UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.20549_____________  FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended December 31, 2010Commission File Number: 333-43664  INVESTORS CAPITAL HOLDINGS, LTD.(Exact name of registrant as specified in its charter) DELAWARE(State or other jurisdiction ofincorporation or organization)

   

   04-3284631(I.R.S. EmployerIdentification No.)230 Broadway E.Lynnfield, Massachusetts01940(Address of principal executive offices)(781) 593-8565(Registrant's telephone number, including area code)
  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 [ X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). Large accelerated filer [ ]                                     Accelerated filer [ ] Non-accelerated filer [ ]                              Smaller reporting company [X](Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
 There were 6,615,122 shares outstanding of the issuer’s common stock, par value $.01 per share, as of February 07, 2011.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




Table of Contents PART I --------------------------------------------------------------------------------FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSISITEM 4. CONTROLS AND PROCEDURES PART II --------------------------------------------------------------------------------OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 6. EXHIBITSSIGNATURES --------------------------------------------------------------------------------


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




PART I FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSINVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)December 31, 2010

   

   March 31, 2010AssetsCurrent AssetsCash and cash equivalents

   $                         5,084,390

   

   $                         5,812,865Deposit with clearing organization, restricted

   175,000

   

   175,000Accounts receivable

   6,333,753

   

   6,042,188Note receivable - (current)

   108,465

   

   140,598Loans receivable from registered representatives (current), net of allowance

   1,138,383

   

   769,263Prepaid income taxes

   364,026

   

   559,007Securities owned at fair value

   2,753

   

   57,933Investments

   50,000

   

   50,000Prepaid expenses

   641,632

   

   957,67413,898,402

   

   14,564,528Property and equipment, net

   675,302

   

   774,182Long Term InvestmentsLoans receivable from registered representatives

   247,356

   

   292,884Note receivable

   495,000

   

   595,000Investments

   206,475

   

   184,319Non-qualified deferred compensation investment

   1,003,504

   

   929,897Cash surrender value life insurance policies

   655,047

   

   551,3982,607,382

   

   2,553,498Other AssetsOther assets

   56,543

   

   25,069Deferred tax asset, net

   958,693

   

   838,773Capitalized software, net

   102,925

   

   138,4971,118,161

   

   1,002,339TOTAL ASSETS

   $                    18,299,247

   

   $                    18,894,547Liabilities and Stockholders' EquityCurrent LiabilitiesAccounts payable

   $                         1,227,145

   

   $                            817,761Accrued expenses

   1,553,133

   

   2,358,656Commissions payable

   2,703,163

   

   3,488,415Notes payable

   50,784

   

   1,130,922Unearned revenues

   1,655,431

   

   101,931Securities sold, not yet purchased, at fair value

   -

   

   5,6937,189,656

   

   7,903,378Long-Term LiabilitiesNon-qualified deferred compensation plan

   1,065,634

   

   793,7351,065,634

   

   793,735Total liabilities

   8,255,290

   

   8,697,113Stockholders' Equity:Common stock, $.01 par value, 10,000,000 shares authorized;6,619,748 issued and 6,615,863 outstanding at December 31, 2010;6,595,804 issued and 6,591,919 outstanding at March 31, 2010

   66,197

   

   65,958Additional paid-in capital

   12,231,361

   

   12,095,862Accumulated deficit

   (2,272,882)

   

   (1,964,084)Less: Treasury stock, 3,885 shares at cost

   (30,135)

   

   (30,135)Accumulated other comprehensive income

   49,416

   

   29,833Total stockholders' equity

   10,043,957

   

   10,197,434TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

   $                    18,299,247

   

   $                    18,894,547See Notes to Condensed Consolidated Financial Statements.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




**INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES****CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS****THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009 (UNAUDITED)**2010

   

   2009Revenue:Commissions

   $                       17,469,594

   

   $                       17,170,742Advisory fees

   3,266,812

   

   3,159,770Other fee income

   528,451

   

   514,064Other revenue

   161,400

   

   206,453Total revenue

   21,426,257

   

   21,051,029Expenses:Commissions and advisory fees

   16,600,763

   

   15,998,733Compensation and benefits

   2,157,884

   

   1,820,196Regulatory, legal and professional services

   549,546

   

   579,701Brokerage, clearing and exchange fees

   481,837

   

   778,837Technology and communications

   311,178

   

   287,270Marketing and promotion

   406,945

   

   296,180Occupancy and equipment

   232,802

   

   202,643Other administrative

   366,757

   

   370,018Interest

   3,472

   

   1,536Total operating expenses

   21,111,184

   

   20,335,114Operating income

   315,073

   

   715,915(Benefit) povision for income taxes

   (30,601)

   

   287,857Net income

   $                            345,674

   

   $                            428,058Basic net income per share

   $                                  0.05

   

   $                                  0.07Diluted net income per share

   $                                  0.05

   

   $                                  0.07Basic dividends per common share

   $                                        -

   

   $                                        -Shares used in basic per share calculations

   6,566,542

   

   6,514,017Shares used in diluted per share calculations

   6,704,651

   

   6,514,017*See Notes to Condensed Consolidated Financial Statements*


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSNINE MONTHS ENDED DECEMBER 31, 2010 AND 2009 (UNAUDITED)2010

   

   2009Revenue:Commissions

   $                       51,180,144

   

   $                       48,241,478Advisory fees

   9,771,954

   

   8,463,511Other fee income

   861,998

   

   762,402Other revenue

   984,697

   

   1,134,273Total revenue

   62,798,793

   

   58,601,664Expenses:Commissions and advisory fees

   49,223,674

   

   44,725,026Compensation and benefits

   6,206,962

   

   5,309,706Regulatory, legal and professional services

   2,669,855

   

   1,731,934Brokerage, clearing and exchange fees

   1,570,861

   

   2,131,287Technology and communications

   914,590

   

   828,829Marketing and promotion

   1,043,976

   

   769,988Occupancy and equipment

   688,643

   

   642,351Other administrative

   807,661

   

   1,009,440Interest

   14,587

   

   18,150Total operating expenses

   63,140,809

   

   57,166,711Operating (loss) income

   (342,016)

   

   1,434,953(Benefit) provision for income taxes

   (33,218)

   

   748,661Net (loss) income

   $                         (308,798)

   

   $                            686,292Basic and diluted (loss) net income per share

   $                               (0.05)

   

   $                                  0.11Basic dividends per common share

   $                                        -

   

   $                                        -Shares used in basic and diluted per share calculations

   6,525,347

   

   6,497,885See Notes to Condensed Consolidated Financial Statements


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010


INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSNINE MONTHS ENDED DECEMBER 31, 2010 AND 2009 (UNAUDITED)2010

   

   2009Cash flows from operating activities:Net (loss) income

   $                         (308,798)

   

   $                            686,292Adjustments to reconcile net (loss) income  to net cashprovided by operating activities:Depreciation and amortization

   315,667

   

   261,330Valuation allowance income taxes

   -

   

   24,008Deferred taxes

   (119,920)

   

   228,440Stock-based compensation

   135,737

   

   191,449Unrealized loss in marketable securities

   1,061

   

   748Non-qualified deferred compensation investment

   23,374

   

   16,366Loss on disposal of equipment

   -

   

   1,199Market adjustment cash surrender value life insurance policy

   (12,985)

   

   (31,365)Charge to commission expense (forgivable loans)

   232,495

   

   98,684Registerred representative loans written off

   -

   

   (126,311)Allowance for doubtful accounts on loans receivable, net of recovery

   20,733

   

   76,710Change in operating assets and liabilities:Accounts receivable

   (291,565)

   

   (511,783)Prepaid expenses and other

   454,292

   

   272,579Loans receivable from registered representatives

   (576,820)

   

   (76,628)Income taxes

   194,981

   

   570,175Accounts receivable-Fidelity Bond

   -

   

   956,223Accounts payable

   409,384

   

   (1,400,494)Securities, net

   48,426

   

   74,555Accrued expenses

   (805,523)

   

   (1,507,522)Commissions payable

   (785,252)

   

   (423,608)Unearned revenues

   1,553,500

   

   1,405,879Net cash provided by operating activities

   488,787

   

   786,926Cash flows from investing activities:Acquisition of property and equipment

   (176,020)

   

   (69,961)Cash surrender value life insurance policies

   (90,664)

   

   (90,664)Payment on note receivable

   132,133

   

   (141)Purchase of investments

   (2,573)

   

   (53,264)Capital expenditures

   -

   

   (130,781)Net cash used in investing activities

   (137,124)

   

   (344,811)Cash flows from financing activities:Payments on note payable

   (1,080,138)

   

   (1,044,805)Net cash used in financing activities

   (1,080,138)

   

   (1,044,805)Net decrease in cash and cash equivalents

   (728,475)

   

   (602,690)Cash and cash equivalents, beginning of period

   5,812,865

   

   6,151,613Cash and cash equivalents, end of period

   $                         5,084,390

   

   $                         5,548,923Supplemental disclosures of cash flow information:Interest paid

   $                              14,587

   

   $                              18,150Income taxes paid

   $                              37,000

   

   $                            140,094See Notes to Condensed Consolidated Financial Statements.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010
  INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2010(UNAUDITED) NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Incorporated in 1995 under Massachusetts law and redomesticated under Delaware law in November 2007, Investors Capital Holdings, Ltd. ("ICH") is a holding company whose wholly-owned subsidiaries assist a nationwide network of independent registered representatives ("representatives") in providing a diversified line of financial services to the public including securities brokerage, investment advice, asset management, financial planning and insurance. Our subsidiaries include the following: Investors Capital Corporation ("ICC") is duly registered under the Securities Exchange Act of 1934, the Investment Advisers Act of 1940 and applicable state law to provide broker-dealer and investment advisory services nationwide. ICC’s national network of independent financial representatives is licensed to provide these services through ICC under the regulatory purview of the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”) and state securities regulators. ICC executes and clears its public customer accounts on a fully disclosed basis through Pershing, LLC. (“Pershing”). ICC, doing business as Investors Capital Advisors (“ICA”), also provides investment advisory services.ICC Insurance Agency, Inc. facilitates the sale of insurance and annuities by our representatives.Investors Capital Holdings Securities Corporation ("ICH Securities") holds cash, cash equivalents, interest income and dividend income for ICH. INTERIM FINANCIAL REPORTING: The accompanying interim unaudited condensed consolidated financial statements of Investors Capital Holdings, Ltd. and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all of the adjustments necessary for a fair presentation of the results of the interim periods presented. Operating results for the three and nine month periods ended December 31, 2010 are not necessarily indicative of the results that may be expected for the year ending March 31, 2011. The balance sheet at March 31, 2010 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended March 31, 2010 filed with the SEC. USE OF ESTIMATES AND ASSUMPTIONS: The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS: Certain amounts in 2009 were reclassified to provide comparison with 2010 classifications. These reclassifications had no effect on previously reported results of operations.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010



SIGNIFICANT ACCOUNTING POLICIES:  Revenue recognition The Company’s revenue recognition policies are summarized below. Mutual Funds/Variable Annuities.Revenue from the sale of mutual funds and variable annuities is recognized as of the date the check and application is accepted by the investment company. Brokerage.The Company earns commissions through stock purchase and sale transactions, mutual fund purchases, government and corporate bonds transactions, fee-based managed accounts and ticket charges. The Company also earns revenue in the form of 12b-1 fees and interest on account balances. The earnings process is substantially complete at trade date in accordance with the rules of FINRA and the SEC. The Company also receives credit for clearing charge adjustments that are netted against any clearing charges the Company may incur for the period. These adjustments are recognized as income in the period received unless otherwise noted by the clearing Company. Unrealized gains and losses are recorded at the time that the Company reconciles its trading positions with the market value. The unrealized gains or losses are adjusted to market until the position is settled or the trade is cancelled. Advisory Fees.Our managed accounts advisory fees are based on the amount of assets managed per agreement negotiated between our independent representatives and their clients. These revenues are recorded quarterly as and when billed based on the fair market value of assets managed throughout the quarter. Any portion remaining uncollected due to account adjustments after account rebalancing is charged against earnings at quarter end. Administration Fees.Administration fees for services rendered to the Company’s representatives with respect to annual FINRA license renewals and Error and Omissions (“E&O”) insurance are recognized as revenue upon registration of the representative with FINRA and listing of the registered representative with the E&O insurance carrier. The funds received from the registered representative are initially recorded as unearned revenue. The amounts collected in excess of the E & O insurance premium and/or fees due FINRA, if any, are recognized as revenue. Fees collected to maintain books and records are deferred and recognized ratably throughout the year. Other Revenue.Revenue from marketing associated with product sales is recognized quarterly based on production levels. Marketing event revenues are recognized at the commencement of each event offset by its costs. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limits for cash and cash equivalents not covered by the Depositors Insurance Fund of Massachusetts. Cash and cash equivalents held at our clearing broker-dealer are fully insured up to $500,000. Receivables Trade Receivables.Substantially all trade receivables reflect amounts due from our clearing broker. As prescribed by the SEC, trade receivables usually settle within three days. If a trade error results, the Company pursues remedies to collect on the trade error. The Company does not record a receivable resulting from a trade error that is in litigation or whose outcome is otherwise not reasonably determinable. In such a case, the Company applies any proceeds from settlements or insurance against any trade losses incurred.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010
   Loans to Representatives.Management performs periodic evaluations and provides an allowance based on the assessment of specifically identified unsecured receivables and other factors, including the representative's payment history and production levels. Once it is determined that it is both probable that a loan has been impaired, typically due to the termination of the relationship, and the amount of loss can reasonably be estimated, the portion of the loan balance estimated to be uncollectible is so classified. Loans charged to commission expense, upon the representative meeting their respective forgiveness target totaled $232,495 and $98,684 for the nine months ended December 31, 2010 and 2009. See “Note 6, Loans to Registered Representatives”. Internal Use Software Cost incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Training costs are expensed as incurred. Internal use software is amortized on a straight-line basis over its estimated useful life, generally three years. Income Taxes The Company uses the asset and liability method to account for income taxes, which requires recognition of deferred tax assets, subject to valuation allowances, and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income or loss in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company had previously recorded a valuation allowance against certain deferred tax assets. Management continues to believe it is more likely than not that the remaining deferred tax assets will be realized. The Company reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. Reserves related to uncertain tax positions are based on a determination of whether and how much of a tax benefit taken in our tax filings or positions is more likely than not to be realized, assuming that the matter in question will be raised by the tax authorities. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense. We believe appropriate provisions for outstanding issues have been made. **Subsequent Events**

The Company performed a review of events subsequent to the balance sheet date through the date the financial statements were issued and determined that there were no such material events requiring disclosure in the financial statements. NOTE 2 - SEGMENT INFORMATION Operating segments are defined as components of a business about which separate financial information of the segment is available that is regularly evaluated by management in deciding how to allocate resources and in assessing performance. The Company evaluates performance based on profit and loss from operations before income taxes not including nonrecurring gains and losses. The Company's reportable operating segments are (i) broker/dealer and related services offered through ICC and (ii) investment advisory services offered through ICC, doing business as ICA. The segments are strategic business units that are managed separately. They operate under different regulatory systems, provide different services and require distinct marketing strategies and varied technological and operational support. They also have differing revenue models; ICC earns transactional commissions and various fees in connection with the brokerage of securities for its customers, whereas ICA generates recurring revenue from fees that are based on the value of assets under management. The Company accounts for inter-segment services and transfers as if the services or transfers were to third parties, that is, at current market prices. In presenting segment data, all corporate overhead items are allocated to the segments, and inter-segment revenue, expense, receivables and payables are eliminated. Currently it is impractical to report segment information using geographical concentration.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




Assets are allocated among ICH and its subsidiaries based upon legal ownership and the services provided. Total period-end assets are presented on a stand-alone basis, i.e., without inter-company eliminations. The Company does not allocate income taxes or unusual items to segments. Corporate items and eliminations are presented in the following table for the purpose of reconciling the stand-alone asset amounts to total consolidated assets. The Company has an expense sharing agreement where management allocates all expenses separately to the parent and ICC, including allocation of costs associated with shared personnel, based upon time studies and a determination of which entities are the beneficiaries of the services rendered by the personnel. Within ICC, expenses are further allocated between the two segments, ICC and ICA as follows: overhead expenses pro rata to revenue, direct full-time and time-shared employee costs based on the segments being served, and other personnel-related expenses pro rata to head count. ICC reimburses ICH in the form of a management fee, “The Management Fee Agreement”, for ICH-incurred overhead expenses that are necessary for ICC to effectively conduct its operations. This overhead primarily is in the nature of salaries and professional and legal fees incurred to obtain such services as audit engagements, legal advice, and industry expertise. The Company in reviewing its net capital requirement will assess the ongoing risk these agreements may have on the firm’s net capital. Segment reporting is as follows:


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




Segment reporting is as follows for the quarter ended:December 31,**2010**

   

   2009Non-interest revenues:ICC brokerage services

   $                       18,064,481

   

   $                       17,757,250ICA asset management services

   3,294,422

   

   3,217,189ICH loss on investment

   (10,994)

   

   (9,005)Total

   21,347,909

   

   20,965,434Interest and dividend income, net:ICC

   $                              76,492

   

   $                              83,402ICH

   1,843

   

   2,180ICH Securities

   13

   

   13Total

   78,348

   

   $                              85,595Depreciation and amortization expenses:ICC brokerage services

   $                            106,310

   

   $                              84,863ICA asset management services

   1,167

   

   1,167Total

   107,477

   

   $                              86,030Operating income (loss):ICC brokerage services

   $                            153,375

   

   $                            488,676ICA asset management services

   270,865

   

   336,727ICH

   (109,180)

   

   (109,501)ICH Securities

   13

   

   13Total

   $                            315,073

   

   $                            715,915Period end total assets:ICC brokerage services

   $                       15,358,571

   

   $                       14,317,172ICA asset management services

   1,296,301

   

   1,223,954ICH

   2,551,460

   

   3,003,951ICH Securities

   10,277

   

   10,226Corporate items and eliminations

   (917,362)

   

   (1,451,228)Total

   $                       18,299,247

   

   $                       17,104,075Corporate items and eliminations:Inter-company eliminations

   $                          (759,631)

   

   $                         (831,458)Income taxes

   (157,731)

   

   (619,770)Total

   $                          (917,362)

   

   $                      (1,451,228)


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




Segment reporting is as follows for the nine months ended:December 31,2010

   

   2009Non-interest revenues:ICC brokerage services

   $                       52,687,838

   

   $                       49,683,146ICA asset management services

   9,880,735

   

   8,645,775ICH loss on investment

   (32,857)

   

   (18,365)Total

   $                       62,535,716

   

   $                       58,310,556Interest and dividend income, net:ICC

   $                            260,288

   

   $                            284,058ICH

   2,750

   

   7,012ICH Securities

   39

   

   38Total

   $                            263,077

   

   $                            291,108Depreciation and amortization expenses:ICC brokerage services

   $                            314,500

   

   $                            257,830ICA asset management services

   1,167

   

   3,500Total

   $                            315,667

   

   $                            261,330Operating income (loss):ICC brokerage services

   $                         (932,595)

   

   $                         1,448,985ICA asset management services

   892,007

   

   807,323ICH

   (301,467)

   

   (821,393)ICH Securities

   39

   

   38Total

   $                         (342,016)

   

   $                         1,434,953Period end total assets:ICC brokerage services

   $                       15,358,571

   

   $                       14,317,172ICA asset management services

   1,296,301

   

   1,223,954ICH

   2,551,460

   

   3,003,951ICH Securities

   10,277

   

   10,226Corporate items and eliminations

   (917,362)

   

   (1,451,228)Total

   $                       18,299,247

   

   $                       17,104,075


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




NOTE 3 - LITIGATION AND REGULATORY MATTERS In the ordinary course of business, the Company and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including arbitrations, brought on behalf of various claimants, some of which seek material and/or indeterminable amounts. Certain of these actions and proceedings are based on alleged violations of consumer protection, securities and other laws and may involve claims for substantial monetary damages asserted against the Company and its subsidiaries. Also, the Company and its subsidiaries are subject to regulatory examinations, information gathering requests, inquiries, investigations and administrative proceedings that may result in fines or other negative impact on the Company. ICC, as a dually registered broker/dealer and investment advisor, is subject to regulation by the SEC, FINRA, NYSE Amex and state securities regulators. The Company maintains Errors and Omissions ("E&O") insurance to protect itself from potential damages and/or legal costs associated with certain litigation and arbitration proceedings and, as a result, in the majority of cases the Company’s exposure is limited to $100,000 in any one case, subject to policy limitations and exclusions. The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company’s exposure is usually limited to $350,000 deductible per case, subject to policy limitations and exclusions. When there is indemnification or insurance, the Company may engage in defense or settlement and subsequently seek reimbursement for such matters. The Company had accrued liabilities of $1,500,000 and $765,000 as of December 31, 2010 and March 31, 2010, respectively, related to legal fees and estimated probable settlement costs relating to the Company’s defense in various lawsuits. Some of the legal and regulatory matters could require the Company to pay damages or make other expenditures or establish reserves for amounts that could not be reasonably estimated and which could exceed those accrued as of December 31, 2010. NOTE 4 - STOCK BASED COMPENSATION The Company measures and recognizes compensation expense for all share-based awards made to representatives, officers, employees and directors based on estimated fair values. Under the modified prospective transition method selected by the Company, all equity-based awards granted to employees and modifications of existing awards are accounted for at fair value with compensation expense recorded as a component of net (loss) income. The Company periodically issues common stock to employees, directors, officers, representatives and other key individuals in accordance with the provisions of the shareholder approved equity compensation plans. Stock Awards Shares of stock granted under Company’s equity incentive plans (the “Equity Plans”) as of December 31, 2010 have been either fully vested at date of grant or subject to vesting over time periods varying from one to five years after the date of grant, unvested shares being subject to forfeiture in the event of termination of the grantee’s relationship with the Company, other than for death or disability. The compensation cost associated with these stock grants is recognized over the vesting period of the shares and is calculated as the market value of the shares on the date of grant. Stock grants have been recorded as deferred compensation, which is a component of paid-in capital within stockholders’ equity on the Company’s Consolidated Balance Sheets.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010


























































































































































































































































































































































































































































































































































































The following activity occurred during the three months ended December 31, 2010:


Weighted Ave

   Weighted AverageShares

   Stock Price

   Vested Life

   Fair Value $Non-vested at October 1, 2010

   67,456

   $                        3.73

   1.47 years

   $                  251,611Granted

   -

   $                              -

   

   -Vested

   (14,812)

   $                        3.74

   

   (55,397)Canceled

   (5,268)

   $                        3.77

   

   (19,860)Non-vested at December 31, 2010

   47,376

   $                        3.74

   2.00 years

   $                  177,186
  The following activity occurred during the nine months ended December 31, 2010: Weighted Ave

   Weighted AverageShares

   Stock Price

   Vested Life

   Fair Value $Non-vested at April 1, 2010

   62,863

   $                        3.50

   

   $                  220,021Granted

   30,000

   $                        4.13

   

   123,900Vested

   (39,430)

   $                        3.69

   

   (145,497)Canceled

   (6,057)

   $                        3.58

   

   (21,684)Non-vested at December 31, 2010

   47,376

   $                        3.74

   2.00 years

   $                  177,186
  The Company’s net loss for the three months ended December 31, 2010 includes $27,146 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $20,216 for grants to independent representatives, under the Plan. The Company’s net income for the three months ended December 31, 2009 includes $33,635 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $34,443 for grants to independent representatives, under the Equity Plans. The Company’s net loss for the nine months ended December 31, 2010 includes $81,727 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $54,010 for grants to independent representatives, under the Plan. The Company’s net income for the nine months ended December 31, 2009 includes $96,544 of compensation costs related to the Company’s grants of restricted stock to executives and employees and $94,905 for grants to independent representatives, under the Equity Plans. As of December 31, 2010 there was $215,615 of unrecognized compensation cost related to grants under the Equity Plans.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




Stock Option Grants The following table summarizes information regarding the Company's employee and director fixed stock options as of December 31, 2010 and, 2009: Employees , Director and Officers

   2010

   2009Fixed Options

   

   Weighted-Average

   

   Weighted-AverageShares

   Exercise Price

   Shares

   Exercise PriceOutstanding at beginning of year

   150,000

   $1.00

   150,000

   $1.00Granted

   -

   

   -Forfeited

   -

   

   -Exercised

   -

   

   -Reclassified(non-employee)

   -

   

   -Outstanding at quarter end

   150,000

   $1.00

   150,000

   $1.00Options exercisable at quarter-end

   150,000

   

   150,000Weighted-average fair value ofoptions granted during the year

   -

   

   -
  The following table summarizes further information about employee and Directors' fixed stock options outstanding as of December 31, 2010: Options Outstanding

   

   

   Options ExercisableWeighted-AverageRange Of

   Number

   

   Remaining

   

   Number

   Weighted-AverageExercise Prices

   Outstanding

   

   Contractual Life

   Exercise Price

   Exercisable

   Exercise Price$1.00

   150,000

   

   No Stated Maturity

   $1.00

   150,000

   $1.00
  NOTE 5 - NOTE RECEIVABLE On October 24, 2005, the Company entered into an agreement (the “Transition Agreement”) with Dividend Growth Advisors, LLC (“DGA”). The Company agreed to terminate its Investment Advisory Agreement with Eastern Point Advisors Funds Trust (the “Trust”) effective October 18, 2005 and to permit the appointment by the Trust of DGA to succeed the Company as the Trust’s investment advisor. Under the terms of the Transition Agreement and an associated promissory note (the “Note”), the receivable owed by the Funds to the Company was assigned to DGA and DGA agreed to pay the Company an amount equal to the total of all fees that the Company had waived or remitted to a fund in the Trust through October 18, 2005. The Note provides for a principal amount of $747,617, quarterly payments of interest accruing thereon at 5.5% and a full payment on or before October 31, 2010. The terms of this note were modified, effective March 3, 2010. Specifically, the maturity was extended for four years to October 31, 2014. Total outstanding as of December 31, 2010 and March 31, 2010 was $603,465 and $735,598, respectively. Prepayments are permitted without penalty. The interest accrued on this note was $8,482 and $2,981, respectively, at December 31, 2010 and March 31, 2010.


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




NOTE 6 – LOANS TO REGISTERED REPRESENTATIVES ICC has granted loans to certain registered representatives with the stipulation that the loans will be forgiven if the representatives remain licensed with the Company for an agreed upon period of time, generally one to five years, and/or meet specified performance goals. Upon forgiveness, the loans are charged to commission expense for financial reporting purposes. Some loans to registered representatives are not subject to a forgiveness contingency. These loans, as well as loans that have failed the forgiveness contingency, are repaid to the Company by deducting a portion of the representatives’ commission payouts throughout the commission cycle until the loans are repaid. Interest charged on these loans to representatives range from 3% to 11.25% annually. Loans to registered representatives included in receivables from employees and registered representatives are as follows at December 31, 2010 and March 31, 2010. Loans to registered representatives are as follows: December 31,

   

   March 31,2010

   

   2010Loans to representativesForgiveable

   $          753,309

   

   $          854,005Other loans

   689,535

   

   244,514Less: allowance

   (57,105)

   

   (36,372)Total loans

   $       1,385,739

   

   $       1,062,147
  NOTE 7 – SHORT –TERM INVESTMENTS As of December 31, 2010, the Company owned investments classified as held to maturity through March 12, 2011. These investments are presented at face value as follows: Purchase Date

   Purchase Price

   Description

   Face Value

   Interest DateInsight Real Estate Series 2007-A12/1/2009

   $                   50,000

   Secured Debentures

   $            50,000

   Quarterly


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Investors Capital Holdings, Ltd. Report on form 10-QQuarter Ended December 31, 2010




NOTE 8 – FAIR VALUE MEASUREMENTS The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach are used to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: Level 1- Inputs are unadjusted quoted prices in active markets for identical assets or liabilities the Company have the ability to access.Level 2- Inputs are inputs (other than quoted prices included within Level 1) that are observable for the asset or liability, either directly or indirectly.Level 3- Inputs include unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability.(The unobservable inputs should be developed based on the best information available in the circumstances and may include the Company’s own data.) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following table presents the Company's fair value hierarchy for those financial assets and liabilities measured at fair value as of December 31, 2010 and March 31, 2010. Assets and Liabilities Measured at Fair Value on a Recurring Basis December 31, 2010 Fair Value Measurements of Reporting Date Using: Quotes Prices in

   SignificantActive Markets for

   Other

   SignificantTotal Fair Value of

   Identical Assets

   Observable

   UnobservableAsset or Liability

   (Level 1)

   Input (Level 2)

   Inputs (Level 3)Investments

   $                   206,475

   $                   206,475

   $                      -

   $                        -Mutual funds

   26,896

   26,896Securities owned at fair value

   2,753

   2,753

   -

   -Total assets

   $                236,124

   $                 236,124

   $                      -

   $                        -
  March 31, 2010 Fair Value Measurements of Reporting Date Using:Quotes Prices inActive Markets for

   Significant Other

   SignificantTotal Fair Value of

   Identical Assets

   Observable Input

   UnobservableAsset or Liability

   (Level 1)

   (Level 2)

   Inputs (Level 3)Investments

   $                   184,319

   $                   184,319

   $                             -

   $                        -Securities owned at fair value

   57,933

   57,933

   -

   -Total assets

   $                242,252

   $                242,252

   $                            -

   $                        -Securities sold, not yet purchased, at fair value

   $                      5,693

   $                      5,693

   $                            -

   $                        -Total liabilities

   $                    5,693

   $                     5,693

   $                            -

   $                        -


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010

NOTE 9 – NON-QUALIFIED DEFERRED COMPENSATION PLAN

Effective December 2007, the Company established the Investors Capital Holdings, Ltd. Deferred Compensation Plan (the “NQ Plan”) as well as a Rabbi Trust Agreement for this Plan. ICC is the NQ Plan’s sponsor. The unfunded NQ Plan enables eligible ICC’s Representatives to elect to defer a portion of earned commissions, as defined by the NQ Plan. The total amount of deferred compensation was $57,315 and $201,812 for the three and nine months ended December 31, 2010 and $62,563 and $221,921 respectively, for the three and nine months ended December 31, 2009.

NOTE 10 – LINE OF CREDIT

The Company has a line of credit (“Line”) with maximum borrowings of $1,000,000. The Line became effective on November 22, 2010, and is subject to annual renewal. The Line has not yet been utilized, therefore no balance is outstanding at December 31, 2010.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis reviews our consolidated financial condition as of December 31, 2010 and March 31, 2010, the consolidated results of operations for the three months and nine months ended December 31, 2010 and 2009 and, as appropriate, factors that may affect future financial performance. The discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. Unless context requires otherwise, as used in this Management’s Discussion and Analysis (i) the “current period” means the three or nine months ended December 31, 2010, (ii) the “prior period” means the three or nine months ended December 31, 2009, (iii) an increase or decrease compares the current period to the prior period, and (iv) all non-comparative amounts refer to the current period.

FORWARD-LOOKING STATEMENTS

The statements, analysis, and other information contained herein relating to trends in our operations and financial results, the markets for our products, the future development of our business, and the contingencies and uncertainties to which we may be subject, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," and other similar expressions, are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Such statements are made based upon management's current expectations and beliefs concerning future events and their effects on the Company and are subject to many risks and uncertainties. Our actual results may differ materially from the results anticipated in these forward-looking statements. Readers are directed to discussions of risks and uncertainties that may be found in this report and other documents filed by the Company with the United States Securities and Exchange Commission. We specifically disclaim any obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.

OVERVIEW

We are a financial services holding company that, through our subsidiaries, provides brokerage, investment advisory, insurance and related services. We operate in a highly regulated and competitive industry that is influenced by numerous external factors such as economic conditions, marketplace liquidity and volatility, monetary policy, global and national political events, regulatory developments, competition and investor preferences. Our revenues and net earnings may be either enhanced or diminished from period to period by these and other external factors.

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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  OUR BUSINESS We operate primarily through our subsidiary, ICC, as a broker-dealer and, doing business as ICA, as a registered investment advisor, with a national network of independent financial representatives. Broker-Dealer Services We provide broker-dealer services in support of trading and investment by our representatives’ customers in securities, including corporate equity and debt securities, U.S. Government securities, municipal securities, mutual funds, limited partnerships and other alternative investments, variable annuities and variable life insurance. We also provide related services such as market information, Internet brokerage, portfolio tracking facilities and records management. Investment Advisory Services We provide investment advisory services, including asset allocation and portfolio rebalancing, for our representative’s customers through ICA. Recruitment and Support of Representatives A key component of our business strategy is to recruit well-established, productive representatives who provide superior service to their clients. Additionally, we assist our representatives in developing and expanding their business by providing a variety of support services and a diversified range of investment products for their clients. We focus on providing substantial added value to our representatives’ practices, enabling them to be more productive, particularly in high margin lines such as advisory services and brokerage. Support provided to assist representatives in pursuing consistent, profitable sales growth takes many forms, including automated trading systems, targeted financial assistance and a network of communication links with investment product companies. Regional and national conventions provide forums for interaction to improve product knowledge, sales and client satisfaction. In addition, we provide our representatives with programs and tools to grow their businesses both through new client acquisition and advancement of existing client relationships. These programs enhance our ability to attract and retain productive representatives. OUR PROCESS Online Brokerage Registered representatives have direct market access to submit security transactions for their clients through the use of an online brokerage platform for trade execution serviced by Pershing LLC acting as our clearing firm. Check and Application Check and application revenue is obtained through a process where a check and a product application is delivered to us for processing that includes principal review and submission to the variable annuity, mutual fund, direct participation or other investment product company. Investments in technology are facilitating our migration over time from a paper intensive to a more paperless process. This shortens the transaction cycle, reduces errors and creates greater efficiencies. Bond Brokerage Our fixed-income brokerage desk uses a network of regional and primary dealers to execute trades across a broad array of fixed income asset classes. The desk also utilizes dealer-only electronic services that allow the desk to offer inventory and to execute trades. Our fixed income traders work with our representatives to develop portfolios for clients.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010 Asset Allocation Asset allocation services are made available through ICA. Our services include the design, selection and rebalancing of investment portfolios on behalf of our representatives' clients. We also provide tools, services and guidance that enable our representatives to provide these investment services directly to their clients. These services, for the most part, are conducted through our online brokerage platform. Other allocation services are performed directly by fund companies. CRITICAL ACCOUNTING POLICIES In General Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that of its significant accounting policies (see Note 1 to the Company’s condensed consolidated financial statements contained herein), those dealing with revenue recognition, allowance for doubtful accounts receivable, and taxes involve a particularly high degree of judgment and complexity. Our accounting policies require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the condensed consolidated financial statements. By their nature, estimates involve judgment based upon available information. Actual results or amounts can and do differ from estimates and the differences can have a material effect on the condensed consolidated financial statements. Therefore, understanding these policies is important to understanding the reported results of operations and the financial position of the Company. Off Balance Sheet Risk We execute securities transactions on behalf of our customers on a fully-disclosed basis. If either the customer or a counter-party fails to perform, we, by agreement with our clearing broker, may be required to discharge the obligations of the non-performing party. In such circumstances, we may sustain a loss if the market value of the security is different from the contract value of the transaction. We seek to control off-balance sheet risk by monitoring the market value of securities held or given as collateral in compliance with regulatory and internal guidelines. Pursuant to such guidelines, our clearing company requires that we reduce positions when necessary. We also complete credit evaluations where there is thought to be credit risk. Reserves We record reserves related to legal proceedings in “accrued expenses” in the condensed consolidated balance sheet. The determination of these reserve amounts requires significant judgment on the part of management. Management considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client’s account; the basis and validity of the claim; the possibility of wrongdoing on the part of an employee or representative of the Company; previous results in similar cases; and legal precedents. Each legal proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded in the condensed consolidated financial statements and is recognized as a charge/credit to earnings in that period. The assumptions made by management in determining the estimates of reserves may be incorrect and the actual costs upon settlement of a legal proceeding may be greater or less than the reserved amount. KEY INDICATORS OF FINANCIAL PERFORMANCE FOR MANAGEMENT Management periodically reviews and analyzes our financial performance across a number of measurable factors considered to be particularly useful in understanding and managing our business. Key metrics in this process include productivity and practice diversification of representatives, top line commission and advisory services revenues, operating expenses, legal costs, taxes, earnings per share and Adjusted EBITDA.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010 PRODUCTIVITY OF REPRESENTATIVES Management believes that improving the overall quality of our independent representatives is a key to achieving growth in revenues and earnings. We believe that upgrading the business practices of our representatives not only grows revenue, but assists in limiting the cost of overhead functions and representative noncompliance. We strive to continually improve the overall quality of our force of representatives by: assisting representatives to improve their skills and practices,recruiting established, high quality representatives, andterminating low quality representatives. A key metric that we use to assess the average quality of our producing (non-staff) representatives is per capita rep-generated revenue based on a rolling 12-month period. Data for the 12-month periods ended December 31, 2010 and 2009 are presented below: Twelve months ended

   

   Increase/

   % Increase/December 31, 2010

   

   December 31, 2009

   

   decrease

   decreaseRep-generated revenue:Commission

   $               67,935,853

   

   $               62,720,527

   

   $ 5,215,326

   8.3%Advisory

   13,107,338

   

   10,825,564

   

   2,281,774

   21.1%Other fee income

   1,113,314

   

   890,424

   

   222,890

   25.0%$               82,156,505

   

   $               74,436,515

   

   $ 7,719,990

   10.4%Number of representatives

   566

   

   577

   

   (11)

   -1.9%Average revenue per representative

   $                    145,153

   

   $                    129,006

   

   $      16,147

   12.5%
  The 12.5% growth in per capita rep-generated revenue for the rollingtwelve month period reflects double-digit growth in commissions from brokerage, modest revenue growth in advisory fees with market appreciation, andparing back of lower-producing registered representatives. ADJUSTED EBITDA Earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted by eliminating other non-cash expense, gains or losses on sales of assets, and various non-recurring items (“adjusted EBITDA”), is a key metric we use in evaluating our financial performance. Adjusted EBITDA eliminates items that we believe are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across various periods. We also use adjusted EBITDA as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions. Adjusted EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, important GAAP financial measures including pre-tax income, net income and cash flows from operating activities. Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009:RESULTS OF OPERATIONSPercentage of Revenue

   PercentQuarter Ended December 31,

   Quarter Ended December 31,

   Change2010

   2009

   2010

   2009

   2010 vs 2009Revenue:Commissions

   $                      17,469,594

   $                         17,170,742

   81.5%

   81.6%

   1.7%Advisory fees

   3,266,812

   3,159,770

   15.2%

   15.0%

   3.4%Other fee income

   528,451

   514,064

   2.5%

   2.4%

   2.8%Other revenue

   161,400

   206,453

   0.8%

   1.0%

   -21.8%Total revenue

   21,426,257

   21,051,029

   100.0%

   100.0%

   1.8%Expenses:Commissions and advisory fees

   16,600,763

   15,998,733

   77.4%

   75.9%

   3.8%Compensation and benefits

   2,157,884

   1,820,196

   10.1%

   8.6%

   18.6%Regulatory, legal and professional services

   549,546

   579,701

   2.6%

   2.8%

   -5.2%Brokerage, clearing and exchange fees

   481,837

   778,837

   2.2%

   3.7%

   -38.1%Technology and communications

   311,178

   287,270

   1.5%

   1.4%

   8.3%Marketing and promotion

   406,945

   296,180

   1.9%

   1.4%

   37.4%Occupancy and equipment

   232,802

   202,643

   1.1%

   1.0%

   14.9%Other administrative

   366,757

   370,018

   1.7%

   1.8%

   -0.9%Interest

   3,472

   1,536

   0.0%

   0.0%

   126.0%Total expenses

   21,111,184

   20,335,114

   98.5%

   96.6%

   3.8%Operating income

   315,073

   715,915

   1.5%

   3.4%

   -56.0%(Benefit) provision for income taxes

   (30,601)

   287,857

   -0.1%

   1.4%

   -110.6%Net income

   $                           345,674

   $                              428,058

   1.6%

   2.0%

   -19.2%Adjusted EBITDA

   $                           473,384

   $                              857,973

   2.2%

   4.1%

   -44.8%Adjustments to conform Adjusted EBITDAto GAAP Net income:Income tax benefit

   37,348

   -

   0.2%

   0.0%

   100.0%Interest expense

   (3,472)

   (1,536)

   0.0%

   0.0%

   126.0%Income tax expense

   (6,746)

   (287,857)

   0.0%

   -1.4%

   -97.7%Depreciation and amortization

   (107,477)

   (86,030)

   -0.5%

   -0.4%

   24.9%Non-cash compensation

   (47,363)

   (54,492)

   -0.2%

   -0.3%

   -13.1%Net income

   $                           345,674

   $                              428,058

   1.6%

   2.0%

   -19.2%
  The Company reported a $0.35 million net income or a $0.05 basic and diluted net income per share in the current period versus $0.43 million netincome or $0.07 basic net income per share in the prior period. Netincome decreased $0.08 million, due primarily to increases in compensation and marketing expenses.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010 REVENUE A 1.8% increase in revenues was due primarily to a rise in commissionable revenues as markets continued to rebound from the recent recession. Commission revenue growth was led by an increase in sales of transaction based products sold through our trade desk that was partially offset by a decrease in sales from variable annuity products. Advisory services revenue rose modestly. Our advisor-directed managed assets program, A-MAP, where investment advisory services are provided directly by our independent representatives, continues to contribute the majority of advisory services revenue. Other fee income, primarily comprised of licensing and annual administrative fees, as well as financial planning fees, was consistent in comparing the current period to the prior period. The decrease in other revenue, which consists of net marketing revenues and interest income, was the result of the timing of our advisor conferences, specifically October in the current period versus May in the prior period, as well as higher direct investment marketing allowances received from product sponsor programs, largely based on sales volumes. EXPENSES Total expenses increased by $0.78 million, or 3.8%, principally as a result of increases in commissions and advisors fees paid to our representatives, compensation, and marketing and promotion. These increases were partially offset by decreases in brokerage and clearing fees. Commissions and advisory fees paid to our representatives represent a percentage of revenue generated by them; accordingly, much of the increase in commissions and advisor fees reflects a corresponding increase in commission and advisory fee revenue. The increase in compensation and benefits is attributed largely to reinstatement of salaries to levels prior to the implementation of cost controls initiated in January 2009, as well as an increase in headcount in our technology, compliance, and communication teams. Additionally, the Company experienced a 30% increase in healthcare costs as compared to the same period last year. A decline in brokerage, clearing and exchange fees was primarily due to the restructuring of our current clearing agreement, as well as decreased costs in connection with transferring new brokerage accounts to this platform. The rise in marketing and promotion expenses, reflecting a cautious expansion of our operating expenses, was led by increases in advertisements in strategic financial services publications, general marketing, in-house fulfillment services and targeted recruitment mail campaigns. We had an income tax benefit of $0.03 million for the three months ended December 31, 2010 as compared to $0.29 million income tax provision for the prior period. The income tax rates for the 2010 and 2009 periods do not bear a customary relationship to effective tax rates primarily as a result of the increase in the permanent differences for each of the periods presented.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  Explanation of results reported in the current nine month period compared to the prior nine month period may be consistent with the comparative quarterly results reported in comparing the current period to the prior period. Please refer to the comparative quarterly results analysis for a general explanation of variances concerning the current nine-month period that are not discussed below. **COMPARISON OF THE NINE MONTH PERIODS ENDED DECEMBER 31, 2010 AND 2009:**RESULTS OF OPERATIONSPercent of RevenueNine Months Ended

   PercentNine Months Ended December 31,

   December 31,

   Change20102010

   2009

   2010

   2009

   vs. 2009Revenue:Commissions

   $                    51,180,144

   $                   48,241,478

   81.4%

   82.4%

   6.1%Advisory fees

   9,771,954

   8,463,511

   15.6%

   14.4%

   15.5%Other fee income

   861,998

   762,402

   1.4%

   1.3%

   13.1%Other revenue

   984,697

   1,134,273

   1.6%

   1.9%

   -13.2%Total revenue

   62,798,793

   58,601,664

   100.0%

   100.0%

   7.2%Expenses:Commissions and advisory fees

   49,223,674

   44,725,026

   78.2%

   76.3%

   10.1%Compensation and benefits

   6,206,962

   5,309,706

   9.9%

   9.1%

   16.9%Regulatory, legal and professional services

   2,669,855

   1,731,934

   4.3%

   3.0%

   54.2%Brokerage, clearing and exchange fees

   1,570,861

   2,131,287

   2.5%

   3.6%

   -26.3%Technology and communications

   914,590

   828,829

   1.5%

   1.4%

   10.3%Marketing and promotion

   1,043,976

   769,988

   1.7%

   1.3%

   35.6%Occupancy and equipment

   688,643

   642,351

   1.1%

   1.1%

   7.2%Other administrative

   807,661

   1,009,440

   1.3%

   1.7%

   -20.0%Interest

   14,587

   18,150

   0.0%

   0.0%

   -19.6%Total expenses

   63,140,809

   57,166,711

   100.5%

   97.6%

   10.5%Operating (loss)income

   (342,016)

   1,434,953

   -0.5%

   2.4%

   -123.8%(Benefit) provision for income taxes

   (33,218)

   748,661

   -0.1%

   1.3%

   -104.4%Net (loss) income

   $                      (308,798)

   $                        686,292

   -0.5%

   1.2%

   -145.0%Adjusted EBITDA

   $                        (27,824)

   $                      1,905,882

   0.0%

   3.3%

   -101.5%Adjustments to conform Adjusted EBITDA toGAAP Net income (loss):Income tax benefit

   473,767

   -

   0.8%

   0.0%

   100.0%Interest expense

   (14,587)

   (18,150)

   0.0%

   0.0%

   -19.6%Income tax expense

   (471,150)

   (748,661)

   -0.8%

   -1.3%

   -37.1%Depreciation and amortization

   (180,630)

   (261,330)

   -0.3%

   -0.4%

   -30.9%Non-cash compensation

   (88,374)

   (191,449)

   -0.1%

   -0.3%

   -53.8%Net (loss) income

   $                      (308,798)

   $                         686,292

   -0.5%

   1.2%

   -145.0%


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010 The Company reported a $0.31 million netloss and a $0.05 net loss per share in the current period versus $0.69 million netincome or $0.11 basic net income per share in the prior period. Netincome decreased by $1.0 million as a result of increases in operating expenses, estimated reserves for regulatory and legal settlements and defense costs, and marketing and promotion. REVENUE Revenues grew by $4.20 million, or 7.2%, led by a $2.94 million, or 6.1%, increase in commissionable revenues resulting from increases in brokerage as well as the improved stock market performance relative to 2009. There was also strong growth from our direct check and application business, notably, commissions from mutual fund sales. The Company has been actively rebalancing its product strategy and investment library to bolster sustainable revenue growth. The rise in advisory fees was led by new assets invested into our A-MAP program, slightly offset by a decline in revenue from our advisory fee wrap program. The increase in our fee base revenue reflected therebounding equity market, which significantly increased the value of the underlying assets. EXPENSES A $5.97 million, or 10.5%, increase in total expenses was due principally to increases in commissions and advisory fees paid to representatives, compensation, and regulatory, legal and professional fees, partially offset by a decrease in brokerage and clearing fees and other administrative expenses. Legal and professional fees increased as a result of defense counsel costs as well as estimated settlement reserves related to a rise in litigation, claims and regulatory actions; including an administrative fine stemming from settled regulatory matters. In addition, some of this increase  is a continuing aftermath from recession-related investor losses incurred in real estate and other alternative investments. Administrative expenses declined as a result of a decrease in bad debts from loans to our registered representatives, but otherwise other expenses were consistent with the prior period. OPERATING AND NET INCOME Historically, the Company’s overall results have been correlated to activity levels in the U.S. equity markets. The Company is currently operating in a challenging environment. Lingering effects of the recent recession and relatedfinancial services industry issues, such as credit quality and illiquidity problems with certain investment vehicles,continue to negatively affect financial performance. Nonetheless, most ofthe Company’s revenue categories realized improvement in the current three and nine month periods as the equity markets and overall economy showed signs of recovery. Operating and net income declined for the three and nine month comparative periods as a modest increase in representative-produced revenues andreduced clearing and execution fees were not enough to offset increases in operating expenses includingcommissions and advisory fees payouts, compensation, regulatory and legal, and marketing and promotion.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  LIQUIDITY AND CAPITAL RESOURCES Our primary source of liquidity remains cash flows from operations, primarily from our broker-dealer and investment advisory business. The total assets or the individual components of total assets may vary significantly from period to period because of changes relating to economic and market conditions. As of December 31, 2010, cash and cash equivalents totaled $5.08 million as compared to $5.81 million as of March 31, 2010. Working capital as of December 31, 2010 was $6.71million as compared to $6.66 million as of March 31, 2010. The ratio of current assets to current liabilities was 1.93 to 1 as of December 31, 2010 as compared to 1.84 to 1 as of March 31, 2010. Operations provided $0.49 million in cash for the current period, as compared to $0.79 million of operating cash provided in the prior period, principally due to changes in our loans from registered representatives, as well accrued expenses which grew largely as a result of a regulatory action settled October 2010. Another driver of changes to our net cash flows from operating activities, was the reported $0.31 million net loss in the current period, whereas, the Company reported a $0.69 million net profit in the prior period. Net cash flows used in investing activities in the current period represent purchases in equipment, collections in principal payments on a note receivable, and contributions on a key man life policy.Net cash flows used in the prior period were consistent with the current period’s investing activities except that there were no principal payment collections on a note receivable and the Company had capital expenditures for software developed for internal use. Cash flows for financing activities in the current period were similar to the prior period as we paid $1.08 million and$1.04 million in loan payments to finance E&O insurance premiums, respectively, for the periods ended December 31, 2010 and 2009. REGULATORY NET CAPITAL Cash disbursements can have a material impact on our registered broker dealer’s regulatory net capital. The SEC Uniform Net Capital Rule (Rule 15c3-1) requires that ICC, our broker-dealer subsidiary, maintain net capital of $100,000 and a ratio of aggregate indebtedness to net capital (a “net capital ratio”) not to exceed 15 to1. Under the rule, indebtedness generally includes all money owed by ICC, and net capital includes ICC cash and assets that are easily converted into cash. SEC rules also prohibit "equity capital" (which, under the net capital rule, includes subordinated loans) from being withdrawn, cash dividends from being paid and other specified actions of similar effect from being taken, if, among other specified contingencies, ICC’s net capital ratio would exceed 10 to 1 or if ICC would have less than 120% of its minimum required net capital. As of December 31, 2010, ICC had net capital of $2.99 million (i.e., an excess of $2.51 million) and a 2.38 to 1 net capital ratio as compared to net capital of approximately $3.39 million (i.e., an excess of $2.91 million) and a 2.13 to 1 net capital ratio as of March 31, 2010. Maintenance of ICC’s net capital is dependent upon sufficient income and cash flows from operations. The decrease in net capital during the current period resulted primarily from increases in legal fees and settlement costs that have impacted the firm’s results of operations during the current period.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010 COMMITMENTS AND CONTINGENCIES We are obligated under various lease agreements which are classified as operating leases. The terms of the leases expire between fiscal year 2010 and 2016. Options to renew for additional terms are included under the lease agreements. Certain office spaceleases contain provisions for escalation of minimum lease payments contingent upon increases in real estate taxes. The total minimum rental due in future periods under these existing agreements is as follows as of December 31, 2010 for the years ended, March 31,2011

   $                98,5672012

   381,3502013

   283,9222014

   276,3542015

   282,2142016 and thereafter

   24,000$           1,346,407
  Total lease expense for office space approximated $0.08 and $0.08 million for the three months ended December 31, 2010 and 2009, respectively, and approximated $0.25 and $0.25 million for the nine months ended December 31, 2010 and 2009, respectively. ITEM 4. CONTROLS AND PROCEDURES Report of Management on Internal Control Over Financial Reporting Disclosure controls are procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as the Company's are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of December 31, 2010, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period, and to ensure that information required to be disclosed in such reports that we file or submit under the Securities Exchange Act of 1934 is accumulated an communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions required regarding required disclosure. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company operates in a highly litigious and regulated business, and the Company often is made a defendant in arbitrations and other legal proceedings that are incidental to our securities business. The Company typically vigorously contests the allegations of the complaints and believes that there are meritorious defenses in these matters. From time to time the Company also is the subject of regulatory investigations and proceedings. Counsel often is unable to confidently predict the likelihood of an outcome, whether favorable or unfavorable, in such matters because of routine and inherent uncertainties. For the majority of pending claims, the Company's current errors and omissions (E&O) policy limits the Company’s maximum exposure in any one case to $100,000. The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company’s exposure is usually limited to $350,000, subject to policy limitations and exclusions. ITEMS 2 – 5. None.


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*Investors Capital Holdings, Ltd. report on form 10-Q**Quarter Ended December 31, 2010*

ITEM 6. EXHIBITSExhibitNumber

   

   Description

   

   Location3.1

   

   Certificate of Incorporation

   

   (2)(Exh. 3.1)3.2

   

   By-Laws

   

   (2)(Exh. 3.2)4.1

   

   Form of Stock Certificate

   

   (3)(Exh. 4.1)10.1

   

   Employment Agreement with Theodore E. Charles (4)

   (10)(Exh. 10.2)10.2

   

   Employment Agreement with Timothy B. Murphy (4)

   (10)(Exh. 10.1)10.3

   

   The 1994 Stock Option Plan (4)

   

   (5)(Exh. 10.3)10.4

   

   The 1996 Stock Incentive Plan (4)

   

   (3)(Exh. 10.3)10.5

   

   The 2001 Equity Incentive Plan (4)

   

   (6)(Exh. 4.4)10.6

   

   The 2005 Equity Incentive Plan (4)

   

   (7)(Exh. 4.5)10.7

   

   Form of June 2006 Stock Grant Agreement (4)

   (8)(Exh. 10.8)10.8

   

   Form of February 2008 Stock Grant Agreement (4)

   (8)(Exh. 10.9)10.9

   

   Consulting Agreement with Theodore E. Charles (4)

   (10)(Exh. 10.3)14.1

   

   Code of Business Conduct and Ethics

   

   (9)(Exh. 5.05)31.1

   

   Certification of Timothy B. Murphy pursuant to Rule 13a-14(a)

   (1)31.2

   

   Certification of Kathleen L. Donnelly pursuant to Rule 13a-14(a)

   (1)32.1

   

   Certification of Timothy B. Murphy pursuant to 18 U.S.C. Section 1350

   (1)32.2

   

   Certification of Kathleen L. Donnelly pursuant to 18 U.S.C. Section 1350

   (1)
  (1)

   Filed herewith.(2)

   Incorporated by reference to the indicated exhibit to the Registrant's Quarterly Report on Form 10-Q filed November 14, 2007.(3)

   Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form SB- 2 (File No. 333-05327) filed August 14, 2000.(4)

   A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of this report.(5)

   Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2005.(6)

   Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-117807) filed July 30, 2004.(7)

   Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-134885) filed June 9, 2006.(8)

   Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2008.(9)

   Incorporated by reference to the indicated exhibit to the Registrant’s Report on Form 8-K filed September 26, 2007.(10)

   Incorporated by reference to the indicated exhibit to the Registrant’s Report on Form 8-K filed April 21, 2010.




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Investors Capital Holdings, Ltd. report on form 10-Q*Quarter Ended December 31, 2010* Any exhibit not included with this Form 10-Q when furnished to any shareholder of record will be furnished to such shareholder upon written request and payment of up to $.25 per page plus postage. Such requests should be directed to Investors Capital Holdings, Ltd., 230 Broadway East, Lynnfield, MA01940-2320.  SIGNATURES Pursuant to the requirements 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.  INVESTORS CAPITAL HOLDINGS, LTD.By:/s/ Kathleen L. DonnellyChief Accounting Officer(Duly authorized officer)

   Date: February 11, 2011


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|Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010
|-----------------------------------------------------------------------------------



|Exhibit 31.1CERTIFICATION
|-------------------------



|I, Timothy B. Murphy, certify that:
|-----------------------------------

|1. | I have reviewed this quarterly report on Form 10-Q of Investors Capital Holdings, Ltd.;                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to statea material fact necessary to make the statements made, in light of the circumstances under which such                                                                                                                                                  
|   | statements were made, not misleading with respect to the period covered by this report;                                                                                                                                                                                                                                                                            
|3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the                                                                                                                                             
|   | smaller reporting company as of, and for, the periods presented in said report;                                                                                                                                                                                                                                                                                    
|4. | The smaller reporting company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the smaller reporting company and have:
|   | a)                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                 
|   | c)                                                                                                                                                                                                                                                                                                                                                                 
|   | d)                                                                                                                                                                                                                                                                                                                                                                 
|5. | The smaller reporting company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the smaller reporting company's auditors and the                                                                                                                                            
|   | audit committee of the smaller reporting company's board of directors (or persons performing the equivalent functions):                                                                                                                                                                                                                                            
|   | a)                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                 

Date:February 11, 2011



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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  Exhibit 31.2CERTIFICATION  I, Kathleen L. Donnelly, certify that: 1.

   I have reviewed this quarterly report on Form 10-Q of Investors Capital Holdings, Ltd.;2.

   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by this report;3.

   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of thesmaller reporting company as of, and for, the periods presented in said report;4.

   The smaller reporting company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the smaller reporting company and have:a)

   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating the smaller reporting company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;b)

   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.c)

   Evaluated the effectiveness of the smaller reporting company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)

   Disclosed in this report any change in the smaller reporting company's internal control over financial reporting that occurred during the smaller reporting company's most recent fiscal quarter (the smaller reporting company's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the smaller reporting company's internal control over financial reporting; and5.

   The smaller reporting company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the smaller reporting company's auditors and theaudit committee of the smaller reporting company's board of directors (or persons performing theequivalentfunctions):a)

   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the smaller reporting company's ability to record, process, summarize and report financial information; andb)

   Any fraud, whether or not material, that involves management or other employees who have a significant role in the smaller reporting company's internal control over financial reporting. Date:February 11, 2011 By: /s/ Kathleen L. Donnelly Kathleen L. DonnellyChief Financial Officer(Principal financial officer)





Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  Exhibit 32.1CERTIFICATION I, Timothy B. Murphy, certify that this report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Investors Capital Holdings, Ltd. Date: February 11, 2011 By: /s/ Timothy B. Murphy  Timothy B. Murphy, President,Chief Executive Officer and Director(Principal executive officer)


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Investors Capital Holdings, Ltd. report on form 10-QQuarter Ended December 31, 2010  Exhibit 32.2CERTIFICATION I, Kathleen L. Donnelly, certify that this report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Investors Capital Holdings, Ltd. Date: February 11, 2011 By: /s/ Kathleen L. Donnelly  Kathleen L. DonnellyChief Financial Officer(Principal financial officer)


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