Summary of Significant Accounting Policies

Nature of Operations

SEI Investments Company (the Company), a Pennsylvania corporation, provides investment processing, investment management, and investment operations solutions to financial institutions, financial advisors, institutional investors, investment managers and ultra-high-net-worth families in the United States, Canada, the United Kingdom, continental Europe and various other locations throughout the world. Investment processing solutions consist of application and business process outsourcing services, professional services and transaction-based services. Revenues from investment processing solutions are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations, except for fees earned associated with trade execution services which are recognized in Transaction-based and trade execution fees.

Investment management programs consist of mutual funds, alternative investments and separate accounts. These include a series of money market, equity, fixed-income and alternative investment portfolios, primarily in the form of registered investment companies. The Company serves as the administrator and investment advisor for many of these products. Revenues from investment management programs are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment operations solutions offer investment managers support for traditional investment products such as mutual funds, collective investment trusts, exchange-traded funds, and institutional and separate accounts, by providing outsourcing services including fund and investment accounting, administration, reconciliation, investor servicing and client reporting. These solutions also provide support to managers focused on alternative investments who manage hedge funds, funds of hedge funds, private equity funds and real estate funds, across registered, partnership and separate account structures domiciled in the United States and overseas. Revenues from investment operations solutions are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain financial information and accompanying note disclosure normally included in the Company’s Annual Report on Form 10-K has been condensed or omitted. The interim financial information is unaudited but reflects all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of financial position of the Company as of September 30, 2014, the results of operations for the three and nine months ended September 30, 2014 and 2013, and cash flows for the nine month periods ended September 30, 2014 and 2013. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

There have been no significant changes in significant accounting policies during the nine months ended September 30, 2014 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Cash and Cash Equivalents

Cash and cash equivalents includes $374,292 and $387,201 at September 30, 2014 and December 31, 2013, respectively, primarily invested in SEI-sponsored open-ended money market mutual funds. The SEI-sponsored mutual funds are considered Level 1 assets.

Restricted Cash

Restricted cash includes $5,000 at September 30, 2014 and December 31, 2013 segregated for regulatory purposes related to trade-execution services conducted by SEI Investments (Europe) Limited. Restricted cash also includes $500 at September 30, 2014 and December 31, 2013, respectively, segregated in special reserve accounts for the benefit of customers of the Company’s broker-dealer subsidiary, SEI Investments Distribution Co. (SIDCO), in accordance with certain rules established by the Securities and Exchange Commission for broker-dealers.

Capitalized Software

The Company capitalized $26,193 and $31,044 of software development costs for the continued development of the SEI Wealth Platform^SM(the Platform) during the nine months ended September 30, 2014 and 2013, respectively. Included in the amount for 2013 is a one-time contractual payment of $8,812 to exercise a conversion option in lieu of periodic fee payments pertaining to a software license for the Platform. As of September 30, 2014, the net book value of the Platform was $310,368. The Platform has an estimated useful life of 15 years and a weighted average remaining life of 7.8 years. Amortization expense for the Platform was $28,345 and $25,046 during the nine months ended September 30, 2014 and 2013, respectively.

Earnings per Share

The calculations of basic and diluted earnings per share for the three months ended September 30, 2014 and 2013 are:



	For the Three Months Ended September 30, 2014
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	83,983	167,925,000	$	0.50
Dilutive effect of stock options	—		4,980,000
Diluted earnings per common share	$	83,983	172,905,000	$	0.49



	For the Three Months Ended September 30, 2013
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	67,195	171,308,000	$	0.39
Dilutive effect of stock options	—		4,735,000
Diluted earnings per common share	$	67,195	176,043,000	$	0.38

Employee stock options to purchase 4,411,000 and 3,042,000 shares of common stock, with an average exercise price of $32.38 and $31.39, were outstanding during the three months ended September 30, 2014 and 2013, respectively, but not included in the computation of diluted earnings per common share because the effect on diluted earnings per common share would have been anti-dilutive.

The calculations of basic and diluted earnings per share for the nine months ended September 30, 2014 and 2013 are:



	For the Nine Months Ended September 30, 2014
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	241,616	168,612,000	$	1.43
Dilutive effect of stock options	—		5,088,000
Diluted earnings per common share	$	241,616	173,700,000	$	1.39



	For the Nine Months Ended September 30, 2013
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	222,609	172,043,000	$	1.29
Dilutive effect of stock options	—		3,993,000
Diluted earnings per common share	$	222,609	176,036,000	$	1.26

Employee stock options to purchase 4,416,000 and 5,522,000 shares of common stock, with an average exercise price of $32.37 and $29.22, were outstanding during the nine months ended September 30, 2014 and 2013, respectively, but not included in the computation of diluted earnings per common share because the effect on diluted earnings per common share would have been anti-dilutive.

Statements of Cash Flows

For purposes of the Consolidated Statements of Cash Flows, the Company considers investment instruments purchased with an original maturity of three months or less to be cash equivalents.

The following table provides the details of the adjustments to reconcile net income to net cash provided by operating activities for the nine months ended September 30:



	2014			2013
Net income	$	241,616		$	222,959
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	16,494			17,050
Amortization	28,611			25,498
Equity in earnings of unconsolidated affiliates	(104,080		)	(86,204		)
Distributions received from unconsolidated affiliate	103,592			109,173
Stock-based compensation	9,481			26,997
Provision for losses on receivables	387			(180		)
Deferred income tax expense	4,768			(21,443		)
Gain from sale of SEI AK	(5,582		)	(22,112		)
Net gain from investments	(49		)	(638		)
Change in other long-term liabilities	2,663			1,671
Change in other assets	(2,769		)	80
Other	(4,665		)	(4,199		)
Change in current asset and liabilities
Decrease (increase) in
Restricted cash for broker-dealer operations	—			500
Receivables from regulated investment companies	(7,169		)	(8,495		)
Receivables	(24,951		)	(17,255		)
Other current assets	(4,862		)	(1,208		)
Increase (decrease) in
Accounts payable	(9,723		)	(3,960		)
Accrued liabilities	(1,988		)	3,149
Deferred revenue	(879		)	(1,088		)
Total adjustments	(721		)	17,336
Net cash provided by operating activities	$	240,895		$	240,295

New Accounting Pronouncements

On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updated standard permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. ASU 2014-09 becomes effective for the Company during the first quarter 2017. The Company is currently evaluating the transition method that will be elected and the effect that the updated standard will have on its consolidated financial statements and related disclosures.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.