cown-20220331

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, 2022
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 Symbol

Name of Exchange on Which Registered

Class A Common Stock, par value $0.01 per share

COWN

The Nasdaq Global Market

7.75% Senior Notes due 2033

COWNL

The 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 Accelerated 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 29, 2022, there were 27,494,230 shares of the registrant's common stock outstanding.


Item No.			Page No.
PART I. FINANCIAL INFORMATION			4
	1. Unaudited Condensed Consolidated Financial Statements		4
		Condensed Consolidated Statements of Financial Condition	4
		Condensed Consolidated Statements of Operations	6
		Condensed Consolidated Statements of Comprehensive Income (Loss)	7
		Condensed Consolidated Statements of Changes in Equity	8
		Condensed Consolidated Statements of Cash Flows	10
		Notes to Condensed Consolidated Financial Statements	12
	2. Management's Discussion and Analysis of Financial Condition and Results of Operations		60
	3. Quantitative and Qualitative Disclosures About Market Risk		91
	4. Controls and Procedures		91
PART II. OTHER INFORMATION			91
	1. Legal Proceedings		91
	1A. Risk Factors		92
	2. Unregistered Sales of Equity Securities and Use of Proceeds		92
	3. Defaults Upon Senior Securities		93
	4. Mine Safety Disclosures		93
	5. Other Information		93
	6. Exhibits		94
SIGNATURES			95

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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, 2021 and the risks contained in Item 1A of this periodic report on Form 10-Q for the three months ended March 31, 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, 2022 and 2021. The Consolidated Financial Statements as of December 31, 2021 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)
	As of March 31, 2022		As of December 31, 2021
Assets
Cash and cash equivalents	$	512,978	$	914,343
Cash collateral pledged	52,865		47,494
Segregated cash	220,882		194,701
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 resell	19,621		—
Receivable on derivative contracts, at fair value	342,712		286,135
Securities borrowed	1,761,146		1,704,603
Other investments ($131,766 and $137,986 at fair value, respectively)	237,628		274,111
Deposits with clearing organizations, brokers and banks	105,854		111,857
Receivable from brokers, dealers and clearing organizations, net of allowance of $616 and $636, respectively	1,487,911		1,614,347
Receivable from customers, net of allowance of $587 and $687, respectively	159,625		159,418
Fees receivable, net of allowance of $828 and $886, respectively	128,136		145,809
Due from related parties	21,666		31,449
Fixed assets, net of accumulated depreciation and amortization of $52,254 and $50,017, respectively	25,037		25,976
Operating lease right-of-use assets	95,430		93,655
Goodwill	234,005		234,005
Intangible assets, net of accumulated amortization of $37,470 and $33,219, respectively	40,731		44,167
Deferred tax asset, net	19,608		21,765
Other assets, net of allowance of $834 and $0 respectively	99,427		84,828
Consolidated Funds
Cash and cash equivalents	23		296


Other investments	97,182		99,067

Other assets	46		46
Total Assets	$	8,426,027	$	8,748,814
Liabilities, Temporary Equity and Permanent Equity
Liabilities
Securities sold, not yet purchased, at fair value	$	974,867	$	1,201,448
Securities sold under agreements to repurchase	229,192		63,469
Payable for derivative contracts, at fair value	46,814		60,163
Securities loaned	1,735,852		1,586,572
Payable to brokers, dealers and clearing organizations	587,540		586,553
Payable to customers	2,243,654		2,432,612
Commission management payable	126,968		102,990
Compensation payable	176,210		443,580
Operating lease liabilities	99,800		98,883
Notes payable and other debt	625,766		623,371

Fees payable	6,580		16,483
Due to related parties	27		—
Accounts payable, accrued expenses and other liabilities	241,110		236,088
Consolidated Funds

Due to related parties	—		23




Accounts payable, accrued expenses and other liabilities	174		225
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, 2022		As of December 31, 2021
(continued)
Commitments and Contingencies (Note 22)



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 capital	1,127,160		1,100,667
Retained earnings	491,189		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' Equity	1,035,148		1,015,869
Nonredeemable non-controlling interests	175,575		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,
		2022		2021
Revenues
Investment banking		$	101,542	$	304,834
Brokerage		168,738		173,737
Investment income (loss)
Securities principal transactions, net		91,252		63,965
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 fees		16,769		25,742
Incentive income		633		2,258
Interest and dividends		46,335		59,388

Insurance and reinsurance premiums		11,321		7,117
Other revenues, net		(949)		1,660
Consolidated Funds
Principal transactions, net		(1,886)		(3,349)
Interest and dividends		2		2

Total revenues		410,592		747,526
Interest and dividends expense		46,524		57,641
Total net revenues		364,068		689,885

Expenses
Employee compensation and benefits		187,178		388,196
Brokerage and trade execution costs		40,591		45,656
Underwriting expenses		259		6,915
Professional, advisory and other fees		13,682		15,460
Service fees		7,150		5,731
Communications		9,471		9,267
Occupancy and equipment		10,316		9,540
Depreciation and amortization		7,185		4,354
Client services and business development		6,569		6,848

Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs		7,343		6,455

Other expenses		12,763		(3,340)
Consolidated Funds

Professional, advisory and other fees		42		110

Other expenses		63		161
Total expenses		302,612		495,353
Other income (loss)
Net gains (losses) on other investments		5,580		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 taxes		67,036		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 funds		20,131		4,562
Net income (loss) attributable to Cowen Inc.		35,016		147,504
Preferred stock dividends		1,698		1,698
Net income (loss) attributable to Cowen Inc. common stockholders		$	33,318	$	145,806
Weighted average common shares outstanding:
Basic		28,386		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,

		2022	2021
Net income (loss)				$	55,147		$	152,066
Other comprehensive income (loss), net of tax:
Foreign currency translation			2			4



Total other comprehensive income (loss), net of tax				2			4
Comprehensive income (loss)				$	55,149		$	152,070
Less: Comprehensive income (loss) attributable to non-controlling interests				20,131			4,562
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,
		2022		2021
Permanent Equity Shares		(in shares)
	Common Shares Outstanding
	Beginning balance	27,778,964		26,845,628

	Restricted stock awards issued	949,803		705,512

	Common stock issuance for partial settlement of contingent liability from prior acquisition	58,587		56,801
	Purchase of treasury stock, at cost	(1,172,451)		(755,610)

	Ending balance	27,614,903		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 balance	334		334

	Ending balance	334		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 balance	1,100,667		1,130,138


	Common stock issuance for partial settlement of contingent liability from prior acquisition	1,881		2,202


	Amortization of share based awards	24,612		19,037
	Ending balance	$	1,127,160	$	1,151,377

	Accumulated Other Comprehensive Income (Loss)
	Beginning balance	$	(2)	$	(7)
	Foreign currency translation	2		4
	Ending balance	—		(3)

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		Three Months Ended March 31,
		2022		2021
		(in dollars)
	Retained Earnings/ (Accumulated deficit)
	Beginning balance	461,982		185,901

	Net income (loss) attributable to Cowen Inc.	35,016		147,504
	Preferred stock dividends (See Note 13)	(1,698)		(1,698)
	Cash dividends to common stockholders (See Note 14)	(4,111)		(2,777)
	Ending balance	491,189		328,930
	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 funds	20,131		4,562
	Capital contributions	1,610		22,515
	Capital distributions	(5,901)		(18,773)

	Deconsolidation of entity	—		(74,813)
	Ending balance	175,575		133,115
Total Permanent Equity		$	1,210,723	$	1,239,980

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

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Cowen Inc. Condensed Consolidated Statements of Cash Flows (dollars in thousands) (unaudited)
	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	55,147	$	152,066
Adjustments to reconcile net income (loss) to net cash provided by / (used in) operating activities:
Bargain purchase gain, net of tax	—		(3,855)
Depreciation and amortization	7,185		4,354

Amortization of debt issuance costs	604		480
Amortization of debt discount (premium)	77		776
Noncash lease expense	(858)		(362)

(Gain) / loss on extinguishment of debt	—		3,890

Share-based awards	24,612		19,037
Change in deferred taxes	2,157		5,913
Net loss (gain) on disposal of fixed assets	101		—
Contingent liability adjustment	—		(614)

Purchases of securities owned, at fair value	(269,037)		(269,073)
Proceeds from sales of securities owned, at fair value	243,634		271,314
Proceeds from sales of securities sold, not yet purchased, at fair value	131,199		63,511
Payments to cover securities sold, not yet purchased, at fair value	(141,186)		(58,346)
Proceeds from sales of other investments	16,780		16,995
Investment Income (loss) principal transactions, net	(22,115)		(158,833)
Consolidated Funds

Proceeds from sales of securities owned, at fair value	—		2,687



Proceeds from other investments	—		14,130
Investment Income (loss) principal transactions, net	1,886		3,143
(Increase) decrease in operating assets:


Securities owned, at fair value, held at broker-dealer	(46,185)		(1,112,154)
Receivable on derivative contracts, at fair value	(56,577)		(44,054)
Securities borrowed	(56,543)		(88,570)
Deposits with clearing organizations, brokers and banks	6,003		22,874
Receivable from brokers, dealers and clearing organizations	126,436		(191,009)
Receivable from customers, net of allowance	(207)		(95,705)
Fees receivable, net of allowance	17,673		(46,170)
Due from related parties	9,783		440
Other assets	(14,597)		(9,344)
Consolidated Funds

Receivable on derivative contracts, at fair value	—		(2,917)

Other assets	—		13
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased, at fair value, held at broker-dealer	(208,080)		187,749
Securities sold under agreement to repurchase	165,723		(2,490)
Payable for derivative contracts, at fair value	(13,348)		(24,035)
Securities loaned	149,280		607,531
Payable to brokers, dealers and clearing organizations	987		73,328
Payable to customers	(188,958)		977,274
Commission management payable	23,978		22,634
Compensation payable	(279,653)		(17,809)
Fees payable	(9,903)		(918)
Due to related parties	27		48
Accounts payable, accrued expenses and other liabilities	14,907		39,591
Consolidated Funds






Due to related parties	(23)		—
Accounts payable, accrued expenses and other liabilities	(51)		(359)
Net 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)
	Three Months Ended March 31,
	2022		2021


(continued)
Cash flows from investing activities:
Securities purchased under agreement to resell	(19,621)		191
Purchases of other investments	(7,662)		(29,117)
Purchase of business	—		2,109
Cash at deconsolidated entity	—		(5,620)
Proceeds from sales of other investments	9,780		31,267



Purchase of fixed assets and intangibles	(2,914)		(1,643)

Net cash provided by / (used in) investing activities	(20,417)		(2,813)
Cash flows from financing activities:



Deferred debt issuance cost	(112)		(6,467)
Borrowings on notes and other debt	4,019		301,490
Repayments on notes and other debt	(2,193)		(139,737)


Purchase of treasury stock	(24,140)		(20,629)
Cash dividends paid	(3,917)		(2,313)
Preferred stock dividends paid	(1,698)		(1,698)
Contingent liability payment	(8,195)		(8,496)
Capital contributions by non-controlling interests in operating entities	1,610		3,498
Capital distributions to non-controlling interests in operating entities	(5,901)		(2,348)
Consolidated Funds
Capital contributions by non-controlling interests in Consolidated Funds	—		19,017
Capital distributions to non-controlling interests in Consolidated Funds	—		(16,424)
Net cash provided by / (used in) financing activities	(40,527)		125,893
Change in cash and cash equivalents	(370,086)		486,241
Cash and cash equivalents, including cash collateral pledged and segregated cash, beginning of period	1,156,834		941,470
Cash and equivalents at end of period:
Cash and cash equivalents	512,978		1,147,531
Cash collateral pledged	52,865		110,303
Segregated cash	220,882		168,942
Cash and cash equivalents, Consolidated Funds	23		935
Cash and cash equivalents, including cash collateral pledged and segregated cash, end of period	$	786,748	$	1,427,711
Supplemental information
Cash paid during the year for interest	$	40,538	$	65,259
Cash paid during the year for taxes	$	12,980	$	8,087
Supplemental non-cash information
Purchase of treasury stock, at cost, through net settlement (See Note 14)	$	12,283	$	6,245
Preferred stock dividends declared (See Note 14)	1,698		1,698
Cash dividends declared (See Note 14)	4,111		2,777
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)	—		74,813

Common stock issuance in relation to acquisitions	1,881		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
	Note 1—Organization and Business	13
	Note 2—Significant Accounting Policies	13
	Note 3—Acquisition	24
	Note 4—Cash Collateral Pledged	25
	Note 5—Segregated Cash	26
	Note 6—Investments of Operating Entities and Consolidated Funds	26
	Note 7—Fair Value Measurements for Operating Entities and Consolidated Funds	33
	Note 8—Deposits with Clearing Organizations, Brokers and Banks	39
	Note 9—Receivable From and Payable to Brokers, Dealers and Clearing Organizations	39
	Note 10—Receivable From and Payable to Customers	39

	Note 11—Commission Management Payable	39

	Note 12—Convertible Debt and Notes Payable	40
	Note 13 —Redeemable Preferred Stock	43
	Note 14—Stockholder's Equity	44
	Note 15—Non-Controlling Interests in Consolidated Subsidiaries and Investment Funds	46
	Note 16—Accumulated Other Comprehensive Income (Loss)	46
	Note 1 7 —Revenue from Contracts with Customers	47
	Note 18—Insurance and Reinsurance	47

	Note 19—Share-Based Payments, Deferred Compensation and Employee Ownership Plans	48

	Note 20—Income Taxes	50
	Note 21—Earnings Per Share	50
	Note 22—Commitments and Contingencies	51
	Note 23—Segment Reporting	54
	Note 24—Regulatory Requirements	55
	Note 25—Related Party Transactions	57
	Note 26—Guarantees and Off-Balance Sheet Arrangements	58
	Note 27—Subsequent Events	59

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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 two business segments: the Operating Company ("Op Co") and the Asset Company ("Asset Co").

The Op Co segment consists of four 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, tech-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, 2021 (the "2021 Form 10-K"). Certain footnote disclosures included in the 2021 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.

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 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.

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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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).

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 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 entity (primarily consisting of securities of such entity which are purchased 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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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"), 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

ASC Topic 326, Financial Instruments – Credit Losses (“ASC 326”) 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, underwriting fees, strategic/financial advisory fees and 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, 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 date;

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.

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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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. 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 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, 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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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 Note 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 accounts of brokers and dealers.

Receivables and payables with brokers, dealers and clearing organizations arising from unsettled regular-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 with multiple financial institutions.

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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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 receivable primarily relate to securities transactions and are reported net of an allowance for credit losses. Fees 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 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. 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.

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 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 on repurchase agreement transactions on an accrual basis in the accompanying condensed consolidated statements of operations.

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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 from 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 a component of permanent equity. Ownership which has been classified in permanent equity are non-controlling interests for which the holder does not have the unilateral right to redeem its ownership interests.

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: 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. 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 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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

•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 606.

• 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 that calculates 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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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 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, 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 recognized 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 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 net asset value. Management fees are generally calculated monthly at the end of each month.

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 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.

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 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 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.

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, Germany, Switzerland, Israel, South Africa, Canada and Hong Kong.

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 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. 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.

3. Acquisition

Malta

On February 26, 2021 (the "Malta 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 “Malta Acquisition”), an insurance company organized under the laws of Malta whose principal business activity is to provide insurance coverage to third parties (see Note 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 Acquisition Date, the Company paid upfront consideration of $12.5 million, with additional deferred consideration of $0.2 million which was paid during the second quarter of 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 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 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 value	1,571
Fixed assets	30
Intangible assets	4,794
Other assets	12,828
Compensation payable	(17)
Other liabilities	(16,099)
Total net identifiable assets acquired and liabilities assumed	17,951
Bargain purchase gain	(5,216)
Total estimated purchase price	$	12,735

As of the Malta 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, 2022, the estimated amortization expense related to these intangible assets in future periods is as follows:


	(dollars in thousands)
2022	343
2023	458
2024	458
2025	458
2026	458
Thereafter	2,124
	$	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.

4. Cash Collateral Pledged

As of March 31, 2022 and December 31, 2021, the Company pledged cash collateral in the amount of $3.4 million and $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 reinsurance agreements which amounted to $49.5 million, as of March 31, 2022, and $44.1 million, as of December 31, 2021, which are expected to be released periodically as per the terms of the reinsurance policy between March 31, 2022 and March 31, 2024 (see Notes 12 and 18).

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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


Location	Amount		Maturity
	(dollars in thousands)
New York	$	209	April 2023
New York	$	1,325	October 2022
New York	$	1,226	August 2022
Boston	$	188	March 2023
San Francisco	$	454	October 2025
	$	3,402

To the extent any letter of credit is drawn upon, interest will be assessed at the prime commercial lending rate. As of March 31, 2022 and December 31, 2021 there were no amounts due related to these letters of credit.

5. Segregated Cash

As of March 31, 2022 and December 31, 2021, cash segregated under federal regulations and other restricted deposits of $220.9 million and $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 (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, 2022 and December 31, 2021, securities owned, at fair value consisted of the following:


	As of March 31, 2022		As of December 31, 2021



	(dollars in thousands)
Common stock	$	2,348,243	$	2,428,820
Preferred stock	190,184		134,930
Warrants and rights	53,082		46,459
Government bonds	11,992		16,002
Corporate bonds	146,998		21,468
Convertible bonds	5,250		5,250
Term loan	2,375		3,907
Trade claims (*)	4,840		3,496
Private investments	550		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 $4.8 million and $3.5 million of trade claims respectively, at March 31, 2022 and December 31, 2021.

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, interest rate swaps and options. The Company's derivatives trading activities

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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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 contracts	As of March 31, 2022				As of December 31, 2021



	Number of contracts / Notional Value		Fair value		Number of contracts / Notional Value		Fair 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


Payable for derivative contracts	As of March 31, 2022				As of December 31, 2021



	Number of contracts / Notional Value		Fair value		Number of contracts / Notional Value		Fair value
	(dollars in thousands)
Futures	$	2,567	$	53	$	9,378	$	266
Currency forwards	$	138,530	1,084		$	149,575	1,346
Equity swaps	$	825,229	152,265		$	988,329	114,689

Options (a)	117,871		25,214		182,440		36,192
Netting - swap (b)			(131,802)				(92,330)
			$	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.

The following tables present the gross and net derivative positions and the related offsetting amount, as of March 31, 2022 and December 31, 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 Condition		Gross amounts not offset in the Condensed Consolidated Statements of Financial Condition
	Gross amounts recognized						Financial 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 value	178,616		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 value	152,493		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)

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) included 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, 2022 and December 31, 2021, all derivative contracts were with major financial institutions.

Other investments

As of March 31, 2022 and December 31, 2021, other investments included the following:


	As of March 31, 2022		As of December 31, 2021



	(dollars in thousands)
Portfolio funds, at fair value (1)	$	131,766	$	137,986
Carried interest (2)	70,281		88,925
Equity method investments (3)	35,581		47,200

	$	237,628	$	274,111

(1) Portfolio funds, at fair value

The portfolio funds, at fair value as of March 31, 2022 and December 31, 2021, included the following:


	As of March 31, 2022		As 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 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)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.

(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 Healthcare Investments IV 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)Other private investment represents the Company's closed end investment in a portfolio fund that invests in a wireless broadband communication provider in Italy.

(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 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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The carried interest as of March 31, 2022 and December 31, 2021, included the following:


	As of March 31, 2022		As of December 31, 2021



	(dollars in thousands)
Cowen Healthcare Investments II LP	$	13,886	$	23,327
Cowen Healthcare Investments III LP	11,510		18,523
Cowen Sustainable Investments I LP	6,725		7,436
Cowen Sustainable Investments Offshore I LP	8,114		9,196
CSI I Prodigy Co-Investment LP	2,241		2,436
CSI PRTA Co- Investment LP	8,682		9,535
TriArtisan TGIF Partners LLC	4,279		4,047
TriArtisan ES Partners LLC	3,389		3,401
TriArtisan PFC Partners LLC	10,408		9,394
Ramius Multi-Strategy Fund LP	555		587
Ramius Merger Fund LLC	368		861

RCG IO Renergys Sarl	124		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. 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. Included in equity method investments are the investments in (a) HealthCare Royalty Partners General Partners (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 and (c) operating companies whose operations primarily include the day-to-day management of real estate entities. The Company recorded no impairment charges in relation to its equity method investments for the three months ended March 31, 2022 and 2021.

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, 2022		As of December 31, 2021


	(dollars in thousands)
Starboard Value LP	$	25,741	$	36,889

HealthCare Royalty GP III, LLC	1,830		1,957



HealthCare Royalty GP, LLC	1,595		1,451
HealthCare Royalty GP II, LLC	210		213
HealthCare Royalty GP IV, LLC	1,618		1,716
RCG Longview Debt Fund IV Management, LLC	331		331
HCR Overflow Fund GP, LLC	774		839

HCRP MGS Account Management, LLC	114		598
HCR Stafford Fund GP, LLC	3,119		2,955

Other	249		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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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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, 2022 and December 31, 2021, securities sold, not yet purchased, at fair value consisted of the following:


	As of March 31, 2022		As of December 31, 2021


	(dollars in thousands)

Common stock	$	956,228	$	1,192,396
Corporate bonds	1,349		37

Preferred stock	17,278		9,009
Warrants and rights	12		6
	$	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, 2022 and December 31, 2021.


							Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition
	Gross amounts recognized, net of allowance		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)		Net amounts included on the Condensed Consolidated Statements of Financial Condition		Additional Amounts Available		Financial instruments		Cash Collateral pledged (b)		Net amounts
	(dollars in thousands)
As of March 31, 2022
Securities borrowed	$	1,761,146	$	—	$	1,761,146	$	—	$	1,661,310	$	—	$	99,836
Securities loaned	1,735,852		—		1,735,852		—		1,706,171		—		29,681
Securities purchased under agreements to resell	19,621		—		19,621		—		21,035		—		(1,414)
Securities sold under agreements to repurchase	229,192		—		229,192		—		249,116		—		(19,924)

As of December 31, 2021
Securities borrowed	1,704,603		—		1,704,603		—		1,652,007		—		52,596
Securities loaned	1,586,572		—		1,586,572		—		1,592,140		—		(5,568)

Securities sold under agreements to repurchase	$	63,469	$	—	$	63,469	$	—	$	74,443	$	—	$	(10,974)

(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, 2022 and December 31, 2021:

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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


	Open and Overnight		Up to 30 days		31 - 90 days		Greater than 90 days		Total
	(dollars in thousands)
As of March 31, 2022
Securities loaned
Common stock	$	1,728,578	$	—	$	—	$	—	$	1,728,578
Corporate bonds	7,274		—		—		—		7,274
Securities purchased under agreements to resell
Corporate bonds	19,621		—		—		—		19,621
Securities sold under agreements to repurchase
Common stock	—		43,073		—		—		43,073
Corporate bonds	186,119		—		—		—		186,119
As of December 31, 2021
Securities loaned
Common stock	$	1,570,835	$	—	$	—	$	—	1,570,835
Corporate bonds	15,737		—		—		—		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, are $9.1 billion and $692.4 million as of March 31, 2022 and $9.7 billion and $744.5 million as of December 31, 2021, respectively. The carrying value of the Company's exposure to loss for these variable interest entities as of March 31, 2022 was $155.1 million, and as of December 31, 2021 was $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, 2022 and December 31, 2021, was $224.7 million and $233.6 million, respectively. The maximum exposure to loss often differs from the 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

Other investments, at fair value

Investments in portfolio funds, at fair value

As of March 31, 2022 and December 31, 2021, investments in portfolio funds, at fair value, included the following:


	As of March 31, 2022		As 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 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, 2022 and December 31, 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.

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, 2022 and December 31, 2021, the Company assessed whether or not its interests in an issuer for which the

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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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, 2022 and December 31, 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.

Investment's percentage of the Company's stockholders' equity

Issuer

Security Type

Country

Industry

Percentage of Stockholders' Equity

Market Value

(dollars in thousands)

As of March 31, 2022

Linkem S.p.A.

Equity and warrants

Italy

Wireless Broadband

7.87

81,498

As of December 31, 2021

Linkem S.p.A.

Equity and warrants

Italy

Wireless Broadband

8.22

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, 2022 and December 31, 2021:


	Assets at Fair Value as of March 31, 2022
	Level 1		Level 2		Level 3		Netting (c)		Total
			(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	11,992	$	—	$	—	$	—	$	11,992
Preferred stock	20,483		—		169,701		—		190,184
Common stock	2,304,895		3,517		39,831		—		2,348,243
Convertible bonds	—		—		5,250		—		5,250
Corporate bonds	28,892		115,680		2,426		—		146,998
Trade claims	—		—		4,840		—		4,840
Term loan	—		2,375		—		—		2,375
Warrants and rights	34,525		—		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
Options	49,573		—		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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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


	Liabilities at Fair Value as of March 31, 2022
	Level 1		Level 2		Level 3		Netting (c)		Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value

Common stock	$	858,685	$	97,543	$	—	$	—	$	956,228
Corporate bonds	—		1,349		—		—		1,349
Preferred stock	17,278		—		—		—		17,278
Warrants and rights	12		—		—		—		12
Payable for derivative contracts, at fair value
Futures	53		—		—				53
Currency forwards	—		1,084		—		—		1,084
Equity swaps	—		152,265		—		(131,802)		20,463

Options	22,135		—		3,079		—		25,214
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—		—		57,339		—		57,339








	$	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 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, 2024. For 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 acquisition can range from $12.5 million to $14.9 million. The undiscounted amounts for the MHT acquisition 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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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


	Assets at Fair Value as of December 31, 2021
	Level 1		Level 2		Level 3		Netting (c)		Total
			(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	16,002	$	—	$	—	$	—	$	16,002
Preferred stock	12,299		—		122,631		—		134,930
Common stock	2,396,041		121		32,658		—		2,428,820
Convertible bonds	—		—		5,250		—		5,250
Corporate bonds	—		19,049		2,419		—		21,468
Trade claims	—		—		3,496		—		3,496
Term loan	—		3,907		—		—		3,907
Private investments	—		—		410		—		410
Warrants and rights	31,056		—		15,403		—		46,459

Receivable on derivative contracts, at fair value

Currency forwards	—		80		—		—		80
Equity swaps	—		305,370		—		(81,742)		223,628
Options	60,985		—		234		—		61,219
Interest rate swap	—		1,208		—				1,208













	$	2,516,383	$	329,735	$	182,501	$	(81,742)	$	2,946,877
Portfolio funds measured at net asset value (a)									137,986
Consolidated Funds' portfolio funds measured at net asset value (a)									99,067
Carried interest (a)									88,925
Equity method investments (a)									47,200
Total investments									$	3,320,055


	Liabilities at Fair Value as of December 31, 2021
	Level 1		Level 2		Level 3		Netting (c)		Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value

Common stock	$	1,192,396	$	—	$	—	$	—	$	1,192,396
Corporate bonds	—		37		—		—		37
Preferred stock	9,009		—		—		—		9,009
Warrants and rights	6		—		—		—		6
Payable for derivative contracts, at fair value
Futures	266		—		—		—		266
Currency forwards	—		1,346		—		—		1,346
Equity swaps	—		114,689		—		(92,330)		22,359
Options	32,773		—		3,419		—		36,192
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—		—		62,223		—		62,223








	$	1,234,450	$	116,072	$	65,642	$	(92,330)	$	1,323,834

(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 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, 2024. For all acquisitions 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 acquisition can range from $10.1 million to $25.0 million. The undiscounted amounts for the MHT acquisition 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.

The following table includes a roll forward of the amounts for the three months ended March 31, 2022 and 2021 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, 2021		Transfers in		Transfers out		Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at March 31, 2022		Change 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 stock	32,658		—		—		2,018		(33)		5,188		39,831		5,188
Convertible bonds	5,250		—		—		—		—		—		5,250		—
Corporate bond	2,419		—		—		—		—		7		2,426		7
Options, asset	234		—		—		—		—		(6)		228		(6)
Options, liability	3,419		—		—		—		—		(340)		3,079		(340)

Warrants and rights	15,403		—		—		414		—		2,740		18,557		2,740

Trade claims	3,496		—		—		1,666		(615)		293		4,840		293
Private investments	410		—		—		353		(250)		37		550		37


Contingent consideration liability	62,223		—		—		—		(10,076)		5,192		57,339		5,192


	Three Months Ended March 31, 2021
	Balance at December 31, 2020		Transfers in		Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at March 31, 2021		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	59,967	$	—	$	—		$	1,859	$	(4,651)	$	(698)	$	56,477	$	(698)
Common stock	23,786		—		(5,353)		(a)	3,226		(1,387)		2,434		22,706		1,679
Convertible bonds	6,040		—		—			1,050		(3,930)		(23)		3,137		(23)

Corporate Bond, asset	135		—		—			70		(49)		(20)		136		(49)
Options, asset	251		—		—			—		—		(10)		241		(10)
Options, liability	3,915		—		—			—		—		(618)		3,297		(618)
Warrants and rights	6,547		—		—			3,406		(1,206)		(823)		7,924		(895)

Term Loan	12,623		—		—			322		—		(521)		12,424		(521)


Trade claim	8,713		—		—			1,378		(4,216)		30		5,905		(1,021)
Private investments	642		—		—			443		—		—		1,085		—
Corporate bond, liability	704		—		—			—		(289)		—		415		—
Government bonds, liability	1,500		—		—			—		(1,278)		300		522		87
Contingent consideration liability	37,952		—		—			(11,312)		—		(7,061)		19,579		(7,061)
Consolidated Funds

Common stock	2,951		—		—			—		—		—		2,951		—
Warrants and rights	5,806		—		—			—		(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.

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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, 2022 and December 31, 2021 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.

Quantitative Information about Level 3 Fair Value Measurements

Fair Value

March 31, 2022

Valuation Techniques

Unobservable Inputs

Range

Weighted 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

Options

228

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

12.5% - 13.5%

6.25x - 6.75x

13%

6.5x

Trade claims

2,138

Discounted cash flows

Discount rate

50%

Warrants and rights

5,986

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

Options

3,079

Discounted cash flows

Option pricing model

Discount rate

Volatility

2.29%

35%

2.29%

35%

Contingent consideration liability

57,339

Discounted cash flows

Monte Carlo simulation

Discount rate

Volatility

8.6% - 16%

20% - 22%

12.3%

20.9%

Total level 3 liabilities

60,418

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at December 31, 2021

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Level 3 Assets

(dollars in thousands)

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 claims

2,376

Discounted cash flows

Discount rate

40%

Warrants and rights

4,483

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%

Options

234

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

12.5% - 13.5%

6.25x - 6.75x

13%

6.5x

Other level 3 assets (a)

98,917

Total level 3 assets

182,501

Level 3 Liabilities

Options

3,419

Option pricing model

Volatility

35%

Contingent consideration liability

62,223

Discounted cash flows

Monte Carlo simulation

Discount rate

Volatility

7% - 15%

20% - 24%

12%

22%

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.

Table of Contents

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 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. 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, 2022 and December 31, 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, 2022						December 31, 2021						Fair Value Hierarchy
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
				(dollars in thousands)
Financial Assets
Operating companies
Cash and cash equivalents	$	512,978		$	512,978		$	914,343		$	914,343		Level 1
Cash collateral pledged	52,865			52,865			47,494			47,494			Level 2
Segregated cash	220,882			220,882			194,701			194,701			Level 1
Securities purchased under agreements to resell	19,621			19,621			—			—			Level 2
Securities borrowed	1,761,146			1,761,146			1,704,603			1,704,603			Level 2
Loans receivable	5,041			5,041		(b)	4,858			4,858		(b)	Level 3
Consolidated Funds
Cash and cash equivalents	23			23			296			296			Level 1
Financial Liabilities
Securities sold under agreements to repurchase	229,192			229,192			63,469			63,469			Level 2
Securities loaned	1,735,852			1,735,852			1,586,572			1,586,572			Level 2

Notes payable and other debt	625,766		(c)	644,238		(a)	623,371		(c)	655,229		(a)	Level 2

(a)Notes payable and other debt are based on the last broker quote available.

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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(b)The fair market value of level 3 loans is calculated using discounted cash flows where applicable.

(c)The carrying amount of the notes payable and other debt includes an unamortized discount and unamortized premium of $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 December 31, 2021, 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, 2022 and December 31, 2021, the Company had a total of $105.9 million and $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, 2022 and December 31, 2021, amounts receivable from brokers, dealers and clearing organizations include:



	As of March 31, 2022		As of December 31, 2021


	(dollars in thousands)
Broker-dealers	$	1,342,242	$	1,533,713
Securities failed to deliver	91,561		17,851
Clearing organizations	44,450		56,075
Securities borrowed/loaned interest receivable	9,658		6,708
	$	1,487,911	$	1,614,347

As of March 31, 2022 and December 31, 2021, amounts payable to brokers, dealers and clearing organizations include:



	As of March 31, 2022		As of December 31, 2021


	(dollars in thousands)
Broker-dealers	$	419,423	$	483,112
Securities failed to receive	95,201		57,894
Clearing organizations	62,804		37,925
Securities borrowed/loaned interest payable	10,112		7,622
	$	587,540	$	586,553

10. Receivable From and Payable To Customers

As of March 31, 2022 and December 31, 2021, receivable from customers of $159.6 million and $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, 2022 and December 31, 2021, payable to customers of $2.2 billion and $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 does 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.

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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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

recapture payable of $127.0 million and $103.0 million, as of March 31, 2022 and December 31, 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, 2022		As of December 31, 2021


	(dollars in thousands)

Notes payable	$	174,139	$	174,015

Term loan	434,319		435,147


Other notes payable	15,857		12,537
Finance lease obligations	1,451		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.

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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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

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Cowen Inc.

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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Cowen Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


	Three Months Ended March 31,
		2022			2021
		(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)		1.63			2.01
Weighted average discount rate - operating leases		4.66		%	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 Payable		Term Loan		Other Notes Payable		Finance Lease Obligation
	(dollars in thousands)
2022	$	11,468	$	16,733	$	3,752	$	849
2023	13,405		22,351		12,593		500
2024	88,578		22,168		543		100
2025	7,750		21,986		—		49
2026	7,750		21,803		—		12
Thereafter	150,375		445,631		—		—
Subtotal	279,326		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.

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Cowen Inc.

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 two 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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Cowen Inc.

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 Shares	Cost (dollars in thousands)		Average Cost per Share
Balance outstanding at December 31, 2021	28,047,929	$	547,112	$	19.51
Shares purchased for minimum tax withholding under the 2010 and 2020 Equity Plans or other similar transactions	374,149	12,283		32.83

Purchase of treasury stock	798,302	24,140		30.24
Balance outstanding at March 31, 2022	29,220,380	$	583,535	$	19.97

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Cowen Inc.

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, 2022		As of March 31, 2021


	(dollars in thousands)










Nonredeemable non-controlling interests in consolidated subsidiaries and investment funds
Operating companies
Beginning balance	126,105		83,818
Capital contributions	1,610		3,498
Capital distributions	(5,901)		(2,348)

Income (loss) attributable to non-controlling interests	20,858		7,661
Ending balance	142,672		92,629

Consolidated Funds
Beginning balance	33,630		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 balance	32,903		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,
		2022		2021
		(dollars in thousands)
Beginning balance		$	(2)	$	(7)

Foreign currency translation		2		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,
			2022		2021
			(dollars in thousands)
Revenue from contracts with customers			Operating Company
Investment banking
Underwriting fees			$	17,583	$	154,304
Strategic/financial advisory fees			58,789		73,555
Placement and sales agent fees			22,584		72,544
Expense reimbursements from clients			2,586		4,431
	Total investment banking revenue		101,542		304,834
Brokerage
Commissions			152,483		159,681
Trade conversion revenue			7,410		6,241
Equity research fees			6,203		4,593
	Total brokerage revenue from customers		166,096		170,515
Management fees			16,555		25,499
Incentive income			633		2,258
Total revenue from contracts with customers - Op Co			$	284,826	$	503,106

			Asset Company
Management fees			214		243
Incentive income			—		—
Total revenue from contracts with customers - Asset Co			214		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,
		2022		2021
		(dollars in thousands)
Incurred and paid claims
Insurance (net of Outward Reinsurance)		$	1,067	$	744
Inward Reinsurance		3,011		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, 2022			Three Months Ended March 31, 2021
	Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock Units	Weighted-Average Grant Date Fair Value		Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock Units	Weighted-Average Grant Date Fair Value





Beginning balance outstanding	4,595,342	$	24.33	5,450,191	$	17.56
Granted	1,919,504	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 outstanding	6,274,247	$	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 1,974,217 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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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-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, 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,
		2022		2021
		(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 funds		20,131		4,562
Net income (loss) attributable to Cowen Inc.		35,016		147,504
Preferred stock dividends		1,698		1,698
Net income (loss) attributable to Cowen Inc. common stockholders for basic earnings per share		33,318		145,806
Change in fair value of contingently issuable shares		41		—
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 computation		28,386		27,359

Performance based restricted stock		374		445
Contingently issuable common stock in connection with acquisitions		82		—
December 2022 Convertible Notes		—		2,659
Series A Convertible Preferred Stock		708		—
Restricted stock		2,222		3,102
Weighted average shares used in diluted computation		31,772		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, 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,
		2022		2021
		(dollars in thousands)
Lease cost
Operating lease cost		$	6,614	$	5,770
Short-term lease cost		141		33
Variable lease cost		837		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,
	2022			2021
	(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)	5.54			4.56
Weighted average discount rate - operating leases	4.13		%	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
2023	381		25,476
2024	370		22,965
2025	370		12,312
2026	278		8,881
Thereafter	—		24,969
Total operating leases	1,765		111,416
Less discount	105		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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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
2023	17,544
2024	8,214
2025	3,889
2026	3,253
Thereafter	7,357
Total service payment commitments	$	62,453

Unfunded Commitments

The following table summarizes unfunded commitments as of March 31, 2022:


Entity	Unfunded Commitments		Commitment 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.

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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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.

23. Segment Reporting

The Company has two 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 represents the Company’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 goodwill and certain other impairments, certain other transaction-related adjustments and/or reorganization expenses and 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:


	Three Months Ended March 31,
			2022		2021
		(dollars in thousands)
Economic Income
Op Co			$	36,297	$	143,858
Asset Co			1,150		(1,476)
Adjustments applied to arrive at Net Income (loss)
Income attributable to non-controlling interest			20,131		4,562
Preferred stock dividends			1,698		1,698
Amortization of (discount)/premium on convertible debt			(75)		(776)
Acquisition related amounts			(80)		(238)
Contingent liability adjustments			(5,133)		6,798

Debt extinguishment gain (loss) and accelerated debt costs			—		(4,538)
Bargain purchase gain			—		3,855

US GAAP Income tax expense			(11,889)		(54,428)
Economic income tax expense			13,048		52,751
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 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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Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


	Three Months Ended March 31,
		2022		2021
		(dollars in thousands)
Op Co
Non-Interest Revenue		$	367,652	$	697,885
Interest Revenue		40,331		51,104

Total Revenues		407,983		748,989
Interest Expense		43,300		53,803

Depreciation and Amortization		7,179		4,349
Income Taxes		11,832		55,085
Asset Co
Non-Interest Revenue		2,599		(1,668)
Interest Revenue		8		203
Interest Revenue, Consolidated funds		2		2
Total Revenues		2,609		(1,463)
Interest Expense		1,236		1,275

Depreciation and Amortization		6		5
Income Taxes		57		(657)
Total Segment
Non-Interest Revenue *		370,251		696,217
Interest Revenue		40,339		51,307
Interest Revenue, Consolidated funds		2		2
Total Revenues		$	410,592	$	747,526
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 Amortization		7,185		4,354
Income Taxes		11,889		54,428

* Includes dividend revenue of $6.0 million and $8.1 million for the three months ended March 31, 2022 and 2021, respectively. In addition, includes dividend revenue, consolidated funds, of $0.0 million and $2.6 million for the three months ended March 31, 2022 and 2021, respectively.

24. Regulatory Requirements

Regulatory Capital

As registered broker-dealers with the United States Securities and Exchange Commission ("SEC"), Cowen and Company, ATM Execution and Westminster are subject to the Uniform Net Capital Rule 15c3-1, "SEA Rule 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 SEA Rule 15c3-1, is equal to the greater of $1.5 million or 2% of aggregate debits arising from customer transactions. ATM Execution, and Westminster are required to maintain minimum net capital, as defined in (a)(1)(ii) of SEA 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 SEA Rule 15c3-1 and other regulatory bodies.

Cowen and 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, Cowen and Company is required to maintain net capital equal to or in excess of $45,000 or the amount of net capital required by SEA Rule 15c3-1, whichever is greater. Additionally, as an options clearing member of the Options Clearing Corporation ("OCC") under OCC Rule 302, Cowen and Company is required to maintain net capital equal to the greater of $2.0

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Cowen Inc.

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, 2022, the regulatory net capital, minimum net capital 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:


Subsidiary	Net Capital		Minimum Net Capital Requirement		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

The Company's U.S. broker-dealers must also comply with the 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 securities 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.

ATM Execution claims 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. Westminster claims the (k)(2)(i) exemption with regard 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 SEA 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, 2022, Cowen and Company had segregated approximately $51.8 million of cash 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 SEA 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 SEA 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, 2022, Cowen and Company had $71.7 million of cash on deposit in PAB Reserve Bank Accounts. Cowen and Company and ATM Execution 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 Cowen 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 at the end of each quarter must exceed a minimum requirement. As of December 31, 2021, the last testing date for Cowen Re and Cowen Insurance Co, the solvency capital ratios of both Cowen Insurance Co and Cowen Re were in excess of the minimum 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, 2022. RCG Insurance Company’s capital and surplus as of March 31, 2022 totaled $6.0 million.

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, 2022 and December 31, 2021, $21.9 million and $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, 2022 and 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, 2022 and December 31, 2021, loans to employees of $9.2 million and $8.8 million, respectively, were included in due from related parties on the accompanying condensed consolidated statements of financial condition. Of these amounts $3.8 million and $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 for the three months ended March 31, 2022 and 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, 2022 and 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 Unaudited Condensed Consolidated Financial Statements (Continued)

The remaining balance included in due from related parties of $12.4 million and $22.6 million as of March 31, 2022 and December 31, 2021, respectively, relates to amounts due to the Company from affiliated investment funds and real estate entities due to expenses paid on their behalf.

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, 2022 and December 31, 2021, such investments aggregated $58.3 million and $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 $10.3 million and $10.1 million for the three months ended March 31, 2022 and 2021, respectively.

The Company may, at times, have unfunded commitment amounts pertaining to related parties. See Note 22 for amounts committed as of March 31, 2022.

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 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, 2022 and December 31, 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 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, 2022.


Lender	Contractual Amount		Available Amount		Maturity Date	Description
Pledge Lines	(dollars in thousands)
BMO Harris Bank	$	75,000	$	75,000	None	Secured Tri-Party Pledge Facility
BMO Harris Bank	150,000		150,000		None	Secured Depository Trust Company Pledge Line
Total	225,000		225,000

Spike Line
BMO Harris Bank Canadian Imperial Bank of Commerce, in syndication	70,000		70,000		August 19, 2022	Unsecured committed spike line facility to cover short term increases in National Securities Clearing Corporation margin deposit requirements
Revolving Credit Facility
Morgan Stanley	25,000		25,000		March 24, 2026	Unsecured Corporate Revolver

Total Credit Lines	$	320,000	$	320,000

27. Subsequent Events

On April 21, 2022 the Board of Directors declared a quarterly cash dividend payable on its common stock of $0.12 per common share, payable on June 15, 2022, to stockholders of record on June 1, 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, 2021 (the "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

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 healthcare investing, sustainable investing, healthcare royalties, merger arbitrage and 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, tech-enabled and business services, and energy. We provide 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. 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, 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 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 US 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.

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.

•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.

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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

Non-Redeemable Non-Controlling Interests

Investment Fund Performance and Assets Under Management

For the three months ended March 31, 2022, the Company's activist strategy had marginally negative results but outperformed its benchmark while its merger arbitrage strategies had positive results. The Company's healthcare royalty strategy is now making allocations from the strategy's fourth fund. The Company’s healthcare investments strategy is now deploying capital from its fourth fund. Finally, our sustainable investing strategy is now deploying capital, with three investments made as of March 31, 2022. The liquidation of certain multi-strategy hedge funds advised by the Company also continues.

As of March 31, 2022, the Company had assets under management of $15.6 billion.

Strategy

Healthcare Investments

Healthcare Royalties

Activism

Merger Arbitrage

Sustainable Investments

Other (a)

(dollars in millions)

AUM

$1,074

$3,556

$8,387

$311

$1,367

$884

Team

Private Equity

Hedge Fund

Managed Account

UCITS

Other

(a) Other strategies include legacy funds and other private 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 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, 2022, the Company's invested capital amounted to a net value of $842.8 million (supporting a long market value of $760.9 million), representing approximately 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, 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, 2022 because they represent only some of the line items in the accompanying condensed consolidated statement of financial condition.


Strategy	Net Value		% of Stockholders' Equity
	(dollars in millions)
Op Co
Broker-dealer capital and related trading	$	613.5	59%
Public and Private Healthcare	28.1		3%
Liquid Alternative Trading	68.7		7%
Other	12.9		1%
Asset Co
Private Investments	119.6		12%

Total	842.8		81%
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, 2022 Compared with Three Months Ended March 31, 2021


	Condensed Consolidated Statements of Operations
	(unaudited)
	Three Months Ended March 31,				Period to Period
	2022		2021		$ Change		% Change
	(dollars in thousands)
Revenues
Investment banking	$	101,542	$	304,834	$	(203,292)	(67)	%
Brokerage	168,738		173,737		(4,999)		(3)	%
Investment income (loss)
Securities principal transactions, net	91,252		63,965		27,287		43	%
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 fees	16,769		25,742		(8,973)		(35)	%
Incentive income	633		2,258		(1,625)		(72)	%
Interest and dividends	46,335		59,388		(13,053)		(22)	%


Insurance and reinsurance premiums	11,321		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 revenues	410,592		747,526		(336,934)		(45)	%
Interest and dividends expense	46,524		57,641		(11,117)		(19)	%
Total net revenues	364,068		689,885		(325,817)		(47)	%
Expenses
Employee compensation and benefits	187,178		388,196		(201,018)		(52)	%
Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs	7,343		6,455		888		14	%
Operating, general, administrative and other expenses	100,801		96,077		4,724		5	%
Depreciation and amortization expense	7,185		4,354		2,831		65	%


Consolidated Funds expenses	105		271		(166)		(61)	%
Total expenses	302,612		495,353		(192,741)		(39)	%
Other income (loss)
Net gains (losses) on other investments	5,580		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 taxes	67,036		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 funds	20,131		4,562		15,569		341	%
Net income (loss) attributable to Cowen Inc.	35,016		147,504		(112,488)		(76)	%
Preferred stock dividends	1,698		1,698		—		—	%
Net income (loss) attributable to Cowen Inc. common stockholders	$	33,318	$	145,806	$	(112,488)	(77)	%

Revenues

Investment Banking

Investment banking revenues decreased $203.3 million to $101.5 million for the three months ended March 31, 2022 compared with $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 five debt capital markets transactions.

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Brokerage

Brokerage revenues decreased $5.0 million to $168.7 million for the three months ended March 31, 2022 compared with $173.7 million in the prior year period. This was attributable to a decrease in institutional brokerage, primarily special situations and electronic commissions. Customer trading volumes across the industry (according to Bloomberg) decreased 12% for the quarter ended March 31, 2022 compared to the prior year period.

Investment Income (loss)

Securities principal transactions, net

Securities principal transactions, net increased $27.3 million to $91.3 million for the three months ended March 31, 2022 compared with $64.0 million in the prior year period. The increase in securities principal transactions, net was primarily attributable to an increase in the value of our digital investments offset partially by a decrease in our healthcare and merchant banking 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) decreased $21.5 million to a loss of $6.1 million for the three months ended March 31, 2022 compared with an income of $15.4 million in the prior year period. The decrease is primarily related to public positions in our healthcare and sustainable fund investments and a decrease in our activist fund investments.

Carried interest allocations

Carried interest allocations decreased $113.9 million to a loss of $17.1 million for the three months ended March 31, 2022 compared with an income of $96.8 million in the prior year period. The primary driver of the decrease was a decrease in allocations from our healthcare and sustainable funds.

Management Fees

Management fees decreased $8.9 million to $16.8 million for the three months ended March 31, 2022 compared with $25.7 million in the prior year period. This decrease in management fees was primarily related to management 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 funds.

Incentive Income

Incentive income decreased $1.6 million to $0.6 million for the three months ended March 31, 2022. This decrease 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 allocated to the Company as carried interest allocations, included in investment income (loss).

Interest and Dividends

Interest and dividends decreased $13.1 million to $46.3 million for the three months ended March 31, 2022 compared with $59.4 million in the prior year period. Interest and dividends amounts are primarily attributable to securities finance activity. The decrease in the securities finance activity is due to lower customer demand which has created less matched book opportunities for international securities.

Insurance and Reinsurance Premiums

Insurance and reinsurance premiums increased $4.2 million to $11.3 million for the three months ended March 31, 2022 compared with $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 Revenues, net

Other revenues decreased $2.6 million to a loss of $0.9 million for the three months ended March 31, 2022 compared with an income of $1.7 million in the prior year period. This primarily related to foreign currency exchange rate fluctuations from our non-USD transactions.

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Consolidated Funds Revenues

Consolidated Funds revenues increased $1.4 million to a loss of $1.9 million for the three months ended March 31, 2022 compared with a loss of $3.3 million in the prior year period. The increase is due to the losses in the prior period related the Enterprise LP fund primarily driven by foreign revaluation of 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 Expense

Interest and dividends expense decreased $11.1 million to $46.5 million for the three months ended March 31, 2022 compared with $57.6 million in the prior year period. Interest and dividends amounts are primarily attributable to securities finance activities. There was a decrease in the securities finance activity due to lower customer demand which has created less matched book opportunities for international securities.

Expenses

Employee Compensation and Benefits

Employee compensation and benefits expenses decreased $201.0 million to $187.2 million for the three months ended March 31, 2022 compared with $388.2 million in the prior year period. The decrease is primarily due to $336.9 million lower total revenues as well as a decrease of $6.4 million in other income (loss) during 2022 as compared to 2021 and thus resulting in a lower compensation and benefits accrual. The compensation to revenue ratio, including other income (loss), was 45% for the three months ended March 31, 2022, compared with 51% in the prior year period.

Insurance and Reinsurance Claims and Commissions

Insurance and reinsurance-related expenses increased $0.8 million to $7.3 million for the three months ended March 31, 2022 compared with $6.5 million the prior year period. The net increase derives from the insurance entity.

Operating, General, Administrative and Other Expenses

Operating, general, administrative and other expenses increased $4.7 million to $100.8 million for the three months ended March 31, 2022 compared with $96.1 million in the prior year period. The increase is primarily related to fair market value adjustments to the contingent consideration liabilities for previous acquisitions offset only partially by lower floor brokerage and trade execution costs and underwriting fees due to lower brokerage and investment banking revenues.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $2.8 million to $7.2 million for the three months ended March 31, 2022 compared with $4.4 million in the prior year period. The increase is primarily related to two acquisitions which closed during 2021.

Consolidated Funds Expenses

Consolidated Funds expenses decreased $0.2 million to $0.1 million for the three months ended March 31, 2022 compared with $0.3 million in the prior year period. During 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 Company'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) decreased $6.4 million to $5.6 million for the three months ended March 31, 2022 compared with $12.0 million in the prior year period. The decrease in other income (loss), which primarily represents our equity method investments, was primarily attributable to a decrease in performance in our activist 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 decreased $42.5 million to $11.9 million for the three months ended March 31, 2022 compared with $54.4 million in the prior year 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 $15.5 million to $20.1 million for the three months ended March 31, 2022 compared with income of $4.6 million in the prior year period. The increase was primarily the result of gains in first quarter of 2022 related to higher valuation in the 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, 2022 and 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 calculated 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. Additionally, the Company manages its operating businesses to an Economic Compensation-to-Proceeds 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 several 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, 2022 Compared with Three Months Ended March 31, 2021

Total Economic Operating Income (Loss) was $42.8 million for the three months ended March 31, 2022, a decrease of $102.7 million compared to Economic Operating Income (Loss) of $145.6 million in the prior year period. Total Economic Income (Loss) was $37.4 million for the three months ended March 31, 2022 compared to Economic Income (Loss) of $142.4 million in the prior year period. Total Pre-tax Economic Income (Loss) was $52.2 million for the three months ended March 31, 2022, a decrease of $144.6 million compared to Pre-tax Economic Income (Loss) of $196.8 million in the prior year period.

Economic Proceeds included in total Economic Income (Loss) were $331.6 million for the three months ended March 31, 2022, a decrease of $355.8 million compared to $687.4 million in the prior year period. This was primarily related to a decrease in investment banking, incentive fees and brokerage revenues.

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Operating Company Segment

Economic Proceeds



	Three Months Ended March 31,				Total Period-to-Period
	2022		2021		$ Change		% Change
	(dollars in thousands)
Economic Proceeds
Investment banking	$	98,697	$	293,488	$	(194,791)	(66)	%
Brokerage	197,856		221,848		(23,992)		(11)	%
Management fees	20,440		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 proceeds	3,819		1,164		2,655		228	%
Total: Economic Proceeds	330,241		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 $330.2 million for the three months ended March 31, 2022, a decrease of $355.0 million compared to $685.2 million in the prior year period.

Investment Banking Economic Proceeds decreased $194.8 million to $98.7 million for the three months ended March 31, 2022 compared with $293.5 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 five debt capital markets transactions.

Brokerage Economic Proceeds decreased $23.9 million to $197.9 million for the three months ended March 31, 2022, compared with $221.8 million in the prior year period. This was attributable to a decrease in institutional brokerage, primarily special situations and electronic commissions. Customer trading volumes across the industry (according to Bloomberg) decreased 12% for the quarter ended March 31, 2022 compared to the prior year period.

Management Fees Economic Proceeds for the segment decreased $6.5 million to $20.4 million for the three months ended March 31, 2022 compared with $26.9 million in the prior year period. This decrease in management fees was primarily related to management 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 funds.

Incentive Income (Loss) Economic Proceeds for the segment decreased $122.7 million to a loss of $12.8 million for the three months ended March 31, 2022 compared with income of $109.9 million in the prior year period. This decrease was primarily related to a decrease in performance fees from our Cowen Sustainable and Cowen Healthcare investment funds.

Investment Income (Loss) Economic Proceeds for the segment decreased $9.7 million to $22.2 million for the three months ended March 31, 2022 compared with $31.9 million in the prior year period. The decrease primarily relates to a decrease in performance investments across most of our strategies including healthcare, merchant banking and portfolio hedge offset partially with gains from our digital investments.

Other Income (Loss) Economic Proceeds for the segment increased $2.6 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 / (Income) were $(8.5) million for the three months ended March 31, 2022, a decrease of $14.4 million compared with $5.9 million in the prior year period. First quarter 2022 interest expense / (income) included an $18 million unrealized gain from a mark-to-market adjustment on an interest rate swap used to offset interest on floating-rate debt.

Net Economic Proceeds were $338.8 million for the three months ended March 31, 2022, a decrease of $340.5 million compared with $679.3 million in the prior year period.

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Economic Expenses



	Three Months Ended March 31,				Total Period-to-Period
	2022		2021		$ Change		% Change
Economic Expenses	(dollars in thousands)










Employee compensation and benefits	$	186,424	$	385,578	$	(199,154)	(52)	%
Non-Compensation Expense	93,792		89,415		4,377		5	%
Depreciation & Amortization	7,179		4,349		2,830		65	%
Non-Controlling Interest	1,013		1,467		(454)		(31)	%
Total: Economic Expenses	$	288,408	$	480,809	$	(192,401)	(40)	%

Economic Expenses were $288.4 million for the three months ended March 31, 2022, a decrease of $192.4 million compared with $480.8 million in the prior year period.

Economic Compensation Expenses were $186.4 million compared to $385.6 million in the prior year period. The decrease was due to lower revenues. The economic compensation-to-proceeds ratio increased to 56.5% compared to 56.3% in the prior year period.

Economic Non-compensation Expenses Fixed non-compensation expense increased $5.2 million to $40.9 million for the three months ended March 31, 2022 compared with $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 expenses which primarily are comprised of expenses that are incurred as a direct result of the processing and soliciting of revenue generating activities, decreased $0.8 million to $52.9 million for the three months ended March 31, 2022 compared with $53.7 million in the prior year period. The decrease is related to decreased brokerage and trade execution costs and decreased variable professional and advisory fees, which includes employment agency fees and legal fees directly related to revenues.

Economic Depreciation and Amortization Expenses increased to $7.2 million for the three months ended March 31, 2022 compared with $4.3 million in the prior year period. The increase is primarily related to two acquisitions which closed during 2021.

Economic Non-controlling interests decreased by $0.5 million to $1.0 million for the three months ended March 31, 2022 compared with $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
	2022		2021		$ Change		% Change
	(dollars in thousands)


















Pre-tax Economic Income (Loss)	$	50,342	$	198,475	$	(148,133)	(75)	%
Economic income tax expense	12,585		53,191		(40,606)		(76)	%
Preferred stock dividends	1,460		1,426		34		2	%
Economic Income (Loss)	36,297		143,858		(107,561)		(75)	%
Add back: Depreciation and amortization expense, net of taxes	5,385		3,183		2,202		69	%
Economic Operating Income (Loss)	$	41,682	$	147,041	$	(105,359)	(72)	%

Preferred Stock Dividends. On May 19, 2015, the Company 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
	2022		2021		$ 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 proceeds	1		(1)		2		(200)	%
Total: Economic Proceeds	1,397		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 $1.4 million for the three months ended March 31, 2022, a decrease of $0.8 million compared with negative proceeds (due to losses) of $2.2 million in the prior year period.

Management Fees Economic Proceeds for the segment remained fairly flat at $0.3 million for the three months ended March 31, 2022 compared with the prior year period.

Incentive Income (Loss) Economic Proceeds for the segment increased $1.0 million to a loss of $0.2 million for the three months ended March 31, 2022 compared with a loss of $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 decreased $1.7 million to $1.4 million for the three months ended March 31, 2022, compared with income of $3.1 million in the prior year period. The decrease primarily to decreased performance of our multi-strategy funds.

Economic Interest Expenses / (Income) were $(1.4) million for the three months ended March 31, 2022, a decrease of $2.5 million compared with $1.1 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 $2.8 million for the three months ended March 31, 2022, an increase of $1.7 million compared with $1.1 million in the prior year period.

Economic Expenses



	Three Months Ended March 31,				Total Period-to-Period
	2022		2021		$ Change		% Change
	(dollars in thousands)









Economic Expenses
Employee compensation and benefits	$	951	$	2,819	$	(1,868)	(66)	%
Non-Compensation Expense	6		(79)		85		(108)	%
Depreciation & Amortization	6		5		1		20	%

Total: Economic Expenses	$	963	$	2,745	$	(1,782)	(65)	%

Economic Expenses were $1.0 million for the three months ended March 31, 2022, a decrease of $1.7 million compared to $2.7 million in the prior year period.

Economic Compensation Expenses were $1.0 million for the three months ended March 31, 2022, a decrease of $1.8 million compared to $2.8 million in the prior year period. The decrease was due to lower total economic proceeds related to investment income (loss).

Economic Non-compensation Expenses Fixed non-compensation expense increased $0.1 million for the three months ended March 31, 2022 compared with the prior year period. The increase is primarily related to 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 Expenses remained consistent for the three months ended March 31, 2022 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
	2022		2021		$ Change		% Change
	(dollars in thousands)


















Pre-tax Economic Income (Loss)	$	1,851	$	(1,644)	$	3,495	(213)	%
Economic income tax expense	463		(440)		903		(205)	%
Preferred stock dividends	238		272		(34)		(13)	%
Economic Income (Loss)	1,150		(1,476)		2,626		(178)	%
Add back: Depreciation and amortization expense, net of taxes	5		3		2		67	%
Economic Operating Income (Loss)	$	1,155	$	(1,473)	$	2,628	(178)	%

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Reconciliation of US GAAP to Non-GAAP Measures for the three months ended March 31, 2022 and 2021

The following tables reconciles total US GAAP Revenues to total Economic Proceeds for the three months ended March 31, 2022 and 2021:


		(unaudited)
		Year Ended March 31, 2022
(Dollar amounts in thousands)		Investment Banking		Brokerage		Investment Income		Management Fees		Incentive Income		Interest and Dividends		Reinsurance Premiums		Other Revenues, net		Consolidated Funds Revenues		Other 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 expenses	a	(259)		—		—		—		—		—		—		—		—		—		(259)
Reimbursable client expenses	b	(2,586)		—		—		—		—		—		—		(311)		—		—		(2,897)
Securities financing interest expense	c	—		(1,247)		—		—		—		(29,805)		—		—		—		—		(31,052)
Fund start-up costs, distribution and other fees	d	—		—		—		(371)		—		—		—		(678)		—		—		(1,049)
Certain equity method investments	e	—		—		—		4,256		3,592		—		—		—		—		(5,756)		2,092
Carried interest	f	—		—		17,067		—		(16,900)		—		—		—		—		—		167
Proprietary trading, interest and dividends	g	—		8,818		(62,084)		—		(337)		(5,882)		—		1,780		—		16,157		(41,548)
Insurance related activities expenses	h	—		—		—		—		—		—		(11,321)		3,978		—		—		(7,343)
Facilitation trading gains and losses	i	—		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 Reclassifications	l	—		—		(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 Banking		Brokerage		Investment Income		Management Fees		Incentive Income		Interest and Dividends		Reinsurance Premiums		Other Revenues, net		Consolidated Funds Revenues		Other 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 expenses	a	(6,915)		—		—		—		—		—		—		—		—		—		(6,915)
Reimbursable client expenses	b	(4,431)		—		—		—		—		—		—		(288)		—		—		(4,719)
Securities financing interest expense	c	—		1,435		—		—		—		(41,801)		—		—		—		—		(40,366)
Fund start-up costs, distribution and other fees	d	—		(157)		—		(4,074)		—		—		—		(637)		—		—		(4,868)
Certain equity method investments	e	—		—		—		3,480		9,643		—		—		—		—		(10,830)		2,293
Carried interest	f	—		—		(96,769)		—		97,039		—		—		—		—		—		270
Proprietary trading, interest and dividends	g	—		16,100		(32,726)		—		(326)		(4,096)		—		(234)		—		11,153		(10,129)
Insurance related activities expenses	h	—		—		—		—		—		—		(7,117)		662		—		—		(6,455)
Facilitation trading gains and losses	i	—		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 Reclassifications	l	—		—		(2,667)		2,052		97		—		—		—		3,347		—		2,829
Income Statement Adjustments:
Acquisition related amounts	n	—		—		—		—		—		—		—		—		—		(3,855)		(3,855)
Debt extinguishment loss	p	—		—		—		—		—		—		—		—		—		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, 2022 and 2021:


			(unaudited)
		Year Ended March 31,
(Dollar amounts in thousands)				2022		2021
Total US GAAP Interest & Dividend Expense				$	46,524	$	57,641
Management Presentation Reclassifications:
Securities financing interest expense	c			(31,052)		(40,366)
Fund start-up costs, distribution and other fees	d			(895)		(538)
Proprietary trading gains and losses	g			(21,161)		(4,235)
Facilitation trading gains and losses	i			(3,267)		(4,693)
Total Management Presentation Reclassifications:				(56,375)		(49,832)

Income Statement Adjustments:

Amortization of discount/(premium) on debt	m			(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, 2022 and 2021:


		(unaudited)
		Year Ended March 31, 2022								Year Ended March 31, 2021
(Dollar amounts in thousands)		Employee Compensation and Benefits		Non-compensation US GAAP Expenses		Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds		Total		Employee Compensation and Benefits		Non-compensation US GAAP Expenses		Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds		Total
Total US GAAP		$	187,178	$	115,434	$	20,131	$	322,743	$	388,196	$	107,157	$	4,562	$	499,915
Management Presentation Reclassifications:
Underwriting expenses	a	—		(259)		—		(259)		—		(6,915)		—		(6,915)
Reimbursable client expenses	b	—		(2,897)		—		(2,897)		—		(4,719)		—		(4,719)

Fund start-up costs, distribution and other fees	d	—		(154)		—		(154)		—		(4,330)		—		(4,330)
Certain equity method investments	e	—		2,092		—		2,092		—		2,293		—		2,293
Carried interest	f	—		167		—		167		—		270		—		270
Proprietary trading, interest and dividends	g	—		471		(20,858)		(20,387)		—		1,768		(7,662)		(5,894)
Insurance related activities expenses	h	—		(7,343)		—		(7,343)		—		(6,455)		—		(6,455)

Associated partner/banker compensation	j	546		(546)		—		—		548		(548)		—		—
Management company non-Controlling interest	k	(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 Reclassifications	l	—		(105)		727		622		—		(271)		3,100		2,829
Income Statement Adjustments:
Acquisition related amounts	n	—		(80)		—		(80)		—		(238)		—		(238)
Contingent liability adjustments	n	—		(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, 2022 and 2021:


				(unaudited)
			Year Ended March 31,
(Dollar amounts in thousands)				2022		2021

US GAAP Net income (loss) attributable to Cowen Inc. common stockholders				$	33,318	$	145,806
	Income Statement Adjustments:
	US GAAP Income tax expense (benefit)	o		11,889		54,428
	Amortization of discount (premium) on debt	m		75		776

	Debt extinguishment gain (loss) and/or accelerated debt costs	p		—		4,538
	Bargain purchase gain	n		—		(3,855)
	Contingent liability adjustments	n		5,133		(6,798)
	Acquisition related amounts	n		80		238
	Preferred stock dividends	q		1,698		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 taxes			5,390		3,186
	Economic Operating Income (Loss)			$	42,837	$	145,568

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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.
a			Underwriting expenses: Economic Proceeds presents investment banking revenues net of underwriting expenses.
b			Reimbursable 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.
c			Securities 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.
d			Fund start-up costs, distribution and other fees: Economic Proceeds and Economic Interest Expense are net of fund start-up costs and distribution fees paid to agents and other debt service costs.
e			Certain 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.
f			Carried 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.
g			Proprietary trading, interest and dividends: Economic Proceeds presents interest and dividends from the Company's proprietary trading in investment income.
h			Insurance 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.
i			Facilitation 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.
j			Associated partner/banker compensation reclassification: Economic Compensation Expense presents certain payments to associated banking partners as compensation rather than non-compensation expenses.
k			Management 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
l			The 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
m			Pre-tax Economic Income (Loss) excludes the amortization of discount (premium) on debt.
n			Pre-tax Economic Income (Loss) excludes acquisition related adjustments (including bargain purchase gain and contingent liability adjustments).
o			Pre-tax Economic Income (Loss) excludes US GAAP income taxes.
p			Pre-tax Economic Income (Loss) excludes gain/(loss) on debt extinguishment and accelerated debt costs.
q			Pre-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, 2022, we had cash and cash equivalents of $513.0 million and net liquid investment assets of $1.1 billion, which includes cash and cash equivalents and short-term investments held by foreign subsidiaries as of March 31, 2022 of $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, 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, 2022, the Company had security deposits totaling $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, 2022:


Entity	Unfunded Commitments		Commitment 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

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 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 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 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.

Regulation

Regulatory Capital

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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.


Subsidiary	Net 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

Customer Protection

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Other Regulatory Requirements

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 $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.

Investing Activities. Net cash used in investing activities of $20.4 million for the three months ended March 31, 2022 was primarily related to securities purchased under agreement to resell. Net cash provided by investing activities of $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 financing activities for the three months ended March 31, 2022 of $40.5 million was primarily related to (i) purchase of 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 $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.

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Debt

Convertible Debt

December 2022 Convertible Notes

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

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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, 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 and $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.

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 term loan 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 of 3.25% 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 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.

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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.

Other Notes Payable

Finance Lease Obligations


	Three Months Ended March 31,
		2022			2021
		(dollars in thousands)
Lease cost
Finance lease cost:
Amortization of finance lease right-of-use assets		$	324		$	309
Interest on lease liabilities		20			34





Weighted average remaining lease term - operating leases (in years)		1.63			2.01
Weighted average discount rate - operating leases		4.66		%	4.89		%

Letters of Credit

As of March 31, 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 reinsurance agreements which amounted to $49.5 million, as of March 31, 2022, and $44.1 million, as

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of December 31, 2021, which are expected to be released periodically as per the terms of the reinsurance policy between March 31, 2022 and March 31, 2024.


Location	Amount		Maturity
	(dollars in thousands)
New York	$	209	April 2023
New York	$	1,325	October 2022
New York	$	1,226	August 2022
Boston	$	188	March 2023
San Francisco	$	454	October 2025
	$	3,402

Contractual Obligations

The following tables summarize the Company's contractual cash obligations as of March 31, 2022:


	Total		< 1 Year		1-3 Years		3-5 Years		More 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 Payments	62,453		22,196		25,758		7,142		7,357
Operating Equipment Leases	1,765		366		751		648		—

Total	175,634		39,375		74,950		28,983		32,326
Debt

Notes Payable	279,326		11,468		101,983		15,500		150,375
Term Loan	550,672		16,733		44,519		43,789		445,631

Finance Lease Obligation	1,510		849		600		61		—

Other Notes Payable	16,888		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, 2022, are as follows:


	Notes Payable		Term Loan		Other Notes Payable		Finance Lease Obligation
	(dollars in thousands)
2022	$	11,468	$	16,733	$	3,752	$	849
2023	13,405		22,351		12,593		500
2024	88,578		22,168		543		100
2025	7,750		21,986		—		49
2026	7,750		21,803		—		12
Thereafter	150,375		445,631		—		—
Subtotal	279,326		550,672		16,888		1,510
Less (a)	(105,187)		(116,353)		(1,031)		(59)
Total	$	174,139	$	434,319	$	15,857	$	1,451

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements as of March 31, 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 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.

Cowen and Company 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 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.

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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.

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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

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 date;

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

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. 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.

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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, 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.

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.

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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

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 22 in our accompanying condensed consolidated financial statements for the quarter ended March 31, 2022 for further discussion.

Recently adopted and future adoption of accounting pronouncements

For a detailed discussion, see Note 2q "Recent pronouncements" in our accompanying condensed consolidated financial statements for the three months ended March 31, 2022.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the three months ended March 31, 2022, there were no material changes in our quantitative and qualitative disclosures about market risks from those disclosed in our 2021 Form 10-K. For a more detailed discussion concerning our market risk, see Item 7A "Quantitative and Qualitative Disclosures about Market Risk" in our 2021 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, 2022.

Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of March 31, 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 for such period.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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various U.S., state and foreign securities, commodity futures and other regulators. In connection with formal and informal 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.

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.

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 2021 Form 10-K for the fiscal year ended December 31, 2021.

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

As of March 31, 2022, the Company's Board of Directors has a share repurchase program that, since its inception, has authorized the Company to purchase up to $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 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, 2022, the Company repurchased 798,302 shares, at an average price of $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, 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.

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Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate 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)	—	—		—	—
Total	379,002	$	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)	—	—		—	—
Total	30,000	$	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)	—	—		—	—
Total	763,449	$	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)	—	—		—	—
Total	1,172,451	$	31.07	798,302

(1) The Company's Board of Directors have authorized the repurchase, subject to market conditions, of up to $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						Amended and Restated Certificate of Incorporation of Cowen Inc. (previously filed as Exhibit 3.1 to the Form 10-Q filed November 25, 2009).
3.2						Second Amended and Restated By-Laws of Cowen Inc. (previously filed as Exhibit 3.1 to the Form 8-K filed on February 18, 2020).
3.3						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Cowen Inc. (previously filed as Exhibit 3.3 to the Form 10-Q filed November 25, 2009).
3.4						Certificate of Designations of the Company for its Series A Cumulative Perpetual Preferred Stock (previously filed as Exhibit 3.1 to Form 8-K filed May 20, 2015).
3.5						Amendment to the Amended and Restated Certificate of Incorporation of Cowen Inc. (previously filed as Exhibit 3.1 to the Form 8-K filed December 5, 2016).
3.6						Certificate of Amendment of Amended and Restated Certificate of Incorporation of Cowen Inc. (previously filed as Exhibit 3.1 to the Form 8-K filed on May 16, 2017)
10.1						Form of Restricted Stock Unit and Deferred Cash Award Agreement (filed herewith).*
10.2						Form of Performance Shares Award Agreement (filed herewith).*
10.3						Cowen Digital Holdings 2022 Equity Unit Incentive Plan (filed herewith).*
10.4						Form of Award Agreement Cowen Digital Holdings 2022 Equity Unit Incentive Plan (filed herewith).*
31.1						Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed herewith).
31.2						Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed herewith).
32						Certification of CEO and CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS						XBRL INSTANCE DOCUMENT
101.SCH						XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CAL						XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
101.DEF						XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
101.LAB						XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
101.PRE						XBRL 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 2, 2022

Title:

Chief Financial Officer (principal financial officer and principal accounting officer)