This discussion should be read in conjunction with our audited Consolidated Financial Statements and the Notes thereto contained elsewhere in this Annual Report.

The financial crisis affecting the global economy has created historic volatility in the market place. Our working capital is invested in short term United States Treasury Bills, and to date the financial crisis has not had a material effect on our liquidity or financial position.

We, like other securities firms, are directly affected by general economic and market conditions including fluctuations in volume and prices of securities, changes and the prospect of changes in interest rates, and demand for brokerage and investment banking services, all of which can affect our profitability. In addition, in periods of reduced financial market activity, profitability is likely to be adversely affected because certain expenses remain relatively fixed, including salaries and related costs, portions of communications costs and occupancy expenses. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other period. To date our revenues have not been adversely affected as a result of the financial crisis.

Competition continues to intensify among all types of brokerage firms, including established discount brokers and new firms entering the on-line brokerage business. Electronic trading continues to account for an increasing amount of trading activity, with some firms charging very low trading execution fees that are difficult for any conventional discount firm to meet. Some of these brokers, however, impose asset based charges for services such as mailing, transfers and handling exchanges which we do not currently impose, and also direct their orders to market makers where they have a financial interest. Continued competition could limit our growth or even lead to a decline in our customer base, which would adversely affect our results of operations. Industry-wide changes in trading practices, such as the continued use of Electronic Communications Networks, are expected to put continuing pressure on commissions/fees earned by brokers while increasing volatility.

We entered into an Operating Agreement, effective as of April 19, 2005 (the "Operating Agreement"), with Suzanne Shank and Napoleon Brandford III, the two individual principals (the "Principals") of SBS Financial Products Company LLC, a Delaware limited liability company ("SBSFPC"). Pursuant to the terms of the Operating Agreement, the Company and each of the Principals made an initial capital contribution of $400,000 in exchange for a 33.33% initial interest in SBSFPC. SBSFPC engages in derivatives transactions related to the municipal underwriting business. The Operating Agreement provides that profit and loss will be shared 66.66% by the Principals and 33.33% by us. Operations from SBSFPC is considered to be integral to our operation.

As a result of our settlement with Intuit, Inc. of a lawsuit relating to a Strategic Alliance Agreement between Siebert and Intuit, $2,024,000 of liabilities recorded by Siebert for expenses prior to December 31, 2003, were reversed in the fourth quarter of 2007.

Critical Accounting Policies

We generally follow accounting policies standard in the brokerage industry and believe that our policies appropriately reflect our financial position and results of operations. Our management makes significant estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities included in the financial statements. The estimates relate primarily to revenue and expense items in the normal course of business as to which we receive no confirmations, invoices, or other documentation, at the time the books are closed for a period. We use our best judgment, based on our knowledge of revenue transactions and expenses incurred, to estimate the amount of such revenue and expenses. We are not aware of any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and expenses incurred when we subsequently receive the actual confirmations, invoices or other documentation. Estimates are also used in determining the useful lives of intangibles assets, and the fair market value of intangible assets. Our management believes that its estimates are reasonable.

Results of Operations

Year Ended December 31, 2008 Compared To Year Ended December 31, 2007

Revenues. Total revenues for 2008 were $29.8 million, a decrease of $4.2 million, or 12.3%, from 2007. Commission and fee income decreased $1.9 million, or 7.3%, from the prior year to $24.2 million due to a decrease in revenues from institutional trading and retail customer trading. Retail customer volumes increased; however, the average commission charged per trade decreased due to more retail customers executing trades online via the Internet, which has a lower commission charge per ticket.

Investment banking revenues increased $112,000, or 3.3%, from the prior year to $3.5 million in 2008 due to our participation in more new issues in the equity and debt capital markets.

Trading profits increased $608,000, or 97.4%, from the prior year to $1.2 million primarily due to the addition of a debt sales-trader and an increase in trading volume.

Income from interest and dividends decreased $965,000, or 54.3%, from the prior year to $813,000 primarily due to lower yields on investments in U.S. Treasury Bills and lower cash balances.

Expenses.Total expenses for 2008 were $34.2 million, an increase of $2.9 million, or 9.3%, from the prior year.

Employee compensation and benefit costs increased $361,000 or 3.0%, from the prior year to $12.3 million primarily due to the expensing of stock options granted to directors of our Company which vest immediately and an increase in health insurance.

Clearing and floor brokerage fees increased $771,000, or 13.5%, from the prior year to $6.5 million primarily due to an increase in volume of trade executions for retail customers and volume relating to the commission recapture operation offset by a decrease in listed floor executions for institutional customers executed at the New York Stock Exchange.

Professional fees increased $1.4 million, or 21.0%, from the prior year to $8.1 million primarily due to an increase in legal fees relating to a dispute with a former employee, consulting fees relating to the commission recapture business and compliance with Sarbanes-Oxley and consulting fees related to the development of our front end computer system.

Advertising and promotion expense increased $84,000, or 11.6%, from the prior year to $809,000 primarily due to an increase in print advertising, brochures and direct mailings to our retail customer base.

Occupancy costs increased $5,000, or 0.4%, from the prior year to $1.3 million due to an increase in rent in the Florida branches and New Jersey office offset by a reduction in rent for our California branch.

Other general and administrative expenses decreased $249,000, or 8.5%, from the prior year to $2.7 million primarily due to a decrease in depreciation and amortization, placement fees, travel and entertainment, insurance and printing costs offset by increases in subscriptions, computer related expenses and office expenses.

Income from our equity investment in Siebert, Brandford, Shank & Co., LLC, an entity in which Siebert holds a 49% equity interest ("SBS"), for 2008 was $2.1 million compared to income of $1.4 million for 2007, an increase of $743,000, or 53.4%, primarily due to SBS participating in more and larger municipal bond offerings. Loss from our equity investment in SBS Financial Products Company, LLC, an entity in which we hold a 33% equity interest ("SBSFPC") for 2008, was $435,000 as compared to income of $40,000, from the same period in 2007. This loss was primarily due to a decline in fair value of SBSFPC's investments in the fourth quarter of 2008. Results of operations of equity investees is considered to be integral to our operations and material to the results of operations.

Taxes.The tax benefit for the year ended December 31, 2008 was $1,031,000 based on our loss before income tax of $2,791,000. The tax provision for the year ended December 31, 2007 was $1.7 million based on our income before tax of $4.0 million. Such benefit and provision represented effective tax rates of 38% and 43%, respectively.

Year Ended December 31, 2007 Compared To Year Ended December 31, 2006

Revenues.Total revenues for 2007 were $33.9 million, an increase of $5.1 million, or 17.7%, from 2006. Commission and fee income increased $1.4 million, or 5.7%, from the prior year to $26.1 million due to an increase in institutional trading and the commission recapture operations as well as increase in retail customer trading volumes offset slightly by a decrease in the average commission charged per trade.

Investment banking revenues increased $1.7 million, or 97.7%, from the prior year to $3.4 million in 2007 due to our participation in more new issues in the equity and debt capital markets.

Siebert commenced a lawsuit against Intuit, Inc. ("Intuit") in 2003 seeking expenses and damages arising from the Joint Brokerage Service conducted under the Strategic Alliance Agreement between Siebert and Intuit. Intuit counterclaimed against Siebert for expenses and damages. A Stipulation and Order of Dismissal with Prejudice entered into by the parties was filed in October 2007, terminating the litigation without any payments by either party. The parties also exchanged general releases. As a result of the settlement, $2,024,000 of liabilities recorded by Siebert for expenses prior to December 31, 2003, were reversed in the fourth quarter of 2007.

Income from interest and dividends increased $131,000, or 8%, from the prior year to $1.8 million primarily due to higher interest rates and higher cash balances.

Expenses. Total expenses for 2007 were $31.3 million, an increase of $4.6 million, or 17.2%, from the prior year.

Employee compensation and benefit costs increased $980,000 or 8.9%, from the prior year to $12.0 million primarily due to an increase in commissions paid based on production offset by a decrease in health insurance and employment of temporary employees.

Clearing and floor brokerage fees increased $490,000, or 9.4%, from the prior year to $5.7 million primarily due to an increase in listed floor executions for institutional customers executed at the New York Stock Exchange and an increase in volume relating to the commission recapture operation.

Professional fees increased $2.9 million, or 75.5% from the prior year to $6.7 million primarily due to an increase in legal fees relating to the Intuit case and consulting fees relating to the our compliance with Sarbanes-Oxley.

Advertising and promotion expense decreased $195,000, or 21.2%, from the prior year to $725,000 primarily due to the reduction in print advertising production in 2007 and the production and airing of television commercials in the Florida region in 2006.

Communications expense increased $306,000, or 17.9%, from the prior year to $2.0 million primarily due to an increase in costs associated with our new website.

Occupancy costs increased $168,000, or 14.7%, from the prior year to $1.3 million principally due to the an increase in rent in the Florida branches and New Jersey and California offices.

Other general and administrative expenses decreased $13,000, from the prior year to $2.9 million primarily due to a decrease in depreciation and amortization expenses, employee placement fees, travel and entertainment costs and office expenses offset by increases in printing, insurance and transportation costs.

Income from our equity investment in Siebert, Brandford, Shank & Co., LLC, an entity in which Siebert holds a 49% equity interest ("SBS"), for 2007 was $1.4 million compared to income of $2.9 million for 2006, a decrease of $1.5 million, or 51.8%, from the same period in 2006 primarily due to SBS participating in less municipal bond offerings especially in the last six months of the year. SBS serves as an underwriter for municipal bond offerings. Income from our equity investment in SBS Financial Products Company, LLC, an entity in which we hold a 33% equity interest ("SBSFPC") for 2007, was $40,000 as compared to income of $916,000, a decrease of $876,000, or 95.6%, from the same period in 2006. This decrease was due to a decrease in the number and size of the transactions. SBSFPC engages in derivatives transactions related to the municipal underwriting business. Operation from equity investees is considered to be integral to our operations and material to the results of operations.

Taxes. The provision for income taxes decreased by $711,000, or 28.6%, from the prior year to $1.8 million due to a decrease in net income before tax to $4.0 million in 2007 from $5.9 million in 2006.

Liquidity and Capital Resources

Our assets are highly liquid, consisting generally of cash, money market funds, U.S. Treasury Bills and securities freely saleable in the open market. Our total assets at December 31, 2008 were $46 million, of which we regarded $31.3 million, or 69%, as highly liquid.

Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At December 31, 2008, Siebert's regulatory net capital was $25.6 million, which was $25.3 million in excess of its minimum capital requirement of $250,000.

Below is a table that presents our obligations and commitments at December 31, 2008:

                                                         Payment Due By Period
                                                Less Than                                   More Than
Contractual Obligations             Total         1 Year      1-3 Years      3-5 Years     Five Years
Operating lease obligations      $ 1,851,000    $  902,000    $  949,000      $       0      $       0