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 have 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, 2015, the results of operations for the three and nine months ended September 30, 2015 and 2014, and cash flows for the nine month periods ended September 30, 2015 and 2014. 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, 2014.

There have been no significant changes in significant accounting policies during the nine months ended September 30, 2015 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Cash and Cash Equivalents

Cash and cash equivalents includes $401,634 and $435,268 at September 30, 2015 and December 31, 2014, respectively, primarily invested in SEI-sponsored open-ended money market mutual funds. The SEI-sponsored mutual funds are Level 1 assets.

Restricted Cash

Restricted cash includes $5,000 at September 30, 2015 and December 31, 2014 segregated for regulatory purposes related to trade-execution services conducted by SEI Investments (Europe) Limited. Restricted cash also includes $500 at September 30, 2015 and December 31, 2014, 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 $22,508 and $26,193 of software development costs during the nine months ended September 30, 2015 and 2014, respectively. The Company's software development costs primarily relate to the continued development of the SEI Wealth Platform^SM(the Platform). The Company capitalized $19,344 and $26,193 of software development costs for significant enhancements to the Platform during the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015, the net book value of the Platform was $291,216. The Platform has an estimated useful life of 15 years and a weighted average remaining life of 6.8 years. Amortization expense for the Platform was $31,635 and $28,345 during the nine months ended September 30, 2015 and 2014, respectively. The remaining amount of the Company's software development costs capitalized during the nine months ended September 30, 2015 is related to a project within the Investment Managers segment.

During the three months ended September 30, 2015, the Company determined that specific functionality within the Platform is no longer in use and wrote off $5,533 of previously capitalized software development costs reported under the Private Banks and Investment Advisors business segments. The expense associated with the write off is included in Facilities, supplies and other costs on the accompanying Consolidated Statement of Operations.

Earnings per Share

The calculations of basic and diluted earnings per share for the three months ended September 30, 2015 and 2014 are:



	For the Three Months Ended September 30, 2015
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	79,425	165,579,000	$	0.48
Dilutive effect of stock options	—		3,676,000
Diluted earnings per common share	$	79,425	169,255,000	$	0.47



	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

Employee stock options to purchase 9,938,000 and 4,411,000 shares of common stock, with an average exercise price of $30.02 and $32.38, were outstanding during the three months ended September 30, 2015 and 2014, respectively, but not included in the computation of diluted earnings per common share because either the performance conditions have not been satisfied or would have been satisfied if the reporting date was the end of the contingency period or the option’s exercise price was greater than the average market price of the Company’s common stock and 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, 2015 and 2014 are:



	For the Nine Months Ended September 30, 2015
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	250,276	166,142,000	$	1.51
Dilutive effect of stock options	—		3,835,000
Diluted earnings per common share	$	250,276	169,977,000	$	1.47



	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

Employee stock options to purchase 9,999,000 and 4,416,000 shares of common stock, with an average exercise price of $30.02 and $32.37, were outstanding during the nine months ended September 30, 2015 and 2014, respectively, but not included in the computation of diluted earnings per common share because either the performance conditions have not been satisfied or would have been satisfied if the reporting date was the end of the contingency period or the option’s exercise price was greater than the average market price of the Company’s common stock and 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:



	2015			2014
Net income	$	250,276		$	241,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	17,946			16,494
Amortization	31,806			28,611
Equity in earnings of unconsolidated affiliates	(104,917		)	(104,080		)
Distributions received from unconsolidated affiliate	116,913			103,592
Stock-based compensation	11,476			9,481
Provision for losses on receivables	(196		)	387
Deferred income tax expense	(4,942		)	4,768
Gain from sale of SEI AK	(2,791		)	(5,582		)
Net loss (gain) from investments	544			(49		)
Change in other long-term liabilities	1,926			2,663
Change in other assets	(706		)	(2,769		)
Write off of capitalized and purchased software	6,055			—
Other	(2,364		)	(1,242		)
Change in current asset and liabilities
Decrease (increase) in
Receivables from regulated investment companies	2,601			(7,169		)
Receivables	(23,081		)	(24,951		)
Other current assets	(11,013		)	(4,862		)
Increase (decrease) in
Accounts payable	(5,950		)	(9,723		)
Accrued liabilities	(11,808		)	(1,988		)
Deferred revenue	2,708			(879		)
Total adjustments	24,207			2,702
Net cash provided by operating activities	$	274,483		$	244,318

New Accounting Pronouncements

In May 2015, the Financial Accounting Standards Board (FASB) issued new guidance that eliminates the current requirement to categorize within the fair value hierarchy investments with fair values measured at NAV using the practical expedient in Accounting Standards Codification 820, Fair Value Measurement (ASC 820). The new guidance will require entities to disclose the fair values of such investments as a reconciling item between the amounts reported on the balance sheets and the amounts reported in the fair value hierarchy table. Entities will be required to continue to disclose information describing the nature and risks of the investments measured using the NAV practical expedient. The new disclosures are required for the Company beginning on January 1, 2016. Early adoption is permitted. The new guidance only impacts footnote disclosures and will have no impact on the Company's financial statements.

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. ASU 2014-09 currently becomes effective for the Company during the first quarter 2018. 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.

On February 18, 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis (ASU 2015-02). The new guidance applies to entities in all industries and provides a new scope exception to registered money market funds and similar unregistered money market funds. It makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the VIE guidance. ASU 2015-02 becomes effective for the Company during the first quarter 2016. The Company is currently evaluating the standard but does not believe that the standard will have any effect on its consolidated financial statements and related disclosures.

Reclassifications

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