Part 2A of Form ADV: Firm Brochure

Transcription

1 Part 2A of Form ADV: Firm Brochure Item 1 Cover Page ADVISORY PROGRAM BROCHURE For CROWN CAPITAL MANAGEMENT LLC Dallas Parkway, Suite 600 Addison, TX (972) This brochure provides information about the qualifications and business practices of Crown Capital Management LLC. If you have any questions about the contents of this brochure, please contact the firm at The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Registration as an investment advisor does not imply a certain level of skill or training. Additional information about Crown Capital Management LLC is also available on the SEC's website at using CRD number

2 Item 2 Material Changes Address Change: Dallas Parkway, Suite 600 Addison, TX 75001

3 Item 3 Table of Contents TABLE OF CONTENTS ADVISORY BUSINESS 4 5 FEES AND COMPENSATION PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT TYPES OF CLIENTS 6 7 METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS 8 9 DISCIPLINARY INFORMATION OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS 10 CODE OF ETHICS, PARTICIPATION OR INTEREST IN CLIENT TRANSACTIONS AND PERSONAL TRADING BROKERAGE PRACTICES REVIEW OF ACCOUNTS CLIENT REFERRALS AND OTHER COMPENSATION CUSTODY INVESTMENT DISCRETION 16 VOTING CLIENT SECURITIES FINANCIAL INFORMATION REQUIREMENTS FOR STATE-REGISTERED ADVISORS 19 11

4 Item 4 Advisory Business INTRODUCTION Crown Capital Management LLC (hereinafter "Crown" or the "Firm") is a Registered Investment Advisor with the Texas State Securities Board and principally owned by Ryan Wood. The Firm provides portfolio management services to its Clients (individually, the "Client"). Registration does not imply a certain level of skill or training. THE ADVISORY PROGRAM Crown offers an advisory program ("Program") whereby the Firm manages Client accounts for a single percentage fee based on assets under management that includes all portfolio management services and expenses. Clearing, custodial, reporting and transaction/commission costs will be charged separately to the Client by the broker-dealer in accordance with the broker-dealer commission structure, which is provided separately. Under this Program, Crown offers discretionary investment advice designed to assist Clients, including individuals, trusts, estates, foundations, and endowments in obtaining professional portfolio management under an advisory fee structure. PORTFOLIO MANAGEMENT SERVICES Portfolio management services are offered on a fully discretionary basis with regard to the allocation and investment management of Client assets among various sectors and asset classes. These services are tailored to the individual needs of the Client, based on the Client's stated financial position, time horizon, personal needs, risk tolerance, and investment objectives. These services also include management of the selection, retention, and disposition of individual investment positions. Clients may impose restrictions on investing in certain securities or types of securities, though such restrictions must be in writing and may impact the composition and performance of the portfolio. Crown offers a differentiated product line where asset allocation models, ranging from conservative short term to aggressive long term, are developed and managed based on proprietary research and analysis conducted by Crown. Once the Client portfolio is constructed, Crown provides continuous supervision of the portfolio as changes in market conditions and Client circumstances may require.

5 Item 5 Fees and Compensation FEES AND EXPENSES OF PROGRAM Crown charges a single asset-based percentage fee for advisory services, which includes the cost of portfolio management services. Clearing, custodial, reporting and transaction/commission costs will be charged separately to the Client by the broker-dealer in accordance with the broker-dealer commission structure, which is provided separately. The annual fee for the Program is billed daily (calculated using 252 business days per year) based on the market value of the assets at the close of the previous day. Clients are required to establish accounts at Interactive Brokers LLC, a member of NYSE/FINRA/SIPC. The Client authorizes Crown to debit the fee directly from the Client's account. If insufficient cash is available to pay such fees, securities in an amount equal to the balance of unpaid fees will be liquidated to pay for the unpaid balance. On an annualized basis, Crown's percentage fee for the Program is based on the following tiered fee schedule: FEE SCHEDULE Break Points - Percentage Fee $0 to $100, % $100,001 to $1,000, % $1,000,001 to $5,000, % $5,000,001 to $25,000, % Amounts over $25,000, % In order to compare the cost of the Program with similar investment advisors, the Client should consider the turnover rate of the investment strategy, trading activity in the account and standard advisory fees and brokerage commissions that would be charged at other broker-dealers and investment advisers. Program fees are non-negotiable. Broker Commission Schedule Flat Rate - USD $0.005 per share Minimum Per Order - USD $1.00 Maximum Per Order - 0.5% of trade value Note: Interactive Brokers requires a minimum of $10 in commissions per month. In the event that the account records less than $10 in a given month, the difference will be charged as an account activity fee. MUTUAL FUND CHARGES All fees paid to Crown for investment advisory services, are separate and distinct from the fees and expenses charged by mutual funds, closed-end investment companies or other managed investments to their shareholders. These fees and expenses are described in each fund's prospectus. Fees charged by mutual funds will generally include a management fee, other fund expenses, and a possible distribution fee. If the fund also imposes sales charges, the Client may pay an initial or deferred sales charge. ADDITIONAL FEES AND EXPENSES In addition to the aforementioned, there may be other costs assessed, which are not included in the Program fee, such as national securities exchange fees, charges for transactions with respect to assets not executed through the custodian, costs associated with exchanging currencies, wire transfer fees, or other fees required by law.

6 Item 6 Performance-Based Fees and Side-By-Side Management Crown does not charge performance-based fees or conduct side-by-side management.

7 Item 7 Types of Clients CLIENT INVESTMENT PROCESS Under this Program, Crown offers discretionary investment advice designed to assist Clients, including individuals, trusts, estates, foundations, and endowments in obtaining professional portfolio management under an advisory fee structure. Crown will collect financial data from the Client and assist the Client in determining the suitability of the Program based on financial information disclosed by the Client to Crown. The investment advice varies depending upon the Client's life situation, desires, objectives, and other preferences. The account is generally managed to diversify the Client's investments and may include various types of securities such as, but not limited to, common and preferred stocks, bonds and exchange traded funds (ETFs). Other types of investments may also be recommended where the Firm deems such investments appropriate based on the Client's stated goals and objectives. Investments and allocations are determined and based upon the Client's predefined objectives, risk tolerance, time horizon, financial information, and other various suitability factors. Accounts are managed on an individualized basis. Further restrictions and guidelines imposed by Clients may affect the composition and performance of a Client's portfolio. For these reasons, performance of the portfolio may not be identical to the average Client of Crown. On an ongoing basis, Crown reviews the Client's financial circumstances and investment objectives and makes any adjustments to the Client's portfolio as may be necessary. CONDITIONS FOR MANAGING ACCOUNTS Crown imposes a minimum of $10,000 to open and maintain an account. This minimum can be waived at the Firm's discretion.

8 Item 8 Methods of Analysis, Investment Strategies and Risk of Loss BUSINESS STANDARDS Investment Advisor Representatives of Crown must meet all examination and experience requirements of the states and/or jurisdictions in which the IAR provides advisory services. As a matter of policy, Crown does not recommend mutual funds or third-party managers that carry significant additional fees and expenses, unless at the Client's request, and has no compensation agreements with any external investment managers. Crown conducts proprietary "top down" fundamental analysis and uses extensive valuation and financial models in order to select individual securities for Client portfolios, consistent with the Client's stated objectives and financial condition. Security selection focuses primarily on small, mid and large-cap U.S. equities but may also include foreign equities, ADRs, preferred stocks, investment grade and high-yield corporate bonds, government and municipal bonds, equity options and ETFs. Crown uses forecasts generated using forward-looking models of economic activity and securities markets, which may incorporate such data as historical returns, historical correlations, expected growth rates, and calculated risk premiums. Past performance is not an appropriate predictor of future performance and reliance on historical and current data necessarily involves certain inherent limitations. Crown also utilizes various portfolio optimization tools, including returns-based style analysis and Monte Carlo simulation, in order to achieve the most desirable risk/reward profile. Although Crown may recommend short-term trading depending on market conditions, the dominant mode of advice will be long-term oriented. All due diligence is conducted in-house, though third-party research is used to supplement the investment process. Also as a matter of policy, Crown does not use leverage (trade on margin), unless at the Client's request. All client performance reports, brokerage statements and other documentation are provided by Interactive Brokers LLC, the Firm's independent broker-dealer. SPECIFIC STRATEGY RISKS Certain strategies employed by the Firm may incur more risk than others. The risk involved with these specific strategies should be evaluated by the Client and the IAR prior to any investment being made in order to ensure that the Client's goals, objectives, and financial situation are such that he or she is able to bear the risks inherent to these investments. For example, certain investment models may utilize a broadly diversified investment strategy focused on income and capital preservation, while others may employ a more concentrated investment strategy focused on capital appreciation. While diversified portfolios that hold many securities across multiple sectors typically display lower volatility, concentrated portfolios generally hold the securities of a limited number of companies and, therefore, may be more volatile because the risk specific to each company may represent a larger portion of assets. It is likely that the performance of these concentrated portfolios will differ significantly from that of the broader equity market. While capital loss is the primary risk for both strategies, other risks may include execution risk, exchange rate risk, country risk, accounting risk, and economic risk. In addition, Crown relies on a significant amount of data from multiple sources when making investment decisions and cannot guarantee the accuracy of such data. Important: Investing in securities involves risk of loss that clients should be prepared to bear.

9 Item 9 Disciplinary Information Crown does not have any prior legal or disciplinary information to disclose.

10 Item 10 Other Financial Industry Activities and Affiliations Crown is not a registered broker-dealer, futures commission merchant, commodity pool operator, commodity trading advisor, or a registered representative of these entities. Crown may provide educational and other investment-related services at no cost to Clients that are separate from its investment advisory services, though these services are incidental to its investment advisory business.

11 Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading CODE OF ETHICS(1),(2) The Firm has adopted a Code of Ethics, the full text of which is available to Clients or potential Clients upon request. The Firm desires to comply with all applicable laws and regulations governing its practice. Therefore, the management of the Firm has determined to set forth guidelines for professional standards, under which all associated persons of the Firm are to conduct themselves. The Firm has set high standards, the intention of which is to protect Client interests at all times and to demonstrate its commitment to its fiduciary duties of honesty, good faith, and fair dealing with Clients. All associated persons are expected to adhere strictly to these guidelines, as well as to the procedures for approval and reporting established in the Code of Ethics primarily related to personal securities transactions and violations of the Code of Ethics. In addition, the Firm maintains and enforces written policies reasonably designed to prevent the misuse of material non-public information by the Firm or any person associated with the Firm. Footnotes: (1) This investment policy has been established recognizing that some securities being considered for purchase and/or sale on behalf of Crown s Clients trade in sufficiently broad markets to permit transactions by Clients to be completed without an appreciable impact on the markets of the securities. Under certain circumstances, exceptions may be made to the policies stated above. Records of these trades, including the reasons for the exceptions, will be maintained with Crown s records in the manner set forth above. (2) The foregoing does not apply to certain types of securities, such as obligations of the U.S. Government, and shares in open-end mutual funds. Open-end mutual funds are purchased or redeemed at a fixed net asset value price per share specific to the date of purchase or redemption. CLIENT PRIVACY The Firm views protecting Clients' private information as a top priority and, pursuant to the requirements of the federal Gramm-Leach-Bliley Act, the Firm has instituted policies and procedures to ensure that Client information is kept private and secure. Crown does not disclose any nonpublic personal information about its Clients or former Clients to any nonaffiliated third parties, except as permitted by law. In the course of servicing a Client's account, the Firm may share some information with its service providers, such as transfer agents, custodians, broker-dealers, accountants, and lawyers. Crown restricts internal access to nonpublic personal information about the Client to those associated persons of the Firm who need access to that information in order to provide services to the Client. As emphasized above, it will always be the Firm's policy never to sell information about current or former Clients or their accounts to anyone. It is also the Firm's policy not to share information unless required to process a transaction, at the request of a Client, or as required by law. POTENTIAL CONFLICTS OF INTEREST Crown has a financial incentive to recommend the Program to Clients over other types of advisory services. However, due to the single advisory fee charged to a Program account, Crown should not be regarded as having a conflict of interest in that it may realize a greater profit on a Program account with a relatively high rate of portfolio turnover compared to other types of accounts, assuming the same level of fees. Crown or individuals associated with the Firm may buy or sell for their personal account(s) investment products identical to those recommended to Clients, creating a potential conflict of interest. To mitigate this conflict, it is the expressed policy of Crown that Client accounts shall always have priority in any purchase or sale over employee accounts. All employee trades require prior approval from the Firm's compliance officer and will only be executed in a manner consistent with the Firm's recommendations to Clients.

12 Item 12 Brokerage Practices BROKER-DEALER SELECTION Crown utilizes Interactive Brokers LLC, a member of NYSE/FINRA/SIPC, as its independent broker-dealer. In selecting Interactive Brokers, Crown considers various factors including global market access, trade execution, commission cost, technology, and risk management. Crown believes that Interactive Brokers provides superior execution services at a highly competitive price, compared to the industry average, and offers the best overall value. As such, Crown requires all Clients to establish an account with Interactive Brokers as part of the Program. The Client approves Crown to direct all trades through Interactive Brokers, which broker-dealer Crown believes provides "best execution" for Clients. SOFT DOLLAR AND BROKERAGE FOR REFERRAL As a matter of policy, Crown does not participate in brokerage "soft dollar" arrangements and purchases third-party research and other services independent of Client securities transactions, the costs of which are included in the advisory fee. Crown does not recommend alternate broker-dealers, accept Client-directed brokerage or receive client referrals in exchange for directed brokerage. AGGREGATION OF TRADES Crown may aggregate orders with respect to a security for advisory Client accounts if such aggregation is consistent with achieving best execution for the various Client accounts. When orders are aggregated, each participating account receives the weighted average share price for all transactions in a particular security effected to fill such orders at the time of execution and transaction costs are shared pro rata based upon each accounts participation in the transaction. However, smaller Clients may bear higher charges if they fail to meet the minimum account sizes set by the broker-dealer. Allocations of orders among Client accounts must be made in a fair and equitable manner.

13 Item 13 Review of Accounts REVIEW OF ACCOUNTS/ACCOUNT REPORTING Client accounts are monitored on a continuous basis, with a formal review conducted at least annually. The advisory representative assigned to the account will conduct the review, with the calendar being the triggering factor for reviews. The custodian holding the Client's funds and securities will provide the Client with a confirmation of every securities transaction in their account, and a brokerage statement at least quarterly. Crown will provide reports to Clients on an as needed basis. TERMINATION Either party may terminate the investment advisory agreement by providing written notice signed by the terminating party. Upon receipt of the termination notice, Crown will deliver securities and funds held in the account as instructed by the Client within 30 days, unless the Client requests that the account be liquidated.

14 Item 14 Client Referrals and Other Compensation CLIENT REFERRALS Crown does not maintain direct or indirect client referral compensation agreements with external parties. Referrals are made by Clients and/or third parties based solely on the merits of the Program. ADDITIONAL COMPENSATION Officers and associated persons of Crown may, from time to time, receive additional compensation for services rendered outside the scope of the Program, provided that such services do not conflict with their fiduciary duty to the Clients. Any external income will be appropriately disclosed.

15 Item 15 Custody ACCOUNT CUSTODY Crown does not maintain custody of any Client assets. Interactive Brokers LLC, the custodian holding the Client's funds and securities, will provide the Client with a confirmation of every securities transaction in their account, and a brokerage statement at least quarterly. Crown will provide reports to Clients on an as needed basis.

16 Item 16 Investment Discretion INVESTMENT DISCRETION Portfolio management services are offered on a fully discretionary basis with regard to the allocation and investment management of Client assets among various sectors and asset categories, consistent with the Client's stated investment objectives. This service also includes the management of the selection, retention, and disposition of individual investment positions. Clients may, from time to time, direct their advisor to execute specific trades in their account. However, Client-directed trades require written approval from the Client before any transaction can be executed. Additional restrictions and guidelines imposed by Clients must be in writing and may affect the composition and performance of a Client's portfolio.

17 Item 17 Voting Client Securities PROXY VOTING Crown will not be required to take any action or render any advice with respect to voting of proxies solicited by, or with respect to, the issuers of securities in which Client's assets may be invested. Although Crown may, on rare occasions and only at the Client's request, offer Clients advice regarding corporate actions and the exercise of proxy voting rights. CLASS ACTION LAWSUITS From time to time, securities held in the accounts of Clients will be the subject of class action lawsuits. The Firm has no obligation to determine if securities held by the Client are subject to a pending or resolved class action lawsuit. It also has no duty to evaluate a Client's eligibility or to submit a claim to participate in the proceeds of a securities class action settlement or verdict. Furthermore, the Firm has no obligation or responsibility to initiate litigation to recover damages on behalf of Clients who may have been injured as a result of actions, misconduct, or negligence by corporate management of issuers whose securities are held by Clients.

18 Item 18 Financial Information Crown does not require or request prepayment of any kind from Clients, does not maintain custody of Client assets and has not been the subject of any bankruptcy petition at any time.

19 Item 19 Requirements for State-Registered Advisers EDUCATION AND BUSINESS BACKGROUND Ryan Wood, CFA, Portfolio Manager - Born in 1981 Formal Education: The University of Texas at Austin, M.B.A. Finance, 2009 Vanderbilt University, B.S. Economics, 2004 Jesuit College Preparatory School, Diploma, 2000 Business Background: Crown Capital Management LLC, Portfolio Manager, June Present Citi Investment Research, Senior Associate, June April 2011 U.S. Trust, Equity Analyst, June June 2007 Other: CFA Charter holder - The Chartered Financial Analyst (CFA) designation requires the candidate to pass three separate annual exams covering a wide range of investment knowledge, as well as attain a minimum of four years of relevant work experience. Series 7, 63, 65, 86, and 87 Certifications - The Series Certifications are individual exams administered by the Financial Industry Regulatory Authority (FINRA) for persons seeking to enter the securities or investment advisory industries. Ryan Wood is not actively engaged in any business activities other than providing investment advice.

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