Investors Capital 10-Q 2011 Q2 Quarterly report

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
_____________

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

Commission File Number: 333-43664

INVESTORS CAPITAL HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
DELAWARE	04-3284631
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

230 Broadway E.
Lynnfield, Massachusetts 01940
(Address of principal executive offices)

(781) 593-8565
(Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [ X] No [ ]

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

     Indicate by check mark whether the registrant is an accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).

     Large accelerated filer [ ]                                   Accelerated filer [ ]

     Non-accelerated filer [ ]                                     Smaller reporting company [X]
  (Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     Yes [ ] No [X]

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

     There were 6,620,743 shares outstanding of the issuer’s common stock, par value $.01 per share, as of November9, 2010.

Table of Contents

PART I

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FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS ITEM
4. CONTROLS AND PROCEDURES

PART II

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OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ITEM
6. EXHIBITS
SIGNATURES

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Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

PART I             FINANCIAL INFORMAITON
ITEM 1. FINANCIAL STATEMENTS
INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
	September 30, 2010	March 31, 2010
Assets
Current Assets
Cash and cash equivalents	$                                  6,242,404	$                                  5,812,865
Deposit with clearing organization, restricted	175,000	175,000
Accounts receivable	4,858,612	6,042,188
Note receivable -  (current)	34,299	140,598
Loans receivable from registered representatives (current), net of allowance	725,070	769,263
Prepaid income taxes	-	559,007
Securities owned at fair value	25,711	57,933
Investments	50,000	50,000
Prepaid expenses	975,571	957,674
	13,086,667	14,564,528
Property and equipment, net	624,402	774,182
Long Term Investments
Accounts receivable	330,000	-
Loans receivable from registered representatives	298,263	292,884
Note receivable	595,000	595,000
Investments	191,078	184,319
Non-qualified deferred compensation investment	921,607	929,897
Cash surrender value life insurance policies	586,116	551,398
	2,922,064	2,553,498
Other Assets
Other assets	13,728	25,069
Deferred tax asset, net	1,312,540	838,773
Capitalized software, net	122,277	138,497
	1,448,545	1,002,339
TOTAL ASSETS	$                             18,081,678	$                             18,894,547
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$                                  1,192,538	$                                     817,761
Accrued expenses	2,439,284	2,358,656
Notes payable	341,626	1,130,922
Commissions payable	3,298,135	3,488,415
Income Taxes Payable	20,187	-
Unearned revenues	199,947	101,931
Securities sold, not yet purchased, at fair value	855	5,693
	7,492,572	7,903,378
Long-Term Liabilities
Non-qualified deferred compensation plan	951,806	793,735
	951,806	793,735
Total liabilities	8,444,378	8,697,113
Stockholders' Equity:
Common stock, $.01 par value, 10,000,000 shares authorized;
6,625,016 issued and 6,621,131 outstanding at September 30, 2010;
6,570,177 issued and 6,566,292 outstanding at March 31, 2009	66,250	65,958
Additional paid-in capital	12,183,944	12,095,862
Accumulated deficit	(2,618,555)	(1,964,084)
Less: Treasury stock, 3,885 shares at cost	(30,135)	(30,135)
Accumulated other comprehensive income	35,796	29,833
Total stockholders' equity	9,637,300	10,197,434
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$                             18,081,678	$                             18,894,547
See Notes to Condensed Consolidated Financial Statements.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)
	2010	2009
Revenue:
Commissions	$                           16,715,609	$                           15,357,927
Advisory fees	3,090,414	2,871,553
Other fee income	143,364	106,661
Other revenue	481,177	599,658
Total revenue	20,430,564	18,935,799
Expenses:
Commissions and advisory fees	16,098,685	14,348,474
Compensation and benefits	2,040,010	1,817,574
Regulatory, legal and professional services	1,315,436	511,359
Brokerage, clearing and exchange fees	497,837	673,784
Technology and communications	322,141	294,069
Marketing and promotion	302,805	275,900
Occupancy and equipment	213,444	210,591
Other administrative	256,052	369,114
Interest	4,241	6,034
Total operating expenses	21,050,651	18,506,899
Operating (loss) income	(620,087)	428,900
Provision for income taxes	23,594	222,202
Net (loss) income	$                             (643,681)	$                                206,698
Basicand dilutednet (loss) income per share	$                                   (0.10)	$                                      0.03
Basic dividends per common share	$                                            -	$                                            -
Shares used in basicand dilutedper share calculations	6,523,675	6,499,394
See Notes to Condensed Consolidated Financial Statements

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)
	2010	2009
Revenue:
Commissions	$                          33,710,550	$                          31,070,736
Advisory fees	6,505,142	5,303,741
Other fee income	333,548	248,338
Other revenue	823,297	927,819
Total revenue	41,372,537	37,550,634
Expenses:
Commissions and advisory fees	32,622,913	28,726,293
Compensation and benefits	4,049,078	3,489,510
Regulatory, legal and professional services	2,120,309	1,126,983
Brokerage, clearing and exchange fees	1,089,024	1,352,449
Technology and communications	630,972	541,558
Marketing and promotion	637,032	473,808
Occupancy and equipment	428,280	439,707
Other administrative	440,904	664,674
Interest	11,114	16,614
Total operating expenses	42,029,626	36,831,596
Operating (loss) income	(657,089)	719,038
(Benefit) provision for income taxes	(2,617)	460,804
Net (loss) income	$                            (654,472)	$                               258,234
Basicand diluted net (loss) income  per share	$                                  (0.10)	$                                     0.04
Basic dividends per common share	$                                          -	$                                          -
Shares used in basicand dilutedper share calculations	6,518,426	6,490,974
See Notes to Condensed Consolidated Financial Statements

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)
	2010	2009
Cash flows from operating activities:
Net (loss) income	$                         (654,472)	$                            258,232
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization	180,630	175,300
Valuation allowance income taxes	-	102,405
Deferred taxes	(473,767)	214,917
Stock-based compensation	88,374	136,957
Unrealized loss in marketable securities	977	696
Non-qualified deferred compensation investment	21,863	7,361
Loss on disposal of equipment	-	1,200
Market adjustment cash surrender value life insurance policy	1,726	(21,476)
Charge to commission expense (forgivable loans)	70,118	71,727
Change in operating assets and liabilities:
Accounts receivable	1,303,575	(821,744)
Prepaid expenses and other	276,439	256,280
Loans receivable from registered representatives	(31,304)	(22,087)
Due from registered represetative	(450,000)	-
Income taxes	579,194	266,804
Accounts receivable-Fidelity Bond	-	956,223
Accounts payable	374,777	(881,976)
Securities, net	26,407	60,158
Accrued expenses	80,629	(1,463,518)
Commissions payable	(190,280)	245,789
Unearned revenues	98,016	74,458
Net cash provided by (used in) operating activities	1,302,902	(382,294)
Cash flows from investing activities:
Acquisition of property and equipment	(30,850)	(16,127)
Cash surrender value life insurance policies	(36,443)	(54,443)
Payment on note receivable	106,299	(56)
Purchase of investments	(796)	(1,882)
Capitalized software	(122,277)	-
Net cash (used in) investing activities	(84,067)	(72,508)
Cash flows from financing activities:
Payments on note payable	(789,296)	(844,116)
Net cash used in financing activities	(789,296)	(844,116)
Net increase (decrease) in cash and cash equivalents	429,539	(1,298,918)
Cash and cash equivalents, beginning of year	5,812,865	6,151,613
Cash and cash equivalents, end of period	$                         6,242,404	$                          4,852,695
Supplemental disclosures of cash flow information:
Interest paid	$                              11,114	$                               16,614
Income taxes paid	$                              37,000	$                               58,731
See Notes to Condensed Consolidated Financial Statements.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

     INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

     Incorporated in 1995 under Massachusetts law and redomiciled under Delaware law in November 2007, Investors Capital Holdings, Ltd. ("ICH") is a holding company whose wholly-owned subsidiaries assist a nationwide network of independent registered representatives ("representatives") in providing a diversified line of financial services to the public including securities brokerage, investment advice, asset management, financial planning and insurance. Our subsidiaries include the following:

• Investors Capital Corporation ("ICC") is duly registered under the Securities Exchange Act of 1934, theInvestment Advisers Act of 1940 and applicable state law to provide broker-dealer and investmentadvisory services nationwide. ICC’s national network of independent financial representatives islicensed to provide these services through ICC under the regulatory purview of the Securities andExchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”) and statesecurities regulators. ICC executes and clears its public customer acc ounts on a fully disclosed basisthrough Pershing, LLC. (“Pershing”). ICC, doing business as Investors Capital Advisors (“ICA”), alsoprovides investment advisory services.
• ICC Insurance Agency, Inc. facilitates the sale of insurance and annuities by our representatives.
• Investors Capital Holdings Securities Corporation ("ICH Securities") holds cash, cash equivalents,interest income and dividend income for ICH.

INTERIM FINANCIAL REPORTING:

     The accompanying interim unaudited condensed consolidated financial statements of Investors Capital Holdings, Ltd. and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all of the adjustments necessary for a fair presentation of the results of the interim periods presented. Operating results for the three and six month periods ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending March 31, 2011. The balance sheet at March 31, 2010 ha s been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended March 31, 2010 filed with the SEC.

USE OF ESTIMATES AND ASSUMPTIONS:

     The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

RECLASSIFICATIONS:

     Certain amounts in 2009 were reclassified to provide comparison with 2010 classifications. These reclassifications had no effect on previously reported results of operations.

SIGNIFICANT ACCOUNTING POLICIES:

Revenue recognition

The Company’s revenue recognition policies are summarized below.

     Mutual Funds/Variable Annuities.Revenue from the sale of mutual funds and variable annuities is recognized as of the date the check and application is accepted by the investment company.

     Brokerage.The Company earns commissions through stock purchase and sale transactions, mutual fund purchases, government and corporate bonds transactions, fee-based managed accounts and ticket charges. The Company also earns revenue in the form of 12b-1 fees and interest on account balances. The earnings process is substantially complete at trade date in accordance with the rules of FINRA and the SEC.

     The Company also receives credit for clearing charge adjustments that are netted against any clearing charges the Company may incur for the period. These adjustments are recognized as income in the period received unless otherwise noted by the clearing Company.

     Unrealized gains and losses are recorded at the time that the Company reconciles its trading positions with the market value. The unrealized gains or losses are adjusted to market until the position is settled or the trade is cancelled.

     Advisory Fees.Our managed accounts advisory fees are based on the amount of assets managed per agreement negotiated between our independent representatives and their clients. These revenues are recorded quarterly as and when billed based on the fair market value of assets managed throughout the quarter. Any portion remaining uncollected due to account adjustments after account rebalancing is charged against earnings at quarter end.

     Administration Fees.Administration fees for services rendered to the Company’s representatives respecting annual FINRA license renewals and Error and Omissions (“E&O”) insurance are recognized as revenue upon registration of the representative with FINRA and listing of the registered representative with the E&O insurance carrier. The funds received from the registered representative are initially recorded as unearned revenue. The amounts collected in excess of the E & O insurance premium and/or fees due FINRA, if any, are recognized as revenue. Fees collected to maintain books and records are deferred and recognized ratably throughout the year.

     Other Revenue.Revenue from marketing associated with product sales is recognized quarterly based on production levels. Marketing event revenues are recognized at the commencement of each event offset by its costs.

Concentration of Credit Risk

     Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limits for cash and cash equivalents not covered by the Depositors Insurance Fund of Massachusetts. Cash and cash equivalents held at our clearing broker-dealer is fully insured up to $500,000.

Receivables

     Trade Receivables.Substantially all trade receivables reflect amounts due from our clearing broker. As prescribed by the SEC, trade receivables usually settle within three days. If a trade error results, the Company

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

pursues remedies to collect on the trade error. The Company does not record a receivable resulting from a trade error that is in litigation or whose outcome is otherwise not reasonably determinable. In such a case, the Company applies any proceeds from settlements or insurance against any trade losses incurred.

     Loans to Representatives.Management performs periodic evaluations and provides an allowance based on the assessment of specifically identified unsecured receivables and other factors, including the representative's payment history and production levels. Once it is determined that it is both probable that a loan has been impaired, typically due to the termination of the relationship, and the amount of loss can reasonably be estimated, the portion of the loan balance estimated to be uncollectible is so classified. Loans charged to commission expense, upon the representative meeting their respective forgiveness target totaled $70,118 and $71,727 for the six months ended September 30, 2010 and 2009. See “Note 6, Loans to Registered Representatives”.

Internal Use Software

     Cost incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Training costs are expensed as incurred. Internal use software is amortized on a straight-line basis over its estimated useful life, generally three years.

Income Taxes

     The Company uses the asset and liability method to account for income taxes, which requires recognition of deferred tax assets, subject to valuation allowances, and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income or loss in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has recorded a valuation allowance against certain deferred tax assets in the current period. Management believes it is more likely than not that the remaining deferred tax assets will be realized.

     The Company reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. Reserves related to uncertain tax positions are based on a determination of whether and how much of a tax benefit taken in our tax filings or positions is more likely than not to be realized, assuming that the matter in question will be raised by the tax authorities. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense. We believe appropriate provisions for outstanding issues have been made.

NOTE 2 - SEGMENT INFORMATION

     Operating segments are defined as components of a business about which separate financial information of the segment is available that is regularly evaluated by management in deciding how to allocate resources and in assessing performance. The Company evaluates performance based on profit and loss from operations before income taxes not including nonrecurring gains and losses.

     The Company's reportable operating segments are (i) broker/dealer and related services offered through ICC and (ii) asset management (investment advisory) services offered through ICC, doing business as ICA, and, until recently, EPA. The segments are strategic business units that are managed separately. They operate under different regulatory systems, provide different services and require distinct marketing strategies and varied technological and operational support. They also have differing revenue models; ICC earns transactional commissions and various fees in connection with the brokerage of securities for its customers, whereas ICA generates recurring revenue from fees that are based on the value of assets under management.

     The Company accounts for inter-segment services and transfers as if the services or transfers were to third parties, that is, at current market prices. In presenting segment data, all corporate overhead items are allocated

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

to the segments, and inter-segment revenue, expense, receivables and payables are eliminated. Currently it is impractical to report segment information using geographical concentration.

     Assets are allocated among ICH and its subsidiaries based upon legal ownership and the services provided. Total period-end assets are presented on a stand-alone basis, i.e., without inter-company eliminations. The Company does not allocate income taxes or unusual items to segments. Corporate items and eliminations are presented in the following table for the purpose of reconciling the stand-alone asset amounts to total consolidated assets.

     The Company has an expense sharing agreement where management allocates all expenses separately to the parent and ICC, including allocation of costs associated with shared personnel, based upon time studies and a determination of which entities are the beneficiaries of the services rendered by the personnel.

Within ICC, expenses are further allocated between the two segments, ICC and ICA as follows: overhead expenses pro rata to revenue, direct full-time and time-shared employee costs based on the segments being served, and other personnel-related expenses pro rata to head count.

     ICC reimburses ICH in the form of a management fee, “The Management Fee Agreement”, for ICH-incurred overhead expenses that are necessary for ICC to effectively conduct its operations. This overhead primarily is in the nature of salaries and professional and legal fees incurred to obtain such services as audit engagements, legal advice, and industry expertise.

     The Company in reviewing its net capital requirement will assess the ongoing risk these agreements may have on the firm’s net capital.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

Segment reporting is as follows:

Segment reporting is as follows for the quarter ended:
	September 30,
	2010	2009
Non-interest revenues:
ICC brokerage services	$                         17,233,323	$                         15,925,453
ICA asset management services	3,127,301	2,923,825
ICH gain (loss) on investment	(13,171)	(6,872)
Total	20,347,453	18,842,406
Interest and dividend income, net:
ICC	82,250	$                                91,163
ICH	848	2,217
ICH Securities	13	13
Total	83,111	$                                93,393
Depreciation and amortization expenses:
ICC brokerage services	88,193	$                                85,991
ICA asset management services	1,167	1,167
Total	89,360	$                                87,158
Operating income (loss):
ICC brokerage services	(814,710)	$                              342,199
ICA asset management services	287,417	213,813
ICH	(92,807)	(127,127)
ICH Securities	13	13
Total	$                            (620,087)	$                              428,898
Period end total assets:
ICC brokerage services	15,841,692	$                         13,130,466
ICA asset management services	861,110	1,391,710
ICH	2,481,750	2,894,490
ICH Securities	10,264	10,213
Corporate items and eliminations	(1,113,138)	(1,085,529)
Total	$                          18,081,678	$                         16,341,350
Corporate items and eliminations:
Inter-company eliminations	$                             (692,001)	$                           (681,551)
Income taxes	(421,137)	(403,978)
Total	$                          (1,113,138)	$                        (1,085,529)

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

Segment reporting is as follows for the six months ended:
	September 30,
	2010	2009
Non-interest revenues:
ICC brokerage services	$                      34,623,360	$                      31,925,896
ICA asset management services	6,586,312	5,428,586
ICH gain (loss) on investment	(21,863)	(9,361)
Total	$                      41,187,809	$                      37,345,121
Interest and dividend income, net:
ICC	$                           183,794	$                           200,655
ICH	908	4,832
ICH Securities	26	26
Total	$                           184,728	$                           205,513
Depreciation and amortization expenses:
ICC brokerage services	$                           178,297	$                           172,967
ICA asset management services	2,333	2,333
Total	$                           180,630	$                           175,300
Operating income (loss):
ICC brokerage services	$                     (1,118,376)	$                           966,394
ICA asset management services	653,549	464,508
ICH	(192,288)	(711,892)
ICH Securities	26	26
Total	$                         (657,089)	$                           719,036
Period end total assets:
ICC brokerage services	$                       15,841,692	$                      13,130,466
ICA asset management services	861,110	1,391,710
ICH	2,481,750	2,894,490
ICH Securities	10,264	10,213
Corporate items and eliminations	(1,113,138)	(1,085,529)
Total	$                       18,081,678	$                      16,341,350

NOTE 3 - LITIGATION AND REGULATORY MATTERS

     In the ordinary course of business, the Company and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including arbitrations, brought on behalf of various claimants, some of which seek material and/or indeterminable amounts. Certain of these actions and proceedings are based on alleged violations of consumer protection, securities and other laws and may involve claims for substantial monetary damages asserted against the Company and its subsidiaries. Also, the Company and its subsidiaries are subject to regulatory examinations, information gathering requests, inquiries, investigations and administrative proceedings that may result in fines or other negative impact on the Company. ICC, as a dually

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

registered broker/dealer and investment advisor, is subject to regulation by the SEC, FINRA, NYSE Amex and state securities regulators.

     The Company maintains Errors and Omissions ("E&O") insurance to protect itself from potential damages and/or legal costs associated with certain litigation and arbitration proceedings and, as a result, in the majority of cases the Company’s exposure is limited to $100,000 in any one case, subject to policy limitations and exclusions. The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company’s exposure is usually limited to $350,000 deductible per case, subject to policy limitations and exclusions.

     The Company had accrued liabilities of approximately $2,230,000 and $765,000 as of September 30, 2010 and March 31, 2010, respectively, related to legal fees and estimated probable settlement costs relating to the Company’s defense in various lawsuits. Included in September 30, 2010’s accrual is $1,000,000 for a regulatory matter settled with the Massachusetts Securities Division on October 27, 2010, of which $400,000 has been agreed to be reimbursed to the Company by one of its registered representatives and which amount is included in accounts receivable on the September 30, 2010 Condensed Balance Sheet. Some of the legal and regulatory matters could require the Company to pay damages or make other expenditures or establish reserves for amounts that could not be reasonably estimated and which could exceed those accrued as of September 30, 2010.

NOTE 4 - STOCK BASED COMPENSATION

     The Company measures and recognizes compensation expense for all share-based awards made to representatives, officers, employees and directors based on estimated fair values. Under the modified prospective transition method selected by the Company, all equity-based awards granted to employees and modifications of existing awards are accounted for at fair value with compensation expense recorded as a component of net (loss) income. The Company periodically issues common stock to employees, directors, officers, representatives and other key individuals in accordance with the provisions of the shareholder approved equity compensation plans.

Stock Awards

     Shares of stock granted under Company’s equity incentive plans (the “Equity Plans”) as of September 30, 2010 have been either fully vested at date of grant or subject to vesting over time periods varying from one to five years after the date of grant, unvested shares being subject to forfeiture in the event of termination of the grantee’s relationship with the Company, other than for death or disability. The compensation cost associated with these stock grants is recognized over the vesting period of the shares and is calculated as the market value of the shares on the date of grant. Stock grants have been recorded as deferred compensation, which is a component of paid-in capital within stockholders’ equity on the Company’s Consolidated Balance Sheets.

     The following activity occurred during the three months ended September 30, 2010:

		Weighted Ave	Weighted Average
	Shares	Stock Price	Vested Life	Fair Value $
Non-vested at July 1, 2010	49,377	$                        3.47	1.47 years	$                   171,338
Granted	30,000	$                        4.13		123,900
Vested	(11,921)	$                        3.62		(43,154)
Canceled	-	$                              -		-
Non-vested at September 30, 2010	67,456	$                         3.73	2.06 years	$                   251,611

     The following activity occurred during the six months ended September 30, 2009:

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

		Weighted Ave	Weighted Average
	Shares	Stock Price	Vested Life	Fair Value $
Non-vested at April 1, 2010	62,863	$                        3.50	1.91 years	$                  220,021
Granted	30,000	$                        4.13		123,900
Vested	(24,619)	$                        3.66		(90,106)
Canceled	(788)	$                        2.76		(2,175)
Non-vested at September 30, 2010
	67,456	$                        3.73	2.06 years	$                  251,611

     The Company’s net loss for the three months ended September 30, 2010 includes $27,147 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $14,840 for grants to independent representatives, under the Plan. The Company’s net income for the three months ended September 30, 2009 includes $33,635 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $34,539 for grants to independent representatives, under the Equity Plans.

     The Company’s net loss for the six months ended September 30, 2010 includes $54,580 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $33,794 for grants to independent representatives, under the Plan. The Company’s net income for the six months ended September 30, 2009 includes $68,818 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $68,139 for grants to independent representatives, under the Equity Plans.

     As of September 30, 2010 there was $251,611 of unrecognized compensation cost related to grants under the Equity Plans.

Stock Option Grants

     The following table summarizes information regarding the Company's employee and director fixed stock options as of September 30, 2010 and, 2009:

Employees , Director and Officers	2010		2009
Fixed Options		Weighted-Average		Weighted-Average
	Shares	Exercise Price	Shares	Exercise Price
Outstanding at beginning of year	150,000	$1.00	150,000	$1.00
Granted	-		-
Forfeited	-		-
Exercised	-		-
Reclassified(non-employee)	-		-
Outstanding at quarter end	150,000	$1.00	150,000	$1.00
Options exercisable at quarter-end	150,000		150,000
Weighted-average fair value of
options granted during the year	-		-

     The following table summarizes further information about employee and Directors' fixed stock options outstanding as of September 30, 2009:

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

Options Outstanding		Options Exercisable
		Weighted-Average
Range Of	Number	Remaining		Number	Weighted-Average
Exercise Prices	Outstanding	Contractual Life	Exercise Price	Exercisable	Exercise Price
$1.00	150,000	No Stated Maturity	$1.00	150,000	$1.00

NOTE 5 - NOTE RECEIVABLE

     On October 24, 2005, the Company entered into an agreement (the “Transition Agreement”) with Dividend Growth Advisors, LLC (“DGA”). The Company agreed to terminate its Investment Advisory Agreement with Eastern Point Advisors Funds Trust (the “Trust”) effective October 18, 2005 and to permit the appointment by the Trust of DGA to succeed the Company as the Trust’s investment advisor. Under the terms of the Transition Agreement and an associated promissory note (the “Note”), the receivable owed by the Funds to the Company was assigned to DGA and DGA agreed to pay the Company an amount equal to the total of all fees that the Company had waived or remitted to a fund in the Trust through October 18, 2005.

     The Note provides for a principal amount of $747,617, quarterly payments of interest accruing thereon at 5.5% and a full payment on or before October 31, 2010. The terms of this note were modified, effective March 3, 2010. Specifically, the maturity was extended for four years to October 31, 2013. Total outstanding as of September 30, 2010 and March 31, 2010 was $629,299 and $735,598, respectively. Prepayments are permitted without penalty. The interest accrued on this note was $9,299 and $2,981, respectively, at September 30, 2010 and March 31,2010.

NOTE 6 – LOANS TO REGISTERED REPRESENTATIVES

     ICC has granted loans to certain registered representatives with the stipulation that the loans will be forgiven if the representatives remain licensed with the Company for an agreed upon period of time, generally one to five years, and/or meet specified performance goals. Upon forgiveness, the loans are charged to commission expense for financial reporting purposes.

     Some loans to registered representatives are not subject to a forgiveness contingency. These loans, as well as loans that have failed the forgiveness contingency, are repaid to the Company by deducting a portion of the representatives’ commission payouts throughout the commission cycle until the loans are repaid. Interest charged on these loans to representatives range from 3% to 11.25% annually. Loans to registered representatives included in receivables from employees and registered representatives are as follows at September 30, 2010 and March 31, 2010.

     Loans to registered representatives are as follows:

	September 30,	March 31,
	2010	2010
Loans to representatives
Forgiveable	$                     879,584	$                     854,005
Other loans	180,121	244,514
Less: allowance	(36,372)	(36,372)
Total loans	$                  1,023,333	$                  1,062,147

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

NOTE 7 – INVESTMENTS

     As of September 30, 2010, the Company owned investments classified as held to maturity through March 12, 2011. These investments are presented at face value as follows: 

Purchase Date	Purchase Price	Description	Face Value	Interest Date
12/1/2009	$ 50,000	Insight Real Estate Series 2007-A Secured Debentures	$ 50,000	Quarterly

NOTE 8 – FAIR VALUE MEASUREMENTS

     The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach are used to measure fair value.

     The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

• Level 1- Inputs are unadjusted quoted prices in active markets for identical assets or liabilities theCompany has the ability to access.
• Level 2- Inputs are inputs (other than quoted prices included within Level 1) that are observable for theasset or liability, either directly or indirectly.
• Level 3- Inputs include unobservable inputs for the asset or liability and rely on management's ownassumptions about the assumptions that market participants would use in pricing the asset or liability.
  (The unobservable inputs should be developed based on the best information available in thecircumstances and may include the Company’s own data.)

     The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following table presents the Company's fair value hierarchy for those financial assets and liabilities measured at fair value as of September 30, 2010 and March 31,2010.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

September 30, 2010 Fair Value Measurements of Reporting Date Using

		Quotes Prices in	Significant
		Active Markets for	Other	Significant
	Total Fair Value of	Identical Assets	Observable	Unobservable
	Asset or Liability	(Level 1)	Input (Level 2)	Inputs (Level 3)
Investments	191,078	191,078
Securities owned at fair value	25,711	25,711	-	-
Total assets	$ 216,789	$ 216,789	$ -	$ -
Securities sold, not yet purchased, at fair value	$ 855	$ 855
Total liabilities	$ 855	$ 855

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

March 31, 2010 Fair Value Measurements of Reporting Date Using
		Quotes Prices in
		Active Markets for	Significant Other	Significant
	Total Fair Value of	Identical Assets	Observable Input	Unobservable
	Asset or Liability	(Level 1)	(Level 2)	Inputs (Level 3)
Investments	184,319	184,319	-	-
Securities owned at fair value	57,933	57,933	-	-
Total assets	$                      242,252	$                     242,252	$                                -	$                              -
Securities sold, not yet purchased, at fair value	$                            5,693	$                           5,693
Total liabilities	$                           5,693	$                          5,693

NOTE 9 – NON-QUALIFIED DEFERRED COMPENSATION PLAN

     Effective December 2007, the Company established the Investors Capital Holdings, Ltd. Deferred Compensation Plan (the “NQ Plan”) as well as a Rabbi Trust Agreement for this Plan. ICC is the NQ Plan’s sponsor. The unfunded NQ Plan enables eligible ICC’s Representatives to elect to defer a portion of earned commissions, as defined by the NQ Plan. The total amount of deferred compensation was $66,695 and $144,498 for the three and six months ended September 30, 2010 and $89,976 and $159,359 for the three and six months ended September 30, 2009, respectively.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Management's Discussion and Analysis reviews our consolidated financial condition as of September 30, 2010 and March 31, 2010, the consolidated results of operations for the three months and six months ended September 30, 2010 and 2009 and, as appropriate, factors that may affect future financial performance. The discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. Unless context requires otherwise, as used in this Management’s Discussion and Analysis (i) the “current period” means the three or six months ended September 30, 2010, (ii) the “prior period” means the three or six months ended September 30, 2009, (iii) an increase or decrease compares the current period to the prior period, and (iv) all non-comparative amounts refer to the current period.

FORWARD-LOOKING STATEMENTS

     The statements, analysis, and other information contained herein relating to trends in our operations and financial results, the markets for our products, the future development of our business, and the contingencies and uncertainties to which we may be subject, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," and other similar expressions, are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Such statements are made based upon management's current expectations and beliefs concerning future events and their effects on the Company and are subject to many risks and uncertainties. Our actual results may differ materially from the results anticipated in these forward-looking statements. Readers are directed to discussions of risks and uncertainties that may be found in this report and other documents filed by the Company with the United States Securities and Exchange Commission. We specifically disclaim any obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.

OVERVIEW

     We are a financial services holding company that, through our subsidiaries, provides brokerage, investment advisory, insurance and related services. We operate in a highly regulated and competitive industry that is influenced by numerous external factors such as economic conditions, marketplace liquidity and volatility,

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

monetary policy, global and national political events, regulatory developments, competition and investor preferences. Our revenues and net earnings may be either enhanced or diminished from period to period by these and other external factors.

OUR BUSINESS

     We operate primarily through our subsidiary, ICC, as a broker-dealer and, doing business as ICA, as a registered investment advisor, with a national network of independent financial representatives.

Broker-Dealer Services

     We provide broker-dealer services in support of trading and investment by our representatives’ customers in securities, including corporate equity and debt securities, U.S. Government securities, municipal securities, mutual funds, limited partnerships and other alternative investments, variable annuities and variable life insurance. We also provide related services such as market information, Internet brokerage, portfolio tracking facilities and records management.

Investment Advisory Services

     We provide investment advisory services, including asset allocation and portfolio rebalancing, for our representative’s customers. In the past, investment advisory services were performed by both ICC and EPA. After consolidating our investment advisory services into ICA, EPA ceased operations and was dissolved in 2008.

Recruitment and Support of Representatives

     A key component of our business strategy is to recruit well-established, productive representatives who provide superior service to their clients. Additionally, we assist our representatives in developing and expanding their business by providing a variety of support services and a diversified range of investment products for their clients. We focus on providing substantial added value to our representatives’ practices, enabling them to be more productive, particularly in high margin lines such as advisory services and brokerage.

     Support provided to assist representatives in pursuing consistent, profitable sales growth takes many forms, including automated trading systems, targeted financial assistance and a network of communication links with investment product companies. Regional and national conventions provide forums for interaction to improve product knowledge, sales and client satisfaction. In addition, we provide our representatives with programs and tools to grow their businesses both through new client acquisition and advancement of existing client relationships. These programs enhance our ability to attract and retain productive representatives.

OUR PROCESS

Online Brokerage

     Registered representatives have direct market access to submit security transactions for their clients through the use of an online brokerage platform for trade execution serviced by our clearing firm, Pershing LLC.

Check and Application

     Check and application revenue is obtained through a process where a check and a product application is delivered to us for processing that includes principal review and submission to the variable annuity, mutual fund, direct participation or other investment product company. Investments in technology are facilitating our migration over time from a paper intensive to a more paperless process. This shortens the transaction cycle, reduces errors and creates greater efficiencies.

Bond Brokerage

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

     Our fixed-income brokerage desk uses a network of regional and primary dealers to execute trades across a broad array of fixed income asset classes. The desk also utilizes dealer-only electronic services that allow the desk to offer inventory and to execute trades. Our fixed income traders work with our representatives to develop portfolios for clients.

Asset Allocation

     Asset allocation services are made available through ICA. Our services include the design, selection and rebalancing of investment portfolios on behalf of our representatives' clients. We also provide tools, services and guidance that enable our representatives to provide these investment services directly to their clients. These services, for the most part, are conducted through our online brokerage platform. Other allocation services are performed directly by fund companies.

CRITICAL ACCOUNTING POLICIES

In General

     Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that of its significant accounting policies (see Note 1 to the Company’s condensed consolidated financial statements contained herein), those dealing with revenue recognition, allowance for doubtful accounts receivable, and taxes involve a particularly high degree of judgment and complexity. Our accounting policies require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the condensed consolidated financial statements. By their nature, estimates involve judgment based upon available information. Actual results or amounts can and do differ from estimates and the differences can have a material effect on the condensed consolidated financial stat ements. Therefore, understanding these policies is important to understanding the reported results of operations and the financial position of the Company.

Off Balance Sheet Risk

     We execute securities transactions on behalf of our customers on a fully-disclosed basis. If either the customer or a counter-party fails to perform, we, by agreement with our clearing broker, may be required to discharge the obligations of the non-performing party. In such circumstances, we may sustain a loss if the market value of the security is different from the contract value of the transaction. We seek to control off-balance sheet risk by monitoring the market value of securities held or given as collateral in compliance with regulatory and internal guidelines. Pursuant to such guidelines, our clearing company requires that we reduce positions when necessary. We also complete credit evaluations where there is thought to be credit risk.

Reserves

     We record reserves related to legal proceedings in “accrued expenses” in the condensed consolidated balance sheet. The determination of these reserve amounts requires significant judgment on the part of management. Management considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client’s account; the basis and validity of the claim; the possibility of wrongdoing on the part of an employee or representative of the Company; previous results in similar cases; and legal precedents. Each legal proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded in the condensed consolidated financial statements and is recognized as a charge/credit to earnings in that period. The assumptions made by management in determini ng the estimates of reserves may be incorrect and the actual costs upon settlement of a legal proceeding may be greater or less than the reserved amount.

KEY INDICATORS OF FINANCIAL PERFORMANCE FOR MANAGEMENT

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

     Management periodically reviews and analyzes our financial performance across a number of measurable factors considered to be particularly useful in understanding and managing our business. Key metrics in this process include productivity and practice diversification of representatives, top line commission and advisory services revenues, operating expenses, legal costs, taxes, earnings per share and Adjusted EBITDA.

PRODUCTIVITY OF REPRESENTATIVES

     Management believes that improving the overall quality of our independent representatives is a key to achieving growth in revenues and earnings. We believe that upgrading the business practices of our representatives not only grows revenue, but assists in limiting the cost of overhead functions and representative noncompliance. We strive to continually improve the overall quality of our force of representatives by:

• assisting representatives to improve their skills and practices,
• recruiting established, high quality representatives, and
• terminating low quality representatives.

     A key metric that we use to assess the average quality of our producing (non-staff) representatives is per capita rep-generated revenue based on a rolling 12-month period. Data for the 12-month periods ended September 30, 2010 and 2009 are presented below:

	Twelve months ended		Increase/	% Increase/
	September 30, 2010	September 30, 2009	decrease	decrease
Rep-generated revenue:
Commission	$                67,637,002	$                 60,551,819	$                   7,085,183	11.7%
Advisory	13,000,295	10,347,528	2,652,767	25.6%
Other fee income	1,098,928	775,171	323,757	41.8%
	$               81,736,225	$                 71,674,518	$                 10,061,707	14.0%
Number of representatives	582	637	(55)	-8.6%
Average revenue per representative	$                    140,440	$                     112,519	$                       27,921	24.8%

We believe that the 24.8% growth in per capita rep-generated revenue is the result of organic revenue growth and market appreciation, coupled with paring down the number of lower-producing registered representatives.

ADJUSTED EBITDA

     Earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted by eliminating other non-cash expense, gains or losses on sales of assets, and various non-recurring items (“adjusted EBITDA”), is a key metric we use in evaluating our financial performance. Adjusted EBITDA eliminates items that we believe are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across various periods. We also use adjusted EBITDA as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions.

     Adjusted EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, important GAAP financial measures including pre-tax income, net income and cash flows from operating activities. Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
RESULTS OF OPERATIONS
			Percentage of Revenue		Percent
	Quarter Ended September 30,		Quarter Ended September 30,		Change
	2010	2009	2010	2009	2010 vs 2009
Revenue:
Commissions	$                            16,715,609	$                            15,357,927	81.8%	81.0%	8.8%
Advisory fees	3,090,414	2,871,553	15.1%	15.2%	7.6%
Other fee income	143,364	106,661	0.7%	0.6%	34.4%
Other revenue	481,177	599,658	2.4%	3.2%	-19.8%
Total revenue	20,430,564	18,935,799	100.0%	100.0%	7.9%
Expenses:
Commissions and advisory fees	16,098,685	14,348,476	78.8%	75.8%	12.2%
Compensation and benefits	2,040,010	1,817,574	10.0%	9.6%	12.2%
Regulatory, legal and professional services	1,315,436	511,359	6.4%	2.7%	157.2%
Brokerage, clearing and exchange fees	497,837	673,784	2.4%	3.6%	-26.1%
Technology and communications	322,141	294,069	1.6%	1.6%	9.5%
Marketing and promotion	302,805	275,900	1.5%	1.5%	9.8%
Occupancy and equipment	213,444	210,591	1.0%	1.1%	1.4%
Other administrative	256,052	369,114	1.3%	1.9%	-30.6%
Interest	4,241	6,034	0.0%	0.0%	-29.7%
Total expenses	21,050,651	18,506,901	103.0%	97.7%	13.7%
Operating (loss) income	(620,087)	428,898	-3.0%	2.3%	-244.6%
Provision for income taxes	23,594	222,202	0.1%	1.2%	-89.4%
Net (loss) income	$                              (643,681)	$                                 206,696	-3.2%	1.1%	-411.4%
Adjusted EBITDA	$                              (484,499)	$                                 590,964	-2.4%	3.1%	-182.0%
Adjustments to conform Adjusted
EBITDA to GAAP Net income (loss):
Income tax benefit	-	80,337	0.0%	0.4%	-100.0%
Interest expense	(4,241)	(6,034)	0.0%	0.0%	-29.7%
Income tax expense	(23,594)	(302,539)	-0.1%	-1.6%	-92.2%
Depreciation	(89,360)	(87,858)	-0.4%	-0.5%	1.7%
Non-cash compensation	(41,987)	(68,174)	-0.2%	-0.4%	-38.4%
Net (loss) income	$                              (643,681)	$                                 206,696	-3.2%	1.1%	-411.4%

     The Company reported a $0.62 million operating loss and a $0.10 per basis share net loss in the current period versus $0.43 million operating income from operations or $0.03 per basic net income per share in the prior period. Adjusted EBITDA decreased $1.08 million primarily due to increased operating expenses, specifically estimated settlement accruals related to regulatory, legal and professional services.

REVENUE

     Revenues increased by $1.49 million, or 7.9%, due primarily to a rise in commissionable revenues as markets continued to rebound from the recent recession. Commission revenue growth was led by sales of variable annuity products and direct participation programs, partially offset by a decrease in sales of mutual fund products. Brokerage was relatively flat.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

     The increase in advisory services revenue reflected growth in market asset values, as well as new investment contributions. Our advisor-directed managed assets program, A-MAP, where investment advisory services are provided directly by our independent representatives, continues to contribute the majority of advisory services revenue.

     Other fee income, primarily comprised of licensing, financial planning and representatives’ errors and omissions policy fees, increased modestly.

     A decrease in other revenue, consisting of net marketing revenues and interest income, tracked lower net marketing revenues generated from our national convention.

EXPENSES

     Total expenses increased by $2.54 million, or 13.7%, principally as a result of increases in commissions and advisors fees paid to representatives, compensation, and regulatory, legal and professional fees These increases were partially offset by decreases in brokerage and clearing fees and other administrative costs. Commissions and advisory fees paid to our representatives represent a percentage of revenue generated by them; accordingly, much of the increase in commissions and advisor fees reflects a corresponding increase in commission and advisory fee revenue.

     The rise in compensation and benefits is attributed largely to reinstatement of salaries to levels prior to the implementation of cost controls initiated in January 2009, as well as an increase in headcount in our technology and compliance departments.

     An increase in regulatory, legal and professional expenses was led by legal fees and estimated settlement reserves related to a rise in litigation, claims and regulatory actions; including an administrative fine payable to the Massachusetts Securities Division stemming from the above regulatory matters.

     In addition to costs related to a regulatory matter, some of this increase in volume of claims appears to be part of a continuing aftermath from recession-related investor losses incurred in real estate and other alternative investments.

     A decline in brokerage, clearing and exchange fees was primarily due to renegotiation of our clearing agreement as well as decreased transaction costs in connection with a corresponding decrease in trading volume in our asset managed accounts.

     A decline in other administrative expenses, which include various insurance, postage, employee training and education and other miscellaneous office expenses, resulted from a decrease in bad debts and fines in the prior period.

     We have an income tax provision of $0.02 million for the three months ended September 30, 2010 as compared to $0.22 million income tax provision for the prior period. The income tax rates for the 2010 and 2009 periods do not bear a customary relationship to effective tax rates primarily as a result of the increase in the permanent differences for each of the periods presented.

COMPARISON OF THE SIX MONTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009

     Explanation of results reported in the current six month period compared to the prior six month period may be consistent with the comparative quarterly results reported in comparing the current period to the prior period.Please refer to the comparative quarterly results analysis for a general explanation of variances concerning the current six-month period that are not discussed below.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

RESULTS OF OPERATIONS
			Percent of Revenue
			Six Months Ended		Percent
	Six Months Ended September 30,		September 30,		Change
					2010
	2010	2009	2010	2009	vs. 2008
Revenue:
Commissions	$                      33,710,550	$                      31,070,736	81.5%	82.7%	8.5%
Advisory fees	6,505,142	5,303,741	15.7%	14.1%	22.7%
Other fee income	333,548	248,338	0.8%	0.7%	34.3%
Other revenue	823,297	927,819	2.0%	2.5%	-11.3%
Total revenue	41,372,537	37,550,634	100.0%	100.0%	10.2%
Expenses:
Commissions and advisory fees	32,622,913	28,726,295	78.9%	76.5%	13.6%
Compensation and benefits	4,049,078	3,489,510	9.8%	9.3%	16.0%
Regulatory, legal and professional services	2,120,309	1,126,983	5.1%	3.0%	88.1%
Brokerage, clearing and exchange fees	1,089,024	1,352,449	2.6%	3.6%	-19.5%
Technology and communications	630,972	541,558	1.5%	1.4%	16.5%
Marketing and promotion	637,032	473,808	1.5%	1.3%	34.4%
Occupancy and equipment	428,280	439,707	1.0%	1.2%	-2.6%
Other administrative	440,904	664,674	1.1%	1.8%	-33.7%
Interest	11,114	16,614	0.0%	0.0%	-33.1%
Total expenses	42,029,626	36,831,598	101.6%	98.1%	14.1%
Operating (loss) income	(657,089)	719,036	-1.6%	1.7%	-191.4%
(Benefit) provision for income taxes	(2,617)	460,804	-0.8%	1.2%	-100.6%
Net (loss) income	$                        (654,472)	$                           258,232	-196.2%	104.0%	-353.4%
Adjusted EBITDA	$                        (376,971)	$                        1,047,907	-113.0%	422.0%	-136.0%
Adjustments to conform Adjusted EBITDA to
GAAP Net income (loss):
Income tax benefit	473,767	252,446	142.0%	101.7%	87.7%
Interest expense	(11,114)	(16,614)	-3.3%	-6.7%	-33.1%
Income tax expense	(471,150)	(713,250)	-141.3%	-287.2%	-33.9%
Depreciation	(180,630)	(175,300)	-54.2%	-70.6%	3.0%
Non-cash compensation	(88,374)	(136,957)	-26.5%	-55.1%	-35.5%
Net (loss) income	$                        (654,472)	$                           258,232	-196.2%	104.0%	-353.4%

     The Company reported a $0.66 million operating loss and a $0.10 per share net loss in the current period versus $0.72 million operating income or $0.04 per basic net income per share in the prior period. Adjusted EBITDA was $0.38 million loss as a result of increased operating expenses, estimated reserves for regulatory and legal settlements in particular.

REVENUE

     Revenues increased by $3.8 million, or 10.2%, led by a $2.64 million, or 8.5%, increase in commissionable revenues reflecting circumstances set forth in the quarterly analysis. Brokerage and mutual fund sales also rose.

     The rise in advisory services revenue was led by results from our A-MAP program, slightly offset by a decline in revenue from our advisory fee wrap program.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

EXPENSES

     Total expenses increased by $5.20 million, or 14.1%, increase in total expenses was due principally to increases in commissions and advisory fees paid to representatives, compensation, and regulatory, legal and professional fees, partially offset by a decrease in brokerage and clearing fees and other administrative expenses.

     The rise in marketing and promotion expenses reflects increased costs for advertisements in financial services periodicals.

     We have an income tax benefit of $0.03 million for the three months ended September 30, 2010 as compared to $0.46 million income tax provision for the prior period.

OPERATING AND NET INCOME

     Historically, the Company’s overall results have been correlated to activity levels in the U.S. equity markets. The Company is currently operating in a challenging environment: the lingering effects of the recent recession and financial services industry issues such as credit quality and illiquidity are believed to continue to negatively impact activity levels. Nonetheless, substantially all the Company’s revenue categories realized improvement in the current three and six month periods as the equity markets and overall economy showed signs of recovery.

     The Company’s reported three and six month operating and net losses are attributable primarily to regulatory and legal settlement reserves as well as the legal fees to defend the firm in numerous complaints.

LIQUIDITY AND CAPITAL RESOURCES

      Our primary source of liquidity remains cash flows from operations, primarily from our broker-dealer and investment advisory business. The total assets or the individual components of total assets may vary significantly from period to period because of changes relating to economic and market conditions.

     As of September 30, 2010, cash and cash equivalents totaled $6.24 million as compared to $5.81 million as of March 31, 2010. Working capital as of September 30, 2010 was $5.59 million as compared to $6.66 million as of March 31, 2010. The ratio of current assets to current liabilities was 1.75 to 1 as of September 30, 2010 as compared to 1.84 to 1 as of March 31, 2010.

     Operations provided $1.30 million in cash for the quarter ended September 30, 2010, as compared to $0.38 million of operating cash used in the prior period, principally due to a change in our accounts receivable, ‘ firm accounts,’ held at our clearing firm.

     Net cash flows from investing activities represent collections in principal payments on a note receivable offset by capital expenditures.

     Cash flows for financing activities in the current period were similar to the prior period as we paid $0.79 million and$0.84 million in loan payments to finance E&O insurance premiums, respectively, for the periods ended September 30, 2010 and 2009.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

REGULATORY NET CAPITAL

     Cash disbursements can have a material impact on our brokerage firm’s regulatory net capital. The SEC Uniform Net Capital Rule (Rule 15c3-1) requires that ICC, our broker-dealer subsidiary, maintain net capital of $100,000 and a ratio of aggregate indebtedness to net capital (a “net capital ratio”) not to exceed 15 to 1. Under the rule, indebtedness generally includes all money owed by ICC, and net capital includes ICC cash and assets that are easily converted into cash. SEC rules also prohibit "equity capital" (which, under the net capital rule, includes subordinated loans) from being withdrawn, cash dividends from being paid and other specified actions of similar effect from being taken, if, among other specified contingencies, ICC’s net capital ratio would exceed 10 to 1 or if ICC would have less than 120% of its minimum required net capital.

     As of September 30, 2010, ICC had net capital of $2.72 million (i.e., an excess of $2.22 million) and a2.78to 1 net capital ratio as compared to net capital of approximately $3.39 million (i.e., an excess of $2.91 million) and a 2.13 to 1 net capital ratio as of March 31, 2010.

     Maintenance of the Company’s net capital is dependent upon sufficient income and cash flow from operations. The decrease in net capital during the current period resulted primarily from increases in legal fees and settlement costs that have impacted the firm’s results of operations during the current period.

COMMITMENTS AND CONTINGENCIES

     We are obligated under various lease agreements covering offices and equipment. These agreements are considered to be operating leases. The terms of the leases expire between fiscal year 2010 and 2016. Options to renew for additional terms are included under the lease agreements. Certain leases contain provisions for escalation of minimum lease payments contingent upon increases in real estate taxes.

     The total minimum rental due in future periods under these existing agreements is as follows as of September 30, 2010:

2011	$                 197,134
2012	381,350
2013	283,922
2014	276,354
2015	282,214
2016 and thereafter	24,000
	$             1,444,974

     Total lease expense approximated $0.08 and $0.09 million for the three months ended September 30, 2010 and 2009, respectively, and approximated $0.16 and $0.22 million for the six months ended September 30, 2010 and 2009, respectively.

ITEM 4. CONTROLS AND PROCEDURES

Report of Management on Internal Control Over Financial Reporting

     Disclosure controls are procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as the Company's are designed to do, and management necessarily was required to apply its judg ment in evaluating the cost-benefit relationship of possible controls and procedures.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

     As of September 30, 2010, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period, and to ensure that information required to be disclosed in such reports that we file or submit under the Securities Exchange Act of 1934 is accumulated an communicated to our management, including our Princip al Executive Officer and Principal Financial Officer, to allow timely decisions required regarding required disclosure.

     There have been no changes in our internal controls over financial reporting that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     The Company operates in a highly litigious and regulated business, and the Company often is made a defendant in arbitrations and other legal proceedings that are incidental to our securities business. The Company typically vigorously contests the allegations of the complaints and believes that there are meritorious defenses in these matters. From time to time the Company also is the subject of regulatory investigations and proceedings. Counsel often is unable to confidently predict the likelihood of an outcome, whether favorable or unfavorable, in such matters because of routine and inherent uncertainties. For the majority of pending claims, the Company's current errors and omissions (E&O) policy limits the Company’s maximum exposure in any one case to $100,000. The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fra udulent activities pursuant to which the Company’s exposure is usually limited to $350,000, subject to policy limitations and exclusions.

ITEMS 2 – 5.

      None.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

ITEM 6. EXHIBITS
Exhibit
Number	Description	Location
3.1	Certificate of Incorporation	(2)(Exh. 3.1)
3.2	By-Laws	(2)(Exh. 3.2)
4.1	Form of Stock Certificate	(3)(Exh. 4.1)
10.1	Employment Agreement with Theodore E. Charles (4)	(10)(Exh. 10.2)
10.2	Employment Agreement with Timothy B. Murphy (4)	(10)(Exh. 10.1)
10.3	The 1994 Stock Option Plan (4)	(5)(Exh. 10.3)
10.4	The 1996 Stock Incentive Plan (4)	(3)(Exh. 10.3)
10.5	The 2001 Equity Incentive Plan (4)	(6)(Exh. 4.4)
10.6	The 2005 Equity Incentive Plan (4)	(7)(Exh. 4.5)
10.7	Form of June 2006 Stock Grant Agreement (4)	(8)(Exh. 10.8)
10.8	Form of February 2009 Stock Grant Agreement (4)	(8)(Exh. 10.9)
10.9	Consulting Agreement with Theodore E. Charles (4)	(10)(Exh. 10.3)
14.1	Code of Business Conduct and Ethics	(9)(Exh. 5.05)
31.1	Certification of Timothy B. Murphy pursuant to Rule 13a-14(a)	(1)
31.2	Certification of Kathleen L. Donnelly pursuant to Rule 13a-14(a)	(1)
32.1	Certification of Timothy B. Murphy pursuant to 18 U.S.C. Section 1350	(1)
32.2	Certification of Kathleen L. Donnelly pursuant to 18 U.S.C. Section 1350	(1)

(1)	Filed herewith.
(2)	Incorporated by reference to the indicated exhibit to the Registrant's Quarterly Report on Form 10-Q filed November 14, 2007.
(3)	Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form SB- 2 (File No. 333-05327) filed August 14, 2000.
(4)	A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of this report.
(5)	Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2005.

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

(6)	Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-117807) filed July 30, 2004.
(7)	Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-134885) filed June 9, 2006.
(8)	Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2008.
(9)	Incorporated by reference to the indicated exhibit to the Registrant’s Report on Form 8-K filed September 26, 2007.
(10)	Incorporated by reference to the indicated exhibit to the Registrant’s Report on Form 8-K filed April 21, 2010.

     Any exhibit not included with this Form 10-Q when furnished to any shareholder of record will be furnished to such shareholder upon written request and payment of up to $.25 per page plus postage. Such requests should be directed to Investors Capital Holdings, Ltd., 230 Broadway East, Lynnfield, MA01940-2320.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

                                                                                                                         INVESTORS CAPITAL HOLDINGS, LTD.

                                                                                                                         By:/s/ Kathleen L. Donnelly

                                                                                                                         Chief Accounting Officer
                                                                                                                         (Duly authorized officer)

                                                                                                                         Date: November12, 2010

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

Exhibit 31.1

CERTIFICATION

I, Timothy B. Murphy, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Investors Capital Holdings, Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
	state a material fact necessary to make the statements made, in light of the circumstances under which such
	statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report,
	fairly present in all material respects the financial condition, results of operations and cash flows of the
	smaller reporting company as of, and for, the periods presented in said report;
4.	The smaller reporting company's other certifying officer and I are responsible for establishing and
	maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-
	15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
	15d-15(f)) for the smaller reporting company and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and
		procedures to be designed under our supervision, to ensure that material information relating the
		smaller reporting company, including its consolidated subsidiaries, is made known to us by others
		within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial
		reporting to be designed under our supervision, to provide reasonable assurance regarding the
		reliability of financial reporting and the preparation of financial statements for external purposes in
		accordance with generally accepted accounting principles.
	c)	Evaluated the effectiveness of the smaller reporting company's disclosure controls and procedures
		and presented in this report our conclusions about the effectiveness of the disclosure controls and
		procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the smaller reporting company's internal control over financial
		reporting that occurred during the smaller reporting company's most recent fiscal quarter (the smaller
		reporting company's fourth quarter in the case of an annual report) that has materially affected, or is
		reasonably likely to materially affect, the smaller reporting company's internal control over financial
		reporting; and
5.	The smaller reporting company's other certifying officer(s) and I have disclosed, based on our most recent
	evaluation of internal control over financial reporting, to the smaller reporting company's auditors and the
	audit committee of the smaller reporting company's board of directors (or persons performing the
	equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control
		over financial reporting which are reasonably likely to adversely affect the smaller reporting
		company's ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a
		significant role in the smaller reporting company's internal control over financial reporting.
Date: November12, 2010  By: /s/ Timothy B. Murphy Timothy B. Murphy, President, Chief Executive Officer and Director (Principal executive officer)

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

Exhibit 31.2

CERTIFICATION

I, Kathleen L. Donnelly, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Investors Capital Holdings, Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
	state a material fact necessary to make the statements made, in light of the circumstances under which such
	statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report,
	fairly present in all material respects the financial condition, results of operations and cash flows of the
	smaller reporting company as of, and for, the periods presented in said report;
4.	The smaller reporting company's other certifying officer and I are responsible for establishing and
	maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-
	15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
	15d-15(f)) for the smaller reporting company and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and
		procedures to be designed under our supervision, to ensure that material information relating the
		smaller reporting company, including its consolidated subsidiaries, is made known to us by others
		within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial
		reporting to be designed under our supervision, to provide reasonable assurance regarding the
		reliability of financial reporting and the preparation of financial statements for external purposes in
		accordance with generally accepted accounting principles.
	c)	Evaluated the effectiveness of the smaller reporting company's disclosure controls and procedures
		and presented in this report our conclusions about the effectiveness of the disclosure controls and
		procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the smaller reporting company's internal control over financial
		reporting that occurred during the smaller reporting company's most recent fiscal quarter (the smaller
		reporting company's fourth quarter in the case of an annual report) that has materially affected, or is
		reasonably likely to materially affect, the smaller reporting company's internal control over financial
		reporting; and
5.	The smaller reporting company's other certifying officer(s) and I have disclosed, based on our most recent
	evaluation of internal control over financial reporting, to the smaller reporting company's auditors and the
	audit committee of the smaller reporting company's board of directors (or persons performing the
	equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control
		over financial reporting which are reasonably likely to adversely affect the smaller reporting
		company's ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a
		significant role in the smaller reporting company's internal control over financial reporting.
Date: November12, 2010  By: /s/ Kathleen L. Donnelly Kathleen L. Donnelly Chief Financial Officer (Principal financial officer)

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

Exhibit 32.1

CERTIFICATION

I, Timothy B. Murphy, certify that this report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Investors Capital Holdings, Ltd.

Date: November12, 2010

By: /s/ Timothy B. Murphy

Timothy B. Murphy, President,
Chief Executive Officer and Director
(Principal executive officer)

Investors Capital Holdings, Ltd. report on form 10-Q
Quarter Ended September 30, 2010

Exhibit 32.2

CERTIFICATION

I, Kathleen L. Donnelly, certify that this report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Investors Capital Holdings, Ltd.

Date: November12, 2010

By: /s/ Kathleen L. Donnelly

Kathleen L. Donnelly
Chief Financial Officer
(Principal financial officer)