FORM 10-K/A GAMCO Investors, Inc. - Gabelli

No prediction can be made as to the effect, if any, that future sales or distributions of class B common stock owned by GGCP will have on the market price of the class A common
stock prevailing from time to time. Sales or distributions of substantial amounts of class A or class B common stock , or the perception that such sales or distributions could occur,
could adversely affect the prevailing market price for the class A common stock.
We reported two material weaknesses in our internal controls over financial reporting in 2006. Failure to properly remediate these material weaknesses could
negatively impact our business and the price of our common stock.
We concluded that these material weaknesses existed in our internal control over financial reporting. First, there was a material weakness relating to the reporting of individual
assets and liabilities of certain proprietary investment accounts in the consolidated financial statements. Next, there was a material weakness relating to the evaluation of and
accounting for certain non-routine transactions in accordance with U.S. generally accepted accounting principles.
We have remediated the first material weakness by implementing a new procedure to review the accounting treatment for all of the Company’s proprietary investments on a regular
basis and are in the process of remediating the second material weakness.
We cannot assure you that our disclosure controls, procedures and internal controls over financial reporting required under Section 404 of the Sarbanes-Oxley Act will prove to be
adequate in the future. Our failure to properly remediate these material weaknesses could negatively impact our business and the price of our common stock.
ITEM 1B: UNRESOLVED STAFF COMMENTS
None.
ITEM 2: PROPERTIES
At December 31, 2006, we leased our principal offices which consisted of a single 60,000 square foot building located at 401 Theodore Fremd Avenue, Rye, New York. This
building was leased in December 1997 (prior to our 1999 IPO) from an entity controlled by members of Mr. Gabelli's immediate family, and approximately 9,000 square feet are
currently subleased to other tenants. We receive rental payments under the sublease agreements, which totaled approximately $261,000 in 2006 and were used to offset operating
expenses incurred for the property. The lease provides that all operating expenses related to the property, which are estimated at $740,000 annually, are to be paid by us.
We have also entered into leases for office space in both the U.S. and overseas principally for portfolio management, research, sales and marketing personnel. These offices are
generally less than 4,000 square feet and leased for periods of five years or less.
ITEM 3: LEGAL PROCEEDINGS
From time to time, we are a defendant in various lawsuits incidental to our business. We do not believe that the outcome of any current litigation will have a material effect on our
financial condition.
Since September 2003, we have been cooperating with inquiries from the NYAG and the SEC by providing documents and testimony regarding certain mutual fund share trading
practices. In June 2006, we began discussions with the SEC for a potential resolution of their inquiry. As a result of these discussions, GBL recorded a reserve against earnings of
approximately $15 million in 2006. Since these discussions are ongoing, we cannot determine at this time whether they will ultimately result in a settlement of this matter, whether
our reserves will be sufficient to cover any payments by GBL related to such a settlement, or whether and to what extent insurance may cover such payments.
ITEM 4:
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the fourth quarter of 2006.
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