New York, New York
(Address of Principal Executive Offices)
10022
(Zip Code)
(646) 562-1010
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading SymbolName of Exchange on Which Registered
Class A Common Stock, par value $0.01 per share COWNThe Nasdaq Global Market
7.75% Senior Notes due 2033COWNLThe Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
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 ☒    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  ☒  No ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large acceleratedAccelerated filer ☐☒
 
Accelerated 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 ☒
As of April 30, 2021,29, 2022, there were 26,866,95127,494,230 shares of the registrant's common stock outstanding.

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Special Note Regarding Forward-Looking Statements
We have made statements in this Quarterly Report on Form 10-Q (including in "Management's Discussion and Analysis of Financial Condition and Results of Operations") that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking terms such as "may," "might," "will," "would," "could," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "project," "possible," "potential," "intend," "seek" or "continue," the negative of these terms and other comparable terminology or similar expressions. In addition, our management may make forward-looking statements to analysts, representatives of the media and others. These forward-looking statements represent only the Company's beliefs regarding future events (many of which, by their nature, are inherently uncertain and beyond our control) and are predictions only, based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In particular, you should consider the risks contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20202021 and the risks contained in Item 1A of this periodic report on Form 10-Q for the three months ended March 31, 2021.2022.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised expectations.
Unaudited Condensed Consolidated Financial Statements are presented for the three months ended March 31, 20212022 and 2020.2021. The Consolidated Financial Statements as of December 31, 20202021 were audited.



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PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements

Cowen Inc.
Condensed Consolidated Statements of Financial Condition
(dollars in thousands, except share and per share data)
(unaudited)		Cowen Inc.
Condensed Consolidated Statements of Financial Condition
(dollars in thousands, except share and per share data)
(unaudited)		Cowen Inc.
Condensed Consolidated Statements of Financial Condition
(dollars in thousands, except share and per share data)
(unaudited)
As of March 31, 2022As of December 31, 2021
AssetsAssetsAs of March 31, 2021As of December 31, 2020Assets
Cash and cash equivalentsCash and cash equivalents$1,147,531 $645,169 Cash and cash equivalents$512,978 $914,343 
Cash collateral pledgedCash collateral pledged110,303 110,743 Cash collateral pledged52,865 47,494 
Segregated cashSegregated cash168,942 185,141 Segregated cash220,882 194,701 
Securities owned, at fair value ($2,042,776 and $1,218,947 were pledged to various parties)3,156,100 2,001,602 
Securities owned, at fair value ($1,704,831 and $1,764,853 were pledged to various parties)Securities owned, at fair value ($1,704,831 and $1,764,853 were pledged to various parties)2,763,514 2,660,742 
Securities purchased under agreements to resellSecurities purchased under agreements to resell0 191 Securities purchased under agreements to resell19,621 — 
Receivable on derivative contracts, at fair valueReceivable on derivative contracts, at fair value95,536 51,482 Receivable on derivative contracts, at fair value342,712 286,135 
Securities borrowedSecurities borrowed1,996,757 1,908,187 Securities borrowed1,761,146 1,704,603 
Other investments ($151,933 and $133,454 at fair value, respectively)366,783 255,027 
Other investments ($131,766 and $137,986 at fair value, respectively)Other investments ($131,766 and $137,986 at fair value, respectively)237,628 274,111 
Deposits with clearing organizations, brokers and banksDeposits with clearing organizations, brokers and banks82,078 104,952 Deposits with clearing organizations, brokers and banks105,854 111,857 
Receivable from brokers, dealers and clearing organizations, net of allowance of $640 and $885, respectively1,920,753 1,729,744 
Receivable from customers, net of allowance of $758 and $530, respectively199,668 103,963 
Fees receivable, net of allowance of $2,982 and $3,348, respectively208,898 160,349 
Receivable from brokers, dealers and clearing organizations, net of allowance of $616 and $636, respectivelyReceivable from brokers, dealers and clearing organizations, net of allowance of $616 and $636, respectively1,487,911 1,614,347 
Receivable from customers, net of allowance of $587 and $687, respectivelyReceivable from customers, net of allowance of $587 and $687, respectively159,625 159,418 
Fees receivable, net of allowance of $828 and $886, respectivelyFees receivable, net of allowance of $828 and $886, respectively128,136 145,809 
Due from related partiesDue from related parties20,921 21,068 Due from related parties21,666 31,449 
Fixed assets, net of accumulated depreciation and amortization of $42,681 and $40,670, respectively31,424 33,023 
Fixed assets, net of accumulated depreciation and amortization of $52,254 and $50,017, respectivelyFixed assets, net of accumulated depreciation and amortization of $52,254 and $50,017, respectively25,037 25,976 
Operating lease right-of-use assetsOperating lease right-of-use assets77,268 78,241 Operating lease right-of-use assets95,430 93,655 
GoodwillGoodwill147,084 147,084 Goodwill234,005 234,005 
Intangible assets, net of accumulated amortization of $27,073 and $37,884, respectively28,116 24,403 
Intangible assets, net of accumulated amortization of $37,470 and $33,219, respectivelyIntangible assets, net of accumulated amortization of $37,470 and $33,219, respectively40,731 44,167 
Deferred tax asset, netDeferred tax asset, net1,757 9,030 Deferred tax asset, net19,608 21,765 
Other assets76,921 54,884 
Other assets, net of allowance of $834 and $0 respectivelyOther assets, net of allowance of $834 and $0 respectively99,427 84,828 
Consolidated FundsConsolidated Funds  Consolidated Funds  
Cash and cash equivalentsCash and cash equivalents935 417 Cash and cash equivalents23 296 
Securities owned, at fair value8,940 10,622 
Other investmentsOther investments100,035 192,670 Other investments97,182 99,067 
Other assetsOther assets46 207 Other assets46 46 
Total AssetsTotal Assets$9,946,796 $7,828,199 Total Assets$8,426,027 $8,748,814 
Liabilities, Temporary Equity and Permanent EquityLiabilities, Temporary Equity and Permanent Equity  Liabilities, Temporary Equity and Permanent Equity  
LiabilitiesLiabilitiesLiabilities
Securities sold, not yet purchased, at fair valueSecurities sold, not yet purchased, at fair value$931,082 $728,115 Securities sold, not yet purchased, at fair value$974,867 $1,201,448 
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase2,546 5,036 Securities sold under agreements to repurchase229,192 63,469 
Payable for derivative contracts, at fair valuePayable for derivative contracts, at fair value52,125 76,160 Payable for derivative contracts, at fair value46,814 60,163 
Securities loanedSecurities loaned3,083,945 2,476,414 Securities loaned1,735,852 1,586,572 
Payable to brokers, dealers and clearing organizationsPayable to brokers, dealers and clearing organizations488,471 415,143 Payable to brokers, dealers and clearing organizations587,540 586,553 
Payable to customersPayable to customers2,657,600 1,680,326 Payable to customers2,243,654 2,432,612 
Commission management payableCommission management payable139,621 116,987 Commission management payable126,968 102,990 
Compensation payableCompensation payable361,793 373,339 Compensation payable176,210 443,580 
Operating lease liabilitiesOperating lease liabilities81,400 82,735 Operating lease liabilities99,800 98,883 
Notes payable and other debtNotes payable and other debt542,519 383,067 Notes payable and other debt625,766 623,371 
Convertible debt81,682 80,808 
Fees payableFees payable42,915 43,833 Fees payable6,580 16,483 
Due to related partiesDue to related parties99 51 Due to related parties27 — 
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities240,790 196,479 Accounts payable, accrued expenses and other liabilities241,110 236,088 
Consolidated FundsConsolidated Funds Consolidated Funds 
Due to related partiesDue to related parties9 7 Due to related parties— 23 
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities219 578 Accounts payable, accrued expenses and other liabilities174 225 
Total LiabilitiesTotal Liabilities$8,706,816 $6,659,078 Total Liabilities$7,094,554 $7,452,460 
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Cowen Inc.
Condensed Consolidated Statements of Financial Condition
(dollars in thousands, except share and per share data)
(unaudited)
As of March 31, 2021As of December 31, 2020
(continued)
Commitments and Contingencies (Note 17)00
Temporary Equity
Redeemable non-controlling interests$0 $0 
Permanent Equity
Cowen Inc. stockholders' equity
Preferred stock, par value $0.01 per share: 10,000,000 shares authorized, 120,750 shares issued and outstanding as of March 31, 2021 (aggregate liquidation preference of $120,750) and 10,000,000 shares authorized, 120,750 shares issued and outstanding as of December 31, 2020 (aggregate liquidation preference of $120,750), respectively$1 $1 
Class A common stock, par value $0.01 per share: 62,500,000 shares authorized, 50,227,804 shares issued and 26,852,331 outstanding as of March 31, 2021 and 62,500,000 shares authorized, 49,465,491 shares issued and 26,845,628 outstanding as of December 31, 2020, respectively (including 292,968 and 334,230 restricted shares, respectively)334 334 
Class B common stock, par value $0.01 per share: 62,500,000 authorized, 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively0 0 
Additional paid-in capital1,151,377 1,130,138 
(Accumulated deficit) retained earnings328,930 185,901 
Accumulated other comprehensive income (loss)(3)(7)
Less: Class A common stock held in treasury, at cost, 23,375,473 and 22,619,863 shares as of March 31, 2021 and December 31, 2020, respectively(373,774)(346,870)
Total Cowen Inc. Stockholders' Equity1,106,865 969,497 
Nonredeemable non-controlling interests133,115 199,624 
Total Permanent Equity$1,239,980 $1,169,121 
Total Liabilities, Temporary Equity and Permanent Equity$9,946,796 $7,828,199 
Cowen Inc.
Condensed Consolidated Statements of Financial Condition
(dollars in thousands, except share and per share data)
(unaudited)
As of March 31, 2022As of December 31, 2021
(continued)
Commitments and Contingencies (Note 22)00
Redeemable Series A Convertible Preferred stock, par value $0.01 per share: 10,000,000 shares authorized, 120,750 shares issued and outstanding as of March 31, 2022 (aggregate liquidation preference of $120,750) and 10,000,000 shares authorized, 120,750 shares issued and outstanding as of December 31, 2021 (aggregate liquidation preference of $120,750)$120,750 $120,750 
Permanent Equity
Class A common stock, par value $0.01 per share: 62,500,000 shares authorized, 56,835,283 shares issued and 27,614,903 outstanding as of March 31, 2022 and 62,500,000 shares authorized, 55,826,893 shares issued and 27,778,964 outstanding as of December 31, 2021, respectively (including 901,374 and 901,374 restricted shares, respectively)334 334 
Class B common stock, par value $0.01 per share: 62,500,000 authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively— — 
Additional paid-in capital1,127,160 1,100,667 
Retained earnings491,189 461,982 
Accumulated other comprehensive income (loss)— (2)
Less: Class A common stock held in treasury, at cost, 29,220,380 and 28,047,929 shares as of March 31, 2022 and December 31, 2021, respectively(583,535)(547,112)
Total Cowen Inc. Stockholders' Equity1,035,148 1,015,869 
Nonredeemable non-controlling interests175,575 159,735 
Total Permanent Equity$1,210,723 $1,175,604 
Total Liabilities, Redeemable Preferred Stock and Permanent Equity$8,426,027 $8,748,814 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Cowen Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
 20212020
Revenues 
Investment banking$304,834 $105,028 
Brokerage173,737 141,377 
Investment income (loss)
Securities principal transactions, net63,965(31,045)
Portfolio fund principal transactions, net15,403(2,818)
Carried interest allocations96,769(11,544)
Total investment income (loss)176,137 (45,407)
Management fees25,742 11,604 
Incentive income2,258 0 
Interest and dividends59,388 42,077 
Reimbursement from affiliates288 261 
Insurance and reinsurance premiums7,117 10,471 
Other revenues8,169 1,321 
Consolidated Funds 
Principal transactions, net(3,349)(73,143)
Interest and dividends2 2,525 
Other revenues0 609 
Total revenues754,323 196,723 
Interest and dividends expense57,641 38,792 
Total net revenues696,682 157,931 
Expenses 
Employee compensation and benefits388,196 124,428 
Brokerage and trade execution costs45,656 32,886 
Underwriting expenses6,915 3,640 
Professional, advisory and other fees15,460 11,039 
Service fees5,731 6,837 
Communications9,267 8,176 
Occupancy and equipment9,540 9,530 
Depreciation and amortization4,354 5,442 
Client services and business development6,848 11,803 
Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs6,455 10,430 
Other expenses3,457 4,228 
Consolidated Funds 
Interest and dividends0 1,252 
Professional, advisory and other fees110 990 
Brokerage and trade execution costs0 20 
Other expenses161 452 
Total expenses502,150 231,153 
Other income (loss) 
Net gains (losses) on other investments12,645 (62)
Bargain purchase gain, net of tax3,855 0 
Gain/(loss) on debt extinguishment(4,538)0 
Total other income (loss)11,962 (62)
Income (loss) before income taxes206,494 (73,284)
Income tax expense (benefit)54,428 (1,173)
Net income (loss)152,066 (72,111)
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Cowen Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
 20212020
(continued)
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds4,562 (62,188)
Net income (loss) attributable to Cowen Inc.147,504 (9,923)
Preferred stock dividends1,698 1,698 
Net income (loss) attributable to Cowen Inc. common stockholders$145,806 $(11,621)
Weighted average common shares outstanding: 
Basic27,359 28,598 
Diluted33,565 28,598 
Earnings (loss) per share:  
Basic$5.33 $(0.41)
Diluted$4.34 $(0.41)

Cowen Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
 20222021
Revenues 
Investment banking$101,542 $304,834 
Brokerage168,738 173,737 
Investment income (loss)
Securities principal transactions, net91,25263,965
Portfolio fund principal transactions, net(6,098)15,403
Carried interest allocations(17,067)96,769
Total investment income (loss)68,087 176,137 
Management fees16,769 25,742 
Incentive income633 2,258 
Interest and dividends46,335 59,388 
Insurance and reinsurance premiums11,321 7,117 
Other revenues, net(949)1,660 
Consolidated Funds 
Principal transactions, net(1,886)(3,349)
Interest and dividends2 2 
Total revenues410,592 747,526 
Interest and dividends expense46,524 57,641 
Total net revenues364,068 689,885 
Expenses 
Employee compensation and benefits187,178 388,196 
Brokerage and trade execution costs40,591 45,656 
Underwriting expenses259 6,915 
Professional, advisory and other fees13,682 15,460 
Service fees7,150 5,731 
Communications9,471 9,267 
Occupancy and equipment10,316 9,540 
Depreciation and amortization7,185 4,354 
Client services and business development6,569 6,848 
Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs7,343 6,455 
Other expenses12,763 (3,340)
Consolidated Funds 
Professional, advisory and other fees42 110 
Other expenses63 161 
Total expenses302,612 495,353 
Other income (loss) 
Net gains (losses) on other investments5,580 12,645 
Bargain purchase gain, net of tax— 3,855 
Gain/(loss) on debt extinguishment— (4,538)
Total other income (loss)5,580 11,962 
Income (loss) before income taxes67,036 206,494 
Income tax expense (benefit)11,889 54,428 
Net income (loss)55,147 152,066 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds20,131 4,562 
Net income (loss) attributable to Cowen Inc.35,016 147,504 
Preferred stock dividends1,698 1,698 
Net income (loss) attributable to Cowen Inc. common stockholders$33,318 $145,806 
Weighted average common shares outstanding: 
Basic28,386 27,359 
Diluted (See Note 21)31,772 33,565 
Earnings (loss) per share:  
Basic$1.17 $5.33 
Diluted (See Note 21)$1.05 $4.34 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Cowen Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(dollars in thousands)
(unaudited)





Three Months Ended March 31, Three Months Ended March 31,
2021202020222021
Net income (loss)Net income (loss)$152,066 $(72,111)Net income (loss)$55,147 $152,066 
Other comprehensive income (loss), net of tax: Other comprehensive income (loss), net of tax: Other comprehensive income (loss), net of tax:
Foreign currency translationForeign currency translation4 0 Foreign currency translation2 4 
Total other comprehensive income (loss), net of tax Total other comprehensive income (loss), net of tax4 0  Total other comprehensive income (loss), net of tax2 4 
Comprehensive income (loss)Comprehensive income (loss)$152,070 $(72,111)Comprehensive income (loss)$55,149 $152,070 
Less: Comprehensive income attributable to non-controlling interests4,562 (62,188)
Less: Comprehensive income (loss) attributable to non-controlling interests Less: Comprehensive income (loss) attributable to non-controlling interests20,131 4,562 
Comprehensive income (loss) attributable to Cowen Inc.Comprehensive income (loss) attributable to Cowen Inc.$147,508 $(9,923)Comprehensive income (loss) attributable to Cowen Inc.$35,018 $147,508 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



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Cowen Inc.
Condensed Consolidated Statements of Changes in Equity
(dollars in thousands, except share data)
(unaudited)
Three Months Ended March 31,
20222021
Permanent Equity Shares(in shares)
Common Shares Outstanding
Beginning balance27,778,964 26,845,628 
Restricted stock awards issued949,803 705,512 
Common stock issuance for partial settlement of contingent liability from prior acquisition58,587 56,801 
Purchase of treasury stock, at cost(1,172,451)(755,610)
Ending balance27,614,903 26,852,331 
Series A Convertible Preferred Shares Outstanding
Beginning balance— 120,750 
Ending balance— 120,750 
Permanent Equity(in dollars)
Total Cowen Inc. Stockholders' Equity (beginning of period)$1,015,869 $969,497 
Class A Common stock
Beginning balance334 334 
Ending balance334 334 
Series A Convertible Preferred stock
Beginning balance— 1 
Ending balance— 1 
Treasury stock
Beginning balance(547,112)(346,870)
Purchase of treasury stock, at cost(36,423)(26,904)
Ending balance(583,535)(373,774)
Additional Paid-in Capital
Beginning balance1,100,6671,130,138
Common stock issuance for partial settlement of contingent liability from prior acquisition1,881 2,202 
Amortization of share based awards24,612 19,037 
Ending balance$1,127,160 $1,151,377 
Accumulated Other Comprehensive Income (Loss)
Beginning balance$(2)$(7)
Foreign currency translation2 4 
Ending balance— (3)
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Three Months Ended March 31,
20222021
(in dollars)
Retained Earnings/ (Accumulated deficit)
Beginning balance461,982185,901 
Net income (loss) attributable to Cowen Inc.35,016147,504
Preferred stock dividends (See Note 13)(1,698)(1,698)
Cash dividends to common stockholders (See Note 14)(4,111)(2,777)
Ending balance491,189328,930
Total Cowen Inc. Stockholders' Equity (end of period)$1,035,148 $1,106,865 
Nonredeemable Non-controlling Interests
Beginning balance$159,735 $199,624 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds20,1314,562
Capital contributions1,61022,515
Capital distributions(5,901)(18,773)
Deconsolidation of entity— (74,813)
Ending balance175,575133,115
Total Permanent Equity$1,210,723 $1,239,980 

Common Shares OutstandingCommon StockPreferred Shares OutstandingPreferred StockTreasury StockAdditional
Paid-in Capital		Accumulated Other Comprehensive Income (Loss)Retained Earnings/ (Accumulated deficit)Total Cowen Inc. Stockholders' EquityNonredeemable Non-controlling InterestsTotal Permanent EquityRedeemable Non-controlling Interest
Balance, December 31, 202026,845,628 $334 120,750 $1 $(346,870)$1,130,138 $(7)$185,901 $969,497 $199,624 $1,169,121 $0 
Net income (loss) attributable to Cowen Inc.— — — — — — — 147,504 147,504 — 147,504 — 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and funds— — — — — — — — — 4,562 4,562 0 
Foreign currency translation— — — — — — 4 — 4 — 4 — 
Capital contributions— — — — — — — — — 22,515 22,515 0 
Capital withdrawals— — — — — — — — — (18,773)(18,773)0 
Deconsolidation of entity— — — — — — — — — (74,813)(74,813)0 
Common stock issuance related to 2019 acquisition56,801 0 — — — 2,202 — — 2,202 — 2,202 — 
Restricted stock awards issued705,512 — — — — — — — — — — — 
Purchase of treasury stock, at cost(755,610)— — — (26,904)— — — (26,904)— (26,904)— 
Preferred stock dividends (See Note 19)— — — — — — — (1,698)(1,698)— (1,698)— 
Cash dividends to common stockholders (See Note 19)— — — — — — — (2,777)(2,777)— (2,777)— 
Amortization of share-based awards— — — — — 19,037 — — 19,037 — 19,037 — 
Balance, March 31, 202126,852,331 $334 120,750 $1 $(373,774)$1,151,377 $(3)$328,930 $1,106,865 $133,115 $1,239,980 $0 
Common Shares OutstandingCommon StockPreferred Shares OutstandingPreferred StockTreasury StockAdditional
Paid-in Capital		Accumulated Other Comprehensive Income (Loss)Retained Earnings/ (Accumulated deficit)Total Cowen Inc. Stockholders' EquityNonredeemable Non-controlling InterestsTotal Permanent EquityRedeemable Non-controlling Interest
Balance, December 31, 201928,610,357 $334 120,750 $1 $(284,301)$1,110,635 $(5)$(16,809)$809,855 $94,320 $904,175 $391,275 
Cumulative effect of the adoption of the new current expected credit loss standard (See Note 2d)— — — — — — — (10)(10)— (10)— 
Net income (loss) attributable to Cowen Inc.— — — — — — — (9,923)(9,923)— (9,923)— 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and funds— — — — — — — — — (1,198)(1,198)(60,990)
Capital contributions— — — — — — — — — 88,682 88,682 118,866 
Capital withdrawals— — — — — — — — — (43,563)(43,563)(131,150)
Common stock issuance related to 2019 acquisition41,262 0 — — — 618 — — 618 — 618 — 
Restricted stock awards issued591,763 — — — — — — — — — — — 
Purchase of treasury stock, at cost(1,615,265)— — — (20,891)— — — (20,891)— (20,891)— 
Preferred stock dividends (See Note 19)— — — — — — — (1,698)(1,698)— (1,698)— 
Cash dividends to common stockholders (See Note 19)— — — — — — — (1,429)(1,429)— (1,429)— 
Amortization of share-based awards— — — — — 8,281 — — 8,281 — 8,281 — 
Balance, March 31, 202027,628,117 $334 120,750 $1 $(305,192)$1,119,534 $(5)$(29,869)$784,803 $138,241 $923,044 $318,001 

The accompanying notes are an integral part of these unauditedcondensed consolidated financial statements.
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Cowen Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)		Cowen Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Cowen Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Three Months Ended March 31, Three Months Ended March 31,
20212020 20222021
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net income (loss)Net income (loss)$152,066 $(72,111)Net income (loss)$55,147 $152,066 
Adjustments to reconcile net income (loss) to net cash provided by / (used in) operating activities:Adjustments to reconcile net income (loss) to net cash provided by / (used in) operating activities:Adjustments to reconcile net income (loss) to net cash provided by / (used in) operating activities:
Bargain purchase gain, net of taxBargain purchase gain, net of tax(3,855)0 Bargain purchase gain, net of tax— (3,855)
Depreciation and amortizationDepreciation and amortization4,354 5,442 Depreciation and amortization7,185 4,354 
Amortization of debt issuance costsAmortization of debt issuance costs480 334 Amortization of debt issuance costs604 480 
Amortization of debt discount (premium)Amortization of debt discount (premium)776 1,109 Amortization of debt discount (premium)77 776 
Noncash lease expenseNoncash lease expense(362)(1,200)Noncash lease expense(858)(362)
(Gain) / loss on extinguishment of debt(Gain) / loss on extinguishment of debt3,890 0 (Gain) / loss on extinguishment of debt— 3,890 
Share-based compensation19,037 8,281 
Share-based awardsShare-based awards24,612 19,037 
Change in deferred taxesChange in deferred taxes5,913 (1,682)Change in deferred taxes2,157 5,913 
Net loss (gain) on disposal of fixed assetsNet loss (gain) on disposal of fixed assets101 — 
Contingent liability adjustmentContingent liability adjustment(614)0 Contingent liability adjustment— (614)
Purchases of securities owned, at fair valuePurchases of securities owned, at fair value(269,073)(749,807)Purchases of securities owned, at fair value(269,037)(269,073)
Proceeds from sales of securities owned, at fair valueProceeds from sales of securities owned, at fair value271,314 845,779 Proceeds from sales of securities owned, at fair value243,634 271,314 
Proceeds from sales of securities sold, not yet purchased, at fair valueProceeds from sales of securities sold, not yet purchased, at fair value63,511 416,453 Proceeds from sales of securities sold, not yet purchased, at fair value131,199 63,511 
Payments to cover securities sold, not yet purchased, at fair valuePayments to cover securities sold, not yet purchased, at fair value(58,346)(334,068)Payments to cover securities sold, not yet purchased, at fair value(141,186)(58,346)
Proceeds from other investments16,995 15,693 
Proceeds from sales of other investmentsProceeds from sales of other investments16,780 16,995 
Investment Income (loss) principal transactions, netInvestment Income (loss) principal transactions, net(158,833)38,039 Investment Income (loss) principal transactions, net(22,115)(158,833)
Consolidated FundsConsolidated Funds Consolidated Funds 
Purchases of securities owned, at fair value0 (1,024,733)
Proceeds from sales of securities owned, at fair valueProceeds from sales of securities owned, at fair value2,687 991,096 Proceeds from sales of securities owned, at fair value— 2,687 
Purchases of other investments0 (1,240)
Proceeds from other investmentsProceeds from other investments14,130 6,669 Proceeds from other investments— 14,130 
Investment Income (loss) principal transactions, netInvestment Income (loss) principal transactions, net3,143 74,071 Investment Income (loss) principal transactions, net1,886 3,143 
(Increase) decrease in operating assets:(Increase) decrease in operating assets: (Increase) decrease in operating assets: 
Securities owned, at fair value, held at broker-dealerSecurities owned, at fair value, held at broker-dealer(1,112,154)713,313 Securities owned, at fair value, held at broker-dealer(46,185)(1,112,154)
Receivable on derivative contracts, at fair valueReceivable on derivative contracts, at fair value(44,054)(20,889)Receivable on derivative contracts, at fair value(56,577)(44,054)
Securities borrowedSecurities borrowed(88,570)(216,989)Securities borrowed(56,543)(88,570)
Deposits with clearing organizations, brokers and banksDeposits with clearing organizations, brokers and banks22,874 (40,193)Deposits with clearing organizations, brokers and banks6,003 22,874 
Receivable from brokers, dealers and clearing organizationsReceivable from brokers, dealers and clearing organizations(191,009)(91,622)Receivable from brokers, dealers and clearing organizations126,436 (191,009)
Receivable from customers, net of allowanceReceivable from customers, net of allowance(95,705)(87,362)Receivable from customers, net of allowance(207)(95,705)
Fees receivable, net of allowanceFees receivable, net of allowance(46,170)(30,723)Fees receivable, net of allowance17,673 (46,170)
Due from related partiesDue from related parties440 1,947 Due from related parties9,783 440 
Other assetsOther assets(9,344)(6,919)Other assets(14,597)(9,344)
Consolidated FundsConsolidated Funds Consolidated Funds 
Cash and cash equivalents(6,138)(8,847)
Receivable on derivative contracts, at fair valueReceivable on derivative contracts, at fair value(2,917)(11,459)Receivable on derivative contracts, at fair value— (2,917)
Receivable from brokers0 5,296 
Other assetsOther assets13 (94)Other assets— 13 
Increase (decrease) in operating liabilities:Increase (decrease) in operating liabilities: Increase (decrease) in operating liabilities: 
Securities sold, not yet purchased, at fair value, held at broker-dealerSecurities sold, not yet purchased, at fair value, held at broker-dealer187,749 15,925 Securities sold, not yet purchased, at fair value, held at broker-dealer(208,080)187,749 
Securities sold under agreement to repurchaseSecurities sold under agreement to repurchase(2,490)34,176 Securities sold under agreement to repurchase165,723 (2,490)
Payable for derivative contracts, at fair valuePayable for derivative contracts, at fair value(24,035)11,624 Payable for derivative contracts, at fair value(13,348)(24,035)
Securities loanedSecurities loaned607,531 (604,072)Securities loaned149,280 607,531 
Payable to brokers, dealers and clearing organizationsPayable to brokers, dealers and clearing organizations73,328 59,078 Payable to brokers, dealers and clearing organizations987 73,328 
Payable to customersPayable to customers977,274 58,590 Payable to customers(188,958)977,274 
Commission management payableCommission management payable22,634 41,068 Commission management payable23,978 22,634 
Compensation payableCompensation payable(17,809)(156,333)Compensation payable(279,653)(17,809)
Fees payableFees payable(918)(378)Fees payable(9,903)(918)
Due to related partiesDue to related parties48 0 Due to related parties27 48 
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities41,793 23,974 Accounts payable, accrued expenses and other liabilities14,907 39,591 
Consolidated FundsConsolidated Funds Consolidated Funds 
Contributions received in advance0 150 
Payable to brokers0 399 
Payable for derivative contracts, at fair value0 13,297 
Due to related partiesDue to related parties(23)— 
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities(51)(359)
Net cash provided by / (used in) operating activitiesNet cash provided by / (used in) operating activities(309,142)363,161 
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Cowen Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)		Cowen Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Cowen Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Three Months Ended March 31, Three Months Ended March 31,
20212020 20222021
(continued)(continued)(continued)
Due to related parties0 (581)
Accounts payable, accrued expenses and other liabilities(359)382 
Net cash provided by / (used in) operating activities359,225 (79,117)
Cash flows from investing activities:Cash flows from investing activities: Cash flows from investing activities: 
Securities purchased under agreement to resellSecurities purchased under agreement to resell191 0 Securities purchased under agreement to resell(19,621)191 
Purchases of other investmentsPurchases of other investments(29,117)(17,650)Purchases of other investments(7,662)(29,117)
Purchase of business (See Note 3)2,109 0 
Purchase of businessPurchase of business— 2,109 
Cash at deconsolidated entityCash at deconsolidated entity— (5,620)
Proceeds from sales of other investmentsProceeds from sales of other investments31,267 12,059 Proceeds from sales of other investments9,780 31,267 
Purchase of fixed assets and intangiblesPurchase of fixed assets and intangibles(1,643)(2,485)Purchase of fixed assets and intangibles(2,914)(1,643)
Net cash provided by / (used in) investing activitiesNet cash provided by / (used in) investing activities2,807 (8,076)Net cash provided by / (used in) investing activities(20,417)(2,813)
Cash flows from financing activities:Cash flows from financing activities:  Cash flows from financing activities:  
Deferred debt issuance costDeferred debt issuance cost(6,467)0 Deferred debt issuance cost(112)(6,467)
Borrowings on notes and other debtBorrowings on notes and other debt301,490 62,812 Borrowings on notes and other debt4,019 301,490 
Repayments on notes and other debtRepayments on notes and other debt(139,737)(933)Repayments on notes and other debt(2,193)(139,737)
Purchase of treasury stockPurchase of treasury stock(20,629)(18,018)Purchase of treasury stock(24,140)(20,629)
Cash dividends paidCash dividends paid(2,313)(1,168)Cash dividends paid(3,917)(2,313)
Preferred dividends paid(1,698)(1,698)
Preferred stock dividends paidPreferred stock dividends paid(1,698)(1,698)
Contingent liability paymentContingent liability payment(10,698)(782)Contingent liability payment(8,195)(8,496)
Capital contributions by non-controlling interests in operating entitiesCapital contributions by non-controlling interests in operating entities3,498 286 Capital contributions by non-controlling interests in operating entities1,610 3,498 
Capital withdrawals to non-controlling interests in operating entities(2,348)(462)
Capital distributions to non-controlling interests in operating entitiesCapital distributions to non-controlling interests in operating entities(5,901)(2,348)
Consolidated FundsConsolidated Funds Consolidated Funds 
Capital contributions by non-controlling interests in Consolidated FundsCapital contributions by non-controlling interests in Consolidated Funds19,017 207,263 Capital contributions by non-controlling interests in Consolidated Funds— 19,017 
Capital withdrawals to non-controlling interests in Consolidated Funds(16,424)(166,238)
Capital distributions to non-controlling interests in Consolidated FundsCapital distributions to non-controlling interests in Consolidated Funds— (16,424)
Net cash provided by / (used in) financing activitiesNet cash provided by / (used in) financing activities123,691 81,062 Net cash provided by / (used in) financing activities(40,527)125,893 
Change in cash and cash equivalentsChange in cash and cash equivalents485,723 (6,131)Change in cash and cash equivalents(370,086)486,241 
Cash and cash equivalents, including cash collateral pledged and segregated cash, beginning of periodCash and cash equivalents, including cash collateral pledged and segregated cash, beginning of period941,053 415,014 Cash and cash equivalents, including cash collateral pledged and segregated cash, beginning of period1,156,834 941,470 
Cash and equivalents at end of period:Cash and equivalents at end of period:Cash and equivalents at end of period:
Cash and cash equivalents Cash and cash equivalents1,147,531 270,079  Cash and cash equivalents512,978 1,147,531 
Cash collateral pledged Cash collateral pledged110,303 7,538  Cash collateral pledged52,865 110,303 
Segregated cash Segregated cash168,942 131,266  Segregated cash220,882 168,942 
Cash and cash equivalents, Consolidated Funds Cash and cash equivalents, Consolidated Funds23 935 
Cash and cash equivalents, including cash collateral pledged and segregated cash, end of periodCash and cash equivalents, including cash collateral pledged and segregated cash, end of period$1,426,776 $408,883 Cash and cash equivalents, including cash collateral pledged and segregated cash, end of period$786,748 $1,427,711 
Supplemental informationSupplemental information   Supplemental information   
Cash paid during the year for interestCash paid during the year for interest$65,259 $29,560 Cash paid during the year for interest$40,538 $65,259 
Cash paid during the year for taxesCash paid during the year for taxes$8,087 $950 Cash paid during the year for taxes$12,980 $8,087 
Supplemental non-cash informationSupplemental non-cash information  Supplemental non-cash information  
Purchase of treasury stock, at cost, through net settlement (See Note 19)$6,245 $2,825 
Preferred stock dividends declared (See Note 19)1,698 1,698 
Cash dividends declared (See Note 19)2,777 1,429 
Purchase of treasury stock, at cost, through net settlement (See Note 14)Purchase of treasury stock, at cost, through net settlement (See Note 14)$12,283 $6,245 
Preferred stock dividends declared (See Note 14)Preferred stock dividends declared (See Note 14)1,698 1,698 
Cash dividends declared (See Note 14)Cash dividends declared (See Note 14)4,111 2,777 
Net assets (liabilities) acquired upon acquisition (net of cash)Net assets (liabilities) acquired upon acquisition (net of cash)3,107 0 Net assets (liabilities) acquired upon acquisition (net of cash)— 3,107 
Net decrease in non-controlling interests in Consolidated Fund due to deconsolidation of Consolidated Fund (See Note 2)Net decrease in non-controlling interests in Consolidated Fund due to deconsolidation of Consolidated Fund (See Note 2)74,813 0 Net decrease in non-controlling interests in Consolidated Fund due to deconsolidation of Consolidated Fund (See Note 2)— 74,813 
Common stock issuance in relation to acquisition (See Note 3)2,202 618 
Common stock issuance in relation to acquisitionsCommon stock issuance in relation to acquisitions1,881 2,202 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Index
Notes to Unaudited Condensed Consolidated Financial Statements Page
  
13
  
13
2624
  
2725
2726
  
2726
  
3533
4239
  
4239
  
4239
  
4339
40
43
44
4346
46
4447
4447
  
4548
 
46
47
 
50
50
51
  
54
  
5655
 
56
 
57
59
61
6158
  
6359

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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Business
Cowen Inc., a Delaware corporation formed in 2009, is a diversified financial services firm that, together with its consolidated subsidiaries (collectively, "Cowen" or the "Company"), provides investment banking, research, sales and trading, prime brokerage, global clearing, securities financing, commission management services and investment management through its 2 business segments: the Operating Company ("Op Co") and the Asset Company ("Asset Co").
The Op Co segment consists of 4 divisions: the Investment Banking division, the Markets division, the Research division and the Cowen Investment Management ("CIM") division. The Company refers to the Investment Banking division, the Markets division and the Research division combined as its investment banking businesses. Op Co's investment banking businesses offer advisory and global capital markets origination, domain knowledge-driven research, sales and trading platforms for institutional investors, global clearing, commission management services and also a comprehensive suite of prime brokerage service. Sectors covered by Op Co's investment banking business include healthcare, technology, media and telecommunications, consumer, industrials, technology enabledtech-enabled and business services, and energy. Op Co’s CIM division includes advisers to investment funds (including private equity structures and privately placed hedge funds) and registered funds. The Company has also invested capital in its insurance and reinsurance businesses.
The Asset Co segment consists of certain of the Company's private investments, private real estate investments and other legacy investment strategies. The focus of Asset Co is to drive future monetization of the invested capital of the segment.
2. Significant Accounting Policies
a.    Basis of presentation
These unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") as promulgated by the Financial Accounting Standards Board ("FASB") through the Accounting Standards Codification (the "Accounting Standards" or "ASC") as the source of authoritative accounting principles in the preparation of financial statements, and include the accounts of the Company, its operating and other subsidiaries, and entities in which the Company has a controlling financial interest or a general partner interest. All material intercompany transactions and balances have been eliminated on consolidation. Certain investment funds that are consolidated in these accompanying condensed consolidated financial statements, as further discussed below, are not subject to the consolidation provisions with respect to their own controlled investments pursuant to specialized industry accounting.
The accompanying condensed financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 20202021 (the "2020"2021 Form 10-K"). Certain footnote disclosures included in the 20202021 Form 10-K have been condensed or omitted from the accompanying condensed financial statements as they are not required for interim reporting under US GAAP or are insignificant to the interim reporting period.
During the first quarter of 2021, the Company changed the presentation of certain income streams on its condensed consolidated statements of operations by moving the income streams from Other income - net gains (losses) on securities, derivatives and other investments to Revenues. Additionally, the Company moved proprietary trading gains and losses generated by the Company’s broker dealer entities from Brokerage revenue to Investment income (loss) – securities principal transactions, net. The specified presentation changes included the following:
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
FromToIncome Streams
Other income - net gains (losses) on securities, derivatives and other investmentsInvestment income (loss) – securities principal transactions, netproprietary trading gains and losses generated outside of the Company’s broker-dealer entities
Other income - net gains (losses) on securities, derivatives and other investmentsInvestment income (loss) – portfolio fund principal transactions, netgains and losses from portfolio funds
Other income - net gains (losses) on securities, derivatives and other investmentsInvestment income (loss) – carried interest allocationscarried interest allocations
Other income - net gains (losses) on securities, derivatives and other investmentsOther revenuenet gains and losses on foreign currency transactions
Brokerage revenueInvestment income (loss) – securities principal transactions, netproprietary trading gains and losses generated by the Company’s broker-dealer entities
Other income – Consolidated Funds – net realized and unrealized gains (losses) on investments and other transactions and other income – Consolidated Funds – net realized and unrealized gains (losses) on derivativesConsolidated Funds – principal transactions, netproprietary trading gains and losses generated from the Consolidated Funds
Other income – Consolidated Funds – net gains (losses) on foreign currency transactionsConsolidated Funds – other revenuenet gains and losses on foreign currency transactions generated by the Consolidated Funds
The Company believes that these presentation changes provide a better representation of the Company’s operating results as it is used by management to monitor the Company’s financial performance and is consistent with industry practice. The changes in presentation have no impact on net income and prior period amounts have been recast to reflect such changes in presentation.
b.    Principles of consolidation
The Company consolidates all entities that it controls through a majority voting interest or otherwise, including those investment funds in which the Company either directly or indirectly has a controlling financial interest. In addition, the Company consolidates all variable interest entities for which it is the primary beneficiary.
The Company consolidates 2 and 3 investment funds for which it acts as the managing member/general partner and investment manager as of March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, the Company consolidated the following investment funds: Ramius Enterprise LP (“Enterprise LP”) and Cowen Private Investments LP ("Cowen Private"). At December 31, 2020, the Company consolidated the following investment funds: Enterprise LP, Cowen Private, and Cowen Sustainable Investments I LP ("CSI I LP"). These funds are referred to as each a "Consolidated Fund" and collectively the "Consolidated Funds".
During the first quarter of 2021, the Company deconsolidated CSI I LP due the Company's portion being diluted through a capital equalization event. During the second quarter of 2020, the Company deconsolidated Ramius Merger Fund LLC (the "Merger Fund") and UCITS Fund ("UCITS Fund") due to a partial redemption of the Company’s direct portfolio fund investment in Merger Fund and a partial termination of the notional value of UCITS Fund units referenced in a total return swap with a third party. The Company continues to hold a direct retained portfolio fund investment in the Merger Fund and CSI I LP and continues to have economic exposure to the returns of UCITS Fund through a total return swap with a third party. Merger Fund, CSI I LP and UCITS Fund continue to be related parties of the Company after deconsolidation. CSI I Golden Holdco LP ("Golden HoldCo") and CSI I Prodigy Holdco LP ("Prodigy HoldCo") were consolidated through November 2020 when the Company raised additional capital within the sustainable investing strategy that diluted the Company's direct and indirect ownership. As a result, the Company's direct and indirect ownership in Golden Holdco and Prodigy Holdco is no longer expected to be significant to either entity and the entities were deconsolidated.
The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a Voting Operating Entity ("VOE") or a Variable Interest Entity ("VIE") under US GAAP.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Voting Operating Entities—VOEs are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently, (ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact the entity's economic performance and (iii) voting rights of equity holders are proportionate to their obligation to absorb losses or the right to receive returns.
Under US GAAP consolidation requirements, the usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. Accordingly, the Company consolidates all VOEs in which it owns a majority of the entity's voting shares or units.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Variable Interest Entities—VIEs are entities that lack one or more of the characteristics of a VOE. In accordance with US GAAP, an enterprise must consolidate all VIEs of which it is the primary beneficiary. Under the US GAAP consolidation model for VIEs, an enterprise that (1) has the power to direct the activities of a VIE that most significantly impacts the VIE's economic performance, and (2) has an obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE, is considered to be the primary beneficiary of the VIE and thus is required to consolidate it.
The Company determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE by performing a periodic qualitative and/or quantitative analysis of the VIE that includes a review of, among other things, its capital structure, contractual agreements between the Company and the VIE, the economic interests that create or absorb variability, related party relationships and the design of the VIE. As of March 31, 2021,VIE.
The VIEs the total assets and total liabilities of the consolidated VIEs were $243.3 million and $8.0 million, respectively. As of December 31, 2020, the total assets and total liabilities of the consolidated VIEs were $325.5 million and $10.1 million, respectively. The deconsolidation of one Consolidated Fund decreased the overall VIEs net assets. The VIEsCompany has invested in act as investment managers and/or investment companies that may be managed by the Company or the Company may have equity interest in those investment companies.Company. The VIEs are financed through their operations and/or loan agreements with the Company.
In the ordinary course of business, the Company also sponsors various other entities that it has determined to be VIEs. These VIEs are primarily investment funds for which the Company serves as the general partner, managing member and/or investment manager with decision-making rights.
The Company does not consolidate the real estateconsolidates these investment funds that are VIEs due to the Company's conclusion that itwhen its variable interest is not the primary beneficiary of these funds in each instance. Investment fund investors are entitled to all of the economics of these VIEs with the exception of the management fee and incentive income, if any, earned by the Company. The Company has equity interests in the funds as both a general partner and a limited partner. In these instances the Company has concluded that the variable interests are not potentially significant to the VIE. Although the Company may advance amounts and pay certain expenses on behalf of the investment funds that it considers to be VIEs, it does not provide, nor is it required to provide, any type of substantive financial support to these entities outside of regular investment management services.entity. (see Note 6 for additional disclosures on VIEs).
Investment companies, which account for their investments under the specialized industry accounting guidance for investment companies prescribed under US GAAP, are not subject to the consolidation provisions for their investments. As of March 31, 2022 and December 31, 2021, the total assets of the consolidated VIEs were $332.4 million and $304.1 million, respectively, and total liabilities of the consolidated VIEs were $6.6 million and $9.8 million, respectively.
The Company consolidates investment funds for which it acts as the managing member/general partner and investment manager. At March 31, 2022, the Company consolidated Ramius Enterprise LP (“Enterprise LP”), an investment fund. At December 31, 2021, the Company consolidated the following investment funds: Enterprise LP and Cowen Private Investments LP ("Cowen Private").
During the first quarter of 2022, the Company deconsolidated Cowen Private as the fund was liquidated. During the first quarter of 2021, the Company deconsolidated Cowen Sustainable Investments I, LP ("CSI I LP") due to the Company's ownership being diluted through a capital equalization event.
Equity Method InvestmentsInvestments—For operating entities over which the Company exercises significant influence but which do not meet the requirements for consolidation as outlined above, the Company uses the equity method of accounting. The Company's investments in equity method investees are recorded in other investments in the accompanying condensed consolidated statements of financial condition. The Company's share of earnings or losses from equity method investees is included in Net gains (losses) on other investments in the accompanying condensed consolidated statements of operations.
The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment charge when the loss in value is deemed other than temporary.
Other—If the Company does not consolidate an entity or apply the equity method of accounting, the Company accounts for its investment in such entitiesentity (primarily allconsisting of securities of such entity which are boughtpurchased and held principally for the purpose of selling them in the near term and classified as trading securities), at fair value with unrealized gains (losses) resulting from changes in fair value reflected within Investment income (loss) - Securities principal transactions, net or Investment income (loss) - portfolio fund investment income (loss) in the accompanying condensed consolidated statements of operations.
Retention of Specialized Accounting—The Consolidated Funds and certain other consolidated companies are investment companies and apply specialized industry accounting. The Company reports its investments on the condensed consolidated statements of financial condition at their estimated fair value, with unrealized gains (losses) resulting from changes in fair value reflected within Consolidated Funds - Principal transactions, net in the accompanying condensed consolidated statements of operations.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Accordingly, the accompanying condensed consolidated financial statements reflect different accounting policies for investments depending on whether or not they are held through a consolidated investment company.
Certain portfolio fund investments qualify as equity method investments and are investment companies that apply specialized industry accounting. In applying equity method accounting guidance, the Company retains the specialized accounting of the investees and reports its investments on the condensed consolidated statements of financial condition at their estimated fair value, with unrealized gains (losses) resulting from changes in fair value reflected within Investment Income - portfolio fund principal transactions, net in the accompanying condensed consolidated statements of operations.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
In addition, the Company's broker-dealer subsidiaries, Cowen and Company, LLC ("Cowen and Company"), Westminster Research Associates LLC ("Westminster"), Cowen Execution Services Limited ("Cowen Execution Ltd"), ATM Execution LLC ("ATM Execution"), Cowen and Company (Asia) Limited ("Cowen Asia"), and Cowen International Limited ("Cowen International Ltd"), and Cowen Prime Services LLC ("Cowen Prime") apply the specialized industry accounting for brokers and dealers in securities, which the Company retains upon consolidation.
c.    Use of estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with US GAAP requires the management of the Company to make estimates and assumptions that affect the fair value of securities and other investments, the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the accompanying condensed consolidated financial statements, as well as the accounting for goodwill and identifiable intangible assets and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
d.    Allowance for credit losses
The Company measures the allowance for credit losses in accordance with adopted ASC Topic 326, Financial Instruments – Credit Losses (“ASC 326”), which. ASC 326 impacts the prescribes prescribed the impairment model for certain financial assets measured at amortized cost by requiring a current expected credit loss ("CECL") methodology to estimate expected credit losses over the entire life of the financial asset, recorded at inception or purchase. Under the accounting update guidance, the Company has the ability to determine there are no expected credit losses in certain circumstances (e.g., based on collateral arrangements or based on the credit quality of the borrower or issuer).
The Company applies the guidance in ASC 326 to securities borrowed and fees and other receivables carried at amortized cost (including, but not limited to, receivables related to securities transactions, corporate financeunderwriting fees, strategic/financial advisory fees and syndicate receivables,placement and sales agent fees, management fees and incentive fees receivable).
The allowance for credit losses is based on the Company's expectation of the collectability of financial instruments, carried at amortized cost, including securities borrowed and fees and other receivables utilizing the CECL framework. The Company considers factors such as historical experience, credit quality, age of balances and current and future economic conditions that may affect the Company’s expectation of the collectability in determining the allowance for credit losses. The Company’s expectation is that the credit risk associated with fees and other receivables is not significant until they are 90 days past due based on the contractual arrangement and expectation of collection in accordance with industry standards.
For securities borrowed, the Company applies a practical expedient to measure the allowance for credit losses based on the fair value of the collateral. If the fair value of the collateral held exceeds the amortized cost of the borrowing and the borrower is expected to continue to replenish the collateral as needed, the Company will not recognize an allowance. If the fair value of collateral is less than amortized cost and the borrower is expected to continue to replenish the collateral as needed, the Company applies the CECL model, utilizing a probability and loss given default methodology, only to the extent of the shortfall between the fair value of the collateral and amortized cost.
The credit loss expense related to the allowance for credit losses as well as any recoveries of amounts previously charged is reflected in other expenses in the accompanying condensed consolidated statements of operations.
e.    Valuation of investments and derivative contracts and other investments
US GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement datedate;
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Level 2Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and
Level 3Fair value is determined based on pricing inputs that are unobservable and includes situations where there is little, if any, market activity for the asset or liability. The determination of fair value for assets and liabilities in this category requires significant management judgment or estimation.
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics,
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specific and broad credit data, liquidity statistics, and other factors. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Company's perceived risk of that instrument. Inputs reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
The Company and its operating subsidiaries act as the manager for the Consolidated Funds. Both the Company and the Consolidated Funds hold certain investments which are valued by the Company, acting as the investment manager. The fair value of these investments is based on their proportional rights of the underlying portfolio company, and is generally estimated based on proprietary models developed by the Company, which include discounted cash flow analysis, public market comparables, and other techniques and may be based, at least in part, on independently sourced market information. The material estimates and assumptions used in these models include the timing and expected amount of cash flows, the appropriateness of discount rates used, and, in some cases, the ability to execute, timing of, and estimated proceeds from expected financings. Significant judgment and estimation impact the selection of an appropriate valuation methodology as well as the assumptions used in these models, and the timing and actual values realized with respect to investments could be materially different from values derived based on the use of those estimates. The valuation methodologies applied impact the reported value of the Company's investments and the investments held by the Consolidated Funds in the condensed consolidated financial statements. Certain of the Company's investments are relatively illiquid or thinly traded and may not be immediately liquidated on demand if needed. Fair values assigned to these investments may differ significantly from the fair values that would have been used had a ready market for the investments existed and such differences could be material.
The Company primarily uses the market approach to value its financial instruments measured at fair value. In determining an instrument's level within the hierarchy, the Company categorizes the Company's financial instruments into three categories: securities, derivative contracts and other investments. To the extent applicable, each of these categories can further be divided between those held long or sold short.
The Company has the option to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in earnings each period. The election is made on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument.  The Company has elected the fair value option for certain of its investments held by its operating companies.  This option has been elected because the Company believes that it is consistent with the manner in which the business is managed, as well as the way that financial instruments in other parts of the business are recorded. 
Securities—Securities with values based on quoted market prices in active markets for identical assets are classified within level 1 of the fair value hierarchy. These securities primarily include active listed equities, certain U.S. government and sovereign obligations, Exchange Traded Funds ("ETFs"), mutual funds and certain money market securities.
Certain positions for which trading activity may not be readily visible, consisting primarily of convertible debt, corporate debt and loans and restricted equities, are stated at fair value and classified within level 2 of the fair value hierarchy. The estimated fair values assigned by management are determined in good faith and are based on available information considering trading activity, broker quotes, quotations provided by published pricing services, counterparties and other market participants, and pricing models using quoted inputs, and do not necessarily represent the amounts which might ultimately be realized. As level 2 investments include positions that are not always traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability.
Derivative Contracts—Derivative contracts can be exchange-traded or privately negotiated over-the-counter (“OTC”). Exchange-traded derivatives, such as futures contracts and exchange-traded option contracts, are typically classified within level 1 or level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. OTC derivatives, such as
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generic forwards, swaps and options, are classified as level 2 when their inputs can be corroborated by market data. OTC derivatives, such as swaps and options, with significant inputs that cannot be corroborated by readily available or observable market data are classified as level 3.
Other Investments—Other investments consist primarily of portfolio funds, real estate investments, carried interest and equity method investments, which are valued as follows:
i.    Portfolio Funds—Portfolio funds include interests in private investment partnerships, foreign investment companies and other collective investment vehicles which may be managed by the Company or its affiliates. The Company applies the practical expedient provided by the US GAAP fair value measurements and disclosures guidance relating to investments
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in certain entities that calculate net asset value (“NAV”) per share (or its equivalent). The practical expedient permits an entity holding investments in certain entities that either are investment companies or have attributes similar to an investment company, and calculate NAV per share or its equivalent for which the fair value is not readily determinable, to measure the fair value of such investments on the basis of that NAV per share, or its equivalent, without adjustment. Investments which are valued using NAV per share as a practical expedient are not categorized within the fair value hierarchy.
ii. Carried Interest—For the private equity and debt fund products the Company offers, the Company is allocated incentive income by the investment funds based on the extent by which the investment funds performance exceeds predetermined thresholds. Carried interest allocations are generally structured from a legal standpoint as an allocation of capital in the Company’s capital account. The Company accounts for carried interest allocations by applying an equity ownership model. Accordingly, the Company accrues performance allocations quarterly based on the fair value of the underlying investments assuming hypothetical liquidation at book value.
iii. Equity Method Investments—For operating entities over which the Company exercises significant influence but which do not meet the requirements for consolidation as outlined above, the Company applies the equity method of accounting. The Company's investments in equity method investees are recorded in other investments in the accompanying condensed consolidated statements of financial condition. The Company's share of earnings or losses from equity method investees is included in Net gains (losses) on other investments in the accompanying condensed consolidated statements of operations.
See Notes 6 and 7 for further information regarding the Company's investments, including equity method investments and fair value measurements.
f.    Offsetting of derivative contracts
To reduce credit exposures on derivatives, the Company may enter into master netting agreements with counterparties that permit the Company the right, in the event of a default by a counterparty, to offset the counterparty’s rights and obligations under the agreement and to liquidate and offset any collateral against any net amount owed by the counterparty. Derivatives are reported on a net-by-counterparty basis (i.e., the net payable or receivable for derivative assets and liabilities for a given counterparty) in the condensed consolidated statements of financial condition when a legal right of offset exists under an enforceable netting agreement. Additionally, derivatives are reported net of cash collateral received and posted under enforceable credit support agreements in the condensed consolidated statements of financial position, provided a legal right of offset exists. See NotesNote 6 for further information about offsetting of derivative financial instruments.
g.    Receivable from and payable to brokers
Receivable from brokers, dealers, and clearing organizations includes amounts receivable for securities failed to deliver by the Company to a purchaser by the settlement date, amounts receivable from broker-dealers and clearing organizations, commissions receivable from broker-dealers, and interest receivable from securities financing arrangements and are reported net of an allowance for credit losses.
Payable to brokers, dealers and clearing organizations includes amounts payable for securities failed to receive by the Company from a seller by the settlement date, amounts payable to broker-dealers and clearing organizations for unsettled trades, interest payable for securities financing arrangements, and payables of deposits held in proprietary accountaccounts of brokers and dealers.
Pursuant to the master netting agreements the Company has entered intoReceivables and payables with its brokers, dealers and clearing organizations receivables and payables arising from unsettled traderegular-way transactions are presented net (assets less liabilities) across balances with the same counterparty. The Company's receivable from and payable to brokers, dealers and clearing organizations balances are held atwith multiple financial institutions.

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h.    Receivable from and payable to customers
Receivable from customers includes amounts owed by customers on cash and margin transactions, recorded on a settlement-date basis and prepaid research, net of allowance for credit losses. For prepaid research, a prepaid research asset is established for research and related services disbursed in advance of anticipated client commission volumes.
Payable to customers primarily consists of amounts owed to customers relating to securities transactions not completed on settlement date, recorded on a settlement-date basis on the statement of financial condition, and other miscellaneous customer payables.
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Securities owned by customers, including those that collateralize margin, are not reflected as assets of the Company on the statement of financial condition. The Company holds these securities with the intention of settlement against customer orders and are held as collateral for customer receivables.
i.    Fees receivable
Fees relatedreceivable primarily relate to securitysecurities transactions and are reported net of an allowance for credit losses. 
ManagementFees receivable also include amounts due to the Company for underwriting fees, strategic/financial advisory fees and placement and sales agent fees. Additionally, management and incentive fees due to the Company are earned as the managing member, general partner and/or investment manager to the Company's investment funds and are recognized in accordance with appropriate revenue recognition guidance (see Note 2n)2o for further reference).
j.    Securities financing arrangements
Securities borrowed and securities loaned are carried at the amounts of cash collateral advanced or received on a gross basis. The related rebates are recorded in the accompanying condensed consolidated statements of operations as interest and dividends income and interest and dividends expense. Securities borrowed transactions require the Company to deposit cash collateral with the lender. With respect to securities loaned, the Company receives cash or securities as collateral from the borrower. When the Company receives securities as collateral, and has concluded it (i) is the transferor and (ii) can pledge the securities to third parties, the Company recognizes the securities received as collateral at fair value in Securities owned, at fair value with the corresponding obligation to return the securities received as collateral at fair value in Securities sold, not yet purchased, at fair value. Securities received as collateral are not recognized when the Company either (i) is not the transferor or (ii) cannot pledge the securities to third parties. The initial collateral advanced or received approximates or is greater than the market value of securities borrowed or loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis, with additional collateral obtained or returned, as necessary. Securities borrowed and loaned may also result in credit exposures for the Company in an event that the counterparties are unable to fulfill their contractual obligations. See Note 2d for further information.
Fees and interest received or paid are recorded in interest and dividends income and interest and dividends expense, respectively, on an accrual basis in the accompanying condensed consolidated statements of operations. In cases where the fair value basis of accounting is elected, any resulting change in fair value would be reported in Investment Income - Securities principal transactions, net in the accompanying condensed consolidated statements of operations. Accrued interest income and expense are recorded in receivable from brokers, dealers and clearing organizations and payable to brokers, dealers and clearing organizations, respectively, on an accrual basis in the accompanying condensed consolidated statements of financial condition. At March 31, 2021 and December 31, 2020, the Company did not have any securities lending transactions for which fair value basis of accounting was elected.
k.     Securities sold under agreements to repurchase
Securities purchased under agreement to resell and securities sold under agreements to repurchase ("repurchase agreements") are accounted for as collateralized financing transactions and are recorded at their contracted resale or repurchase amount plus accrued interest. A repo is a transaction in which a firm buys or sells financial instruments from/to a counterparty, typically in exchange for cash, and simultaneously enters into an agreement to resell or repurchase the same or substantially the same financial instruments to/from such counterparty at a stated price plus accrued interest at a future date. When the Company receives securities as collateral, and has concluded it (i) is the transferor and (ii) can pledge the securities to third parties, the Company recognizes the securities received as collateral at fair value in Securities owned, at fair value with the corresponding obligation to return the securities received as collateral at fair value in Securities sold, not yet purchased, at fair value. Securities received as collateral are not recognized when the Company either (i) is not the transferor or (ii) cannot pledge the securities to third parties. The initial collateral advanced approximates or is greater than the market value of securities purchased or sold in the transaction. The Company typically enters into repurchase transactions with counterparties that prefer repurchase transactions to securities borrowed and securities loaned transactions. The Company has executed master repurchase agreements with such counterparties and utilizes such counterparties to finance its own positions, or replace a securities lending transaction with a repurchase for matched book purposes. The Company monitors the market value of repurchases on a daily basis, with additional collateral obtained or returned, as necessary. Repurchases may also result in credit exposures for the Company in an event that the
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counterparties are unable to fulfill their contractual obligations. The Company mitigates its credit risk by continuously monitoring its credit exposure and collateral values by demanding additional collateral or returning excess collateral in accordance with the netting provisions available in the master repurchase contracts in place with the counterparties.
Interest paid is recorded in interest and dividends expense in accordance with US GAAP and market convention for the imputation of interest on repurchase agreement transactions on an accrual basis in the accompanying condensed consolidated statements of operations. In cases where the fair value basis



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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
l.    Goodwill and intangible assets
Goodwill
Goodwill represents the excess of the purchase price consideration of acquired companies over the estimated fair value assigned to the individual assets acquired and liabilities assumed. Goodwill is allocated to the Company's reporting units at the date the goodwill is initially recorded. Once goodwill has been allocated to the reporting units, it generally no longer retains its identification with a particular acquisition but instead becomes identifiable with the reporting unit. As a result, all of the fair value of each reporting unit is available to support the value of goodwill allocated to the unit.
In accordance with US GAAP requirements for testing for impairment of goodwill, the Company tests goodwill for impairment on an annual basis or at an interim period if events or changed circumstances would more likely than not reduce the fair value of a reporting unit below its carrying amount. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances led to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that fair value exceeds its carrying amount, then performing a quantitative impairment test is not necessary. If the Company concludes otherwise, the Company is required to perform a quantitative impairment test that requires a comparison of the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying value, the related goodwill is not considered impaired and no further analysis is required. If the carrying value of the reporting unit exceeds its fair value, then the Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.
Intangible assets
Intangible assets with finite lives are amortized over their estimated average useful lives. Intangible assets are tested for potential impairment whenever events or changes in circumstances suggest that an asset or asset group's carrying value may not be fully recoverable. An impairment loss, calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized in the accompanying condensed consolidated statements of operations if the sum of the estimated undiscounted cash flows relating tofrom the use or disposition of the asset or asset group is less than the corresponding carrying value. The Company continually monitors the estimated average useful lives of existing intangible assets.
m.    Temporary Equity
Temporary equity consists of Redeemable 5.625% Series A cumulative perpetual convertible preferred stock ("Series A Convertible Preferred Stock"). The Company has irrevocably elected to cash settle $1,000.00 of each conversion of any share of the Series A Convertible Preferred Stock. As the holders can exercise the conversion option on their shares of Series A Convertible Preferred Stock at any time and require cash payment upon conversion, the Company has classified the Series A Convertible Preferred Stock preferred stock in temporary equity.
n.    Non-controlling interests in consolidated subsidiaries
Non-controlling interests represent the pro rata share of the income or loss of the non-wholly owned consolidated entities attributable to the other owners of such entities. When non-controlling interest holders do not have redemption features that can be exercised at the option of the holder currently or contingent upon the occurrence of future events, their ownership has been classified as temporarya component of permanent equity. Ownership which has been classified in permanent equity are non-controlling interests for which are either not redeemable at the option of the holder or the holder does not have the unilateral right to redeem its ownership interests.
n.o.    Revenue recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), which requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company follows a five-step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, the Company includes variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. Significant judgments are required in the application of the five-step model including;including: when determining whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events.
The Company's principal sources of revenue are generated within two segments. The Op Co segment generates revenue through five principal sources: investment banking revenue, brokerage revenue, management fees, investment income (loss) and incentive income. Investment income is excluded from ASC Topic 606. The Asset Co segment generates revenue through investment income (loss), management fees and incentive income. Investment income is excluded from ASC Topic 606. Revenue from contracts with customers includes management fees, incentive income, investment banking revenue and brokerage services revenue excluding principal transactions. ASC Topic 606 does not apply to revenue associated with financial instruments, interest income and expense, leasing and insurance contracts. The following is a description of principal activities, from which the Company generates its revenue. For more detailed information about reportable segments, see Note 22.23.
Investment banking
The Company earns investment banking revenue primarily from fees associated with public and private capital raising transactions and providing strategic advisory services. Investment banking revenues are derived primarily from public and private small- and mid-capitalization companies within the Company's sectors.     
Investment banking revenue consists of underwriting fees, strategic/financial advisory fees, expenses reimbursed from clients and placement and sales agent fees.    
•Underwriting fees. The Company earns underwriting fees in securities offerings in which the Company acts as an underwriter, such as initial public offerings, follow-on equity offerings, debt offerings, and convertible securities offerings. Fee revenue relating to underwriting commitments is recorded at the point in time when all significant items relating to the underwriting process have been completed and the amount of the underwriting revenue has been determined. This generally is the point at which all of the following have occurred: (i) the issuer's registration statement has become effective with the SEC or the other offering documents are finalized; (ii) the Company has made a firm commitment for the purchase of securities from the issuer; (iii) the Company has been informed of the number of securities that it has been allotted; and (iv) the issuer obtains control and benefits of the offering; which generally occurs on trade date.
Underwriting fees are recognized gross of transaction-related expenses, and such amounts are adjusted to reflect actual expenses in the period in which the Company receives the final settlement, typically within 90 days following the closing of the transaction.
•Strategic/financial advisory fees. The Company's strategic advisory revenue includes success fees earned in connection with advising companies, principally in mergers, acquisitions and restructuring transactions. The Company also earns fees for related advisory work such as providing fairness opinions. A significant portion of the Company's advisory revenue (i.e., success-related advisory fees) is considered variable consideration and recognized when it is probable that the variable consideration will not be reversed in a future period. The variable consideration is constrained until satisfaction of the performance obligation. The Company records strategic advisory revenues at the point in time, gross of related expenses, when the services for the transactions are completed or the contract is canceled under the terms of each assignment or engagement.
•Placement and sales agent fees. The Company earns placement agency fees and sales agent commissions in non-underwritten transactions, such as private placements of loans and debt and equity securities, including private investment in public equity transactions ("PIPEs"), and as sales agent in at-the-market offerings of equity securities. The Company records placement revenues (which may be in cash and/or securities) at the point in time when the services for the transactions are completed under the terms of each assignment or engagement. The Company records sales agent commissions on a trade-date basis.
•Expense reimbursements from clients.  Investment banking revenue includes expense reimbursements for transaction-related expenses, primarily consisting of legal, travel and other costs directly associated with the transaction.  Expense reimbursements associated with investment banking engagements are recognized in revenue at the point in time when the Company is contractually entitled to reimbursement. The related expenses are presented gross within their respective expense category in the accompanying condensed consolidated statements of operations.
Brokerage
Brokerage revenue consists of commissions, principal transactions, equity research fees and trade conversion revenue.
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•Commissions. Commission revenue includes fees from executing and clearing client transactions and commission sharing arrangements. Trade execution and clearing services, when provided together, represent a single performance obligation as the services are not separately identifiable in the context of the contract. Commission revenues associated with combined trade execution and clearing services on a standalone basis, are recognized at a point in time on trade-date. Commission revenues are generally paid on settlement date and the Company records a receivable between trade-date and payment on settlement date. The Company permits institutional customers to allocate a portion of their commissions to pay for research products and other services provided by third parties. The amounts allocated for those purposes are commonly referred to as "soft dollar arrangements". The Company also offers institutional clients the ability to allocate a portion of their gross commissions incurred on trades executed with various brokers to pay for research products and other services provided by third parties by entering into commission sharing arrangements. The Company acts as an agent in the soft dollar and commission sharing arrangements as the customer controls the use of the soft dollars and directs payments to third-party service providers on its behalf. Accordingly, amounts allocated to soft dollar arrangements are netted against commission revenues and recorded on trade date. Commissions on soft dollar brokerage are recorded net of the related expenditures. The costs of commission sharing arrangements are recorded for each eligible trade and shown net of commission revenue.
•Equity research fees. Equity research fees are paid to the Company for providing access to equity research. In the US, revenue is recognized once an arrangement exists, access to research has been provided and the customer has benefited from the research. As part of MiFID II, the international customers of the Company's broker-dealers have executed equity research contracts with its clients. The contracts either contain a fixed price for providing access to research or a price at the discretion of the customer with a contract minimum. Fixed equity research fees are recognized over the contract period as the customer is benefiting from the research throughout the contract term. When the equity research fees are based on the customer’s discretion with a contract minimum, the Company recognizes the contract minimum over the life of the contract as the customer benefits from the research provided and adjusts the revenue when the Company can estimate the amount of equity research fees over the contract minimum. Additionally, the Company earns variable consideration for attending client conferences and events. Revenue is recognized when the Company attends a client conference or event.
•Trade conversion revenue. Trade conversion revenue includes fees earned from converting foreign securities into an American Depository Receipt ("ADR") and fees earned from converting an ADR into foreign securities on behalf of customers, and margins earned from facilitating customer foreign exchange transactions. Trade conversion revenue is recognized on a trade-date basis.
Investment Income
Investment income (loss) consists of securities principal transactions, net, portfolio fund principal transactions, net and carried interest allocations. Investment income is excluded from ASC Topic 606606.
• Securities principal transactions, net. Principal transactions, net includes realized gains and losses from transactions in financial instruments and unrealized gains and losses from ongoing changes in the fair value of the Company’s positions.
Principal transactions, net generated by the Company's broker-dealers include net trading gains and losses from the Company's market-making activities in over-the-counter equity and fixed income securities, trading of convertible securities, and trading gains and losses on inventory and other Company positions, which include securities previously received as part of investment banking transactions. In certain cases, the Company provides liquidity to clients by buying or selling blocks of shares of listed stocks without previously identifying the other side of the trade at execution, which subjects the Company to market risk. These positions are typically held for a short duration.
With respects to the Company's proprietary trading strategies, purchases and sales of securities, net of commissions, derivative contracts, and the related revenues and expenses are recorded on a trade-date basis with net trading gains and losses included as a component of Investment income - Securities principal transactions, net, in the accompanying condensed consolidated statements of operations.
•Portfolio Fund principal transactions, net. Portfolio funds include interests in private investment partnerships, foreign investment companies and other collective investment vehicles which may be managed by the Company or its affiliates. The Company applies the practical expedient provided by the US GAAP fair value measurements and disclosures guidance relating to investments in certain entities that calculate net asset value (“NAV”) per share (or its equivalent). The practical expedient permits an entity holding certain investments in certain entities that either are investment companies or have attributes similar to an investment company, and calculatecalculates NAV per share or its equivalent for which the fair value is not readily determinable and is considered an investment company under ASC 946 to measure the
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is not readily determinable, to measure the fair value of such investments on the basis of that NAV per share, or its equivalent, without adjustment. Investments which are valued using NAV per share as a practical expedient are not categorized within the fair value hierarchy. Realized and unrealized gains (losses) resulting from changes in NAV per share are reflected within Investment income – portfolio fund principal transactions, net in the accompanying condensed consolidated statements of operations.
•Carried interest allocations. The Company is allocated carried interest based on net profits (as defined in the respective investment management or partnership agreement) related to certain of the Company's private equity investment funds. For the private equity and debt fund products the Company offers, the carried interest earned is typically up to 30% of the distributions made to investors after return of their contributed capital and generally a preferred return. The Company recognizes carried interest allocated to the Company under an equity ownership model as investment income - carried interest allocations in the accompanying condensed consolidated statements of operations accordance with ASC Topic 323.323, Investments - Equity Method and Joint Ventures. Under the equity method of accounting the Company recognizes its allocations of incentive income or carried interest within Investment Income - Carried interest allocations in the accompanying condensed consolidated statements of operations along with the allocations proportionate to the Company's ownership interests in the investment funds.
Generally, carried interest is earnedrecognized after the investor has received a full return of its invested capital, plus a preferred return. However, for certain private equity structures, the Company is entitled to receive incentive fees earlier, provided that the investors have received their preferred return on a current basis or on an investor by investor basis. These private equity structures are generally subject to a potential clawback of these incentive fees upon the liquidation of the private equity structure if the investor has not received a full return of its invested capital plus the preferred return thereon.
Management fees
The Company earns management fees from investment funds and certain managed accounts for which it serves as the investment manager; such fees earned are typically based on committed and invested capital. The Company has determined that the primary drivers of management fees are committed and invested capital relating to private equity funds. The management fees are earned as the investment management services are provided and are not subject to reversals. The performance obligation related to the transfer of these services is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Company.
Management fees are generally paid on a quarterly basis and are prorated for capital inflows (or commitments) and redemptions (or distributions) and are recognized as revenue at that time as they relate specifically to the services provided in that period, which are distinct from the services provided in other periods. While some investors may have separately negotiated fees, in general the management fees are as follows:
•Private equity funds. Management fees for the Company's private equity or debt funds are generally charged at an annual rate of 1% to 2% of committed capital during the investment period (as defined in the relevant partnership agreement). After the investment period, management fees for these private equity funds are generally charged at an annual rate of 1% to 2% of the net asset value or the aggregate cost basis of the unrealized investments held by the private equity funds.  For certain other private equity funds (and managed accounts), the management fees range from 0.2% to 1% and there is no adjustment based on the investment period.  Management fees for the Company's private equity funds are generally paid on a quarterly basis.
•Hedge funds. Management fees for the Company's hedge funds are generally charged at an annual rate of up to 2% of utilized invested capital, committed capital or notional trading level.net asset value. Management fees are generally calculated monthly at the end of each month.
•Cowen trading strategies. Advisory fees for the Company's collateral management advisory business are typically paid quarterly based on utilized invested capital or committed capital, generally subject to a minimum fee.
Incentive income
The Company earns incentive income based on net profits (as defined in the respective investment management or partnership agreement) related to certain of the Company's investment funds and managed accounts.  The incentive income is charged to the investment funds in accordance with their corresponding investment management or partnership agreement. For the hedge funds the Company offers, incentive income earned is typically up to 20% (in certain cases on performance in excess of a benchmark) of the net profits earned for the full year that are attributable to each fee-paying investor. 
The Company recognizes incentive income charged to the Company's hedge funds based on the net profits of the hedge funds. The Company recognizes such incentive income when the fees are no longer subject to reversal or are crystallized. For
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
certain  hedge funds, the incentive fee crystallizes annually when the high-water mark for such hedge funds is reset, which delays recognition of the incentive fee until year end. In periods following a period of a net loss attributable to an investor, the Company generally does not earn incentive income on any future profits attributable to such investor until the accumulated net loss from prior periods is recovered, an arrangement commonly referred to as a "high-water mark." Generally, incentive income is earned after the investor has received a full return of its invested capital, plus a preferred return.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Consolidated Funds – principal transaction, net
Purchases and sales of securities, net of commissions, derivative contracts, and the related revenues and expenses are recorded on a trade-date basis with net trading gains and losses included as a component of Consolidated Funds - Principal transactions, net in the accompanying condensed consolidated statements of operations.
Certain of the Companies Consolidated Funds invest in other investment funds for which the Company applies the practical expedient provided by the US GAAP fair value measurements and disclosures guidance relating to investments in certain entities that calculate net asset value (“NAV”) per share (or its equivalent). The practical expedient permits an entity holding investments in certain entities that either are investment companies or have attributes similar to an investment company, and calculate NAV per share or its equivalent for which the fair value is not readily determinable, to measure the fair value of such investments on the basis of that NAV per share, or its equivalent, without adjustment. Investments which are valued using NAV per share as a practical expedient are not categorized within the fair value hierarchy. Realized and unrealized gains (losses) resulting from changes in NAV per share are reflected within Consolidated Funds – Principal transaction, net.
Interest and dividends
Interest and dividends are earned by the Company from various sources. The Company receives interest and dividends primarily from securities finance activities and securities held by the Company for purposes of investing capital, investments held by its Consolidated Funds and its brokerage balances. Interest is recognized in accordance with US GAAP and market convention for the imputation of interest of the host financial instrument. Interest income is recognized on the debt of those issuers that is deemed collectible. Interest income and expense includes premiums and discounts amortized and accreted on debt investments based on criteria determined by the Company using the effective yield method, which assumes the reinvestment of all interest payments. Dividends are recognized on the ex-dividend date.
Reimbursement from affiliates
The Company allocates, at its discretion, certain expenses incurred on behalf of its investment management businesses. These expenses relate to the administration of such subsidiaries and assets that the Company manages for its investment funds. In addition, pursuant to the investment funds' offering documents, the Company charges certain allowable expenses to the investment funds, including charges and personnel costs for legal, compliance, accounting, tax compliance, risk and technology expenses that directly relate to administering the assets of the investment funds. Such expenses that have been reimbursed at their actual costs are included in the accompanying condensed consolidated statements of operations as employee compensation and benefits, professional, advisory and other fees, communications, occupancy and equipment, client services and business development and other expenses.
Insurance and reinsurance
Premiums for insurance and reinsurance contracts are earned over the coverage period. In most cases, premiums are recognized as revenues ratably over the term of the contract with unearned premiums computed on a monthly basis. For each of its contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with US GAAP. If the Company determines that a contract does not expose it to a reasonable possibility of a significant loss from insurance risk, the Company records the contract under the deposit method of accounting with any net amount receivable reflected as an asset in other assets, and any net amount payable reflected as a liability within accounts payable, accrued expenses and other liabilities on the condensed consolidated statements of financial condition.
The liabilities for losses and loss adjustment expenses are recorded at the estimated ultimate payment amounts, including reported losses.  Estimated ultimate payment amounts are based upon (1) reports of losses from policyholders, (2) individual case estimates and (3) estimates of incurred but unreported losses.
Provisions for losses and loss adjustment expenses are charged to earnings after deducting amounts recovered and estimates of recoverable amounts and are included in other expenses on the condensed consolidated statements of operations.
Costs of acquiring new policies, which vary with and are directly related to the production of new policies, have been deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Such costs include
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
commissions and allowances as well as certain costs of policy issuance and underwriting and are included within other assets in the condensed consolidated statements of financial condition.
All of the items above are reported net of any Outward Reinsurance (see Note 14)18), which is determined as the portion of the Company’s premiums, liabilities for losses and loss adjustment expenses, provisions for losses and loss adjustment expenses, and costs of acquiring new policies that are ceded to providers of such Outward Reinsurance pursuant to their terms and conditions. These ceded amounts are calculated based on the same principles outlined above.
Interest and dividends expense
Interest and dividends expense relates primarily to securities finance activities, trading activity with respect to the Company's investments and interest expense on debt.
o.p.    Income taxes
The Company accounts for income taxes in accordance with US GAAP which requires the recognition of tax benefits or expenses based on the estimated future tax effects of temporary differences between the financial statement and tax basis of its assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. Valuation allowances are established to reduce deferred tax assets to an amount that is more likely
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
than not to be realized. The Company evaluates its deferred tax assets for recoverability considering negative and positive evidence, including its historical financial performance, projections of future taxable income, future reversals of existing taxable temporary differences, and tax planning strategies. The Company records a valuation allowance against its deferred tax assets to bring them to a level that it is more likely than not to be utilized.
US GAAP clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements, requiring the Company to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company recognizes accrued interest and penalties related to its uncertain tax positions as a component of income tax expense.
In accordance with federal and state tax laws, the Company and its subsidiaries file consolidated federal, state, and local income tax returns as well as stand-alone state and local tax returns. The Company also has subsidiaries that are residents in foreign countries where tax filings have to be submitted on a stand-alone or combined basis. These subsidiaries are subject to taxes in their respective countries and the Company is responsible for and therefore reports all taxes incurred by these subsidiaries in the condensed consolidated statements of operations. The foreign jurisdictions where the Company owns subsidiaries and has tax filing obligations are the United Kingdom, Luxembourg, Malta, Gibraltar, Germany, Switzerland, Israel, South Africa, Canada and Hong Kong.
p.q.    Recent pronouncements
In August 2020, the FASB issued guidance simplifying an issuer’s accounting for convertible instruments by eliminating two of the three models in ASC 470-20 that require separate accounting for embedded conversion features; separate accounting is still required in certain cases. The guidance also simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. The guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. The guidance requires new disclosures about events that occur during the reporting period and cause conversion contingencies to be met and about the fair value of a public business entity’s convertible debt at the instrument level. For public business entities, the guidance is effective for reporting periods beginning after December 15, 2021 and interim periods within those fiscal years with early adoption permitted. The Company adopted the guidance as of January 1, 2022 under the modified retrospective method. With the adoption of this guidance, the Company is currently evaluatingrequired to include the impactportion of the new guidance.Series A Convertible Preferred Stock that can be settled in Class A common stock (the amount in excess of $1,000.00 per share of the Series A Convertible Preferred Stock) in the diluted earnings per share calculation. See Note 21 for the calculation of diluted earnings per share.
In August 2018, the FASB issued guidance prescribing targeted improvements to financial services – insurance industry accounting guidance for long-duration contracts. The new guidance (i) prescribes the discount rate to be used in measuring the liability for future policy benefits for traditional and limited payment long-duration contracts, and requires assumptions for those liability valuations to be updated after contract inception, (ii) requires more market-based product guarantees on certain separate account and other account balance long-duration contracts to be accounted for at fair value, (iii) simplifies the amortization of deferred acquisition costs for virtually all long-duration contracts, and (iv) introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures. For all entities, the guidance is effective for reporting periods beginning after December 15, 2022 and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact of the new guidance.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
3. Acquisition
Malta Holdings
On February 26, 2021 (the "Malta Holdings Acquisition Date"), the Company, through its indirect wholly owned subsidiary, Cowen Malta Holdings Ltd. (“Malta Holdings”), completed the acquisition of all of the outstanding equity interest of Axeria Insurance Limited (the “Acquisition"“Malta Acquisition”), an insurance company organized under the laws of Malta whose principal business activity is to provide insurance coverage to third parties (See(see Note 14)18). Axeria Insurance Limited was renamed Cowen Insurance Company Ltd (“Cowen Insurance Co”) upon acquisition. The Malta Acquisition was completed for a combination of cash and deferred consideration. In the aggregate, the purchase price, assets acquired, and liabilities assumed were not significant and near-term impact to the Company and its consolidated results of operations and cash flows is not expected to be significant.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The aggregate estimated purchase price of the Malta Acquisition was $12.7 million. On the Malta Holdings Acquisition Date, the Company paid upfront consideration of $12.5 million, with additional deferred consideration of $0.2 million. The deferred consideration liability is included within accounts payable, accrued expenses and other liabilities onmillion which was paid during the consolidated statementssecond quarter of financial condition.2021.
The Malta Acquisition was accounted for under the acquisition method of accounting in accordance with US GAAP. As such, the results of operations of the business acquired is included in the accompanying condensed consolidated statements of operations since the date of the Malta Acquisition and the assets acquired, liabilities assumed recorded at their fair values within their respective line items on the accompanying condensed consolidated statement of financial condition. The Company has recognized a bargain purchase gain of $5.2 million related to the Malta Acquisition and is shown net of associated tax of $1.3 million in the condensed consolidated statement of operations. The bargain purchase gain is primarily driven by the recognition of the customer relationships intangible asset and a contractual discount on the closing equity balance at the Malta Holdings Acquisition Date. Additionally, following the Malta Acquisition, the business acquired is included in the Cowen Investment Management reporting unit within the Operating Company segment.
The table below summarizes the preliminary purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as of February 26, 2021:
(dollars in thousands)
Cash$14,844 
Securities owned, at fair value1,571 
Fixed assets30 
Intangible assets4,794 
Other assets12,828 
Compensation payable(17)
Other liabilities(16,099)
Total net identifiable assets acquired and liabilities assumed17,951 
Bargain purchase gain(5,216)
Total estimated purchase price$12,735 
As of the Malta Holdings Acquisition Date, the estimated fair value of the Company's intangible assets, which are primarily broker relationships, was $4.6 million and had a weighted average useful life of 10 years. The licenses of $0.2 million has indefinite life. Amortization expense for the three months ended March 31, 2022 was $0.1 million and for the three months ended March 31, 2021 was insignificant.
As of March 31, 2021,2022, the estimated amortization expense related to these intangible assets in future periods is as follows:
 (dollars in thousands)
2021$343 
2022458 
2023458 
2024458 
2025458 
Thereafter2,365 
$4,540 
 (dollars in thousands)
2022343 
2023458 
2024458 
2025458 
2026458 
Thereafter2,124 
$4,299 
In addition to the purchase price consideration, for the three months ended March 31, 2021, the Company had incurred acquisition-related expenses of $0.2 million, including financial advisory, legal and valuation services, which are included in professional, advisory and other fees in the accompanying condensed consolidated statements of operations.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
4. Cash Collateral Pledged    
As of March 31, 20212022 and December 31, 2020,2021, the Company pledged cash collateral in the amount of $3.5$3.4 million and $4.0$3.4 million respectively, which relates to letters of credit issued to the landlords of the Company's premises in New York City, Boston and San Francisco. The Company also has pledged cash collateral for reinsurancereinsurance agreements which amounted to $106.8$49.5 million, as of March 31, 2021,2022, and $106.8$44.1 million, as of December 31, 2020,2021, which are expected to be released periodically as per the terms of the reinsurance policy between June 30, 2021March 31, 2022 and March 31, 2024 (see Notes 1412 and 18).
As of March 31, 20212022, the Company has the following irrevocable letters of credit, related to leased office space, for which there is cash collateral pledged, which the Company pays a fee on the stated amount of the letter of credit.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
LocationAmountMaturity
 (dollars in thousands)
New York$215209 April 20222023
New York$1,4241,325 October 2022
New York$1,2521,226 November 2021August 2022
Boston$194188 March 20282023
San Francisco$458454 October 2025
$3,5433,402 
To the extent any letter of credit is drawn upon, interest will be assessed at the prime commercial lending rate. As of March 31, 20212022 and December 31, 2020 ther2021e there were 0 amounts due related to these letters of credit.
5. Segregated Cash
As of March 31, 20212022 and December 31, 2020,2021, cash segregated in compliance withunder federal regulations and other restricted deposits of $168.9$220.9 million and $185.1$194.7 million, respectively, consisted of cash deposited in Special Reserve Bank Accounts for the exclusive benefit of customers under SEC Rule 15c3-3 and cash deposited in Special Reserve Bank Accounts for the exclusive benefit of Proprietary Accounts of Broker-Dealers ("PAB") under SEC Rule 15c3-3.15c3-3 (see Note 24).
6. Investments of Operating Entities and Consolidated Funds
a.    Operating entities
Securities owned, at fair value
Securities owned, at fair value are held by the Company and are considered held for trading. Substantially all equity securities, which are not part of the Company's self-clearing securities finance activities, are pledged to external clearing brokers under terms which permit the external clearing broker to sell or re-pledge the securities to others subject to certain limitations.
As of March 31, 20212022 and December 31, 2020,2021, securities owned, at fair value consisted of the following:
As of March 31, 2021As of December 31, 2020
 (dollars in thousands)
Common stock$2,934,604 $1,770,301 
Preferred stock66,853 69,358 
Warrants and rights30,961 27,701 
Government bonds19,671 19,721 
Corporate bonds81,460 86,503 
Convertible bonds3,137 6,040 
Term loan (*)12,424 12,623 
Trade claims (*)5,905 8,713 
Private investments1,085 642 
$3,156,100 $2,001,602 
As of March 31, 2022As of December 31, 2021
 (dollars in thousands)
Common stock$2,348,243 $2,428,820 
Preferred stock190,184 134,930 
Warrants and rights53,082 46,459 
Government bonds11,992 16,002 
Corporate bonds146,998 21,468 
Convertible bonds5,250 5,250 
Term loan2,375 3,907 
Trade claims (*)4,840 3,496 
Private investments550 410 
$2,763,514 $2,660,742 
(*)The Company has elected the fair value option for securities owned, at fair value with a fair value of $5.9$4.8 million and $8.8$3.5 million of trade claims respectively, at March 31, 20212022 and December 31, 2020.2021.
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Receivable on and Payable for derivative contracts, at fair value
The Company predominantly enters into derivative transactions to satisfy client needs and to manage its own exposure to market and credit risks resulting from its trading activities. The Company’s direct exposure to derivative financial instruments includes futures, currency forwards, equity swaps, credit defaultinterest rate swaps and options..options. The Company's derivatives trading activities
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expose the Company to certain risks, such as price and interest rate fluctuations, volatility risk, credit risk, counterparty risk, foreign currency movements and changes in the liquidity of markets.
The Company's long and short exposure to derivatives is as follows:
Receivable on derivative contractsAs of March 31, 2022As of December 31, 2021
 Number of contracts / Notional ValueFair valueNumber of contracts / Notional ValueFair value
 (dollars in thousands)
Currency forwards$11,482 $109 $10,727 $80 
Equity swaps$2,077,076 388,875 $1,950,181 305,370 
Options (a)120,847 49,801 217,393 61,219 
Interest rate swap (c)$427,000 19,839 $285,000 1,208 
Netting - swaps (b)(115,912)(81,742)
$342,712 $286,135 
Receivable on derivative contractsAs of March 31, 2021As of December 31, 2020
 Number of contracts / Notional ValueFair valueNumber of contracts / Notional ValueFair value
 (dollars in thousands)
Currency forwards$132,960 $384 $4,902 $15 
Swaps$1,746,919 142,266 $944,544 64,634 
Options other (a)163,622 42,124 371,188 49,102 
Netting - swaps (b)(89,238)(62,269)
$95,536 $51,482 

Payable for derivative contractsPayable for derivative contractsAs of March 31, 2021As of December 31, 2020Payable for derivative contractsAs of March 31, 2022As of December 31, 2021
Number of contracts / Notional ValueFair valueNumber of contracts / Notional ValueFair value Number of contracts / Notional ValueFair valueNumber of contracts / Notional ValueFair value
(dollars in thousands) (dollars in thousands)
FuturesFutures$2,567 $53 $9,378 $266 
Currency forwardsCurrency forwards$138,530 1,084 $149,575 1,346 
Equity swapsEquity swaps$825,229 152,265 $988,329 114,689 
Currency forwards$1,990 $16 $123,346 $3,067 
Swaps$1,603,710 82,391 $896,863 43,560 
Options other (a)130,627 31,524 198,320 66,566 
Options (a)Options (a)117,871 25,214 182,440 36,192 
Netting - swap (b)Netting - swap (b)(61,806)(37,033)Netting - swap (b)(131,802)(92,330)
$52,125 $76,160 $46,814 $60,163 
(a) Includes the volume of contracts for index, equity, commodity future and cash conversion options.
(b) Derivatives are reported on a net basis, by counterparty, when a legal right of offset exists under an enforceable netting agreement as well as net of cash collateral received or posted under enforceable credit support agreements. See Note 2f for further information on offsetting of derivative financial instruments.
(c) Interest rate swap offsetting the Company's floating rate debt on the Company's term loan. See Note 12
The following tables present the gross and net derivative positions and the related offsetting amount, as of March 31, 20212022 and December 31, 2020.2021. This table does not include the impact of over-collateralization.
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)Net amounts included on the Condensed Consolidated Statements of Financial ConditionGross amounts not offset in the Condensed Consolidated Statements of Financial Condition
Gross amounts recognizedFinancial instruments (a)Cash Collateral pledged (a)Net amounts
(dollars in thousands)
As of March 31, 2021
Receivable on derivative contracts, at fair value$184,774 $89,238 $95,536 $2,694 $48,448 $44,394 
Payable for derivative contracts, at fair value113,931 61,806 52,125 2,694 1,124 48,307 
As of December 31, 2020
Receivable on derivative contracts, at fair value$113,751 $62,269 $51,482 $691 $169 $50,622 
Payable for derivative contracts, at fair value113,193 37,033 76,160 691 3,174 72,295 
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)Net amounts included on the Condensed Consolidated Statements of Financial ConditionGross amounts not offset in the Condensed Consolidated Statements of Financial Condition
Gross amounts recognizedFinancial instruments (a)Cash Collateral pledged (a)Net amounts
(dollars in thousands)
As of March 31, 2022
Receivable on derivative contracts, at fair value$458,624 $115,912 $342,712 $1,431 $256,061 $85,220 
Payable for derivative contracts, at fair value178,616 131,802 46,814 2,840 — 43,974 
As of December 31, 2021
Receivable on derivative contracts, at fair value$367,877 $81,742 $286,135 $1,421 $211,442 $73,272 
Payable for derivative contracts, at fair value152,493 92,330 60,163 2,839 — 57,324 
(a)Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.
The realized and unrealized gains/(losses) related to derivatives trading activities were $(37.8) million and $35.5 million for the three months ended March 31, 2022 and 2021, respectively, and are included in Investment income- Securities principal
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The realized and unrealized gains/(losses) related to derivatives trading activities were $35.5 million and $28.8 million for the three months ended March 31, 2021 and 2020, respectively, and are included in Investment income - Securities principal transactions, net in the accompanying condensed consolidated statements of operations. The net gains (losses) on derivative contracts in the table above are one of a number of activities comprising the Company's business activities and are calculated before consideration of economic hedging transactions, which generally offset the net gains (losses) includedincluded above.
Pursuant to the various derivatives transactions discussed above, except for exchange traded derivatives and certain options, the Company is required to post/receive collateral. These amounts are recognized in receivable from brokers, dealers and clearing organizations and payable to brokers, dealers and clearing organizations respectively. As of March 31, 20212022 and December 31, 2020,2021, all derivative contracts were with major financial institutions.
Other investments
As of March 31, 20212022 and December 31, 2020,2021, other investments included the following:
As of March 31, 2021As of December 31, 2020As of March 31, 2022As of December 31, 2021
(dollars in thousands) (dollars in thousands)
Portfolio funds, at fair value (1)Portfolio funds, at fair value (1)$151,933 $133,454 Portfolio funds, at fair value (1)$131,766 $137,986 
Carried interest (2)Carried interest (2)180,352 82,892 Carried interest (2)70,281 88,925 
Equity method investments (3)Equity method investments (3)34,498 38,681 Equity method investments (3)35,581 47,200 
$366,783 $255,027 $237,628 $274,111 
(1) Portfolio funds, at fair value
The portfolio funds, at fair value as of March 31, 20212022 and December 31, 2020,2021, included the following:
As of March 31, 2021As of December 31, 2020
(dollars in thousands)
Starboard Value and Opportunity Fund LP (c)(*)$46,008 $42,519 
Formation8 Partners Fund I, L.P. (f)33,408 31,894 
Cowen Healthcare Investments II LP (i) (*)26,733 26,186 
Lagunita Biosciences, LLC (d)3,785 3,850 
Eclipse Ventures Fund I, L.P. (b)4,804 4,457 
HealthCare Royalty Partners II LP (a)(*)1,605 1,588 
HealthCare Royalty Partners LP (a)(*)1,035 1,072 
Starboard Leaders Fund LP (e)(*)2,328 2,020 
Eclipse SPV I, LP (j)(*)1,809 1,708 
Ramius Merger Fund LLC (m)(*)2,252 2,197 
TriArtisan ES Partners LLC (k)(*)1,848 1,657 
Cowen Healthcare Investments III LP (i)(*)7,717 5,714 
TriArtisan PFC Partners LLC (l)(*)760 691 
Starboard Value and Opportunity Fund Ltd (c) (*)2,556 2,364 
Eclipse Ventures Fund II, L.P. (b)1,910 1,733 
Eclipse Continuity Fund I, L.P. (b)1,252 1,101 
Cowen Sustainable Investments I LP (i)(*)9,299 0 
Difesa Partners, LP (h)985 848 
BDC Fund I Coinvest 1, L.P. (n)1,250 1,250 
Other private investment (o)(*)311 326 
Other affiliated funds (p)(*)278 279 
$151,933 $133,454 
As of March 31, 2022As of December 31, 2021
(dollars in thousands)
HealthCare Royalty Partners LP (a)(*)$791 $832 
HealthCare Royalty Partners II LP (a)(*)1,241 1,259 
Eclipse Ventures Fund I, L.P. (b)6,348 5,829 
Eclipse Ventures Fund II, L.P. (b)2,359 2,354 
Eclipse Continuity Fund I, L.P. (b)1,827 1,641 
Starboard Value and Opportunity Fund LP (c)(*)48,246 49,252 
Starboard Value and Opportunity Fund Ltd (c) (*)2,675 2,732 
Lagunita Biosciences, LLC (d)5,227 5,671 
Starboard Leaders Fund LP (e)(*)2,826 2,823 
Formation8 Partners Fund I, L.P. (f)19,949 20,992 
BDC Fund I Coinvest 1, L.P. (g)1,250 1,250 
Difesa Partners, LP (h)971 1,017 
Cowen Sustainable Investments I LP (i)(*)12,879 13,102 
Cowen Healthcare Investments II LP (i) (*)9,524 13,055 
Cowen Healthcare Investments III LP (i)(*)6,847 8,426 
Cowen Healthcare Investments IV LP (i)(*)1,987 1,071 
Eclipse SPV I, LP (j)(*)1,445 1,445 
TriArtisan ES Partners LLC (k)(*)1,805 1,805 
TriArtisan PFC Partners LLC (l)(*)1,177 1,112 
Ramius Merger Fund LLC (m)(*)1,760 1,692 
Other private investment (n)(*)294 303 
Other affiliated funds (o)(*)338 323 
$131,766 $137,986 
* These portfolio funds are affiliates of the Company.
The Company has no unfunded commitments regarding the portfolio funds held by the Company except as noted in Note 17.22.
(a)HealthCare Royalty Partners, L.P. and HealthCare Royalty Partners II, L.P. are private equity funds and therefore distributions will be made when cash flows are received from the underlying investments, typically on a quarterly basis.
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(b)Each of Eclipse Ventures Fund I, L.P., Eclipse Ventures Fund II, L.P. and Eclipse Continuity Fund I, L.P. are venture capital funds which invests in early stage and growth stage hardware companies. Distributions will be made when the underlying investments are liquidated.
(c)Starboard Value and Opportunity Fund LP and Starboard Value and Opportunity Fund Ltd permits quarterly withdrawals upon 90 days' notice.
(d)Lagunita Biosciences, LLC, is a healthcare investment company that creates and grows early stage companies to commercialize impactful translational science that addresses significant clinical needs, is a private equity structure and therefore distributions will be made when the underlying investments are liquidated.
(e)Starboard Leaders Fund LP does not permit withdrawals, but instead allows terminations with respect to capital commitments upon 30 days' prior written notice at any time following the first anniversary of an investor's initial capital contribution.
(f)Formation8 Partners Fund I, L.P. is a private equity fund which invests in early stage and growth transformational information and energy technology companies. Distributions will be made when the underlying investments are liquidated.
(g)RCG Longview DebtBDC Fund V,I Coinvest 1, L.P. is a real estate private equity structures. The timing of distributions dependsfund focused on the nature of the underlying investments and thereforeinvesting in growth companies in industries disrupted by digitization. Distributions will be made either quarterly or when the underlying investments are liquidated.
(h)Difesa Partners, LP permits semi-annual withdrawals occurring on or after the anniversary of initial contribution upon 90 days written notice.
(i)Cowen Sustainable Investments I LP, Cowen Healthcare Investments II LP, Cowen Healthcare Investments III LP and Cowen SustainableHealthcare Investments IIV LP are private equity funds.  Distributions are made from the fund when cash flows or securities are received from the underlying investments. Investors do not have redemption rights.
(j)Eclipse SPV I, L.P. is a co-investment vehicle organized to invest in a private company focused on software-driven automation projects.  Distributions will be made when the underlying investments are liquidated.
(k)TriArtisan ES Partners LLC is a co-investment vehicle organized to invest in a privately held nuclear services company. Distributions will be made when the underlying investment is liquidated.
(l)TriArtisan PFC Partners LLC is a co-investment vehicle organized to invest in a privately held casual dining restaurant chain. Distributions will be made when the underlying investment in liquidated.
(m)Ramius Merger Fund LLC permits monthly withdrawals on 45 days prior notice.
(n)BDC Fund I Coinvest 1, L.P. is a private equity fund focused on investing in growth companies in industries disrupted by digitization. Distributions will be made when the underlying investments are liquidated.
(o)Other private investment represents the Company's closed end investment in a portfolio fund that invests in a wireless broadband communication provider in Italy.
(p)(o)The majority of these investment funds are affiliates of the Company or are managed by the Company and the investors can redeem from these funds as investments are liquidated.
(2)Carried interest
The Company applies an accounting policy election to recognize incentive income allocated to the Company under an equity ownership model in other investments in the accompanying condensed consolidated statements of financial condition (see Note 2n)2o). Carried interest allocated to the Company from certain portfolio funds represents Cowen's general partner capital accounts from those funds. These balances are subject to change upon cash distributions, additional allocations or reallocations back to limited partners within the respective funds. All carried interest balances are earned from affiliates of the Company.
A portion of the Company's carried interest is granted to employees through profit sharing awards designed to more closely align compensation with the overall realized performance of the Company. These arrangements enable certain employees to earn compensation based on performance revenue earned by the Company and are recorded within compensation payable in the accompanying condensed consolidated statements of financial condition and employee compensation and benefits expense in the accompanying condensed consolidated statements of operation based on the probable and estimable payments under the terms of the awards. 
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The carried interest as of March 31, 20212022 and December 31, 2020,2021, included the following:
As of March 31, 2021As of December 31, 2020
(dollars in thousands)
Cowen Healthcare Investments II LP$73,415 $62,112 
Cowen Healthcare Investments III LP31,034 11,520 
Cowen Sustainable Investments I LP13,581 0 
Cowen Sustainable Investments Offshore I LP17,944 0 
CSI I Prodigy Co-Investment LP6,617 0 
CSI PRTA Co- Investment LP26,242 0 
TriArtisan TGIF Partners LLC3,689 3,361 
TriArtisan ES Partners LLC4,514 3,152 
TriArtisan PFC Partners LLC2,329 1,455 
Ramius Multi-Strategy Fund LP638 734 
Ramius Merger Fund LLC162 368 
RCG IO Renergys Sarl187 190 
$180,352 $82,892 

As of March 31, 2022As of December 31, 2021
(dollars in thousands)
Cowen Healthcare Investments II LP$13,886 $23,327 
Cowen Healthcare Investments III LP11,510 18,523 
Cowen Sustainable Investments I LP6,725 7,436 
Cowen Sustainable Investments Offshore I LP8,114 9,196 
CSI I Prodigy Co-Investment LP2,241 2,436 
CSI PRTA Co- Investment LP8,682 9,535 
TriArtisan TGIF Partners LLC4,279 4,047 
TriArtisan ES Partners LLC3,389 3,401 
TriArtisan PFC Partners LLC10,408 9,394 
Ramius Multi-Strategy Fund LP555 587 
Ramius Merger Fund LLC368 861 
RCG IO Renergys Sarl124 136 
Other affiliated funds— 46 
$70,281 $88,925 
(3) Equity method investments
Equity method investments include investments held by the Company in several operating companies whose operations primarily include the day-to-day management of a number of real estate funds, including the portfolio management and administrative services related to the acquisition, disposition, and active monitoring of the real estate funds' underlying debt and equity investments. The Company's ownership interests in these equity method investments range from 15% to 55%. The Company holds a majority of the outstanding ownership interest (i.e., more than 50%) in RCG Longview Partners II, LLC and 40% in Surf House Ocean Views Holdings, LLC (which is a joint venture in a real estate development project).companies. The operating agreement that governs the management of day-to-day operations and affairs of these entities stipulates that certain decisions require support and approval from other members in addition to the support and approval of the Company. As a result, all operating decisions made in these entities requires the support of both the Company and an affirmative vote of a majority of the other managing members who are not affiliates of the Company. As the Company does not possess control over any of these entities, the presumption of consolidation has been overcome pursuant to current Accounting Standards and the Company accounts for these investments under the equity method of accounting. Also includedIncluded in equity method investments are the investments in (a) HealthCare Royalty Partners General Partners and (b) Starboard Value (and certain related parties) which serves as an operating company whose operations primarily include the day-to-day management (including portfolio management) of several activist investment funds and related managed accounts.
accounts and (c) operating companies whose operations primarily include the day-to-day management of real estate entities. The Company completed assessments of the recoverability of the Company'srecorded no impairment charges in relation to its equity method investments and determined that the carrying value of the investment in Surf House Ocean View Holdings, LLC exceeded the estimated fair value of the Company's interest, which was other than temporary. There were 0 impairment charges for the three months ended March 31, 2022 and 2021. An other than temporary impairment charge of $7.3 million for the three months ended March 31, 2020 was recognized to reduce the carrying value of the investment to fair value, which was subsequently completely impaired at the end of 2020. Impairment charges are included in net gains (losses) on other investments on the accompanying condensed consolidated statements of operations.
The Company elected to use the cumulative earnings approach for the distributions it receives from its equity method investments. Under the cumulative earnings approach, any distributions received up to the amount of cumulative earnings are treated as return on investment and classified in operating activities within the cash flows. Any excess distributions would be considered as return of investments and classified in investing activities.
The following table summarizes equity method investments held by the Company:
As of March 31, 2022As of December 31, 2021
(dollars in thousands)
Starboard Value LP$25,741 $36,889 
HealthCare Royalty GP III, LLC1,830 1,957 
HealthCare Royalty GP, LLC1,595 1,451 
HealthCare Royalty GP II, LLC210 213 
HealthCare Royalty GP IV, LLC1,618 1,716 
RCG Longview Debt Fund IV Management, LLC331 331 
HCR Overflow Fund GP, LLC774 839 
 HCRP MGS Account Management, LLC114 598 
HCR Stafford Fund GP, LLC3,119 2,955 
Other249 251 
$35,581 $47,200 
The Company's income from equity method investments was $5.6 million and $12.6 million and for the three months ended March 31, 2022 and 2021, respectively, and is included in net gains (losses) on other investments on the accompanying condensed consolidated statements of operations.
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The following table summarizes equity method investments held by the Company:
As of March 31, 2021As of December 31, 2020
(dollars in thousands)
Starboard Value LP$27,769 $31,528 
HealthCare Royalty GP III, LLC2,221 2,213 
RCG Longview Management, LLC268 268 
HealthCare Royalty GP, LLC442 920 
HealthCare Royalty GP II, LLC272 269 
RCG Longview Debt Fund IV Management, LLC331 331 
RCG Longview Equity Management, LLC105 105 
HCR Stafford Fund GP, LLC1,159 1,025 
Liberty Harbor North222 222 
Other1,709 1,800 
$34,498 $38,681 
The Company's income (loss) from equity method investments was income of $12.6 million and a loss of $0.06 million for the three months ended March 31, 2021 and 2020, respectively, and is included in net gains (losses) on other investments on the accompanying condensed consolidated statements of operations.
Securities sold, not yet purchased, at fair value
Securities sold, not yet purchased, at fair value represent obligations of the Company to deliver a specified security at a contracted price and, thereby, create a liability to purchase that security at prevailing prices. The Company's liability for securities to be delivered is measured at their fair value as of the date of the condensed consolidated financial statements. However, these transactions result in off-balance sheet risk, as the Company's ultimate cost to satisfy the delivery of securities sold, not yet purchased, at fair value may exceed the amount reflected in the accompanying condensed consolidated statements of financial condition. As of March 31, 20212022 and December 31, 2020,2021, securities sold, not yet purchased, at fair value consisted of the following:
As of March 31, 2021As of December 31, 2020 As of March 31, 2022As of December 31, 2021
(dollars in thousands) (dollars in thousands)
Common stockCommon stock$918,021 $699,894 Common stock$956,228 $1,192,396 
Corporate bondsCorporate bonds453 11,358 Corporate bonds1,349 37 
Government bonds522 1,500 
Preferred stockPreferred stock7,567 6,589 Preferred stock17,278 9,009 
Warrants and rightsWarrants and rights4,519 8,774 Warrants and rights12 6 
$931,082 $728,115 $974,867 $1,201,448 
Securities purchased under agreements to resell/securities sold under agreements to repurchase and securities lending and borrowing transactions
The following tables present the contractual gross and net securities borrowing and lending agreements and securities sold under agreements to repurchase and the related offsetting amount as of March 31, 20212022 and December 31, 2020.2021.
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Gross amounts not offset on the Condensed Consolidated Statements of Financial ConditionGross amounts not offset on the Condensed Consolidated Statements of Financial Condition
Gross amounts recognized, net of allowanceGross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)Net amounts included on the Condensed Consolidated Statements of Financial ConditionAdditional Amounts AvailableFinancial instrumentsCash Collateral pledged (b)Net amountsGross amounts recognized, net of allowanceGross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)Net amounts included on the Condensed Consolidated Statements of Financial ConditionAdditional Amounts AvailableFinancial instrumentsCash Collateral pledged (b)Net amounts
(dollars in thousands)(dollars in thousands)
As of March 31, 2021
As of March 31, 2022As of March 31, 2022
Securities borrowedSecurities borrowed$1,761,146 $— $1,761,146 $— $1,661,310 $— $99,836 
Securities loanedSecurities loaned1,735,852 — 1,735,852 — 1,706,171 — 29,681 
Securities purchased under agreements to resellSecurities purchased under agreements to resell19,621 — 19,621 — 21,035 — (1,414)
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase229,192 — 229,192 — 249,116 — (19,924)
As of December 31, 2021As of December 31, 2021
Securities borrowedSecurities borrowed$1,996,757 $0 $1,996,757 $0 $1,970,665 $0 $26,092 Securities borrowed1,704,603 — 1,704,603 — 1,652,007 — 52,596 
Securities loanedSecurities loaned3,083,945 0 3,083,945 0 3,100,800 0 (16,855)Securities loaned1,586,572 — 1,586,572 — 1,592,140 — (5,568)
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase2,546 0 2,546 0 2,759 0 (213)Securities sold under agreements to repurchase$63,469 $— $63,469 $— $74,443 $— $(10,974)
As of December 31, 2020
Securities borrowed$1,908,187 $0 $1,908,187 $0 $1,809,399 $0 $98,788 
Securities loaned2,476,414 0 2,476,414 0 2,383,342 0 93,072 
Securities purchased under agreements to resell191 0 191 0 204 0 (13)
Securities sold under agreements to repurchase5,036 0 5,036 0 5,544 0 (508)
(a)Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.
(b)Includes the amount of cash collateral held/posted.
The following tables present gross obligations for securities loaned and securities sold under agreements to repurchase by remaining contractual maturity and class of collateral pledged as of March 31, 20212022 and December 31, 2020:2021:
Open and OvernightUp to 30 days31 - 90 daysGreater than 90 daysTotal
(dollars in thousands)
As of March 31, 2021
Securities loaned
    Common stock$2,827,291 $0 $0 $0 $2,827,291 
    Corporate bonds256,654 0 0 0 256,654 
Securities sold under agreements to repurchase
    Corporate bonds0 0 2,546 0 2,546 
As of December 31, 2020
Securities loaned
    Common stock2,232,687 0 0 0 2,232,687 
    Corporate bonds243,726 0 0 0 243,726 
Securities sold under agreements to repurchase
Corporate bonds$0 $0 $5,036 $0 $5,036 
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Open and OvernightUp to 30 days31 - 90 daysGreater than 90 daysTotal
(dollars in thousands)
As of March 31, 2022
Securities loaned
    Common stock$1,728,578 $— $— $— $1,728,578 
    Corporate bonds7,274 — — — 7,274 
Securities purchased under agreements to resell
     Corporate bonds19,621 — — — 19,621 
Securities sold under agreements to repurchase
    Common stock— 43,073 — — 43,073 
    Corporate bonds186,119 — — — 186,119 
As of December 31, 2021
Securities loaned
    Common stock$1,570,835 $— $— $— 1,570,835 
    Corporate bonds15,737 — — — 15,737 
Securities sold under agreements to repurchase
    Common stock— 20,906 42,563 — 63,469 
Variable Interest Entities
The total assets and liabilities of the variable interest entities for which the Company has concluded that it holds a variable interest, but for which it is not the primary beneficiary, arae $8.9re $9.1 billion and $1.2 billion $692.4 million as of March 31, 20212022 and $8.0$9.7 billion and $1.3 billion$744.5 million as of December 31, 2020,2021, respectively. The carrying value of the Company's exposure to loss for these variable interest entities as of March 31, 20212022 was $236.4$155.1 million,, and as of December 31, 20202021 was $210.7$165.5 million, all of which is included in other investments, at fair value in the accompanying condensed consolidated statements of financial condition. Additionally, the Company's maximum exposure to loss for the variable interest entities noted above as of March 31, 20212022 and December 31, 2020,2021, was $224.7 million and $233.6 million, respective$364.9 million and $326.0 million, respectively.ly.  The maximum exposure to loss often differs from the
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
carrying value of exposure to loss of the variable interests. The maximum exposure to loss is dependent on the nature of the variable interests in the VIEs and is limited to the notional amounts of certain commitments and guarantees.
b.    Consolidated Funds
Securities owned, at fair value
As of March 31, 2021 and December 31, 2020, securities owned, at fair value, held by the Consolidated Funds consisted of the following:
As of March 31, 2021As of December 31, 2020
 (dollars in thousands)
     Common stock$3,611 $4,816 
     Warrants and rights5,329 5,806 
$8,940 $10,622 
Other investments, at fair value
Investments in portfolio funds, at fair value
As of March 31, 20212022 and December 31, 2020,2021, investments in portfolio funds, at fair value, included the following:
As of March 31, 2021As of December 31, 2020
(dollars in thousands)
Investments of Enterprise LP$100,035 $104,475 
Investments of Cowen Sustainable Investments I LP0 88,195 
$100,035 $192,670 
As of March 31, 2022As of December 31, 2021
(dollars in thousands)
Investments of Enterprise LP$97,182 $99,067 
$97,182 $99,067 
Consolidated portfolio fund investments of Enterprise LP    
On May 12, 2010, the Company announced its intention to close its master fund, Ramius Enterprise Master.Master Fund Ltd ("Enterprise Master"). Enterprise LP operated under a "master-feeder" structure up until January 1, 2019, when Enterprise Master distributed its capital to each feeder and was liquidated. As of March 31, 20212022 and December 31, 2020,2021, the consolidated investments in portfolio funds include Enterprise LP's investment in RCG Special Opportunities Fund, Ltd which is a portfolio fund that invests in a limited number of private equity investments directly as well as through affiliated portfolio funds.
Consolidated portfolio fund investments of Cowen Sustainable Investments I LP
Cowen Sustainable Investments I LP ("CSI I LP") is a private investment fund making debt and equity investments in companies and real assets that are accelerating the global transition to a sustainable economy. The fund primarily focuses its investments around four themes: (i) renewable energy and battery storage; (ii) clean transportation; (iii) sustainable agriculture and food production; and (iv) resource and industrial efficiency. CSI I LP has made investments in ecoATM, LLC, a manufacturer and owner of automated kiosks that allow consumers to sell back unwanted smart phones, and Proterra, Inc, a designer and manufacturer of zero-emission electric transit vehicles and electric vehicle technology solutions for commercial applications. CSI I LP is a private equity-style vehicle that does not permit redemptions; proceeds realized from the fund’s investments are expected to be distributed after the end of the fund’s investment period. CSI I LP was deconsolidated during the first quarter of 2021 (See Note 2).
Indirect Concentration of the Underlying Investments Held by Consolidated Funds
From time to time, either directly held by the Company, indirectly through the Company's consolidated entities or indirectly through its investments in the Consolidated Funds, the Company may maintain exposure to a particular issue or issuer (both long and/or short) which may account for 5% or more of the Company's equity. Based on information that is available to the Company as of March 31, 20212022 and December 31, 2020,2021, the Company assessed whether or not its interests in an issuer for which the
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Company's pro-rata share exceeds 5% of the Company's equity. There was one indirect concentration that exceeded 5% of the Company's equity as of March 31, 20212022 and December 31, 2020,2021, respectively.
Through its investments in a Consolidated Fund and combined with direct Company investments, the Company maintained exposure to a particular investment which accounted for 5% or more of the Company's equity.
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Investment's percentage of the Company's stockholders' equity
IssuerSecurity TypeCountryIndustryPercentage of Stockholders' EquityMarket Value
(dollars in thousands)
As of March 31, 2021Linkem S.p.A.Equity, loans and warrantsItalyWireless Broadband7.62 %$84,324 
As of December 31, 2020Linkem S.p.A.Equity, loans and warrantsItalyWireless Broadband9.07 %$87,944 

Investment's percentage of the Company's stockholders' equity
IssuerSecurity TypeCountryIndustryPercentage of Stockholders' EquityMarket Value
(dollars in thousands)
As of March 31, 2022Linkem S.p.A.Equity and warrantsItalyWireless Broadband7.87 %$81,498 
As of December 31, 2021Linkem S.p.A.Equity and warrantsItalyWireless Broadband8.22 %$83,537 
7. Fair Value Measurements for Operating Entities and Consolidated Funds
The following table presents the assets and liabilities that are measured at fair value on a recurring basis on the accompanying condensed consolidated statements of financial condition by caption and by level within the valuation hierarchy as of March 31, 20212022 and December 31, 2020:2021:
 Assets at Fair Value as of March 31, 2021
 Level 1Level 2Level 3Netting (c)Total
  (dollars in thousands) 
Operating Entities
    Securities owned, at fair value 
Government bonds$19,671 $0 $0 $— $19,671 
Preferred stock10,376 0 56,477 — 66,853 
Common stock2,911,824 74 22,706 — 2,934,604 
Convertible bonds0 0 3,137 — 3,137 
Corporate bonds0 81,324 136 — 81,460 
Trade claims0 0 5,905 — 5,905 
Term loan0 0 12,424 — 12,424 
Warrants and rights23,037 0 7,924 — 30,961 
Private investments0 0 1,085 — 1,085 
    Receivable on derivative contracts, at fair value
Currency forwards0 384 0 — 384 
Swaps0 142,266 0 (89,238)53,028 
Options41,883 0 241 — 42,124 
Consolidated Funds
    Securities owned, at fair value
Common stock660 0 2,951 — 3,611 
Warrants and rights0 0 5,329 — 5,329 
$3,007,451 $224,048 $118,315 $(89,238)$3,260,576 
Portfolio funds measured at net asset value (a)151,933 
Consolidated Funds' portfolio funds measured at net asset value (a)100,035 
Carried interest (a)180,352 
Equity method investments (a)34,498 
Total investments$3,727,394 

 Assets at Fair Value as of March 31, 2022
 Level 1Level 2Level 3Netting (c)Total
  (dollars in thousands) 
Operating Entities
    Securities owned, at fair value 
Government bonds$11,992 $— $— $— $11,992 
Preferred stock20,483 — 169,701 — 190,184 
Common stock2,304,895 3,517 39,831 — 2,348,243 
Convertible bonds— — 5,250 — 5,250 
Corporate bonds28,892 115,680 2,426 — 146,998 
Trade claims— — 4,840 — 4,840 
Term loan— 2,375 — — 2,375 
Warrants and rights34,525 — 18,557 — 53,082 
Private investments— — 550 — 550 
    Receivable on derivative contracts, at fair value
Currency forwards— 109 — — 109 
Equity swaps— 388,875 — (115,912)272,963 
Options49,573 — 228 — 49,801 
Interest rate swap— 19,839 — — 19,839 
$2,450,360 $530,395 $241,383 $(115,912)$3,106,226 
Portfolio funds measured at net asset value (a)131,766 
Consolidated Funds' portfolio funds measured at net asset value (a)97,182 
Carried interest (a)70,281 
Equity method investments (a)35,581 
Total investments$3,441,036 
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Liabilities at Fair Value as of March 31, 2021 Liabilities at Fair Value as of March 31, 2022
Level 1Level 2Level 3Netting (c)Total Level 1Level 2Level 3Netting (c)Total
(dollars in thousands) (dollars in thousands)
Operating EntitiesOperating EntitiesOperating Entities
Securities sold, not yet purchased, at fair value Securities sold, not yet purchased, at fair value     Securities sold, not yet purchased, at fair value    
Government bonds$0 $0 $522 $— $522 
Common stockCommon stock918,021 0 0 — 918,021 Common stock$858,685 $97,543 $— $— $956,228 
Corporate bondsCorporate bonds0 38 415 — 453 Corporate bonds— 1,349 — — 1,349 
Preferred stockPreferred stock7,567 0 0 — 7,567 Preferred stock17,278 — — — 17,278 
Warrants and rightsWarrants and rights4,519 0 0 — 4,519 Warrants and rights12 — — — 12 
Payable for derivative contracts, at fair value Payable for derivative contracts, at fair value Payable for derivative contracts, at fair value
FuturesFutures53 — — 53 
Currency forwardsCurrency forwards— 1,084 — — 1,084 
Equity swapsEquity swaps— 152,265 — (131,802)20,463 
Currency forwards0 16 0 — 16 
Swaps0 82,391 0 (61,806)20,585 
OptionsOptions28,227 0 3,297 — 31,524 Options22,135 — 3,079 — 25,214 
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities
Contingent consideration liability (b) Contingent consideration liability (b)0 0 19,579 — 19,579  Contingent consideration liability (b)— — 57,339 — 57,339 
$958,334 $82,445 $23,813 $(61,806)$1,002,786 $898,163 $252,241 $60,418 $(131,802)$1,079,020 
(a) In accordance with US GAAP, portfolio funds are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy. Carried interest and equity method investments presented in the table above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated statement of financial condition.
(b) In accordance with the terms of the purchase agreements for acquisitions that closed during the first quarter of 2019 (the acquisition of Quarton International AG "Quarton"), the fourth quarter of 2020 (the acquisition of MHT Partners, LP "MHT") and the fourth quarter of 2020,2021 (the acquisition of Portico Capital Advisors "Portico"), the Company is required to pay to the sellers a portion of future net income and/or revenues of the acquired businesses, if certain targets are achieved through the periods ended through December 31, 2020 and December 31, 2023.2024. For both the Quarton Acquisition and the MHT Acquisition,all acquisitions the Company estimated the contingent consideration liabilities using a combination of Monte Carlo and Discounted Cash Flow methods which require the Company to make estimates and assumptions regarding the future cash flows and profits. Changes in these estimates and assumptions could have a significant impact on the amounts recognized. The undiscounted amounts for the Quarton Acquisitionacquisition can range from $10.1$12.5 million to $25.0$14.9 million. The undiscounted amounts for the MHT Acquisitionacquisition have no minimum or maximum as it is calculated based on revenue. The undiscounted amounts for the Portico acquisition can range from zero to $58.0 million.
(c) Derivatives are reported on a net basis, by counterparty, when a legal right of offset exists under an enforceable netting agreement as well as net of cash collateral received or posted under enforceable credit support agreements. See Note 2f for further information on offsetting of derivative financial instruments.
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Assets at Fair Value as of December 31, 2020 Assets at Fair Value as of December 31, 2021
Level 1Level 2Level 3Netting (c)Total Level 1Level 2Level 3Netting (c)Total
 (dollars in thousands)   (dollars in thousands) 
Operating EntitiesOperating EntitiesOperating Entities
Securities owned, at fair value Securities owned, at fair value     Securities owned, at fair value    
Government bondsGovernment bonds$19,721 $0 $0 $— $19,721 Government bonds$16,002 $— $— $— $16,002 
Preferred stockPreferred stock9,391 0 59,967 — 69,358 Preferred stock12,299 — 122,631 — 134,930 
Common stockCommon stock1,746,407 108 23,786 — 1,770,301 Common stock2,396,041 121 32,658 — 2,428,820 
Convertible bondsConvertible bonds0 0 6,040 — 6,040 Convertible bonds— — 5,250 — 5,250 
Corporate bondsCorporate bonds0 86,368 135 — 86,503 Corporate bonds— 19,049 2,419 — 21,468 
Trade claimsTrade claims0 0 8,713 — 8,713 Trade claims— — 3,496 — 3,496 
Term loanTerm loan0 0 12,623 — 12,623 Term loan— 3,907 — — 3,907 
Private investmentsPrivate investments0 0 642 — 642 Private investments— — 410 — 410 
Warrants and rightsWarrants and rights21,154 0 6,547 — 27,701 Warrants and rights31,056 — 15,403 — 46,459 
Receivable on derivative contracts, at fair value Receivable on derivative contracts, at fair value Receivable on derivative contracts, at fair value
Currency forwardsCurrency forwards0 15 0 — 15 Currency forwards— 80 — — 80 
Swaps0 64,634 0 (62,269)2,365 
Equity swapsEquity swaps— 305,370 — (81,742)223,628 
OptionsOptions48,851 0 251 — 49,102 Options60,985 — 234 — 61,219 
Interest rate swapInterest rate swap— 1,208 — 1,208 
Consolidated Funds
Securities owned, at fair value
Common stock1,865 0 2,951 — 4,816 
Warrants and rights0 0 5,806 — 5,806 
$1,847,389 $151,125 $127,461 $(62,269)$2,063,706 $2,516,383 $329,735 $182,501 $(81,742)$2,946,877 
Portfolio funds measured at net asset value (a)Portfolio funds measured at net asset value (a)133,454 Portfolio funds measured at net asset value (a)137,986 
Consolidated Funds' portfolio funds measured at net asset value (a)Consolidated Funds' portfolio funds measured at net asset value (a)192,670 Consolidated Funds' portfolio funds measured at net asset value (a)99,067 
Carried interest (a)Carried interest (a)82,892 Carried interest (a)88,925 
Equity method investments (a)Equity method investments (a)38,681 Equity method investments (a)47,200 
Total investmentsTotal investments$2,511,403 Total investments$3,320,055 

Liabilities at Fair Value as of December 31, 2020 Liabilities at Fair Value as of December 31, 2021
Level 1Level 2Level 3Netting (c)Total Level 1Level 2Level 3Netting (c)Total
(dollars in thousands) (dollars in thousands)
Operating EntitiesOperating EntitiesOperating Entities
Securities sold, not yet purchased, at fair valueSecurities sold, not yet purchased, at fair value    Securities sold, not yet purchased, at fair value    
US Government securities$0 $0 $1,500 $— $1,500 
Common stockCommon stock699,894 0 0 — 699,894 Common stock$1,192,396 $— $— $— $1,192,396 
Corporate bondsCorporate bonds0 10,654 704 — 11,358 Corporate bonds— 37 — — 37 
Preferred stockPreferred stock6,589 0 0 — 6,589 Preferred stock9,009 — — — 9,009 
Warrants and rightsWarrants and rights8,774 0 0 — 8,774 Warrants and rights6 — — — 6 
Payable for derivative contracts, at fair valuePayable for derivative contracts, at fair valuePayable for derivative contracts, at fair value
FuturesFutures266 — — — 266 
Currency forwardsCurrency forwards0 3,067 0 — 3,067 Currency forwards— 1,346 — — 1,346 
Swaps0 43,560 0 (37,033)6,527 
Equity swapsEquity swaps— 114,689 — (92,330)22,359 
OptionsOptions62,651 0 3,915 — 66,566 Options32,773 — 3,419 — 36,192 
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities
Contingent consideration liability (b) Contingent consideration liability (b)0 0 36,718 — 36,718  Contingent consideration liability (b)— — 62,223 — 62,223 
$777,908 $57,281 $42,837 $(37,033)$840,993 $1,234,450 $116,072 $65,642 $(92,330)$1,323,834 
(a) In accordance with US GAAP, portfolio funds are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy. Carried interest and equity method investments presented in the table above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated statement of financial condition.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(b) In accordance with the terms of the purchase agreements for acquisitions that closed during the first quarter of 2019 (the Quarton acquisition), the fourth quarter of 2020 (the MHT acquisition) and the fourth quarter of 2020,2021 (the Portico acquisition), the Company is required to pay to the sellers a portion of future net income and/or revenues of the acquired businesses, if certain targets are achieved through the periods ended through December 31, 2020 and December 31, 2023.2024. For bothall acquisitions the Quarton Acquisition and the MHT Acquisition, the
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Company estimated the contingent consideration liabilities using a combination of Monte Carlo and Discounted Cash Flow methods which require the Company to make estimates and assumptions regarding the future cash flows and profits. Changes in these estimates and assumptions could have a significant impact on the amounts recognized. The undiscounted amounts for the Quarton Acquisitionacquisition can range from $10.1 million to $35.1$25.0 million. The undiscounted amounts for the MHT Acquisitionacquisition have no minimum or maximum as it is calculated based on revenue. The undiscounted amounts for the Portico acquisition can range from zero  to $58.0 million.
(c) Derivatives are reported on a net basis, by counterparty, when a legal right of offset exists under an enforceable netting agreement as well as net of cash collateral received or posted under enforceable credit support agreements. See Note 2f for further information on offsetting of derivative financial instruments.
The following table includes a roll forward of the amounts for the three months ended March 31, 20212022 and 20202021 for financial instruments classified within level 3. The classification of a financial instrument within level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement.


Three Months Ended March 31, 2022
Balance at December 31, 2021Transfers inTransfers outPurchases/(covers)(Sales)/shortsRealized and Unrealized gains/lossesBalance at March 31, 2022Change in unrealized gains/losses relating to instruments still held (1)
(dollars in thousands)
Operating Entities
Preferred stock$122,631 $— $— $3,441 $(1,100)$44,729 $169,701 $44,729 
Common stock32,658 — — 2,018 (33)5,188 39,831 5,188 
Convertible bonds5,250 — — — — — 5,250 — 
Corporate bond2,419 — — — — 7 2,426 7 
Options, asset234 — — — — (6)228 (6)
Options, liability3,419 — — — — (340)3,079 (340)
Warrants and rights15,403 — — 414 — 2,740 18,557 2,740 
Trade claims3,496 — — 1,666 (615)293 4,840 293 
Private investments410 — — 353 (250)37 550 37 
Contingent consideration liability62,223 — — — (10,076)5,192 57,339 5,192 
Three Months Ended March 31, 2021
Balance at December 31, 2020Transfers inTransfers outPurchases/(covers)(Sales)/shortsRealized and Unrealized gains/lossesBalance at March 31, 2021Change in unrealized gains/losses relating to instruments still held (1)
(dollars in thousands)
Operating Entities
Preferred stock$59,967 $0 $0 $1,859 $(4,651)$(698)$56,477 $(698)
Common stock23,786 0 (5,353)(b)3,226 (1,387)2,434 22,706 1,679 
Convertible bonds6,040 0 0 1,050 (3,930)(23)3,137 (23)
Corporate bond135 0 0 70 (49)(20)136 (49)
Options, asset251 0 0 0 0 (10)241 (10)
Options, liability3,915 0 0 0 0 (618)3,297 (618)
Term loan12,623 0 0 322 0 (521)12,424 (521)
Warrants and rights6,547 0 0 3,406 (1,206)(823)7,924 (895)
Trade claims8,713 0 01,378 (4,216)30 5,905 (1,021)
Private investments642 0 0 443 0 0 1,085 0 
Corporate bond, liability704 0 0 0 (289)0 415 0 
Government bonds, liability1,500 0 0 0 (1,278)300 522 87 
Contingent consideration liability37,952 0 0 (11,312)0 (7,061)19,579 (7,061)
Consolidated Funds
Common stock2,951 0 0 0 0 0 2,951 0 
Warrants and rights5,806 0 0 0 (670)193 5,329 (477)

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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Three Months Ended March 31, 2020Three Months Ended March 31, 2021
Balance at December 31, 2019Transfers inTransfers outPurchases/(covers)(Sales)/shortsRealized and Unrealized gains/lossesBalance at March 31, 2020Change in unrealized gains/losses relating to instruments still held (1)Balance at December 31, 2020Transfers inTransfers outPurchases/(covers)(Sales)/shortsRealized and Unrealized gains/lossesBalance at March 31, 2021Change in unrealized gains/losses relating to instruments still held (1)
(dollars in thousands)(dollars in thousands)
Operating EntitiesOperating EntitiesOperating Entities
Preferred stockPreferred stock$7,835 $0 $0 $365 $0 $0 $8,200 $0 Preferred stock$59,967 $— $— $1,859 $(4,651)$(698)$56,477 $(698)
Common stockCommon stock17,466 0 0 1,798 (593)(1,161)17,510 (1,257)Common stock23,786 — (5,353)(a)3,226 (1,387)2,434 22,706 1,679 
Convertible bondsConvertible bonds2,500 0 0 286 0 0 2,786 0 Convertible bonds6,040 — — 1,050 (3,930)(23)3,137 (23)
Corporate Bond, assetCorporate Bond, asset2,421 0 0 422 (24)(7)2,812 12 Corporate Bond, asset135 — — 70 (49)(20)136 (49)
Options, assetOptions, asset336 0 0 0 0 (4)332 (4)Options, asset251 — — — — (10)241 (10)
Options, liabilityOptions, liability2,920 0 0 0 0 (1,118)1,802 (1,118)Options, liability3,915 — — — — (618)3,297 (618)
Warrants and rightsWarrants and rights594 0 0 0 0 4 598 4 Warrants and rights6,547 — — 3,406 (1,206)(823)7,924 (895)
Term LoanTerm Loan12,623 — — 322 — (521)12,424 (521)
Trade claimTrade claim7,083 1,044 (a)0 1,166 0 (110)9,183 (110)Trade claim8,713 — — 1,378 (4,216)30 5,905 (1,021)
Private investmentsPrivate investments237 0 0 233 0 (5)465 (5)Private investments642 — — 443 — — 1,085 — 
Corporate bond, liabilityCorporate bond, liability1,000 0 0 0 0 (200)800 (200)Corporate bond, liability704 — — — (289)— 415 — 
Government bonds, liabilityGovernment bonds, liability1,950 0 0 0 0 (450)1,500 (450)Government bonds, liability1,500 — — — (1,278)300 522 87 
Contingent consideration liabilityContingent consideration liability30,896 0 0 0 (1,400)(838)28,658 (838)Contingent consideration liability37,952 — — (11,312)— (7,061)19,579 (7,061)
Consolidated FundsConsolidated FundsConsolidated Funds
Preferred stock4,393 0 0 0 0 0 4,393 0 
Common stockCommon stock0 0 0 100,000 0 0 100,000 0 Common stock2,951 — — — — — 2,951 — 
Warrants and rightsWarrants and rights$5,567 $0 $0 $0 $0 $44 $5,611 $44 Warrants and rights5,806 — — — (670)193 5,329 (477)
(1) Unrealized gains/losses are reported in Investment income - Securities principal transactions, net in the accompanying condensed consolidated statements of operations.
(a) The security stopped trading on an open market.
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(b)Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(a) The entity in which the Company is invested completed an initial public offering.
Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above.
The Company recognizes all transfers and the related unrealized gain (loss) at the beginning of the reporting period.
Transfers between level 2 and 3 generally relate to whether significant relevant observable inputs are available for the fair value measurements or due to change in liquidity restrictions for the investments.
The following table includes quantitative information as of March 31, 20212022 and December 31, 20202021 for financial instruments classified within level 3. The table below quantifies information about the significant unobservable inputs used in the fair value measurement of the Company's level 3 financial instruments.
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Quantitative Information about Level 3 Fair Value Measurements
Fair Value
March 31, 2022
Valuation TechniquesUnobservable InputsRangeWeighted Average
Level 3 Assets(dollars in thousands)
Common and preferred stocks$75,253 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
12.5% - 20%
6.25x - 6.75x
13%
6.5x
Options228 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
12.5% - 13.5%
6.25x - 6.75x
13%
6.5x
Trade claims2,138 Discounted cash flowsDiscount rate50%50%
Warrants and rights5,986 
Discounted cash flows
Guideline companies
Option pricing model
Discount rate
EBITDA Market Multiples
Volatility
12.5% - 13.5%
6.25x - 6.75x
73% - 103%
13.0%
6.5x
97.2%
Other level 3 assets (a)157,778 
Total level 3 assets$241,383 
Level 3 Liabilities
Options3,079 
Discounted cash flows
Option pricing model
Discount rate
Volatility
2.29%
35%
2.29%
35%
Contingent consideration liability57,339 
Discounted cash flows
Monte Carlo simulation
Discount rate
Volatility
8.6% - 16%
20% - 22%
12.3%
20.9%
Total level 3 liabilities$60,418 
Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Quantitative Information about Level 3 Fair Value Measurements
Fair Value
March 31, 2021
Valuation TechniquesUnobservable InputsRangeWeighted Average
Level 3 Assets(dollars in thousands)
Common and preferred stocks$70,935 
Discounted cash flows
Guideline companies
Probability of Success
Discount rate
EBITDA Market Multiples
Probability of Success
11% - 20%
6.25x - 6.75x
70%
12%
6.5x
70%
Options241 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
11% - 12%
6.25x - 6.75x
12%
6.5x
Trade claims3,713 Discounted cash flowsDiscount rate20%20%
Warrants and rights10,394 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
4% - 12%
6.25x - 6.75x
7.0%
6.5x
Corporate, convertible bonds and term loan12,424 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
11% - 12%
6.25x - 6.75x
12%
6.5x
Other level 3 assets (a)20,608 
Total level 3 assets$118,315 
Level 3 Liabilities
Options3,297 Option pricing modelsVolatility35%35%
Contingent consideration liability19,579 
Discounted cash flows
Monte Carlo simulation
Discount rate
Volatility
7% - 15%
18% - 20%
13%
18%
Other level 3 liabilities (a)937 
Total level 3 liabilities$23,813 

Quantitative Information about Level 3 Fair Value MeasurementsQuantitative Information about Level 3 Fair Value Measurements
Fair Value at December 31, 2020Valuation TechniquesUnobservable InputsRangeWeighted AverageFair Value at December 31, 2021Valuation TechniquesUnobservable InputsRangeWeighted Average
Level 3 AssetsLevel 3 Assets(dollars in thousands)Level 3 Assets(dollars in thousands)
Common and preferred stocksCommon and preferred stocks$65,735 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
10% - 12%
6.25x - 6.75x
11%
6.5x
Common and preferred stocks$76,491 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
12.5% - 20%
6.25x - 6.75x
13%
6.5x
Trade claimsTrade claims3,500 Discounted cash flowsDiscount rate15%15%Trade claims2,376 Discounted cash flowsDiscount rate40%40%
Warrants and rightsWarrants and rights11,217 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
4% - 11%
6.25x - 6.75x
7%
6.5x
Warrants and rights4,483 
Discounted cash flows
Guideline companies
Option pricing model
Discount rate
EBITDA Market Multiples
Volatility
12.5% - 13.5%
6.25x - 6.75x
90% - 100%
13%
6.5x
95%
OptionsOptions251 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
10% - 12%
6.25x - 6.75x
11%
6.5x
Options234 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
12.5% - 13.5%
6.25x - 6.75x
13%
6.5x
Corporate, convertible bonds and term loan12,623 
Discounted cash flows
Guideline companies
Discount rate
EBITDA Market Multiples
10% - 12%
6.25x - 6.75x
11%
6.5x
Other level 3 assets (a)Other level 3 assets (a)34,135 Other level 3 assets (a)98,917 
Total level 3 assetsTotal level 3 assets$127,461 Total level 3 assets$182,501 
Level 3 LiabilitiesLevel 3 LiabilitiesLevel 3 Liabilities
OptionsOptions3,915 Option pricing modelsVolatility35%35%Options3,419 Option pricing modelVolatility35%35%
Contingent consideration liabilityContingent consideration liability36,718 
Discounted cash flows
Monte Carlo simulation
Discount rate
Volatility
9% - 16%
22% - 24%
15%
22%
Contingent consideration liability62,223 
Discounted cash flows
Monte Carlo simulation
Discount rate
Volatility
7% - 15%
20% - 24%
12%
22%
Other level 3 liabilities (a)2,204 
Total level 3 liabilitiesTotal level 3 liabilities$42,837 Total level 3 liabilities$65,642 
(a)The quantitative disclosures exclude financial instruments for which the determination of fair value is based on prices from recent transactions.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The Company has established valuation policies, procedures and internal control infrastructure over the fair value measurement of financial instruments. In the event that observable inputs are not available, the control processes are designed to ensure that the valuation approach utilized is applicable, reasonable and consistently applied. Where a pricing model is used to determine fair value, these control processes include reviews of the methodology and inputs for both reasonableness and applicability. Consistent with best practices, recently executed comparable transactions and other observable market data are used
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
for the purposes of validating both the model and the assumptions used to calculate fair value. Independent of trading and valuation functions, the Company’s Valuation Committee in conjunction with its Price Verification team, plays an important role in determining that financial instruments are appropriately valued and that fair value measurements are both reasonable and reliable. This is particularly important where prices or valuations that require inputs are less observable. The Valuation Committee is comprised of senior management, including non-investment professionals, who are responsible for overseeing and monitoring the pricing of the Company's investments.
The US GAAP fair value leveling hierarchy is designated and monitored on an ongoing basis. In determining the designation, the Company takes into consideration a number of factors including the observability of inputs, liquidity of the investment and the significance of a particular input to the fair value measurement. Designations, models, pricing vendors, third party valuation providers and inputs used to derive fair market value are subject to review by the valuation committee and the internal audit group. The Company reviews its valuation policy guidelines on an ongoing basis and may adjust them in light of improved valuation metrics and models, the availability of reliable inputs and information, and prevailing market conditions. The Company regularly reviews a profit and loss report, as well as other periodic reports, and analyzes material changes from period to period in the valuation of its investments as part of its control procedures. The Company also performs back testing on a regular basis by comparing prices observed in executed transactions to previous valuations.
The fair market value for level 3 securities may be highly sensitive to the use of industry-standard models, unobservable inputs and subjective assumptions. The degree of fair market value sensitivity is also contingent upon the subjective weight given to specific inputs and valuation metrics. The Company holds various equity and debt instruments where different weight may be applied to industry-standard models representing standard valuation metrics such as: discounted cash flows, market multiples, comparative transactions, capital rates, recovery rates and timing, and bid levels. Generally, changes in the weights ascribed to the various valuation metrics and the significant unobservable inputs in isolation may result in significantly lower or higher fair value measurements. Volatility levels for warrants and options are not readily observable and subject to interpretation. Changes in capital rates, discount rates and replacement costs could significantly increase or decrease the valuation of the real estate investments. The interrelationship between unobservable inputs may vary significantly amongst level 3 securities as they are generally highly idiosyncratic. Significant increases (decreases) in any of those inputs in isolation can result in a significantly lower (higher) fair value measurement.
Other financial assets and liabilities
The following table presents the carrying values and fair values, at March 31, 20212022 and December 31, 2020,2021, of financial assets and liabilities and information on their classification within the fair value hierarchy which are not measured at fair value on a recurring basis. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value (see Note 2e).
 March 31, 2021December 31, 2020Fair Value Hierarchy
 Carrying AmountFair ValueCarrying AmountFair Value
  (dollars in thousands) 
Financial Assets 
Operating companies
Cash and cash equivalents$1,147,531 $1,147,531 $645,169 $645,169 Level 1
Cash collateral pledged110,303 110,303 110,743 110,743 Level 2
Segregated cash168,942 168,942 185,141 185,141 Level 1
Securities purchased under agreements to resell0 0 191 204 Level 2
Securities borrowed1,996,757 1,996,757 1,908,187 1,908,187 Level 2
Loans receivable4,467 4,467 (d)7,682 7,682 (d)Level 3
Consolidated Funds
Cash and cash equivalents935 935 417 417 Level 1
Financial Liabilities
Securities sold under agreements to repurchase2,546 2,759 5,036 5,544 Level 2
Securities loaned3,083,945 3,083,945 2,476,414 2,476,414 Level 2
Convertible debt81,682 (a)181,597 (b)80,808 (a)135,444 (b)Level 2
Notes payable and other debt542,519 (e)568,212 (c)383,067 (e)405,840 (c)Level 2
 March 31, 2022December 31, 2021Fair Value Hierarchy
 Carrying AmountFair ValueCarrying AmountFair Value
  (dollars in thousands) 
Financial Assets 
Operating companies
Cash and cash equivalents$512,978 $512,978 $914,343 $914,343 Level 1
Cash collateral pledged52,865 52,865 47,494 47,494 Level 2
Segregated cash220,882 220,882 194,701 194,701 Level 1
Securities purchased under agreements to resell19,621 19,621 — — Level 2
Securities borrowed1,761,146 1,761,146 1,704,603 1,704,603 Level 2
Loans receivable5,041 5,041 (b)4,858 4,858 (b)Level 3
Consolidated Funds
Cash and cash equivalents23 23 296 296 Level 1
Financial Liabilities
Securities sold under agreements to repurchase229,192 229,192 63,469 63,469 Level 2
Securities loaned1,735,852 1,735,852 1,586,572 1,586,572 Level 2
Notes payable and other debt625,766 (c)644,238 (a)623,371 (c)655,229 (a)Level 2
(a)The carrying amount of the convertibleNotes payable and other debt includes an unamortized discount of $5.8 million and $6.7 million as of March 31, 2021 and December 31, 2020, respectively.
(b)The convertible debt includes the conversion option and isare based on the last broker quote available.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(c)Notes payable and other debt are based on the last broker quote available.
(d)(b)The fair market value of level 3 loans is calculated using discounted cash flows where applicable.
(e)(c)The carrying amount of the notes payable and other debt includes an unamortized discount and unamortized premium of $1.5$2.7 million and $0.2 million as of March 31, 2022, respectively, and unamortized discount and unamortized premium of $2.8 million and $0.3 million as of MarchDecember 31, 2021, respectively and unamortized premium of $0.4 million as of December 31, 2020.respectively.
8. Deposits with Clearing Organizations, Brokers and Banks
Under the terms of agreements between the Company and some of its clearing organizations, brokers and banks, balances owed are collateralized by certain of the Company's cash and securities balances. As of March 31, 20212022 and December 31, 2020,2021, the Company had a total of $82.1$105.9 million and $105.0$111.9 million, respectively, in deposit accounts with clearing organizations, brokers and banks that could be used as collateral to offset losses incurred by the clearing organizations, brokers and banks, on behalf of the Company's activities, if such losses were to occur.
9. Receivable From and Payable To Brokers, Dealers and Clearing Organizations
Receivable from and payable to brokers, dealers and clearing organizations includes cash held at the clearing brokers, amounts receivable or payable for unsettled transactions, monies borrowed and proceeds from short sales equal to the fair value of securities sold, not yet purchased, at fair value, which are restricted until the Company purchases the securities sold short. Pursuant to the master netting agreements the Company entered into with its brokers, dealers and clearing organizations, these balances are presented net (assets less liabilities) across balances with the same counterparty. The Company's receivable from and payable to brokers, dealers and clearing organizations balances are held at multiple financial institutions.
As of March 31, 20212022 and December 31, 2020,2021, amounts receivable from brokers, dealers and clearing organizations include:
As of March 31, 2021As of December 31, 2020
 (dollars in thousands)
Broker-dealers$1,753,510 $1,608,273 
Securities failed to deliver76,127 55,655 
Clearing organizations79,833 41,795 
Securities borrowed/loaned interest receivable11,283 24,021 
$1,920,753 $1,729,744 
As of March 31, 2022As of December 31, 2021
 (dollars in thousands)
Broker-dealers$1,342,242 $1,533,713 
Securities failed to deliver91,561 17,851 
Clearing organizations44,450 56,075 
Securities borrowed/loaned interest receivable9,658 6,708 
$1,487,911 $1,614,347 

As of March 31, 20212022 and December 31, 2020,2021, amounts payable to brokers, dealers and clearing organizations include:
As of March 31, 2021As of December 31, 2020
 (dollars in thousands)
Broker-dealers$326,231 $286,011 
Securities failed to receive100,528 68,036 
Clearing organizations48,466 33,732 
Securities borrowed/loaned interest payable13,246 27,364 
$488,471 $415,143 

As of March 31, 2022As of December 31, 2021
 (dollars in thousands)
Broker-dealers$419,423 $483,112 
Securities failed to receive95,201 57,894 
Clearing organizations62,804 37,925 
Securities borrowed/loaned interest payable10,112 7,622 
$587,540 $586,553 
10. Receivable From and Payable To Customers
As of March 31, 20212022 and December 31, 2020,2021, receivable from customers of $199.7$159.6 million and $104.0$159.4 million, respectively, consist of amounts owed by customers relating to securities transactions not completed on settlement date and receivables arising from prepaid research.
As of March 31, 20212022 and December 31, 2020,2021, payable to customers of $2.7$2.2 billion and $1.7$2.4 billion, respectively, include amounts due on cash and margin transactions to the Company's clients, some of which have their assets held by a Company omnibus account, which are included within receivables from brokers, dealers and clearing organizations in the accompanying condensed consolidated statements of financial condition. In the omnibus structure, positions that are owned by Cowen International Ltd are fully cross collateralized by client funds, meaning that the Company for all intents and purposes, has nodoes not have market risk. Additionally, Cowen International Ltd has no obligation to settle any trade that it deems inappropriate from a risk perspective, adding an important market and counterparty risk mitigating factor.
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11. Commission Management Payable
The Company receives a gross commission from various brokers, which is then used to fund commission sharing and recapture arrangements, less the portion retained as income to the Company. Accrued commission sharing and commission
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
recapture payable of $139.6$127.0 million and $117.0$103.0 million, as of March 31, 20212022 and December 31, 2020,2021, respectively, are classified as commission management payable in the accompanying condensed consolidated statements of financial condition.
12. Convertible Debt and Notes Payable
As of March 31, 2022 and December 31, 2021, the Company's outstanding debt was as follows:
 As of March 31, 2022As of December 31, 2021
 (dollars in thousands)
Notes payable$174,139 $174,015 
Term loan434,319 435,147 
Other notes payable15,857 12,537 
Finance lease obligations1,451 1,672 
$625,766 $623,371 
Convertible Debt
December 2022 Convertible Notes
The Company, on December 14, 2017, issued $135.0 million aggregate principal amount of 3.00% convertible senior notes due December 2022 (the “December 2022 Convertible Notes”). The December 2022 Convertible Notes have a final maturity date of December 15, 2022 unless earlier repurchased by the Company or converted by the holder in accordance with their terms prior to such date. The interest on the December 2022 Convertible Notes is payable semi-annually on December 15 and June 15 of each year. The December 2022 Convertible Notes are senior unsecured obligations of Cowen. The December 2022 Convertible Notes were issued with an initial conversion price of $17.375 per share of Cowen's Class A common stock. Pursuant to the indenture governing the December 2022 Convertible Notes, conversions of the December 2022 Convertible Notes will be settled by the delivery and/or payment, as the case may be, of Cowen’s Class A Common Stock, cash, or a combination thereof, at the Company's election.
The Company recognized the embedded cash conversion option at issuance date fair value, which also represents the initial unamortized discount on the December 2022 Convertible Notes of $23.4 million and is shown net in convertible debt in the accompanying condensed consolidated statements of financial condition. On June 26, 2018, the Company received shareholder approval for the Company to settle the December 2022 Convertible Notes entirely in Class A common stock. Upon receiving shareholder approval, the Company reclassified the separately recognized conversion option from a derivative liability to equity.
During December 2020, the Company repurchased and extinguished $46.9 million of the outstanding principal amount of the December 2022 Convertible Notes for cash consideration of $70.5 million. In conjunction with the partial extinguishment of the December 2022 Convertible Notes, the Company accelerated the pro rata unamortized discount of $3.6 million and capitalized debt issuance costs of $0.4 million. The Company allocated $29.6 million of the cash consideration paid to the extinguishment of the equity component of the December 2022 Convertible Notes. The Company recognized $2.7 million of gain on debt extinguishment.
On March 24, 2021, the Company issued a redemption notice announcing that the Company would redeem all of the December 2022 Convertible Notes, and provided holders the option to elect to settle the as-converted value of the December 2022 Convertible Notes as allowed under the terms of the December 2022 Convertible Notes. As a result of the Company’s call for redemption of the December 2022 Convertible Notes, the December 2022 Convertible Notes were convertible, at the option of the holder at any time prior to June 22, 2021, the second business day prior to the December 2022 Convertible Notes' Redemption Date. On June 24, 2021 (the "Redemption Date") the Company redeemed all of the outstanding principal amount of the December 2022 Convertible Notes. The redemption amount was determined based on the holders election to convert, which allowed for either 100.00% of the principal amount thereof plus accrued and unpaid interest on such principal amount up to June 15, 2021, to, but not including the Redemption Date of the December 2022 Convertible Notes, or the value of the Company's Class A common stock to be issued on conversion. The settlement method for the December 2022 Convertible Notes was $88.1 million in cash, (the outstanding principal amount of the December 2022 Convertible Notes) and 2,938,841 shares of the Company’s Class A common stock, (the remainder of the conversion obligation in excess of the principal amount). The conversion rate on the December 2022 Convertible Notes on the Redemption Date was 33.35 shares of the Company’s Class A common stock per $1,000.00 principal amount of December 2022 Convertible Notes converted. In conjunction with the redemption of the remaining December 2022 Convertible Notes, the Company accelerated the pro rata unamortized discount of $5.1 million and capitalized debt issuance costs of $0.5 million.
Amortization on the discount, included within interest and dividends expense in the accompanying condensed consolidated statements of operations is $0.8 million for the three months ended March 31, 2021, based on an effective interest rate of 7.13%.
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The Company capitalized the debt issuance costs in the amount of $2.2 million, which is a direct deduction from the carrying value of the debt and was amortized over the life of the December 2022 Convertible Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations. The Company recorded interest expense of $0.7 million for the three months ended March 31, 2021.
Notes Payable
May 2024 Notes
On May 7, 2019, the Company completed its private placement of $53.0 million aggregate principal amount of 7.25% senior notes due May 2024 (the "May 2024 Notes") with certain institutional investors. On September 30, 2019, the Company issued an additional $25.0 million of the same series of notes. The additional May 2024 Notes were purchased at a premium of $0.5 million, which is shown net in notes payable in the accompanying condensed consolidated statement of financial condition. To date the May 2024 Notes have maintained their initial private rating. Interest on the May 2024 Notes is payable semi-annually in arrears on May 6 and November 6. The Company recorded interest expense of $1.4 million and $1.4 million for the three months ended March 31, 2022 and 2021, respectively. The Company capitalized debt issuance costs of approximately $1.5 million in May 2019 and $0.6 million in September 2019, which is a direct deduction from the carrying value of the debt and will be amortized over the life of the May 2024 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations.
June 2033 Notes
On June 11, 2018, the Company completed its public offering of $90.0 million of 7.75% senior notes due June 2033 (the "June 2033 Notes") and subsequently the underwriters exercised in full their option to purchase an additional $10.0 million principal amount of the June 2033 Notes. Interest on the June 2033 Notes is payable quarterly in arrears on March 15, June 15, September 15 and December 15. The Company recorded interest expense of $1.9 million for the three months ended March 31, 2022 and 2021, respectively. The Company capitalized debt issuance costs of approximately $3.6 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the June 2033 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations.
December 2027 Notes
On December 8, 2017, the Company completed its public offering of $120.0 million of 7.35% senior notes due December 2027 (the "December 2027 Notes") and subsequently the underwriters exercised in full their option to purchase an additional $18.0 million principal amount of the December 2027 Notes. Interest on the December 2027 Notes is payable quarterly in arrears on March 15, June 15, September 15 and December 15. The Company recorded interest expense of $2.5 million for three months ended March 31, 2021. The Company capitalized debt issuance costs of approximately $5.0 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the December 2027 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations. The net proceeds of the offering, after deducting the underwriting discount and estimated offering expenses payable by the Company were used to redeem all of its 8.25% senior notes due October 2021 and for general corporate purposes.
On March 24, 2021, the Company delivered payment of and discharged all $138.0 million outstanding aggregate principal of the December 2027 Notes plus accrued and unpaid interest through the effective redemption date of April 23, 2021. In conjunction with the extinguishment of the December 2027 Notes , the Company accelerated the pro-rata capitalized debt issuance costs. During the three months ended March 31, 2021, the Company recognized $4.4 million of loss on debt extinguishment.
Term Loan
March 2028 Term Loan
On March 24, 2021, the Company borrowed $300 million of first lien term loan due March 24, 2028. On December 15, 2021, the Company borrowed an additional $150 million first lien termloan under the same terms and conditions as, and fungible with, the initial first lien term loan (collectively, the “March 2028 Term Loan”). The aggregate amount borrowed under the March 2028 Term Loan is $450 million. The March 2028 Term Loan bears interest at an annual rate equal to, at the option of the Company, either the (a) London Inter-bank Offered Rate ("LIBOR") (adjusted for reserves and subject to a floor of 0.75%) plus a margin of3.25% or (b) an alternate base rate plus a margin of 2.25%. The Company is required to pay amortization of approximately 1.00% per annum of the original principal amount of the March 2028 Term Loan. Additionally, the Company has entered into an interest rate swap to offset the floating interest rate of the March 2028 Term Loan (See Note 6). The obligations of the Company for the March 2028 Term Loan are guaranteed by certain of the Company’s wholly-owned domestic subsidiaries (excluding its broker-dealer subsidiaries) (the “Guarantors”) and secured by substantially all of the assets of the Company and the
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Guarantors, subject in each case to certain customary exceptions. The terms of the March 2028 Term Loan contain customary affirmative and negative covenants, subject to certain customary exceptions, thresholds, qualifications and “baskets”. Proceeds from the March 2028 Term Loan were used to (i) satisfy and discharge and redeem the Company’s 2027 Senior Notes, (ii) redeem the Company’s December 2022 Convertible Notes that remained outstanding as of March 31, 2021 and pay the cash settlement amount in connection with the conversion of December 2022 Convertible Notes prior to that redemption date, and (iii) for the payment of fees, commissions, premiums, expenses and other transaction costs (including original issue discount or upfront fees) payable in connection with the transactions related thereto. As of March 31, 2022, the outstanding principal amount of the March 2028 Term Loan was $445.5 million.
Interest expense for the March 2028 Term Loan was $4.5 million and $0.2 million for the three months ended March 31, 2022 and 2021, based on an effective interest rate of 4.46%. In March 2021, the Company capitalized debt issuance costs of approximately $6.6 million and initial unamortized discount of $1.5 million related to the March 2028 Term Loan which is a direct deduction from the carrying value of the debt and will be amortized over the life of the March 2028 Term loan in interest and dividends expense in the accompanying condensed consolidated statements of operations. In December 2021, the Company capitalized debt issuance costs of approximately $2.7 million and unamortized discount of $1.5 million related to the additional borrowing of $150 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the March 2028 Term loan in interest and dividends expense in the accompanying condensed consolidated statements of operations.
The U.K. Financial Conduct Authority, which regulates LIBOR, has announced that all US Dollar LIBOR settings will either cease to be provided by any administrator or no longer be representative as of June 30, 2023. As the March 2028 Term Loan represents the Company’s only significant exposure to LIBOR as of March 31, 2022, the transition to an alternative Inter-bank Offer Rate is not expected to have a material impact on Company's consolidated financial statements.
Other Notes Payable
During January 2022, the Company borrowed $4.0 million to fund insurance premium payments. This note had an effective interest rate of 2.01% and was due in December 2022, with monthly payment requirements of $0.4 million. As of March 31, 2022, the outstanding balance note was $3.2 million. Interest expense for the three months ended March 31, 2022 was insignificant.
On September 30, 2020, the Company borrowed $72.0 million from Purple Protected Asset S-81 ("PPA S-81"), a Luxembourg entity unrelated to Cowen. The Company repaid $60.0 million of the PPA S-81 loan in June 2021. The loan is payable on September 30, 2023, had an initial interest rate of 1.4 times the Secured Overnight Financing Rate ("SOFR") plus 6.07% until December 31, 2020 and 1.4 times the SOFR plus 5.8% until June 30, 2021 and 3.65 times the SOFR plus 4.0% thereafter with quarterly interest payments. The loan obligation, as well as a loan issued by The Military Mutual Ltd (a United Kingdom company unrelated to Cowen) with principal of $28.4 million that was sold by Cowen Re to PPA S-81 at fair value for no gain or loss on September 30, 2020, are fully cash collateralized through a reinsurance policy provided by Cowen Re which is reflected in cash collateral pledged in the condensed consolidated statements of financial condition as of December 31, 2020 (see Notes 4 and 18). The Company capitalized debt issuance costs of approximately $1.7 million which is a direct deduction from the carrying value of the loan and will be amortized over the life of the loan in interest and dividends expense shown in the accompanying condensed consolidated statements of operations. The Company recorded interest expense of $0.5 million and $1.1 million for the three months ended March 31, 2022 and 2021, respectively, related to its loan payable to PPA S-81.
During November 2019, the Company borrowed $2.6 million to fund general corporate capital expenditures. This note had an effective interest rate of 6% and is due in November 2024, with monthly payment requirements of $0.1 million. As of March 31, 2022, the outstanding balance on this note was $1.5 million. Interest expense for the three months ended March 31, 2022 and 2021 was insignificant.
Finance Lease Obligations
The Company has entered into various finance leases for computer equipment. These finance lease obligations are included in notes payable and other debt in the accompanying condensed consolidated statements of financial condition.
For the three months ended March 31, 2022 and 2021, quantitative information regarding the Company's finance lease obligations reflected in the accompanying condensed consolidated statements of operations, the supplemental cash flow information and certain other information related to finance leases were as follows:
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Three Months Ended March 31,
20222021
(dollars in thousands)
Lease cost
Finance lease cost:
    Amortization of finance lease right-of-use assets$324 $309 
    Interest on lease liabilities$20 $34 
Other information
Cash paid for amounts included in the measurement of lease liabilities:
    Operating cash flows from finance leases$20 $34 
    Financing cash flows from finance leases$274 $332 
Weighted average remaining lease term - operating leases (in years)1.632.01
Weighted average discount rate - operating leases4.66 %4.89 %
Annual scheduled maturities of debt and minimum payments (of principal and interest) for all debt outstanding as of March 31, 2022, are as follows:
Notes PayableTerm LoanOther Notes PayableFinance Lease
Obligation
 (dollars in thousands)
2022$11,468 $16,733 $3,752 $849 
202313,405 22,351 12,593 500 
202488,578 22,168 543 100 
20257,750 21,986 — 49 
20267,750 21,803 — 12 
Thereafter150,375 445,631 — — 
Subtotal279,326 550,672 16,888 1,510 
Less (a)(105,187)(116,353)(1,031)(59)
Total$174,139 $434,319 $15,857 $1,451 
(a)Amount necessary to reduce net minimum payments to present value calculated at the Company's implicit rate at inception. This amount also includes capitalized debt costs and the unamortized discount on the Company's convertible debt.
Letters of Credit
As of March 31, 2022, the Company has six irrevocable letters of credit, related to leased office space, for which there is cash collateral pledged, which the Company pays a fee on the stated amount of the letter of credit. The Company also has pledged cash collateral for reinsurance agreements (See Note 4).
To the extent any letter of credit is drawn upon, interest will be assessed at the prime commercial lending rate. As of March 31, 2022 and December 31, 2021, there were no amounts due related to these letters of credit.
13. Redeemable Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.01 per share. Subject to the rights of holders of any outstanding preferred stock, the number of authorized shares of preferred stock may be increased or decreased by the affirmative vote of the holders of a majority of the shares entitled to vote on such matters, but in no instance can the number of authorized shares be reduced below the number of shares then outstanding. The Company's amended and restated certificate of incorporation permits the Company to issue up to 10,000,000 shares of preferred stock in one or more series with such designations, titles, voting powers, preferences and rights and such qualifications, limitations and restrictions as may be fixed by the board of directors of the Company without any further action by the Company's stockholders. The Company's board of directors may increase or decrease the number of shares of any series of preferred stock following the issuance of that series of preferred stock, but in no instance can the number of shares of a series of preferred stock be reduced below the number of shares of the series then outstanding.
On May 19, 2015, the Company completed its offering of 120,750 shares of Series A Convertible Preferred Stock that provided $117.2 million of proceeds, net of underwriting fees and issuance costs of $3.6 million. Each share of the Series A
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Convertible Preferred Stock is entitled to dividends at a rate of 5.625% per annum, which will be payable, when and if declared by the board of directors of the Company, quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year. The Company may, at its option, pay dividends in cash, common stock or a combination thereof. The Company declared and paid a cash dividend in respect of the Series A Convertible Preferred Stock of $1.7 million for the three months ended March 31, 2022. The Company declared and accrued a cash dividend in respect of the Series A Convertible Preferred Stock of$1.7 million for the three months ended March 31, 2021. Each share of Series A Convertible Preferred Stock is non-voting and has a liquidity preference over the Company's Class A common stock and ranks senior to all classes or series of the Company's Class A common stock, but junior to all of the Company's existing and future indebtedness with respect to dividend rights and rights upon the Company's involuntary liquidation, dissolution or winding down.
Upon issuance, each share of Series A Convertible Preferred Stock was convertible, at the option of the holder, into a number of shares of the Company's Class A common stock equal to the liquidation preference of $1,000.00 divided by the conversion rate. The initial conversion rate (subsequent to the December 5, 2016 reverse stock split) is 38.0619 shares (which equates to $26.27 per share) of the Company's Class A common stock for each share of the Series A Convertible Preferred Stock. At any time on or after May 20, 2020, when the Company's capped call option expired, the Company was able to elect to convert all outstanding shares of the Series A Convertible Preferred Stock into shares of the Company's Class A common stock, cash or a combination thereof, at the Company's election, in each case, based on the then-applicable conversion rate, if the last reported sale price of the Company's Class A common stock equals or exceeds 150% of the then-current conversion price on at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days (including on the last trading day of such period) immediately prior to such election. At the time of conversion, the conversion rate may be adjusted based on certain events, including but not limited to the issuance of cash dividends or Class A common stock as dividends to the Company's Class A common shareholders or a share split or combination.
On December 31, 2021, the Company irrevocably elected that, upon the conversion of any share of the outstanding Series A Convertible Preferred Stock, the Company will settle $1,000.00 of its conversion obligation in cash. With respect to each conversion, to the extent the conversion obligation per share of Series A Convertible Preferred Stock is greater than $1,000.00, the Company may satisfy its conversion obligation in respect of such excess using any settlement method permitted under the Certificate of Designations. As the holders can exercise the conversion option on their shares of Series A Convertible Preferred Stock at any time and require cash payment upon conversion, the Company reclassified the Series A Convertible Preferred Stock to temporary equity at December 31, 2021.
14. Stockholder's Equity
The Company is authorized to issue 125,000,000 shares of common stock, which shall consist of 62,500,000 shares of Class A common stock, par value $0.01 per share, and 62,500,000 shares of Class B common stock, par value $0.01 per share. Subject to the rights of holders of any outstanding preferred stock, the number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of a majority of the shares entitled to vote on such matters, but in no instance can the number of authorized shares be reduced below the number of shares then outstanding.
The certificate of incorporation of the Company provides for 2 classes of common stock, and for the conversion of each class into the other, to provide a mechanism by which holders of Class A common stock of the Company who may be limited in the amount of voting common stock of the Company they can hold pursuant to federal, state or foreign bank laws, to convert their shares into non-voting Class B common stock to prevent being in violation of such laws. Each holder of Class A common stock is entitled to one vote per share in connection with the election of directors and on all other matters submitted to a stockholder vote, provided, however, that, except as otherwise required by law, holders of Class A common stock are not entitled to vote on any amendment to the Company's amended and restated certificate of incorporation that relates solely to the terms of one or more outstanding series of the Company's preferred stock, if holders of the preferred stock series are entitled to vote on the amendment under the Company's certificate of incorporation or Delaware law. No holder of Class A common stock may accumulate votes in voting for directors of the Company.
No holder of Class B common stock is entitled to vote except as otherwise provided by law, provided however that the Company must obtain the consent of a majority of the holders of Class B common stock to effect any amendment, alteration or repeal of any provision of the Company's amended and restated certificate of incorporation or amended and restated by-laws that would adversely affect the voting powers, preferences or rights of holders of Class B common stock. Except as otherwise provided by law, Class B common stock shares will not be counted as shares held by stockholders for purposes of determining whether a vote or consent has been approved or given by the requisite percentage of shares.
Each share of Class A common stock is convertible at the option of the holder and at no cost into one share of Class B common stock, and each share of Class B common stock is convertible at the option of the holder and at no cost into one share of Class A common stock. The conversion ratios will be adjusted proportionally to reflect any stock split, stock dividend, merger,
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
reorganization, recapitalization or other change in the Class A common stock and Class B common stock. Upon conversion, converted shares resume the status of authorized and unissued shares.
Subject to the preferences of the holders of any of the Company's preferred stock that may be outstanding from time to time, each share of Class A common stock and Class B common stock will have an equal and ratable right to receive dividends and other distributions in cash, property or shares of stock as may be declared by the Company's board of directors out of assets or funds legally available for the payment of dividends and other distributions.
In the event of the liquidation, dissolution or winding up of the Company, subject to the preferences of the holders of any preferred stock of the Company that may be outstanding from time to time, holders of Class A common stock and Class B common stock will be entitled to share equally and ratably in the assets available for distribution to the Company's stockholders. There are no redemption or sinking fund provisions applicable to the Class A or the Class B common stock.
Embedded Cash Conversion Option on the December 2022 Convertible Notes
Upon issuance of the December 2022 Convertible Notes (see Note 12), the Company recognized the embedded cash conversion option at fair value of $23.4 million which was valued as of June 26, 2018 at $29.0 million. On June 26, 2018, the Company received shareholder approval for the Company to settle the December 2022 Convertible Notes entirely in Class A common stock. Upon receiving shareholder approval, the Company reclassified the separately recognized conversion option from a derivative liability to equity. The Company allocated $29.6 million of the cash consideration paid on the December 2020 partial extinguishment of the Convertible Notes (see Note 12) to this equity component. The Company redeemed all of the remaining December 2022 Convertible Notes on June 24, 2021.
Cash Dividends to Common Stockholders
During the first quarter of 2020, the Company began the declaration of a quarterly cash dividend payable on its common stock. During March 2021, the Company's Board of Directors declared a cash dividend of $0.08 per share of Class A common stock. During June 2021, September 2021 and December 2021, the Company's Board of Directors declared a cash dividend of $0.10 per share of Class A common stock. During March 2022, the Company's Board of Directors declared a cash dividend of $0.12 per share of Class A common stock. Dividends are payable on all outstanding shares of Class A common stock and on granted but unvested shares of Class A common stock under the Equity Plans on the date of record (See Note 19). During the three months ended March 31, 2022, the Company paid $3.9 million of cash dividends to its holders of Class A common stock.
Treasury Stock
Treasury stock of $583.5 million as of March 31, 2022, compared to $547.1 million as of December 31, 2021, resulted from $12.3 million acquired through repurchases of shares to cover employee minimum tax withholding obligations related to stock compensation vesting events under the Equity Plans or other similar transactions and $24.1 million purchased in connection with a share repurchase program.
The following represents the activity relating to the treasury stock held by the Company during the three months ended March 31, 2022:
Treasury Stock SharesCost
(dollars in thousands)		Average Cost per Share
Balance outstanding at December 31, 202128,047,929 $547,112 $19.51 
Shares purchased for minimum tax withholding under the 2010 and 2020 Equity Plans or other similar transactions374,149 12,283 32.83 
Purchase of treasury stock798,302 24,140 30.24 
Balance outstanding at March 31, 202229,220,380 $583,535 $19.97 








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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
15. Non-Controlling Interests in Consolidated Subsidiaries and Investment Funds
Redeemable and nonredeemable non-controlling interests in consolidated subsidiaries and investment funds and the related net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds are comprised as follows:
As of March 31, 2022As of March 31, 2021
(dollars in thousands)
As of March 31, 2021As of December 31, 2020
(dollars in thousands)
Nonredeemable non-controlling interests in consolidated subsidiaries and investment fundsNonredeemable non-controlling interests in consolidated subsidiaries and investment fundsNonredeemable non-controlling interests in consolidated subsidiaries and investment funds
Operating companiesOperating companies92,629 83,818 Operating companies
Beginning balance Beginning balance126,105 83,818 
Capital contributions Capital contributions1,610 3,498 
Capital distributions Capital distributions(5,901)(2,348)
Income (loss) attributable to non-controlling interests Income (loss) attributable to non-controlling interests20,858 7,661 
Ending balance Ending balance142,672 92,629 
Consolidated FundsConsolidated Funds40,486 115,806 Consolidated Funds
Beginning balance Beginning balance33,630 115,806 
Capital contributions Capital contributions— 19,017 
Capital distributions Capital distributions— (16,425)
$133,115 $199,624 
Deconsolidation of entity Deconsolidation of entity— (74,813)
Income (loss) attributable to non-controlling interests Income (loss) attributable to non-controlling interests(727)(3,099)
Ending balance Ending balance32,903 40,486 
Total Nonredeemable non-controlling interests in consolidated subsidiaries and investment fundsTotal Nonredeemable non-controlling interests in consolidated subsidiaries and investment funds$175,575 $133,115 
16. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income includes the after tax change in Other revenues in the accompanying
Three Months Ended March 31,
20212020
(dollars in thousands)
Income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds  
Operating companies$7,661 $127 
Consolidated Funds(3,099)(62,315)
$4,562 $(62,188)
condensed consolidated statement of operations. During the periods presented, the Company did not have material reclassifications out of other comprehensive income.
Three Months Ended March 31,
20222021
(dollars in thousands)
Beginning balance$(2)$(7)
Foreign currency translation2 4 
Ending balance$— $(3)

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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
13.17. Revenue from Contracts with Customers
For the three months ended March 31, 20212022 and 2020,2021, the following tables presents revenues from contracts with customers disaggregated by fee type and segment.
Three Months Ended March 31,
20212020
(dollars in thousands)
Revenue from contracts with customersOperating Company
Investment banking
     Underwriting fees$154,304 $63,270 
     Strategic/financial advisory fees73,555 21,996 
     Placement and sales agent fees72,544 17,596 
     Expense reimbursements from clients4,431 2,166 
Total investment banking revenue304,834 105,028 
Brokerage
     Commissions161,792 132,208 
     Trade conversion revenue4,130 4,639 
     Equity research fees4,593 4,005 
Total brokerage revenue from customers170,515 140,852 
Management fees25,499 11,346 
Incentive income2,258 0 
Total revenue from contracts with customers - Op Co$503,106 $257,226 
Asset Company
Management fees243 258 
Incentive income0 0 
Total revenue from contracts with customers - Asset Co243 258 
Total revenue from contracts with customers$503,349 $257,484 

Three Months Ended March 31,
20222021
(dollars in thousands)
Revenue from contracts with customersOperating Company
Investment banking
     Underwriting fees$17,583 $154,304 
     Strategic/financial advisory fees58,789 73,555 
     Placement and sales agent fees22,584 72,544 
     Expense reimbursements from clients2,586 4,431 
Total investment banking revenue101,542 304,834 
Brokerage
     Commissions152,483 159,681 
     Trade conversion revenue7,410 6,241 
     Equity research fees6,203 4,593 
Total brokerage revenue from customers166,096 170,515 
Management fees16,555 25,499 
Incentive income633 2,258 
Total revenue from contracts with customers - Op Co$284,826 $503,106 
Asset Company
Management fees214 243 
Incentive income— — 
Total revenue from contracts with customers - Asset Co214 243 
Total revenue from contracts with customers$285,040 $503,349 

14.18. Insurance and reinsurance
The Company completed the acquisition of Cowen Insurance Co on February 26, 2021. (See Note 3). Cowen Insurance Co is ana Malta based insurance company that reinsures a significant proportion of its portfolio (“Outward Reinsurance”). The Company's wholly owned Luxembourg subsidiary, Cowen Reinsurance S.A. (formerly Hollenfels Re SA ("Hollenfels"S.A.) (“Cowen Re”) provides reinsurance to third party insurance and reinsurance companies (“Inward Reinsurance”). Cowen Insurance Co’s and Hollenfels'Cowen Re's share of claims incurred and paid during the periods below, as well as the change in claims outstanding and claims incurred but not reported ("IBNR") during these periods, net of reinsurance, were as follows:
Three Months Ended March 31,
20212020
(dollars in thousands)
Incurred and paid claims
Insurance (net of Outward Reinsurance)$744 $0 
Inward Reinsurance3,904 4,235 
Total$4,648 $4,235 
Change in claims outstanding and claims IBNR
Insurance (net of Outward Reinsurance)$(136)$0 
Inward Reinsurance(559)17,293 
Total$(695)$17,293 

Three Months Ended March 31,
20222021
(dollars in thousands)
Incurred and paid claims
Insurance (net of Outward Reinsurance)$1,067 $744 
Inward Reinsurance3,011 3,904 
Total$4,078 $4,648 
Change in claims outstanding and claims IBNR
Insurance (net of Outward Reinsurance)$54 $(136)
Inward Reinsurance(589)(559)
Total$(535)$(695)
Cowen Insurance Co and Hollenfels utilizesCowen Re utilize several methods to determine itstheir claims IBNR. Cowen Insurance Co and HollenfelsCowen Re generally employ an estimation methodology whereby historical average claims ratios over a period of up to 10 years are utilized, based on availability of data. In cases where current claims development contradicts historical results, Cowen
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Insurance Co and HollenfelsCowen Re employ a method to average claims ratios derived through different actuarial calculation methods. If an event occurs that may give rise to significant future claims in excess of the amount calculated using the above-mentioned
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methodologies, the impact of such an event is calculatedcalculated using existing claims data and actuarial estimation methods to adjust Cowen Insurance Co's and Hollenfels'sCowen Re's IBNR provision. During the three months ended March 31, 2021,2022, claims liability and claim adjustment expenses were calculated using the above-mentioned methods consistent with prior years.
WhilstWhile Cowen Insurance Co and HollenfelsCowen Re typically settles itssettle their premiums and claim payments on a quarterly basis, the frequency of claims in the underlying policies is impractical for Cowen Insurance Co and HollenfelsCowen Re to obtain. Certain contracts Cowen Insurance Co and Hollenfels has written areCowen Re write contracts on both a quota-share basis whileproportional and non-proportional basis.The contracts contain inspection rights to allow the rest ofcompanies to inspect the policiespolicy documents that provide aggregate loss protection, rendering the collection of informationsource for allthe underlying contractsdata provided by the cedant. This negates the need for them to collect and hold the documents themselves which would be impracticable. Cowen Insurance Co and HollenfelsCowen Re did not discount any of its reserves and did not cede any portion of its exposures during the three months ended March 31, 20212022 and 2020.2021.
From time to time, Cowen Insurance Co and HollenfelsCowen Re may enter into insurance and reinsurance agreements that require it to post collateral of cash or U.S. government bonds to cover certain exposures as defined in the respective insurance and reinsurance agreements. As of March 31, 2021, Hollenfels2022, Cowen Re had pledged $120.5$61.4 million of collateral towards such reinsurance obligations, of which $49.4 million was in cash and $12.0 million was in U.S. government bonds. As of March 31, 2021, total collateral pledged was $120.5 million, of which $106.8 million was cash and $13.7 million was U.S. government bonds. These arebonds. The collateral pledged as of March 31, 2022 was $1.4 million higher than the same amounts that had been pledged at December 31, 2020. Hollenfels2021. This is due to cash movements required to maintain contracted minimum balances with cedants. Cowen Re expects $101.2$40.5 million of the cash collateral pledged to be released on September 30, 2023. The remaining cash collateral of $5.6$20.9 million and all of the U.S. government bonds areis expected to be released periodically between June 30, 2021March 31, 2022 and March 31, 2024 in accordance with the terms of the underlying insurance and reinsurance agreements. As of December 31, 2021, Cowen Insurance Co had no pledged collateral.
15.19. Share-Based Payments, Deferred Compensation and Employee Ownership Plans
The Company has issued share-based compensation under the 2010 and 2020 Equity and Incentive Plan (the "Equity Plans"). The Equity Plans permit the grant of options, restricted shares, restricted stock units, and other equity-based awards to the Company's employees and directors. Stock options granted generally vest over two to five-yearfive-year periods and expire seven years from the date of grant. Restricted shares and restricted share units issued, both of which are eligible to accrue dividend equivalents, may be immediately vested or may generally vest over a two-to five-yearfive-year period. Awards are subject to the risk of forfeiture, inclusive of accrued dividend equivalents. As of March 31, 2021,2022, there were 0.80.6 million shares available for future issuance under only the 2020 Equity Plans.Incentive Plan.
Under the Equity Plans, the Company awarded $34.1$49.1 million of deferred cash awards to its employees during the three months ended March 31, 2021.2022. These awards vest over a four-yearfour-year period and accrue interest at 0.70% per year. As of March 31, 2021,2022, the Company had unrecognized compensation expense related to the Equity Plans' deferred cash awards of $90.5$89.8 million.
The Company measures compensation cost for equity classified share-based awards according toon grant date and amortizes the equity method. In accordance with the expense recognition provisions of those standards, the Company amortizes unearned compensation associated with share-basedsuch awards on a straight-line basis over the vesting period of the option or award, net of estimated forfeitures. In relation to awards under the Equity Plan, the Company recognized compensation expense of $28.2$21.6 million and $8.3$28.2 million for the three months ended March 31, 20212022 and 2020,2021, respectively. The income tax effect recognized for the Equity Plans was a benefit of $10.8$7.0 million and $1.8$10.8 million for the three months ended March 31, 2022 and 2021, and 2020, respectively.
Restricted Stock Units Granted to Employees
Restricted shares and restricted stock units are referred to collectively as restricted stock. The following table summarizes the Company's restricted share and restricted stock unit activity for the three months ended March 31, 20212022 and 2020:
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value		Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value
Beginning balance outstanding5,450,191 $17.56 5,364,486 $16.67 
Granted1,593,941 34.85 2,140,932 17.39 
Vested(291,062)16.11 (640,084)14.63 
Canceled0 0 (87,348)14.80 
Forfeited(8,134)20.22 (30,562)15.86 
Ending balance outstanding6,744,936 $21.71 6,747,424 $17.12 

2021:
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value		Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value
Beginning balance outstanding4,595,342 $24.33 5,450,191 $17.56 
Granted1,919,504 31.98 1,593,941 34.85 
Vested(224,073)19.32 (291,062)16.11 
Canceled— — — — 
Forfeited(16,526)20.51 (8,134)20.22 
Ending balance outstanding6,274,247 $26.86 6,744,936 $21.71 
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Included in the restricted share and restricted stock unit activity are performance-linked restricted stock units of 1,603,6301,974,217 which were awarded infrom March 2016 April 2019, July 2020 and February 2021.through March 2022. Certain of the awards granted have the ability to be cash settled when the attained award exceeds a certain percentage of granted amount. The cash portion of the award has been bifurcated from the equity component and recorded as a compensation payable in the accompanying condensed consolidated statement of financial condition. Of the awards granted, 379,319712,652 have vested and 320,681 have been canceled, as they did not meet the performance criteria, through March 31, 2021.2022. Included in vested sharesunits are 233,333 sharesunits that had an attainable share value of 420,000, due to reaching certain performance goals, and were delivered in March 2021. Of this attainable share value 350,000 shares were settled in the issuance of restrictedthe Company's Class A common stock units and were delivered in March 2021 with the remaining 70,000 shares being settled in cash at the volume weighted average price on settlement date. Also included in vested units are 333,333 units that had an attainable share value of 666,666, due to reaching certain performance goals. Of this attainable value 528,800 shares were settled in the Company's Class A common stock and were delivered in March 2022 with the remaining 137,866 shares being settled in cash at the volume weighted average price of the Company's Class A common stock on settlement date. The remaining awards, included in the outstanding balance as of March 31, 2021,2022, vest betweenon December 20212022, December 2023 and December 20232024 and will be earned only to the extent that the Company attains specified market conditions relating to its volume-weighted average share price and total shareholder return in relation to certain benchmark indices and performance goals relating to aggregate net income and average return on shareholder equity. The actual number of RSUsattained shares ultimately earned could vary from 0,zero, if performance goals are not met, to as much as 200%240% of the targeted award. Each RSU is equal to the one share of the Company's Class A common stock. Compensation expense is recognized to the extent that it is probable that the Company will attain the performance goals.
The fair value of restricted stock (excluding certain performance-linked units with market conditions which are valued using the Monte Carlo valuation model) is determined based on the number of shares granted and the quoted price of the Company's common stock on the date of grant.
As of March 31, 2021,2022, there was $118.1$116.0 million of unrecognized compensation expense related to the Company's grant of nonvested restricted shares and restricted stock units to employees. Unrecognized compensation expense related to nonvested restricted shares and restricted stock units granted to employees is expected to be recognized over a weighted-average period of 2.132.14 years.
Restricted Shares and Restricted Stock Units Granted to Non-Employee Board Members
There were 0no restricted stock units awarded or delivered to non-employee board members during the three months ended March 31, 20212022 and 2020.2021. The Company delivered no units to non-employee board members during the three months ended March 31, 2022 and 2021. As of March 31, 20212022 and December 31, 2020,2021, there were 246,333 and 259,536 restricted stock units outstanding for non-employee board members.members, respectively.
Other Share Based Payments and Awards
In certain circumstances, the Company grants carried interest in consolidated managing member/general partner subsidiaries to third parties through the grant of equity awards in exchange for professional, advisory and other services. The equity awards are recorded within additional paid in capital in the accompanying condensed consolidated statements of financial condition and professional, advisory and other fees expense in the accompanying condensed consolidated statements of operations based on the fair value of the award granted and expensed over the terms of the award. In addition, the equity awards provide the third parties profit points aligned to the allocated carried interest distributions. Upon vesting of the awards, the third parties' allocation of carried interest is determined by applying an equity ownership model. Accordingly, the Company accrues carried interest allocations based on the fair value of the underlying investments assuming hypothetical liquidation at book value upon vesting as nonredeemable non-controlling interest.
On March 1, 2022, Cowen Digital Holdings LLC (“CDIG”) authorized 2,000,000 Class B Units, of which 1,487,500 Class B Units were issued to an affiliate, for which a subsidiary of the Company is the Managing Member, on behalf of the Company’s employees as incentive awards (the "Digital Awards") under the 2022 Equity Unit Incentive Plan. The Class B Units will, upon vesting, represent a 20% ownership of CDIG, a consolidated subsidiary of the Company upon vesting. Once the vesting conditions of the Digital Awards have been met, such awards will be presented as nonredeemable non-controlling interest in the accompanying condensed consolidated statements of financial condition. Half of the Digital Awards vest over a period of time and are tied to service (time based) and the other half vest when a qualifying event as stipulated in the Digital Award documents occurs (performance based). Once vested, Class B units will not be entitled to distributions unless and until a profit distribution hurdle has been met. The Company recognized compensation expense of $0.3 million related to the time based Digital Awards for the three months ended March 31, 2022. At March 31, 2022, there was $1.3 million of unrecognized compensation expense related to the time based Digital Awards which will be recognized over their five year vesting period. The fair value of time based Digital Awards is determined based on the fair market value of CDIG and its consolidated subsidiaries. The fair market value of CDIG and its consolidated subsidiaries is calculated utilizing recent transactions, discounted cash flows, and market multiples. The Digital Awards are then using a standard Black Scholes options pricing model. The primary input in determining the fair market value as of March 1, 2022 was recent/pending transactions in CDIG’s underlying investments. The expense related
16.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
to the performance based component of the Digital Awards will be recognized when the qualifying event is considered to be probable. The income tax effect recognized for the Digital Awards was a benefit of $0.1 million for the three months ended March 31, 2022.
20. Income Taxes
The taxable results of the Company’s U.S. operations are included in the consolidated income tax returns of Cowen, Inc. as well as stand-alone state and local tax returns. The Company has subsidiaries that are resident in foreign countries where tax filings are submitted on a stand‑alonestand-alone basis. These subsidiaries are subject to tax in their respective countries and the Company is responsible for and, thus, reports all taxes incurred by these subsidiaries. The countries where the Company owns subsidiaries that file tax returns are United Kingdom, Luxembourg, Malta, Gibraltar, Germany, Switzerland, Israel, South Africa, Canada and Hong Kong.
The Company calculates its U.S. tax provision using the estimated annual effective tax rate methodology. The tax expense or benefit caused by an unusual or infrequent item is recorded in the quarter in which it occurs. To the extent that information is not available for the Company to fully determine the full year estimated impact of an item of income or tax adjustment, the Company calculates the tax impact of such item discretely. Accordingly, the Company uses the discrete methodology to calculate the income tax provision for its foreign subsidiaries and the tax impact of income attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds. Based on these methodologies, the Company’s effective income tax rate was 17.74% and 26.36% for the three months endedMarch 31, 2021.2022 and 2021, respectively. During the three months ended March 31, 2021, 2022, the itemsitem whose tax impact werewas recorded discretely related primarily to foreign taxes, as well as stock compensation. The Company's effective tax rate was1.60% for the three months ended March 31, 2020.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
For the three months ended March 31, 2021,2022, the effective tax rate differs from the statutory rate of 21% primarily due to income attributable to non-controlling interests in consolidated subsidiaries and investment funds, global intangible low-taxes income, stock compensation,foreign taxes, as well as other nondeductible expenses.expenses. For thethe three months ended March 31, 2020,2021, the effective tax rate differs from the statutory rate of 21% primarily due to lossesincome attributable to non-controllingnoncontrolling interests in consolidated subsidiaries and investment funds, foreign taxes,global intangible low-taxes income, stock compensation, as well as other nondeductible expenses.
As a result of the enactment of the American Rescue Plan Act signed on March 11, 2021, theThe Company is required to assess thehas no uncertain tax impact of the Act in the quarter the law was enacted. Based on management analysis, there was no material impact on the Company's financial statementsposition liability as of March 31, 2021.
The Company maintained an uncertain tax position liability of $0.3 million as of March 31, 20212022 and December 31, 2020 related to New York State tax matters.2021.
The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating or capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that, in management's view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future.future. As of March 31, 2021,2022, the Company recorded a valuation allowance against deferred tax assets related to its foreign tax credits and foreign net operating losses.
The Company is subject to examination by the United States Internal Revenue Service as well as state, local and foreign tax authorities in jurisdictions where the Company has significant business operations, such as New York, United Kingdom, Luxembourg, Malta, Germany and Switzerland. Currently, the Company is under audit by New York State for the 2013 to 2017 tax years. Management is not expecting a material tax liability from these audits.Germany.
The Company continues to permanently reinvest the capital and accumulated earnings of its subsidiaries in the United Kingdom, Malta, Germany, Switzerland, Israel, Canada, South Africa and Hong Kong.
17.21. Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to the Company's common stockholders by the weighted average number of shares of Class A common stock outstanding for the period. As of March 31, 2022, there were 27,614,903 shares of Class A common stock outstanding. As of March 31, 2022, the Company has included 246,803 fully vested, unissued restricted stock units and restricted shares in its calculation of basic earnings per share. As of December 31, 2021, there were 27,778,964 shares of Class A common stock outstanding. As of December 31, 2021, the Company has included 972,732 fully vested, unissued restricted stock units and restricted shares in its calculation of basic earnings per share.
Diluted earnings per common share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive items. The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested restricted shares and restricted stock units. In calculating the number of dilutive shares outstanding, the shares of common stock underlying unvested restricted shares and restricted stock units are assumed to have been delivered, for the entire period being presented. The number of performance-linked unvested restricted stock units that are included in the calculation are at the amount that could be earned using current payout rates. The assumed proceeds from the assumed vesting, delivery and exercising were calculated as the amount of compensation cost attributed to future services and not yet recognized.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The Company previously concluded that it had the intent and ability to settle the December 2022 Convertible Notes in cash and, as a result, the convertible notes did not have an impact on the Company's diluted earnings per share calculation. On March 24, 2021, the Company issued a redemption notice announcing that the Company would redeem all of the December 2022 Convertible Notes (See Note 12). On June 24, 2021, the Company cash settled the December 2022 Convertible Notes up to the principal amount of the December 2022 Convertible Notes and share settled through the delivery of shares of the Company’s Class A common stock for the remainder of the conversion obligation in excess of the principal amount. The shares of the Company’s Class A common stock issued are within basic earnings per share subsequent to June 24, 2021. Prior to that date, the Company has applied the if-converted method to the portion of the December 2022 notes above the principal amount that settled in shares upon a conversion in dilutive earnings per share.
On December 31, 2021, the Company irrevocably elected to cash settle $1,000.00 of its obligation in respect of each conversion of any share of the Series A Convertible Preferred Stock. Prior to this date, the Company could elect to settle the Series A Convertible Preferred Stock in shares, cash, or a combination of both. Effective January 1, 2022, Company adopted ASC 470-20, which requires the Company to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. With the adoption of this guidance, the Company is required to include the portion of the Series A Convertible Preferred Stock that can be settled in Class A common stock (the amount in excess of $1,000.00 per share of the Series A Convertible Preferred Stock) in the diluted earnings per share calculation. As a result, the Series A Convertible Preferred Stock impacts the Company’s diluted earnings per share calculation for the March 31, 2022 (See Note 2).
The computation of earnings per share is as follows:
 Three Months Ended March 31,
 20222021
 (dollars and share data in thousands, except per share data)
Net income (loss)$55,147 $152,066 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds20,131 4,562 
Net income (loss) attributable to Cowen Inc.35,016 147,504 
Preferred stock dividends1,698 1,698 
Net income (loss) attributable to Cowen Inc. common stockholders for basic earnings per share33,318 145,806 
Change in fair value of contingently issuable shares41 — 
Net income (loss) attributable to Cowen Inc. common stockholders for diluted earnings per share$33,359 $145,806 
Shares for basic and diluted calculations: 
Weighted average shares used in basic computation28,386 27,359 
Performance based restricted stock374 445 
Contingently issuable common stock in connection with acquisitions82 — 
December 2022 Convertible Notes— 2,659 
Series A Convertible Preferred Stock708 — 
Restricted stock2,222 3,102 
Weighted average shares used in diluted computation31,772 33,565 
Earnings (loss) per share: 
Basic$1.17 $5.33 
Diluted$1.05 $4.34 
22. Commitments and Contingencies
Operating Lease Obligations
The Company has entered into leases for real estate and other facilities. These leases contain rent escalation clauses and options to extend the applicable lease term. The Company does not include renewal options in the lease term for calculating the Company's lease liability as the renewal options allow the Company operational flexibility and the Company is not reasonably certain to exercise these renewal options at this time. The Company records the expenses related to occupancy and equipment on
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
a straight-line basis over the lease term and these expenses are included in occupancy and equipment expense and client services and business development expense in the accompanying condensed consolidated statements of operations.
For the three months ended March 31, 20212022 and 2020,2021, quantitative information regarding the Company's operating lease obligations reflected in the accompanying condensed consolidated statements of operations were as follows:
Three Months Ended March 31,
20212020
(dollars in thousands)
Lease cost
Operating lease cost$5,770 $5,685 
Short-term lease cost33 146 
Variable lease cost906 788 
Sublease income(160)(216)
Total lease costs$6,549 $6,403 
Three Months Ended March 31,
20222021
(dollars in thousands)
Lease cost
Operating lease cost$6,614 $5,770 
Short-term lease cost141 33 
Variable lease cost837 906 
Sublease income(155)(160)
Total lease costs$7,437 $6,549 

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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The following table summarizes the supplemental cash flow information and certain other information related to operating leases for the three months ended March 31, 20212022 and 2020:2021:
Three Months Ended March 31,
20222021
(dollars in thousands)
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$9,814 $6,748 
Weighted average remaining lease term - operating leases (in years)5.544.56
Weighted average discount rate - operating leases4.13 %4.10 %
Three Months Ended March 31,
20212020
(dollars in thousands)
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$6,748 $8,578 
Weighted average remaining lease term - operating leases (in years)4.565.11
Weighted average discount rate - operating leases4.10 %4.14 %
As of March 31, 2021,2022, maturities of the outstanding operating lease liabilities for the Company were as follows:
Equipment Leases (operating)Real Estate and Other Facility Rental (a) (b)
 (dollars in thousands)
2021$207 $19,065 
2022150 22,612 
202311 19,123 
20240 15,883 
20250 5,446 
Thereafter0 7,862 
Total operating leases368 89,991 
Less discount21 8,927 
Less short-term leases0 11 
Total lease liability$347 $81,053 
Equipment Leases (operating)Real Estate and Other Facility Rental (a) (b)
 (dollars in thousands)
2022$366 $16,813 
2023381 25,476 
2024370 22,965 
2025370 12,312 
2026278 8,881 
Thereafter— 24,969 
Total operating leases1,765 111,416 
Less discount105 13,218 
Less short-term leases— 58 
Total lease liability$1,660 $98,140 
(a)The Company has entered into various agreements to sublease certain of its premises.
(b)During the three months ended March 31, 2021,2022, the Company recognized an increase of $5.3$8.3 million of operating right-of-use assets and leases liabilities related to for facility leases.
See Note 18 for further information on the finance lease minimum payments.
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Other CommitmentsCash Dividends to Common Stockholders
AsDuring the first quarter of 2020, the Company began the declaration of a quarterly cash dividend payable on its common stock. During March 2021, the Company's Board of Directors declared a cash dividend of $0.08 per share of Class A common stock. During June 2021, September 2021 and December 2021, the Company's Board of Directors declared a cash dividend of $0.10 per share of Class A common stock. During March 2022, the Company's Board of Directors declared a cash dividend of $0.12 per share of Class A common stock. Dividends are payable on all outstanding shares of Class A common stock and on granted but unvested shares of Class A common stock under the Equity Plans on the date of record (See Note 19). During the three months ended March 31, 2022, the Company paid $3.9 million of cash dividends to its holders of Class A common stock.
Treasury Stock
Treasury stock of $583.5 million as of March 31, 2022, compared to $547.1 million as of December 31, 2021, futureresulted from $12.3 million acquired through repurchases of shares to cover employee minimum annual service payments fortax withholding obligations related to stock compensation vesting events under the Equity Plans or other similar transactions and $24.1 million purchased in connection with a share repurchase program.
The following represents the activity relating to the treasury stock held by the Company were as follows:
Service Payments
 (dollars in thousands)
2021$17,854 
202216,739 
20238,934 
20245,254 
20253,366 
Thereafter10,594 
Total service payment commitments$62,741 
during the three months ended March 31, 2022:
Treasury Stock SharesCost
(dollars in thousands)		Average Cost per Share
Balance outstanding at December 31, 202128,047,929 $547,112 $19.51 
Shares purchased for minimum tax withholding under the 2010 and 2020 Equity Plans or other similar transactions374,149 12,283 32.83 
Purchase of treasury stock798,302 24,140 30.24 
Balance outstanding at March 31, 202229,220,380 $583,535 $19.97 








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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
15. Non-Controlling Interests in Consolidated Subsidiaries and Investment Funds
Redeemable and nonredeemable non-controlling interests in consolidated subsidiaries and investment funds and the related net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds are comprised as follows:
 As of March 31, 2022As of March 31, 2021
 (dollars in thousands)
Nonredeemable non-controlling interests in consolidated subsidiaries and investment funds
Operating companies
    Beginning balance126,105 83,818 
    Capital contributions1,610 3,498 
    Capital distributions(5,901)(2,348)
    Income (loss) attributable to non-controlling interests20,858 7,661 
    Ending balance142,672 92,629 
Consolidated Funds
    Beginning balance33,630 115,806 
    Capital contributions— 19,017 
    Capital distributions— (16,425)
    Deconsolidation of entity— (74,813)
    Income (loss) attributable to non-controlling interests(727)(3,099)
    Ending balance32,903 40,486 
Total Nonredeemable non-controlling interests in consolidated subsidiaries and investment funds$175,575 $133,115 
16. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income includes the after tax change in Other revenues in the accompanying condensed consolidated statement of operations. During the periods presented, the Company did not have material reclassifications out of other comprehensive income.
Three Months Ended March 31,
20222021
(dollars in thousands)
Beginning balance$(2)$(7)
Foreign currency translation2 4 
Ending balance$— $(3)

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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
17. Revenue from Contracts with Customers
For the three months ended March 31, 2022 and 2021, the following tables presents revenues from contracts with customers disaggregated by fee type and segment.
Three Months Ended March 31,
20222021
(dollars in thousands)
Revenue from contracts with customersOperating Company
Investment banking
     Underwriting fees$17,583 $154,304 
     Strategic/financial advisory fees58,789 73,555 
     Placement and sales agent fees22,584 72,544 
     Expense reimbursements from clients2,586 4,431 
Total investment banking revenue101,542 304,834 
Brokerage
     Commissions152,483 159,681 
     Trade conversion revenue7,410 6,241 
     Equity research fees6,203 4,593 
Total brokerage revenue from customers166,096 170,515 
Management fees16,555 25,499 
Incentive income633 2,258 
Total revenue from contracts with customers - Op Co$284,826 $503,106 
Asset Company
Management fees214 243 
Incentive income— — 
Total revenue from contracts with customers - Asset Co214 243 
Total revenue from contracts with customers$285,040 $503,349 

18. Insurance and reinsurance
Cowen Insurance Co is a Malta based insurance company that reinsures a significant proportion of its portfolio (“Outward Reinsurance”). The Company's wholly owned Luxembourg subsidiary, Cowen Reinsurance S.A. (formerly Hollenfels Re S.A.) (“Cowen Re”) provides reinsurance to third party insurance and reinsurance companies (“Inward Reinsurance”). Cowen Insurance Co’s and Cowen Re's share of claims incurred and paid during the periods below, as well as the change in claims outstanding and claims incurred but not reported ("IBNR") during these periods, net of reinsurance, were as follows:
Three Months Ended March 31,
20222021
(dollars in thousands)
Incurred and paid claims
Insurance (net of Outward Reinsurance)$1,067 $744 
Inward Reinsurance3,011 3,904 
Total$4,078 $4,648 
Change in claims outstanding and claims IBNR
Insurance (net of Outward Reinsurance)$54 $(136)
Inward Reinsurance(589)(559)
Total$(535)$(695)
Cowen Insurance Co and Cowen Re utilize several methods to determine their claims IBNR. Cowen Insurance Co and Cowen Re generally employ an estimation methodology whereby historical average claims ratios over a period of up to 10 years are utilized, based on availability of data. In cases where current claims development contradicts historical results, Cowen Insurance Co and Cowen Re employ a method to average claims ratios derived through different actuarial calculation methods. If an event occurs that may give rise to significant future claims in excess of the amount calculated using the above-mentioned
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
methodologies, the impact of such an event is calculated using existing claims data and actuarial estimation methods to adjust Cowen Insurance Co's and Cowen Re's IBNR provision. During the three months ended March 31, 2022, claims liability and claim adjustment expenses were calculated using the above-mentioned methods consistent with prior years.
While Cowen Insurance Co and Cowen Re typically settle their premiums and claim payments on a quarterly basis, the frequency of claims in the underlying policies is impractical for Cowen Insurance Co and Cowen Re to obtain. Cowen Insurance Co and Cowen Re write contracts on both a proportional and non-proportional basis.The contracts contain inspection rights to allow the companies to inspect the policy documents that provide the source for the underlying data provided by the cedant. This negates the need for them to collect and hold the documents themselves which would be impracticable. Cowen Insurance Co and Cowen Re did not discount any of its reserves and did not cede any portion of its exposures during the three months ended March 31, 2022 and 2021.
From time to time, Cowen Insurance Co and Cowen Re may enter into insurance and reinsurance agreements that require it to post collateral of cash or U.S. government bonds to cover certain exposures as defined in the respective insurance and reinsurance agreements. As of March 31, 2022, Cowen Re had pledged $61.4 million of collateral towards such reinsurance obligations, of which $49.4 million was in cash and $12.0 million was in U.S. government bonds. As of March 31, 2021, total collateral pledged was $120.5 million, of which $106.8 million was cash and $13.7 million was U.S. government bonds. The collateral pledged as of March 31, 2022 was $1.4 million higher than the amounts pledged at December 31, 2021. This is due to cash movements required to maintain contracted minimum balances with cedants. Cowen Re expects $40.5 million of the cash collateral pledged to be released on September 30, 2023. The remaining collateral of $20.9 million is expected to be released periodically between March 31, 2022 and March 31, 2024 in accordance with the terms of the underlying insurance and reinsurance agreements. As of December 31, 2021, Cowen Insurance Co had no pledged collateral.
19. Share-Based Payments, Deferred Compensation and Employee Ownership Plans
The Company has issued share-based compensation under the 2010 and 2020 Equity Incentive Plan (the "Equity Plans"). The Equity Plans permit the grant of options, restricted shares, restricted stock units, and other equity-based awards to the Company's employees and directors. Stock options granted generally vest over two to five-year periods and expire seven years from the date of grant. Restricted shares and restricted share units issued, both of which are eligible to accrue dividend equivalents, may be immediately vested or may generally vest over a two-to five-year period. Awards are subject to the risk of forfeiture, inclusive of accrued dividend equivalents. As of March 31, 2022, there were 0.6 million shares available for future issuance under only the 2020 Equity Incentive Plan.
Under the Equity Plans, the Company awarded $49.1 million of deferred cash awards to its employees during the three months ended March 31, 2022. These awards vest over a four-year period and accrue interest at 0.70% per year. As of March 31, 2022, the Company had unrecognized compensation expense related to the Equity Plans' deferred cash awards of $89.8 million.
The Company measures compensation cost for equity classified share-based awards on grant date and amortizes the unearned compensation associated with such awards on a straight-line basis over the vesting period of the option or award, net of estimated forfeitures. In relation to awards under the Equity Plan, the Company recognized compensation expense of $21.6 million and $28.2 million for the three months ended March 31, 2022 and 2021, respectively. The income tax effect recognized for the Equity Plans was a benefit of $7.0 million and $10.8 million for the three months ended March 31, 2022 and 2021, respectively.
Restricted Stock Units Granted to Employees
Restricted shares and restricted stock units are referred to collectively as restricted stock. The following table summarizes the Company's restricted share and restricted stock unit activity for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value		Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value
Beginning balance outstanding4,595,342 $24.33 5,450,191 $17.56 
Granted1,919,504 31.98 1,593,941 34.85 
Vested(224,073)19.32 (291,062)16.11 
Canceled— — — — 
Forfeited(16,526)20.51 (8,134)20.22 
Ending balance outstanding6,274,247 $26.86 6,744,936 $21.71 
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unfunded Commitments
Included in the restricted share and restricted stock unit activity are performance-linked restricted stock units of 1,974,217 which were awarded from March 2016 through March 2022. Certain of the awards granted have the ability to be cash settled when the attained award exceeds a certain percentage of granted amount. The following table summarizes unfunded commitmentscash portion of the award has been bifurcated from the equity component and recorded as a compensation payable in the accompanying condensed consolidated statement of financial condition. Of the awards granted, 712,652 have vested and 320,681 have been canceled, as they did not meet the performance criteria, through March 31, 2022. Included in vested units are 233,333 units that had an attainable share value of 420,000, and were delivered in March 2021. Of this attainable share value 350,000 shares were settled in the issuance of the Company's Class A common stock and were delivered in March 2021 with the remaining 70,000 shares being settled in cash at the volume weighted average price on settlement date. Also included in vested units are 333,333 units that had an attainable share value of 666,666, due to reaching certain performance goals. Of this attainable value 528,800 shares were settled in the Company's Class A common stock and were delivered in March 2022 with the remaining 137,866 shares being settled in cash at the volume weighted average price of the Company's Class A common stock on settlement date. The remaining awards, included in the outstanding balance as of March 31, 2021:
EntityUnfunded CommitmentsCommitment Term
(dollars in thousands)
HealthCare Royalty Partners funds (a)$7,333 3.80 years
Eclipse Ventures Fund I, L.P.$28 3.80 years
Eclipse Fund II, L.P.$95 4.80 years
Eclipse Continuity Fund I, L.P.$41 5.80 years
Cowen Healthcare Investments III LP$4,126 5.80 years
Cowen Sustainable Investments I LP$15,709 8.80 years
(a)2022, vest on December 2022, December 2023 and December 2024 and will be earned only to the extent that the Company attains specified market conditions relating to its volume-weighted average share price and total shareholder return in relation to certain benchmark indices and performance goals relating to aggregate net income and average return on shareholder equity. The Company is a limited partneractual number of attained shares ultimately earned could vary from zero, if performance goals are not met, to as much as 240% of the HealthCare Royalty Partners funds (which are managed by Healthcare Royalty Management) andtargeted award. Compensation expense is a member of HealthCare Royalty Partners General Partners. The Company will make its pro-rata investment in the HealthCare Royalty Partners funds along with the other limited partners.
Litigation
In the ordinary course of business, the Company and its affiliates, subsidiaries and current and former officers, directors and employees (the "Company and Related Parties") are named as defendants in, or as parties to, various legal actions and proceedings. Certain of these actions and proceedings assert claims or seek relief in connection with alleged violations of securities, banking, anti-fraud, anti-money laundering, employment and other statutory and common laws. Certain of these actual or threatened legal actions and proceedings include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief.
In the ordinary course of business, the Company and Related Parties are also subject to governmental and regulatory examinations, information gathering requests (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Certain of the Company's affiliates and subsidiaries are registered broker-dealers, futures commission merchants, investment advisers or other regulated entities and, in those capacities, are subject to regulation by various U.S., state and foreign securities, commodity futures and other regulators. In connection with formal and informal inquiries by these regulators, the Company receives requests and orders seeking documents and other information in connection with various aspects of the Company's regulated activities.
Duerecognized to the global scope of the Company's operations, and its presence in countries around the world, the Company and Related Parties may be subject to litigation, governmental and regulatory examinations, information gathering requests, investigations and proceedings (both formal and informal), in multiple jurisdictions with legal and regulatory regimes that may differ substantially, and present substantially different risks, from those to which the Company and Related Parties are subject in the United States.
The Company seeks to resolve all litigation and regulatory matters in the manner management believes is in the best interests of the Company and its shareholders, and contests liability, allegations of wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter.
In accordance with US GAAP, the Company establishes reserves for contingencies when the Company believesextent that it is probable that a loss has been incurredthe Company will attain the performance goals. The fair value of restricted stock is determined based on the number of shares granted and the amountquoted price of loss canthe Company's common stock on the date of grant.
As of March 31, 2022, there was $116.0 million of unrecognized compensation expense related to the Company's grant of nonvested restricted shares and restricted stock units to employees. Unrecognized compensation expense related to nonvested restricted shares and restricted stock units granted to employees is expected to be reasonably estimated.recognized over a weighted-average period of 2.14 years.
Restricted Shares and Restricted Stock Units Granted to Non-Employee Board Members
There were no restricted stock units awarded to non-employee board members during the three months ended March 31, 2022 and 2021. The Company disclosesdelivered no units to non-employee board members during the three months ended March 31, 2022 and 2021. As of March 31, 2022 and 2021, there were 246,333 and 259,536 restricted stock units outstanding for non-employee board members, respectively.
Other Share Based Payments and Awards
In certain circumstances, the Company grants carried interest in consolidated managing member/general partner subsidiaries to third parties through the grant of equity awards in exchange for professional, advisory and other services. The equity awards are recorded within additional paid in capital in the accompanying condensed consolidated statements of financial condition and professional, advisory and other fees expense in the accompanying condensed consolidated statements of operations based on the fair value of the award granted and expensed over the terms of the award. In addition, the equity awards provide the third parties profit points aligned to the allocated carried interest distributions. Upon vesting of the awards, the third parties' allocation of carried interest is determined by applying an equity ownership model. Accordingly, the Company accrues carried interest allocations based on the fair value of the underlying investments assuming hypothetical liquidation at book value upon vesting as nonredeemable non-controlling interest.
On March 1, 2022, Cowen Digital Holdings LLC (“CDIG”) authorized 2,000,000 Class B Units, of which 1,487,500 Class B Units were issued to an affiliate, for which a contingency if theresubsidiary of the Company is at leastthe Managing Member, on behalf of the Company’s employees as incentive awards (the "Digital Awards") under the 2022 Equity Unit Incentive Plan. The Class B Units will, upon vesting, represent a reasonable possibility that20% ownership of CDIG, a loss mayconsolidated subsidiary of the Company upon vesting. Once the vesting conditions of the Digital Awards have been incurred and there is no reserve for the loss because the conditions above are not met. The Company's disclosure includes an estimate of the reasonably possible loss or range of loss for those matters, for which an estimate canmet, such awards will be made. Neither a reserve nor disclosure is required for losses that are deemed remote.
The Company appropriately reserves for certain matters where, in the opinion of management, the likelihood of liability is probable and the extent of such liability is reasonably estimable. Such amounts are included within accounts payable, accrued expenses and other liabilitiespresented as nonredeemable non-controlling interest in the accompanying condensed consolidated statements of financial condition. Estimates, byHalf of the Digital Awards vest over a period of time and are tied to service (time based) and the other half vest when a qualifying event as stipulated in the Digital Award documents occurs (performance based). Once vested, Class B units will not be entitled to distributions unless and until a profit distribution hurdle has been met. The Company recognized compensation expense of $0.3 million related to the time based Digital Awards for the three months ended March 31, 2022. At March 31, 2022, there was $1.3 million of unrecognized compensation expense related to the time based Digital Awards which will be recognized over their nature, arefive year vesting period. The fair value of time based Digital Awards is determined based on judgment and currently available information and involve a varietythe fair market value of factors, including, but not limited to, the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, the Company's defensesCDIG and its experienceconsolidated subsidiaries. The fair market value of CDIG and its consolidated subsidiaries is calculated utilizing recent transactions, discounted cash flows, and market multiples. The Digital Awards are then using a standard Black Scholes options pricing model. The primary input in similar cases or proceedingsdetermining the fair market value as well as its assessment of matters, including settlements, involving other defendantsMarch 1, 2022 was recent/pending transactions in similar orCDIG’s underlying investments. The expense related cases or proceedings. The Company may increase or decrease its legal reserves in the future, on a matter-by-matter basis, to account for developments in such matters. The Company accrues legal fees as incurred.


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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
18. Convertible Debt and Notes Payable
Asto the performance based component of March 31, 2021 and December 31, 2020, the Company's outstanding debt was as follows:
 As of March 31, 2021As of December 31, 2020
 (dollars in thousands)
Convertible debt$81,682 $80,808 
Notes payable173,656 307,653 
Term loan291,303 0 
Other notes payable74,982 72,505 
Finance lease obligations2,578 2,909 
$624,201 $463,875 
Convertible Debt
December 2022 Convertible Notes
Digital Awards will be recognized when the qualifying event is considered to be probable. The Company, on December 14, 2017, issued $135.0 million aggregate principal amount of 3.00% convertible senior notes due December 2022 (the “December 2022 Convertible Notes”). The December 2022 Convertible Notes are due on December 15, 2022 unless earlier repurchased by the Company or converted by the holder in accordance with their terms prior to such date. The interest on the December 2022 Convertible Notes is payable semi-annually on December 15 and June 15 of each year. The December 2022 Convertible Notes are senior unsecured obligations of Cowen. The December 2022 Convertible Notes were issued with an initial conversion price of $17.375 per share of Cowen's Class A common stock.
On June 26, 2018, the Company received shareholder approvalincome tax effect recognized for the Company to settle the December 2022 Convertible Notes entirely in Class A common stock. Upon receiving shareholder approval, the Company reclassified the separately recognized conversion option fromDigital Awards was a derivative liability to equity. Pursuant to the indenture governing the December 2022 Convertible Notes, conversionsbenefit of the December 2022 Convertible Notes will be settled by the delivery and/or payment, as the case may be, of Cowen’s Class A Common Stock, cash, or a combination thereof, at the Company's election.
The Company recognized the embedded cash conversion option at issuance date fair value, which also represents the initial unamortized discount on the December 2022 Convertible Notes of $23.4$0.1 million and is shown net in convertible debt in the accompanying condensed consolidated statements of financial condition. Amortization on the discount, included within interest and dividends expense in the accompanying condensed consolidated statements of operations is $0.8 million and $1.1 million for the three months ended March 31, 20212022.
20. Income Taxes
The taxable results of the Company’s U.S. operations are included in the consolidated income tax returns of Cowen, Inc. as well as stand-alone state and 2020, respectively, based on an effective interest rate of 7.13%.local tax returns. The Company capitalizedhas subsidiaries that are resident in foreign countries where tax filings are submitted on a stand-alone basis. These subsidiaries are subject to tax in their respective countries and the debt issuance costsCompany is responsible for and, thus, reports all taxes incurred by these subsidiaries. The countries where the Company owns subsidiaries that file tax returns are United Kingdom, Luxembourg, Malta, Germany, Switzerland, Israel, South Africa, Canada and Hong Kong.
The Company calculates its U.S. tax provision using the estimated annual effective tax rate methodology. The tax expense or benefit caused by an unusual or infrequent item is recorded in the amountquarter in which it occurs. To the extent that information is not available for the Company to fully determine the full year estimated impact of $2.2 million, which is a direct deduction froman item of income or tax adjustment, the carrying valueCompany calculates the tax impact of such item discretely. Accordingly, the debtCompany uses the discrete methodology to calculate the tax impact of income attributable to redeemable non-controlling interests in consolidated subsidiaries and will be amortized overinvestment funds. Based on these methodologies, the life of the December 2022 Convertible Notes in interestCompany’s effective income tax rate was 17.74% and dividends expense in the accompanying condensed consolidated statements of operations. The Company recorded interest expense of $0.7 million and $1.0 million26.36% for the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, the item whose tax impact was recorded discretely related primarily to stock compensation.
For the three months ended March 31, 2022, the effective tax rate differs from the statutory rate of 21% primarily due to income attributable to non-controlling interests in consolidated subsidiaries and 2020, respectively.investment funds, global intangible low-taxes income, foreign taxes, as well as other nondeductible expenses. For the three months ended March 31, 2021, the effective tax rate differs from the statutory rate of 21% primarily due to income attributable to noncontrolling interests in consolidated subsidiaries and investment funds, global intangible low-taxes income, stock compensation, as well as other nondeductible expenses.
DuringThe Company has no uncertain tax position liability as of March 31, 2022 and December 2020,31, 2021.
The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating or capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that, in management's view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company repurchased and extinguished $46.9 million ofthat are actually expected to be realized, for tax purposes, in the outstanding principal amount of the December 2022 Convertible Notes for cash consideration of $70.5 million. In conjunction with the partial extinguishment of the December 2022 Convertible Notes, the Company accelerated the pro rata unamortized discount of $3.6 million and capitalized debt issuance costs of $0.4 million. The Company allocated $29.6 million of the cash consideration paid to the extinguishment of the equity component of the December 2022 Convertible Notes. The Company recognized $2.7 million of gain on debt extinguishment.foreseeable future. As of March 31, 2021, the outstanding principal amount of the December 2022, Convertible Notes was $88.1 million.
On March 24, 2021, the Company issuedrecorded a redemption notice announcing thatvaluation allowance against deferred tax assets related to its foreign tax credits and foreign net operating losses.
The Company is subject to examination by the United States Internal Revenue Service as well as state, local and foreign tax authorities in jurisdictions where the Company will redeem allhas significant business operations, such as New York, United Kingdom, Luxembourg, Malta, and Germany.
The Company continues to permanently reinvest the capital and accumulated earnings of its subsidiaries in the December 2022 Convertible Notes. The redemption dateUnited Kingdom, Malta, Germany, Switzerland, Israel, Canada, and Hong Kong.
21. Earnings Per Share
Basic earnings per share is June 24, 2021 ("Redemption Date"). The redemption price is 100.00% of the principal amount thereof plus accrued and unpaid interest on such principal amount, to, but not including the Redemption Date of the December 2022 Convertible Notes. As a result of the Company’s call for redemption of the December 2022 Convertible Notes, the December 2022 Convertible Notes are convertible, at the option of the holder at any time prior to June 22, 2021, the second business day priorcalculated by dividing net income attributable to the December 2022 Convertible Notes' Redemption Date. The settlement method forCompany's common stockholders by the December 2022 Convertible Notes surrendered for conversion will be cash settlement up to the principal amount of the December 2022 Convertible Notes surrendered for conversion and share settlement through the deliveryweighted average number of shares of the Company’s Class A common stock outstanding for the remainderperiod. As of the conversion obligation, if any, in excess of the principal amount. The conversion rate of the DecemberMarch 31, 2022, Convertible Notes on March 24, 2021 was 58.3324there were 27,614,903 shares of the Company’s Class A common stock outstanding. As of March 31, 2022, the Company has included 246,803 fully vested, unissued restricted stock units and restricted shares in its calculation of basic earnings per $1,000 principalshare. As of December 31, 2021, there were 27,778,964 shares of Class A common stock outstanding. As of December 31, 2021, the Company has included 972,732 fully vested, unissued restricted stock units and restricted shares in its calculation of basic earnings per share.
Diluted earnings per common share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive items. The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested restricted shares and restricted stock units. In calculating the number of dilutive shares outstanding, the shares of common stock underlying unvested restricted shares and restricted stock units are assumed to have been delivered, for the entire period being presented. The number of performance-linked unvested restricted stock units that are included in the calculation are at the amount that could be earned using current payout rates. The assumed proceeds from the assumed vesting, delivery and exercising were calculated as the amount of December 2022 Convertible Notes converted.(see Note 19)compensation cost attributed to future services and not yet recognized.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The Company previously concluded that it had the intent and ability to settle the December 2022 Convertible Notes Payable
May 2024 Notes
On May 7, 2019,in cash and, as a result, the Company completed its private placement of $53.0 million aggregate principal amount of 7.25% seniorconvertible notes due May 2024 (the "May 2024 Notes") with certain institutional investors. On September 30, 2019, the Company issueddid not have an additional $25.0 million of the same series of notes. The additional May 2024 Notes were purchased at a premium of $0.5 million, which is shown net in notes payable in the accompanying condensed consolidated statement of financial condition. To date the May 2024 Notes have maintained their initial private rating, and the interest rate has remained unchanged. Interestimpact on the May 2024 Notes is payable semi-annually in arrears on May 6 and November 6. The Company recorded interest expense of $1.4 million and $1.4 million for the three months ended March 31, 2021 and 2020, respectively. The Company capitalized debt issuance costs of approximately $1.5 million in May 2019 and $0.6 million in September 2019, which is a direct deduction from the carrying value of the debt and will be amortized over the life of the May 2024 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations.
June 2033 Notes
On June 11, 2018, the Company completed its public offering of $90.0 million of 7.75% senior notes due June 2033 (the "June 2033 Notes") and subsequently the underwriters exercised in full their option to purchase an additional $10.0 million principal amount of the June 2033 Notes. Interest on the June 2033 Notes is payable quarterly in arrears on March 15, June 15, September 15 and December 15. The Company recorded interest expense of $1.9 million and $1.9 million for the three months ended March 31, 2021 and 2020, respectively. The Company capitalized debt issuance costs of approximately $3.6 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the June 2033 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations.
December 2027 Notes
On December 8, 2017, the Company completed its public offering of $120.0 million of 7.35% senior notes due December 2027 (the "December 2027 Notes") and subsequently the underwriters exercised in full their option to purchase an additional $18.0 million principal amount of the December 2027 Notes. Interest on the December 2027 Notes is payable quarterly in arrears on March 15, June 15, September 15 and December 15. The Company recorded interest expense of $2.5 million for the three months ended March 31, 2021 and 2020, respectively. The Company capitalized debt issuance costs of approximately $5.0 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the December 2027 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations. The net proceeds of the offering, after deducting the underwriting discount and estimated offering expenses payable by the Company were used to redeem all of its 8.25% senior notes due October 2021 and for general corporate purposes.
Company's diluted earnings per share calculation. On March 24, 2021, the Company delivered payment of and dischargedissued a redemption notice announcing that the Company would redeem all $138.0 million outstanding aggregate principal of the December 20272022 Convertible Notes plus accrued and unpaid interest through(See Note 12). On June 24, 2021, the effective redemption date of April 23, 2021. In conjunction withCompany cash settled the extinguishmentDecember 2022 Convertible Notes up to the principal amount of the December 20272022 Convertible Notes ,and share settled through the delivery of shares of the Company’s Class A common stock for the remainder of the conversion obligation in excess of the principal amount. The shares of the Company’s Class A common stock issued are within basic earnings per share subsequent to June 24, 2021. Prior to that date, the Company acceleratedhas applied the pro-rata capitalized debt issuance costs. Duringif-converted method to the three months ended Marchportion of the December 2022 notes above the principal amount that settled in shares upon a conversion in dilutive earnings per share.
On December 31, 2021, the Company recognized $4.4 millionirrevocably elected to cash settle $1,000.00 of loss on debt extinguishment.
Term Loan
March 2028 Term Loan
On March 24, 2021,its obligation in respect of each conversion of any share of the Series A Convertible Preferred Stock. Prior to this date, the Company borrowed $300 millioncould elect to settle the Series A Convertible Preferred Stock in shares, cash, or a combination of first lien term loan due March 24, 2028 (the “March 2028 Term Loan”). The interest on the March 2028 Term Loan is payable at the option ofboth. Effective January 1, 2022, Company adopted ASC 470-20, which requires the Company on a monthly, quarterlyto use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or bi-annual rate equal to London Inter-bank Offered Rate ("LIBOR") (of no less thanshares, except for certain liability-classified share-based payment awards. With the flooradoption of 0.75%) plus a margin of 3.25%. Thethis guidance, the Company is required to pay 1.00% per annuminclude the portion of the original principalSeries A Convertible Preferred Stock that can be settled in Class A common stock (the amount in excess of $1,000.00 per share of the March 2028 Term Loan. The obligations ofSeries A Convertible Preferred Stock) in the Companydiluted earnings per share calculation. As a result, the Series A Convertible Preferred Stock impacts the Company’s diluted earnings per share calculation for the March 2028 Term Loan are guaranteed by certain31, 2022 (See Note 2).
The computation of earnings per share is as follows:
 Three Months Ended March 31,
 20222021
 (dollars and share data in thousands, except per share data)
Net income (loss)$55,147 $152,066 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds20,131 4,562 
Net income (loss) attributable to Cowen Inc.35,016 147,504 
Preferred stock dividends1,698 1,698 
Net income (loss) attributable to Cowen Inc. common stockholders for basic earnings per share33,318 145,806 
Change in fair value of contingently issuable shares41 — 
Net income (loss) attributable to Cowen Inc. common stockholders for diluted earnings per share$33,359 $145,806 
Shares for basic and diluted calculations: 
Weighted average shares used in basic computation28,386 27,359 
Performance based restricted stock374 445 
Contingently issuable common stock in connection with acquisitions82 — 
December 2022 Convertible Notes— 2,659 
Series A Convertible Preferred Stock708 — 
Restricted stock2,222 3,102 
Weighted average shares used in diluted computation31,772 33,565 
Earnings (loss) per share: 
Basic$1.17 $5.33 
Diluted$1.05 $4.34 
22. Commitments and Contingencies
Operating Lease Obligations
The Company has entered into leases for real estate and other facilities. These leases contain rent escalation clauses and options to extend the Company’s wholly-owned domestic subsidiaries (excluding its broker-dealer subsidiaries) (the “Guarantors”) and secured by substantially all ofapplicable lease term. The Company does not include renewal options in the assets oflease term for calculating the Company's lease liability as the renewal options allow the Company operational flexibility and the Guarantors, subject in each caseCompany is not reasonably certain to certain customary exceptions.exercise these renewal options at this time. The terms ofCompany records the March 2028 Term Loan contain customary affirmativeexpenses related to occupancy and negative covenants, including standard leverage and financial incurrence covenants. Proceeds from the term loan were or will be used to (i) satisfy and discharge and redeem the Company’s 2027 Senior Notes, (ii) redeem the Company’s December 2022 Convertible Notes that remain outstanding as of March 31, 2021 and pay the cash settlement amount in connection with the conversion of December 2022 Convertible Notes prior to that redemption date, and (iii) for the payment of fees, commissions, premiums, expenses and other transaction costs (including original issue discount or upfront fees) payable in connection with the transactions related thereto. As of March 31, 2021, the outstanding principal amount of the March 2028 Term Loan was $299.3 million.equipment on
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Interest expense for the March 2028 Term Loan for the three months ended March 31, 2021 was $0.2 million, based on an effective interest rate of 4.46%. The Company capitalized debt issuance costs of approximately $6.4 million and initial unamortized discount of $1.5 million which is a direct deduction from the carrying value of the debt and will be amortizedstraight-line basis over the life of the March 2028 Term loanlease term and these expenses are included in interestoccupancy and dividendsequipment expense and client services and business development expense in the accompanying condensed consolidated statements of operations.
June 2020 Term Loan
On June 30, 2017, a subsidiary ofFor the Company borrowed $28.2 million to fund general corporate purposes. In July 2019, the subsidiary of the Company borrowed separately, from the same lender, $4.0 million to fund general corporate purposes. Each loan was secured by the value ofthree months ended March 31, 2022 and 2021, quantitative information regarding the Company's limited partnership interestsoperating lease obligations reflected in two affiliated investment funds. the accompanying condensed consolidated statements of operations were as follows:
Three Months Ended March 31,
20222021
(dollars in thousands)
Lease cost
Operating lease cost$6,614 $5,770 
Short-term lease cost141 33 
Variable lease cost837 906 
Sublease income(155)(160)
Total lease costs$7,437 $6,549 
The Company had provided a guarantee for these loans. Both loans had an effective interest rate of LIBOR plus 3.75% with a lump sum payment offollowing table summarizes the entire combined principal amount due (as amended) on June 26, 2020 when they were both fully repaid. The Company recorded interest expense of $0.4 millionsupplemental cash flow information and certain other information related to operating leases for the three months ended March 31, 2020.2022 and 2021:
Three Months Ended March 31,
20222021
(dollars in thousands)
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$9,814 $6,748 
Weighted average remaining lease term - operating leases (in years)5.544.56
Weighted average discount rate - operating leases4.13 %4.10 %
Other Notes Payable
During January 2021, the Company borrowed $3.0 million to fund insurance premium payments. This note had an effective interest rate of 2.01% and was due in December 2021, with monthly payment requirements of $0.3 million. As of March 31, 2021,2022, maturities of the outstanding balance on this note was $2.4 million. Interest expenseoperating lease liabilities for the Company were as follows:
Equipment Leases (operating)Real Estate and Other Facility Rental (a) (b)
 (dollars in thousands)
2022$366 $16,813 
2023381 25,476 
2024370 22,965 
2025370 12,312 
2026278 8,881 
Thereafter— 24,969 
Total operating leases1,765 111,416 
Less discount105 13,218 
Less short-term leases— 58 
Total lease liability$1,660 $98,140 
(a)The Company has entered into various agreements to sublease certain of its premises.
(b)During the three months ended March 31, 2021 was insignificant.
During November 2019,2022, the Company borrowed $2.6recognized an increase of $8.3 million to fund general corporate capital expenditures. This note had an effective interest rate of 6%operating right-of-use assets and is due in November 2024, with monthly payment requirements of $0.1 million. As of March 31, 2021, the outstanding balance on this note was $1.9 million. Interest expense for the three months ended March 31, 2021 and 2020 was insignificant.
On September 30, 2020, the Company borrowed $72.0 million from Purple Protected Asset S-81 ("PPA S-81"), a Luxembourg entity unrelated to Cowen. The loan is payable on September 30, 2023, had an initial interest rate of 1.4 times the Secured Overnight Financing Rate ("SOFR") plus 6.07% until December 31, 2020 and 1.4 times the SOFR plus 5.8% thereafter with quarterly interest payments. The loan obligation, as well as a loan issued by The Military Mutual Ltd (a United Kingdom company unrelated to Cowen) with principal of $28.4 million that was sold by Hollenfels to PPA S-81 at fair value for no gain or loss on September 30, 2020, are fully cash collateralized through a reinsurance policy provided by Hollenfels which is reflected in cash collateral pledged in the condensed consolidated statements of financial condition as of December 31, 2020 (see Notes 4 and 14). The Company capitalized debt issuance costs of approximately $1.7 million which is a direct deduction from the carrying value of the loan and will be amortized over the life of the loan in interest and dividends expense shown in the accompanying condensed consolidated statements of operations. The Company recorded interest expense of $1.1 million for the three months ended March 31, 2021leases liabilities related to its loan payable to PPA S-81.
Spike Line
Pursuant to an amendment in May 2020, Cowen and Company replaced Cowen Execution Services LLC ("Cowen Execution") as the borrower and accepted, reaffirmed and assumed all of Cowen Execution’s rights, duties, obligations and liabilities under the spike line facility and the related loan documents. In August 2020, Cowen and Company renewed a one-year committed spike line facility to cover short term increases in National Securities Clearing Corporation margin deposit requirements. The spike line facility has a capacity of $70 million. This facility has (i) an effective interest rate equal to the Federal Funds rate plus 2.50% on any money drawn from the liquidity facility and (ii) a commitment or unused line fee that is 50 basis points on the undrawn amount. All amounts outstanding under this facility were fully repaid during the second quarter of 2020. Interest expense for the three months ended March 31, 2021 was $0.1 million.
Revolving Credit Facility
In December 2019, the Company entered into a two-year committed corporate credit facility with a capacity of $25.0 million. This credit facility has (i) an effective interest rate equal to LIBOR plus 3.25% on any money drawn from the credit facility and (ii) a commitment or unused line fee that is 50 basis points on the undrawn amount. All amounts outstanding under this credit facility were fully repaid during the second quarter of 2020. Interest expense for the three months ended March 31, 2020 was $0.2 million.leases.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Finance Lease Obligations
The Company has entered into various finance leases for computer equipment. These finance lease obligations are included in notes payable and other debt in the accompanying condensed consolidated statements of financial condition.
For the three months ended March 31, 2021 and 2020, quantitative information regarding the Company's finance lease obligations reflected in the accompanying condensed consolidated statements of operations, the supplemental cash flow information and certain other information related to finance leases were as follows:
Three Months Ended March 31,
20212020
(dollars in thousands)
Lease cost
Finance lease cost:
    Amortization of finance lease right-of-use assets$309 $308 
    Interest on lease liabilities$34 $49 
Other information
Cash paid for amounts included in the measurement of lease liabilities:
    Operating cash flows from finance leases$34 $49 
    Financing cash flows from finance leases$332 $314 
Weighted average remaining lease term - operating leases (in years)2.012.97
Weighted average discount rate - operating leases4.89 %4.88 %
Annual scheduled maturities of debt and minimum payments (of principal and interest) for all debt outstanding as of March 31, 2021, are as follows:
Convertible DebtNotes PayableTerm LoanOther Notes PayableFinance Lease
Obligation
 (dollars in thousands)
2021$2,644 $11,468 $11,205 $7,207 $1,117 
202290,763 13,405 14,835 593 1,168 
20230 13,405 14,715 72,593 411 
20240 88,578 14,595 543 11 
20250 7,750 14,475 0 0 
Thereafter0 158,125 310,163 0 0 
Subtotal93,407 292,731 379,988 80,936 2,707 
Less (a)(11,725)(119,075)(88,685)(5,954)(129)
Total$81,682 $173,656 $291,303 $74,982 $2,578 
(a)Amount necessary to reduce net minimum payments to present value calculated at the Company's implicit rate at inception. This amount also includes capitalized debt costs and the unamortized discount on the Company's convertible debt.
Letters of Credit
As of March 31, 2021, the Company has six irrevocable letters of credit, related to leased office space, for which there is cash collateral pledged, which the Company pays a fee on the stated amount of the letter of credit. The Company also has pledged cash collateral for reinsurance agreements (See Note 4).
To the extent any letter of credit is drawn upon, interest will be assessed at the prime commercial lending rate. As of March 31, 2021 and December 31, 2020, there were no amounts due related to these letters of credit.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
19. Stockholder's Equity
The Company is authorized to issue 125,000,000 shares of common stock, which shall consist of 62,500,000 shares of Class A common stock, par value $0.01 per share, and 62,500,000 shares of Class B common stock, par value $0.01 per share. The Company is also authorized to issue 10,000,000 shares of preferred stock, par value $0.01 per share. Subject to the rights of holders of any outstanding preferred stock, the number of authorized shares of common stock or preferred stock may be increased or decreased by the affirmative vote of the holders of a majority of the shares entitled to vote on such matters, but in no instance can the number of authorized shares be reduced below the number of shares then outstanding.
Common stock
The certificate of incorporation of the Company provides for 2 classes of common stock, and for the conversion of each class into the other, to provide a mechanism by which holders of Class A common stock of the Company who may be limited in the amount of voting common stock of the Company they can hold pursuant to federal, state or foreign bank laws, to convert their shares into non-voting Class B common stock to prevent being in violation of such laws. Each holder of Class A common stock is entitled to one vote per share in connection with the election of directors and on all other matters submitted to a stockholder vote, provided, however, that, except as otherwise required by law, holders of Class A common stock are not entitled to vote on any amendment to the Company's amended and restated certificate of incorporation that relates solely to the terms of one or more outstanding series of the Company's preferred stock, if holders of the preferred stock series are entitled to vote on the amendment under the Company's certificate of incorporation or Delaware law. No holder of Class A common stock may accumulate votes in voting for directors of the Company.
No holder of Class B common stock is entitled to vote except as otherwise provided by law, provided however that the Company must obtain the consent of a majority of the holders of Class B common stock to effect any amendment, alteration or repeal of any provision of the Company's amended and restated certificate of incorporation or amended and restated by-laws that would adversely affect the voting powers, preferences or rights of holders of Class B common stock. Except as otherwise provided by law, Class B common stock shares will not be counted as shares held by stockholders for purposes of determining whether a vote or consent has been approved or given by the requisite percentage of shares.
Each share of Class A common stock is convertible at the option of the holder and at no cost into one share of Class B common stock, and each share of Class B common stock is convertible at the option of the holder and at no cost into one share of Class A common stock. The conversion ratios will be adjusted proportionally to reflect any stock split, stock dividend, merger, reorganization, recapitalization or other change in the Class A common stock and Class B common stock. Upon conversion, converted shares resume the status of authorized and unissued shares.
Subject to the preferences of the holders of any of the Company's preferred stock that may be outstanding from time to time, each share of Class A common stock and Class B common stock will have an equal and ratable right to receive dividends and other distributions in cash, property or shares of stock as may be declared by the Company's board of directors out of assets or funds legally available for the payment of dividends and other distributions.
In the event of the liquidation, dissolution or winding up of the Company, subject to the preferences of the holders of any preferred stock of the Company that may be outstanding from time to time, holders of Class A common stock and Class B common stock will be entitled to share equally and ratably in the assets available for distribution to the Company's stockholders. There are no redemption or sinking fund provisions applicable to the Class A or the Class B common stock.
Preferred Stock
The Company's amended and restated certificate of incorporation permits the Company to issue up to 10,000,000 shares of preferred stock in one or more series with such designations, titles, voting powers, preferences and rights and such qualifications, limitations and restrictions as may be fixed by the board of directors of the Company without any further action by the Company's stockholders. The Company's board of directors may increase or decrease the number of shares of any series of preferred stock following the issuance of that series of preferred stock, but in no instance can the number of shares of a series of preferred stock be reduced below the number of shares of the series then outstanding.
Preferred Stock and Purchase of Capped Call Option
On May 19, 2015, the Company completed its offering of 120,750 shares of the Company's 5.625% Series A cumulative perpetual convertible preferred stock ("Series A Convertible Preferred Stock") that provided $117.2 million of proceeds, net of underwriting fees and issuance costs of $3.6 million. Each share of the Series A Convertible Preferred Stock is entitled to dividends at a rate of 5.625% per annum, which will be payable, when and if declared by the board of directors of the Company, quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year. The Company may, at its option, pay
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
dividends in cash, common stock or a combination thereof. The Company declared and accrued a cash dividend in respect of the Series A Convertible Preferred Stock of $1.7 million and $1.7 million for the three months ended March 31, 2021 and 2020, respectively.
Each share of Series A Convertible Preferred Stock is non-voting and has a liquidity preference over the Company's Class A common stock and ranks senior to all classes or series of the Company's Class A common stock, but junior to all of the Company's existing and future indebtedness with respect to dividend rights and rights upon the Company's involuntary liquidation, dissolution or winding down.
Each share of Series A Convertible Preferred Stock is convertible, at the option of the holder, into a number of shares of the Company's Class A common stock equal to the liquidation preference of $1,000 divided by the conversion rate. The initial conversion rate (subsequent to the December 5, 2016 reverse stock split) is 38.0619 shares (which equates to $26.27 per share) of the Company's Class A common stock for each share of the Series A Convertible Preferred Stock. At any time on or after May 20, 2020, when the Company's capped call option expired, the Company may elect to convert all outstanding shares of the Series A Convertible Preferred Stock into shares of the Company's Class A common stock, cash or a combination thereof, at the Company's election, in each case, based on the then-applicable conversion rate (which at December 31, 2020 was 38.488), if the last reported sale price of the Company's Class A common stock equals or exceeds 150% of the then-current conversion price on at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days (including on the last trading day of such period) immediately prior to such election. At the time of conversion, the conversion rate may be adjusted based on certain events, including but not limited to the issuance of cash dividends or Class A common stock as dividends to the Company's Class A common shareholders or a share split or combination. The Company has the intent and ability to settle the preferred shares in cash and, as a result, the preferred shares do not have an impact on the Company's diluted earnings per share calculation (See Note 21).
Embedded Cash Conversion Option on the December 2022 Convertible Notes
Upon issuance of the December 2022 Convertible Notes (see Note 18), the Company recognized the embedded cash conversion option at fair value of $23.4 million which was valued as of June 26, 2018 at $29.0 million. On June 26, 2018, the Company received shareholder approval for the Company to settle the December 2022 Convertible Notes entirely in Class A common stock. Upon receiving shareholder approval, the Company reclassified the separately recognized conversion option from a derivative liability to equity. The Company allocated $29.6 million of the cash consideration paid on the December 2020 partial extinguishment of the Convertible Notes (see Note 18) to this equity component.
Cash Dividends to Common Stockholders
During the first quarter of 2020, the Company began the declaration of a quarterly cash dividend payable on its common stock. During March 2021, the Company's Board of Directors declared a cash dividend of $0.08 per share of Class A common stock. During June 2021, September 2021 and December 2021, the Company's Board of Directors declared a cash dividend of $0.10 per share of Class A common stock. During March 2022, the Company's Board of Directors declared a cash dividend of $0.12 per share of Class A common stock. Dividends are payable on all outstanding shares of Class A common stock and on granted but unvested shares of Class A common stock under the Equity Plans on the date of record (See Note 15)19). During the three months ended March 31, 2021,2022, the Company paid $2.3$3.9 million of cash dividends to its holders of Class A common stock.
Treasury Stock
Treasury stock of $373.8$583.5 million as of March 31, 2021,2022, compared to $346.9$547.1 million as of December 31, 2020,2021, resulted from $6.2$12.3 million acquired through repurchases of shares to cover employee minimum tax withholding obligations related to stock compensation vesting events under the Equity Plans or other similar transactions $0.03 million received from an escrow account established to satisfy the Company's indemnification claims arising under the terms of the purchase agreement entered into in connection with the Company's acquisition of Convergex Group, LLC and $20.6$24.1 million purchased in connection with a share repurchase program.
The following represents the activity relating to the treasury stock held by the Company during the three months ended March 31, 2021:2022:
Treasury Stock SharesCost
(dollars in thousands)		Average Cost per Share
Balance outstanding at December 31, 202128,047,929 $547,112 $19.51 
Shares purchased for minimum tax withholding under the 2010 and 2020 Equity Plans or other similar transactions374,149 12,283 32.83 
Purchase of treasury stock798,302 24,140 30.24 
Balance outstanding at March 31, 202229,220,380 $583,535 $19.97 
Treasury Stock SharesCost
(dollars in thousands)		Average Cost per Share
Balance outstanding at December 31, 202022,619,863 $346,870 $15.33 
Shares purchased for minimum tax withholding under the 2010 and 2020 Equity Plans or other similar transactions148,752 6,246 41.99 
Shares of stock received in respect of indemnification claims1,155 29 25.33 
Purchase of treasury stock605,703 20,629 34.06 
Balance outstanding at March 31, 202123,375,473 $373,774 $15.99 








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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
20.15. Non-Controlling Interests in Consolidated Subsidiaries and Investment Funds
Redeemable and nonredeemable non-controlling interests in consolidated subsidiaries and investment funds and the related net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds are comprised as follows:
 As of March 31, 2022As of March 31, 2021
 (dollars in thousands)
Nonredeemable non-controlling interests in consolidated subsidiaries and investment funds
Operating companies
    Beginning balance126,105 83,818 
    Capital contributions1,610 3,498 
    Capital distributions(5,901)(2,348)
    Income (loss) attributable to non-controlling interests20,858 7,661 
    Ending balance142,672 92,629 
Consolidated Funds
    Beginning balance33,630 115,806 
    Capital contributions— 19,017 
    Capital distributions— (16,425)
    Deconsolidation of entity— (74,813)
    Income (loss) attributable to non-controlling interests(727)(3,099)
    Ending balance32,903 40,486 
Total Nonredeemable non-controlling interests in consolidated subsidiaries and investment funds$175,575 $133,115 
16. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income includes the after tax change in Other revenues in the accompanying condensed consolidated statement of operations. During the periods presented, the Company did not have material reclassifications out of other comprehensive income.
Three Months Ended March 31,
20212020
(dollars in thousands)
Beginning balance$(7)$(5)
Foreign currency translation4 0 
Ending balance$(3)$(5)
Three Months Ended March 31,
20222021
(dollars in thousands)
Beginning balance$(2)$(7)
Foreign currency translation2 4 
Ending balance$— $(3)

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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
17. Revenue from Contracts with Customers
For the three months ended March 31, 2022 and 2021, the following tables presents revenues from contracts with customers disaggregated by fee type and segment.
Three Months Ended March 31,
20222021
(dollars in thousands)
Revenue from contracts with customersOperating Company
Investment banking
     Underwriting fees$17,583 $154,304 
     Strategic/financial advisory fees58,789 73,555 
     Placement and sales agent fees22,584 72,544 
     Expense reimbursements from clients2,586 4,431 
Total investment banking revenue101,542 304,834 
Brokerage
     Commissions152,483 159,681 
     Trade conversion revenue7,410 6,241 
     Equity research fees6,203 4,593 
Total brokerage revenue from customers166,096 170,515 
Management fees16,555 25,499 
Incentive income633 2,258 
Total revenue from contracts with customers - Op Co$284,826 $503,106 
Asset Company
Management fees214 243 
Incentive income— — 
Total revenue from contracts with customers - Asset Co214 243 
Total revenue from contracts with customers$285,040 $503,349 

18. Insurance and reinsurance
Cowen Insurance Co is a Malta based insurance company that reinsures a significant proportion of its portfolio (“Outward Reinsurance”). The Company's wholly owned Luxembourg subsidiary, Cowen Reinsurance S.A. (formerly Hollenfels Re S.A.) (“Cowen Re”) provides reinsurance to third party insurance and reinsurance companies (“Inward Reinsurance”). Cowen Insurance Co’s and Cowen Re's share of claims incurred and paid during the periods below, as well as the change in claims outstanding and claims incurred but not reported ("IBNR") during these periods, net of reinsurance, were as follows:
Three Months Ended March 31,
20222021
(dollars in thousands)
Incurred and paid claims
Insurance (net of Outward Reinsurance)$1,067 $744 
Inward Reinsurance3,011 3,904 
Total$4,078 $4,648 
Change in claims outstanding and claims IBNR
Insurance (net of Outward Reinsurance)$54 $(136)
Inward Reinsurance(589)(559)
Total$(535)$(695)
Cowen Insurance Co and Cowen Re utilize several methods to determine their claims IBNR. Cowen Insurance Co and Cowen Re generally employ an estimation methodology whereby historical average claims ratios over a period of up to 10 years are utilized, based on availability of data. In cases where current claims development contradicts historical results, Cowen Insurance Co and Cowen Re employ a method to average claims ratios derived through different actuarial calculation methods. If an event occurs that may give rise to significant future claims in excess of the amount calculated using the above-mentioned
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
methodologies, the impact of such an event is calculated using existing claims data and actuarial estimation methods to adjust Cowen Insurance Co's and Cowen Re's IBNR provision. During the three months ended March 31, 2022, claims liability and claim adjustment expenses were calculated using the above-mentioned methods consistent with prior years.
While Cowen Insurance Co and Cowen Re typically settle their premiums and claim payments on a quarterly basis, the frequency of claims in the underlying policies is impractical for Cowen Insurance Co and Cowen Re to obtain. Cowen Insurance Co and Cowen Re write contracts on both a proportional and non-proportional basis.The contracts contain inspection rights to allow the companies to inspect the policy documents that provide the source for the underlying data provided by the cedant. This negates the need for them to collect and hold the documents themselves which would be impracticable. Cowen Insurance Co and Cowen Re did not discount any of its reserves and did not cede any portion of its exposures during the three months ended March 31, 2022 and 2021.
From time to time, Cowen Insurance Co and Cowen Re may enter into insurance and reinsurance agreements that require it to post collateral of cash or U.S. government bonds to cover certain exposures as defined in the respective insurance and reinsurance agreements. As of March 31, 2022, Cowen Re had pledged $61.4 million of collateral towards such reinsurance obligations, of which $49.4 million was in cash and $12.0 million was in U.S. government bonds. As of March 31, 2021, total collateral pledged was $120.5 million, of which $106.8 million was cash and $13.7 million was U.S. government bonds. The collateral pledged as of March 31, 2022 was $1.4 million higher than the amounts pledged at December 31, 2021. This is due to cash movements required to maintain contracted minimum balances with cedants. Cowen Re expects $40.5 million of the cash collateral pledged to be released on September 30, 2023. The remaining collateral of $20.9 million is expected to be released periodically between March 31, 2022 and March 31, 2024 in accordance with the terms of the underlying insurance and reinsurance agreements. As of December 31, 2021, Cowen Insurance Co had no pledged collateral.
19. Share-Based Payments, Deferred Compensation and Employee Ownership Plans
The Company has issued share-based compensation under the 2010 and 2020 Equity Incentive Plan (the "Equity Plans"). The Equity Plans permit the grant of options, restricted shares, restricted stock units, and other equity-based awards to the Company's employees and directors. Stock options granted generally vest over two to five-year periods and expire seven years from the date of grant. Restricted shares and restricted share units issued, both of which are eligible to accrue dividend equivalents, may be immediately vested or may generally vest over a two-to five-year period. Awards are subject to the risk of forfeiture, inclusive of accrued dividend equivalents. As of March 31, 2022, there were 0.6 million shares available for future issuance under only the 2020 Equity Incentive Plan.
Under the Equity Plans, the Company awarded $49.1 million of deferred cash awards to its employees during the three months ended March 31, 2022. These awards vest over a four-year period and accrue interest at 0.70% per year. As of March 31, 2022, the Company had unrecognized compensation expense related to the Equity Plans' deferred cash awards of $89.8 million.
The Company measures compensation cost for equity classified share-based awards on grant date and amortizes the unearned compensation associated with such awards on a straight-line basis over the vesting period of the option or award, net of estimated forfeitures. In relation to awards under the Equity Plan, the Company recognized compensation expense of $21.6 million and $28.2 million for the three months ended March 31, 2022 and 2021, respectively. The income tax effect recognized for the Equity Plans was a benefit of $7.0 million and $10.8 million for the three months ended March 31, 2022 and 2021, respectively.
Restricted Stock Units Granted to Employees
Restricted shares and restricted stock units are referred to collectively as restricted stock. The following table summarizes the Company's restricted share and restricted stock unit activity for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value		Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock UnitsWeighted-Average
Grant Date
Fair Value
Beginning balance outstanding4,595,342 $24.33 5,450,191 $17.56 
Granted1,919,504 31.98 1,593,941 34.85 
Vested(224,073)19.32 (291,062)16.11 
Canceled— — — — 
Forfeited(16,526)20.51 (8,134)20.22 
Ending balance outstanding6,274,247 $26.86 6,744,936 $21.71 
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Included in the restricted share and restricted stock unit activity are performance-linked restricted stock units of 1,974,217 which were awarded from March 2016 through March 2022. Certain of the awards granted have the ability to be cash settled when the attained award exceeds a certain percentage of granted amount. The cash portion of the award has been bifurcated from the equity component and recorded as a compensation payable in the accompanying condensed consolidated statement of financial condition. Of the awards granted, 712,652 have vested and 320,681 have been canceled, as they did not meet the performance criteria, through March 31, 2022. Included in vested units are 233,333 units that had an attainable share value of 420,000, and were delivered in March 2021. Of this attainable share value 350,000 shares were settled in the issuance of the Company's Class A common stock and were delivered in March 2021 with the remaining 70,000 shares being settled in cash at the volume weighted average price on settlement date. Also included in vested units are 333,333 units that had an attainable share value of 666,666, due to reaching certain performance goals. Of this attainable value 528,800 shares were settled in the Company's Class A common stock and were delivered in March 2022 with the remaining 137,866 shares being settled in cash at the volume weighted average price of the Company's Class A common stock on settlement date. The remaining awards, included in the outstanding balance as of March 31, 2022, vest on December 2022, December 2023 and December 2024 and will be earned only to the extent that the Company attains specified market conditions relating to its volume-weighted average share price and total shareholder return in relation to certain benchmark indices and performance goals relating to aggregate net income and average return on shareholder equity. The actual number of attained shares ultimately earned could vary from zero, if performance goals are not met, to as much as 240% of the targeted award. Compensation expense is recognized to the extent that it is probable that the Company will attain the performance goals. The fair value of restricted stock is determined based on the number of shares granted and the quoted price of the Company's common stock on the date of grant.
As of March 31, 2022, there was $116.0 million of unrecognized compensation expense related to the Company's grant of nonvested restricted shares and restricted stock units to employees. Unrecognized compensation expense related to nonvested restricted shares and restricted stock units granted to employees is expected to be recognized over a weighted-average period of 2.14 years.
Restricted Shares and Restricted Stock Units Granted to Non-Employee Board Members
There were no restricted stock units awarded to non-employee board members during the three months ended March 31, 2022 and 2021. The Company delivered no units to non-employee board members during the three months ended March 31, 2022 and 2021. As of March 31, 2022 and 2021, there were 246,333 and 259,536 restricted stock units outstanding for non-employee board members, respectively.
Other Share Based Payments and Awards
In certain circumstances, the Company grants carried interest in consolidated managing member/general partner subsidiaries to third parties through the grant of equity awards in exchange for professional, advisory and other services. The equity awards are recorded within additional paid in capital in the accompanying condensed consolidated statements of financial condition and professional, advisory and other fees expense in the accompanying condensed consolidated statements of operations based on the fair value of the award granted and expensed over the terms of the award. In addition, the equity awards provide the third parties profit points aligned to the allocated carried interest distributions. Upon vesting of the awards, the third parties' allocation of carried interest is determined by applying an equity ownership model. Accordingly, the Company accrues carried interest allocations based on the fair value of the underlying investments assuming hypothetical liquidation at book value upon vesting as nonredeemable non-controlling interest.
On March 1, 2022, Cowen Digital Holdings LLC (“CDIG”) authorized 2,000,000 Class B Units, of which 1,487,500 Class B Units were issued to an affiliate, for which a subsidiary of the Company is the Managing Member, on behalf of the Company’s employees as incentive awards (the "Digital Awards") under the 2022 Equity Unit Incentive Plan. The Class B Units will, upon vesting, represent a 20% ownership of CDIG, a consolidated subsidiary of the Company upon vesting. Once the vesting conditions of the Digital Awards have been met, such awards will be presented as nonredeemable non-controlling interest in the accompanying condensed consolidated statements of financial condition. Half of the Digital Awards vest over a period of time and are tied to service (time based) and the other half vest when a qualifying event as stipulated in the Digital Award documents occurs (performance based). Once vested, Class B units will not be entitled to distributions unless and until a profit distribution hurdle has been met. The Company recognized compensation expense of $0.3 million related to the time based Digital Awards for the three months ended March 31, 2022. At March 31, 2022, there was $1.3 million of unrecognized compensation expense related to the time based Digital Awards which will be recognized over their five year vesting period. The fair value of time based Digital Awards is determined based on the fair market value of CDIG and its consolidated subsidiaries. The fair market value of CDIG and its consolidated subsidiaries is calculated utilizing recent transactions, discounted cash flows, and market multiples. The Digital Awards are then using a standard Black Scholes options pricing model. The primary input in determining the fair market value as of March 1, 2022 was recent/pending transactions in CDIG’s underlying investments. The expense related
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to the performance based component of the Digital Awards will be recognized when the qualifying event is considered to be probable. The income tax effect recognized for the Digital Awards was a benefit of $0.1 million for the three months ended March 31, 2022.
20. Income Taxes
The taxable results of the Company’s U.S. operations are included in the consolidated income tax returns of Cowen, Inc. as well as stand-alone state and local tax returns. The Company has subsidiaries that are resident in foreign countries where tax filings are submitted on a stand-alone basis. These subsidiaries are subject to tax in their respective countries and the Company is responsible for and, thus, reports all taxes incurred by these subsidiaries. The countries where the Company owns subsidiaries that file tax returns are United Kingdom, Luxembourg, Malta, Germany, Switzerland, Israel, South Africa, Canada and Hong Kong.
The Company calculates its U.S. tax provision using the estimated annual effective tax rate methodology. The tax expense or benefit caused by an unusual or infrequent item is recorded in the quarter in which it occurs. To the extent that information is not available for the Company to fully determine the full year estimated impact of an item of income or tax adjustment, the Company calculates the tax impact of such item discretely. Accordingly, the Company uses the discrete methodology to calculate the tax impact of income attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds. Based on these methodologies, the Company’s effective income tax rate was 17.74% and 26.36% for the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, the item whose tax impact was recorded discretely related primarily to stock compensation.
For the three months ended March 31, 2022, the effective tax rate differs from the statutory rate of 21% primarily due to income attributable to non-controlling interests in consolidated subsidiaries and investment funds, global intangible low-taxes income, foreign taxes, as well as other nondeductible expenses. For the three months ended March 31, 2021, the effective tax rate differs from the statutory rate of 21% primarily due to income attributable to noncontrolling interests in consolidated subsidiaries and investment funds, global intangible low-taxes income, stock compensation, as well as other nondeductible expenses.
The Company has no uncertain tax position liability as of March 31, 2022 and December 31, 2021.
The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating or capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that, in management's view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future. As of March 31, 2022, the Company recorded a valuation allowance against deferred tax assets related to its foreign tax credits and foreign net operating losses.
The Company is subject to examination by the United States Internal Revenue Service as well as state, local and foreign tax authorities in jurisdictions where the Company has significant business operations, such as New York, United Kingdom, Luxembourg, Malta, and Germany.
The Company continues to permanently reinvest the capital and accumulated earnings of its subsidiaries in the United Kingdom, Malta, Germany, Switzerland, Israel, Canada, and Hong Kong.
21. Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to the Company's common stockholders by the weighted average number of shares of Class A common stock outstanding for the period. As of March 31, 2021,2022, there were 26,852,33127,614,903 shares of Class A common stock outstanding. As of March 31, 2021,2022, the Company has included 259,536246,803 fully vested, unissued restricted stock units and restricted shares in its calculation of basic earnings per share. As of December 31, 2020,2021, there were 26,845,62827,778,964 shares of Class A common stock outstanding. As of December 31, 2020,2021, the Company has included 334,230972,732 fully vested, unissued restricted stock units and restricted shares in its calculation of basic earnings per share.
Diluted earnings per common share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive items. The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested restricted shares and restricted stock units and, during the first quarter of 2021, the remainder of the conversion obligation in excess of the principal amount of the December 2022 Convertible Notes which will be share settled. (see Note 18)units. In calculating the number of dilutive shares outstanding, the shares of common stock underlying unvested restricted shares and restricted stock units are assumed to have been delivered, and options (including the conversion option of the December 2022 Convertible Notes) and warrants are assumed to have been exercised, for the entire period being presented. The number of performance-linked unvested restricted stock units that are included in the calculation are at the amount that could be earned using current payout rates. The assumed proceeds from the assumed vesting, delivery and exercising were calculated as the amount of compensation cost attributed to future services and not yet recognized.
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The Company previously concluded that it had the intent and ability to settle the December 2022 Convertible Notes in cash and, as a result, the convertible notes did not have an impact on the Company's diluted earnings per share calculation. On March 24, 2021, the Company issued a redemption notice announcing that the Company willwould redeem all of the December 2022 Convertible Notes (See Note 18)12). As a result ofOn June 24, 2021, the Company’s call for redemption ofCompany cash settled the December 2022 Convertible Notes they are convertible, at the option of the holder at any time prior to June 22, 2021, the second business day prior to the 2022 Convertible Notes' Redemption Date. The settlement method for the December 2022 Convertible Notes surrendered for conversion will be cash settlement up to the principal amount of the December 2022 Convertible Notes surrendered for conversion and share settlementsettled through the delivery of shares of the Company’s Class A common stock for the remainder of the conversion obligation if any, in excess of the principal amount. The conversion rate of the December 2022 Convertible Notes on March 24, 2021 was 58.3324 shares of the Company’s Class A common stock issued are within basic earnings per $1,000 principal amount of December 2022 Convertible Notes converted. Theshare subsequent to June 24, 2021. Prior to that date, the Company has applied the if-converted method to the portion of the December 2022 notes above the principal amount that will be settled in shares upon a conversion.conversion in dilutive earnings per share.
TheOn December 31, 2021, the Company canirrevocably elected to cash settle $1,000.00 of its obligation in respect of each conversion of any share of the Series A Convertible Preferred Stock. Prior to this date, the Company could elect to settle the Series A Convertible Preferred Stock in shares, cash, or a combination of both. The Company's intentEffective January 1, 2022, Company adopted ASC 470-20, which requires the Company to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement (if the effect is to settlemore dilutive) for instruments that may be settled in cash and, based on current and projected liquidity needs,or shares, except for certain liability-classified share-based payment awards. With the adoption of this guidance, the Company is required to include the portion of the Series A Convertible Preferred Stock that can be settled in Class A common stock (the amount in excess of $1,000.00 per share of the Series A Convertible Preferred Stock) in the diluted earnings per share calculation. As a result, the Series A Convertible Preferred Stock impacts the Company’s diluted earnings per share calculation for the March 31, 2022 (See Note 2).
The computation of earnings per share is as follows:
 Three Months Ended March 31,
 20222021
 (dollars and share data in thousands, except per share data)
Net income (loss)$55,147 $152,066 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds20,131 4,562 
Net income (loss) attributable to Cowen Inc.35,016 147,504 
Preferred stock dividends1,698 1,698 
Net income (loss) attributable to Cowen Inc. common stockholders for basic earnings per share33,318 145,806 
Change in fair value of contingently issuable shares41 — 
Net income (loss) attributable to Cowen Inc. common stockholders for diluted earnings per share$33,359 $145,806 
Shares for basic and diluted calculations: 
Weighted average shares used in basic computation28,386 27,359 
Performance based restricted stock374 445 
Contingently issuable common stock in connection with acquisitions82 — 
December 2022 Convertible Notes— 2,659 
Series A Convertible Preferred Stock708 — 
Restricted stock2,222 3,102 
Weighted average shares used in diluted computation31,772 33,565 
Earnings (loss) per share: 
Basic$1.17 $5.33 
Diluted$1.05 $4.34 
22. Commitments and Contingencies
Operating Lease Obligations
The Company has entered into leases for real estate and other facilities. These leases contain rent escalation clauses and options to extend the abilityapplicable lease term. The Company does not include renewal options in the lease term for calculating the Company's lease liability as the renewal options allow the Company operational flexibility and the Company is not reasonably certain to do so.exercise these renewal options at this time. The Company records the expenses related to occupancy and equipment on
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The computationa straight-line basis over the lease term and these expenses are included in occupancy and equipment expense and client services and business development expense in the accompanying condensed consolidated statements of earnings per share isoperations.
For the three months ended March 31, 2022 and 2021, quantitative information regarding the Company's operating lease obligations reflected in the accompanying condensed consolidated statements of operations were as follows:
 Three Months Ended March 31,
 20212020
 (dollars and share data in thousands, except per share data)
Net income (loss)$152,066 (72,111)
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds4,562 (62,188)
Net income (loss) attributable to Cowen Inc.147,504 (9,923)
Preferred stock dividends1,698 1,698 
Net income (loss) attributable to Cowen Inc. common stockholders$145,806 $(11,621)
Shares for basic and diluted calculations: 
Weighted average shares used in basic computation27,359 28,598 
Performance based restricted stock445 0 
December 2022 Convertible Notes2,659 0 
Restricted stock3,102 0 
Weighted average shares used in diluted computation33,565 28,598 
Earnings (loss) per share: 
Basic$5.33 $(0.41)
Diluted$4.34 $(0.41)
Three Months Ended March 31,
20222021
(dollars in thousands)
Lease cost
Operating lease cost$6,614 $5,770 
Short-term lease cost141 33 
Variable lease cost837 906 
Sublease income(155)(160)
Total lease costs$7,437 $6,549 

The following table summarizes the supplemental cash flow information and certain other information related to operating leases for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
20222021
(dollars in thousands)
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$9,814 $6,748 
Weighted average remaining lease term - operating leases (in years)5.544.56
Weighted average discount rate - operating leases4.13 %4.10 %
As of March 31, 2022, maturities of the outstanding operating lease liabilities for the Company were as follows:
Equipment Leases (operating)Real Estate and Other Facility Rental (a) (b)
 (dollars in thousands)
2022$366 $16,813 
2023381 25,476 
2024370 22,965 
2025370 12,312 
2026278 8,881 
Thereafter— 24,969 
Total operating leases1,765 111,416 
Less discount105 13,218 
Less short-term leases— 58 
Total lease liability$1,660 $98,140 
(a)The Company has entered into various agreements to sublease certain of its premises.
(b)During the three months ended March 31, 2022, the Company recognized an increase of $8.3 million of operating right-of-use assets and leases liabilities related to facility leases.
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Other Commitments
As of March 31, 2022, future minimum annual service payments for the Company were as follows:
Service Payments
 (dollars in thousands)
2022$22,196 
202317,544 
20248,214 
20253,889 
20263,253 
Thereafter7,357 
Total service payment commitments$62,453 
Unfunded Commitments
The following table summarizes unfunded commitments as of March 31, 2022:
EntityUnfunded CommitmentsCommitment Term
(dollars in thousands)
HealthCare Royalty Partners funds (a)$6,451 2.8 years
Eclipse Ventures Fund I, L.P.$28 2.8 years
Eclipse Fund II, L.P.$18 3.8 years
Eclipse Continuity Fund I, L.P.$16 4.8 years
Cowen Healthcare Investments III LP$2,165 4.8 years
Cowen Healthcare Investments IV LP$5,784 5.8 years
Cowen Sustainable Investments I LP$14,643 7.8 years
(a) The Company is a limited partner of the HealthCare Royalty Partners funds (which are managed by Healthcare Royalty Management) and is a member of HealthCare Royalty Partners General Partners. The Company will make its pro-rata investment in the HealthCare Royalty Partners funds along with the other limited partners.
Litigation
In the ordinary course of business, the Company and its affiliates, subsidiaries and current and former officers, directors and employees (the "Company and Related Parties") are named as defendants in, or as parties to, various legal actions and proceedings. Certain of these actions and proceedings assert claims or seek relief in connection with alleged violations of securities, banking, anti-fraud, anti-money laundering, employment and other statutory and common laws. Certain of these actual or threatened legal actions and proceedings include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief.
In the ordinary course of business, the Company and Related Parties are also subject to governmental and regulatory examinations, information gathering requests (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Certain of the Company's affiliates and subsidiaries are registered broker-dealers, futures commission merchants, investment advisers or other regulated entities and, in those capacities, are subject to regulation by various U.S., state and foreign securities, commodity futures and other regulators. In connection with formal and informal inquiries by these regulators, the Company receives requests and orders seeking documents and other information in connection with various aspects of the Company's regulated activities.
Due to the global scope of the Company's operations, and its presence in countries around the world, the Company and Related Parties may be subject to litigation, governmental and regulatory examinations, information gathering requests, investigations and proceedings (both formal and informal), in multiple jurisdictions with legal and regulatory regimes that may differ substantially, and present substantially different risks, from those to which the Company and Related Parties are subject in the United States.
The Company seeks to resolve all litigation and regulatory matters in the manner management believes is in the best interests of the Company and its shareholders, and contests liability, allegations of wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter.
In accordance with US GAAP, the Company establishes reserves for contingencies when the Company believes that it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. The Company discloses a contingency if there is at least a reasonable possibility that a loss may have been incurred and there is no reserve for the loss because the
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conditions above are not met. The Company's disclosure includes an estimate of the reasonably possible loss or range of loss for those matters, for which an estimate can be made. Neither a reserve nor disclosure is required for losses that are deemed remote.
The Company appropriately reserves for certain matters where, in the opinion of management, the likelihood of liability is probable and the extent of such liability is reasonably estimable. Such amounts are included within accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated statements of financial condition. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including, but not limited to, the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, the Company's defenses and its experience in similar cases or proceedings as well as its assessment of matters, including settlements, involving other defendants in similar or related cases or proceedings. The Company may increase or decrease its legal reserves in the future, on a matter-by-matter basis, to account for developments in such matters. The Company accrues legal fees as incurred.
22.23. Segment Reporting
The Company has 2 reportable business segments: Op Co and Asset Co. The Op Co segment consists of Cowen Investment Management ("CIM"), Investment Banking, Markets and Research. The Asset Co segment consists of the Company's private investments, private real estate investments and other legacy investment strategies.
Segment Measures
The measure of profit or loss for these segments is Economic Income (Loss), which management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels. Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other factors.
In general, Economic Income (Loss) is an after tax measure which excludes(which represents the impact of deferred taxesCompany’s income tax expense or benefit calculated on Pre-tax Economic Income (Loss) once all currently available net operating losses have been utilized and is presented after preferred stock dividends. Economic Income (Loss) (i) includes management reclassifications which the Company believes provides additional insight into the performance of the Company’s core businesses and divisions (ii) eliminates the impact of consolidation for Consolidated Funds and (iii) excludes (1) goodwill and certain other impairments, (2) certain other transaction-related adjustments and/or reorganization expenses and (3) certain costs associated with debt.
The Company does not disclose total asset information for its business segments as the information is not reviewed by the Chief Operating Decision Maker ("CODM"). The Op Co and Asset Co segments do not conduct inter-segment transactions.
The following table sets forth operating results for the Company's consolidated US GAAP net income (loss) and related reclassifications and adjustments necessary to reconcile to the Company's Economic Income (Loss) measure which represents the Company's Op Co and Asset Co segments' results:
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Three Months Ended March 31, Three Months Ended March 31,
20212020 20222021
(dollars in thousands) (dollars in thousands)
Economic IncomeEconomic IncomeEconomic Income
Op CoOp Co143,858 3,650 Op Co$36,297 $143,858 
Asset CoAsset Co(1,476)(16,229)Asset Co1,150 (1,476)
Adjustments made to arrive at Income (loss) before income taxes
Non-controlling Interest4,562 (62,188)
Adjustments applied to arrive at Net Income (loss)Adjustments applied to arrive at Net Income (loss)
Income attributable to non-controlling interestIncome attributable to non-controlling interest20,131 4,562 
Preferred stock dividendsPreferred stock dividends1,698 1,698 Preferred stock dividends1,698 1,698 
Amortization of (discount)/premium on convertible debtAmortization of (discount)/premium on convertible debt(776)(1,110)Amortization of (discount)/premium on convertible debt(75)(776)
Acquisition related amountsAcquisition related amounts(238)0 Acquisition related amounts(80)(238)
Contingent liability adjustmentsContingent liability adjustments6,798 895 Contingent liability adjustments(5,133)6,798 
Debt extinguishment gain (loss)(4,538)0 
Debt extinguishment gain (loss) and accelerated debt costsDebt extinguishment gain (loss) and accelerated debt costs— (4,538)
Bargain purchase gainBargain purchase gain3,855 0 Bargain purchase gain— 3,855 
Net Income tax effect(1,677)1,173 
US GAAP Income tax expenseUS GAAP Income tax expense(11,889)(54,428)
Economic income tax expenseEconomic income tax expense13,048 52,751 
Net income (loss)Net income (loss)152,066 (72,111)Net income (loss)$55,147 $152,066 
Economic Income (Loss) information provided and reviewed by the CODM includes (i) non-interest revenue, (ii) interest revenue, (iii) interest expense, (iv) depreciation and amortization expense and (v) income taxes (subsequent to 2020 after all available net operating losses were utilized) presented on an Economic Income (Loss) basis by Segment. The following table sets forth the included segment information on a US GAAP basis with reconciliations to consolidated amounts.
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Three Months Ended March 31, Three Months Ended March 31,
20212020 20222021
(dollars in thousands) (dollars in thousands)
Op CoOp CoOp Co
Non-Interest Revenue Non-Interest Revenue704,682 173,123  Non-Interest Revenue$367,652 $697,885 
Interest Revenue Interest Revenue51,104 33,666  Interest Revenue40,331 51,104 
Interest Revenue, Consolidated funds0 577 
Total Revenues Total Revenues755,786 207,366  Total Revenues407,983 748,989 
Interest Expense Interest Expense53,803 33,639  Interest Expense43,300 53,803 
Interest Expense, Consolidated funds0 1,061 
Depreciation and Amortization Depreciation and Amortization4,349 5,436  Depreciation and Amortization7,179 4,349 
Income Taxes Income Taxes55,085 —  Income Taxes11,832 55,085 
Asset CoAsset CoAsset Co
Non-Interest Revenue Non-Interest Revenue(1,668)(10,695) Non-Interest Revenue2,599 (1,668)
Interest Revenue Interest Revenue203 50  Interest Revenue8 203 
Interest Revenue, Consolidated funds Interest Revenue, Consolidated funds2 2  Interest Revenue, Consolidated funds2 2 
Total Revenues Total Revenues(1,463)(10,643) Total Revenues2,609 (1,463)
Interest Expense Interest Expense1,275 1,689  Interest Expense1,236 1,275 
Interest Expense, Consolidated funds0 0 
Depreciation and Amortization Depreciation and Amortization5 6  Depreciation and Amortization6 5 
Income Taxes Income Taxes(657)—  Income Taxes57 (657)
Total SegmentTotal SegmentTotal Segment
Non-Interest Revenue * Non-Interest Revenue *703,014 162,428  Non-Interest Revenue *370,251 696,217 
Interest Revenue Interest Revenue51,307 33,716  Interest Revenue40,339 51,307 
Interest Revenue, Consolidated funds Interest Revenue, Consolidated funds2 579  Interest Revenue, Consolidated funds2 2 
Total Revenues Total Revenues754,323 196,723  Total Revenues$410,592 $747,526 
Interest and Dividend Expense (includes dividend expense of $2.6 million, and $3.5 million for the three months ended March 31, 2021 and 2020, respectively)57,641 38,792 
Interest and Dividend Expense, Consolidated funds (includes dividend expense of $0.2 million for the three months ended March 31, 2020)0 1,252 
Interest and Dividend Expense (includes dividend expense of $2.0 million and $2.6 million for the three months ended March 31, 2022 and 2021, respectively)Interest and Dividend Expense (includes dividend expense of $2.0 million and $2.6 million for the three months ended March 31, 2022 and 2021, respectively)46,524 57,641 
Depreciation and AmortizationDepreciation and Amortization4,354 5,442 Depreciation and Amortization7,185 4,354 
Income TaxesIncome Taxes54,428 — Income Taxes11,889 54,428 
* Includes dividend revenue of $8.1$6.0 million and $8.3$8.1 million for the three months ended March 31, 20212022 and 2020,2021, respectively. In addition, includes dividend revenue, consolidated funds, of $2.6$0.0 million and $3.5$2.6 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
23.24. Regulatory Requirements
Regulatory Capital
As registered broker-dealers with the United States Securities and Exchange Commission ("SEC"), Cowen and Company, ATM Execution Cowen Prime and Westminster are subject to the SEC's Uniform Net Capital Rule 15c3-1, ("SEC"SEA Rule 15c3-1"15c3-1," under the Securities Exchange Act ("SEA"), of 1934, which requires the maintenance of minimum net capital. Each registered broker-dealer has elected to compute net capital under the alternative method permitted by that rule.
The Company acquired Portico, a registered broker-dealer on December 16, 2021. As a result of the acquisition, Portico's net assets were transferred into Cowen and Company. The Company applied to withdraw Portico's status as a FINRA registered broker-dealer on December 20, 2021 which was approved by the SEC on February 18, 2022.
Under the alternative method, Cowen and Company's minimum net capital requirement, as defined in (a)(4) of SECSEA Rule 15c3-1, is equal to the greater of $1.0$1.5 million or 2% of aggregate debits arising from customer transactions. ATM Execution, Cowen Prime and Westminster are required to maintain minimum net capital, as defined in (a)(1)(ii) of SECSEA Rule 15c3-1, equal to the greater of $250,000 or 2% of aggregate debits arising from customer transactions. Advances to affiliates, repayment of borrowings, distributions, dividend payments, and other equity withdrawals are subject to certain notification and other provisions of SECSEA Rule 15c3-1 and other regulatory bodies. Cowen Prime is registered with the SEC as an investment advisor under Advisers Act.
Cowen Primeand Company is also subject to certain net capital rule requirements under the Regulation 1.17 of the Commodity Futures Trading Commission ("CFTC") under Commodities Exchange Act (“CEA”) as an introducing broker. Under Regulation 1.17, ("Regulation 1.17"). Regulation 1.17 requiresCowen and Company is required to maintain net capital equal to or in excess of $45,000 or the amount of net capital required by SEC SEA Rule 15c3-1, whichever is greater. Cowen and Company is also subject toAdditionally, as an options clearing member of the Options Clearing Corporation ("OCC") Rule 302.under OCC Rule 302, requires maintenance ofCowen and Company is required to maintain net capital equal to the greater of $2.0 million or 2% of aggregate debit items. At March 31, 2021, Cowen and Company had $325.9 million of net capital in excess of this minimum requirement.
Cowen International Ltd and Cowen Execution Ltd are subject to the capital requirements of the U.K. Financial Conduct Authority ("FCA"), as defined, and must exceed the minimum capital requirement set forth by the FCA.
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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
million or 2% of aggregate debit items. At March 31, 2022, Cowen and Company had $397.2 million of net capital in excess of its minimum requirements under SEA Rule 15c3-1.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010. The Dodd-Frank Act contains provisions that require the registration of all swap dealers, major swap participants, security-based swap dealers, and/or major security-based swap participants. Cowen Financial Products, Ltd ("Cowen Financial Products") registered only with the SEC with an effective date of November 1, 2021 as a securities-based swap dealer and is not using models to compute its net capital. Under the rules there is a minimum net capital requirement for, among others, an entity that acts as a dealer in security-based swaps, which is the greater of $20 million or 2% of risk margin amount The risk margin amount means the sum of (i) the total initial margin required to be maintained by the SEC securities-based swaps dealer at each clearing agency with respect to securities-based swaps transactions cleared for securities-based swap customers and (ii) the total initial margin amount calculated by the SEC securities-based swaps dealer swaps dealer with respect to non-cleared securities-based swaps under SEC rules. At March 31, 2022, Cowen Financial Products had $16.7 million of net capital in excess of its minimum requirements under SEA Rule 18a-1.
Cowen International Ltd and Cowen Execution Ltd are subject to the capital requirements of the U.K. Financial Conduct Authority ("FCA"), as defined, and must exceed the minimum capital requirement set forth by the FCA. On 1 January 2022, the FCA adopted the Investment Firms Prudential Regime ("IFPR"). This is a new prudential regime which applies to MiFID investment firms authorized and regulated by the FCA in the UK. The IFPR refocuses prudential requirements and expectations away from the risks firms face, to also consider and look to manage the potential harm firms can pose to consumers and markets. Cowen International Ltd and Cowen Execution Ltd will both be designated as Class 2 firms under the new regime and will have a minimum capital requirement equal to the higher of; the Permanent minimum capital requirement, their respective Fixed Overhead requirement, and their Risk Responsive Computation ("K-factors").
Cowen Asia, a previously established entity, was re-registered with regulatory approval on May 17, 2019. Cowen Asia is subject to the financial resources requirements of the Securities and Futures Commission ("SFC") of Hong Kong. Financial Resources must exceed the Total Financial Resources requirement of the SFC.
As of March 31, 2021, these regulated broker-dealers had2022, the regulatory net capital, or financial resources, regulatoryminimum net capital requirements or minimum FCA or SFC requirement and excess net capital of U.S. regulated broker dealers and swap dealer together with the equivalent of capital requirements and compliance information for foreign broker dealers registered with the FCA and the SFC are presented as follows:
SubsidiaryNet CapitalMinimum Net Capital RequirementExcess Net Capital
 (dollars in thousands)
Cowen and Company$406,557 $9,343 $397,214 
ATM Execution$7,880 $250 $7,630 
Westminster$19,521 $250 $19,271 
Cowen Financial Products$36,658 $20,000 $16,658 
Cowen International Ltd (a)$51,109 $25,735 $25,374 
Cowen Execution Ltd (a)$17,900 $5,075 $12,825 
Cowen Asia (a)$2,045 $383 $1,662 
SubsidiaryNet CapitalMinimum Net Capital RequirementExcess Net Capital
 (dollars in thousands)
Cowen and Company$332,197 $6,289 $325,908 
ATM Execution$4,951 $250 $4,701 
Cowen Prime$22,722 $250 $22,472 
Westminster$31,116 $250 $30,866 
Cowen International Ltd$39,812 $25,444 $14,368 
Cowen Execution Ltd$13,205 $3,418 $9,787 
Cowen Asia$2,272 $386 $1,886 
(a)The equivalent of Net Capital under FCA rules is referred as “capital resources” and under SFC rules is referred as “net liquid capital.” The equivalent of Minimum Net Capital Requirement under FCA rules is referred as “minimum capital resources requirement and under SFC rules is referred as “net liquid capital requirement."
Customer Protection
The Company's U.S. broker-dealers must also comply with SECthe customer protection provisions under SEA Rule 15c3-3 which requires a computation of a reserve requirement for customer and maintenance of a deposit of cash or claimsecurities into a special reserve bank account for the exclusive benefit of customers; or claim an exemption pursuant to subparagraphs (k)(2)(i) or (k)(2)(ii) of that rule. Firms can rely on more than one exemption. Cowen Prime and
ATM Execution claimclaims the (k)(2)(ii) exemption with regard to all of their customer accounts and transactions that are introduced on a fully-disclosed basis to their clearing agents for clearing, settlement and custody. Cowen Prime and Westminster claimclaims the (k)(2)(i) exemption with regardsregard to customer transactions and balances that are cleared, settled and custodied in bank accounts designated as Special Accounts for the Exclusive Benefit of Customers ("Special Bank Accounts"). Westminster also claims exemption for other business activities that are not covered under (k)(2)(i) contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 for receiving transaction-based compensation in return for providing commission management services.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
In accordance with the requirements of SECSEA Rule 15c3-3, Cowen and Company may be required to deposit in a Special Reserve Account cash or acceptable qualified securities for the exclusive benefit of customers. As of March 31, 2021,2022, Cowen and Company had segregated approximately $13.751.8 millionof cash while it had 0 required deposit.to satisfy the customer reserve provision of SEA Rule 15c3-3.
As a clearing and carrying broker-dealer, Cowen and Company is required to compute a reserve requirement for proprietary accounts of broker-dealers ("PAB"), as defined in SECSEA Rule 15c3-3. Cowen and Company conducts PAB reserve computations in order to determine the amount it is required to deposit in its PAB Reserve Bank Accounts pursuant to SECSEA Rule 15c3-3. This allows each correspondent firm that uses Cowen and Company as its clearing broker-dealer to classify its PAB account assets held at Cowen and Company as allowable assets in the correspondent's net capital calculation. At March 31, 2021,2022, Cowen and Company had $30.371.7 million of cash on deposit in PAB Reserve Bank Accounts, which was more than its required deposit of $19.1 million.Accounts. Cowen and Company and ATM Execution and Cowen Prime also maintain certain assets in PAB accounts held at their respective clearing brokers. Each treats its assets held in those PAB accounts at the respective clearing brokers as allowable assets for net capital purposes.
Cowen Financial Products, as a registered securities based swap dealer, claims Rule 18a-4(f) exemption under the Securities Exchange Act of 1934 (the “Act”) with regard to its swap counterparties on the basis that it has provided sufficient notice to its swap counterparties of their respective rights to require segregation of funds or other property used to secure uncleared security based swaps pursuant to section 3E(f)(1)(A)-(B) of the Act (15 U.S.C. 78c-5(f)(1)(A)). Any margin collateral received and held by the security based swap dealer with respect to uncleared security based swaps will not be subject to a segregation requirement. The notice outlines how a claim of those swap counterparties for the collateral would be treated in a bankruptcy or other formal liquidation proceeding of the security-based swap dealer.
Other Regulatory Requirements
Cowen Insurance Co and HollenfelsCowen Re are individually required to maintain a solvency capital ratio as calculated by relevant European Commission directives and local regulatory rules in Malta and Luxembourg, respectively. Each company's individual solvency capital ratio calculated as of December 31at the end of each yearquarter must exceed a minimum requirement. As of December 31, 2020 (the2021, the last testing date),date for Cowen Re and Cowen Insurance Co, the solvency capital ratios of both Cowen Insurance Co and HollenfelsCowen Re were in excess of the minimum requirement.requirements.
Based on minimum capital and surplus requirements pursuant to the laws of the state of New York that apply to captive insurance companies, RCG Insurance Company, Cowen's captive insurance company incorporated and licensed in the state of New York, was required to maintain capital and surplus of approximately $0.3 million as of March 31, 2021.2022. RCG Insurance Company’s capital and surplus as of March 31, 20212022 totaled approximately $6.4$6.0 million.

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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
24.25. Related Party Transactions
The Company and its affiliated entities are the managing member, general partner and/or investment manager to the Company's investment funds and certain managed accounts. Management fees and incentive income are primarily earned from affiliated entities. As of March 31, 20212022 and December 31, 2020, $29.32021, $21.9 million and $28.4$16.6 million, respectively, included in fees receivable, are earned from related parties. The Company may, at its discretion, reimburse certain fees charged to the investment funds that it manages to avoid duplication of fees when such funds have an underlying investment in another affiliated investment fund. For the three months ended March 31, 20212022 and 2020,2021, the amounts which the Company reimbursed the investment funds it manages were immaterial. Fees receivable and fees payable are recorded at carrying value, which approximates fair value.
The Company may also make loans to employees or other affiliates, excluding executive officers of the Company. These loans are interest bearing and settle pursuant to the agreed-upon terms with such employees or affiliates, and are included in due from related parties in the accompanying condensed consolidated statements of financial condition. As of March 31, 20212022 and December 31, 2020,2021, loans to employees of $11.3$9.2 million and $9.5$8.8 million, respectively, were included in due from related parties on the accompanying condensed consolidated statements of financial condition. Of these amounts $6.7$3.8 million and $4.6$3.8 million, respectively, are related to forgivable loans. These forgivable loans provide for a cash payment up-front to employees, with the amount due back to the Company forgiven over a vesting period.  An employee that voluntarily ceases employment, or is terminated with cause, is generally required to pay back to the Company any unvested forgivable loans granted to them.  The forgivable loans are recorded as an asset to the Company on the date of grant and payment, and then amortized to compensation expense on a straight-line basis over the vesting period.  The vesting period on forgivable loans is generally one to three years. The Company recorded compensation expense of $0.8 million and$1.2 million and $1.1 million for the three months ended March 31, 20212022 and 2020,2021, respectively. This expense is included in employee compensation and benefits in the accompanying condensed consolidated statements of operations. For the three months ended March 31, 20212022 and 2020,2021, the interest income was $0.1 million, for these related party loans and advances, and are included in interest and dividends in the accompanying condensed consolidated statements of operations.
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Cowen Inc.
Notes to the sales of portions of the Company's ownership interest in the activist business of Starboard Value to the Starboard principals. It is being financed through the profits of the relevant Starboard entities over a five-year period and earns interest at 5.0% per annum. As of March 31, 2021, the balance had been repaid in full. The interest income for the three months ended March 31, 2021 was insignificant and the interest income for the three months ended March 31, 2020 was $0.1 million.Unaudited Condensed Consolidated Financial Statements (Continued)
The remaining balance included in due from related parties of $9.6$12.4 million and $7.9$22.6 million as of March 31, 20212022 and December 31, 2020,2021, respectively, relates to amounts due to the Company from affiliated investment funds and real estate entities due to expenses paid on their behalf. Included in due to related parties is approximately $0.2 million and $0.2 million as of March 31, 2021 and December 31, 2020, respectively, related to a subordination agreement with an investor in certain real estate funds. This total is based on a hypothetical liquidation of the real estate funds as of the balance sheet date.
Employees and certain other related parties invest on a discretionary basis within consolidated entities. These investments generally are subject to preferential management fee and performance fee arrangements. As of March 31, 20212022 and December 31, 2020,2021, such investments aggregated $34.8$58.3 million and $84.3$53.9 million, respectively, were included in non-controlling interests on the accompanying condensed consolidated statements of financial condition. Their share of the net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds aggregated $10.1$10.3 million and $0.1$10.1 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
The Company may, at times, have unfunded commitment amounts pertaining to related parties. See Note 1722 for amounts committed as of March 31, 2021.2022.
25.26. Guarantees and Off-Balance Sheet Arrangements
Guarantees
US GAAP requires the Company to disclose information about its obligations under certain guarantee arrangements. Those standards define guarantees as contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying security (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or nonoccurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. Those standards also define guarantees as contracts that contingently require the guarantor to make
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
payments to the guaranteed party based on another entity's failure to perform under an agreement as well as indirect guarantees of the indebtedness of others.
In the normal course of its operations, the Company enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Company's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects the risk of loss to be remote.
The Company indemnifies and guarantees certain service providers, such as clearing and custody agents, trustees and administrators, against specified potential losses in connection with their acting as an agent of, or providing services to, the Company or its affiliates. The Company also indemnifies some clients against potential losses incurred in the event specified third-party service providers, including sub-custodians and third-party brokers, improperly execute transactions. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make significant payments under these arrangements and has not recorded any contingent liability in the condensed consolidated financial statements for these indemnifications.
The Company also provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the accompanying condensed consolidated financial statements for these indemnifications.
The Company may maintain cash and cash equivalents at financial institutions in excess of federally insured limits. The Company has not experienced any material losses in such accounts and does not believe it is exposed to significant credit risks in relation to such accounts.
Off-Balance Sheet Arrangements
The Company has no material off-balance sheet arrangements, which have not been disclosed, as of March 31, 20212022 and December 31, 2020.2021. Through indemnification provisions in clearing agreements with clients, customer activities may expose the Company to off-balance-sheet credit risk. Pursuant to the clearing agreement, the Company is required to reimburse the Company's clearing broker, without limit, for any losses incurred due to a counterparty's failure to satisfy its contractual obligations. However, these transactions are collateralized by the underlying security, thereby reducing the associated risk to changes in the market value of the security through the settlement date.
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The Company's customer securities activities are transacted on a delivery versus payment, cash or margin basis. In delivery versus payment transactions, the Company is exposed to risk of loss in the event of the customers' or brokers' inability to meet the terms of their contracts.
In margin transactions, the Company extends credit to clients collateralized by cash and securities in their account. In the event the customers or brokers fail to satisfy their obligations, the Company may be required to purchase or sell securities at prevailing market prices in order to fulfill the obligations.
The Company's exposure to credit risk can be directly impacted by volatile securities markets, which may impair the ability of counterparties to satisfy their contractual obligations. The Company seeks to control its credit risk through a variety of reporting and control procedures, including establishing credit limits based upon a review of the customers' financial condition and credit ratings. The Company seeks to control the risk associated with its customer margin transactions by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company also monitors required margin levels daily and, pursuant to its guidelines, requires customers to deposit additional collateral, or reduce positions, when necessary.
In addition, during the normal course of business, the Company has exposure to a number of risks including market risk, currency risk, credit risk, operational risk, liquidity risk and legal risk. As part of the Company's risk management process, these risks are monitored on a regular basis throughout the course of the year.
The Company enters into secured and unsecured borrowing agreements to obtain funding necessary to cover daily securities settlements with clearing corporations. At times, funding is required for unsettled customer delivery versus payment and riskless principal transactions, as well as to meet deposit requirements with clearing organizations. Secured arrangements are
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Cowen Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
collateralized by the securities. The Company maintains uncommitted financing arrangements with large financial institutions, the details of which are summarized below as of March 31, 2021.2022.
LenderContractual AmountAvailable AmountMaturity DateDescription
Pledge Lines(dollars in thousands)
BMO Harris Bank$75,000 $75,000 NoneSecured Tri-Party Pledge Facility
BMO Harris Bank150,000 150,000 NoneSecured Depository Trust Company Pledge Line
       Total225,000 225,000 
Spike Line
BMO Harris Bank
Canadian Imperial Bank
of Commerce
Texas Capital Bank, in syndication		70,000 70,000 August 20, 2021Unsecured committed spike line facility to cover short term increases in National Securities Clearing Corporation margin deposit requirements
Revolving Credit Facility
Morgan Stanley25,000 25,000 March 24, 2026Unsecured Corporate Revolver
Total Credit Lines$320,000 $320,000 
LenderContractual AmountAvailable AmountMaturity DateDescription
Pledge Lines(dollars in thousands)
      BMO Harris Bank$75,000 $75,000 NoneSecured Tri-Party Pledge Facility
       BMO Harris Bank150,000 150,000 NoneSecured Depository Trust Company Pledge Line
       Total225,000 225,000 
Spike Line
     BMO Harris Bank
     Canadian Imperial Bank
     of Commerce, in syndication		70,000 70,000 August 19, 2022Unsecured committed spike line facility to cover short term increases in National Securities Clearing Corporation margin deposit requirements
Revolving Credit Facility
     Morgan Stanley25,000 25,000 March 24, 2026Unsecured Corporate Revolver
Total Credit Lines$320,000 $320,000 

26.27. Subsequent Events
On April 27, 202121, 2022 the Board of Directors declared a quarterly cash dividend payable on its common stock of $0.10$0.12 per common share, payable on June 15, 2021,2022, to stockholders of record on June 1, 2021. During the same meeting, the Board of Directors also approved a $25.0 million increase in the Company's share repurchase program (see Note 19) bringing the total remaining shares available for repurchase to $50.0 million.2022.
The Company has evaluated events that have occurred after the balance sheet date but before the financial statements are issued and has determined that there were no other subsequent events requiring adjustment or disclosure in the condensed consolidated financial statements.




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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
         The discussion contains forward-looking statements, which involve numerous risks and uncertainties, including, but not limited to, those described in the sections titled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20202021 (the "2020"2021 Form 10-K") and in Item 1A of this Quarterly Report on Form 10-Q, many of which risks are currently elevated by, and may or will continue to be elevated by, the COVID-19 pandemic. This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and related notes of Cowen Inc. included elsewhere in this quarterly report. Actual results may differ materially from those contained in any forward-looking statements.
Overview
Cowen Inc., a Delaware corporation formed in 2009, is a diversified financial services firm that, together with its consolidated subsidiaries (collectively, "Cowen" or the "Company"), provides investment banking, research, sales and trading, prime brokerage, global clearing, securities financing, commission management services and investment management through its two business segments: the Operating Company ("Op Co") and the Asset Company ("Asset Co").
Operating Company
The Op Co segment consists of four divisions: the Cowen Investment Management ("CIM") division, the Investment Banking division, the Markets division (which includes sales and trading, prime brokerage, global clearing, securities financing and commission management services) and the Research division. The Company refers to the Investment Banking division, the Markets division and the Research division collectively as its investment banking businesses. Op Co's CIM division includes advisers to investment funds (including private equity structures and privately placed hedge funds), and registered funds. Op Co's investment banking businesses offer industry focused investment banking for growth-oriented companies including advisory and global capital markets origination, domain knowledge-driven research, sales and trading platforms for institutional investors, global clearing, commission management services and also a comprehensive suite of prime brokerage services.
The CIM division is the Company's investment management business, which operates primarily under the Cowen Investment Management name. CIM offers innovative investment products and solutions across the liquidity spectrum to institutional and private clients. The predecessor to this business was founded in 1994 and, through one of its subsidiaries, has been registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act") since 1997. The Company's investment management business offers investors access to a number of strategies to meet their specific needs including private healthcare investing, private sustainable investing, healthcare royalties, activismmerger arbitrage and merger arbitrage.activism. A portion of the Company’s capital is invested alongside the Company's investment management clients. The Company has also invested capital in its insurance and reinsurance businesses.
Op Co's investment banking businesses include investment banking, research, sales and trading, prime brokerage, global clearing, securities financing and commission management services provided primarily to companies and institutional investor clients. Sectors covered by Op Co's investment banking business include healthcare, technology, media and telecommunications, consumer, industrials, informationtech-enabled and technologybusiness services, and energy. We provideprovide research and brokerage services to over 6,000 domestic and international clients seeking to trade securities and other financial instruments, principally in our sectors. The investment banking businesses also offer a full-service suite of introduced prime brokerage services targeting emerging private fund managers. Historically, we have focused our investment banking efforts on small to mid-capitalization public companies as well as private companies. From time to time, the Company invests in private capital raising transactions of its investment banking clients.
Asset Company
The Asset Co segment consists of the Company's private investments, private real estate investments and other legacy investment strategies. The focus of Asset Co is to drive future monetization of the invested capital of the segment.
Certain Factors Impacting Our Business
Our Company's businesses and results of operations are impacted by the following factors:
•Underwriting, private placement and strategic/financial advisory fees.  Our revenues from investment banking are directly linked to the underwriting fees we earn in equity and debt securities offerings in which the Company acts as an underwriter, private placement fees earned in non-underwritten transactions, sales commissions earned in at-the-market offerings and success fees earned in connection with advising both buyers and sellers, principally in mergers and acquisitions. As a result, the future performance of our investment banking business will depend on, among other things, our ability to secure lead manager and co-manager roles in clients' capital raising transactions as well as our ability to secure mandates as a client's strategic financial advisor.
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•Liquidity.  As a clearing broker-dealer in the U.S., we are subject to cash deposit requirements with clearing organizations, brokers and banks that may be large in relation to our total liquid assets.
•Equity research fees.  Equity research fees are paid to the Company for providing access to equity research. The Company also permits institutional customers to allocate a portion of their commissions to pay for research products and other services provided by third parties. Our ability to generate revenues relating to our equity research depends on the quality of our research and its relevance to our institutional customers and other clients.
•Principal transactions. Principal transactions revenue includes net trading gains and losses from the Company's market-making activities and net trading gains and losses on inventory and other Company positions. Commissions associated with these transactions are also included herein. In certain cases, the Company provides liquidity to clients buying or selling blocks of shares of listed stocks without previously identifying the other side of the trade at execution, which subjects the Company to market risk.
•Commissions.  Our commission revenues depend for the most part on our customers' trading volumes and on the notional value of the non-U.S. securities traded by our customers.
•Investment performance.  Our revenues from incentive income and carried interest allocations are linked to the performance of the investment funds and accounts that we manage. Performance also affects assets under management because it influences investors' decisions to invest assets in, or withdraw assets from, the investment funds and accounts managed by us.
•Fee and allocation rates.  Our management fee revenues are linked to the management fee rates we charge as a percentage of contributed and invested capital. Our incentive income revenues are linked to the rates we charge as a percentage of performance-driven asset growth. Our incentive allocations are generally subject to "high-water marks," whereby incentive income is generally earned by us only to the extent that the net asset value of an investment fund at the end of a measurement period exceeds the highest net asset value as of the end of the earlier measurement period for which we earned incentive income. Our incentive allocations, in some cases, are subject to performance hurdles. Additionally, our revenues from management fees are directly linked to assets under management. Positive performance in our legacy funds increases assets under management which results in higher management fees.
•Investment performance of our own capital.  We invest our own capital and the performance of such invested capital affects our revenues.  Investment income in the investment bank business includes gains and losses generated by the capital the Company invests in private capital raising transactions of its investment banking clients.  Our revenues from investment income are linked to the performance of the underlying investments.
External Factors Impacting Our Business
Our financial performance is highly dependent on the environment in which our businesses operate. We believe a favorable business environment is characterized by many factors, including a stable geopolitical climate, transparent financial markets, low inflation, low interest rates, low unemployment, strong business profitability and high business and investor confidence. Unfavorable or uncertain economic or market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability (or increases in the cost of) credit and capital, increases in inflation or interest rates, exchange rate volatility, unfavorable global asset allocation trends,trends, outbreaks of hostilities or other geopolitical instability, such as the ongoing war in Ukraine, corporate, political or other scandals that reduce investor confidence in the capital markets, global health crisis, such as the ongoing COVID-19 pandemic, or a combination of these or other factors. Until the COVID-19 pandemic subsides, we could experience reduced levels in certain of our investment banking activities, reduced revenues from incentive income in our investment management business and reduced investment income. Our businesses and profitability have been and may continue to be adversely affected by market conditions in many ways, including the following:
•Our investment bank business has been, and may continue to be, adversely affected by market conditions. Increased competition continues to affect our investment banking and capital markets businesses. The same factors also affect trading volumes in secondary financial markets, which affect our brokerage business. Commission rates, market volatility, increased competition from larger financial firms and other factors also affect our brokerage revenues and may cause these revenues to vary from period to period.
•Our investment management business can be adversely affected by unanticipated levels of requested redemptions. We experienced significant levels of requested redemptions during the 2008 financial crisis and, while the environment for investing in investment management products has since improved, it is possible that we could intermittently experience redemptions above historical levels, regardless of investment fund performance.
•Our investment bank business focuses primarily on small to mid-capitalization and private companies in specific industry sectors. These sectors may experience growth or downturns independent of general economic and market conditions, or may face market conditions that are disproportionately better or worse than those impacting the economy and markets
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generally. In addition, increased government regulation has had, and may continue to have, a disproportionate effect on
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capital formation by smaller companies. Therefore, our investment bank business could be affected differently than overall market trends.
Our businesses, by their nature, do not produce predictable earnings. Our results in any period can be materially affected by conditions in global financial markets and economic conditions generally. We are also subject to various legal and regulatory actions that impact our business and financial results.
Recent Developments
On March 23, 2022, Cowen announced the public launch of the Company's digital asset division, Cowen Digital LLC. Based in Stamford, Connecticut, the new division offers full-service trade execution and custody solutions on a platform that provides institutional clients with secure and compliant access to the digital asset ecosystem. Custody solutions are provided through Cowen’s strategic partnership with Standard Custody & Trust, a subsidiary of PolySign Inc.
Basis of Presentation
The unaudited condensed consolidated financial statements of the Company in this Form 10-Q are prepared in accordance with Generally Accepted Accounting Principles in the United States ("US GAAP")GAAP as promulgated by the Financial Accounting Standards Board ("FASB") through Accounting Standards Codification (the "Accounting Standards") as the source of authoritative accounting principles in the preparation of financial statements and include the accounts of the Company, its subsidiaries, and entities in which the Company has a controlling financial interest or a substantive, controlling general partner interest. All material intercompany transactions and balances have been eliminated in consolidation. Certain fund entities that are consolidated in the condensed consolidated financial statements, are not subject to these consolidation provisions with respect to their own investments pursuant to their specialized accounting.
The Company serves as the managing member/general partner and/or investment manager to affiliated fund entities which it sponsors and manages. Certain of these funds in which the Company has a substantive, controlling general partner interest are consolidated with the Company pursuant to US GAAP as described below (the "Consolidated Funds"). Consequently, the Company's condensed consolidated financial statements reflect the assets, liabilities, income and expenses of these funds on a gross basis. The ownership interests in these funds which are not owned by the Company are reflected as redeemable and non-redeemable non-controlling interests in consolidated subsidiaries in the condensed consolidated financial statements appearing elsewhere in this Form 10-Q. The management fees and incentive income earned by the Company from these funds are eliminated in consolidation.
During the first quarter of 2021, the Company changed the presentation of certain income streams on its condensed consolidated statements of operations by moving the income streams from Other income - net gains (losses) on securities, derivatives and other investments to Revenues. Additionally, the Company moved proprietary trading gains and losses generated by the Company’s broker dealer entities from Brokerage revenue to Investment income (loss) – securities principal transactions, net.
The Company believes that these presentation changes provide a better representation of the Company’s operating results as it is used by management to monitor the Company’s financial performance and is consistent with industry practice. The changes in presentation have no impact on net income and prior period amounts have been recast to reflect such changes in presentation.
Acquisition
On February 26, 2021, the Company, through its indirect wholly owned subsidiary, Cowen Malta Holdings Ltd., completed the acquisition of all of the outstanding equity interest of Axeria Insurance Limited, an insurance company organized under the laws of Malta whose principal business activity is to provide insurance coverage to third parties Axeria Insurance Limited was renamed Cowen Insurance Company Ltd upon acquisition.
Expenses
The Company's expenses consist of compensation and benefits, insurance and reinsurance costs, general, administrative and other, and Consolidated Funds expenses.
•Compensation and Benefits.  Compensation and benefits is comprised of salaries, benefits, discretionary cash bonuses and equity-based compensation. Annual incentive compensation is variable, and the amount paid is generally based on a combination of employees' performance, their contribution to their business segment, and the Company's performance. Generally, compensation and benefits comprise a significant portion of total expenses, with annual incentive compensation comprising a significant portion of total compensation and benefits expenses.
•Insurance and Reinsurance claims, commissions and amortization of deferred acquisition costs. Insurance and reinsurance-related expenses reflect loss and claim reserves, acquisition costs and other expenses incurred with respect to our insurance and reinsurance operations.
•Operating, General and Administrative.  General, administrative and other expenses are primarily related to professional services, occupancy and equipment, business development expenses, communications, expenses associated with our reinsurance business and other miscellaneous expenses. These expenses may also include certain one-time charges and non-cash expenses.
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•Depreciation and Amortization.  Depreciation and amortization is comprised of depreciation expense for tangible assets and the amortization of intangible assets. The depreciation of assets capitalized under finance leases is included in depreciation and amortization expenses as well.
•Consolidated Funds Expenses.  The Company's condensed consolidated financial statements reflect the expenses of the Consolidated Funds and the portion attributable to other investors is allocated to a non-controlling interest.
Income Taxes
The taxable results of the Company’s U.S. operations are subject to U.S. federal, state and local taxation as a corporation. The Company is also subject to foreign taxation on income it generates in certain countries.
The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating or
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capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that, in management’s view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future. Deferred tax liabilities that cannot be realized in a similar future time period and thus that cannot offset the Company’s deferred tax assets are not taken into account when calculating the Company’s net deferred tax assets.
Temporary Equity
Temporary equity consists of Redeemable 5.625% Series A cumulative perpetual convertible preferred stock ("Series A Convertible Preferred Stock"). The Company has irrevocably elected to cash settle $1,000.00 of each conversion of any share of the Series A Convertible Preferred Stock. As the holders can exercise the conversion option on their shares of Series A Convertible Preferred Stock at any time and require cash payment upon conversion, the Company has classified the Series A Convertible Preferred Stock preferred stock in temporary equity.
Non-Redeemable Non-Controlling Interests
Non-controlling interests represent the pro rata share of the income or loss of the non-wholly owned consolidated entities attributable to the other owners of such entities. When non-controlling interest holders do not have redemption features that can be exercised at the option of the holder currently or contingent upon the occurrence of future events, their ownership has been classified as temporarya component of permanent equity. Ownership which has been classified in permanent equity are non-controlling interests for which are either not redeemable at the option of the holder or the holder does not have the unilateral right to redeem its ownership interests.
Investment Fund Performance and Assets Under Management
For the three months ended March 31, 2021,2022, the Company's activist andstrategy had marginally negative results but outperformed its benchmark while its merger arbitrage investment strategies (including the merger arbitrage-focused UCITS Fund) had positive results. The Company's healthcare royalty strategy is now making allocations from the strategy's fourth fund. Our privateThe Company’s healthcare investments strategy is now deploying capital from its third fund, having made twenty three investments by the end of the three months ended March 31, 2021, with a pipeline of opportunities ahead.fourth fund. Finally, our sustainable investing strategy had its final closing and is now deploying capital, with twothree investments made as of March 31, 2021, with a pipeline of opportunities ahead.2022. The liquidation of certain multi-strategy hedge funds advised by the Company also continues.
As of March 31, 2021,2022, the Company had assets under management of $14 billion.o
CapabilityPrivate Healthcare InvestmentsHealthcare RoyaltiesActivismMerger ArbitrageSustainabilityOther (a)
(dollars in millions)
AUM$946$3,653$6,871$345$1,476$739
Team
Private Equityüüü
Hedge Fundüü
Managed Accountüüüü
UCITSü
Otherü
f $15.6 billion.
StrategyHealthcare InvestmentsHealthcare RoyaltiesActivismMerger ArbitrageSustainable InvestmentsOther (a)
(dollars in millions)
AUM$1,074$3,556$8,387$311$1,367$884
Team
Private Equityüüü
Hedge Fundüü
Managed Accountüüüü
UCITSü
Otherü
(a) Other capabilitiesstrategies include private equity funds, legacy funds and other tradingprivate investment strategies.
The Company's Invested Capital
The Company invests a significant portion of its capital base to help drive results and facilitate the growth of the Op Co and Asset Co business segments. Within Op Co, management allocates capital to three primary investment categories: (i) broker-dealer capital and related trading strategies; (ii) liquid alternative trading strategies; and (iii) public and private healthcare strategies. Broker-dealer capital and related trading strategies include capital investments in the Company's broker-dealers as well as securities finance and special purpose acquisition company trading strategies to grow liquidity and returns within operating businesses.  Much of the Company's public and private healthcare strategies and liquid alternative trading strategies portfolios are invested alongside the Company's investment management clients. The Company's liquid alternative trading strategies include
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merger arbitrage and activist fund strategies. In addition, from time to time, the Company makes investments in private capital raising transactions of its investment banking clients.
The Company allocates capital to Asset Co's private investments. Asset Co's private investments include the Company's investment in Italian wireless broadband provider Linkem, private equity funds Formation8 and Eclipse and legacy real estate investments.
As of March 31, 2021,2022, the Company's invested capital amounted to a net value of $928.5$842.8 million (supporting a long market value of $1,028.4$760.9 million), representing approximately 84%81% of Cowen's stockholders' equity presented in accordance with
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US GAAP. The table below presents the Company's invested equity capital by strategy and as a percentage of Cowen's stockholders' equity as of March 31, 2021.2022. The total net values presented in the table below do not tie to Cowen's condensed consolidated statement of financial condition as of March 31, 20212022 because they represent only some of the line items in the accompanying condensed consolidated statement of financial condition.
StrategyStrategyNet Value% of Stockholders' EquityStrategyNet Value% of Stockholders' Equity
(dollars in millions)(dollars in millions)
Op CoOp CoOp Co
Broker-dealer capital and related trading Broker-dealer capital and related trading$642.9 58% Broker-dealer capital and related trading$613.5 59%
Public and Private Healthcare Public and Private Healthcare68.0 6% Public and Private Healthcare28.1 3%
Liquid Alternative Trading Liquid Alternative Trading79.8 7% Liquid Alternative Trading68.7 7%
Other Other9.3 1% Other12.9 1%
Asset CoAsset CoAsset Co
Private Investments Private Investments128.5 12% Private Investments119.6 12%
TotalTotal928.5 84%Total842.8 81%
Cowen Inc. Stockholders' EquityCowen Inc. Stockholders' Equity$1,106.9 Cowen Inc. Stockholders' Equity$1,035.1 
The allocations shown in the table above will change over time.
Results of Operations
To provide comparative information of the Company's operating results for the periods presented, a discussion of Economic Income (Loss) (which is a non-GAAP measure) of our Op Co and Asset Co segments follows the discussion of our total consolidated US GAAP results.
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Three Months Ended March 31, 20212022 Compared with Three Months Ended March 31, 2020
Condensed Consolidated Statements of Operations
 Three Months Ended March 31,Period to Period
 20212020$ Change% Change
 (dollars in thousands)
Revenues    
Investment banking$304,834 $105,028 $199,806 190 %
Brokerage173,737 141,377 32,360 23 %
Investment income (loss)
Securities principal transactions, net63,965(31,045)95,010(306)%
Portfolio fund principal transactions, net15,403(2,818)18,221(647)%
Carried interest allocations96,769(11,544)108,313(938)%
Total investment income (loss)176,137 (45,407)221,544 (488)%
Management fees25,742 11,604 14,138 122 %
Incentive income2,258 — 2,258 #DIV/0!
Interest and dividends59,388 42,077 17,311 41 %
Reimbursement from affiliates288 261 27 10 %
Insurance and reinsurance premiums7,117 10,471 (3,354)(32)%
Other revenues8,169 1,321 6,848 518 %
Consolidated Funds revenues(3,347)(70,009)66,662 (95)%
Total revenues754,323 196,723 557,600 283 %
Interest and dividends expense57,641 38,792 18,849 49 %
Total net revenues696,682 157,931 538,751 341 %
Expenses    
Employee compensation and benefits388,196 124,428 263,768 212 %
Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs6,455 10,430 (3,975)(38)%
Operating, general, administrative and other expenses102,874 88,139 14,735 17 %
Depreciation and amortization expense4,354 5,442 (1,088)(20)%
Consolidated Funds expenses271 2,714 (2,443)(90)%
Total expenses502,150 231,153 270,997 117 %
Other income (loss)    
Net gains (losses) on other investments12,645 (62)12,707 (20,495)%
Bargain purchase gain, net of tax3,855 — 3,855 NM
Gain/(loss) on debt extinguishment(4,538)— (4,538)NM
Total other income (loss)11,962 (62)12,024 (19,394)%
Income (loss) before income taxes206,494 (73,284)279,778 (382)%
Income tax expense (benefit)54,428 (1,173)55,601 (4,740)%
Net income (loss)152,066 (72,111)224,177 (311)%
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds4,562 (62,188)66,750 (107)%
Net income (loss) attributable to Cowen Inc.147,504 (9,923)157,427 (1,586)%
Preferred stock dividends1,698 1,698 — — %
Net income (loss) attributable to Cowen Inc. common stockholders$145,806 $(11,621)$157,427 (1,355)%
2021
Condensed Consolidated Statements of Operations
(unaudited)
 Three Months Ended March 31,Period to Period
 20222021$ Change% Change
 (dollars in thousands)
Revenues    
Investment banking$101,542 $304,834 $(203,292)(67)%
Brokerage168,738 173,737 (4,999)(3)%
Investment income (loss)
Securities principal transactions, net91,25263,96527,28743 %
Portfolio fund principal transactions, net(6,098)15,403(21,501)(140)%
Carried interest allocations(17,067)96,769(113,836)(118)%
Total investment income (loss)68,087 176,137 (108,050)(61)%
Management fees16,769 25,742 (8,973)(35)%
Incentive income633 2,258 (1,625)(72)%
Interest and dividends46,335 59,388 (13,053)(22)%
Insurance and reinsurance premiums11,321 7,117 4,204 59 %
Other revenues, net(949)1,660 (2,609)(157)%
Consolidated Funds revenues(1,884)(3,347)1,463 44 %
Total revenues410,592 747,526 (336,934)(45)%
Interest and dividends expense46,524 57,641 (11,117)(19)%
Total net revenues364,068 689,885 (325,817)(47)%
Expenses    
Employee compensation and benefits187,178 388,196 (201,018)(52)%
Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs7,343 6,455 888 14 %
Operating, general, administrative and other expenses100,801 96,077 4,724 5 %
Depreciation and amortization expense7,185 4,354 2,831 65 %
Consolidated Funds expenses105 271 (166)(61)%
Total expenses302,612 495,353 (192,741)(39)%
Other income (loss)    
Net gains (losses) on other investments5,580 12,645 (7,065)(56)%
Bargain purchase gain, net of tax— 3,855 (3,855)NM
Gain/(loss) on debt extinguishment— (4,538)4,538 NM
Total other income (loss)5,580 11,962 (6,382)(53)%
Income (loss) before income taxes67,036 206,494 (139,458)(68)%
Income tax expense (benefit)11,889 54,428 (42,539)(78)%
Net income (loss)55,147 152,066 (96,919)(64)%
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds20,131 4,562 15,569 341 %
Net income (loss) attributable to Cowen Inc.35,016 147,504 (112,488)(76)%
Preferred stock dividends1,698 1,698 — — %
Net income (loss) attributable to Cowen Inc. common stockholders$33,318 $145,806 $(112,488)(77)%
Revenues
Investment Banking
Investment banking revenues increased $199.8decreased $203.3 million to $304.8$101.5 million for the three months ended March 31, 20212022 compared with $105.0$304.8 million in the prior year period. During the three months ended March 31, 2022, the Company completed six underwriting transactions, 19 strategic advisory transactions and eight debt capital markets transactions. During the three months ended March 31, 2021,, the Company completed 62 underwriting transactions, 21 strategic advisory transactions and 5 debt capital markets transactions. During the three months ended March 31, 2020, the Company completed 28 capital markets transactions, 12 strategic advisory transactions and threefive debt capital markets transactions.
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Brokerage
BrBrokerage revenuokerage revenues increased $32.3es decreased $5.0 million to $173.7$168.7 million for the three months ended March 31, 20212022 compared with $141.4$173.7 million in the prior year period. This was attributable to an increasea decrease in Institutional Brokerage,institutional brokerage, primarily Special Situations, Cash,special situations and Electronic commission revenue and an increase in Institutional Services, primarily Prime Brokerage.electronic commissions. Customer trading volumes across the industry (according to Bloomberg) increased 33%decreased 12% for the quarter ended March 31, 20212022 compared to the prior year period.
Investment Income (loss)
Securities principal transactions, net
PrincipalSecurities principal transactions, net increased $95.0$27.3 million to $64.0$91.3 million for the three months ended March 31, 20212022 compared with a loss of $31.0$64.0 million in the prior year period. The increase in securities principal transactions, net was primarily attributable to thean increase in performancethe value of our digital investments offset partially by a decrease in our healthcare and merchant banking investments (AppHarvest, Kaleyra, Dermtech), healthcare investments (public strategy), special purpose acquisition companies, securities finance and merger strategies.investments. Additionally, first quarter 2022 also included $18 million from a mark-to-market unrealized gain on an interest rate swap used to offset interest on floating-rate debt. We subsequently realized this gain in early April.
Portfolio fund principal transactions, net
Portfolio fund investment income (loss) increased $18.2decreased $21.5 million to $15.4a loss of $6.1 million for the three months ended March 31, 20212022 compared with a lossan income of $2.8$15.4 million in the prior year period. The increasedecrease is primarily related to gainspublic positions in the Cowen Healthcareour healthcare and Cowen Sustainable funds.sustainable fund investments and a decrease in our activist fund investments.
Carried interest allocations
Carried interest allocations increased $108.3decreased $113.9 million to $96.8a loss of $17.1 million for the three months ended March 31, 20212022 compared with a lossan income of $11.5$96.8 million in the prior year period. The primary driver of the increasedecrease was a decrease in allocations from our healthcare and sustainable investment funds.
Management Fees
Management fees increased $14.1decreased $8.9 million to $25.7$16.8 million for the three months ended March 31, 20212022 compared with $11.6$25.7 million in the prior year period. This increase isdecrease in management fees was primarily related to our sustainablemanagement fees earned from new investors entering the Cowen Sustainable funds in the first quarter of 2021 when, during the quarter, the fund had multiple capital raises offset partially by an increase in the Cowen Healthcare investments business.funds.
Incentive Income
Incentive income increaseddecreased $1.6 million to $2.3$0.6 million for the three months ended March 31, 2021.2022. This increasedecrease was primarily related to a decrease in performance fees from our Cowen Sustainable and Cowen Healthcare investment funds. Due to revenue recognition standards, effective January 1, 2018, the Company recognizes the majority of incentive income earnedallocated to the Company as carried interest allocations, included in our merger fund.investment income (loss).
Interest and Dividends
Interest and dividends increased $17.3decreased $13.1 million to $59.4$46.3 million for the three months ended March 31, 20212022 compared with $42.1$59.4 million in the prior year period. Interest and dividends amounts are primarily attributable to securities finance activity. The increasedecrease in the securities finance activity is due to higherlower customer demand which has created moreless matched book opportunities for international securities.
Reimbursements from Affiliates
Reimbursements from affiliates remained fairly flat at $0.3 million for the three months ended March 31, 2021 compared with $0.3 million in the prior year period.
Insurance and Reinsurance Premiums
Insurance and reinsurance premiums decreased $3.4increased$4.2 million to $7.1$11.3 million for the three months ended March 31, 20212022 compared with $10.5$7.1 million in the prior year period. This increase is driven by an increase in premiums (net of reinsurance) in both our insurance and reinsurance entities.
Other Revenue This decrease is because premiums from policies that were not renewed in 2020 outweighed premiums from new policies in 2020; the decrease was partially offset by the positives, net premium from Cowen Insurance Company.
Other Revenues
Other revenues increased $6.9revenues decreased $2.6 million to $8.2a loss of $0.9 million for the three months ended March 31, 20212022 compared with $1.3an income of $1.7 million in the prior year period. The increase relatesThis primarily related to an increase in board monitoring feesforeign currency exchange rate fluctuations from our private equity business.non-USD transactions.


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Consolidated Funds Revenues
ConsolidatedConsolidated Funds revenues increased $66.7$1.4 million to a loss of $3.3$1.9 million for the three months ended March 31, 20212022 compared with a loss of $70.0$3.3 million in the prior year period. The increase is due to the losses in the prior period related to the
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UCITS fund as the merger strategy experienced significant challenges in Q1 2020. The UCITs fund was deconsolidated during the second quarter of 2020.our Linkem investment. The amounts shown under Consolidated Funds reflect the consolidated total performance for such investment funds, and the portion of those gains or losses that are attributable to other investors is allocated to non-controlling interests.
Interest and Dividends ExpenseExpense
Interest and dividends expense increased $18.8decreased $11.1 million to $57.6$46.5 million for the three months ended March 31, 20212022 compared with $38.8$57.6 million in the prior year period. Interest and dividends amounts are primarily attributable to securities finance activities. There was an increasea decrease in the securities finance activity due to higherlower customer demand which has created moreless matched book opportunities for international securities.
Expenses
Employee Compensation and Benefits
Employee compensationcompensation and benefitsbenefits expenses increased $263.8decreased $201.0 million to $388.2$187.2 million for the three months ended March 31, 20212022 compared with $124.4$388.2 million in the prior year period. The increasedecrease is primarily due to $557.6$336.9 million higherlower total revenues as well as an increasea decrease of $12.0$6.4 million in other income (loss) during 20212022 as compared to 20202021 and thus resulting in a higherlower compensation and benefits accrual. The compensation to revenue ratio, including other income (loss), was 51%45% for the three months ended March 31, 2021,2022, compared with 63%51% in the prior year period.
Insurance and Reinsurance Claims and Commissions
Insurance and reinsurance-related expenses decreased $3.9expenses increased $0.8 million to $6.5$7.3 million for the three months ended March 31, 20212022 compared with $10.4$6.5 million in the prior yearyear period. The decrease is mainly due to a reduction innet increase derives from the claims provision stemming from fewer policies being in force during 2020.insurance entity.
Operating, General, Administrative and Other Expenses
Operating, general, administrative and other expenses increased $14.8$4.7 million to $102.9$100.8 million for the three months ended March 31, 20212022 compared with $88.1$96.1 million in the prior year period. The increase is primarily related to higherfair market value adjustments to the contingent consideration liabilities for previous acquisitions offset only partially by lower floor brokerage and trade execution costs as well as higherand underwriting fees due to higherlower brokerage and investment banking revenues, offset only partially by decreased marketing and business development expenses and occupancy costs.revenues.
Depreciation and Amortization Expenses
Depreciation and amortization expenses decreased $1.0increased $2.8 million to $4.4$7.2 million for the three months ended March 31, 20212022 compared with $5.4$4.4 million in the prior year period. The decreaseincrease is primarily related certain intangible assets being fully amortized in the first quarter ofto two acquisitions which closed during 2021.
Consolidated Funds ExpensesExpenses
Consolidated Funds expenses decreased $2.4$0.2 million to $0.3$0.1 million for the three months ended March 31, 20212022 compared with $2.7$0.3 million in the prior year period. The decrease isDuring the first quarter of 2022, the Company deconsolidated Cowen Private Investments LP as the fund was liquidated. During the first quarter of 2021, the Company deconsolidated Cowen Sustainable Investments I, LP due to the deconsolidation of one fund during 2021. TheCompany's ownership being diluted through a capital equalization event.The amounts shown under Consolidated Funds reflect the consolidated total performance for such investment funds, and the portion of those gains or losses that are attributable to other investors is allocated to non-controlling interests.
Other Income (Loss)
Other income (loss) increased $11.9decreased $6.4 million to $12.0$5.6 million for the three months ended March 31, 20212022 compared with a loss of $0.1$12.0 million in the prior year period. The increasedecrease in other income (loss), which primarily represents our equity method investments, was primarily attributable to the increasea decrease in performance in our activist investments.investments and also the bargain purchase gain on an acquisition from the first quarter of 2021, offset partially by a loss on debt extinguishment.
Income Taxes
Income tax expense increased $55.6decreased$42.5 million to $54.4$11.9 million for the three months ended March 31, 20212022 compared with an income tax benefit of $1.2$54.4 million in the prior year period.period. This change is primarily attributable to the change in the Company’s income before income taxes for the respective periods.

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Net Income (Loss) Attributable to Non-controlling Interests
Net income (loss) attributable to non-controlling interests increased $66.8$15.5 million to $4.6$20.1 million for the three months ended March 31, 20212022 compared with a lossincome of $62.2$4.6 million in the prior year period. The increase was primarily the result lossesof gains in the first quarter of 20202022 related to weaker performancehigher valuation in the UCITS fund, which was deconsolidated during the second quarter
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of 2020.Company's digital investment. Non-controlling interests represent the pro rata share of the income or loss of the non-wholly owned consolidated entities attributable to the other owners of such entities.
Preferred Stock Dividends
On May 19, 2015, the Company completed its offering of 120,750 shares of the Company's 5.625% Series A cumulative perpetual convertible preferred stock. Each share of the Series A Convertible Preferred Stock is entitled to dividends at a rate of 5.625% per annum. The Company may, at its option, pay dividends in cash, common stock or a combination thereof. The Company accrued $1.7 million preferred stock dividends for the periods ended March 31, 20212022 and 2020,2021, respectively.
Segment Analysis, Economic Income (Loss) and related components
Economic Income (Loss) and related components
The Company presents supplemental financial measures that are not prepared in accordance with US GAAP. These non-GAAP financial measures include (i) Pre-tax Economic Income (Loss) (ii) Economic Income (Loss), (iii) Economic Operating Income (Loss), (iv) Economic Proceeds and related components, (v) Net Economic Proceeds and related components, (vi) Economic Expenses and related components and (vii) related per share measures. The Company believes that these non-GAAP financial measures, viewed in addition to, and not in lieu of, the Company’s reported US GAAP results, provide useful information to investors and analysts regarding its performance and overall results of operations as it presents investors and analysts with a supplemental operating view of the Company’s financials to help better inform their analysis of the Company’s performance.
These Non-GAAP financial measures are an integral part of the Company’s internal reporting to measure the performance of its business segments, allocate capital and other strategic decisions as well as assess the overall effectiveness of senior management. The Company believes that presenting these non-GAAP measures may provide expanded transparency into the Company’s business operations, growth opportunities and expense allocation decisions.
The Company’s primary non-GAAP financial measures of profit or loss are Pre-tax Economic Income (Loss), Economic Income (Loss) and Economic Operating Income (Loss). Pre-tax Economic Income (Loss) is a pre-tax measure which (i) includes management reclassifications which the Company believes provides additional insight on the performance of the Company’s core businesses and divisions; (ii) eliminates the impact of consolidation for Consolidated Funds; and excludes (iii) goodwill and intangible impairment, (iv) certain other transaction-related adjustments and/or reorganization expenses, as well as (v) certain costs associated with debt. Economic Income (Loss) is a similar measure, but after tax, which includes the Company’s income tax expense or benefit [calculatedcalculated on Pre-tax Economic Income (Loss)] once all currently available net operating losses have been utilized (this occurred during tax year 2020) and is presented after preferred stock dividends. Economic Operating Income (Loss) is a similar measure to Economic Income (Loss), but before depreciation and amortization expenses. The Company believes that these non-GAAP financial measures provide analysts and investors transparency into the measures of profit and loss management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels. Additionally, the measures provide investors and analysts with additional insight into the activities of the Company’s core businesses, taking into account, among other things, the impact of minority investment stakes, securities borrowing and lending activities and expenses from investment banking activities on US GAAP reported results. The Company presents Pre-tax Economic Income (Loss) in addition to Economic Income (Loss) and Economic Operating Income (Loss) to provide insight to investors and analysts on how the Company manages its tax position over time.
In addition to Pre-tax Economic Income (Loss), Economic Income (Loss) and Economic Operating Income (Loss), the Company also presents Economic Proceeds, Net Economic Proceeds, Economic Expenses, as well as their related components. These measures include management reclassifications and the elimination of the impact of the consolidation for Consolidated funds as described above. These adjustments are meant to provide comparability to our peers as well as to provide investors and analysts with transparency into how the Company manages its operating businesses and how analysts and investors review and analyze the Company’s and its peers’ similar lines of businesses. For example, among others, within the Company’s Op Co business segment, investors and analysts typically review and analyze the performance of investment banking revenues net of underwriting expenses and excluding the impact of reimbursable expenses. Additionally, the performance of the Company’s Markets business is typically analyzed as a unit incorporating commissions, interest from securities financing transactions and gains and losses from proprietary and facilitation trading. The Company’s investment management business performance is analyzed and reviewed by investors and analysts through investment income, incentive income and management fees. The
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presentation of Economic Proceeds, Net Economic Proceeds, Economic Expenses as well as their related components align with these and other examples of how the Company’s business activities and performance are reviewed by analysts and investors in addition to providing simplification related to legacy businesses and investments for which the Company maintains long-term monetization strategies .strategies. Additionally, the Company manages its operating businesses to an Economic Compensation-to-Proceeds
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ratio. Presentation of Economic Compensation Expense and Economic Proceeds provides transparency in addition to the Company’s US GAAP Compensation Expense.
Reconciliations to comparable US GAAP measures are presented along with the Company’s Non-GAAP financial measures. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other public companies and are not identical to corresponding measures used in our various agreements or public filings.
These Non-GAAP measures should not be considered in isolation or as a substitute for revenue, expenses, income (loss) before income taxes, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared in accordance with US GAAP. As a result of the adjustments made to arrive at these Non-GAAP measures described below, these Non-GAAP measures have limitations in that they do not take into account certain items included or excluded under US GAAP, including its consolidated funds.
For a reconciliation of US GAAP net income (loss) to Pre-tax Economic Income (Loss), Economic Income (Loss) and Economic Operating Income (Loss) for the periods presented and additional information regarding the reconciling adjustments discussed above, see the following section "Reconciliation of US GAAP (Unaudited) to Non-GAAP Measures".
The Company conducts its operations through two segments: Op Co and Asset Co. The Company's principle sources of revenues included in Economic Income (Loss) are derived from activities in the following business segments. The Op Co and Asset Co segments do not conduct inter-segment transactions.
The Op Co segment generates revenue through fiveseveral principal sources: investment banking revenue, brokerage revenue, management fees, incentive income, and investment income earned from the Company's own capital.
The Asset Co segment generates revenue through management fees, incentive income and investment income from the Company’s own capital.
Three Months Ended March 31, 20212022 Compared with Three Months Ended March 31, 20202021
Total Economic Operating Income (Loss) was $145.6$42.8 million for the three months ended March 31, 2021, an increase2022, a decrease of $152.7$102.7 million compared to Economic Operating Income (Loss) of $7.1$145.6 million in the prior year period. Total Economic Income (Loss) was $142.4$37.4 million for the three months ended March 31, 2021, an increase of $155.0 million2022 compared to Economic Income (Loss) of $12.6$142.4 million in the prior year period. Total Pre-tax Economic Income (Loss) was $196.8$52.2 million for the three months ended March 31, 2021, an increase2022, a decrease of $207.7$144.6 million compared to Pre-tax Economic Income (Loss) of $(10.9)$196.8 million in the prior year period.
Economic Proceeds included in total Economic Income (Loss) were $687.4$331.6 million for the three months ended March 31, 2021, an increase2022, a decrease of $476.8$355.8 million compared to $210.6$687.4 million in the prior year period. This was primarily related to an increasea decrease in investment banking, incentive fees and brokerage revenues and incentive income.revenues.
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Operating Company Segment
Economic Proceeds
 Three Months Ended March 31,Total Period-to-Period
 20212020$ Change% Change
 (dollars in thousands)
Economic Proceeds
Investment banking$293,488 $99,197 $194,291 196 %
Brokerage221,848 132,672 89,176 67 %
Management fees26,884 13,116 13,768 105 %
Incentive income (loss)109,925 (1,942)111,867 (5,760)%
Investment income (loss)31,918 (19,449)51,367 (264)%
Other income (loss) economic proceeds1,164 562 602 107 %
Total: Economic Proceeds685,227 224,156 461,071 206 %
Economic Interest Expense5,943 6,343 (400)(6)%
Net Economic Proceeds$679,284 $217,813 $461,471 212 %
 Three Months Ended March 31,Total Period-to-Period
 20222021$ Change% Change
 (dollars in thousands)
Economic Proceeds
Investment banking$98,697 $293,488 $(194,791)(66)%
Brokerage197,856 221,848 (23,992)(11)%
Management fees20,440 26,884 (6,444)(24)%
Incentive income (loss)(12,797)109,925 (122,722)(112)%
Investment income (loss)22,226 31,918 (9,692)(30)%
Other income (loss) economic proceeds3,819 1,164 2,655 228 %
Total: Economic Proceeds330,241 685,227 (354,986)(52)%
Economic Interest Expense / (Income)(8,509)5,943 (14,452)(243)%
Net Economic Proceeds$338,750 $679,284 $(340,534)(50)%
Economic Proceeds The Op Co segment economic proceeds included in Economic Income (Loss) were $685.2330.2 million for the three months ended March 31, 2021,2022, an increasea decrease of $461.0355.0 million compared to $224.2685.2 million in the prior year period.
Investment Banking Economic Proceeds increaseddecreased $194.3194.8 million to $293.598.7 million for the three months ended March 31, 20212022 compared with $99.2293.5 million in the prior year period. During the three months ended March 31, 2022, the Company completed six underwriting transactions, 19 strategic advisory transactions and eight debt capital markets transactions. During the three months ended March 31, 2021, the Company completed 62 underwriting transactions, 21 strategic advisory transactions and 5 debt capital markets transactions. During the three months ended March 31, 2020, the Company completed 28 capital markets transactions, 12 strategic advisory transactions and threefive debt capital markets transactions.
Brokerage Economic Proceeds increased $89.1decreased $23.9 million to $221.8197.9 million for the three months ended March 31, 2021,2022, compared with $132.7$221.8 million in the prior year period. This was attributable to an increasea decrease in Institutional Brokerage,institutional brokerage, primarily Special Situations, Cash,special situations and Electronic commission revenue and an increase in Institutional Services, primarily Prime Brokerage.electronic commissions. Customer trading volumes across the industry (according to Bloomberg) increased 33%decreased 12% for the quarter ended March 31, 20212022 compared to the prior year period.
Management Fees Economic Proceeds for the segment increased $13.8decreased$6.5 million to $26.9$20.4 million for the three months ended March 31, 20212022 compared with $13.1$26.9 million in the prior year period. This increase isdecrease in management fees was primarily related to our sustainablemanagement fees earned from new investors entering the Cowen Sustainable funds in the first quarter of 2021 when, during the quarter, the fund had multiple capital raises offset partially by an increase in the Cowen Healthcare investments business.funds.
Incentive Income (Loss) Economic Proceeds for the segment increaseddecreased $111.8122.7 million to a loss of $109.912.8 million for the three months ended March 31, 20212022 compared with a lossincome of $1.9$109.9 million in the prior year period. This increasedecrease was primarily related to an increasea decrease in performance fees from our sustainableCowen Sustainable and healthcare investments businesses.Cowen Healthcare investment funds.
Investment Income (Loss) Economic Proceeds for the segment increased$51.4decreased $9.7 million to $31.922.2 million for the three months ended March 31, 20212022 compared with a loss of $19.4$31.9 million in the prior year period. The increasedecrease primarily relates to an increasea decrease in performance investments across most of our strategies including activist, healthcare, merger arbitrage, merchant banking and sustainability.portfolio hedge offset partially with gains from our digital investments.
Other Income (Loss) Economic Proceeds for the segment increased $0.62.6 million to $3.8 million for the three months ended March 31, 2022 compared with income of $1.2 million in the prior year period. The change is driven by a $3.3 million increase in the insurance result and a $1.8 million gain on derivatives offset by a $2.5 million loss on foreign exchange.
Economic Interest Expenses / to(Income) were $1.2(8.5) million for the three months ended March 31, 20212022, a decrease of $14.4 million compared with $0.6$5.9 million in the prior year period. The increase comesFirst quarter 2022 interest expense / (income) included an $18 million unrealized gain from the Company's insurance business where reductions in reinsurance premiums have beena mark-to-market adjustment on an interest rate swap used to offset by insurance premiums from Cowen Insurance Company Limited (CICL), which was acquired during the quarter, and improvements in reinsurance loss provisions.interest on floating-rate debt.
Net Economic Interest ExpensesProceeds were $5.9338.8 million for the three months ended March 31, 2021,2022, a decrease of $0.4 million compared with $6.3 million in the prior year period.
Net Economic Proceedswere $679.3 million for the three months ended March 31, 2021, an increase of $461.5340.5 million compared with $217.8$679.3 million in the prior year period.




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Economic Expenses
 Three Months Ended March 31,Total Period-to-Period
 20212020$ Change% Change
Economic Expenses(dollars in thousands)
Employee compensation and benefits$385,578 $125,006 $260,572 208 %
Non-Compensation Expense89,415 80,631 8,784 11 %
Depreciation & Amortization3,183 5,428 (2,245)(41)%
Non-Controlling Interest1,467 1,740 (273)(16)%
Total: Economic Expenses$479,643 $212,805 $266,838 125 %
 Three Months Ended March 31,Total Period-to-Period
 20222021$ Change% Change
Economic Expenses(dollars in thousands)
Employee compensation and benefits$186,424 $385,578 $(199,154)(52)%
Non-Compensation Expense93,792 89,415 4,377 5 %
Depreciation & Amortization7,179 4,349 2,830 65 %
Non-Controlling Interest1,013 1,467 (454)(31)%
Total: Economic Expenses$288,408 $480,809 $(192,401)(40)%
Economic Expenses were $479.6288.4 million for the three months ended March 31, 2021,2022, an increasea decrease of $266.8192.4 million compared with $212.8$480.8 million in the prior year period.
Economic Compensation Expenses were $385.6$186.4 million compared to $125.0$385.6 million in the prior year period. The increasedecrease was due to higherlower revenues. The economic compensation-to-proceeds ratio remained flat atincreased to 56.5% compared to 56.3% compared toin the prior year period.
Economic Non-compensation Expenses Fixed non-compensation expense increased only$0.1$5.2 million to $37.540.9 million for the three months ended March 31, 20212022 compared with $37.3$35.7 million in the prior year period. The increase primarily related to an increase in professional and advisory fees and communication costs. Variable non-compensation expenseexpenses which primarily are comprised of expenses that are incurred as a direct result of the processing and soliciting of revenue generating activities, increased$8.6decreased $0.8 million to $51.9$52.9 million for the three months ended March 31, 20212022 compared with $43.3$53.7 million in the prior year period. The increasedecrease is related to increaseddecreased brokerage and trade execution costs partially offset by lower marketing and business development costs.decreased variable professional and advisory fees, which includes employment agency fees and legal fees directly related to revenues.
Economic Depreciation and Amortization Expenses decreasedincreased to $3.2$7.2 million for the three months ended March 31, 20212022 compared with $5.4$4.3 million in the prior year period. The decreaseincrease is primarily related certain intangible assets being fully amortized in the first quarter ofto two acquisitions which closed during 2021.
Economic Non-controlling interests decreased by $0.2$0.5 million to $1.5$1.0 million for the three months ended March 31, 20212022 compared with $1.7$1.5 million in the prior year period. Non-controlling interest represents the portion of the net income or loss attributable to certain non-wholly owned subsidiaries that is allocated to our partners in those subsidiaries.
Economic Income and Economic Operating Income

 Three Months Ended March 31,Total Period-to-Period
 20222021$ Change% Change
 (dollars in thousands)
Pre-tax Economic Income (Loss)$50,342 $198,475 $(148,133)(75)%
Economic income tax expense12,585 53,191 (40,606)(76)%
Preferred stock dividends1,460 1,426 34 2 %
Economic Income (Loss)36,297 143,858 (107,561)(75)%
Add back: Depreciation and amortization expense, net of taxes5,385 3,183 2,202 69 %
Economic Operating Income (Loss)$41,682 $147,041 $(105,359)(72)%
 Three Months Ended March 31,Total Period-to-Period
 20212020$ Change% Change
 (dollars in thousands)
Pre-tax Economic Income (Loss)$198,475 $5,008 $193,467 3863 %
Economic income tax expense *53,191 — 53,191 NA
Preferred dividends1,426 1,358 68 5 %
Economic Income (Loss) *143,858 3,650 140,208 3841 %
Add back: Depreciation and amortization expense, net of taxes3,183 5,428 (2,245)(41)%
Economic Operating Income (Loss)$147,041 $9,078 $137,963 1,520 %
* Economic Income (Loss) is presented net of associated taxes, starting in the first quarter of 2021, asPreferred Stock Dividends.On May 19, 2015, the Company utilized all available net operating losses during 2020.completed its offering of 120,750 shares of Series A Convertible Preferred Stock. Each share of the Series A Convertible Preferred Stock is entitled to dividends at a rate of 5.625% per annum. The Company may, at its option, pay dividends in cash, common stock or a combination thereof.
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Asset Co Segment
 Three Months Ended March 31,Total Period-to-Period
 20212020$ Change% Change
Economic Proceeds(dollars in thousands)
Management fees$316 $204 $112 55 %
Incentive income (loss)(1,214)(2,144)930 (43)%
Investment income (loss)3,090 (11,655)14,745 (127)%
Other income (loss) economic proceeds(1)— (1)NM
Total: Economic Proceeds2,191 (13,595)15,786 (116)%
Economic Interest Expense1,090 1,435 (345)(24)%
Net Economic Proceeds$1,101 $(15,030)$16,131 (107)%
 Three Months Ended March 31,Total Period-to-Period
 20222021$ Change% Change
Economic Proceeds(dollars in thousands)
Brokerage(62)— (62)NM
Management fees$266 $316 $(50)(16)%
Incentive income (loss)(215)(1,214)999 (82)%
Investment income (loss)1,407 3,090 (1,683)54 %
Other income (loss) economic proceeds1 (1)2 (200)%
Total: Economic Proceeds1,397 2,191 (794)(36)%
Economic Interest Expense / (Income)(1,417)1,090 (2,507)(230)%
Net Economic Proceeds$2,814 $1,101 $1,713 156 %
Economic Proceeds The Asset Co segment proceeds included in Economic Income (Loss) were $2.2$1.4 million for the three months ended March 31, 2021, an increase2022, a decrease of $15.8$0.8 million compared with negative proceeds (due to losses) of $13.6$2.2 million in the prior year period.
Management Fees Economic Proceeds for the segment increased $0.1 million toremained fairly flat at $0.3 million for the three months ended March 31, 20212022 compared with $0.2 million in the prior year period. This increase was related to an increase in management fees from the Company's multi-strategy business.
Incentive Income (Loss) Economic Proceeds for the segment increased $0.9$1.0 million to a loss of $1.2$0.2 million for the three months ended March 31, 20212022 compared with a loss of $2.1$1.2 million in the prior year period. This increase was related to an increase in performance fees from the Company's multi-strategy business.
Investment Income (Loss) Economic Proceeds for the segment increased$14.8decreased $1.7 million to $3.1$1.4 million for the three months ended March 31, 2021,2022, compared with a lossincome of $11.7$3.1 million in the prior year period. The increasedecrease primarily relates to an impairment of an equity method investment and decreased performance of our multi-strat fund which occurred in the first quarter of 2020.multi-strategy funds.
Economic Interest Expenses / (Income) were $1.1(1.4) million for the three months ended March 31, 2021,2022, a decrease of $0.32.5 million compared with $1.41.1 million in the prior year period. First quarter 2022 interest expense included an allocation of a gain from a mark-to-market adjustment on an interest rate swap used to offset interest on floating-rate debt.
Net Economic Proceeds for the segment were proceeds of $1.12.8 million for the three months ended March 31, 2021,2022, an increase of $16.11.7 million compared with negative proceeds (due to losses) of $15.0$1.1 million in the prior year period.

Economic Expenses

 Three Months Ended March 31,Total Period-to-Period
 20212020$ Change% Change
 (dollars in thousands)
Economic Expenses
Employee compensation and benefits$2,819 $699 $2,120 303 %
Non-Compensation Expense(79)154 (233)(151)%
Depreciation & Amortization3 6 (3)(50)%
Total: Economic Expenses$2,743 $859 $1,884 219 %

 Three Months Ended March 31,Total Period-to-Period
 20222021$ Change% Change
 (dollars in thousands)
Economic Expenses
Employee compensation and benefits$951 $2,819 $(1,868)(66)%
Non-Compensation Expense6 (79)85 (108)%
Depreciation & Amortization6 5 1 20 %
Total: Economic Expenses$963 $2,745 $(1,782)(65)%
Economic Expenses were $2.7$1.0 million for the three months ended March 31, 2021, an increase2022, a decrease of $1.8$1.7 million compared to $0.9$2.7 million in the prior year period.
Economic CompensationCompensation Expenses were $2.8$1.0 million for thethe three months ended March 31, 2021,2022, a decrease of $1.8 million compared to $0.7$2.8 million in the prior year period. The increasedecrease was due to higher revenueslower total economic proceeds related to investment income losses.(loss).
Economic Non-compensation Expenses Fixed non-compensation expense increased decreased$0.2 million to and expense credit of $0.1$0.1 million for the three months ended March 31, 20212022 compared with $0.1 million in the prior year period. The decreaseincrease is primarily related to decreased professional, advisory and other fees. Variable non-compensation expenses, which remained consistent for the three months ended March 31, 2022 compared with the prior year period, are comprised of expenses that are incurred as a direct result of the processing and soliciting of revenue generating activities.
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Economic Depreciation and Amortization ExpensesExpenses remained fairly flatconsistent for t thehe three months ended March 31, 20212022 compared to the prior year period and relates to costs allocated from general company assets.
Economic Income and Economic Operating Income
 Three Months Ended March 31,Total Period-to-Period
 20222021$ Change% Change
 (dollars in thousands)
Pre-tax Economic Income (Loss)$1,851 $(1,644)$3,495 (213)%
Economic income tax expense463 (440)903 (205)%
Preferred stock dividends238 272 (34)(13)%
Economic Income (Loss)1,150 (1,476)2,626 (178)%
Add back: Depreciation and amortization expense, net of taxes5 3 2 67 %
Economic Operating Income (Loss)$1,155 $(1,473)$2,628 (178)%
 Three Months Ended March 31,Total Period-to-Period
 20212020$ Change% Change
 (dollars in thousands)
Pre-tax Economic Income (Loss)$(1,644)$(15,889)$14,245 (90)%
Economic income tax expense *(440)— (440)NM
Preferred dividends272 340 (68)(20)%
Economic Income (Loss) *(1,476)(16,229)14,753 (91)%
Add back: Depreciation and amortization expense, net of taxes3 6 (3)(50)%
Economic Operating Income (Loss)$(1,473)$(16,223)$14,750 (91)%
* Economic Income (Loss) is presented net of associated taxes, starting in the first quarter of 2021, asPreferred Stock Dividends.On May 19, 2015, the Company utilized all available net operating losses during 2020.

completed its offering of 120,750 shares of Series A Convertible Preferred Stock. Each share of the Series A Convertible Preferred Stock is entitled to dividends at a rate of 5.625% per annum. The Company may, at its option, pay dividends in cash, common stock or a combination thereof.
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Reconciliation of US GAAP to Non-GAAP Measures for the three months ended March 31, 20212022 and 20202021
The following tables reconciles total US GAAP Revenues to total Economic Proceeds for the three months ended March 31, 20212022 and 2020:

(unaudited)
Three Months Ended March 31, 2021

(Dollar amounts in thousands)
Investment BankingBrokerageInvestment IncomeManagement FeesIncentive IncomeInterest and DividendsReimbursement from AffiliatesReinsurance premiumsOther revenuesConsolidated Funds RevenuesOther Income (Loss)Total
Total US GAAP Revenues and Other Income (Loss)$304,834 $173,737 $176,137 $25,742 $2,258 $59,388 $288 $7,117 $8,169 $(3,347)$11,962 $766,285 
Management Presentation Reclassifications:
Underwriting expensesa(6,915)— — — — — — — — — — (6,915)
Reimbursable client expensesb(4,431)— — — — — (288)— — — — (4,719)
Securities financing interest expensec— 1,435 — — — (41,801)— — — — — (40,366)
Fund start-up costs and distribution feesd— (158)— (4,074)— — — — (635)— — (4,867)
Certain equity method investmentse— — — 3,480 9,643 — — — — — (10,830)2,293 
Carried interestf— — (96,769)— 97,039 — — — — — — 270 
Proprietary trading, interest and dividendsg— 14,622 (35,393)— (326)(4,096)— — (235)— 13,818 (11,610)
Insurance related activities expensesh— — — — — — — (7,117)662 — — (6,455)
Facilitation trading gains and lossesi— 32,212 (8,967)— — (13,491)— — — — (12,966)(3,212)
Total Management Presentation Reclassifications:(11,346)48,111 (141,129)(594)106,356 (59,388)(288)(7,117)(208)— (9,978)(75,581)
Fund Consolidated Reclassificationsl— — — 2,052 97 — — — — 3,347 (2,667)2,829 
Income Statement Adjustments:
Acquisition related amountsn— — — — — — — — (6,798)— (3,855)(10,653)
Debt extinguishmentp— — — — — — — — — — 4,538 4,538 
Total Economic Proceeds$293,488 $221,848 $35,008 $27,200 $108,711 $— $— $— $1,163 $— $— $687,418 





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(unaudited)
Three Months Ended March 31, 2020
(Dollar amounts in thousands)Investment BankingBrokerageInvestment IncomeManagement FeesIncentive IncomeInterest and DividendsReimbursement from AffiliatesReinsurance premiumsOther revenuesConsolidated Funds RevenuesOther Income (Loss)Total
Total US GAAP Revenues and Other Income (Loss)$105,028 $141,377 $(45,407)$11,604 $— $42,077 $261 $10,471 $1,321 $(70,009)$(62)$196,661 
Management Presentation Reclassifications:
Underwriting expensesa(3,640)— — — — — — — — — — (3,640)
Reimbursable client expensesb(2,191)— — — — — (286)— — — — (2,477)
Securities financing interest expensec— 5,284 — — — (27,190)— — — — — (21,906)
Fund start-up costs and distribution feesd— — — (2,011)— — — — (260)— — (2,271)
Certain equity method investmentse— — — 3,049 6,601 — — — — — (7,913)1,737 
Carried interestf— — 11,085 — (10,687)— — — — — — 398 
Proprietary trading, interest and dividendsg— 3,144 (19,209)— — (7,910)— — (533)11,110 7,975 (5,423)
Insurance related activities expensesh— — — — — — — (10,471)34 — — (10,437)
Facilitation trading gains and lossesi— (17,133)22,427 — — (6,977)— — — — — (1,683)
Total Management Presentation Reclassifications:(5,831)(8,705)14,303 1,038 (4,086)(42,077)(286)(10,471)(759)11,110 62 (45,702)
Fund Consolidated Reclassificationsl— — — 678 — — 25 — — 58,899 — 59,602 
Total Economic Proceeds$99,197 $132,672 $(31,104)$13,320 $(4,086)$— $— $— $562 $— $— $210,561 


2021:
(unaudited)
Year Ended March 31, 2022

(Dollar amounts in thousands)
Investment BankingBrokerageInvestment IncomeManagement FeesIncentive IncomeInterest and DividendsReinsurance PremiumsOther Revenues, netConsolidated Funds RevenuesOther Income (Loss)Total
Total US GAAP Revenues and Other Income (Loss)$101,542 $168,738 $68,087 $16,769 $633 $46,335 $11,321 $(949)$(1,884)$5,580 $416,172 
Management Presentation Reclassifications:
Underwriting expensesa(259)— — — — — — — — — (259)
Reimbursable client expensesb(2,586)— — — — — — (311)— — (2,897)
Securities financing interest expensec— (1,247)— — — (29,805)— — — — (31,052)
Fund start-up costs, distribution and other feesd— — — (371)— — — (678)— — (1,049)
Certain equity method investmentse— — — 4,256 3,592 — — — — (5,756)2,092 
Carried interestf— — 17,067 — (16,900)— — — — — 167 
Proprietary trading, interest and dividendsg— 8,818 (62,084)— (337)(5,882)— 1,780 — 16,157 (41,548)
Insurance related activities expensesh— — — — — — (11,321)3,978 — — (7,343)
Facilitation trading gains and lossesi— 21,485 1,877 — — (10,648)— — — (15,981)(3,267)
Total Management Presentation Reclassifications:(2,845)29,056 (43,140)3,885 (13,645)(46,335)(11,321)4,769 — (5,580)(85,156)
Fund Consolidated Reclassificationsl— — (1,314)52 — — — — 1,884 — 622 
Total Economic Proceeds$98,697 $197,794 $23,633 $20,706 $(13,012)$— $— $3,820 $— $— $331,638 
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(unaudited)
Year Ended March 31, 2021
(Dollar amounts in thousands)Investment BankingBrokerageInvestment IncomeManagement FeesIncentive IncomeInterest and DividendsReinsurance PremiumsOther Revenues, netConsolidated Funds RevenuesOther Income (Loss)Total
Total US GAAP Revenues and Other Income (Loss)$304,834 $173,737 $176,137 $25,742 $2,258 $59,388 $7,117 $1,660 $(3,347)$11,962 $759,488 
Management Presentation Reclassifications:
Underwriting expensesa(6,915)— — — — — — — — — (6,915)
Reimbursable client expensesb(4,431)— — — — — — (288)— — (4,719)
Securities financing interest expensec— 1,435 — — — (41,801)— — — — (40,366)
Fund start-up costs, distribution and other feesd— (157)— (4,074)— — — (637)— — (4,868)
Certain equity method investmentse— — — 3,480 9,643 — — — — (10,830)2,293 
Carried interestf— — (96,769)— 97,039 — — — — — 270 
Proprietary trading, interest and dividendsg— 16,100 (32,726)— (326)(4,096)— (234)— 11,153 (10,129)
Insurance related activities expensesh— — — — — — (7,117)662 — — (6,455)
Facilitation trading gains and lossesi— 30,733 (8,967)— — (13,491)— — — (12,968)(4,693)
Total Management Presentation Reclassifications:(11,346)48,111 (138,462)(594)106,356 (59,388)(7,117)(497)— (12,645)(75,582)
Fund Consolidated Reclassificationsl— — (2,667)2,052 97 — — — 3,347 — 2,829 
Income Statement Adjustments:
Acquisition related amountsn— — — — — — — — — (3,855)(3,855)
Debt extinguishment lossp— — — — — — — — — 4,538 4,538 
Total Income Statement Adjustments:— — — — — — — — — 683 683 
Total Economic Proceeds$293,488 $221,848 $35,008 $27,200 $108,711 $— $— $1,163 $— $— $687,418 










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The following table reconciles total US GAAP interest and dividends expense to total Economic Interest Expense for the three months ended March 31, 2021and 2020:2022 and 2021:
(unaudited)
Three Months Ended March 31,
(Dollar amounts in thousands)20212020
Total US GAAP Interest & Dividend Expense$57,641 $38,792 
Management Presentation Reclassifications:
Securities financing interest expensec(40,366)(21,906)
Proprietary trading gains and lossesg(6,254)(6,315)
Facilitation trading gains and lossesi(3,212)(1,683)
Total Management Presentation Reclassifications:(49,832)(29,904)
Income Statement Adjustments:
Amortization of discount/(premium) on debtm(776)(1,110)
Total Economic Interest Expense$7,033 $7,778 

(unaudited)
Year Ended March 31,
(Dollar amounts in thousands)20222021
Total US GAAP Interest & Dividend Expense$46,524 $57,641 
Management Presentation Reclassifications:
Securities financing interest expensec(31,052)(40,366)
Fund start-up costs, distribution and other feesd(895)(538)
Proprietary trading gains and lossesg(21,161)(4,235)
Facilitation trading gains and lossesi(3,267)(4,693)
Total Management Presentation Reclassifications:(56,375)(49,832)
Income Statement Adjustments:
Amortization of discount/(premium) on debtm(75)(776)
Total Income Statement Adjustments:(75)(776)
Total Economic Interest Expense$(9,926)$7,033 
The following tables reconcile total US GAAP Expenses and non-controlling interests to total Economic Expenses for the three months ended March 31, 2021and 2020:2022 and 2021:
(unaudited)
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
(Dollar amounts in thousands)Employee Compensation and BenefitsNon-compensation US GAAP ExpensesNet income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment fundsTotalEmployee Compensation and BenefitsNon-compensation US GAAP ExpensesNet income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment fundsTotal
Total US GAAP$388,196 $113,954 $4,562 $506,712 $124,428 $106,725 $(62,188)$168,965 
Management Presentation Reclassifications:
Underwriting expensesa— (6,915)— (6,915)— (3,640)— (3,640)
Reimbursable client expensesb— (4,719)— (4,719)— (2,477)— (2,477)
Fund start-up costs and distribution feesd— (4,867)— (4,867)— (2,271)— (2,271)
Certain equity method investmentse— 2,293 — 2,293 — 1,737 — 1,737 
Carried interestf— 270 — 270 — 398 — 398 
Proprietary trading, interest and dividendsg— 2,306 (7,662)(5,356)— 1,021 (129)892 
Insurance related activities expensesh— (6,455)— (6,455)— (10,437)— (10,437)
Associated partner/banker compensationj548 (548)— — 1,624 (1,624)— — 
Management company non-Controlling interestk(347)(1,120)1,467 — (347)(1,394)1,741 — 
Total Management Presentation Reclassifications:201 (19,755)(6,195)(25,749)1,277 (18,687)1,612 (15,798)
Fund Consolidated Reclassificationsl— (271)3,100 2,829 — (2,714)62,316 59,602 
Income Statement Adjustments:
Acquisition related amountsn— (238)— (238)— 895 — 895 
Total Income Statement Adjustments:— (238)— (238)— 895 — 895 
Total Economic Expenses$388,397 $93,690 $1,467 $483,554 $125,705 $86,219 $1,740 $213,664 
(unaudited)
Year Ended March 31, 2022Year Ended March 31, 2021
(Dollar amounts in thousands)Employee Compensation and BenefitsNon-compensation US GAAP ExpensesNet income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment fundsTotalEmployee Compensation and BenefitsNon-compensation US GAAP ExpensesNet income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment fundsTotal
Total US GAAP$187,178 $115,434 $20,131 $322,743 $388,196 $107,157 $4,562 $499,915 
Management Presentation Reclassifications:
Underwriting expensesa— (259)— (259)— (6,915)— (6,915)
Reimbursable client expensesb— (2,897)— (2,897)— (4,719)— (4,719)
Fund start-up costs, distribution and other feesd— (154)— (154)— (4,330)— (4,330)
Certain equity method investmentse— 2,092 — 2,092 — 2,293 — 2,293 
Carried interestf— 167 — 167 — 270 — 270 
Proprietary trading, interest and dividendsg— 471 (20,858)(20,387)— 1,768 (7,662)(5,894)
Insurance related activities expensesh— (7,343)— (7,343)— (6,455)— (6,455)
Associated partner/banker compensationj546 (546)— — 548 (548)— — 
Management company non-Controlling interestk(349)(664)1,013 — (347)(1,120)1,467 — 
Total Management Presentation Reclassifications:197 (9,133)(19,845)(28,781)201 (19,756)(6,195)(25,750)
Fund Consolidated Reclassificationsl— (105)727 622 — (271)3,100 2,829 
Income Statement Adjustments:
Acquisition related amountsn— (80)— (80)— (238)— (238)
Contingent liability adjustmentsn— (5,133)— (5,133)— 6,798 — 6,798 
Total Income Statement Adjustments:— (5,213)— (5,213)— 6,560 — 6,560 
Total Economic Expenses$187,375 $100,983 $1,013 $289,371 $388,397 $93,690 $1,467 $483,554 
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The following table reconciles US GAAP Net Income (loss) Attributable to Cowen Inc. Common Stockholders to Pre-tax Economic Income (Loss), Economic Income (loss), and Economic Operating Income (loss) for the three months ended March 31, 2021and 2020:
(unaudited)
Three Months Ended March 31,
(Dollar amounts in thousands)20212020
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders$145,806 $(11,621)
Income Statement Adjustments:
US GAAP Income tax expense (benefit)o54,428 (1,173)
Amortization of discount (premium) on debtm776 1,110 
Debt extinguishmentn4,538 — 
Bargain purchase gainp(3,855)— 
Contingent liability adjustmentsn(6,798)(895)
Acquisition related amountsn238 — 
Preferred dividendsq1,698 1,698 
Pre-tax Economic Income (Loss)196,831 (10,881)
Economic income tax expense *(52,751)— 
Preferred dividends(1,698)(1,698)
Economic Income (Loss) *142,382 (12,579)
Add back: Depreciation and amortization expense, net of taxes3,186 5,434 
Economic Operating Income (Loss)$145,568 $(7,145)
2022 and 2021:
(unaudited)
Year Ended March 31,
(Dollar amounts in thousands)20222021
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders$33,318 $145,806 
Income Statement Adjustments:
US GAAP Income tax expense (benefit)o11,889 54,428 
Amortization of discount (premium) on debt    m75 776 
Debt extinguishment gain (loss) and/or accelerated debt costsp— 4,538 
Bargain purchase gainn— (3,855)
Contingent liability adjustmentsn5,133 (6,798)
Acquisition related amountsn80 238 
Preferred stock dividendsq1,698 1,698 
Pre-tax Economic Income (Loss)52,193 196,831 
Economic income tax expense(13,048)(52,751)
Preferred stock dividends(1,698)(1,698)
Economic Income (Loss)$37,447 $142,382 
Add back: Depreciation and amortization expense, net of taxes5,390 3,186 
Economic Operating Income (Loss)$42,837 $145,568 

* Economic Income (Loss) is presented net of associated taxes, starting in the first quarter of 2021, as the Company utilized all available net operating losses during 2020.
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Management Reclassifications
Management reclassification adjustments and fund consolidation reclassification adjustments have no effect on Economic Operating Income (Loss). These adjustments are reclassifications to change the location of certain line items.
aUnderwriting expenses: Economic Proceeds presents investment banking revenues net of underwriting expenses.
bReimbursable client expenses: Economic Proceeds presents expenses reimbursed from clients and affiliates within their respective expense category but is included as a part of revenues under US GAAP.
cSecurities financing interest expense: Brokerage within Economic Proceeds included net securities borrowed and securities loaned activities which are shown gross in interest income and interest expense for US GAAP.
dFund start-up costs, distribution and distributionother fees: Economic Proceeds presents revenuesand Economic Interest Expense are net of fund start-up costs and distribution fees paid to agents.agents and other debt service costs.
eCertain equity method investments: Economic Proceeds and Economic Expenses recognize the Company's proportionate share of management and incentive fees and associated share of expenses on a gross basis for equity method investments within the activist business, real estate operating entities and the healthcare royalty business. The Company applies the equity method of accounting to these entities and accordingly the results from these businesses are recorded within Other Income (Loss) for US GAAP.
fCarried interest: The Company applies an equity ownership model to carried interest which is recorded in Investment income - Carried interest allocation for US GAAP. The Company presents carried interest as Incentive Income Economic Proceeds.
gProprietary trading, interest and dividends: Economic Proceeds presents interest and dividends from the Company's proprietary trading in investment income.
hInsurance related activities expenses: Economic Proceeds presents underwriting income from the Company's insurance and reinsurance related activities, net of expenses, within other revenue. The costs are recorded within expenses for US GAAP reporting.
iFacilitation trading gains and losses: Economic Brokerage Proceeds presents gains and losses on investments held as part of the Company's facilitation and trading business within brokerage revenues as these investments are directly related to the markets business activities while these are presented in Investment income - Securities principal transactions, net for US GAAP reporting.
jAssociated partner/banker compensation reclassification: Economic Compensation Expense presents certain payments to associated banking partners as compensation rather than non-compensation expenses.
kManagement company non-controlling interest: Economic Expenses non-controlling interest represents only operating entities that are not wholly owned by the Company. The Company also presents non-controlling interests within total expenses for Economic Income (Loss).
Fund Consolidation Reclassifications
lThe impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in Economic Income (Loss). Adjustments to reconcile to US GAAP Net Income (Loss) included elimination of incentive income and management fees earned from the Consolidated Funds and addition of investment fund expenses excluding management fees paid, investment fund revenues and investment income (loss).
Income Statement Adjustments
mPre-tax Economic Income (Loss) excludes the amortization of discount (premium) on debt.
nPre-tax Economic Income (Loss) excludes acquisition related adjustments.adjustments (including bargain purchase gain and contingent liability adjustments).
oPre-tax Economic Income (Loss) excludes US GAAP income taxes.
pPre-tax Economic Income (Loss) excludes gain/(loss) on debt extinguishment.extinguishment and accelerated debt costs.
qPre-tax Economic income (Loss) excludes preferred stock dividends.

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Liquidity and Capital Resources
We continually monitor our liquidity position. The working capital needs of the Company's business have been met through current levels of equity capital, current cash and cash equivalents, and anticipated cash generated from our operating activities, including management fees, incentive income, returns on the Company's own capital, investment banking fees and brokerage commissions. The Company expects that its primary working capital liquidity needs over the next twelve months will be:
•to pay our operating expenses, primarily consisting of compensation and benefits, interest on debt and other general and administrative expenses; and
•to provide capital to facilitate the growth of our existing business.
Based on our historical results, management's experience, our current business strategy and current assets under management, the Company believes that its existing cash resources will be sufficient to meet its anticipated working capital and capital expenditure requirements for at least the next twelve months. However, the Company’s assessment could be affected by various risks and uncertainties, including but not limited to, the effects of the COVID-19 pandemic. Our cash reserves include cash, cash equivalents and assets readily convertible into cash such as our securities held in inventory. Securities inventories are stated at fair value and are generally readily marketable. As of March 31, 2021,2022, we had cash and cash equivalents of $1,147.5$513.0 million and net liquid investment assets of $1,593.4 million,$1.1 billion, which includes cash and cash equivalents and short-term investments held by foreign subsidiaries as of March 31, 20212022 of $87.8$114.2 million. The Company continues to permanently reinvest the capital and accumulated earnings of its subsidiaries in the United Kingdom, Malta, Germany, Switzerland, Israel, Canada, South Africa and Hong Kong.
The timing of cash bonus payments to our employees may significantly affect our cash position and liquidity from period to period. While our employees are generally paid salaries semi-monthly during the year, cash bonus payments, which can make up a significant portion of total compensation, are generally paid by March 15th.
As a clearing member firm providing services to certain of our brokerage customers, we are subject to cash deposit requirements with clearing organizations, brokers and banks that may be large in relation to total liquid assets and may fluctuate significantly based upon the nature and size of customers' trading activity and market volatility. At March 31, 2021,2022, the Company had security deposits totaling $82.1$105.9 million with clearing organizations in the U.S. for the settlement of equity trades. In the normal course of our U.S. settlement activities, we may also need to temporarily finance customer securities positions from short settlements or delivery failures.
The Company may incur additional indebtedness or raise additional capital under certain circumstances to respond to market opportunities and challenges. Current market conditions may make it more difficult or costly to borrow additional funds or raise additional capital.
Unfunded commitments
The following table summarizes unfunded commitments as of March 31, 2021:
2022:
EntityUnfunded CommitmentsCommitment term
(dollars in thousands)
HealthCare Royalty Partners funds (a)$7,3336,451 3.802.8 years
Eclipse Ventures Fund I, L.P.$28 3.802.8 years
Eclipse Fund II, L.P.$9518 4.803.8 years
Eclipse Continuity Fund I, L.P.$4116 5.804.8 years
Cowen Healthcare Investments III LP$4,1262,165 5.804.8 years
Cowen Healthcare Investments IV LP$5,784 5.8 years
Cowen Sustainable Investments I LP$15,70914,643 8.807.8 years
(a) The Company is a limited partner of the HealthCare Royalty Partners funds (which are managed by Healthcare Royalty Management) and is a member of HealthCare Royalty Partners General Partners. The Company will make its pro-rata investment in the HealthCare Royalty Partners funds along with the other limited partners.
Due to the nature of the securities business and our role as a market-maker and execution agent, the amount of our cash and short-term investments, as well as operating cash flow, may vary considerably due to a number of factors, including the dollar value of our positions as principal, whether we are net buyers or sellers of securities, the dollar volume of executions by our customers and clearinghouse requirements, among others. Certain regulatory requirements constrain the use of a portion of our liquid assets for financing, investing or operating activities. Similarly, due to the nature of our business lines, the capital necessary to maintain current operations and our current funding needs subject our cash and cash equivalents to different requirements and uses.
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Preferred Stock and Purchase of Capped Call Option
On May 19, 2015, the Company completed its offering of 120,750 shares of the Company's 5.625% Series A cumulative perpetual convertible preferred stock ("Series A Convertible Preferred Stock")Stock that provided $117.2 million of proceeds, net of
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underwriting fees and issuance costs of $3.6 million. Each share of the Series A Convertible Preferred Stock is entitled to dividends at a rate of 5.625% per annum, which will be payable, when and if declared by the board of directors of the Company, quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year. The Company may, at its option, pay dividends in cash, common stock or a combination thereof. The Company declared and accruedpaid a cash dividend in respect of the Series A Convertible Preferred Stock of $1.7 million for the three months ended March 31, 20212022. The Company declared and 2020, respectively.accrued a cash dividend in respect of the Series A Convertible Preferred Stock of$1.7 million for the three months ended March 31, 2021
Each share of Series A Convertible Preferred Stock is non-voting and has a liquidity preference over the Company's Class A common stock and ranks senior to all classes or series of the Company's Class A common stock, but junior to all of the Company's existing and future indebtedness with respect to dividend rights and rights upon the Company's involuntary liquidation, dissolution or winding down.
EachUpon issuance, each share of Series A Convertible Preferred Stock iswas convertible, at the option of the holder, into a number of shares of the Company's Class A common stock equal to the liquidation preference of $1,000 divided by the conversion rate. The initial conversion rate (subsequent to the December 5, 2016 reverse stock split) is 38.0619 shares (which equates to $26.27 per share) of the Company's Class A common stock for each share of the Series A Convertible Preferred Stock. At any time on or after May 20, 2020, when the Company's capped call option expired, the Company maywas able to elect to convert all outstanding shares of the Series A Convertible Preferred Stock into shares of the Company's Class A common stock, cash or a combination thereof, at the Company's election, in each case, based on the then-applicable conversion rate, (which at December 31, 2020 was 38.488), if the last reported sale price of the Company's Class A common stock equals or exceeds 150% of the then-current conversion price on at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days (including on the last trading day of such period) immediately prior to such election. At the time of conversion, the conversion rate may be adjusted based on certain events, including but not limited to the issuance of cash dividends or Class A common stock as dividends to the Company's Class A common shareholders or a share split or combination. The
On December 31, 2021, the Company hasirrevocably elected that, upon the intent and abilityconversion of any share of the outstanding Series A Convertible Preferred Stock, the Company will settle $1,000.00 of its conversion obligation in cash. With respect to settleeach conversion, to the preferred shares in cash and, as a result,extent the preferred shares do not have an impact on the Company's diluted earningsconversion obligation per share calculation (See Note 21).
Theof Series A Convertible Preferred Stock is greater than $1,000.00, the Company may also incur additional indebtedness or raise additional capitalsatisfy its conversion obligation in respect of such excess using any settlement method permitted under certain circumstancesthe Certificate of Designations. As the holders can exercise the conversion option on their shares of Series A Convertible Preferred Stock at any time and require cash payment upon conversion, the Company reclassified the Series A Convertible Preferred Stock to respond to market opportunities and challenges. Current market conditions may make it more difficult or costly to borrow additional funds or raise additional capital.temporary equity at December 31, 2021.
Regulation
Regulatory Capital
As registered broker-dealers with the United States Securities and Exchange Commission ("SEC"), Cowen and Company, ATM Execution Cowen Prime and Westminster are subject to the SEC's Uniform Net Capital Rule 15c3-1, ("SEC"SEA Rule 15c3-1"15c3-1," under the Securities Exchange Act ("SEA"), of 1934, which requires the maintenance of minimum net capital. Each registered broker-dealer has elected to compute net capital under the alternative method permitted by that rule.
The Company acquired Portico, a registered broker-dealer on December 16, 2021. As a result of the acquisition, Portico's net assets were transferred into Cowen and Company. The Company applied to withdraw Portico's status as a FINRA registered broker-dealer on December 20, 2021 which was approved by the SEC on February 18, 2022.
Under the alternative method, Cowen and Company's minimum net capital requirement, as defined in (a)(4) of SECSEA Rule 15c3-1, is equal to the greater of $1.0$1.5 million or 2% of aggregate debits arising from customer transactions. ATM Execution, Cowen Prime and Westminster are required to maintain minimum net capital, as defined in (a)(1)(ii) of SECSEA Rule 15c3-1, equal to the greater of $250,000 or 2% of aggregate debits arising from customer transactions. Advances to affiliates, repayment of borrowings, distributions, dividend payments, and other equity withdrawals are subject to certain notification and other provisions of SECSEA Rule 15c3-1 and other regulatory bodies.
Cowen Prime is registered with the SEC as an investment advisor under Advisers Act.
Cowen Primeand Company is also subject to certain net capital rule requirements under the Regulation 1.17 of the Commodity Futures Trading Commission ("CFTC") under Commodities Exchange Act (“CEA”) as an introducing broker. Under Regulation 1.17, ("Regulation 1.17"). Regulation 1.17 requiresCowen and Company is required to maintain net capital equal to or in excess of $45,000 or the amount of net capital required by SECSEA Rule 15c3-1, whichever is greater. Cowen and Company is also subject toAdditionally, as an options clearing member of the Options Clearing Corporation ("OCC") Rule 302.under OCC Rule 302, requires maintenance ofCowen and Company is required to maintain net capital equal to the greater of $2.0
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million or 2% of aggregate debit items. At March 31, 2021,2022, Cowen and Company had $325.9had $397.2 million of net capital in excess of thisits minimum requirement.requirements under SEA Rule 15c3-1.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010. The Dodd-Frank Act contains provisions that require the registration of all swap dealers, major swap participants, security-based swap dealers, and/or major security-based swap participants. Cowen Financial Products, Ltd ("Cowen Financial Products") registered only with the SEC with an effective date of November 1, 2021 as a securities-based swap dealer and is not using models to compute its net capital. Under the rules there is a minimum net capital requirement for, among others, an entity that acts as a dealer in security-based swaps, which is the greater of $20 million or 2% of risk margin amount The risk margin amount means the sum of (i) the total initial margin required to be maintained by the SEC securities-based swaps dealer at each clearing agency with respect to securities-based swaps transactions cleared for securities-based swap customers and (ii) the total initial margin amount calculated by the SEC securities-based swaps dealer swaps dealer with respect to non-cleared securities-based swaps under SEC rules. At March 31, 2022, Cowen Financial Products had $16.7 million of net capital in excess of its minimum requirements under SEA Rule 18a-1.
Cowen International Ltd and Cowen ExecutionExecution Ltd are subject to the capital requirements of the U.K. Financial Conduct Authority ("FCA"), as defined, and must exceed the minimum capital requirement set forth by the FCA. On 1 January 2022, the FCA adopted the Investment Firms Prudential Regime ("IFPR"). This is a new prudential regime which applies to MiFID investment firms authorized and regulated by the FCA in the UK. The IFPR refocuses prudential requirements and expectations away from the risks firms face, to also consider and look to manage the potential harm firms can pose to consumers and markets. Cowen International Ltd and Cowen Execution Ltd will both be designated as Class 2 firms under the new regime and will have a minimum capital requirement equal to the higher of; the Permanent minimum capital requirement, their respective Fixed Overhead requirement, and their Risk Responsive Computation ("K-factors").
Cowen Asia, a previously established entity, was re-registered with regulatory approval on May 17, 2019. Cowen Asia is subject to the financial resources requirements of the Securities and Futures Commission ("SFC") of Hong Kong. Financial Resources must exceed the Total Financial Resources requirement of the SFC.
As of March 31, 2021, these regulated broker-dealers had2022, the regulatory net capital, or financial resources, regulatoryminimum net capital requirements or minimum FCA or SFC requirement and excess net capital of U.S. regulated broker dealers and swap dealer together with the equivalent of capital requirements and compliance information for foreign broker dealers registered with the FCA and the SFC are presented as follows:
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SubsidiaryNet Capital (a)Net Capital Requirement (b)Excess Net Capital
 (dollars in thousands)
Cowen and Company$406,557 $9,343 $397,214 
ATM Execution$7,880 $250 $7,630 
Westminster$19,521 $250 $19,271 
Cowen Financial Products$36,658 $20,000 $16,658 
Cowen International Ltd (a)$51,109 $25,735 $25,374 
Cowen Execution Ltd (a)$17,900 $5,075 $12,825 
Cowen Asia (a)$2,045 $383 $1,662 

(a)The equivalent of Net Capital under FCA rules is referred as “capital resources” and under SFC rules is referred as “net liquid capital.” The equivalent of Minimum Net Capital Requirement under FCA rules is referred as “minimum capital resources requirement and under SFC rules is referred as “net liquid capital requirement."
Customer Protection
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SubsidiaryNet CapitalNet Capital RequirementExcess Net Capital
 (dollars in thousands)
Cowen and Company$332,197 $6,289 $325,908 
ATM Execution$4,951 $250 $4,701 
Cowen Prime$22,722 $250 $22,472 
Westminster$31,116 $250 $30,866 
Cowen International Ltd$39,812 $25,444 $14,368 
Cowen Execution Ltd$13,205 $3,418 $9,787 
Cowen Asia$2,272 $386 $1,886 
The Company's U.S. broker-dealers must also comply with SECthe customer protection provisions under SEA Rule 15c3-3 which requires a computation of a reserve requirement for customer and maintenance of a deposit of cash or claimsecurities into a special reserve bank account for the exclusive benefit of customers; or claim an exemption pursuant to subparagraphs (k)(2)(i) or (k)(2)(ii) of that rule. Firms can rely on more than one exemption. Cowen Prime and
ATM Execution claimclaims the (k)(2)(ii) exemption with regard to all of their customer accounts and transactions that are introduced on a fully-disclosed basis to their clearing agents for clearing, settlement and custody. Cowen Prime and Westminster claimclaims the (k)(2)(i) exemption with regardsregard to customer transactions and balances that are cleared, settled and custodied in bank accounts designated as Special Accounts for the Exclusive Benefit of Customers ("Special Bank Accounts"). Westminster also claims exemption for other business activities that are not covered under (k)(2)(i) contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 for receiving transaction-based compensation in return for providing commission management services.
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In accordance with the requirements of SECSEA Rule 15c3-3, Cowen and Company may be required to deposit in a Special Reserve Account cash or acceptable qualified securities for the exclusive benefit of customers. As of March 31, 2021,2022, Cowen and Company had segregated approximately $13.7$51.8 million of cash while it had no required deposit.to satisfy the customer reserve provision of SEA Rule 15c3-3.
As a clearing and carrying broker-dealer, Cowen and Company is required to compute a reserve requirement for proprietary accounts of broker-dealers ("PAB"), as defined in SECSEA Rule 15c3-3. Cowen and Company conducts PAB reserve computations in order to determine the amount it is required to deposit in its PAB Reserve Bank Accounts pursuant to SECSEA Rule 15c3-3. This allows each correspondent firm that uses Cowen and Company as its clearing broker-dealer to classify its PAB account assets held at Cowen and Company as allowable assets in the correspondent's net capital calculation. At March 31, 2021,2022, Cowen and Company had $30.3$71.7 million of cash on deposit in PAB Reserve Bank Accounts, which was more than its required deposit of $19.1 million. Accounts. Cowen and Company and ATM Execution and Cowen Prime also maintain certain assets in PAB accounts held at their respective clearing brokers. Each treats its assets held in those PAB accounts at the respective clearing brokers as allowable assets for net capital purposes.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010. The Dodd-Frank Act contains provisions that require the registration of all swap dealers, major swap participants, security-based swap dealers, and/or major security-based swap participants. The CFTC has finalized rules establishing capital requirements and financial reporting requirements for CFTC registered swap dealers not subject to regulation by a banking regulator. The SEC has finalized rules establishing similar standards for an entity registering as a standalone securities-based swaps dealer. Compliance with these rules is required by October 6, 2021. Cowen Financial Products, LLC is expectedas a registered securities based swap dealer, claims Rule 18a-4(f) exemption under the Securities Exchange Act of 1934 (the “Act”) with regard to comply withits swap counterparties on the SEC capital rules for standalone securities-basedbasis that it has provided sufficient notice to its swap counterparties of their respective rights to require segregation of funds or other property used to secure uncleared security based swaps dealerspursuant to section 3E(f)(1)(A)-(B) of the Act (15 U.S.C. 78c-5(f)(1)(A)). Any margin collateral received and held by the effective date. Under the rules there is a minimum net capital requirement for, among others, an entity that acts as a dealer in security-based swaps, which is the greater of $20 million or 2% (that the SEC could, in the future, increase up to 4% or 8% of a risk margin amount. The risk margin amount means the sum of (i) the total initial margin required to be maintained by the SEC securities-based swaps dealer at each clearing agency with respect to securities-based swaps transactions cleared for securities-basedsecurity based swap customers and (ii) the total initial margin amount calculated by the SEC securities-based swaps dealer swaps dealer with respect to non-cleared securities-baseduncleared security based swaps under new SEC rules.will not be subject to a segregation requirement. The notice outlines how a claim of those swap counterparties for the collateral would be treated in a bankruptcy or other formal liquidation proceeding of the security-based swap dealer.
Other Regulatory Requirements
Cowen Insurance Co and HollenfelsCowen Re are individually required to maintain a solvency capital ratio as calculated by relevant European Commission directives and local regulatory rules in Malta and Luxembourg, respectively. Each company's individual solvency capital ratio calculated as of December 31at the end of each yearquarter must exceed a minimum requirement. As of December 31, 2020 (the2021, the last testing date),date for Cowen Re and Cowen Insurance Co, the solvency capital ratios of both Cowen Insurance Co and HollenfelsCowen Re were in excess of the minimum requirement.requirements.
Based on minimum capital and surplus requirements pursuant to the laws of the state of New York that apply to captive insurance companies, RCG Insurance Company, Cowen's captive insurance company incorporated and licensed in the state of New York, was required to maintain capital and surplus of approximately$0.3 $0.3 million as of March 31, 2021.2022. RCG Insurance Company’s capital and surplus as of March 31, 20212022 totaled approximately $6.4 million.

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Cash Flows Analysis
The Company's primary sources of cash are derived from its operating activities, realized returns on its own invested capital and borrowings on debt. The Company's primary uses of cash include compensation and general and administrative expenses.
Operating Activities.    Net cash used in operating activities of $309.1 million for the three months ended March 31, 2022 was primarily related to (i) a decrease in compensation payable, (ii) a decrease in purchases of securities owned, at fair value only partially offset by an increase in proceeds from sales of securities owned, at fair value, (iii) a decrease in securities sold, but not yet purchased, at fair value, held at broker dealer only partially offset by an increase in securities loaned and securities sold under agreement to repurchase and (iv) decrease in payable to customers. Net cash provided by operating activities of $359.2$363.1 million for the three months ended March 31, 2021 was primarily related to (i) an increase in stock loan, (ii) an increase in payable to customers and (iii) net income only partially offset by a decrease in securities owned, at fair value, held at broker dealer. N
Investing Activities.et    Net cash used in operatinginvesting activities of $78.9$20.4 million for the three months ended March 31, 20202022 was primarily related to (i) purchases of securities owned, at fair value in consolidated funds offset partially by proceeds from sales of securities owned, at fair value in consolidated funds, (ii) proceeds from securities owned, at fair value, held at broker dealers, (iii) purchases of securities owned, at fair value offset partially by proceeds from sales of securities owned, at fair value and (iv) offset partially by stock borrowing and stock lending activity.
Investing Activities.purchased under agreement to resell. Net cash provided by investing activities of $2.8$2.8 million for the three months ended March 31, 2021 was primarily related to the proceeds from sales of other investments offset only partially by purchases of other investments.
Financing Activities.    Net cash used in investingfinancing activities of $8.1 million for the three months ended March 31, 20202022 of $40.5 million was primarily related to the(i) purchase of other investments.
Financing Activities.treasury stock (net of re-issue), (ii) decrease in contingent liability and (iii) decrease in capital distributions to non-controlling interests. Net cash provided by financing activities for the three months ended March 31, 2021 of $123.7$125.9 million was primarily related to an (i) increase in borrowings on notes and other debt offset by decrease in repayments on notes and other debt.
 Net cash provided by financing activities for the three months ended March 31, 2020

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Table of $80.8 million was primarily related to (i) capital contributions by non-controlling interests offset only partially by capital withdrawals by non-controlling interests in Consolidated Funds and (ii) borrowings on notes and other debt.Contents
Debt
Convertible Debt
December 2022 Convertible Notes
The Company, on December 14, 2017, issued $135.0 million aggregate principal amount of 3.00% convertible senior notes due December 2022 (the “December 2022 Convertible Notes”). The December 2022 Convertible Notes are due onhave a final maturity date of December 15, 2022 unless earlier repurchased by the Company or converted by the holder in accordance with their terms prior to such date. The interest on the December 2022 Convertible Notes is payable semi-annually on December 15 and June 15 of each year. The December 2022 Convertible Notes are senior unsecured obligations of Cowen. The December 2022 Convertible Notes were issued with an initial conversion price of $17.375 per share of Cowen's Class A common stock.
On June 26, 2018, the Company received shareholder approval for the Company to settle the December 2022 Convertible Notes entirely in Class A common stock. Upon receiving shareholder approval, the Company reclassified the separately recognized conversion option from a derivative liability to equity. Pursuant to the indenture governing the December 2022 Convertible Notes, conversions of the December 2022 Convertible Notes will be settled by the delivery and/or payment, as the case may be, of Cowen’s Class A Common Stock, cash, or a combination thereof, at the Company's election.
The Company recognized the embedded cash conversion option at issuance date fair value, which also represents the initial unamortized discount on the December 2022 Convertible Notes of $23.4 million and is shown net in convertible debt in the accompanying condensed consolidated statements of financial condition. Amortization onOn June 26, 2018, the discount, included within interest and dividends expense in the accompanying condensed consolidated statements of operations is $0.8 million and $1.1 millionCompany received shareholder approval for the three months ended March 31, 2021 and 2020, respectively, based on an effective interest rate of 7.13%. The Company capitalized the debt issuance costs in the amount of $2.2 million, which is a direct deduction from the carrying value of the debt and will be amortized over the life ofto settle the December 2022 Convertible Notes entirely in interest and dividends expense inClass A common stock. Upon receiving shareholder approval, the accompanying condensed consolidated statements of operations. The Company recorded interest expense of $0.7 million and $1.0 million forreclassified the three months ended March 31, 2021 and 2020, respectively.separately recognized conversion option from a derivative liability to equity.
During December 2020, the Company repurchased and extinguished $46.9 million of the outstanding principal amount of the December 2022 Convertible Notes for cash consideration of $70.5 million. In conjunction with the partial extinguishment of the December 2022 Convertible Notes, the Company accelerated the pro rata unamortized discount of $3.6 million and capitalized debt issuance costs of $0.4 million. The Company allocated $29.6 million of the cash consideration paid to the extinguishment of the equity component of the December 2022 Convertible Notes. The Company recognized $2.7 million of gain on debt extinguishment. As of March 31, 2021, the outstanding principal amount of the December 2022 Convertible Notes was $88.1 million.
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On March 24, 2021, the Company issued a redemption notice announcing that the Company willwould redeem all of the December 2022 Convertible Notes. The redemption date is June 24, 2021 ("Redemption Date"). The redemption price is 100.00%Notes, and provided holders the option to elect to settle the as-converted value of the principal amount thereof plus accrued and unpaid interest on such principal amount, to, but not including, the December 2022 Convertible Notes Redemption Date.as allowed under the terms of the December 2022 Convertible Notes. As a result of the Company’s call for redemption of the December 2022 Convertible Notes, the December 2022 Convertible Notes arewere convertible, at the option of the Companyholder at any time prior to June 22, 2021, the second business day prior to the December 2022 Convertible Notes' Redemption Date. On June 24, 2021 (the "Redemption Date") the Company redeemed all of the outstanding principal amount of the December 2022 Convertible Notes. The redemption amount was determined based on the holders election to convert, which allowed for either 100.00% of the principal amount thereof plus accrued and unpaid interest on such principal amount up to June 15, 2021, to, but not including the Redemption Date of the December 2022 Convertible Notes, or the value of the Company's Class A common stock to be issued on conversion. The settlement method for the December 2022 Convertible Notes surrendered for conversion will bewas $88.1 million in cash, settlement up to the(the outstanding principal amount of the December 2022 Convertible Notes surrendered for conversionNotes) and share settlement through the delivery of2,938,841 shares of the Company’s Class A common stock, for the(the remainder of the conversion obligation if any, in excess of the principal amount.amount). The conversion rate ofon the December 2022 Convertible Notes on March 24, 2021the Redemption Date was 58.332433.35 shares of the Company’s Class A common stock per $1,000$1,000.00 principal amount of December 2022 Convertible Notes converted.(see Note 19)converted. In conjunction with the redemption of the remaining December 2022 Convertible Notes, the Company accelerated the pro rata unamortized discount of $5.1 million and capitalized debt issuance costs of $0.5 million.
Amortization on the discount, included within interest and dividends expense in the accompanying condensed consolidated statements of operations is $0.8 million for the three months ended March 31, 2021, based on an effective interest rate of 7.13%. The Company capitalized the debt issuance costs in the amount of $2.2 million, which is a direct deduction from the carrying value of the debt and was amortized over the life of the December 2022 Convertible Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations. The Company recorded interest expense of $0.7 million for the three months ended March 31, 2021.
Notes Payable
May 2024 Notes
On May 7, 2019, the Company completed its private placement of $53.0 million aggregate principal amount of 7.25% senior notes due May 2024 (the "May 2024 Notes") with certain institutional investors. On September 30, 2019, the Company issued an additional $25.0 million of the same series of notes. The additional May 2024 Notes were purchased at a premium of $0.5 million, which is shown net in notes payable in the accompanying condensed consolidated statement of financial condition. To date the May 2024 Notes have maintained their initial private rating, and the interest rate has remained unchanged.rating. Interest on the May 2024 Notes is payable semi-annually in arrears
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on May 6 and November 6. The Company recorded interest expense of $1.4 million and $1.4 million for the three months ended March 31, 20212022 and 2020,2021, respectively. The Company capitalized debt issuance costs of approximately $1.5 million in May 2019 and $0.6 million in September 2019, which is a direct deduction from the carrying value of the debt and will be amortized over the life of the May 2024 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations.
June 2033 Notes
On June 11, 2018, the Company completed its public offering of $90.0 million of 7.75% senior notes due June 2033 (the "June 2033 Notes") and subsequently the underwriters exercised in full their option to purchase an additional $10.0 million principal amount of the June 2033 Notes. Interest on the June 2033 Notes is payable quarterly in arrears on March 15, June 15, September 15 and December 15. The Company recorded interest expense of $1.9 million and $1.9 million for the three months ended March 31, 20212022 and 2020,2021, respectively. The Company capitalized debt issuance costs of approximately $3.6 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the June 2033 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations.
December 2027 Notes
On December 8, 2017, the Company completed its public offering of $120.0 million of 7.35% senior notes due December 2027 (the "December 2027 Notes") and subsequently the underwriters exercised in full their option to purchase an additional $18.0 million principal amount of the December 2027 Notes. Interest on the December 2027 Notes is payable quarterly in arrears on March 15, June 15, September 15 and December 15. The Company recorded interest expense of $2.5 million for the three months ended March 31 2021 and 2020, respectively.2021. The Company capitalized debt issuance costs of approximately $5.0 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the December 2027 Notes in interest and dividends expense in the accompanying condensed consolidated statements of operations. The net proceeds of the offering, after deducting the underwriting discount and estimated offering expenses payable by the Company were used to redeem all of its 8.25% senior notes due October 2021 and for general corporate purposes.
On March 24, 2021, the Company delivered payment of and discharged all $138.0 million outstanding aggregate principal of the December 2027 Notes plus accrued and unpaid interest through the effective redemption date of April 23, 2021. In conjunction with the extinguishment of the December 2027 Notes , the Company accelerated the pro-rata capitalized debt issuance costs. During the three months ended March 31, 2021, the Company recognized $4.4 million of loss on debt extinguishment.
Term Loan
March 2028 Term Loan
On March 24, 2021, the Company borrowed $300 million of first lien term loan due March 24, 2028 (the2028. On December 15, 2021, the Company borrowed an additional $150 million first lien termloan under the same terms and conditions as, and fungible with, the initial first lien term loan (collectively, the “March 2028 Term Loan”). The interest onaggregate amount borrowed under the March 2028 Term Loan is payable$450 million. The March 2028 Term Loan bears interest at an annual rate equal to, at the option of the Company, on a monthly, quarterly or bi-annual rate equal toeither the (a) London Inter-bank Offered Rate ("LIBOR") (adjusted for reserves)reserves and subject to a floor of 0.75%) plus a margin of3.25% or (b) an alternate base rate plus a margin of 2.25%. The Company is
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required to pay amortization of approximately 1.00% per annum of the original principal amount of the March 2028 Term Loan. Additionally, the Company has entered into an interest rate swap to offset the floating interest rate of the March 2028 Term Loan (See Note 6). The obligations of the Company for the March 2028 Term Loan are guaranteed by certain of the Company’s wholly-owned domestic subsidiaries (excluding its broker-dealer subsidiaries) (the “Guarantors”) and secured by substantially all of the assets of the Company and the Guarantors, subject in each case to certain customary exceptions. The terms of the March 2028 Term Loan contain customary affirmative and negative covenants, including standard leveragesubject to certain customary exceptions, thresholds, qualifications and financial incurrence covenants.“baskets”. Proceeds from the term loanMarch 2028 Term Loan were or will be used to (i) satisfy and discharge and redeem the Company’s 2027 Senior Notes, (ii) redeem the Company’s December 2022 Convertible Notes that remainremained outstanding as of March 31, 2021 and pay the cash settlement amount in connection with the conversion of December 2022 Convertible Notes prior to that redemption date, and (iii) for the payment of fees, commissions, premiums, expenses and other transaction costs (including original issue discount or upfront fees) payable in connection with the transactions related thereto. As of March 31, 2021,2022, the outstanding principal amount of the March 2028 Term Loan was $299.3$445.5 million.
Interest expense for the March 2028 Term Loan was $4.5 million and $0.2 million for the three months ended March 31, 2022 and 2021, was $0.2 million. Thebased on an effective interest rate of 4.46%. In March 2021, the Company capitalized debt issuance costs of approximately $6.4$6.6 million and initial unamortized discount of $1.5 million related to the March 2028 Term Loan which is a direct deduction from the carrying value of the debt and will be amortized over the life of the March 2028 Term loan in interest and dividends expense in the accompanying condensed consolidated statements of operations. In December 2021, the Company
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capitalized debt issuance costs of approximately $2.7 million and unamortized discount of $1.5 million related to the additional borrowing of $150 million which is a direct deduction from the carrying value of the debt and will be amortized over the life of the March 2028 Term loan in interest and dividends expense in the accompanying condensed consolidated statements of operations.
The U.K. Financial Conduct Authority, which regulates LIBOR, has announced that all US Dollar LIBOR settings will either cease to be provided by any administrator or no longer be representative as of June 202030, 2023. As the March 2028 Term Loan
On June 30, 2017, a subsidiary represents the Company’s only significant exposure to LIBOR as of the Company borrowed $28.2 million to fund general corporate purposes. In July 2019, the subsidiary of the Company borrowed separately, from the same lender, $4.0 million to fund general corporate purposes. Each loan was secured by the value of the Company's limited partnership interests in two affiliated investment funds. The Company had provided a guarantee for these loans. Both loans had an effective interest rate of LIBOR plus 3.75% with a lump sum payment of the entire combined principal amount due (as amended) on June 26, 2020 when they were both fully repaid. The Company recorded interest expense of $0.4 million for the three months ended March 31, 2020.2022, the transition to an alternative Inter-bank Offer Rate is not expected to have a material impact on Company's consolidated financial statements.
Other Notes Payable
During January 2021,2022, the Company borrowed $3.0$4.0 million to fund insurance premium payments. This note had an effective interest rate of 2.01% and was due in December 2021,2022, with monthly payment requirements of $0.3$0.4 million. As of March 31, 2021,2022, the outstanding balance on this note was $2.4$3.2 million. Interest expense for the three months ended March 31, 2021 was insignificant.
During November 2019, the Company borrowed $2.6 million to fund general corporate capital expenditures. This note had an effective interest rate of 6% and is due in November 2024, with monthly payment requirements of $0.1 million. As of March 31, 2021, the outstanding balance on this note was $1.9 million. Interest expense for the three months ended March 31, 2021 and 20202022 was insignificant.
On September 30, 2020, the Company borrowed $72.0 million from Purple Protected Asset S-81 ("PPA S-81"), a Luxembourg entity unrelated to Cowen. The Company repaid $60.0 million of the PPA S-81 loan in June 2021. The loan is payable on September 30, 2023, had an initial interest rate of 1.4 times the Secured Overnight Financing Rate ("SOFR") plus 6.07% until December 31, 2020 and 1.4 times the SOFR plus 5.8% until June 30, 2021 and 3.65 times the SOFR plus 4.0% thereafter with quarterly interest payments. The loan obligation, as well as a loan issued by The Military Mutual Ltd (a United Kingdom company unrelated to Cowen) with principal of $28.4 million that was sold by HollenfelsCowen Re to PPA S-81 at fair value for no gain or loss on September 30, 2020, are fully cash collateralized through a reinsurance policy provided by HollenfelsCowen Re which is reflected in cash collateral pledged in the condensed consolidated statements of financial condition as of December 31, 2020 (see Notes 4 and 14)18). The Company capitalized debt issuance costs of approximately $1.7 million which is a direct deduction from the carrying value of the loan and will be amortized over the life of the loan in interest and dividends expense shown in the accompanying condensed consolidated statements of operations. The Company recorded interest expense of $0.5 million and $1.1 million for the three months ended March 31, 2022 and 2021, respectively, related to its loan payable to PPA S-81.
Spike Line
PursuantDuring November 2019, the Company borrowed $2.6 million to an amendment in May 2020, Cowen and Company replaced Cowen Execution Services LLC ("Cowen Execution") as the borrower and accepted, reaffirmed and assumed all of Cowen Execution’s rights, duties, obligations and liabilities under the spike line facility and the related loan documents. In August 2020, Cowen and Company renewed a one-year committed spike line facility to cover short term increases in National Securities Clearing Corporation margin deposit requirements. The spike line facility has a capacity of $70 million.fund general corporate capital expenditures. This facility has (i)note had an effective interest rate equal toof 6% and is due in November 2024, with monthly payment requirements of $0.1 million. As of March 31, 2022, the Federal Funds rate plus 2.50%outstanding balance on any money drawn from the liquidity facility and (ii) a commitment or unused line fee that is 50 basis points on the undrawn amount. All amounts outstanding under this facility were fully repaid during the second quarter of 2020.note was $1.5 million. Interest expense for the three months ended March 31, 2022 and 2021 was $0.1 million.

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Revolving Credit Facility
In December 2019, the Company entered into a two-year committed corporate credit facility with a capacity of $25.0 million. This credit facility has (i) an effective interest rate equal to LIBOR plus 3.25% on any money drawn from the credit facility and (ii) a commitment or unused line fee that is 50 basis points on the undrawn amount. All amounts outstanding under this credit facility were fully repaid during the second quarter of 2020. Interest expense for the three months ended March 31, 2020 was $0.2 million.insignificant.
Finance Lease Obligations
The Company has entered into various finance leases for computer equipment. These finance lease obligations are included in notes payable and other debt in the accompanying condensed consolidated statements of financial condition.
For the three months ended March 31, 20212022 and 2020,2021, quantitative information regarding the Company's finance lease obligations reflected in the accompanying condensed consolidated statements of operations, the supplemental cash flow information and certain other information related to finance leases were as follows:
Three Months Ended March 31,Three Months Ended March 31,
2021202020222021
(dollars in thousands)(dollars in thousands)
Lease costLease costLease cost
Finance lease cost:Finance lease cost:Finance lease cost:
Amortization of finance lease right-of-use assets Amortization of finance lease right-of-use assets$309 $308  Amortization of finance lease right-of-use assets$324 $309 
Interest on lease liabilities Interest on lease liabilities34 49  Interest on lease liabilities20 34 
Weighted average remaining lease term - operating leases (in years)Weighted average remaining lease term - operating leases (in years)2.012.97Weighted average remaining lease term - operating leases (in years)1.632.01
Weighted average discount rate - operating leasesWeighted average discount rate - operating leases4.89 %4.88 %Weighted average discount rate - operating leases4.66 %4.89 %
Letters of Credit
As of March 31, 2021,2022, the Company has the following irrevocable letters of credit, related to leased office space, for which there is cash collateral pledged, which the Company pays a fee on the stated amount of the letter of credit. The Company also has pledged cash collateral for reinsurancereinsurance agreementswhich amounted to $106.8 $49.5 million, as of March 31, 2021,2022, and $106.8$44.1 million, as
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of December 31, 2020,2021, which are expected to be released periodically as per the terms of the reinsurance policy between June 30, 2021March 31, 2022 and March 31, 20242024.
.
LocationAmountMaturity
 (dollars in thousands)
New York$215209 April 20222023
New York$1,4241,325 October 2022
New York$1,2521,226 November 2021August 2022
Boston$194188 March 20282023
San Francisco$458454 October 2025
$3,5433,402 
To the extent any letter of credit is drawn upon, interest will be assessed at the prime commercial lending rate. As of March 31, 20212022 and December 31, 2020 there2021 there were no amounts due related to these letters of credit.
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Contractual Obligations
The following tables summarize the Company's contractual cash obligations as of March 31, 2021:
Total< 1 Year1-3 Years3-5 YearsMore Than
5 Years
 (dollars in thousands)
Equipment, Service and Facility Leases    
Real Estate and Other Facility Rental$89,991 $19,065 $41,735 $21,329 $7,862 
Service Payments62,741 17,854 25,673 8,620 10,594 
Operating Equipment Leases368 207 161 — — 
   Total153,100 37,126 67,569 29,949 18,456 
Debt    
Convertible Debt93,407 2,644 90,763 — — 
Notes Payable292,731 11,468 26,810 96,328 158,125 
Term Loan379,988 11,205 29,550 29,070 310,163 
Finance Lease Obligation2,707 1,117 1,579 11 — 
Other Notes Payable80,936 7,207 73,186 543 — 
   Total$849,769 $33,641 $221,888 $125,952 $468,288 
2022:
Total< 1 Year1-3 Years3-5 YearsMore Than
5 Years
 (dollars in thousands)
Equipment, Service and Facility Leases    
Real Estate and Other Facility Rental$111,416 $16,813 $48,441 $21,193 $24,969 
Service Payments62,453 22,196 25,758 7,142 7,357 
Operating Equipment Leases1,765 366 751 648 — 
   Total175,634 39,375 74,950 28,983 32,326 
Debt    
Notes Payable279,326 11,468 101,983 15,500 150,375 
Term Loan550,672 16,733 44,519 43,789 445,631 
Finance Lease Obligation1,510 849 600 61 — 
Other Notes Payable16,888 3,752 13,136 — — 
   Total$848,396 $32,802 $160,238 $59,350 $596,006 
Minimum payments for all debt outstanding
Annual scheduled maturities of debt and minimum payments for all debt outstanding as of March 31, 2021,2022, are as follows:
Convertible DebtNotes PayableTerm LoanOther Notes PayableFinance Lease
Obligation
 (dollars in thousands)
2021$2,644 $11,468 $11,205 $7,207 $1,117 
202290,763 13,405 14,835 593 1,168 
2023— 13,405 14,715 72,593 411 
2024— 88,578 14,595 543 11 
2025— 7,750 14,475 — — 
Thereafter— 158,125 310,163 — — 
Subtotal93,407 292,731 379,988 80,936 2,707 
Less (a)(11,725)(119,075)(88,685)(5,954)(129)
Total$81,682 $173,656 $291,303 $74,982 $2,578 
Notes PayableTerm LoanOther Notes PayableFinance Lease
Obligation
 (dollars in thousands)
2022$11,468 $16,733 $3,752 $849 
202313,405 22,351 12,593 500 
202488,578 22,168 543 100 
20257,750 21,986 — 49 
20267,750 21,803 — 12 
Thereafter150,375 445,631 — — 
Subtotal279,326 550,672 16,888 1,510 
Less (a)(105,187)(116,353)(1,031)(59)
Total$174,139 $434,319 $15,857 $1,451 
(a)Amount necessary to reduce net minimum payments to present value calculated at the Company's implicit rate at inception. This amount also includes capitalized debt costs and the unamortized discount on the Company's convertible debt.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements as of March 31, 2021.2022. However, through indemnification provisions in our clearing agreements, customer activities may expose us to off-balance-sheet credit risk. Pursuant to the clearing agreements,
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we are required to reimburse our clearing broker, without limit, for anyany losses incurred due to a counterparty's failure to satisfy its contractual obligations. However, these transactions are collateralized by the underlying security, thereby reducing the associated risk to changes in the market value of the security through the settlement date.
Cowen and Company Cowen Prime, and ATM Execution are members of various securities exchanges and clearing organizations. Under the standard membership agreement, members are required to guarantee the performance of other members and, accordingly, if another member becomes unable to satisfy its obligations to the various securities exchanges and clearing organizations, all other members would be required to meet the shortfall. The Company's liability under these arrangements is not quantifiable. Accordingly, no contingent liability is carried in the accompanying condensed consolidated statements of financial condition for these arrangements.
Cowen and Company temporarily loans securities to other brokers in connection with its securities lending activities. Cowen and Company receives cash as collateral for the securities loaned. Increases in securities prices may cause the market value of the securities loaned to exceed the amount of cash received as collateral. In the event that counterparty to these
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transactions does not return the loaned securities, Cowen and Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. Cowen and Company controls this risk by requiring credit approvals for counterparties, by monitoring the market value of securities loaned on a daily basis, and by requiring additional cash as collateral or returning collateral when necessary.
Cowen and Company temporarily borrows securities from other brokers in connection with its securities borrowing activities. Cowen and Company deposits cash as collateral for the securities borrowed. Decreases in securities prices may cause the market value of the securities borrowed to fall below the amount of cash deposited as collateral. In the event that counterparty to these transactions does not return collateral, Cowen and Company may be exposed to the risk of selling the securities at prevailing market prices. Cowen and Company controls this risk by requiring credit approvals for counterparties, by monitoring the collateral values on a daily basis, and by depositing additional collateral with counterparties or receiving cash when deemed necessary.
Critical Accounting Policies and Estimates
Critical accounting policies are those that require the Company to make significant judgments, estimates or assumptions that affect amounts reported in its condensed consolidated financial statements or the notes thereto. The Company bases its judgments, estimates and assumptions on current facts, historical experience and various other factors that the Company believes to be reasonable and prudent. Actual results may differ materially from these estimates.
The following is a summary of what the Company believes to be its most critical accounting policies and estimates.
Consolidation
The Company's condensed consolidated financial statements include the accounts of the Company, its subsidiaries, and entities in which the Company has a controlling financial interest, including the Consolidated Funds, in which the Company has a controlling general partner interest. All material intercompany transactions and balances have been eliminated in consolidation. The Company's investment funds are not subject to these consolidation provisions with respect to their investments pursuant to their specialized accounting.
The Company's condensed consolidated financial statements reflect the assets, liabilities, revenues, expenses and cash flows of the Consolidated Funds on a gross basis. The management fees and incentive income earned by the Company from the Consolidated Funds were eliminated in consolidation; however, the Company's allocated share of net income from these investment funds was increased by the amount of this eliminated income. Hence, the consolidation of these investment funds had no net effect on the Company's net earnings. The Company consolidates all entities that it controls through a majority voting interest or otherwise, including those investment funds in which the Company either directly or indirectly has a controlling financial interest. In addition, the Company consolidates all variable interest entities for which it is the primary beneficiary.
The Company consolidates two and three investment funds for which it acts as the managing member/general partner and investment manager as of March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, the Company consolidated the following investment funds: Ramius Enterprise LP (“Enterprise LP”) and Cowen Private Investments LP ("Cowen Private"). At December 31, 2020, the Company consolidated the following investment funds: Enterprise LP, Cowen Private, and Cowen Sustainable Investments I LP ("CSI I LP"). These funds are referred to as each a "Consolidated Fund" and collectively the "Consolidated Funds".
During the first quarter of 2021, the Company deconsolidated CSI I LP due the Company's portion being diluted through a capital equalization event. During the second quarter of 2020, the Company deconsolidated Ramius Merger Fund LLC (the "Merger Fund") and UCITS Fund ("UCITS Fund") due to a partial redemption of the Company’s direct portfolio fund investment in Merger Fund and a partial termination of the notional value of UCITS Fund units referenced in a total return swap with a third party. The Company continues to hold a direct retained portfolio fund investment in the Merger Fund and CSI I LP and continues to have economic exposure to the returns of UCITS Fund through a total return swap with a third party. Merger Fund, CSI I LP and UCITS Fund continue to be related parties of the Company after deconsolidation. CSI I Golden Holdco LP ("Golden HoldCo") and CSI I Prodigy Holdco LP ("Prodigy HoldCo") were consolidated through November 2020 when the Company raised additional capital within the sustainable investing strategy that diluted the Company's direct and indirect ownership. As a result, the Company's direct and indirect ownership in Golden Holdco and Prodigy Holdco is no longer expected to be significant to either entity and the entities were deconsolidated.
The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a Voting Operating Entity ("VOE") or a Variable Interest Entity ("VIE") under US GAAP.
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Voting Operating Entities—VOEs are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently, (ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact the entity's economic performance and (iii) voting rights of equity holders are proportionate to their obligation to absorb losses or the right to receive returns.
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Under US GAAP consolidation requirements, the usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. Accordingly, the Company consolidates all VOEs in which it owns a majority of the entity's voting shares or units.
Variable Interest Entities—VIEs are entities that lack one or more of the characteristics of a VOE. In accordance with US GAAP, an enterprise must consolidate all VIEs of which it is the primary beneficiary. Under the US GAAP consolidation model for VIEs, an enterprise that (1) has the power to direct the activities of a VIE that most significantly impacts the VIE's economic performance, and (2) has an obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE, is considered to be the primary beneficiary of the VIE and thus is required to consolidate it.
The Company determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE by performing a periodic qualitative and/or quantitative analysis of the VIE that includes a review of, among other things, its capital structure, contractual agreements between the Company and the VIE, the economic interests that create or absorb variability, related party relationships and the design of the VIE.
The VIEs the Company has invested in act as investment managers and/or investment companies that may be managed by the Company. The VIEs are financed through their operations and/or loan agreements with the Company.
In the ordinary course of business, the Company also sponsors various other entities that it has determined to be VIEs. These VIEs are primarily investment funds for which the Company serves as the general partner, managing member and/or investment manager with decision-making rights. The Company consolidates these investment funds when its variable interest is potentially significant to the entity (see Note 6 for additional disclosures on VIEs).
The Company does not consolidateconsolidates investment funds for which it acts as the real estate funds that are VIEsmanaging member/general partner and investment manager. At March 31, 2022, the Company consolidated Ramius Enterprise LP (“Enterprise LP”), an investment fund. At December 31, 2021, the Company consolidated the following investment funds: Enterprise LP and Cowen Private Investments LP ("Cowen Private").
During the first quarter of 2022, the Company deconsolidated Cowen Private as the fund was liquidated. During the first quarter of 2021, the Company deconsolidated Cowen Sustainable Investments I, LP ("CSI I LP") due to the Company's conclusion that it is not the primary beneficiary of these funds in each instance. Investment fund investors are entitled to all of the economics of these VIEs with the exception of the management fee and incentive income, if any, earned by the Company. The Company has equity interests in the funds as bothownership being diluted through a general partner and a limited partner. In these instances the Company has concluded that the variable interests are not potentially significant to the VIE. Although the Company may advance amounts and pay certain expenses on behalf of the investment funds that it considers to be VIEs, it does not provide, nor is it required to provide, any type of substantive financial support to these entities outside of regular investment management services.capital equalization event.
Equity Method Investments—For operating entities over which the Company exercises significant influence but which do not meet the requirements for consolidation as outlined above, the Company uses the equity method of accounting. The Company's investments in equity method investees are recorded in other investments in the accompanying condensed consolidated statements of financial condition. The Company's share of earnings or losses from equity method investees is included in Net gains (losses) on other investments in the accompanying condensed consolidated statements of operations.
The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment charge when the loss in value is deemed other than temporary.
Other—If the Company does not consolidate an entity or apply the equity method of accounting, the Company accounts for its investment in such entitiesentity (primarily allconsisting of securities of such entity which are boughtpurchased and held principally for the purpose of selling them in the near term and classified as trading securities), at fair value with unrealized gains (losses) resulting from changes in fair value reflected within Investment income (loss) - Securities principal transactions, net or Investment income (loss) - portfolio fund investment income (loss) in the accompanying condensed consolidated statements of operations.
Retention of Specialized Accounting—The Consolidated Funds and certain other consolidated companies are investment companies and apply specialized industry accounting. The Company reports its investments on the condensed consolidated statements of financial condition at their estimated fair value, with unrealized gains (losses) resulting from changes in fair value reflected within Consolidated Funds - Principal transactions, net in the accompanying condensed consolidated statements of operations. Accordingly, the accompanying condensed consolidated financial statements reflect different accounting policies for investments depending on whether or not they are held through a consolidated investment company.
Certain portfolio fund investments qualify as equity method investments and are investment companies that apply specialized industry accounting. In applying equity method accounting guidance, the Company retains the specialized accounting of the investees and reports its investments on the condensed consolidated statements of financial condition at their estimated fair value, with unrealized gains (losses) resulting from changes in fair value reflected within Investment Income - portfolio fund principal transactions, net in the accompanying condensed consolidated statements of operations.
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In addition, the Company's broker-dealer subsidiaries and security-based swap dealer apply the specialized industry accounting for brokers and dealers in securities, which the Company retains upon consolidation.
Valuation of investments and derivative contracts
US GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement datedate;
Level 2Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and
Level 3Fair value is determined based on pricing inputs that are unobservable and includes situations where there is little, if any, market activity for the asset or liability. The determination of fair value for assets and liabilities in this category requires significant management judgment or estimation.
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Company's perceived risk of that instrument. Inputs reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
The Company and its operating subsidiaries act as the manager for the Consolidated Funds. Both the Company and the Consolidated Funds hold certain investments which are valued by the Company, acting as the investment manager. The fair value of these investments is based on their proportional rights of the underlying portfolio company, and is generally estimated based on proprietary models developed by the Company, which include discounted cash flow analysis, public market comparables, and other techniques and may be based, at least in part, on independently sourced market information. The material estimates and assumptions used in these models include the timing and expected amount of cash flows, the appropriateness of discount rates used, and, in some cases, the ability to execute, timing of, and estimated proceeds from expected financings. Significant judgment and estimation impact the selection of an appropriate valuation methodology as well as the assumptions used in these models, and the timing and actual values realized with respect to investments could be materially different from values derived based on the use of those estimates. The valuation methodologies applied impact the reported value of the Company's investments and the investments held by the Consolidated Funds in the condensed consolidated financial statements. Certain of the Company's investments are relatively illiquid or thinly traded and may not be immediately liquidated on demand if needed. Fair values assigned to these investments may differ significantly from the fair values that would have been used had a ready market for the investments existed and such differences could be material.
The Company primarily uses the market approach to value its financial instruments measured at fair value. In determining an instrument's level within the hierarchy, the Company categorizes the Company's financial instruments into three categories: securities, derivative contracts and other investments. To the extent applicable, each of these categories can further be divided between those held long or sold short.
The Company has the option to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in earnings each period. The election is made on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument.  The Company has elected the fair value option for certain of its investments held by its operating companies.  This option has been elected because the Company believes that it is consistent with the manner in which the business is managed, as well as the way that financial instruments in other parts of the business are recorded. 
Securities—Securities with values based on quoted market prices in active markets for identical assets are classified within level 1 of the fair value hierarchy. These securities primarily include active listed equities, certain U.S. government and sovereign obligations, Exchange Traded Funds ("ETFs"), mutual funds and certain money market securities.
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Certain positions for which trading activity may not be readily visible, consisting primarily of convertible debt, corporate debt and loans and restricted equities, are stated at fair value and classified within level 2 of the fair value hierarchy. The estimated fair values assigned by management are determined in good faith and are based on available information considering trading activity, broker quotes, quotations provided by published pricing services, counterparties and other market participants, and pricing models using quoted inputs, and do not necessarily represent the amounts which might ultimately be realized. As level 2 investments include positions that are not always traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability.
Derivative contracts—Derivative contracts can be exchange-traded or privately negotiated over-the-counter (“OTC”). Exchange-traded derivatives, such as futures contracts and exchange-traded option contracts, are typically classified within level 1 or level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. OTC derivatives, such as generic forwards, swaps and options, are classified as level 2 when their inputs can be corroborated by market data. OTC derivatives, such as swaps and options, with significant inputs that cannot be corroborated by readily available or observable market data are classified as level 3.
Other investments—Other investments consist primarily of portfolio funds, real estate investments, carried interest and equity method investments, which are valued as follows:
i.    Portfolio funds—Portfolio funds include interests in private investment partnerships, foreign investment companies and other collective investment vehicles which may be managed by the Company or its affiliates. The Company applies the practical expedient provided by the US GAAP fair value measurements and disclosures guidance relating to investments in certain entities that calculate net asset value (“NAV”) per share (or its equivalent). The practical expedient permits an entity holding investments in certain entities that either are investment companies or have attributes similar to an investment company, and calculate NAV per share or its equivalent for which the fair value is not readily determinable, to measure the fair value of such investments on the basis of that NAV per share, or its equivalent, without adjustment. Investments which are valued using NAV per share as a practical expedient are not categorized within the fair value hierarchy.
ii. Carried Interest—For the private equity and debt fund products the Company offers, the Company is allocated incentive income by the investment funds based on the extent by which the investment funds performance exceeds predetermined thresholds. Carried interest allocations are generally structured from a legal standpoint as an allocation of capital in the Company’s capital account. The Company accounts for carried interest allocations by applying an equity ownership model. Accordingly, the Company accrues performance allocations quarterly based on the fair value of the underlying investments assuming hypothetical liquidation at book value.
iii. Equity Method Investments—ForFor operating entities over which the Company exercises significant influence but which do not meet the requirements for consolidation as outlined above, the Company applies the equity method of accounting. The Company's investments in equity method investees are recorded in other investments in the accompanying condensed consolidated statements of financial condition. The Company's share of earnings or losses from equity method investees is included in Net gains (losses) on other investments in the accompanying condensed consolidated statements of operations.
Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price consideration of acquired companies over the estimated fair value assigned to the individual assets acquired and liabilities assumed. Goodwill is allocated to the Company's reporting units at the date the goodwill is initially recorded. Once goodwill has been allocated to the reporting units, it generally no longer retains its identification with a particular acquisition, but instead becomes identifiable with the reporting unit. As a result, all of the fair value of each reporting unit is available to support the value of goodwill allocated to the unit.
In accordance with US GAAP requirements for testing for impairment of goodwill, the Company tests goodwill for impairment on an annual basis or at an interim period if events or changed circumstances would more likely than not reduce the fair value of a reporting unit below its carrying amount. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances led to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that fair value exceeds its carrying amount, then performing a quantitative impairment test is not necessary. If the Company concludes otherwise, the Company is required to perform a quantitative impairment test that requires a comparison of the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying value, the related goodwill is not considered impaired and no further analysis is required. If the
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carrying value of the reporting unit exceeds its fair value, then the Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.
Intangible assets
Intangible assets with finite lives are amortized over their estimated average useful lives. Intangible assets are tested for potential impairment whenever events or changes in circumstances suggest that an asset or asset group's carrying value may not be fully recoverable. An impairment loss, calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized in the accompanying condensed consolidated statements of operations if the sum of the estimated undiscounted cash flows relating tofrom the use or disposition of the asset or asset group is less than the corresponding carrying value. The Company continually monitors the estimated average useful lives of existing intangible assets.
Legal Reserves
The Company estimates potential losses that may arise out of legal and regulatory proceedings and records a reserve and takes a charge to income when losses with respect to such matters are deemed probable and can be reasonably estimated, in accordance with US GAAP. These amounts are reported in other expenses, net of recoveries, in the condensed consolidated statements of operations. See Note 1722 in our accompanying condensed consolidated financial statements for the quarter ended March 31, 20212022 for further discussion.
Recently adopted and future adoption of accounting pronouncements
        For a detailed discussion, see Note 2p2q "Recent pronouncements" in our accompanying condensed consolidated financial statements for the three months ended March 31, 2021.2022.
Item 3.    Quantitative and Qualitative Disclosures about Market Risk
During the three months ended March 31, 2021,2022, there were no material changes in our quantitative and qualitative disclosures about market risks from those disclosed in our 20202021 Form 10-K. For a more detailed discussion concerning our market risk, see Item 7A "Quantitative and Qualitative Disclosures about Market Risk" in our 20202021 Form 10-K.
Item 4.    Controls and Procedures
Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer (the principal executive officer and principal financial officer, respectively), evaluated our disclosure controls and procedures as of March 31, 2021.2022.
Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of March 31, 2021,2022, our disclosure controls and procedures are effective to provide a reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer of the Company, as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended March 31, 2021.for such period.
PART II. OTHER INFORMATION
Item 1.    Legal Proceedings    
In the ordinary course of business, the Company and its affiliates, subsidiaries and current and former officers, directors and employees (the "Company and Related Parties") are named as defendants in, or as parties to, various legal actions and proceedings. Certain of these actions and proceedings assert claims or seek relief in connection with alleged violations of securities, banking, anti-fraud, anti-money laundering, employment and other statutory and common laws. Certain of these actual or threatened legal actions and proceedings include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief.
In the ordinary course of business, the Company and Related Parties are also subject to governmental and regulatory examinations, information gathering requests (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Certain of our affiliates and subsidiaries are registered broker-dealers, futures commission merchants, investment advisers or other regulated entities and, in those capacities, are subject to regulation by
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various U.S., state and foreign securities, commodity futures and other regulators. In connection with formal and informal
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inquiries by these regulators, we receive requests and orders seeking documents and other information in connection with various aspects of our regulated activities.
Due to the global scope of our operations, and presence in countries around the world, the Company and Related Parties may be subject to litigation, governmental and regulatory examinations, information gathering requests, investigations and proceedings (both formal and informal), in multiple jurisdictions with legal and regulatory regimes that may differ substantially, and present substantially different risks, from those to which the Company and Related Parties are subject in the United States.
The Company seeks to resolve all litigation and regulatory matters in the manner management believes is in the best interests of the Company and its shareholders, and contests liability, allegations of wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter.
In accordance with US GAAP, the Company establishes reserves for contingencies when the Company believes that it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. The Company discloses a contingency if there is at least a reasonable possibility that a loss may have been incurred and there is no reserve for the loss because the conditions above are not met. The Company's disclosure includes an estimate of the reasonably possible loss or range of loss for those matters, for which an estimate can be made. Neither a reserve nor disclosure is required for losses that are deemed remote.
The Company appropriately reserves for certain matters where, in the opinion of management, the likelihood of liability is probable and the extent of such liability is reasonably estimable. Such amounts are included within accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated statements of financial condition. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including, but not limited to, the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, the Company's defenses and its experience in similar cases or proceedings as well as its assessment of matters, including settlements, involving other defendants in similar or related cases or proceedings. The Company may increase or decrease its legal reserves in the future, on a matter-by-matter basis, to account for developments in such matters. The Company accrues legal fees as incurred.
Item 1A.    Risk Factors
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our 20202021 Form 10-K as well as those set forth below. These risk factors describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our businesses, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.
Liquidity Risks
The terms of the credit agreement governing our new revolving credit facility and new term loan may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
On March 24, 2021, we entered into a new credit agreement, pursuant to which the lenders party thereto made available to us a term loan in an aggregate principal amount of $300 million and a revolving credit facility with aggregate commitments of $25 million (with a $5 million sub-limit for the issuance of letters of credit). As of Marchfiscal year ended December 31, 2021, the revolving credit facility was unfunded and $300 million was drawn under the term loan. The terms of the credit agreement contain a number of restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries and may limit our ability to engage in acts that may be in our long-term best interest, including, subject to customary exceptions, thresholds, qualifications and “baskets”, restrictions on our ability to:

•    incur additional indebtedness and guarantee indebtedness;
•    pay dividends or make other distributions or repurchase or redeem capital stock;
•    prepay, redeem or repurchase certain indebtedness;
•    issue certain preferred stock or similar equity securities;
•    make loans and investments;
•    sell assets;
•    incur liens;
•    enter into transactions with affiliates;
•    alter the businesses we conduct;
•    enter into agreements restricting our subsidiaries’ ability to pay dividends;
•    engage in sale and leaseback transactions; and
•    consolidate, merge or sell all or substantially all of our assets.
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The restrictive covenants in the credit agreement also require us to comply with a financial maintenance covenant, consisting of a maximum total net leverage ratio of no greater than 3.35 to 1.00, measured as of the last day of each fiscal quarter on which outstanding borrowings under the revolving credit facility exceed 35.0% of the commitments thereunder (excluding certain letters of credit), and to satisfy other financial condition tests in order to undertake certain actions.
In addition, our obligations under the credit agreement are guaranteed by certain of our wholly-owned domestic subsidiaries (excluding our broker-dealer subsidiaries) (the “Guarantors”) and secured by substantially all of our and our Guarantors’ assets, subject in each case to certain customary exceptions.
A breach of the covenants or restrictions under the credit agreement governing our new revolving credit facility and our new term loan could result in an event of default. Such a default would allow the lenders to accelerate the indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies. In addition, an event of default would permit the lenders under our revolving credit facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our new revolving credit facility or our new term loan, those lenders could proceed against the collateral granted them to secure that indebtedness. In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be:
•    limited in how we conduct our business;
•    unable to raise additional debt or equity financing to operate during general economic or business downturns; and
•    unable to compete effectively or to take advantage of new business opportunities.

In addition, our new term loan and new revolving credit facility have a variable rate of interest, which increases our exposure to interest rate fluctuations, to the extent we elect not to hedge such exposures.
Other Risks to Stockholders
Conversion of the December 2022 Convertibles Notes may dilute the ownership interest of our stockholders or otherwise depress the market price of our Class A common stock.
In March 2021 we called for redemption the $88.1 million principal amount of outstanding December 2022 Convertible Notes. The December 2022 Convertible Notes that are outstanding will be redeemed on June 24, 2021 (the “Redemption Date”) at a redemption price equal to 100.00% of the principal amount thereof plus accrued and unpaid interest on such principal amount to, but not including, the Redemption Date. As a result of the Company’s call for redemption of the December 2022 Convertible Notes, such December 2022 Notes Convertible Notes may be converted by holders thereof at any time before the close of business on June 22, 2021. As of March 24, 2021 (the date the Company delivered the notice of redemption to the holders of December 2022 Convertible Notes), the Conversion Rate (as defined in the indenture governing the December 2022 Convertible Notes) was 58.3324 per $1,000 principal amount of December 2022 Convertible Notes. In addition, as a result of our call for redemption of the December 2022 Convertible Notes, a make-whole fundamental change has occurred under the indenture governing the December 2022 Convertible Notes. If a holder of December 2022 Convertible Notes timely elects to convert its December 2022 Convertible Notes, the Conversion Rate will be increased by 0.3818 additional shares of our Class A common stock. The settlement method for the December 2022 Convertible Notes surrendered for conversion will be cash up to the principal amount and shares of our Class A common stock for the remainder of the conversion obligation, with the number of shares determined by reference to the volume-weighted average price of our Class A common stock for each trading day in a 50-trading day observation period, as provided under the indenture governing the December 2022 Convertible Notes. On March 9, 2021, the first day of this observation period, the closing per share price of our Class A common stock was $37.36. As of April 30, 2021, the closing per share price of our Class A common stock was $39.49. If the price of our Class A common stock during this observation period remains above the effective conversion price of the December 2022 Convertible Notes, we expect substantially all of the December 2022 Convertible Notes will be presented for conversion prior to the Redemption Date and that we will issue a currently indeterminate number of shares of our Class A common stock to the extent our conversion obligation exceeds the aggregate principal amount of December 2022 Convertible Notes presented for conversion. In addition, since a substantial portion of any conversion consideration and the make-whole will likely be paid in shares of our Class A common stock, any sales in the public market of our Class A common stock issuable in connection with conversion could adversely affect prevailing market prices of our Class A common stock.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
As of March 31, 2021,2022, the Company's Board of Directors has a share repurchase program that, authorizessince its inception, has authorized the Company to purchase up to $296.1$466.4 million of Cowen Class A common stock from time to time through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. The specific timing and
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amount of repurchases will vary depending on various factors, including, among others, market conditions and competing needs for the use of our capital.  We may elect to conduct future share repurchases through open market purchases, private transactions or automatic share repurchase programs under SEC Rule 10b5-1. During the three months ended March 31, 2021,2022, the Company repurchased 605,703798,302 shares, at an average price of $34.06$30.24 per share, of Cowen Class A common stock through the share repurchase program.
The table below sets forth the information with respect to purchases made by or on the behalf of the Company or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act, as amended), of our common stock during the three months ended March 31, 2021.2022. Board approval of repurchases is based on dollar amount. As a result, the Company cannot estimate the number of shares that may yet be purchased.
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Month 1 (January 1, 2021 – January 31, 2021)
Common stock repurchases(1)— $— — $21,128,277 
Employee transactions(2)— — — — 
Other (3)1,155 25.33 — — 
Total1,155 $25.33 — 
Month 2 (February 1, 2021 – February 29, 2021)
Common stock repurchases(1)171,418 $30.32 171,418 $15,931,607 
Employee transactions(2)39 26.83 — — 
Other (3)— — — — 
Total171,457 $30.31 171,418 
Month 3 (March 1, 2021 – March 31, 2021)
Common stock repurchases(1)434,285 $35.53 434,285 $25,000,000 
Employee transactions(2)148,713 42.00 — — 
Other (3)— — — — 
Total582,998 $37.18 434,285 
Total (January 1, 2021 – March 31, 2021)
Common stock repurchases(1)605,703 $34.06 605,703 $— 
Employee transactions(2)148,752 41.99 — — 
Other (3)1,155 25.33 — — 
Total755,610 $35.61 605,703 
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PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Month 1 (January 1, 2022 – January 31, 2022)
Common stock repurchases(1)379,002 $33.23 379,002 $43,526,497 
Employee transactions(2)— — — — 
Other (3)— — — — 
Total379,002 $33.23 379,002 
Month 2 (February 1, 2022 – February 28, 2022)
Common stock repurchases(1)30,000 $29.55 30,000 $42,639,886 
Employee transactions(2)— — — — 
Other (3)— — — — 
Total30,000 $29.55 30,000 
Month 3 (March 1, 2022 – March 31, 2022)
Common stock repurchases(1)389,300 $27.38 389,300 $31,979,581 
Employee transactions(2)374,149 32.83 — — 
Other (3)— — — — 
Total763,449 $30.05 389,300 
Total (January 1, 2022 – March 31, 2022)
Common stock repurchases(1)798,302 $30.24 798,302 $— 
Employee transactions(2)374,149 32.83 — — 
Other (3)— — — — 
Total1,172,451 $31.07 798,302 
(1)    The Company's Board of Directors have authorized the repurchase, subject to market conditions, of up to $296.1$466.4 million of the Company's outstanding Class A common stock.
(2)    Represents shares of the Company's Class A common stock withheld in satisfaction of tax withholding obligations upon the vesting of equity awards or other similar transactions.
(3)    Represents shares of common stock distributed to the Company from an escrow account established to satisfy the Company's indemnification claims arising under the terms of the purchase agreement entered into in connection with the Company's acquisition of Convergex Group, LLC.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6.    Exhibits

Exhibit No.Description
3.1
3.2
3.3
3.4
3.5
3.6
10.1
10.2
10.3
10.4
31.1
31.2
32
101.INSXBRL INSTANCE 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
104 Cover Page Interactive Data File - (formatted as inline XBRL and contained in Exhibit 101)





* Signifies management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COWEN INC.
  By:/s/ JEFFREY M. SOLOMON
  Name:Jeffrey M. Solomon
 Title:Chair and Chief Executive Officer (Principal Executive Officer)
  By:/s/ STEPHEN A. LASOTA
  Name:Stephen A. Lasota
Date:May 3, 20212, 2022 Title:Chief Financial Officer (principal financial officer and principal accounting officer)