Investment Advisory Agreement

You (the Client) and WiseBanyan, Inc., (WiseBanyan or Advisor), agree to enter into an
investment management relationship which will allow WiseBanyan to manage your i
nvestment account at such securities broker as Client may designate (the Broker).
The Client hereby designates Broker to be FolioFn. This Agreement is effective a
s of the first day such an account is opened and is ready to receive trading ins
tructions from WiseBanyan (the Effective Date) based upon the investment plan prov
ided by WiseBanyan to Client (the Plan). In consideration of the mutual covenants
herein, Client and WiseBanyan agree as follows:
1. Portfolio Management Services. WiseBanyan will direct, in WiseBanyans sole dis
cretion and without first consulting Client, the investment and reinvestment of
the assets in Clients account (the Account) in securities and cash or cash equivale
nts. Through the online account opening process, WiseBanyan will assist Client i
n determining Clients investment objectives and policies.
Client recognizes that the value and usefulness of the discretionary portfolio m
anagement services provided by WiseBanyan will depend upon information provided
by Client and Clients active participation in determining investment objectives.
Client agrees to promptly inform WiseBanyan in writing of any changes in Clients
financial situation, investment objective or investment restrictions and any oth
er factors that may be important to WiseBanyan in the management of Clients Accou
nt. Client agrees proactively initiate and repeat the process used to determine
the Clients investment objectives and policies after each instance of any changes
in the Clients financial situation, investment objective, or investment restrict
ions.
This agreement grants WiseBanyan discretionary power in the management of the po
rtfolio. Though WiseBanyan shall work to develop a plan with the client, WiseBan
yan may, in its sole discretion, buy or sell any securities or change any plan t
hat has previously been agreed upon.
2. Power of Attorney. To enable WiseBanyan to exercise fully its discretion and
authority as provided in Section 1, Client hereby constitutes and appoints WiseB
anyan as Clients agent and attorney-in-fact with limited power and authority for
Client and on Clients behalf to buy, sell and otherwise deal in Securities and co
ntracts relating to same for the Account. Client further grants to WiseBanyan as
Clients agent and attorney-in-fact full power and authority to do and perform ev
ery act necessary and proper to be done in the exercise of the foregoing powers
as fully as Client might or could do if personally present, including adding and
withdrawing funds from checking or savings accounts as directed by the client.
This power of attorney shall not allow WiseBanyan to transfer funds or securitie
s between any account held in the name of Client and any account not held in the
name of Client. This power of attorney shall terminate only on termination of t
his Agreement or on receipt by WiseBanyan of written notice of the death, incapa
city or dissolution of Client.
3. Representations and Warranties.
a. Client represents and warrants to WiseBanyan and agrees as follows:
i. Client has the requisite legal capacity, authority and power to execute, deli
ver and perform his or her obligations under this Agreement. This Agreement has
been duly authorized, executed and delivered by Client and is the legal, valid a
nd binding agreement of Client, enforceable against Client in accordance with it
s terms. Clients execution of this Agreement and the performance of his or her ob
ligations hereunder do not conflict with or violate any obligations by which Cli
ent is bound, whether arising by contract, operation of law or otherwise. If the
Client is an entity, the trustee, agent, representative or nominee (the Client R
epresentative) executing this Agreement on behalf of Client has the requisite leg
al capacity, authority and power to execute, deliver and perform such execution
and the obligations under this Agreement as applicable. Specifically, if the Cli
ent is a corporation or partnership, the individual signing this Agreement has b
een authorized to execute this Agreement by appropriate corporate or partnership
action, and if this Agreement is entered into by a trustee or fiduciary, the tr
ustee or fiduciary has authority to enter into this Agreement and that the servi
ces described herein are authorized under the applicable plan, trust or law. Cli
ent will deliver to WiseBanyan evidence of Clients and Client Representatives auth
ority on WiseBanyans request and will promptly notify WiseBanyan of any change in
such authority, including but not limited to an amendment to Client's organizat
ional, delegation or formation documents that changes the information Client pro
vides to WiseBanyan on opening the Account.
ii. For Entity Clients: If Client Representative is entering into this Agreement
, Client and Client Representative understand and agree that the representations
, warranties and agreements made herein are made by Client both: (a) with respec
t to Client; and (b) with respect to the Client Representative.
iii. For Joint Account Clients (With Rights of Survivorship): If Clients are ent
ering into this Agreement on behalf of a joint account, Clients understand and a
gree that the representations, warranties and agreements made herein are made on
behalf of all of the joint account holders and further agree that each (a) is a
Client; (b) has the authority to act on behalf of the Account and WiseBanyan wi
ll accept such instructions from any one Client; (c) is jointly and severally li
able per the terms of this Agreement; and (d) that in the case of death of any o
f the joint account holders, interest in the entire Account shall vest in the su
rviving account holder(s) under the same terms and conditions of this Agreement
and the surviving account holder(s) shall promptly provide WiseBanyan with writt
en notice thereof and provide any documentation reasonably requested by WiseBany
an in its management of the Account.
iv. Client is the owner or co-owner of all cash and Securities in the Account, a
nd there are no restrictions on the pledge, hypothecation, transfer, sale or pub
lic distribution of such cash or Securities.
v. Client understands and acknowledges that there can be no exclusions or restri
ctions of ETFs utilized as part of the Plan.
vi. Client will provide WiseBanyan with accurate information about Clients identi
ty, background, net worth, investing timeframe and other risk considerations in
the Investment Profile and will promptly update that information as Clients circu
mstances change.
b. Client understands and agrees that (A) WiseBanyan does not guarantee the perf
ormance of the Account, is not responsible to Client for any investment losses,
and the Account is not insured against loss of income or principal; (B) there ar
e significant risks associated with investing in Securities, including, but not
limited to, the risk that the Account could suffer substantial diminution in val
ue, and this risk applies even when the Account is managed by an investment advi
ser; (C) the past performance of any benchmark, market index, ETF, or other Secu
rity does not indicate its future performance, and future transactions will be m
ade in different Securities and different economic environments; and (D) WiseBan
yan will cause the Account to invest in Securities in essentially the proportion
s set forth by the Plan (subject to the profile information received from Client
), and provide only the specific reviews and restrictions described in this Agre
ement, and will not otherwise review or control such Account. There are signific
ant risks associated with any investment program.
i. Client understands and agrees that WiseBanyans sole obligation hereunder or ot
herwise is to manage the Account in accordance with the Plan designated by WiseB
anyan for Client, and Client has not engaged WiseBanyan to provide any individua
l financial planning services, notwithstanding any duty or obligation Client Rep
resentative may have to an entity Client. Client understands and agrees that Wis
eBanyan is not responsible for any losses in an Account, as provided in Section
10, and WiseBanyan may at any time in its sole discretion determine that a Plan
may require reallocation of Securities.
ii. Client understands and agrees that the Account will be managed solely by Wis
eBanyan issuing trading instructions to Broker to cause the Account to follow th
e Plan. An Accounts transactions may be executed by Broker at approximately the s
ame time as other client accounts managed by WiseBanyan in accordance with other
WiseBanyan Client Plans, and if the transactions are large in relation to the t
rading volume on that particular day, the price may be different than it would b
e for the execution of a smaller transaction.
iii. Client understands and agrees that WiseBanyan is not responsible to Client
for any failures, delays and/or interruptions in the timely or proper execution
of trades or any other orders placed by WiseBanyan on behalf of Client due to an
y or all of the following, which are likely to happen from time to time: (A) any
kind of interruption of the services provided by Broker or WiseBanyans ability t
o communicate with Broker; (B) hardware or software malfunction, failure or unav
ailability; (C) Broker system outages; (D) internet service failure or unavailab
ility; (E) the actions of any governmental, judicial or regulatory body; and/or
(F) force majeure.
iv. Client understands and agrees that an Accounts composition and performance ma
y be different for a variety of reasons from those of any initial Plan recommend
ation to a Client. These differences can arise each time the Plan is adjusted or
rebalanced, including, but not limited to, the following instances: (A) when th
e Account is established and the initial Securities positions are established; (
B) when Client contributes additional capital to such Account; (C) when Client r
evises his/her Investment Profile and causes WiseBanyan to recommend a new Plan
or revise the existing Plan; (D) each time the Advisory Fee (described in Sectio
n 5) is charged and paid from such Account; and (E) any time WiseBanyan adjusts
its algorithm by which the composition of the Account is maintained as specified
for the Plan. On any such adjustment, WiseBanyan may adjust the Plan in its dis
cretion to approximate the composition specified in the Plan as closely as reaso
nably practicable based on the conditions at the time.
v. Client understands and agrees that the prices of Securities purchased or sold
for the Account may be less favorable than the prices in similar transactions f
or other WiseBanyan Clients for whom WiseBanyan has designated different Plans.
4. Confidentiality. Client agrees to permit Advisor to consult with and to obtai
n information from Clients attorney, accountant or other advisors to the extent n
ecessary. Advisor will hold in strict confidence all non-public personal and fin
ancial information that Client furnishes to Advisor, except for information that
Client explicitly agrees to share publicly, regarding Clients financial situatio
n, as required by applicable laws. Client agrees that all information, recommend
ations and advice provided by Advisor shall be regarded as confidential and shal
l not be disclosed to any other person or entity.
5. Responsibility for Additional Expenses. The Account may be responsible for ad
ditional expenses not charged by WiseBanyan related to the management, trading a
nd transfer of the assets of such Account, including, but not limited to ETF fee
s or transfer and bank service fees charged by Clients bank. At its sole discreti
on, WiseBanyan may elect to bear, either by direct payment or through re-imburse
ment to the client, any one of the fees listed herein.
6. Broker. All transactions shall be executed by Broker as the custodian of the
Account. Client understands and agrees that WiseBanyans brokerage practices shall
be consistent with the disclosure in WiseBanyans Form ADV Part 2 as amended from
time to time. Client represents and warrants that Client is satisfied with the
terms and conditions (including, but not limited to, commission rates) relating
to all services to be provided by Broker. WiseBanyan shall not have any responsi
bility for obtaining for the Account the best prices. Client recognizes that Cli
ent may not obtain rates as low as it might otherwise obtain if WiseBanyan had d
iscretion to select broker-dealers other than Broker.
7. Account Losses. Client understands and agrees that WiseBanyan will not be lia
ble to Client for any losses incurred by Client that arise out of or are in any
way connected with any Securities transaction or other act or failure to act of
WiseBanyan under this Agreement, including, but not limited to, any tax liabilit
y asserted against Client by any federal, state or local authority with respect
to the Account, so long as such recommendation or other act or failure to act do
es not constitute a breach of WiseBanyans fiduciary duty to Client. Client (and i
n addition, for entity accounts, Client Representative) shall indemnify and defe
nd WiseBanyan and WiseBanyans directors, officers, shareholders, employees and af
filiates and hold them harmless from and against any and all claims, losses, dam
ages, liabilities and expenses, as they are incurred, by reason of any act or om
ission of Client or Broker or any custodian, broker, agent or other third party
selected by WiseBanyan in a commercially reasonable manner or selected by Client
, except such as arise from WiseBanyans breach of fiduciary duty to Client. In ad
dition to the above indemnities, for entity Clients, the Client Representative s
hall further indemnify and defend WiseBanyan and WiseBanyans directors, officers,
shareholders, employees and affiliates and hold them harmless from and against
any and all claims, losses, damages, liabilities and expenses, as they are incur
red, resulting from or in connection to Clients assertion of Client Representativ
es lack of proper authorization from Client to enter into this Agreement. Anythin
g in this section or otherwise in this Agreement to the contrary notwithstanding
, however, nothing herein shall constitute a waiver or limitation of any rights
that Client may have under any federal or state securities laws.
8. Account Statements. Client will receive account statements from Broker, which
are the official records of the Account. Client understands that upon opening t
he account, client will promptly be provided with a username and password to the
website of the Broker. Client further understands that to obtain account statem
ents, he or she must login to the Brokers website to obtain statements. WiseBanya
n may also provide information about the Account from time to time.
9. Independent Contractor. WiseBanyan is and will hereafter act as an independen
t contractor and not as an employee of Client, and nothing in this Agreement may
be interpreted or construed to create any employment, partnership, joint ventur
e or other relationship between WiseBanyan and Client.
10. Delivery of Information. Client acknowledges electronic delivery of WiseBany
ans brochure that would be required to be delivered under the Advisers Act (inclu
ding the information in Part 2 of WiseBanyans Form ADV), which is available on th
e Site and provided here by link: https://wisebanyan.com/assets/docs/WiseBanyanA
DVPart2.pdf
WiseBanyan agrees to annually deliver electronically, without charge, WiseBanyans
brochure required by the Advisers Act.
11. Severability and Amendment. The invalidity or unenforceability of any provis
ion hereof shall in no way affect the validity or enforceability of any and all
other provisions hereof. Client acknowledges that WiseBanyan may amend this Agre
ement from time to time by notifying Client by email or message to Clients WiseBa
nyan user account, which amendment will be effective immediately.
12. Governing Law. This Agreement shall be governed by and construed and interpr
eted in accordance with the laws of the state in which the client resides.
13. Standard of Care. Advisor will use its best judgment and its good faith effo
rts in rendering services to Client. Advisor does not warrant or guarantee any p
articular level of Account performance, or that the Account will be profitable o
ver time. Client acknowledges that Client is assuming the market risk involved i
n the investment of Account assets in accordance with this Agreement. The sole s
tandard of care imposed on Advisor, its members, principals, officers, employees
and agents by this Agreement is to act with the care, prudence and diligence un
der the circumstances then prevailing that a prudent investor acting in a like c
apacity would use. Nothing contained in this Agreement shall constitute a waiver
of any rights that a client may have under federal or state securities laws.
14. Fees and Compensation. The total annual fee charged to each client shall be
0.00% of assets managed by WiseBanyan. Fees due shall be calculated by multiplyi
ng the Advisory Fee by the net market value of the Account as of the close of tr
ading on the New York Stock Exchange (NYSE) (herein, close of markets) on such day,
or as of the close of markets on the immediately preceding trading day for any d
ay when the NYSE is closed, and then by dividing by 365 (except in any leap year
, during which year the amount shall be divided by 366). Except as provided belo
w, the fees due for each calendar month (consisting of the aggregate of the dail
y fee for each day in that calendar month) shall be due and payable in arrears n
o later than the tenth business day of the immediately following calendar month.
Client may also elect to be billed in advance for each month. Should client ele
ct to be billed in advance each month, the Fee shall be calculated by multiplyin
g the Advisory Fee by the net market value of the Account at close of business o
n the last calendar day of the prior month, and WiseBanyan shall deduct the fee
from the account no later than the tenth business day of the month. WiseBanyan w
ill promptly notify Client of any increase or decrease in the Advisory Fee. An i
ncrease in the Advisory Fee will be effective for the Account starting in the ne
xt month that begins at least 30 days after WiseBanyan sends or posts such notic
e. A reduction in the Advisory Fee will be effective for the Account starting in
the next month following its reduction. A sample calculation of the advisory fe
e is shown in Exhibit A.
If Client closes the Account, withdraws the entire balance of the Account, or ot
herwise terminates this Agreement on any date other than the last business day o
f the month, Client shall pay any outstanding aggregate daily fees for the perio
d from the day immediately following the last day of the last calendar month for
which Client has paid, through the effective date of such withdrawal or termina
tion, as of such effective date. Should the client have pre-paid or over-paid th
e fee for any reason, and, should the contract be terminated, an payment of the
fee over what is due through the date of termination shall be returned to the cl
ient in a timely manner. In the event that WiseBanyan is unable or unwilling to
perform the service as defined in Section 1, WiseBanyan shall refund any fees ch
arged for such time.
If, for any reason, WiseBanyan shall close and liquidate all the positions held
in the Account, Client may receive the proceeds of the liquidated portion of the
Account, and this Agreement shall terminate.
If for any reason there is insufficient cash available in the Account to cover W
iseBanyans fees at the time they are charged and deducted from the Account, WiseB
anyan, in its sole discretion, may cause Securities in the Account to be liquida
ted to cover its fees.
Client understands that the Broker may charge a minimum custodial fee to the acc
ount. In the event that the Broker charges this fee directly to the account, and
such fee is higher than the fee charged by WiseBanyan to the client, WiseBanyan
may re-imburse the client for this fee by transferring moneys directly into the
client account. Such re-imbursements will be in an amount such that the total n
et effective fee paid by the client will be equal to the fee agreed upon between
WiseBanyan and Client and disclosed on Clients account page.
WiseBanyan reserves the right, in its sole discretion, to reduce or waive the Ad
visory Fee for certain Client Accounts for any period of time determined by Wise
Banyan. In addition, Client agrees that WiseBanyan may waive its fees for the Ac
counts of Clients other than Client, without notice to Client and without waivin
g its fees for Client.
15. ERISA Accounts. If Client is a retirement plan (the Plan) subject to the provi
sions of the Employee Retirement Income Security Act of 1974, as amended (ERISA),
Advisor agrees and acknowledges that, as investment manager to the Plan, Advisor
is a fiduciary under ERISA with respect to the Plan. Client represents that the
Plans sponsor has appointed Advisor and any Investment Manager engaged on Clients
behalf to (a) manage the Plans assets solely according to the directions of the
Plan sponsor and other named fiduciaries of the Plan and (b) transmit trading in
structions on the Plans behalf. Client understands and acknowledges that Advisor
is not the administrator of the Plan as defined by ERISA. The Client represents th
at the Plans sponsor and trustees have read this Agreement and have determined th
at Advisors fee is reasonable in light of the services contemplated by this Agree
ment. Client agrees to provide Advisor with accurate and timely information on a
ll Plan matters essential to the performance of Advisors duties under this Agreem
ent. Client acknowledges that Advisor shall not incur any liability in connectio
n with any action that it takes (or does not take) at the written direction of t
he Plans authorized representatives or their agents or in reliance upon any writt
en information supplied by any of such persons, in each case excepting any damag
e or loss arising solely from Advisors breach of its fiduciary duty under this Ag
reement, negligence, willful misconduct or bad faith. The federal and state secu
rities laws impose liabilities under certain circumstances on persons who act in
good faith, and therefore nothing in this Agreement will waive or limit any rig
hts that Client may have under those laws.
16. Proxy Voting. Advisor does not exercise proxy voting authority over securiti
es held in Clients Account. Client retains proxy voting authority over securities
held in Clients Account.
17. Termination and Withdrawals. This agreement will stay in effect until termin
ated by either Client or WiseBanyan. This Agreement may be terminated by either
party with or without cause. There shall be a five business day grace period com
mencing at the signing of this contract during which the client may choose to te
rminate the contract and the advisor shall only charge for fees incurred prior t
o the termination excluding administrative fees, account set-up fees, and minimu
m quarterly fees.
Client may cancel this Agreement after the Grace Period by providing 7 days adva
nce notice of cancellation to WiseBanyan. WiseBanyan may cancel this Agreement b
y providing notice through the primary email address or primary mailing address
in the Clients Account Application as Client shall update from time to time. If,
for any reason, Advisor shall close and liquidate all positions held in the Acco
unt, Client may receive the proceeds of the liquidated portion of the Account, a
nd this Agreement shall terminate. Client understands and agrees that WiseBanyan
may determine to liquidate immediately all holdings in the Account. Client may
withdraw all or part of the Account by notifying WiseBanyan at any time or by in
itiating the withdrawal from within Clients online account, provided that all par
tial withdrawals comply with WiseBanyans required Account minimums as posted on t
he WiseBanyans website and updated from time to time, unless Advisor otherwise co
nsents in advance. Clients withdrawal of all of the Account under this Agreement
will terminate this Agreement, unless WiseBanyan otherwise consents in advance.
Advisor reserves the right to revise Account minimums on a case-by-case basis an
d allow Accounts to remain open after Client withdrawal of all of the Account on
a case-by-case basis. In addition, Client understands and agrees that the WiseB
anyan may revise Account minimums on a case-by-case basis for clients other than
Client, without notice to Client and without revising overall Account minimums
for Client.
18. No Assignment. Neither party may assign this Agreement without the other par
tys consent.
19. Dispute Resolution. In the event of any dispute concerning or arising out of
this Agreement, such dispute shall be submitted by the parties to arbitration i
n the state in which the client resides. Arbitration proceedings may be commence
d by either party after giving the other party notice thereof and proceeding the
reafter in accordance with the rules of the American Arbitration Association. An
y such arbitration shall be governed by and subject to the applicable substantiv
e laws of the state in which the arbitration proceeding is held and the then pre
vailing commercial arbitration rules of the American Arbitration Association; pr
ovided, however, that the arbitrators shall be required to render a reasoned awa
rd stating with particularity the grounds for their decision and further provide
d that the arbitrators shall have no authority to award punitive, exemplary or o
ther extraordinary damages. The parties hereby waive all rights to obtain puniti
ve damages in connection with any dispute arising under this Agreement. The arbi
trators award in any such arbitration shall be final and binding, and judgment up
on such award may be enforced by any court of competent jurisdiction, subject on
ly to vacation or modification as permitted by law.
20. Entire Agreement, Severability and Other Terms. This Agreement embodies all
understandings and agreements between the parties hereto and may only be amended
by a written document executed by both parties hereto. If any provision hereof
shall be held or made unenforceable by a statute, rule, regulation, decision of
a tribunal or otherwise, such provision shall be automatically reformed and cons
trued so as to be valid, operative and enforceable to the maximum extent by law
or equity while most nearly preserving its original intent. The invalidity of an
y part of this Agreement shall not render invalid the remainder of the Agreement
and, to that extent, the provisions of this Agreement shall be deemed to be sev
erable. Section headings are provided for convenience only and shall not affect
the interpretation of this Agreement. This Agreement shall be construed under th
e laws of the State of New York without reference to its choice of law rules.
21. Risks. Client understands and agrees that:
a. WiseBanyan does not guarantee the performance of the Account, is not responsi
ble to Client for any investment losses, and the Account is not insured against
loss of income or principal.
b. That there are significant risks associated with investing in securities and
the market, including, but not limited to, the risk that the Account could suffe
r substantial diminution in value, and this risk applies even when the Account i
s managed by an investment advisor or the Advisor.
c. The past performance of any benchmark, market index, ETF, or other securities
does not indicate its future performance, future performance may vary, and the
future transactions can be made in different securities and during different eco
nomic environments; and 4) Advisor will cause the Account to initially invest in
securities in essentially the proportions and allocation set forth by the initi
al plan (subject to any changes made in response to the profile information rece
ived from the Client), and provide only the specific reviews and restrictions de
scribed in this Agreement, and will not otherwise review or control such Account
. There are significant risks associated with any investment program.
For Residents of Texas:
Client acknowledges receipt of Part 2 of Form ADV; a disclosure statement contai
ning the equivalent information; or a disclosure statement containing at least t
he information required by Part 2A Appendix 1 of Form ADV, if the client is ente
ring into a wrap fee program sponsored by the investment adviser. If the appropr
iate disclosure statement was not delivered to the client at least 48 hours prio
r to the dclient entering into any written or oral advisory contract with this i
nvestment adviser, then the client has the right to terminate the contract witho
ut penalty within five business days after entering into the contract. For the p
urposes of this provision, a contract is considered entered into when all partie
s to the contract have signed the contract, or, in the case of an oral contract,
otherwise signified their acceptance, any other provisions of this contract not
withstanding.
Nothing in this agreement shall relieve an investment adviser from any obligatio
n pursuant to any provision of the Investment Advisers Act of 1940 or the rules
and regulations thereunder or other federal case law, interpretative opinions, a
nd administrative actions by the SEC (as in existence on April 8, 1997) or state
law to disclose any information to its clients not specifically required by thi
s section.
Exhibit A
Calculation of Advisory Fees
The following is a representative calculation of advisory fees for clients, and
the advisory fee for Client may differ in both rate and amount. The following is
merely an illustration of the calculation.
Sample Calculation for Advisory Fees
Assumption: 0.0% annual management fee
If the client has $10,000 in his portfolio as of 1/31/2014, on 2/28/2014 the cli
ent shall be charged 0.0% * (28/365) * $10,000, or $0.00 advisory fee for the pe
riod 1/31/2014 through 2/28/2014. This shall be due and payable no later than th
e tenth business day following, but not including, 2/28/2014.
Brokerage Account Agreement
Below is the agreement as written by FolioFn, the Broker and Custodian of the ac
count. While WiseBanyan will administer and monitor the account, FolioFn will pr
ocess and execute the trades on behalf of you, the client.
This customer agreement describes how we will handle your account and trades. Its
a legal document that sets out our obligations to you and your obligations to u
s. It covers how we agree to address the most important issues that may arise be
tween you and us. Like an owners manual, this agreement explains how key features
of our service work. Reading it now will save you from misunderstandings and al
low you to enjoy the full benefits of what we offer.
By typing your name to this agreement during the account opening process, you ag
ree to this agreement as amended by us from time to time. By using our site, you
also agree to any other online agreements that we post on our site, including a
ny changes we make to these agreements. You agree that these agreements are the
legal equivalent of signed, written contracts, and equally binding. By using our
Web site, you agree to any changes.
When we use you and your in this agreement, we are referring to the brokerage custom
er, which includes corporations, partnerships, investment clubs, and other entit
ies. We or us refer to FOLIOfn Investments, Inc. Authorized person refers to another p
erson, if any, who you authorized to take action on an account with us, includin
g to establish an account for you and to sign and deliver all required documents
on your behalf, including any advisor that you may have. Advisor means a financial
advisor or registered representative, if any, with whom you have a separate agre
ement to manage and control your financial assets.
Important Information about Procedures for Opening Your Account
To help the government fight the funding of terrorism and money laundering activ
ities, Federal law requires all financial institutions to obtain, verify, and re
cord information that identifies each person who opens an account. Accordingly,
when you open an account with us we will ask for your name, address, date of bir
th, taxpayer identification number, and other information that will allow us to
identify you. We may also ask to see a copy of your drivers license or other iden
tifying documents.
Certifications You Make in This Agreement
You are, and any authorized person is, at least 18 years of age, a permanent res
ident of the United States and using a valid social security number or taxpayer
ID number. You have read, understood, and agree to all terms and conditions in t
his agreement. You have truthfully and fully completed all the items in opening
an account and using our services. You are opening an account for investment pur
poses and not to disable or disrupt our operations or to engage in any abusive,
improper, or illegal activity and you agree not to take or engage in any such ac
tions. You are not subject to backup witholding as a result of failure to report
all interest and dividends, or the Internal Revenue Service (IRS) has notified
you that you are no longer subject to backup withholding. The IRS does not requi
re consent to any provision of this document other than the certifications requi
red to avoid backup withholding.
When you open an account with us, you agree:
To provide truthful and accurate information, and to keep it current, To allow u
s to get credit reports and verify information you provide in your account appli
cation, To settle all transactions in U.S. dollars drawn on a U.S. financial ins
titution, and To pay our fees and to pay any amount owed on your account.
If we approve your account application, we will open an account for you.
We reserve the right to modify pricing and services at any time. We reserve the
right to restrict or terminate your account in the event of abusive, improper, o
r illegal activity.
Indemnification
You agree to indemnify us and hold us and our affiliates, directors, officers, e
mployees, and agents harmless under this agreement from and against all claims,
actions, costs and liabilities, including attorneys fees, arising from or related
to:
Any breach by you of any provision or representation of this agreement; Any disp
ute that does not directly result from our performance of brokerage services as
set forth in this agreement; and Any inaccurate information supplied to us by yo
u or your authorized agent.
We Do Not Provide Investment, Tax, or Legal Advice
You understand that we will not give you any advice or recommendations about whe
ther a security or investment is appropriate or suitable for you. The decisions
to buy, sell, or hold any investment rests solely with you.
By making information available to you on our Web site, we are not recommending
or advising you to invest in any particular Folio, security, or to use any inves
tment strategy. Information on our Web site is not personalized to fit your need
s. It is not tailored to reflect your own financial circumstances or investment
objectives, so the securities or investment strategies discussed on our site mig
ht not be suitable for you.
We do not review your financial situation or tolerance for risk. Although we may
provide tools that enable you to assess your own tolerance for risk, or otherwi
se assist you and seek to educate you in various ways, we do not determine if th
e tools we provide to select Folios or investments or otherwise assist or seek t
o educate you will result in suitable or profitable investments for you.
All investments entail risks, and you are responsible for determining whether yo
u can afford the risks of using our tools or making any investment.
While we provide you with tools and ways to help you manage your investments and
taxes, we do not give you investment, tax, or legal advice. If you wish to have
such advice, you will need to consult your own investment, tax, or legal advise
rs. You agree that we do not provide such advice, and that you make all decision
s about investing and trading in your account.
All Documents are Delivered Electronically; You Will Be Provided Electronic Noti
ce of These Documents and Access to Them Electronically
We believe we are one of the most advanced brokerages in terms of providing acco
unt information to our customers electronically. Our opening and maintaining you
r account is conditioned on your agreement to receive all notices, documents, an
d other information related to your account and investments electronically. This
may be done through an online posting on our Web site by email or other electro
nic media to which you hereby consent. Your consent to electronic delivery exten
ds to all information required to be provided by us, by the issuers of the secur
ities in which you invest, and by other third parties. This means you will recei
ve email or other notices that your account statements, confirmations, tax docum
ents (which may include Form 1099BProceeds from Broker and Barter Exchange, Form
1099DIVDividends and Distributions, Form 1099INTInterest Income, Form 1099OIDOrigin
al Issue Discount and Form 1099MISCMiscellaneous Income), prospectuses, annual re
ports, proxy statements, proxies, tender offers and mergers, corporate recapital
izations, margin and maintenance calls, and all other information are available
for viewing or printing from your Statements & Tax Records, our proxy delivery a
nd voting application, or elsewhere on our Web site.
You agree that when we send these email notices to you that they constitute deli
very to you of the information or documents referred to in the email even if you
do not actually access the information or documents on our Web site. You may re
voke this consent to electronic delivery at any time by providing written notice
to us. However, since we have priced our services based on the considerable sav
ings of electronic delivery, we reserve the right to terminate your account or,
in certain instances, charge you an extra fee if you ask for paper documents.
You agree to keep a working email address and other current contact information
and will update your account information immediately if your email address or ot
her contact information changes. If you do not maintain an e-mail address that i
s working and accessible to us, and we believe we are required to provide you pa
per notice or documents of particular matters or actions, and we do so, we may c
harge you an additional fee of not more than $100 per such delivery. You acknowl
edge that you may incur costs (such as online service provider charges or printi
ng costs) associated with the electronic delivery of information to you. To view
PDF files, you will need to download the Adobe Acrobat Reader, which is provide
d for free.
If your email address or other contact information changes at any time, you must
update your account information on our site. If we send you a paper reminder of
the need to have an e-mail address that is working and accessible to us, we wil
l charge a reasonable fee for that reminder.
Important Information Specifically Regarding Tax Documents for Your Account
As noted above, by opening and maintaining an account with us, you consent to el
ectronic delivery of all account notices and documents, including tax notices an
d documents. Tax documents will be delivered to your Statements & Tax Records on
our Web site in PDF files and may be viewed and printed using Adobe Acrobat Rea
der, which is provided for free. The tax documents delivered to your Statements
& Tax Records will remain available for a minimum of two years after they are de
livered.
Your consent to electronic delivery of all required tax notices and documents wi
ll remain valid unless it is withdrawn. If at any time you wish to withdraw your
consent to electronic delivery of tax documents, you may do so by providing wri
tten notice to us at our current mailing or email address. After we have receive
d written notice of your consent withdrawal, we will email confirmation to you t
hat we have received such notice and will provide future tax documents in paper
form.
The withdrawal of consent to electronic delivery of tax documents does not apply
retroactively to any documents that we had provided electronically prior to our
receipt of your withdrawal notice. Should you require paper copies of any tax d
ocuments that we provided electronically, please send a written request to our c
urrent mailing or email address describing the documents that you need. Please r
emember, however, that since we have priced our services based on the considerab
le savings of electronic delivery, we reserve the right to terminate your accoun
t if you ask for paper documents (although we will deliver in paper the tax docu
ments that are required to be delivered to you).
In order to ensure that you receive all tax notices and documents either electro
nically or in paper form, as applicable, you must provide us with your current e
mail address and other contact information. If your email address or other conta
ct information changes at any time, you need to update your account information
on our site.
All Orders Must Be Placed Through Our Web Site; Alternatives May Not Be Availabl
e
All trading orders must be placed through our Web site. We offer you a unique wa
y to invest through Folios. You may hold one security or up to a maximum of 100
securities (or, on some special plans, more than 100 securities) in a Folio and
may hold multiple Folios and securities in a single account, and multiple accoun
ts. One trading alternative allows you to place an order to buy or sell a specif
ic dollar amount across all the securities in your Folio. According to your pref
erences, the total dollar amount of your order is allocated among the securities
in your Folio, buying or selling fractional shares as necessary.
Trading or modifying Folios in dollar amounts rather than share amounts results
in complex computations, and orders may affect up to 100 securities or more in a
Folio at once. Our Customer Service Representatives can assist you in entering
an order online, but they cannot accept Folio orders over the phone on a routine
basis.
If emergencies arise, they will be able to take orders for some types of trades
over the phone, but they will not be able to take every order that you could pla
ce on our site. If you place an order over the phone, you may be charged additio
nal fees because of the additional costs of processing these orders. Please cons
ult our Fees page to read in detail about the orders we can take over the phone
and the charges for those orders.
Risks of Limiting Trades to Our Web Site
Please consider carefully if you can afford or want to take on the risks of limi
ting your method of placing orders to our Web site. If you cannot access our Web
site or our Web site is not functioning, you may not be able to place Folio ord
ers through other means. You agree that you assume responsibility for all losses
that arise if your orders cannot be placed on or through our Web site.
Risks of Online Investing
While we have put tremendous resources into building and testing our computer sy
stems, computer glitches, slowdowns, and crashes will occur.
We will also need to restrict access to some parts of our site or our entire sit
e to perform routine maintenance. We will try to schedule our maintenance during
the middle of the night.
While it is our intention that our Web site will be available seven days a week
except when maintenance is scheduled (usually for weekends), you understand that
we do not guarantee that you will always be able to access our Web site to plac
e orders or that your orders will always be executed. Computer problems can aris
e on your end, our end, or anywhere in between: your computer may break down; th
e connection between your computer and your Internet service provider may not wo
rk properly; your Internet service provider may go down; or our computers and th
e computers we link to may be unavailable due to unforeseen system outages.
When trading volumes soar on our nations stock markets and many investors want to
buy or sell at the same time, lines form and orders cannot be filled as quickly
. You agree that we are not responsible for any losses or liabilities that may o
ccur as a result of high trading volume, market volatility, or computer, telecom
munications, or Internet failures, regardless of the cause.
Extraordinary Events
You agree that we are not liable for any losses caused directly or indirectly by
extraordinary events or conditions beyond our control. Such events include, but
are not limited to, government actions, exchange or market rulings, and suspens
ions of trading.
Keep Your Account Information Secure
You understand that you are responsible for securing the confidentiality and use
of your user name, password, and other methods of securing access to your accou
nt(s). You will be solely responsible for all transactions that are sent electro
nically using your user name, password, and other security measures. You should
notify us immediately if your user name or password is compromised or lost.
You understand that we use technology to protect and encrypt the transmission of
information from and to you. You also understand that we strongly suggest that
you use a browser with 128-bit encryption to secure your information.
While we have taken reasonable measures to keep your information secure, we are
not liable if your data and communications are intercepted. Should someone inter
cept a transmission of your information, you agree that you will not hold us, ou
r affiliates, independent companies, or others who provide services through our
Web site liable for any type of damages. This includes any liabilities or damage
s resulting from viruses that may infect your or our computer(s) or third-party
Internet facilities.
Consent to Recording Your Telephone Conversations
You consent to having your conversations with us recorded if we decide to record
such conversations.
No Guarantee on Accuracy of Third Party Information
You understand that we are not responsible for the accuracy or your use of any i
nformation we receive from third parties. While we use vendors we believe to be
reliable, we have not verified and do not make any warranty for information prov
ided by third parties. Our Web site contains links to other Web sites. We provid
e these links for the convenience of our customers; however, we have no control
over these other sites. Therefore, we are in no way responsible for and in no wa
y approve, endorse, or guarantee the accuracy, reliability, or completeness of a
ny data or information provided in any hyperlinked Web page or Web site.
Services and Products Provided by Our Affiliates and Others
You understand that our web sites allow you access to various financial products
and services that are provided by affiliates of ours or by companies that are i
ndependent of us. These products and services may be governed by separate terms
and conditions that are accessible through the Web pages of the companies that p
rovide the products and services. You agree to the terms and conditions that gov
ern the products and services offered by our affiliates and these independent co
mpanies. Our affiliates and the independent companies can enforce their terms an
d conditions, relying upon your acceptance of this Agreement to do so. You agree
and intend this and any other online agreement to be the legal equivalent of si
gned, written contracts, and equally binding.
Disclosure of Information to Issuers
Under Securities and Exchange Commission (SEC) rules, an issuer of securities th
at is distributing proxy materials to its shareholders is entitled to request fr
om a broker-dealer name, address and securities position information for those c
ustomers of the broker-dealer who own the issuers securities who do not object to
the release of that information. By electronically signing this Agreement, you
object to the release of your name, address and securities position information
to the issuers of securities you own and hold in your account(s) with us and we
will not provide that information directly to such issuers.
Handling Your Trades: Window vs. Market
Before you can purchase a security, you must have available cash or money market
funds to cover your purchase in your account.
You have various options for executing your orders, including through a window tr
ade, a market trade and through stop or limit orders.
Window Trades
On a typical day when the market is open for the entire day, we will usually con
duct two window trades. If the market is open less than a full day we usually co
nduct one window trade. If you place a trade after the last window trade closes,
your trade will be executed during the first window on the next trading day. Pl
ease consult our Web site for current window trade times and frequency. We also
may provide additional window trades for very large customers whose trading migh
t otherwise adversely affect other customers trades.
In a window trade, you and other customers submit orders throughout the day unti
l the window closes that we then fill after the window closes. After the window
closes, we will either forward such orders in an aggregated format to our market
centers for execution or we will begin to match orders from buyers and sellers.
If we match orders and we have a successful match between your order and anothe
r order (full or partial), we will fill your order internally between the price
to buy and sell, otherwise known as the bid/ask price spread. Where we cannot ma
tch your order, or if we determine not to match orders generally, we will either
forward your order to market centers for execution, or, for odd lots or fractio
nal shares, we may execute unmatched orders using our own inventory of securitie
s or add to those orders from our own inventory and forward the orders to market
centers for execution. The orders sent to market centers for execution and the
orders matched internally are then reviewed and priced to ensure that all buyers
in a security receive the same execution price and all sellers in a security re
ceive the same execution price.
The process of closing the window, matching the orders internally if we determin
e to do so, forwarding unmatched orders to market centers for execution or execu
ting them against our own inventory (for odd lots or fractional shares), pricing
all the orders after execution, and posting the orders to your account frequent
ly takes from one to two hours and can take longer. You understand and agree tha
t in some unusual instances the morning window may not be fully posted until aft
er the afternoon window closes, and in that event you would not be able to place
a subsequent order in the afternoon window (because a subsequent order cannot b
e placed while an earlier order is still posting).
What Is an Ask Price?
The price you buy at if you send your order to the market.
What Is a Bid Price?
The price you sell at if you send your order to the market.
Example
For the purposes of this example, assume there is a morning window trade at 11:0
0 AM Eastern Time.
At 8:00 am Eastern Time (ET): You place an order to buy $1000 of your favorite F
olio of 50 securities. At 11:00 am (ET): The trading window closes. After 11:00
am (ET): We match 15 securities in your buy order against sell orders by other o
f our customers, giving you an advantageous price between the bid/ask spread (if
we are then matching orders). We will either forward the remaining 35 buy order
s to market makers for execution, or, for odd lots or fractional shares, we may
execute unmatched orders using our own inventory of securities. We cannot guaran
tee that every window trade will take place on time or occur at all, or that we
will be engaged in matching any orders. You understand and agree that there may
be times when window trades are delayed or are cancelled because of quote vendor
failures, computer failures or events affecting the markets.
Window Tradable Securities and Rules
You can only trade a limited universe of securities through a window trade. We k
eep a list of these securities, called window tradable securities, on our Web site
. Some window tradable securities may be included in various tiers that are availa
ble only to certain types of customers (such as advisors) or for which an extra
charge is levied for trading them. These additional charges would be disclosed i
n pricing plans or noted on our web site and are subject to change from time to
time. While you can trade up to 100 securities in one Folio order, you can place
only one order per Folio in any given window.
Example
If you have three Folios, A, B, and C, you can place one order for each Folio in
one window. You cannot place two orders for Folio A in one window.
We choose window securities based on a combination of the securitys market capita
lization and trading volume. We also generally restrict our selection of window
securities to those securities that are traded on an exchange (NYSE, NASDAQ Glob
al Select Market, NASDAQ Global Market, or NASDAQ Capital Market.) Our list of w
indow securities will change over time. We may drop a security from our list for
a variety of reasons. For instance, a security may be delisted from an exchange
or no longer be actively traded. If you own a Folio containing a security that
is no longer listed as window-tradable, you generally can still sell all of the se
curity in a window trade. You cannot sell some of the shares of this security or
buy more of this security through a window trade, but generally you can move sh
ares to Non-Folio Holdings and do a market, stop or limit trade.
Cancel Order Limit
Since the price may change between the time you place your window trade order an
d the time the window closes, we provide you with a Cancel Order Limit feature.
This feature allows you to set a price limit that will cause your order to be au
tomatically cancelled if your limit is reached. Generally, we set the limit at no
limit, but you can change it. The Cancel Order Limit applies to total price chan
ges for all the securities in the Folio. It does not apply to the price change o
f an individual security in the Folio (you can use a limit order or stop order for t
hat). If you want to change the limit or take it off, you can do so when you ope
n an account or from the Settings page. You can change the Cancel Order Limit fr
om the page where you place a trade, but the change you make there will only app
ly to the trade you are making.
The Cancel Order Limit can help protect you from selling at a price much lower t
han you intended, or buying at a price much higher than you intended. You agree
that if the price movement is greater than the limit you set (for example 5%), t
he order is canceled. Our system should not be used for market timing, and the C
ancel Order Limit should not be used to support an active trading strategy.
Market Trades/Limit/Stop Orders Cost Extra
Although you can trade as few as one security in a Folio through a window trade,
you may not want to wait for a window to trade a security. You can also send an
order immediately to a market for execution, as you would do with a traditional
online brokerage firm. Because of the way the stock market works, these orders
sent to the market for execution must be in whole shares; fractional shares or d
ollar-based orders (which can be used in window trades) will not be accepted for
market, limit or stop orders.
In addition to the securities you can trade through a window, there may be other
securities that you can hold in your account. If securities are not among those
that you can trade through a window, you can only buy or sell them by placing a
market, limit, stop, or stop-limit order that is sent directly to the market. W
e do not internally match such orders and you will generally pay a commission on
each security that you buy or sell by sending an order to the market for execut
ion. Please consult our Fees page for commission information.
Market Volatility, Market Orders and Limit/Stop Orders
You understand thatwhether you place a market, limit or stop orderyou will receive
the price at which your order is executed in the marketplace. You understand th
at placing contingent orders, such as stop-loss or stop-limit orders will not necess
arily limit your losses to the intended amounts, since market conditions on an e
xchange on which the order is placed may make it impossible to execute such orde
rs. Similarly, you understand that using market orders can be risky, since large g
aps can occur in price movements of active stocks. Particularly during periods o
f high volume, illiquidity, fast movement or volatility in the marketplace, the
execution price received may differ, perhaps substantially, from the quote provi
ded on entry of an order, and you may receive partial executions of an order at
different prices. You understand that we are not liable for any such price fluct
uations. You also understand that price quotes generally are for only a small nu
mber of shares as specified by the marketplace, and larger orders are relatively
more likely to receive executions at prices that vary from the quotes or in mul
tiple lots at different prices.
Securities may open for trading at prices substantially higher or lower than the
previous closing price or the anticipated price. If you place a market order (w
hether during normal market hours or when the market is closed), you agree to pa
y or receive the prevailing market price at the time your market order is execut
ed. You understand that the price you pay may be significantly higher or lower t
han anticipated at the time you placed the order. To avoid buying a security at
a higher price and possibly exceeding your buying power, or selling it at a lowe
r price than you desire, you understand your option to enter a limit order. You
also understand that limit orders may not be executed at any particular time, or
at all if there is not sufficient trading at or better than the limit price you
specify. Our web site contains further information regarding orders types and l
imitations, which you agree to read and understand before placing such orders.
Account Maintenance Fee
An account maintenance fee may be assessed to transactional accounts and certain
other accounts. These fees may be assessed quarterly or otherwise. Please see t
he available pricing plans on our website for more information. The account main
tenance fee, like all other fees, may be changed by us from time to time and at
any time. Generally, account maintenance fees do not apply to subscription accou
nts, but other fees do.
We May Receive Payments for Your Orders
Using a computerized system, we route some customer orders to a particular broke
r/dealer or market center based on the exchange or market in which the security
is traded. When we do this, we may receive payment for order flow, a standard in
dustry practice where brokerage firms receive a small per-share rebate on orders
routed to certain market makers or specialists for execution. We will provide y
ou with information about the source and amount of compensation for any order yo
u placed if you make a request in writing. In addition, we may also receive comp
ensation that is not directly related to specific per-share amounts from market
centers but based instead on the overall quantity, quality and/or type of order
flow presented to the market center or otherwise. We monitor executions regularl
y to ensure that all orders are executed at prices equal to or better than the d
isplayed national best bid/offer price.
Selecting Markets for Your Orders
We may select the broker/dealer or market where we send your orders. You will no
t have the ability to direct your trades to a specific market for execution.
Reinvestment of Cash Distributions
You may choose to have your cash distributions (dividends, capital gains, and re
turn of capital) at or above specific thresholds automatically reinvested in the
securities that paid them. Cash distributions that are less than the specified
threshold will generally be swept into the then current sweep vehicle in accorda
nce with our then current sweep policies. We may change the threshold and freque
ncy for automatic reinvestments of distributions at any time and from time to ti
me without notice.
Partial Shares
You generally cannot transfer any partial (or fractional) share amount out of yo
ur account. If you want to transfer the securities in your account to another br
okerage firm and the receiving firm does not accept partial shares, we will tran
sfer your whole shares. Partial shares will be sold in the next window after we
receive your complete transfer instructions. The money from these partial share
sales will be deposited in your account and transferred according to the transfe
r instructions.
Taxes and Tax Lot Methods
In general, you will owe tax on any security you sell for a profit after subtrac
ting brokerage fees. If you sell a security for a loss, you may be able to deduc
t the loss and lower your taxes.
Our monthly, annual, account maintenance, IRA or other fees are not brokerage fe
es, and are not deductible from the sale of individual securities. But fees, kno
wn generally as commissions, for market, limit, stop and similar trades are gene
rally added to the cost basis of a purchase and deducted from the proceeds of a
sale.
We provide a number of ways to specify which tax lots are sold when you sell sec
urities. You can change the settings when you open an account or by clicking on
the Settings tab. The change you make in Settings will apply universally, every time
you sell shares. You can also change this setting from the page where you place
a trade, and the change you make there will only apply to the trade you are mak
ing.
Sweep Vehicle
The available cash in your account will automatically be invested pursuant to th
e terms of the sweep vehicle then applicable to that account, that amount of cas
h and the amount of cash then in that account. When and if the applicable sweep
vehicle is a money market fund, you are provided access on our Web site to the p
rospectus that describes the funds operation and costs.
When the applicable sweep vehicle for accounts is a bank account sweep vehicle i
t will be governed by the various terms and conditions attached as an Exhibit to
this customer agreement and included herein by reference. By maintaining an acc
ount with us you hereby agree to such terms and conditions in the Exhibit hereto
. We may change the selection of a sweep vehicle (including any available money
market funds or bank or insurance wrapped, or free credit vehicles or otherwise)
we use with prior notice to you and amounts in your existing sweep vehicle may
be converted to the new sweep vehicle, unless you instruct us otherwise. We rese
rve the right to change custodians for any sweep vehicle and may elect to expand
or restrict our offering of sweep vehicles.
You recognize that bank account sweep vehicles may offer Federal Deposit Insuran
ce Corporation insurance up to certain limits (please see the attached Exhibit f
or more information). Since your monthly account statement will detail activity
in any sweep vehicle, you agree that you will not receive a confirmation for tra
nsactions in your sweep vehicle. Any available cash in your account will be auto
matically invested in your sweep vehicle on a regular basis. We will redeem suff
icient amounts from your sweep vehicle to pay for security purchases in your acc
ount on settlement date. Unless margin purchases are then available and you have
elected to have margin available for your account and have been so approved, an
d then only within the applicable limits, you cannot enter purchase orders unles
s there are sufficient funds in your account (the amount available in the sweep
vehicle plus amounts settling from the sale of certain securities less or plus c
ertain other amounts (such as buys that have not yet settled or wires that have
been received that day)) to cover the amount of the purchase.
Managing Transactions in Your Accounts
When your buy order is executed, the amount of the purchase will likely be retai
ned in your sweep vehicle and earmarked to pay for the purchase. Although you wi
ll not be able to use this cash for other purposes, it generally will earn inter
est until it is transferred out of the sweep vehicle to settle your purchase. Mo
st trades settle in three business days from the purchase date. For trades that
settle in one business day, such as certain mutual funds, cash will be transferr
ed out of your sweep vehicle on the next business day after the trade date.
When you sell an investment, we will usually receive your money in three busines
s days, or in one business day, depending on the type of sale. As soon as we rec
eive your money, it will be invested in your sweep vehicle in accordance with ou
r then current sweep policies, which may be changed from time to time without no
tice.
If you send us a check, we will deposit it into your account and notify you by e
mail of the deposit in accordance with our then current policies, which may be c
hanged from time to time without notice. These funds will be invested in your sw
eep vehicle, generally no later than on the fourth business day after deposit, b
ut in accordance with our then current sweep policies. While you will usually be
able to make an investment in one to three business days after these funds are
deposited into your account, you will generally not be able to withdraw the mone
y from your account for some additional time in accordance with our then current
policies . Currently, we generally place at least a ten-day hold on the withdra
wal of monies deposited to an account by check, in accordance with our then curr
ent policies.
We will deduct from your account balance our fees and any other outstanding liab
ilities, such as overdrafts or debits, resulting from activities in your account
s. We will deduct these fees from any existing cash balances in your account. If
there is insufficient cash in your account, then we will redeem sufficient shar
es from your sweep vehicle to cover the balance owed. If there are insufficient
funds in your sweep vehicle to cover the fees, we will create a debit in your ac
count. We will require prompt payment of the amount owed and in all cases within
30 days for cash accounts. We will charge interest on the unpaid balance at the
margin rate listed below. If the debit has not been paid promptly, and in all c
ases within 30 days if the debit has not been paid, we will liquidate enough of
the holdings in your account to pay the amount owed. This will be done without c
onsideration of any tax consequence the sell order may cause. We are not liable
for any damages or losses to you due to so such liquidation of holdings, or due
to our failure to liquidate holdings within specified timeframes; you recognize
that the obligation to pay such debits is yours.
You pledge all assets in your non-IRA account(s) as collateral to secure your in
debtedness to us and these assets and accounts will be subject to a general lien
in our favor. All assets now or in the future held in your non-IRA account may
be pledged or otherwise used as collateral to secure the amount(s) owed to us.
Check Writing
You understand that the use of your checking account is governed by the rules of
the bank that provides check writing services for us, the Uniform Commercial Co
de, and federal and state laws. You will pay fees for our and the banks expenses
of operating the checking account, including fees for ordering checks, bouncing
checks, stop payment requests, and dishonored checks that are deposited to your
account. Please see our Fees on our Web site for the current list of charges.
Check Requests
We offer customer service assisted check requests. If you request that we send a
check to you, there will be a charge. Please see our Fees on our Web site for t
he current list of charges.
Transferring Funds Through Bank Wires
The Federal Reserve System processes bank wires. They are normally completed on
the business day following your request. There will be a charge for Bank Wire se
rvices; please see our Fees on our Web site for the current list of charges.
Electronic Fund Transfers (EFTs) Through ACH
The Automated Clearing House, ACH, processes electronic fund transfers. To use t
his service, your bank must be an ACH member, and one common name must appear on
both your account with your bank account and us. You can transfer anywhere betw
een $10 and $99,999 through ACH. Transfers are normally completed within three b
usiness days, and credits to your account may be on hold for five to seven busin
ess days thereafter, in accordance with our then current policies. We may limit
whether we accept or permit ACHs initiating or terminating at our site.
Account Statements and Confirmations Report Errors Immediately
You will receive notice by email periodically, but not less than quarterly, that
your account statement is accessible and available for viewing or printing from
our Web site. These statements will detail all activity recorded in your accoun
t. You will also receive notice by email that a trade confirmation is accessible
and available for viewing or printing from our Web site the business day follow
ing the date of activity. You are strongly encouraged to review these documents
promptly. We will conclude that all information is correct unless you contact us
promptly about any errors.
If, for any reason, you do not periodically receive emails from us notifying you
of your statement or trade confirmation delivery, you agree to notify us immedi
ately so that we can determine the cause of the notification failure and take ap
propriate steps to correct it.
Laws and Regulations Apply
All transactions executed through us are subject to the constitution, rules, reg
ulations, customs, and methods of doing business at the exchange, market, cleari
nghouse, or agency that processes transactions. Various federal and state laws a
nd regulations may apply to transactions in your account. These laws and regulat
ions may place restrictions on your ability to freely trade some securities if y
ou own restricted or control securities, or if an insider trading policy applies to
you. You agree to comply with all relevant legal requirements and only to effect
transactions through us that are legally permissible.
Securities Investor Protection Corporation (SIPC)
A brochure explaining the coverage provided by SIPC is available from us upon re
quest or on SIPCs website at www.sipc.org.
Joint Accounts
If this is a joint account, you understand that any account holder may exercise
complete control over the account as if he or she was an individual account hold
er. For example, any joint account holder may buy, sell, modify, receive money a
nd account documents, and make agreements relating to the account.
We will follow the instructions of any joint account holder, even if one account
holder asks us to deliver all funds to him or her. We will not inquire about th
e appropriateness of a request unless we receive a written notice. However, we m
ay impose a requirement that all account holders agree to a request if we believ
e it is necessary. We may seek payment of any and all fees or charges due from t
he account against one or more of the account holders individually.
Margin Accounts
Although we do not currently offer margin accounts, we plan to do so in the futu
re. These provisions will apply if you decide to use margin in the future.
General Margin Provisions
A margin account enables us to extend credit to purchase marginable securities, as
defined by the Federal Reserve Board and approved by us. All margin accounts ar
e subject to our approval. You acknowledge and understand that when you trade on
margin, you are borrowing from us. You agree to promptly satisfy all margin and
maintenance calls.
You agree to maintain, at all times, an amount of securities and/or cash great e
nough to satisfy all of our requirements and requirements of the Federal Reserve
Board. You acknowledge that margin transactions are riskier and can involve gre
ater loss than cash transactions. You understand that your financial exposure co
uld exceed the value of your securities. You should carefully examine your finan
cial resources, investment objectives, and tolerance for risk to determine if a
margin account is right for you. You agree to read and be bound by these provisi
ons and to contact us before trading on margin if you do not understand these pr
ovisions. Any transaction conducted under this margin agreement shall be subject
to the rules, regulations, rulings, and interpretations of the Financial Indust
ry Regulatory Authority (FINRA) and of any market and its clearing house, and to a
ll rules and regulations resulting from governmental acts and statutes as applic
able. The Federal Equal Credit Opportunity Act prohibits us (as a creditor) from
discriminating against credit applicants on the basis of race, color, religion,
national origin, sex, marital status or age (provided the applicant has the cap
acity to enter into a binding contract). By agreeing to these provisions, holder
s of margin accounts acknowledge and agree that (i) some of their securities may
be lent to us as principal or lent out to others by us, (ii) you may lose the a
bility to vote those securities, and (iii) they may receive dividend-in-lieu pay
ments instead of dividend payments as a result of our lending out securities.
Margin Requirements
Regulation T and House Credit LimitsRegulation T of the Federal Reserve System go
verns the amount of credit and the conditions under which credit is extended to
customers. Our requirements are equal to or more restrictive than the regulatory
requirements.
Our Margin RequirementsAll margin accounts are subject to the following requireme
nts:
Minimum equity in a margin account is $2,000, Initial margin of 50 percent of th
e current market value of the securities, and Maintenance margin of 35 percent o
f the current market value of most securities (maintenance margin may be higher
for highly volatile securities or for accounts that are highly concentrated rega
rdless of the volatility of the security held in the account or for any reason w
e deem appropriate in our sole judgment. A list of securities whose maintenance
percent is higher than 35% may be found on our website and may be updated freque
ntly). The minimum amount to open a margin account may consist of cash, marginab
le securities, or a combination of cash and marginable securities. You agree to
maintain such margins as we may require from time to time and to pay on demand a
ny debit balance owed on any of your accounts. You agree to be charged interest
on any credit extended to or maintained for you for the purpose of purchasing, c
arrying, or trading in any security.
Collateral, Liquidations and Covering Positions
You may be required to deposit additional collateral, in the form of cash or mar
ginable securities, and we may liquidate positions in your account for any reaso
n including, but not limited to, the following reasons:
A decline in the market value of the securities in the margin account, Extreme m
arket volatility or trading volumes, The equity in your account declines below t
he $2,000 minimum, Changes in the marginability or negotiability of your securit
ies, Your failure to promptly meet any call for additional collateral, A large c
oncentration in a volatile or illiquid security, Your intention not to meet a ca
ll for additional collateral, Filing of a petition in bankruptcy by you or again
st you, The appointment of a receiver is filed by or against you, An attachment
is levied against any of your accounts or any account in which you have an inter
est, Your death or incapacity, Our ability to borrow the securities you are requ
ired to deliver changes adversely, and Orders of any stock exchange/market or re
gulatory body.
In any such event, we, without prior notice or demand may:
Sell any and all securities and/or other property in your account(s), whether ca
rried individually or jointly with others, Buy to cover any and all securities a
nd/or other property which may be short in such account(s), and Cancel any open
orders.
Any such sales or purchases may be made at our sole discretion on any exchange o
r other market where such business is usually conducted, or in a public auction
or private sale. We may be the purchaser or seller for our own account. You will
be liable for any deficiencies in such account in the event of liquidation, in
whole or in part, by you or us.
Interest Rate
The annual rate of interest you will be charged on margin loans may vary from a
minimum of 0.5% above our base rate to a maximum of 1.75% above our base rate, d
epending upon the amount of your average debit balance.
Average Balance Debit Interest
to be Charged
Above Base Rate
$0-$49,999 +1.75%
$50,000-$99,999 +0.75%
$100,000+ +0.5%
Our base rate is established with reference to commercially recognized interest
rates, industry conditions regarding the extension of margin credit, and general
credit conditions, and unless otherwise stated is the then applicable Fed Funds
Rate plus 2.5%. The annual rate of interest is subject to change without prior
written notice in accordance with changes in the base rate. Interest is computed
monthly on the average debit balance during the month. Settlement date debit ba
lances and free credit balances in the cash account will be applied to the margi
n account balance if the margin account has a debit balance. A cash account sett
lement date debit balance will increase the amount of margin to be charged. A ca
sh account free credit balance will reduce the amount of margin interest to be c
harged. If, during the month, there is a change in interest rates, separate char
ges will be shown on your statement for each interest period under the different
rate.
Your rate of interest may be changed without notice in accordance with changes i
n the base rate and your average debit balance. When your interest rate is to be
increased for any other reason, you will be given at least 30 days written noti
ce. Your monthly statement will show the dollar amount of interest and the inter
est rate charged to your account. We use a calendar month basis to calculate int
erest.
Disclosure of Credit Terms on Margin Transactions
Securities and Exchange Commission Rule 10b-16 requires a broker who extends cre
dit to a customer in connection with any securities transaction to furnish the c
ustomer specified information describing the terms, conditions, and methods by w
hich interest charges are made to customers accounts. The information set out bel
ow is being provided to you in conformity with that rule. Interest will be charg
ed on all accounts for any credit extended to or maintained for you for the purp
ose of purchasing, carrying, or trading in securities or otherwise.
Margin Account Restrictions
If your account is restricted for any reason, you will not be able to execute an
y order until the restriction has been lifted, or until sufficient cash is in th
e account for purchases and securities are in the account in the case of sales.
Custodial Accounts for Minors
We will maintain custodial accounts for minors under the Uniform Gift to Minors
Act or the Uniform Transfer to Minors Act. If this is a custodial account, you u
nderstand that the assets in the account belong to the minor. If you transfer as
sets out of the account, you understand that they must be used for the benefit o
f the minor.
Closing and Closed Accounts
You or we may close your account at any time. This customer agreement will remai
n binding until we acknowledge in writing that it is no longer binding. You will
remain responsible for all charges, debts, or other transactions if they arise
before or after your account is closed. Any service fee to close an account will
be posted under our Fees on our web site and is subject to change from time to
time. We reserve the right to charge a service fee or close any account that fai
ls to maintain minimum balances. We will notify you of any actions or charges we
take against your account. IRA accounts will also be assessed the Annual Custod
ian Fee applicable to your account and pricing plan at the time of termination f
or the calendar year.
If you close your membership and the associated accounts, we will restrict your
accounts and stop charging you the Folio Unlimited Plan Fee or Basic Plan Accoun
t Service Fee as applicable. If any residual balance remains in your accounts th
en we will charge you the lesser of the then applicable Closed Account Residual
Balance Fee or the remaining balance in your accounts until your balance reaches
zero. This fee covers subsequent statements and other reporting for your accoun
t. Other fees may also apply to a closed account, for example the fee for reques
ting a check to be mailed to you for a residual balance. Residual balances may i
nclude interest and dividends received after you remove your assets. If you remo
ve assets from your accounts without contacting us to close your membership we w
ill continue to bill your accounts the applicable membership fees until your bal
ance reaches zero, at which time we will close your accounts.
Unclaimed Property/Escheatment
In the event assets remain in your account for a period of time and we are unabl
e to reach you, your assets may be transferred to the appropriate state if no ac
tivity occurs in your account within the time period specified by applicable sta
te law. For more information about the treatment of unclaimed property in your s
tate and the escheatment process, you should contact the appropriate state gover
nment agency of the state in which you reside.
Special Provisions regarding Advised (or Managed) Accounts
The following provisions apply for all of your accounts managed by an advisor. B
y signing or typing your name to this agreement or authorizing your advisor to d
o so, you agree to this agreement as amended by us from time to time. By using o
ur site or authorizing your advisor to do so, you agree to any online agreements
that we post on our site, including any changes we make to these agreements (of
which your advisor should inform you). You agree that these agreements are the
legal equivalent of signed, written contracts, and equally binding.
You certify that:
Your advisor has investment discretion and trading authority over your assets he
ld with us. Your advisor has the authority to receive prospectuses for securitie
s purchased for your account for which prospectuses are required to be delivered
. Your advisor has the authority to receive trade confirmations for trades made
in your account and statements for your account (and you, too, will have access
to statements in your account). Your advisor has the right to be paid their fee
from assets in your account. Your advisor has access to review and update certai
n elements of your profile and account information, and has the ability to view
any action in your account even if such action is taken directly by you separate
ly from your advisor. You agree to the Special Provisions Regarding Proxy Voting
and Certain Voluntary Corporate Actions, below. You will first call your adviso
r (before calling us, which you may do if necessary) if you have questions about
your account or any transactions. Your advisor may in turn call us if assistanc
e is required. Your advisor may incur fees in your account through trading or sp
ecial service requests. Either you or your advisor may close your account at any
time. This agreement will remain binding until we acknowledge in writing that i
t is no longer valid. You are allowing us to debit your account for all fees pay
able to your advisor (as well as fees payable to us). Upon notice of account clo
sure or transfer, we also reserve the right, but we are not obligated, to bill y
our account for management fees submitted via invoice from your advisor in the a
mounts provided by your advisors client agreement with you. Any discrepancy in fe
e amounts or prorated fees must be addressed directly with your advisor. You aut
horize us to accept instructions from your advisor and to take all actions that
are necessary or incidental to such instructions without obtaining your approval
or counter-signature. You indemnify and hold us and our affiliates, directors,
officers, employees, and agents harmless under this agreement from and against a
ll claims, actions, costs, and liabilities, including attorneys fees, arising fro
m or related to the performance or non-performance, delivery or non-delivery of
services by your advisor and any dispute between you and your advisor that does
not directly result from our performance of brokerage services as set forth in t
his agreement.
Special Provisions for Proxy Voting and Certain Voluntary Corporate Actions
We understand that voting on various matters now presented for shareholder actio
n, such as views on various social issues and even executive compensation levels
, can be a personal decision and preference for you. Our website provides for el
ectronic delivery to you of all relevant proxy voting information and allows you
to vote proxies easily (and also respond to certain voluntary corporate actions
). Consequently, many advisors do not accept authority and responsibility for pr
oxy voting with that authority retained by the client. Other advisors do accept
the authority and responsibility to vote. Our website allows you to grant an adv
isor or other third party (such as a proxy advisory firm), the ability to vote p
roxies and respond to certain voluntary corporate actions, in addition to you, b
ut you will also retain this right and receive delivery of applicable documents
unless this right is specifically disclaimed by you. Generally, however, advisor
s do not accept this sole and exclusive authority and the authority to vote prox
ies remains solely with you or is retained by you. If you wish to disclaim this
right you may do so by: i) making a different arrangement with your advisor or a
nother person (such as a proxy advisory firm) to vote on your behalf, ii) notify
ing us of that different arrangement in writing and stating that you disclaim th
e right to also receive documents and be able to vote or respond to such actions
, and iii) instruct us to deliver the applicable documents that would otherwise
be provided to you to be provided instead exclusively to your advisor or such ot
her person.
Please note, this right of yours to vote and/or to decide voluntary corporate ac
tions is retained by you even if your advisor or another has also been authorize
d by you to vote proxies and/or respond to voluntary corporate actions on your b
ehalf through our services and even though we are also providing them notice of
such actions and access to vote or respond to such voluntary corporate actions (
unless you specifically disclaim such right). Consequently, in those circumstanc
es, we will deliver proxy and voluntary corporate action information both to you
and to your advisor or the other person you designate. In this manner, you rema
in aware of all corporate actions and can exercise your right to vote, or rescin
d any authority to vote you may have also granted to another, on any particular
item or generally. If there is a particular matter on which you wish to ensure t
hat only you can vote where you have also provided voting authority to another,
please call our customer service representatives. Additionally, if you have esta
blished an alternative means for you and/or your advisor or another person to vo
te proxies or decide corporate actions outside the scope of this agreement and o
ur services and no longer wish to receive any related proxy or corporate action
documents, please notify us in writing so that we may discontinue providing deli
very of such documents to you.
Limitations on Watch Accounts
You may have up to ten Watch Folios and place up to 20 Folio trades a day in you
r Watch Account, in accordance with our then current policies. You can also dele
te a Watch Account Folio and create a new one.
High Volume Trading Fee
In the extraordinarily unlikely event that you have one or a combination of trad
ing strategies where the total number of securities you trade in windows exceeds
the incredibly high threshold of 2,000 in a calendar month we will charge a fif
ty cent ($0.50) fee for each additional security trade in a trading window over
2,000 in a calendar month which is more than most customers need or want. Most U
.S. listed stocks, ADRs and ETFs are available in trading windows. We do not sup
port most Pink Sheet, Bulletin Board or debt securities.
Modifying This Agreement
We can amend this agreement and the terms and conditions of your use of our onli
ne services by notice to you. Your conduct of any business through our Web site
after notice of such amendments will constitute your agreement to the amendments
. If a provision of this agreement is or becomes inconsistent with any law or re
gulation, the provision in question will be amended to conform to the law or reg
ulation, and all other provisions will remain binding.
The internal laws of the Commonwealth of Virginia, without regard to its choice
of law provisions, shall govern this agreement and its enforcement.
This agreement shall cover all accounts opened by you. Its terms and conditions
shall apply to your successors and anyone you assign it to, and to our successor
s and anyone we assign it to.
Arbitration
Pre-Dispute Arbitration Agreement
This agreement contains a pre-dispute arbitration clause. By signing an arbitrat
ion agreement the parties agree as follows:
All parties to this agreement are giving up the right to sue each other in court
, including the right to a trial by jury, except as provided by the rules of the
arbitration forum in which a claim is filed.
Arbitration awards are generally final and binding; a partys ability to have a co
urt reverse or modify an arbitration award is very limited.
The ability of the parties to obtain documents, witness statements and other dis
covery is generally more limited in arbitration than in court proceedings.
The arbitrators do not have to explain the reason(s) for their award.
The panel of arbitrators will typically include a minority of arbitrators who we
re or are affiliated with the securities industry.
The rules of some arbitration forums may impose time limits for bringing a claim
in arbitration. In some cases, a claim that is ineligible for arbitration may b
e brought in court.
The rules of the arbitration forum in which the claim is filed, and any amendmen
ts thereto, shall be incorporated into this agreement.
You agree that all controversies between us will be settled through arbitration
as provided for by the Financial Industry Regulatory Authority. You understand t
hat we must use arbitration to decide and settle all controversies arising betwe
en us about any issue related to your account or this customer agreement. Any ju
dgment resulting from arbitration may be entered in any court of competent juris
diction.
You cannot bring a putative or certified class action to arbitration. You cannot
seek to enforce a pre-dispute arbitration agreement against:
Any person who has initiated a putative class action in court, or
A member of a putative class unless the person has opted out of the class with r
espect to all claims.
You can seek to enforce a pre-dispute arbitration agreement against those mentio
ned in items 1 and 2 in the immediate preceding paragraph when:
The class certification is denied, or
The class is decertified, or
The customer is excluded from the class by the court.
You will not have waived your rights to enforce an arbitration agreement by comp
lying with this agreement concerning class actions.
EXHIBIT - Terms and Conditions of Bank Sweep Vehicle
This document contains important information about our Insured Deposit Cash Swee
p Account (IDCSA) program.
Brokerage Accounts with IDCSA.em> Opening or maintaining a brokerage account wit
h us automatically enrolls you in an IDCSA as your sweep vehicle that may includ
e one or more optional cash deposits (OCDMs). You appoint us as your authorized ag
ent and custodian pursuant to the terms and conditions of the brokerage account
agreement, including this Exhibit, all of which we may modify from time to time
by written notice to you. In addition to the automatic sweep function you may al
so elect to deposit all or some of your cash into an optional cash deposit mecha
nism (the cash in which is placed in the IDCSA just like any cash automatically
swept). One or more OCDMs may be made available to you depending on the type of
brokerage account you have and perhaps other factors. OCDMs are part of the IDCS
A Program and monies in that Program are held at the Program Banks or Direct Ban
ks as described below. Depositing to the Program through an OCDM will require yo
u, or a person acting on your behalf (such as an advisor with authority to do so
) to elect specifically to deposit amounts into the IDCSA through the OCDM each
time you wish to move moneywe will not deposit money into the IDCSA automatically
for you through the OCDM as we do for amounts subject to the automatic sweep me
chanism. By doing the work to make the automatic deposits yourself and determini
ng how much you wish to deposit on your own, if you are eligible to do so throug
h an available OCDM, you may earn higher yields than on the amounts automaticall
y swept into the IDCSAs.
Our IDCSA Program may use two sets of banks, Program Banks and Direct Banks. In
both cases Deutsche Bank Trust Company Americas (DBTCA) will perform administrativ
e tasks such as record-keeping of customer beneficial interests and permitted wi
thdrawals and interest and fee calculations. With respect to Direct Banks, DBTCA
will treat them as though they are Program Banks with the intent that all IDCSA
Program accounts satisfy guidelines issued by the Financial Industry Regulatory
Authority applicable to us regarding bank sweep programs. Material differences
in the handling of cash flows for Program Banks and Direct Banks are set out bel
ow. Regardless of whether the money is deposited through the automatic sweep opt
ion or OCDM option, we will place your money in a Federal Deposit Insurance Corp
oration (FDIC) Insured money market account at a depository institution (Program Ba
nk or Direct Bank, collectively Bank). Individual, business, corporate, joint, gifts-
to-minors and retirement accounts are all eligible and included in the Program.
Each cash sweep and each deposit through an OCDM from your account is a deposit
in a Bank and that deposit is solely the obligation of the Bank and not us. We a
ct only as agent and custodian for you, the depositor. In the event any Bank par
ticipating in the IDCSA Program rejects any additional deposits or withdraws ent
irely or is terminated from the Program by us, then we, as your agent, are autho
rized by you to move your deposit to another Bank. In the event we are unable to
make such alternate arrangements (which we do not expect will be the case), we
will transfer your balance to a money market fund that we will have designated a
s an alternate sweep vehicle and alternate OCDM vehicle, or to your brokerage ac
count (where it will be held as a free credit). In either event we will notify you
of such action.
Cash balances deposited into the Banks are not covered by the Securities Investo
r Protection Corporation (SIPC). Instead, all cash deposits by account type in the
IDSCA (which for all purposes herein includes amounts in the IDCSA deposited th
rough the automatic sweep function or the OCDM) are fully covered by insurance f
rom the FDIC, up to certain amounts. Ordinarily, an individual bank can only pro
vide insurance of $250,000 for non-retirement accounts and $250,000 for retireme
nt accounts. We provide extended FDIC Insurance by placing your cash in multiple
Banks when it meets the limits of any bank. For example, if there were fifteen
(15) Program Banks in the Program at such time, the applicable insurance limits
are $3.75 million for non-retirement accounts and $3.75 million for retirement a
ccounts (subject to the combined total of all your deposits at a specific Bank,
including those accounts you maintain at a Bank outside of the Program). General
ly, all of a persons accounts are counted together if they are of the same accoun
t type. For example, all IRAs for individuals are counted together towards the $
3.75 million limitation, and all of a persons individual accounts (including acco
unts held as a sole proprietorship) are counted together towards the $3.75 milli
on limitation. But accounts of a different type (such as IRA versus an individua
l account versus a corporate account and even versus a joint account) are not ag
gregated with each other for purposes of these limits.
You can get publicly available financial information concerning any or all of th
e Banks at http://www.ffiec.gov/nicpubweb/nicweb/nichome.aspx and more detail on
FDIC insurance from http://www.fdic.gov/deposit/deposits/index.html or by conta
cting the FDIC Public Information Center by mail at 801 17th Street, N.W., Room
100, Washington, DC 20434 or by phone at 1-877-275-3342.
All questions regarding your Program account should be directed to us, not the B
anks. Current interest rates and other information can be obtained by accessing
the information on our web site. By your continued use of the IDCSA, you agree t
o the terms provided herein. We may, without notice, refuse any deposit, close a
ny account or impose a fee, if your actions become administratively burdensome.
Our Status and that of the Program Banks. All Banks in our IDCSA Program are dep
ository institutions duly chartered under the laws of the United States or a Sta
te thereof, the deposits of which are insured by the FDIC. We are a broker-deale
r registered with the Securities and Exchange Commission and a member of FINRA.
We are not a bank. All amounts deposited in IDCSAs through the automatic sweep v
ehicle or an OCDM are held by the respective Banks, not by us. Amounts in the ID
CSAs are not covered by SIPC insurance. Amounts held in IDCSAs are insured inste
ad by the FDIC up to $250,000 for both retirement and non retirement accounts pe
r account type per Bank (and the IDCSA Program uses multiple Banks to obtain a m
ultiple of coverage over the $250,000), subject to the combined total of all you
r deposits at a specific bank, including those deposits made in accounts you mai
ntain at a Bank outside of the Program.
The separate accounts established by us on your behalf will be evidenced by a bo
ok entry on the account records of each such Bank. No evidence of ownership, suc
h as a passbook or certificate, will be issued to you. Accordingly all transacti
ons involving your IDCSA must be made through us.
FDIC Insurance for Your Account. The IDCSAs at the Banks are insured in the even
t a Bank fails by the FDIC, an independent agency of the U.S. government, to a m
aximum amount of $250,000 per account type including principal and accrued inter
est to the day the Bank is closed, when aggregated with all other deposits held
by you in the same capacity at the same Bank. Your funds become eligible for dep
osit insurance immediately upon placement in a Bank or deposit account by us as
agent for you under the IDSCA Program. While in transit from us to the Program B
anks and from the Program Banks to us the funds pass through our intermediary ba
nk (currently DBTCA). Funds in transit from us to Direct Banks and from Direct B
anks to us do not pass through an intermediary bank. Funds at DBTCA are also eli
gible for FDIC Insurance, to a maximum amount of $250,000 per account type, when
aggregated with any other deposits held by you in the same capacity at DBTCA. I
t is possible that your funds in transit at DBTCA will exceed the maximum amount
of FDIC coverage available through DBTCA as an individual bank; therefore the a
mount that exceeds that amount may not be covered by FDIC insurance until such f
unds are remitted to Program Banks. Certain provisions apply to late received fu
nds (see Interest below).
You may wish to compare the terms, rates of return, required minimum amounts, ch
arges and other features of our IDCSA (both through the sweep mechanism as well
as the OCDM) with other accounts and alternative investments at other brokerages
. Generally our rates of return are at the low end of rates available in the mar
ketplace and more similar to rates payable on cash in checking accounts than in
higher yielding cash-based investment accounts. If cash sweep rates are material
to your decision as to where to have an investment account you should compare o
ur rates with those at other institutions and review the overall package of serv
ices and benefits we offer to those offered at such other institutions in making
your decisions.
If your funds are deposited into a Bank where you already hold one or more depos
it accounts at such Bank in the same capacity in which you hold your account wit
h us, balances in those accounts would be aggregated with your interest in the I
DCSA at the same Bank for FDIC insurance purposes. Therefore, you may wish to ex
ercise your right to instruct us not to deposit any of your funds to such a spec
ific Bank.
If your funds exceed the capacity of the Banks to provide deposit insurance, you
r funds will be swept into a single Bank as selected by us, which may be a Progr
am Bank or a Direct Bank, with such excess not covered by FDIC insurance or mult
iple Banks on a pro rata basis with such excess not covered by FDIC insurance. W
e intend to continue to work to increase the FDIC insurance available under our
IDCSA Program, by adding additional Banks to exceed the amounts currently availa
ble.
Deposits. There is no minimum initial deposit (but you may earn little or no int
erest in certain deposit tiers). Funds deposited by us into the IDCSA will begin
earning interest from the day they are received by the Banks (see Interest belo
w). Your deposit will be in book entry form, therefore, you will not receive a p
assbook or a certificate. The list of Banks participating in the IDCSA Program i
s updated from time to time and the updated list is available on our web site. Y
ou may exclude any Bank from being able to receive amounts from your IDSCA at an
y time. We inform you which Banks your account is deposited in on your monthly s
tatement. We reserve the right to choose the priority of Banks in which your fun
ds are placed. Further, we reserve the right to include additional Program Banks
and Direct Banks, as well as delete Program Banks or Direct Banks. We provide n
otice through postings on our website.
Withdrawals. All withdrawals necessary to satisfy debits in your brokerage or tr
ansaction accounts will be made by us as your agent. A debit will be created, fo
r example, when you purchase securities or request withdrawal of funds from your
brokerage account or when you write a check, or otherwise withdraw funds (such
as through an ACH). Checks written on your brokerage account are not drawn direc
tly against the amounts deposited for you at any of the Banks, but the money is
transferred back from the Banks to either our intermediary bank (DBTCA) and then
to us in the case of Program Banks or simply directly to us in the case of Dire
ct Banks, and then used to satisfy your debit through the IDCSA.
The funds necessary to satisfy debits in your securities account will first be o
btained from free credit balances in your brokerage account (if any), and then w
ithdrawals will be made automatically from the IDCSA to the extent of amounts de
posited through the automatic sweep function. Only amounts that were deposited i
nto the IDCSA through the automatic sweep mechanism will be made available by us
to satisfy a debit in the account automatically. Amounts deposited into the IDC
SA through an OCDM must first be withdrawn through the OCDM by you or your agent
(through a sale on the brokerage platform) after which they may be available to s
atisfy a debit.
Interest. Interest on funds in the IDSCA will accrue daily as simple interest an
d be credited to your account monthly, at which time it will earn simple interes
t with your principal balance. Interest begins to accrue on the day of deposit t
o the Bank and up to, but not including, the day of withdrawal. This method appl
ies a daily periodic interest rate based on the balance level in the IDSCA. The
daily rate is 1/365 (or 1/366 in a leap year) of the interest rate. 1099-INT for
ms will be sent to you indicating the amount of interest paid to your IDSCA by t
he Banks. For late received funds, primarily new money received into an account
by us after noon on a business day when both we and Banks are open and that is t
o be automatically swept into the IDCSA (usually for late received wires or ACHs
or money received on a business day when either we or the banks are closed), su
ch money may or may not be deposited under the Program that day, and if deposite
d under the Program that day may or may not be available for deposit in multiple
Banks that day. If such funds are not deposited under the Program that day, suc
h funds will be deposited under the Program no later than the next business day
that we and the Banks are open. If such funds are deposited under the Program th
at day then they may, until the next business day when both we and the Banks are
open, be deposited in a single Bank, (which for this purpose only would include
DBTCA), receive only that amount of FDIC insurance available from a single bank
, and begin to earn interest only from the next business day when both we and ba
nks are open (at which time such funds shall also be available for deposit in mu
ltiple Banks).
Rates earned on amounts automatically swept and on amounts deposited through the
OCDM functions will be established periodically by us based on prevailing marke
t and other business conditions and may vary depending on the balance in your ac
count and the mechanism (automatic sweep or OCDM) used to deposit the funds into
your IDCSA. Current interest rate information and an explanation of the rate ca
lculation is available on our websites.
Rates on the amounts automatically swept will be paid as specified on our websit
e, but generally are expected to be on a blended, tiered basis, meaning that the
amounts paid increase on the cash amounts at higher tiers. In addition, the tie
rs are based on the total amount of cash balances in all your accountsregardless
of account typethat are aggregated at the taxpayer ID level for amounts that are
automatically swept. This is different from the aggregation for FDIC insurance p
urposes. For FDIC insurance purposes you want to keep as many separate buckets ava
ilable as possible so you can obtain additional insurance. For interest rate tie
ring purposes, you want to aggregate as many accounts together as possible for p
urposes of receiving higher rates. Under our IDCSA Program we are able to accomp
lish both goals for the amounts that are automatically swept. For the amounts th
at are deposited through an OCDM, interest may be earned on a flat rate basis (w
here all amounts deposited earn the same rate) or on a dollar one basis where diff
erent rates are paid depending on the total amount deposited through that OCDM i
n a particular account or folio (the rate is not blended). For an OCDM, there is n
o aggregation of accounts for purposes of determining rates, but there still is
for FDIC purposes.
For example, if we were to payfor amounts that are automatically swept0.1% on mone
y invested between $0 and $10,000 and 0.5% on money invested between $10,000 and
$30,000 and you had a total of $20,000 in two accounts under the same taxpayer
ID, one an IRA and one an individual account, then under our IDSCA Program, you
would receive 0.1% on the first $10,000 and 0.5% on the second $10,000 (for your
aggregated total of $20,000) for tiering purposes. If the same amounts were dep
osited in the IDCSAs through an OCDM instead of being swept, and the OCDM paid a
flat rate of .25% then you would earn .25% on the full $20,000 (because all amo
unts earn the same rate.) If amounts deposited through the OCDM in the separate
accounts/folios paid a rate of 0% for amounts up to $5,000 and 0.5% on all amoun
ts (including from dollar one) deposited through that specific accounts/folios OCDM
if such amount is over $5,000, then the rate paid here would depend on the distr
ibution of the $20,000specifically if the $20,000 was broken up as $5,000 in one
brokerage account/folio and $15,000 in another, then the first one would earn no
interest and the other would earn 0.5% on the $15,000. If the $20,000 were even
ly divided however, then each $10,000 amount would earn 0.5% (because each is ov
er $5,000). In other words, each amount, whether at the account or folio level,
deposited through the OCDM stands on its own for purposes of determining the int
erest earned and is not aggregated with amounts automatically swept. In all inst
ances, each account, because they are different account types, would still separ
ately qualify for FDIC insurance up to the respective limits for such account ty
pes.
The actual rates and tiers are subject to change without prior notice. Please se
e our website for the current rates and tiers.
Fees. No direct fees will be assessed to you or deducted from your specified rat
e of return for amounts automatically swept. We reserve the right to charge a fe
e for amounts deposited or withdrawn through an OCDMany such fee will be disclose
d with applicable rates for the OCDM. Fees are collected directly from, or deduc
ted from gross payments made by, Banks depending on the specifics of the operati
onal set-up with each Bank.
In the case of Program Banks, the fee of the intermediary bank (DBTCA) will be col
lected from the Program Banks in the form of fees collected in addition to inter
est paid on the IDCSAs. We will receive a fee from DBTCA that varies depending o
n the interest paid on the IDCSAs. The more interest paid to you the less we ear
n. Under our agreement with DBTCA as the Program sponsor, we would expect that t
he total amounts payable by DBTCA to us would be in the range of Federal Funds E
ffective Average Rate (the rate for deposits in U.S. Dollars most recently publi
shed on the website of the Board of Governors of the Federal Reserve System at:
http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt) plus 10 to
plus 275 basis points (bps), minus the amounts paid as interest on the IDCSAs.
In the case of Direct Banks, our fee will generally be deducted by us from the g
ross interest paid on the IDCSAs. Our fee varies depending on the interest paid
on the IDCSAs. The more interest paid to you the less we earn.
The actual amounts paid as interest on the IDCSAs are subject to change and vary
depending on the tier, the mechanism used for the deposit (automatic sweep or O
CDM) and other factors (please see our website). Our fee (the Program Fee) current
ly is expected to range, from i) a low of 10 bps to ii) a high of the Federal Fu
nds Effective Average Rate plus 275 basis points or such rate that DBTCA negotia
tes with each Program Bank less their fee given the low Federal Funds Effective
Average Rate. DBTCA expects that its fee under the Program will range from 15 to
50 bps. Given the current uncertainty in the interest rate market, changes in B
anks and our ability generally to participate in the Program, the fees payable t
o us could materially change.
The fees are subject to change and we may also waive all or part of any fee. Oth
er than the Program Fee, and applicable fees imposed by us on a brokerage accoun
t or deposits or withdrawals through an OCDM, there will be no charge, fee or co
mmission imposed on your account with respect to the IDCSA. The amount of intere
st we pay on the IDCSA for given levels of assets in the IDCSA is provided on ou
r web site and may vary from time to time.
Account Information. Activity with respect to your IDCSA, including the Banks in
which your IDCSA is invested and the interest rate(s) paid to you, will appear
on your periodic brokerage account statement. You may contact us to obtain infor
mation about your IDCSA deposits, including balances held on the books of each B
ank, activity in the account, and the current interest rate(s) paid to you.
Summary of Certain Relationships. We will act as exclusive custodian and agent w
ith respect to all transactions related to your interest in any IDCSA. No Bank w
ill accept any instructions concerning your interest in an IDCSA on deposit in a
Bank through an IDCSA under the Program, unless such instructions are transmitt
ed by us or an authorized agent on our behalf. We will assume the responsibility
and the risk of loss for any funds transfers of yours that have theretofore bee
n delivered by you to us until such time as the funds have been received in the
deposit account (Settlement Account) maintained by us at a designated bank (Settlem
ent Bank, which shall be DBTCA, unless another bank is designated by us) for the
purpose of transmitting funds from the Program Banks through the Settlement Bank
to us, and from us through the Settlement Bank to the accounts at the Program B
anks. We will also assume the responsibility and the risk of loss for any funds
transfers of yours that have theretofore been delivered by you to us until such
time as the funds have been received in the deposit account maintained at a Dire
ct Bank. Withdrawals will be deemed paid by a particular Program Bank when such
funds are transmitted by such Program Bank to the Settlement Account and such Pr
ogram Bank will be released from all liability for such withdrawn funds once the
Program Bank delivers those funds to the Settlement Account. Withdrawals will b
e deemed paid by a particular Direct Bank when such funds are transmitted by a p
articular Direct Bank to us and the Direct Bank will be released from all liabil
ity for such withdrawn funds once it delivers those funds to us. Neither the Pro
gram Banks nor the Direct Banks are responsible for the actions of DBTCA or us w
ith respect to the IDSCA Program or otherwise.
Waiver of Confidentiality. You expressly give consent for federal or state regul
ators to access your customer account information for audit and review purposes.