Investment Advisory and Financial Planning Compliance Manual

Transcription

1 Investment Advisory and Financial Planning Compliance Manual June 27, 2011

2 Table of Contents. Section 1: Introduction Section 2: Compliance Program Background Development, Distribution, and Amendments of Compliance Policies and Procedures Annual Reviews of Policies and Procedures Designation of a Chief Compliance Officer Section 3: General Roles and Responsibilities of the Firm and Agents Compliance with Applicable Laws and Regulations Fiduciary Duty Prohibited Activities Section 4: Registration & Licensing Form ADV Form ADV Part 2B Additional Requirements Form ADV-W State Registration Notice Filings Agent Registration Fingerprint Cards Filing Fees & Renewals Dual Registration of Agents Section 5: Complaints Definition of Complaint 1 P age

3 Notification by Agents Filing Requirements Investigation of Complaints Section 6: Disclosures Brochure Rule Initial Delivery (Form ADV Part 2A and 2B) Brochure Rule Annual Delivery Offer (Form ADV Part 2A and 2B) Brochure Rule Customer Requests for a Copy of the ADV (Form ADV Part 2A and 2B) Electronic Delivery of Information Proxy Voting Policy. Code of Ethics Privacy Policy Initial Delivery Privacy Policy Annual Delivery Supplemental Disclosures Section 7: Agreements and Contracts Requirement for Advisory Agreements Delivery of Advisory Agreements. Section 8: Custody Definition of Custody Policy on Custody Notification of Custody Notification of Qualified Custodian Account Statements Section 9: Financials Minimum Requirements Customer Refunds Section 10: Communications 2 P age

4 Background Written Correspondence Public Appearances and Presentations Electronic Communications Web Sites Social Media and Social Networking Sites Use of Senior-Specific Certifications and Professional Designations Section 11: Advertising & Marketing Background Testimonials Use of Customer Surveys Use of Third Party Ratings Use of Advisory Customer List Past Recommendations. Graphs, Charts, Formulas, and Other Materials Offer of Free Reports, Analysis, or other Services Performance Section 12: Solicitors Background Firm Policy Qualifications & Registration of Solicitors Solicitor Agreement Solicitor Disclosure to Customers Section 13: Trading and Valuation Practices Background Bunched Transactions Agency Cross Transactions Principal Transactions Directed Brokerage Trading Errors Best Execution Trade Allocations Soft Dollars Valuation of Securities 3 P age

5 Supervision of Customer Activity Section 14: Anti-Money Laundering Program Background Interim Requirements General Statement of Policy Senior Management Approval Understanding Money Laundering and Terrorist Financing Designation of an AML Compliance Officer Know Your Customer Monitoring Investment Activity Suspicious Activity Reports ( SARs ) Required Reporting for Certain Currency Transactions and Foreign Accounts Information Sharing under the PATRIOT Act Prohibited Customers and Transactions Office of Foreign Asset Control ( OFAC ) AML Training Independent Testing Section 15: Business Continuity Planning Business Continuity Plan Business Continuity Notice Section 16: Insider Trading Background Material Information Non-Public Information Insider Trading Compliance Requirements Section 17: Proxy Voting/Class Action Litigation Proxy Voting Class Action Lawsuits. 4 P age

6 Section 18: Privacy and the Safeguarding of Customer Information Background Firm Policy Safeguarding Customer Information Violations of the Firm s Policy Actions in the Case of Breaches Privacy Notice Section 19: Code of Ethics Section 20: Books and Records Background Required Recordkeeping Records Maintained at Branch Offices Electronic Storage of Books and Records Section 21: Financial Planning General Policy Compensation Required Agreements Billing for Financial Planning Services Receipt of Compensation Duties in Providing Financial Planning Services Recordkeeping Appendix 5 P age

7 . Section 1: Introduction The Compliance Manual has been developed to provide structure and policies for Woodstock Financial Group, hereinafter known as Firm, and its investment advisory representatives, hereinafter known as agent in the conduct of investment advisory business. It is designed as a permanent record that will be periodically reviewed and updated. The Firm endeavors and requires its agents to conduct business with integrity in accordance to ethical and professional standards and in a manner that is consistent with the rules and regulations applicable to the Firm. More so, the Firm has a fiduciary duty to its customers. The Firm and its agents should be thoroughly familiar with the contents of the Compliance Manual in the conduct of investment advisory business Section 2: Compliance Program Background The Firm is required to, prior to providing investment advice to customers, to: Adopt written compliance policies and procedures; Conduct annual review of those policies and procedures; and Designate a Chief Compliance Officer. Development, Distribution, and Amendments of Compliance Policies and Procedures The Firm has developed the Compliance Manual as a means of adopting and implementing policies and procedures reasonably designed to prevent violation, by the Firm, its agents, and personnel, of the Investment Advisers Act of 1940 and other applicable regulations. The policies and procedures are further designed as a means to detect violations of regulations and providing a means and method for correcting such violations. The Firm, through its Designated Person, is responsible for updating the Compliance Manual for changes in business activities, regulations, results from an annual review of the Firm s compliance program prompting changes to the policies be made, results of regulatory audits prompting changes to the policies be made, and the identification of conflicts of interest not previously adequately addressed in the Firm s Compliance Manual. Any amendments to the policies and procedures will be made on a timely basis. The Firm will maintain copies of the Compliance Manual and any amendments in appropriate files for a period of not less than five years. The Firm, through its Designated Person, is responsible for the distribution of the procedures to agents and personnel of the Firm. The Designated Person will provide instructions for the Compliance Manual and 6 P age

8 subsequent amendments to be posted to the Firm s web site for access by the Firm s agents and personnel. The Designated Person will be responsible for communicating to agents and personnel of amendments or revisions to the Firm s Compliance Manual, which will be accomplished via electronic notifications, unless an alternative means of delivery is deemed to be more practical or desirous. The Firm will maintain copies of any electronic notifications or other notifications in the appropriate firm files, or, alternatively, attestations by agents and personnel that they have reviewed the Firm s Compliance Manual. Agents and personnel of the firm are required to review and become thoroughly familiar with the contents of the Compliance Manual. If so required, agents and personnel will be responsible for timely submissions of attestations concerning the review of the Compliance Manual. In the event an agent or personnel of the Firm, upon reviewing the Compliance Manual or otherwise, do not clearly understand their responsibilities and requirements as set forth in the policies and procedures or are unsure about the applicability of a provision within the Compliance Manual, the agent or personnel is responsible for contacting the Designated Person. Annual Reviews of Policies and Procedures The Firm, through its Designated Person, is responsible for conducting or arranging for the conducting of an annual review of the Firm s policies and procedures by a third party or other Firm personnel, who has sufficient knowledge and experience to conduct such reviews. At a minimum, the annual review will consider: any compliance matters that arose during the previous year; any changes in the business activities of the adviser or its affiliates; any changes in the Advisers Act or applicable regulations that might suggest a need to revise the policies or procedures; any risk or conflicts of interests posed by products and services offered, organizational structure, contractual agreements, resources capabilities, compliance supervisory methods, and operational functions; and prior areas of concern or deficiencies. The Firm s annual review will be memorialized in a written report. The Firm will maintain copies of such reports for a period of not less than five years. The Firm will also maintain documentation and evidence of corrective actions taken in response to such annual reviews in a manner and method that is consistent based on the nature of the findings, including, the preparation of a memorandum of actions taken. Designation of a Chief Compliance Officer The Firm is responsible for the designation of a Chief Compliance Officer to oversee the Firm s compliance with applicable regulations, including the Advisers Act, and policies of the Firm. In appointing a Chief Compliance Officer, the Firm will assign such responsibilities to an individual or individuals that are: competent and knowledgeable regarding federal securities laws; empowered with full responsibility and authority to develop and enforce appropriate policies and procedures for the Firm; have sufficient seniority and authority within the Firm to compel others to follow the compliance policies and procedures; responsible for all compliance personnel; and has overall responsibility for the Firm s compliance efforts and the annual review of the compliance program. 7 P age

9 The designation of the Chief Compliance Officer will be documented in this Compliance Manual under the Appendix Designated Persons and on the Form ADV of the Firm filed electronically through the Investment Advisor Registration Depository, hereinafter known as IARD. Changes in the Chief Compliance Officer will be documented through amendments to the Form ADV, which will be maintained electronically in the IARD system, and through amendments to the Compliance Manual, which will be maintained for a period of no less than five years. Section 3: General Roles and Responsibilities of the Firm and Agents Compliance with Applicable Laws and Regulations The Firm and all agents of the Firm are required to comply with all rules and regulations applicable to the Firm. Upon learning of any violation, agents and personnel of the Firm should immediately notify the Designated Person. Upon learning or receiving indications of any such violation, the Designated Person will investigate the matter and determine what steps, if any, should be undertaken based on the facts and circumstances. Fiduciary Duty The Firm and its agents have a fiduciary duty to customers as required under the Investment Advisers Act of 1940 ( Act ). Prior interpretations and rulings have clearly indicated that the Firm and its agents to eliminate and at least expose all conflicts of interest which may incline the Firm and its agents, whether consciously or unconsciously, to render advice that is not disinterested. Regulations and firm policy prohibit the use of mails or any other instrumentality of interstate commerce to: to employ an device, scheme, or artifice to defraud a customer or prospective customer; to engage in any practice, transaction, or course of business which defrauds or deceives a customer or prospective customer; knowingly to sell any security to or purchase any security from a customer when acting as a principal for his or her own account, or knowingly to effect a purchase or sale for a customer s account when also acting as broker for the person on the other side of the transaction (i.e. agency cross transaction), without disclosing to the customer in writing before the completion of the transaction the capacity in which the Firm or its agent is acting and obtaining the customer s consent to the transaction; and to engage in fraudulent, manipulative, or deceptive practices. In meeting such requirements, the Firm and its agents have: a duty to have a reasonable, independent basis for its investment advice; a duty to obtain best execution for clients securities transactions where the adviser is in a position to direct brokerage transactions; a duty to ensure that its investment advice is suitable to the client s objectives, needs, and circumstances; a duty to refrain from effecting personal securities transactions inconsistent with client interests; and 8 P age

10 a duty to be loyal to clients. The Firm requires all agents and personnel of the Firm to act in a manner that is consistent with fiduciary obligations, including all of the above items above noted. It is the policy of the Firm that the Firm and its agents disclose conflicts of interest, act in the best interest of customers, act in a manner that is consistent with instructions provided by customers, provide advice on securities that is reasonable and consistent with information supplied by customers, including objectives, risk tolerance, financial condition, and other pertinent to the customer based on their facts and circumstances, and refrain from providing false or misleading information or withholding information from customers that is material and otherwise deemed to be a material omission. Prohibited Activities Pursuant to Firm policy, neither the Firm or any agent or employee of the Firm shall engage in dishonest or unethical practices in the course of his or her business, or otherwise and shall include, but is not limited to, the below mentioned areas. More so, the Firm, agents, and employees are prohibited from engaging in conduct or any act, indirectly or through or by any other person that would be unlawful for such person to do directly under the provisions of the Act or any rule or regulation thereunder; employing any device, scheme, or artifice to defraud; engaging in any act, practice, or course of business which operates or would operate as a fraud or deceit; or engaging in other conduct such as nondisclosure, incomplete disclosure, or other deceptive practices. The conduct set forth below is prohibited activities: Recommending to a customer to whom investment supervisory, management, or consulting services are provided the purchase, sale, or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the customer on the basis of the information furnished by the customer after reasonable inquiry concerning the customer s investment objectives, financial situation and needs, and any other information known or acquired by the Firm or its agents after reasonable examination of the customer s financial records. Placing an order to purchase or sell a security for the account of a customer without authority to do so. Placing an order to purchase or sell a security for the account of a customer upon instruction of a third party without first having obtained a written third-party trading authorization from the customer. Exercising any discretionary power in placing an order for the purchase or sale of securities for a customer without obtaining written discretionary authority from the customer prior to the first transaction placed, unless the discretionary power relates solely to the price at which, or the time when, an order involving a definite amount of a specified security shall be executed, or both. Inducing trading in a customer s account that is excessive in size or frequency in view of the financial resources, investment objectives, and character of the account. Engaging in reverse churning. Misrepresenting to any customer, or prospective advisory customer, the qualifications of the Firm, agent, or any employee of the Firm; misrepresenting the nature of the advisory services being offered or fees to be charged for such service, or omitting a material fact necessary to make any statements made regarding qualifications, services, or fees, in light of the circumstances under which they are made, not misleading. Providing a report or recommendation to any customer prepared by someone other than the Firm or its agents without disclosing that fact. (This prohibition does not apply to a situation where the 9 P age

11 Firm or its agents use published research reports or statistical analyses to render advice or where the Firm or its agents orders such a report in the normal course of providing service.) Charging a customer an unreasonable advisory fee considering the type of services to be provided, the experience and expertise of the Firm and its agents, and the sophistication and bargaining power of the customer. Guaranteeing a customer that a specific result will be achieved (gain or no loss) with advice which will be rendered. Disclosing the identity, affairs, or investments of any customer unless required by law to do so, or unless consented to by the customer. Publishing, circulating or distributing any advertisement that does not comply with regulations or Firm policy. Paying a cash fee, directly or indirectly, to a solicitor with respect to solicitation activities in a manner that does not comply with Rule 206(4)-3 under the Investment Advisers Act of 1940 or the firm s policies with respect to solicitors. Failing to disclose to any customer or prospective customer all material facts with respect to the financial and disciplinary information required to be disclosed under Rule 206(4)-4 under the Investment Advisers Act of Acting as principal for the Firm s or agent s own account knowingly effecting any sale or purchase of any security for the account of a customer.. Employing any individual who is not registered as required by the Act, provided that no investment adviser or federal covered adviser that is exempt from registration under the Act shall be required to register its investment adviser representatives. Borrowing money or securities from a customer unless the customer is a dealer, an affiliate of the Firm or federal covered adviser, or a financial institution engaged in the business of loaning funds. Loaning money to a customer unless the Firm or agent is a financial institution engaged in the business of loaning funds or the customer is an affiliate of the investment adviser or federal covered adviser. Entering into, extending or renewing any investment advisory contract unless the contract is in writing and discloses, in substance, the services to be provided, the term of the contract, the advisory fee, the formula for computing the fee, the amount of prepaid fee to be returned in the event of contract termination or non-performance, whether the contract grants discretionary power to the investment adviser, federal covered adviser, or investment adviser representative and that no assignment of such contract shall be made by the Firm or agent without the consent of the other party to the contract. To indicate in an advisory contract, any conditions, stipulations, or provisions binding any person to waive compliance with any provision of this Act or of the Investment Advisers Act of 1940, or any other practice contrary to the provisions of Section 215 of the Investment Advisers Act of Engaging in any act, practice, or course of business that is fraudulent, deceptive, or manipulative and contrary to the provisions of Section 206(4) of the Investment Advisers Act of 1940, Entering into, extending, or renewing any advisory contract contrary to the provisions of Section 205 of the Investment Adviser Act of Failing to disclose to customers, in writing, before entering into or renewing any advisory agreement, any material conflict of interest relating to the Firm, the agent, or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice, including, but not limited to: o Compensation arrangements connected with advisory services to customers that are in addition to compensation from such customers for such services; and o Charging a customer an advisory fee for rendering advice when a commission for executing securities transactions pursuant to such advice will be received by the Firm, its agents, or any of its employees. 10 P age

12 Section 4: Registration & Licensing Form ADV The Firm, through its Designated Person, is responsible for ensuring the Firm keeps current information about itself through the Form ADV. At a minimum, the Firm will file an amendment to its Form ADV electronically through the IARD system as follows: Within ninety (90) days after the end of the Firm s fiscal year, the Firm will file an Annual Updating Amendment and any other changes to Items not specifically denoted; Promptly for any changes to Items 1, 3, 9, or 11 of Part 1A; Promptly for material changes to Items 4, 8, or 10 of Part 1A; and Promptly for any material changes in the information in the Firm s brochure (i.e. Part 2A and Part 2Band, if applicable, Part 2A Appendix 1). If the Firm decides to offer a wrap program; the Firm will complete a Part 2A Appendix 1. This form will be completed as long as the Firm is compensated under a wrap fee program for sponsoring, organizing, administering, selecting or providing advice to customers regarding the selection of other investment advisers in the program. A wrap fee program is any program under which a specified fee or fees not based directly upon transactions in a customer s account is charged for investment advisory services (which may include portfolio management or advice concerning the selection of investment advisers) and execution of customer transactions that is all inclusive. The Firm will maintain updates, including annual updating amendments, concerning ADV Part 1A via the IARD system, which electronically stores current and former filings. For Part 2A and Part 2B and, if applicable, Part 2A Appendix 1, the Firm will maintain amendments to the forms in an appropriate compliance file of the Firm for not less than a period of five years. The Firm will, in the event of a change to the Part 2A, 2B, or, if applicable, Part 2A Appendix 1upload any amendments to such forms to the IARD system. Form ADV Part 2B Additional Requirements The Form ADV Part 2B is a brochure supplement providing information about an agent rendering investment advice that requires disclosure of basic identity information; educational and business background; disclosable event history; other business activities; additional compensation; and some additional information concerning the supervision of the agent. For the Part 2B, agents of the Firm are required to promptly notify the Designated Person if any information concerning them becomes inaccurate in any way, including any additional information, such as disclosable events, and to assist the Designated Person as needed with their updating of the Form ADV Part 2B. The Designated Person upon receipt of information will promptly update the Form ADV Part 2B. Form ADV-W 11 P age

13 Under the following circumstances, the Firm will be responsible for filing a Form ADV-W thereby withdrawing its registration with the SEC in which it is registered: Ceases to be an investment advisor; Assets fall below $100 million, thereby requiring registration with states, unless the firm is relying upon an exemptive provision that allows the Firm to remain registered with the SEC in lieu of states; and The Firm is ordered to file an ADV-W and upon unsuccessful appeal, if such is requested. The Firm, through its Designated Person, will be responsible for filing promptly a Form ADV-W when required. A copy of Form ADV-W filings will be maintained through the IARD system, which electronically stores current and former filings. State Registration A state cannot require the Firm, as a federally registered investment advisor, to register with the state unless the Firm no longer meets requirements to maintain registration with the SEC. In the event the Firm does not meet requirements or cannot rely upon and chooses not to rely upon exemptive provisions allowing the Firm to remain a federal registrant, the following procedures apply. The Firm will register with those states in which the Firm has a physical place of business and are expecting to meet requirements on the number of customers residing in those states. State regulations vary widely in regards to number of customers, although a high percentage of states require registration if the firm does business with more than 5 customers residing in such state. Depending on the state, some states do not require registration until a deminimus number of customers is obtained in that state. In other cases, some states require registration upon entering into one customer relationship with a resident or entity in that state. The Firm, through its Designated Person, will review the subject state(s) statutory requirements on registration and, if required, register with the state(s) in accordance to the state(s) statutes. For states that have a deminimus requirements, the Firm, through its Designated Person, will review Firm data on customers locations to determine when and whether registration is required. The Firm, through its Designated Person, will maintain files on the submission of documents to respective states and any requests for information from states. The application for registration with a state will be maintained in the IARD system through amendments to the Form ADV. Notice Filings The Firm, as a federal-registrant, is required to provide notice filings to states in which the firm conducts investment advisory business, subject to deminimus or other provisions of state regulations. The Firm, through its Designated Person, has determined to provide notice filings to each state in which it conducts investment advisory business. The Designated Person or their designee, in order to meet firm and regulatory requirements concerning notice filings, will designate on the Form ADV those states in which it conducts investment advisory business If the Firm does not meet requirements or cannot rely upon and chooses not to rely upon exemptive provisions allowing the Firm to remain a federal registrant, the Firm will no longer be subject to notice filing requirements as a state registrant. Agent Registration 12 P age

14 The Firm is required to register all agents who meet the definition of an investment advisory representative with appropriate state(s) as defined by the state. State registration requirements vary widely as there may or may not be a requirement for a physical place of business to be in the state for registration to occur, there may or may not be a deminimus requirement in terms of the number of customers, and the definition of an investment advisory representative will frequently differ among states. The Firm, through its Designated Person, is responsible for the review of appropriate state regulations and the registration of such agents when required under state regulations. For agents requiring or requesting registration in a subject state, the Firm, through its Designated Person, will submit registration for such agent by filing a Form U-4 and pay, subject to reimbursement by the agent, any fee for such registration as required by statutes of the subject state. Prior to acting in a capacity that requires registration as an agent, the Firm requires agents to have successfully completed certain licensing requirements (i.e. Series 65 or the Series 66 license in combination with the Series 7 license) or maintain in good standing certain professional designations (i.e. CFP, CFA, ChFC, etc.). The Firm, through its Designated Person, is responsible for ensuring all individuals possess appropriate qualifications prior to serving as an agent in an investment advisory capacity. If an agent s registration is to be terminated, the Firm, through its Designated Person, will file such termination request as prescribed by the applicable state s statutes, including filing a Form U-5 on their behalf, within 30 days of the termination date. Agents are responsible for promptly informing the Designated Person if they believe or have reason to believe they are required to be registered in a state. Fingerprint Cards Upon receipt from an agent, the Firm, through its Designated Person, will submit fingerprint cards to FINRA in the registration of agents as investment advisory representatives upon initial hire of such individual, either as a broker/dealer and/or investment advisory representative. Agents are required upon initial hire with the Firm, either as a broker/dealer and/or investment advisory representative, to submit to the Firm two fingerprint cards along with other required information and documents, including a copy of the Form U-4. Agents are responsible for obtaining such fingerprint cards at the time of hire and to provide such fingerprint cards to the Designated Person or their designee. Agents are not required to obtain fingerprint cards prior to registration with the Firm as an investment advisory agent in the event they have maintained current registrations with the Firm as a broker/dealer representative. Filing Fees & Renewals The Firm, through its Designated Person, will be responsible to facilitate the payment, when due, of Firm registration, agent registration, state notice, renewal and/or other regulatory fees applicable to the Firm and its associates. Agents are responsible for reimbursing the Firm of all costs associated with their registration in a particular jurisdiction as an agent. The Firm will deduct the costs of such registration from their commissions and, if needed, be billed directly through the debiting of a credit card on hand for such agent. Dual Registration of Agents 13 P age

15 The Firm prohibit san agent of the Firm to be dually registered with another investment advisory firm in addition to the Firm. Exceptions may be granted as long as such dual registration is permitted by state law and the firm approves of such request. In the case of Georgia law, an agent may be registered by more than one investment advisory firm. If an agent desires to be registered with more than one firm, the agent must provide written notice of and receive approval from the Designated Person prior to engagingin any activity or accepting registraiton from another rinvestment advisory firm. Section 5: Complaints Definition of Complaint The term complaint is generally defined as any written statement of a customer or any person acting on behalf of a customer alleging a grievance involving the activities of those persons under the control of the Firm in connection with the solicitation or execution of any transaction or the disposition of securities or funds of that customer. Notification by Agents Agents must notify the Designated Person immediately upon learning of the existence of a customer complaint and forward a copy of the complaint to the Designated Person. Upon request from the Designated Person, the agent is required to provide all information and documentation in their possession relating to such complaint. Agents are expected to cooperate fully with the Firm and with regulatory authorities in the investigation of any customer complaint. Filing Requirements In the event the Firm or its agents are subject to a complaint, the Form U-4 or Form U-5 of the individual agent and/or the Form ADV of the Firm will also need updating in the event the complaint leads to an affirmative answer to any disclosure question posed on the registration forms. The Firm, through its Designated Person, shall file such amendments within 30 days of receipt of such complaint, if required. A copy of any and all Form U-4 amendments will be maintained in the registration files of the agent at the Firm and will be maintained throughout the agent s registration with the Firm and thereafter for a period of six years after termination. Investigation of Complaints Upon receipt of a customer complaint, the Firm, through its Designated Person, shall be responsible for ensuring that all written and electronically transmitted customer complaints are handled in accordance with all applicable laws and in keeping with the provisions of this section. The Firm takes all customer complaints seriously and the Designated Person shall promptly initiate a review of the factual circumstances surrounding any written complaint that has been received. The manner and nature of such review shall vary in accordance to the allegations made in customer complaints. The Firm, through its Designated Person, is responsible for communicating the results of any such review the complainant. The Firm will maintain a separate file for all written and electronically transmitted customer complaints, to include a copy of the complaint, communications with the complainant, investigative documents reasonable 14 P age

16 in nature based on the facts and circumstances, notifications by agents, and a memorandum or report of the results of such investigative, including any action taken. Section 6: Disclosures Brochure Rule Initial Delivery (Form ADV Part 2A and 2B) Agents of the Firm are responsible for delivering to customers or prospective customers a copy of its brochure (i.e. Form ADV Part 2A and Part 2B), at least 48 hours prior to entering into the advisory agreement but no later than the time of entering into an agreement provided that the customer can terminate the agreement without penalty within 5 business days, which is a standard feature of the firm s advisory agreement. The Firm will document the receipt of such brochure by the customer s agreement they have received such brochure as part of an advisory agreement entered into by the customer and Firm. Brochure Rule Annual Delivery Offer (Form ADV Part 2A and 2B) In addition to the initial delivery of the brochure, the Firm, through its Designated Person, is responsible for ensuring that customers, with the potential exception of investment company contracts and contracts for impersonal services requiring a payment of less than $200, are offered, at no charge, a copy of its brochure upon request by the customer. The Firm will make an offer to provide such brochure, through annual notification submitted by the Firm within 120 days of the firm s fiscal year-end ate. Brochure Rule Customer Requests for a Copy of the ADV (Form ADV Part 2A and 2B) In the event a customer requests a copy of the brochure (i.e. Form ADV Part 2A and 2B), the Firm, will supply the brochure to the customer within 7 days of receipt of such request. The Firm will maintain documentation of such customer requests and the Firm s delivery of the brochure by way of maintaining the customer s request letter and a copy of a mail receipt or cover letter with the brochure in an appropriate file. Agents in receipt of such requests are responsible for immediately notifying the Designated Person and providing, if applicable, any request letters and copies of a mail receipt or cover letter with the brochure provided to the customer, to the Designated Person. Electronic Delivery of Information The Firm, as a matter of policy, does not disseminate required disclosures or other required information to customers in electronic form. Should the Firm determine to disseminate or receive certain types of information to/from customers or prospective customers, in lieu of physical mail instruments, the Firm is permitted to: deliver the Firm s Brochure (either annually or initially); provide disclosure of custody arrangements and required account statements; provide disclosure of solicitation arrangements; provide disclosure to customers for agency cross transactions; provide disclosure to customers for principal transactions; accept customer acknowledgement of solicitation arrangements; accept customer consent to agency cross transactions; 15 P age

17 accept customer consent to principal transactions; and accept customer consent to the assignment of an investment advisory contract. The Firm, through its Designated Person, has enacted the following policies addressing electronic dissemination of information should the Firm desire the electronic delivery of information: The Firm will obtain a customer s or prospective customer s written consent to the delivery of information by electronic means. Such written consent will include, at a minimum: 1) the customer s acknowledgement and understanding of the terms and conditions by which the Firm will deliver information electronically; 2) a description of what information will be disseminated to the customer or prospective customer by electronic means; 3) the electronic means that will be employed in delivering information; 4) the time period covered by the consent; 5) the potential costs of having information, if any, for delivering information electronically; 5) the customer s acknowledgment that they have sufficient access or means to access any information disseminated electronically; 6) if such information will be disseminated by electronic mail or similar electronic means, the customer agrees to provide a working electronic address and retains responsibility for notifying the Firm of any changes to the working electronic address; and 7) information on how the customer may revoke or amend their consent and authorization thereafter. The Firm will determine if such information being delivered is comparable to that information in paper form, the format or means of access allows the customer or prospective customer to have the ability to retain the information, and whether or not the processes or formats employed by the Firm makes it unduly burdensome to the customer or prospective customer for accessing such information. Should the Firm s policy change as to what information, if any, will be disseminated electronically, the Firm will provide advance notification describing such change. The Firm will maintain any consents or authorizations received from customers to receiving information by electronic delivery, written communication revoking or amending a customer s consent or authorization to receive information by electronic delivery, and copies of s and electronic messages disseminating information to customers. Records will be maintained for a period of five years after the termination of the customer relationship with the firm with respect to authorizations and communications revoking or amending a customer s consent or authorization. s and other electronic messages will be maintained for a period of no less than five years Proxy Voting Policy The Firm strictly prohibits the Firm, agents, and personnel from the voting of proxies on behalf of customers. The Firm, though it s advisory agreement and its brochure, informs customers and prospective customers that neither the Firm nor its agents may vote proxies on behalf of customers. Should a policy change occur, the Firm will notify customers through its brochure, a contract, and/or through separate disclosure its policies on proxy voting. In the event the Firm ever decides to vote proxies, the Firm, through its Designated Person, will advise customers in concise form the proxy voting process the Firm has adopted and how customers may request a copy of the Firm s policies and procedures pertaining to proxy voting. More importantly, the firm will adopt policies and procedures addressing proxy voting, including disclosures. Code of Ethics The Firm has adopted a Code of Ethics. The Firm, through its Designated Person, will disclose the existence and nature of the Code of Ethics in concise form through its brochure upon delivery of the 16 P age

18 brochure. For customers requesting a copy of the Code of Ethics, the Firm, through its Designated Person, will provide a copy of the Firm s Code of Ethics within 7 days of receipt of such customer request, whether directly from the customer or an agent. Agents receiving requests from customers for a copy of the Code of Ethics are responsible for informing the Designated Person of such requests within two business days of receipt of such request. The Firm will maintain documentation of such customer requests and the Firm s delivery of the Code of Ethics by way of maintaining the customer s request letter and a copy of a mail receipt or cover letter with the brochure in an appropriate file for a period of no less than five years. Privacy Policy Initial Delivery The Firm has adopted a Privacy Policy, which includes a privacy notice. The Firm, through its Designated Person, will provide a copy of the Privacy Notice upon initiation of the customer relationship and annually thereafter. The Firm will maintain documentation of the customer s receipt of such privacy policy through an acknowledgement in its advisory agreement upon initiation of the relationship. Privacy Policy Annual Delivery For annual disseminations, the Firm will submit a copy of the Firm s Privacy Policy to each customer of the Firm. The Firm will maintain a copy of the Privacy Notice and documentation to whom such Privacy Notice was disseminated. Supplemental Disclosures In the event that material developments occur with respect to the Firm (such as with respect to its business, financial condition, personnel, etc.) or otherwise that will, or have the potential to, have a material impact on the ability of the Firm to continue to perform investment advisory services on behalf of its customers or otherwise to remain a viable business operation, the Firm, through its Designated Person, will give due consideration to whether such developments merit an amendment to the Firm s Form ADV, or otherwise merit supplemental disclosure to the Firm s customers. If necessary, the Designated Person, will confer with Firm management and, if needed, with one or more of the Firm s external service providers, such as legal counsel, consultants, etc. The Designated Person shall be responsible for ensuring that any amended or supplemental disclosure is prepared in a proper and timely manner and either made available, or delivered, to customers. Copies of supplemental disclosures will be maintained for a period of no less than five years. Section 7: Agreements and Contracts Requirement for Advisory Agreements The Firm, through its agents, is responsible for obtaining from each customer in which it provides investment advisory services an executed advisory agreement for services to be performed in the form of an investment advisory contract. Such agreement is required to be obtained prior to providing such investment advisory services and are required to be forwarded to the Designated Person. In the case of a new account, 17 P age

19 a copy of the executed advisory agreement is to be included with paperwork sent to the Firm s Operational Department. The Firm, through its Designated Person, is responsible for the development of and maintenance of advisory agreements that are compliant with applicable regulations and interpretations, including the use of hedge clauses. The Designated Person is responsible for disseminating and making available current versions of the advisory agreement for agents to utilize in attracting and securing customer relationships in which investment advisory services will be rendered. A current copy of the advisory agreement will be maintained on the Firm s web site under Advisor Logins. Delivery of Advisory Agreements Agents of the Firm are required to supply a copy of the advisory agreement and any other paperwork completed by the customer in the establishment of an advisory relationship with the Firm and its agents. Evidence of delivery of such documents will be maintained in the appropriate customer s files by way of an acknowledgement by the customer in the advisory agreement whereby they acknowledge reciept of such contracts and agreements. Section 8: Custody Definition of Custody Custody is defined as: Possession of customer funds or securities unless received inadvertently and returned to the sender promptly, but in any case within three business days of receiving them; Any arrangement (including a general power of attorney) under which the investment adviser is authorized or permitted to withdraw customer funds or securities maintained with a custodian upon the investment adviser s instruction to the custodian; and Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives the investment adviser or the investment adviser s supervised person legal ownership of or access to customer funds or securities. The receipt of checks drawn by customers and made payable to unrelated third parties will not meet the definition of custody if forwarded to the third party within 24 hours of receipt and the adviser maintains the records in accordance to books and records requirements. Policy on Custody The Firm strictly prohibits the custody of assets by the Firm or any of its agents. The Firm, through its Designated Person, shall prohibit the following: Possessing customer funds or securities; 18 P age

20 Receipts of securities and checks from customers shall be immediately provided to the Designated Person, who shall take immediate action to return such securities or checks to the customers within 3 days of receipt; Any agent or the Firm servicing in the capacity of power of attorney, in which the Firm or its agents are permitted to withdraw customer funds or securities without specific written instruction of the customer; Any agent or the Firm serving as a trustee to a Trust; Any agent or the Firm acting in the capacity of a general partner, managing member, or similar position in which the Firm or agent has the authorization and control to direct investment activities of a limited partnership, LLC, etc., other than for the Firm itself excluding real estate investment activities of Raike Real Estate; Directly debiting customer accounts for fees unless the Firm has on record authorization by the customer for the withdrawal of such funds. Notification of Custody If the Firm is deemed to have custody of customer funds or securities, the Firm, through its Designated Person, will promptly update its Form ADV to indicate it maintains custody and adopt procedures as needed to comply with custody requirements. Notification of Qualified Custodian Agents of the Firm are required to notify the customer of the qualified custodian s name, address, and the manner in which the fund and securities are maintained promptly when an account is established and following any changes to this information. Account Statements It is Firm policy that all customers of the Firm receive account statements relating to accounts in which the Firm manages or supervises. The Firm will rely on a qualified custodian to send an account statement, at least quarterly, to each of the Firm s customers for which it maintains funds or securities, identifying the amount of funds and of each security in the account at the end of the period and setting forth all transactions in the account during that period. If the Firm decides to provide account statements to a customer, the Firm will include all required information to be provided as well as a statement urging the customer to compare the account statements from the custodian with those from the Firm. No agent is permitted to send account statements prepared by them to customers unless they have received such statements from the Firm. Section 9: Financials Minimum Requirements The Firm, through its Designated Person, is responsible for the preparation of financial statements and maintenance of books and records supporting such statements. At a minimum, the Firm will prepare on a monthly basis the following financial records and maintain supporting documentation, such a journal entries and account statements, giving rise to such financial statements. 19 P age

21 Balance Sheet Income Statement Trial Balance General Ledger Customer Refunds If a customer terminates their relationship with the Firm prior to services being completed during the period of billing, the Firm will initiate a pro rata refund of the amount paid by the customer for which services have not been rendered based on the date notice is received from the customer, unless the customer contractually agrees through the advisory agreement that the agreement is in force until the end of the calendar period in which fees have been previously billed. In computing the refund, the Firm shall utilize the Investment Advisory Billing Refund Worksheet in documenting the Firm s efforts if a refund is required Agents are responsible for notifying the firm and forwarding requests by the customer for the termination of any advisory relationship. Section 10: Communications Background All investment adivsory firms and their agents have a fiduciary duty to communicate to customers and the general public in a manner that avoids any misrepresentations, material omissions, or fraudulent communications. The Firm places great emphasis on the accuracy and balance of any communication pieces. Written Correspondence The Firm and its agents are responsible for complying with the following procedures regarding outgoing and incoming correspondence: All outgoing correspondence, defined as communications with one customer, is required to be submitted on a monthly basis to the Compliance Department, who will review such correspondence. The agent is required to maintain a centralized file of all correspondence within their location and the Firm, at the main office, will maintain a centralized file of correspondence. All incoming correspondence should be maintained in a centralized correspondence file at the agent s location The Firm, through its Designated Person, will document the review of such written correspondence by executing and dating the review of such pieces. Public Appearances and Presentations 20 P age