Exhibit 10.10.3
FULLY DISCLOSED CLEARING AGREEMENT
This Fully Disclosed Clearing Agreement (the "Agreement") is executed
and entered into by and between ▇▇▇▇▇▇ Financial Services, Inc ("▇▇▇▇▇▇"), a
North Carolina corporation, and Rushmore Securities Corporation
("Correspondent")
WHEREAS, Correspondent is in the process of registering or is
registered with the Securities and Exchange Commission ("SEC") as a
broker-dealer of securities in accordance with Section 15(b) of the Securities
and Exchange Act of 1934 (the "Act") and is applying for membership or is a
member of the National Association of Securities Dealers, Inc. ("NASD"), and
desires for ▇▇▇▇▇▇ to act as a clearing broker for Correspondent; and
WHEREAS, ▇▇▇▇▇▇ meets all requirements of the SEC to function as a
clearing broker, and desires to enter into an agreement to clear and maintain
cash, margin, option or other accounts ("Accounts") for Correspondent or
customers ("Customers") of Correspondent.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and of the guarantee of this Agreement by any guarantor(s), and for
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES
Correspondent represents and warrants to ▇▇▇▇▇▇ that:
(a) Correspondent is a corporation duly organized, validly
existing and in good standing under the laws of the state of
its incorporation.
(b) Correspondent has all the requisite authority in conformity
with all applicable laws and regulations to enter into this
Agreement and to retain the services of ▇▇▇▇▇▇ in accordance
with the terms hereof.
(c) Correspondent shall employ as a manager of its brokerage
operation only a person who has all requisite licenses and
experience in compliance with applicable securities laws and
regulations.
(d) Correspondent shall duly employ personnel ("Registered
Representatives") who have the requisite licenses and
experience in compliance with applicable securities laws and
regulations.
(e) Correspondent has advised ▇▇▇▇▇▇ of any clearing arrangements
that have been made or are expected to be made with any other
clearing broker or dealer.
▇▇▇▇▇▇ represents and warrants to Correspondent that:
(a) ▇▇▇▇▇▇ is a corporation duly organized, validly existing and
in good standing under the laws of the state of North
Carolina.
(b) ▇▇▇▇▇▇ is registered as a broker-dealer with the SEC and is in
compliance with the rules and regulations thereof
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(c) ▇▇▇▇▇▇ is a member corporation in good standing of the NASD
and is in compliance with the rules and regulations thereof.
(d) ▇▇▇▇▇▇ is in compliance with the rules and regulations of each
national securities exchange of which it is a member.
2. CUSTOMER AND CORRESPONDENT ACCOUNTS
Responsibility for compliance with the provisions of the NASD's Conduct
Rules regarding opening, approving and monitoring Customer accounts shall be
allocated between ▇▇▇▇▇▇ and Correspondent as set forth in this Section 2.
(a) Account Documentation. Correspondent will be responsible for
obtaining and verifying all required information and the
identity of each potential Customer. Correspondent will be
responsible for obtaining all documents related to customer
accounts, and for the transmission of all required documents
to ▇▇▇▇▇▇ on a timely basis. ▇▇▇▇▇▇ may, in its discretion,
receive documents directly from the Customer. Correspondent
acknowledges the obligation to retain all documents in an
easily accessible place in accordance with SEC rules and
agrees to provide the original application by overnight
delivery or a legible copy by facsimile transmission within 24
hours of a request from ▇▇▇▇▇▇. Correspondent will be
responsible for complying with the requirement of SEC Rule
15g-9, if applicable.
(b) Knowledge of Customer and Customer's Investment Objectives.
Correspondent will be responsible for learning and documenting
all the required information relating to each and every
Customer in order to insure compliance by Correspondent with
applicable rules and regulations. This required information
includes, but is not limited to, all of the information and
instructions submitted to ▇▇▇▇▇▇ pursuant to Section 2(a), any
additional facts relative to the Customer's investment
objectives, and every person holding power of attorney over
any Customer Account. It shall be the responsibility of
Correspondent to ensure that those of its Customers who open
Accounts hereunder shall not be minors. Correspondent shall be
solely responsible for any issues regarding the suitability of
any investments for its Customers.
(c) Acceptance of Accounts. Prior to any Customer Account being
opened with ▇▇▇▇▇▇, it must be approved by Correspondent.
▇▇▇▇▇▇ reserves the right to withhold acceptance of, or to
reject, for any reason, any Customer, Customer Account,
Correspondent Account or any transaction for any Account and
to terminate any Account previously accepted by ▇▇▇▇▇▇.
Initial acceptance of each Account shall be conditioned upon
▇▇▇▇▇▇'▇ receipt of completed forms as required by Section
2(a). Correspondent shall not submit such forms with respect
to any Customer Account unless Correspondent has in its
possession the documentation of all information required
pursuant to Section 2(b). ▇▇▇▇▇▇ shall be under no obligation
to accept any Account as to which any documentation required
to be submitted to ▇▇▇▇▇▇ or maintained by Correspondent
pursuant to Sections 2(a) and 2(b) is incomplete. Prior to
acceptance of any Account, no action taken by ▇▇▇▇▇▇ or any of
its employees, including, without being limited to, executing
or clearing a trade in any Account, shall be deemed to be or
shall constitute acceptance of such Account.
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(d) Supervision of Orders and Accounts. ▇▇▇▇▇▇ will execute orders
for Correspondent's Customers after Correspondent's
appropriate principals have accepted and approved said
Accounts. Correspondent will be responsible for the review and
supervision of, and the suitability of, investments made by
each and every one of its Customers and ▇▇▇▇▇▇ shall have no
responsibility, Correspondent shall be responsible for
insuring that all transactions in and activities related to
all Accounts opened by it with ▇▇▇▇▇▇, including discretionary
accounts, will be in compliance with all applicable laws,
rules and regulations of the United States, the several
states, governmental agencies, securities exchanges and the
NASD, including any laws relating to Correspondent's
fiduciary, responsibilities to Customers, either under the
Employee Retirement Income Security Act of 1974 or otherwise.
Correspondent shall diligently supervise the activities of its
officers, employees and representatives with respect to all
Accounts. ▇▇▇▇▇▇ will perform the clearing services provided
for in this Agreement for Accounts accepted by it in
accordance with the terms of this Agreement, as it may be
amended from time to time, and otherwise in accordance with
its best business judgement. To the extent, if any, that
▇▇▇▇▇▇ accepts from Correspondent orders for execution in
accordance with Section 7(a), Correspondent shall be
responsible for informing ▇▇▇▇▇▇ of the location of the
securities that are the subject of the order so that ▇▇▇▇▇▇
may comply with the provisions of Rule 3110 of the NASD's
Conduct Rules.
(e) Accounts of Associated Persons. Correspondent will not accept
Accounts for any persons that come within the express
provisions of Rule 3050 of the NASD's Conduct Rules unless
Correspondent has complied with the provisions of said Rule
and, if applicable, provided evidence of employer approval as
required by the Rule.
(f) Account Responsibility for Certain Purposes. Notwithstanding
anything herein to the contrary, for purposes of the
Securities Investment Protection Act of 1970 and the Financial
Responsibility Rules of the SEC, the Customer Accounts are the
responsibility, of ▇▇▇▇▇▇. For all other purposes, the
Customer Accounts shall be the full, total and sole
responsibility of Correspondent.
3. EXTENSION OF CREDIT
Responsibility for compliance with the provisions of Regulation T
issued by the Board of Governors of the Federal Reserve System pursuant to the
Securities Exchange Act of 1934 ("Regulation T") and all other applicable rules,
regulations and requirements of any exchange or regulatory agency affecting the
extension of credit shall be allocated between ▇▇▇▇▇▇ and Correspondent as set
forth in this Section 3.
(a) Margin Agreements. At the time of opening of each margin
account, Correspondent will furnish ▇▇▇▇▇▇ with a ▇▇▇▇▇▇
Customer Margin and Short Account Agreement, executed by the
Customer, on the form furnished to Correspondent by ▇▇▇▇▇▇.
Correspondent may use a substitute form upon written approval
by ▇▇▇▇▇▇.
(b) Margin and Margin Maintenance. Correspondent is responsible
for assuring Customer's payment of Customer's initial margin
requirements and of all amounts necessary to meet subsequent
maintenance calls in each Customer Account, in order to insure
compliance with Regulation T and the house rules of ▇▇▇▇▇▇.
Such
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payment may be collected by Correspondent on ▇▇▇▇▇▇'▇ behalf,
or made directly to ▇▇▇▇▇▇ at Correspondent's option.
Correspondent is responsible for the payment of initial margin
and of all amounts necessary to meet subsequent margin calls
in each Correspondent Account ▇▇▇▇▇▇ shall have the unlimited
right to buy in or sell out positions in Accounts whenever
▇▇▇▇▇▇, in its sole discretion, deems such action appropriate
and despite whether, if the Account is a Margin Account, any
such Account is then in compliance with applicable margin
maintenance requirement or has requested an extension of time
to make any payment required by Regulation T. Correspondent
acknowledges that ▇▇▇▇▇▇ has the right to demand payment on
any debit balance and that Correspondent is responsible to
▇▇▇▇▇▇ for any unsecured debit balance resulting from any
failure of a Customer to make any such payments upon demand.
(c) Margin Requirements. Initial margin and margin maintenance
requirements applicable to any margin account shall be in
accordance with the house rules of ▇▇▇▇▇▇, rather than in
accordance with any lower requirement of any law, any exchange
or any regulatory agency. ▇▇▇▇▇▇ may change the margin
requirements applicable to any Account or class of accounts,
as described in its house rules; Correspondent shall be
responsible for advising its Customer of the changed
requirements and for the payment by the Customer of any
additional margin necessary to insure compliance with such
increased requirements.
(d) Losses. In addition to, and not in limitation of,
Correspondent's agreement to indemnify ▇▇▇▇▇▇ pursuant to the
provisions of Section 10, Correspondent indemnifies and holds
harmless ▇▇▇▇▇▇ from and against any and all loss, cost,
expense and liability (including legal and accounting fees and
expenses) sustained by ▇▇▇▇▇▇ arising out of any of the
following:
(i) any failure by any Customer to comply with the terms
of its Customer Margin and Short Account Agreement
with ▇▇▇▇▇▇;
(ii) The failure of Correspondent or any Customer to
comply with Regulation T;
(iii) the failure of Correspondent to satisfy its
obligations under this Section 3; or
(iv) The failure of delivery of securities sold or failure
of payment for securities purchased in accordance
with the provisions of Regulation T; the return to
▇▇▇▇▇▇ unpaid of any check given to ▇▇▇▇▇▇ by
Correspondent or any Customer; or the payment for
and/or delivery of all "when issued" transactions
which ▇▇▇▇▇▇ may accept or execute for the Accounts.
4. MAINTENANCE OF BOOKS AND RECORDS
▇▇▇▇▇▇ will maintain stock records and other records on a basis
consistent with generally accepted practices in the securities
industry and will maintain copies of such records in accordance with
the NASD and SEC guidelines for record retention in effect from time to
time. At the time this Agreement is executed and annually thereafter,
▇▇▇▇▇▇ will provide Correspondent with a list or description of all
exception or other reports that it offers to Correspondent (See
Attached Schedule B.) Annually, ▇▇▇▇▇▇ will provide Correspondent with
a list of those reports requested by or supplied to Correspondent and
will provide a copy
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of such notice to Correspondent's DEA. ▇▇▇▇▇▇ and Correspondent shall
each be responsible for preparing and filing the reports required by
the governmental and regulatory agencies that have jurisdiction over
each and ▇▇▇▇▇▇ and Correspondent will provide the other with such
information, if any, which is in the control of one party but is
required by the other to prepare any such report.
5. RECEIPT, DELIVERY AND SAFEGUARDING OF FUNDS AND SECURITIES
(a) Receipt and Delivery in the Ordinary Course of Business.
▇▇▇▇▇▇, acting on behalf of Correspondent, will receive and
deliver all funds and securities in connection with
transactions for Customer Accounts in accordance with the
Customer's instructions to Correspondent. Correspondent shall
be responsible for advising Customers of their obligations to
deliver funds or securities in connection with each such
transaction. Correspondent shall be responsible for any
failure of any Customer to fulfill such obligation. ▇▇▇▇▇▇
shall be responsible for the safeguarding of all funds and
securities delivered to and accepted by it, subject to count
and verification by ▇▇▇▇▇▇. However, ▇▇▇▇▇▇ will not be
responsible for any funds or securities delivered by a
Customer or Correspondent, its agents or employees, until such
funds or securities are physically delivered to ▇▇▇▇▇▇'▇
premises and accepted by ▇▇▇▇▇▇ or deposited in bank accounts
maintained in ▇▇▇▇▇▇'▇ name. It is expressly understood and
agreed, however, that Correspondent is responsible for
compliance with the Currency and Foreign Transactions
Reporting Act (31 U.S.C. Section 5311 et seq.) and the rules
and regulations promulgated thereunder (31 C.F.R Section
103.11, as amended, et seq.).
(b) Custody Services. Whenever ▇▇▇▇▇▇ has been instructed to act
as custodian of the securities in any Correspondent or
Customer Account, or to hold such securities in "safekeeping,"
▇▇▇▇▇▇ may hold the securities in the Customer's name or may
cause such securities to be registered in the name of ▇▇▇▇▇▇
or its nominee or in the names of nominees of any depository
used by ▇▇▇▇▇▇. ▇▇▇▇▇▇ will perform the services required in
connection with acting as custodian for securities in
Correspondent and Customer Accounts, such as (i) collection
and payment of dividends; (ii) transmittal and handling
(through Correspondent) of tenders or exchanges pursuant to
tender offers and exchange offers; (iii) transmittal of all
proxy materials and other shareholder communications; and (iv)
handling of exercises or expirations of rights and warrants,
and of redemptions of securities.
(c) Receipt and Delivery Pursuant to Special Instruction. Upon
instruction from Correspondent or a Customer, ▇▇▇▇▇▇ will make
such transfers of securities or Accounts as may be requested.
Correspondent shall be responsible for determining if any
securities held in Correspondent or Customer Accounts are
"restricted securities" or "control stock" as defined by the
rules of the SEC and that orders executed for such securities
are in compliance with applicable laws, rules and regulations.
(d) Draft-Issuing Authority. At its discretion ▇▇▇▇▇▇ may
authorize certain of Correspondent's employees to sign drafts
as drawer payable to Correspondent's Customers in amounts and
pursuant to conditions as may be determined by ▇▇▇▇▇▇ from
time to time. Correspondent agrees that it will not request
▇▇▇▇▇▇ to authorize someone to sign drafts who is not an
employee of Correspondent. Correspondent further agrees that
this authority shall not be granted by ▇▇▇▇▇▇ until
Correspondent
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has notified ▇▇▇▇▇▇ in writing that it has established and
will maintain and enforce supervisory procedures with respect
to the issuance of such instruments Correspondent agrees to
fully indemnify ▇▇▇▇▇▇ from the negligence, fraud, or mistakes
of Correspondent or Correspondent's employees in connection
with any draft issuing authority granted to them and
Correspondent authorizes ▇▇▇▇▇▇ to charge any Correspondent
Account or any other assets of Correspondent held by ▇▇▇▇▇▇
with the amount of any such losses. Notwithstanding Section
5(a), ▇▇▇▇▇▇ will not be responsible for the safeguarding of
funds withdrawn by Correspondent or Correspondent's employees
pursuant to such draft issuing authority. ▇▇▇▇▇▇ may withdraw
this draft issuing privilege without notice at any time during
the term of this Agreement. Notwithstanding anything herein to
the contrary, ▇▇▇▇▇▇ may at any time, at its sole discretion,
despite any prior authorization, refuse payment on any draft
for which Correspondent is drawer and ▇▇▇▇▇▇ is payee.
6. CONFIRMATIONS AND STATEMENTS
(a) Preparation and Transmission. ▇▇▇▇▇▇ will prepare and send to
Customers monthly statements of account (or quarterly
statements if no activity occurs in an account during any
quarter covered by such statement), which statements shall
meet ▇▇▇▇▇▇'▇ requirements as to format and quality and will
indicate that Correspondent is the introducing broker for the
Account. ▇▇▇▇▇▇ will be responsible for preparing and
transmitting confirmations. Upon prior written approval from
▇▇▇▇▇▇, Correspondent may assume the responsibility of
preparing and transmitting confirmations, including the
responsibility for compliance with the provisions of Rule 2230
of the NASD's Conduct Rules. Copies of all monthly or
quarterly statements sent by ▇▇▇▇▇▇ to Customers will be send
to Correspondent. ▇▇▇▇▇▇ will also provide to Correspondent
monthly statements of clearing services performed by ▇▇▇▇▇▇
for Correspondent and Customer Accounts showing the fees
charged for such services during the month, as provided in
Section 8.
(b) Examination and Notification of Errors. Correspondent shall
examine promptly all monthly statements of account, monthly
statements of clearing services and other reports provided to
Correspondent by ▇▇▇▇▇▇. Correspondent shall notify ▇▇▇▇▇▇ of
any error claimed by Correspondent in any Account in
connection with (i) any transaction prior to the settlement
date of such transaction, (ii) information appearing on daily
reports within seven days of such report, and (iii)
information appearing on monthly statements or reports within
30 days of Correspondent's receipt of any monthly statement or
report. Any notice of error shall be accompanied by such
documentation as may be necessary to substantiate
Correspondent's claim. Correspondent shall provide promptly
upon ▇▇▇▇▇▇'▇ request any additional documentation which
▇▇▇▇▇▇ reasonably believes is necessary or desirable to
determine and correct any such error.
7. ACCEPTANCE OF ORDERS, EXECUTION OF TRANSACTIONS, OTHER SERVICES
(a) Customers' Orders. Orders received by Correspondent can be
executed by Correspondent or forwarded to ▇▇▇▇▇▇ for
execution. The party executing the order shall be responsible
for errors in execution. Acceptance of orders from Customers
shall be the responsibility of Correspondent, and
Correspondent shall be responsible
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for the authenticity of all orders, Correspondent shall advise
each of its Customers that its relationship with ▇▇▇▇▇▇ is
solely that of an introducing broker to a clearing broker and
that, except as set forth in Section 2(f) above, Correspondent
bears all responsibility for the Customer's Account. ▇▇▇▇▇▇ is
not obligated to accept for execution any orders placed
directly with ▇▇▇▇▇▇ by a Customer. In addition, ▇▇▇▇▇▇ is not
obligated to accept any orders from Correspondent if ▇▇▇▇▇▇
determines in good faith that it should not. Correspondent
assumes the risk of failure by an over-the-counter dealer with
which Correspondent executes an order in the event such dealer
fails to perform and will reimburse ▇▇▇▇▇▇ for any, loss
incurred by it in the transaction.
(b) Transactions Clearing. During the term of this Agreement,
▇▇▇▇▇▇ will clear transactions on a fully disclosed basis for
Accounts of Correspondent and the Customers that Correspondent
introduces and ▇▇▇▇▇▇ accepts as provided in Section 2(b);
provided, however, that ▇▇▇▇▇▇ is not obligated to clear any
transactions for Correspondent or Correspondent's Customers if
▇▇▇▇▇▇ determines in good faith that it should not.
(c) Other Services. ▇▇▇▇▇▇ will perform such other services, upon
such terms and at such prices, as ▇▇▇▇▇▇ and Correspondent may
from time to time agree.
8. FEES AND SETTLEMENTS FOR SECURITIES TRANSACTIONS
(a) Commissions: Fees for Clearing Services.
(i) Correspondent has provided to ▇▇▇▇▇▇ its basic
commission schedule and ▇▇▇▇▇▇ will charge each
Customer the commission shown on such schedule or
which Correspondent otherwise directs ▇▇▇▇▇▇ to
charge on each transaction. Correspondent's basic
commission schedule may be amended from time to time
by written instructions to ▇▇▇▇▇▇ from Correspondent.
▇▇▇▇▇▇ shall be required to implement such changes
only to the extent that they are within the usual
capabilities of ▇▇▇▇▇▇'▇ data processing and
operations systems and only over such reasonable time
as ▇▇▇▇▇▇ may ▇▇▇▇ necessary or desirable to avoid
disruption of ▇▇▇▇▇▇'▇ normal operational
capabilities. ▇▇▇▇▇▇ may charge Correspondent for
changes in the basic commission schedule.
Correspondent's basic commission schedule shall be
within the format of ▇▇▇▇▇▇'▇ computer system.
(ii) ▇▇▇▇▇▇ will charge Correspondent for clearing
services according to the fee schedule set forth in
Schedule A attached hereto and incorporated herein
for all purposes. Clearing charges may be modified
from time to time by ▇▇▇▇▇▇ without re-execution of
this Agreement. To implement new charges, ▇▇▇▇▇▇ will
mail or telecopy a new Schedule A to Correspondent.
If Correspondent does not object to the new charges
within ten (10) days of such mailing or telecopying,
as provided below, the new charges shall become
effective and the new Schedule A shall become a part
of and modify this Agreement without any further
action by the parties. Upon such event, ▇▇▇▇▇▇ and
Correspondent shall replace the previous Schedule A
with the new Schedule A. Correspondent may object to
new charges by giving notice canceling this Agreement
as provided under Sections 12 and 20(m) During the
pendency
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of such notice period, the previous charges shall
continue to be effective until termination.
(b) Settlements. ▇▇▇▇▇▇ will collect commissions from Customers on
behalf of Correspondent and through Correspondent. ▇▇▇▇▇▇ may
make payments to Correspondent against such commissions in
advance of the monthly settlement contemplated by this Section
8(b), the amount of such payments to be determined in ▇▇▇▇▇▇'▇
sole discretion based upon ▇▇▇▇▇▇'▇ experience with
Correspondent.
As soon as practicable after the end of each month,
▇▇▇▇▇▇ will forward to the Correspondent a statement showing
the amount of commissions and other amounts collected by
▇▇▇▇▇▇ on Correspondent's behalf, and all amounts due to
▇▇▇▇▇▇ from Correspondent (including, without being limited
to, clearing charges, other charges, other fees and Customer's
unsecured debit items, however arising), together with the
amount by which the total owed Correspondent exceeds the total
owed ▇▇▇▇▇▇. If such statement indicates that Correspondent
owes monies to ▇▇▇▇▇▇, Correspondent shall promptly pay ▇▇▇▇▇▇
the amount by which the total owed ▇▇▇▇▇▇ exceeds the total
owed Correspondent. If Correspondent fails to make such
payment on a timely basis, ▇▇▇▇▇▇ shall have the right to
charge any other Account maintained by ▇▇▇▇▇▇ for
Correspondent or any other assets of Correspondent held by
▇▇▇▇▇▇ (including the deposit required pursuant to Section 9
and positions and balances in Correspondent Accounts) for the
net amount due ▇▇▇▇▇▇. Any failure by ▇▇▇▇▇▇ to charge any
Account or assets of Correspondent held by ▇▇▇▇▇▇ shall not
act as a waiver of ▇▇▇▇▇▇'▇ right to demand payment of, or to
charge Correspondent's Accounts for, the full amount due at
any time.
9. DEPOSIT
Contemporaneously with the signing of this Agreement, Correspondent
will deliver cash or securities to ▇▇▇▇▇▇, as specked in Schedule A attached,
for deposit in an account maintained by ▇▇▇▇▇▇ (the "Deposit Account"). If at
any subsequent time ▇▇▇▇▇▇, in its sole discretion, requires an additional
deposit, Correspondent will deposit additional cash or securities in an amount
specified by ▇▇▇▇▇▇. Instead of making such additional deposit, Correspondent
may reduce Correspondent's business volume or modify the nature of the
securities involved in the Correspondent's transactions ("business mix") as
specified by ▇▇▇▇▇▇. Any failure by ▇▇▇▇▇▇ to demand compliance with the
requirement that Correspondent either deposit additional amounts or modify
Correspondent's business mix shall not act as a waiver of ▇▇▇▇▇▇'▇ right to
demand compliance with such requirements at any time If the deposit is not
adequately funded as required by ▇▇▇▇▇▇, ▇▇▇▇▇▇ may, in addition to all other
rights under this Agreement, transfer cash or securities of Correspondent held
by ▇▇▇▇▇▇ to the Deposit Account. Correspondent agrees that if ▇▇▇▇▇▇, at its
sole discretion, determines it to be necessary, ▇▇▇▇▇▇ shall accept only
liquidating transactions for Customer Accounts and that Correspondent will give
notice of such fact to Customers. If such notice is not given to Customers by
Correspondent, Correspondent agrees that ▇▇▇▇▇▇ may give such notice to
Customers. ▇▇▇▇▇▇ shall be entitled to set-off against any deposit in addition
to any and all other rights or remedies ▇▇▇▇▇▇ may leave under this Agreement or
otherwise. Correspondent agrees that if this Agreement is terminated for any
reason, ▇▇▇▇▇▇ may liquidate securities deposited and deduct from such deposit
any amounts Correspondent owes ▇▇▇▇▇▇ because of failure to meet any of
Correspondent's obligations under this Agreement.
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10. INDEMNIFICATION
(a) Indemnity.
(i) Correspondent agrees to indemnify and hold harmless
▇▇▇▇▇▇, each person who controls ▇▇▇▇▇▇ within the meaning of
the Securities Exchange Act of 1934 and any directors,
officers, employees, agents and attorneys of ▇▇▇▇▇▇ ("▇▇▇▇▇▇
Indemnified Persons") from and against all claims, demands,
proceedings, suits and actions and all liabilities, losses,
expenses and costs (including any legal and accounting fees
and expenses) relating to ▇▇▇▇▇▇'▇ defense of any failure, for
any reason, fraudulent or otherwise, by Correspondent,
Correspondent's employees, independent agents or contractors,
or Customers to comply with any obligation under this
Agreement or any other agreement executed and delivered to
▇▇▇▇▇▇ in connection with ▇▇▇▇▇▇'▇ performance of services
hereunder and any act or failure to act by ▇▇▇▇▇▇ Indemnified
Persons, except any act or failure to act which is the result
of gross negligence or willful misconduct on the part of any
such ▇▇▇▇▇▇ Indemnified Person. Without limiting the
generality of the foregoing, such failure is explicitly
intended by the parties to include failure resulting from (i)
suspension of trading or bankruptcy or insolvency of any
company, securities of which are held in a Customer's
Accounts; (ii) failure by any Customer to maintain adequate
margin; or (iii) breach of any obligation existing between
Correspondent and a Customer of Correspondent or any law, rule
or regulation of the United States, a state or territory
thereof, the SEC, the Federal Reserve Board or other
authority, applicable to any transaction contemplated by this
Agreement.
(ii) ▇▇▇▇▇▇ shall indemnify and hold Correspondent
harmless against any losses, claims, damages, liabilities or
expenses including without limitation those asserted by
Customers (which shall include, but not be limited to, all
costs of defense and investigation and all attorney's fees) to
which Correspondent may become subject, insofar as such
losses, claims, damages, liabilities or expenses arise out of,
or are based upon the gross negligence or willful misconduct
of ▇▇▇▇▇▇ or its employees in providing the services
contemplated hereunder.
(iii) Upon receipt by any indemnified party under this Section
of notice of the commencement of any action, and if a claim is
to be made against the indemnifying party under this Section,
the indemnified party will promptly notify the indemnifying
party. The omission to notify the indemnifying party will not
relieve it from any liability that it may have to any
indemnified party otherwise than under this Section
10(a)(iii). In any such action brought against any indemnified
party, the indemnifying party will be entitled to participate
in and, to the extent that it may wish, to assume the defense
thereof, subject to the provisions herein stated, with counsel
satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election
to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any
legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees
and expenses of such counsel shall not be at the expense of
the indemnifying party if the indemnifying party has assumed
the defense of the action with counsel satisfactory to the
indemnified party.
Page 9
(b) Security Interest and Authorization to Charge. Correspondent
grants to ▇▇▇▇▇▇ a first lien and security interest in any
Correspondent Account maintained by ▇▇▇▇▇▇ and any other
assets of Correspondent now or hereafter held by ▇▇▇▇▇▇ and
authorizes ▇▇▇▇▇▇ to discharge such lien by charging such
Account and assets with all amounts owing to ▇▇▇▇▇▇ including,
but not limited to, (i) any cost or expense resulting from
failures to deliver or failures to receive, (ii) any losses
resulting from unsecured debit balances in any Customer or
Correspondent Account and (iii) any amounts to which ▇▇▇▇▇▇ is
otherwise entitled pursuant to the provisions of Section 10(a)
▇▇▇▇▇▇ shall have discretion to liquidate or sell any
securities without notice to Correspondent, and to determine
which securities to sell. Such charge may be made against
Correspondent Account or assets at any time and in such amount
as Penson deems appropriate. No delay in charging any
Correspondent Account or asset shall operate as a waiver of
▇▇▇▇▇▇'▇ right to do so at any future time as and when Penson
deems appropriate ▇▇▇▇▇▇ shall have the unlimited right to
set-off any indebtedness or other obligations of Correspondent
under this Agreement or otherwise (absolute or contingent,
matured or unmatured) against any obligations of ▇▇▇▇▇▇ to
Correspondent, including from the Deposit Account (as
described in Section 9 and/or any other money, securities, or
other property of Correspondent in ▇▇▇▇▇▇'▇ possession).
(c) Reserves. In connection with any claim that does or could give
rise to a claim for indemnification under this Section 10 for
▇▇▇▇▇▇ or an ▇▇▇▇▇▇ Indemnified Person, ▇▇▇▇▇▇ may, in its
discretion, in addition to any and all other rights and
remedies under this Agreement, reserve and retain any money,
securities or other property of Correspondent pending a
determination of such claim. The money, securities or other
property of Correspondent set aside in such a reserve shall be
subject to ▇▇▇▇▇▇'▇ standard lien and security interest
described in Section 10(b) above.
11. UNDERTAKINGS OF CORRESPONDENT
(a) Financial Statements and Other Reports. Correspondent will
furnish to ▇▇▇▇▇▇ as soon as possible a copy of
Correspondent's balance sheet and statement of earnings for
the current fiscal year and for each of Correspondent's
subsequent fiscal years. Each such balance sheet and statement
of earnings shall be certified by independent public
accountants. Correspondent also shall furnish ▇▇▇▇▇▇ with
copies of its quarterly Focus filings promptly after filing.
(b) Other Clearing Services. During the term of this Agreement,
Correspondent will not sign a clearing agreement with another
clearing broker or dealer without prior written approval by
▇▇▇▇▇▇, such approval not to be unreasonably withheld.
However, ▇▇▇▇▇▇ does hereby approve Correspondent's current
clearing relationship with Southwest Securities Corp.
(c) Suspension or Restriction. In the event that Correspondent or
any employee of Correspondent shall become subject to
suspension or restriction by any regulatory body having
jurisdiction over Correspondent and Correspondent's securities
business, Correspondent will notify ▇▇▇▇▇▇ immediately and
Correspondent authorizes ▇▇▇▇▇▇ to take such steps as may be
necessary for ▇▇▇▇▇▇ to maintain compliance with the rules and
regulations to which ▇▇▇▇▇▇ is subject Correspondent further
authorizes ▇▇▇▇▇▇, in any event, to comply with directives or
demands made upon ▇▇▇▇▇▇ by any exchange or regulatory body
relative to Correspondent and Customers. In
Page 10
connection with such directives or demands, ▇▇▇▇▇▇ may seek
advice or legal counsel and Correspondent will reimburse
▇▇▇▇▇▇ for reasonable fees and expenses of such counsel
(d) Fixed Price Offerings. Correspondent agrees that in making
sales of Securities, as a part of a fixed price offering, it
will comply with all applicable rules of the NASD, including,
without limitation, the NASD's Interpretations with respect to
Free-Riding and Withholding under Rules 2110 and 2740 of the
NASD's Conduct Rules.
(e) Customer Orders Correspondent represents that all orders
received by ▇▇▇▇▇▇ will be in accordance with its Customers'
instructions. The parties hereto expressly agree that ▇▇▇▇▇▇
shall not be responsible for investigation into the facts
surrounding any transaction that it may have with
Correspondent, or that Correspondent may have with its
Customers or other persons, nor shall ▇▇▇▇▇▇ be under any
responsibility for compliance by Correspondent with any laws
or regulations which may be applicable to Correspondent.
(f) Inquiries on Certificates. ▇▇▇▇▇▇ agrees to act as
Correspondent's direct inquirer under the Lost and Stolen
Securities Program under Rule 17f-1 (17CFR 240.17f-1).
12. TERMINATION OF AGREEMENT: TRANSFER OF ACCOUNTS
(a) Effectiveness. This Agreement shall remain in force for two
(2) years from the date Correspondent first clears
transactions at ▇▇▇▇▇▇. Subsequent to this initial term,
either party may terminate this Agreement by giving forty-five
(45) days prior written notice to the other party.
(b) Termination by ▇▇▇▇▇▇. Notwithstanding Section 12(a), ▇▇▇▇▇▇
may terminate this Agreement at any time on five (5) days
written notice to Correspondent in the event that
Correspondent:
(i) fails to comply with the terms of this Agreement and
upon notification by ▇▇▇▇▇▇ fails to begin compliance
within 10 days from said notification; or
(ii) is enjoined, prohibited or suspended, as a result of
an administrative or judicial proceeding, from
engaging in securities business activities
constituting all or portions of Correspondent's
securities business, which injunction, prohibition or
suspension in ▇▇▇▇▇▇'▇ judgment makes impracticable
the fully disclosed clearing relationship established
in this Agreement.
(c) Automatic Termination. In addition to any other provisions for
termination herein, this Agreement shall terminate immediately
in the event that either Correspondent or ▇▇▇▇▇▇ ceases to
conduct its business or that ▇▇▇▇▇▇:
(i) is no longer registered as a broker/dealer with the
SEC; or
(ii) is no longer a member in good standing of the NASD;
or
Page 11
(iii) is suspended by any national securities exchange of
which ▇▇▇▇▇▇ is a member for failure to comply with
the rules and regulations thereof.
(d) Conversion of Accounts. In the event that this Agreement is
terminated for any reason, it shall be Correspondent's
responsibility to arrange for the conversion of Correspondent
and Customer Accounts to another clearing broker.
Correspondent will give ▇▇▇▇▇▇ notice (the "Conversion
Notice") of
(i) the name of the broker that will assume
responsibility for clearing services for Customers
and Correspondent;
(ii) the date on which such broker will commence providing
such services;
(iii) Correspondent's undertaking, in form and substance
satisfactory to ▇▇▇▇▇▇, that Correspondent's
agreement with such broker provides that such broker
will accept on conversion all Correspondent and
Customer Accounts, then maintained by ▇▇▇▇▇▇; and
(iv) the name of an individual within that organization
who ▇▇▇▇▇▇ can contact to coordinate the conversion.
The Conversion Notice shall accompany Correspondent's
notice of termination given pursuant to Section 12(a)
or within thirty (30) days of the occurrence of an
event specified in Section 12(c).
If Correspondent fails to give the Conversion Notice
to ▇▇▇▇▇▇, ▇▇▇▇▇▇ may give to Customers such notice as Penson
deems appropriate of the termination of this Agreement and may
make such arrangements as Penson deems appropriate for
transfer or delivery of Customer and Correspondent Accounts.
Correspondent will pay to ▇▇▇▇▇▇ $3,000 in programming charges
to process the conversion. In addition, Correspondent shall
pay any costs incurred by ▇▇▇▇▇▇ as billed by any third party
vendors such as transfer agents, etc.
(e) Survival. Termination of this Agreement shall not affect
▇▇▇▇▇▇'▇ rights or liabilities relating to business transacted
prior to the effective date of such termination. From the date
of termination until transfer or delivery of all Customer and
Correspondent Accounts, ▇▇▇▇▇▇'▇ rights and liabilities
relating to business transacted after such termination shall
be governed by the same terms as those set forth in this
Agreement.
(f) No Obligation to Release. ▇▇▇▇▇▇ shall not be required to
release to Correspondent any securities or cash held by ▇▇▇▇▇▇
for Correspondent in one or more Correspondent Accounts until
any amounts owing to ▇▇▇▇▇▇ pursuant to the provisions of this
Agreement are paid; and Correspondent's outstanding
obligations hereunder to ▇▇▇▇▇▇ are determined, including
determination of any disputed amounts, and satisfied; and any
property of ▇▇▇▇▇▇ in the possession of Correspondent 1$
returned to ▇▇▇▇▇▇.
13. CONFIDENTIAL NATURE OF DOCUMENTS
All agreements, documents, papers, and data in any form, supplied by
Correspondent concerning Correspondent's business or Customers shall be treated
by ▇▇▇▇▇▇ as confidential. To
Page 12
the extent such documents or data are retained by ▇▇▇▇▇▇, they shall be kept in
a safe place and shall be made available to third parties only as authorized by
Correspondent in writing or pursuant to any order or request of a court or
regulatory body having appropriate jurisdiction. ▇▇▇▇▇▇ shall give Correspondent
prompt notice of the receipt by ▇▇▇▇▇▇ of any such order or subpoena, unless
prohibited from doing so by the issuing authority which notice shall be given
prior to ▇▇▇▇▇▇'▇ compliance therewith. Such documents shall be made available
by ▇▇▇▇▇▇ for inspection and examination by Correspondent's auditors, by
properly authorized agents or employees of any regulatory bodies or commissions
or by such other persons as Correspondent may authorize in writing.
Notwithstanding anything herein to the contrary, Correspondent expressly
authorizes ▇▇▇▇▇▇ to supply any information requested relating to Correspondent,
its business, or its Customers to any regulatory body having appropriate
authority.
14. NOTICE TO CUSTOMERS
Subject to the requirements of the NASD's Conduct Rules, Correspondent
shall provide, or cause to be provided to every Customer upon the opening of a
Customer Account, notice of the existence and general terms of this Agreement.
15. CUSTOMER COMPLAINT PROCEDURES
Correspondent will be responsible for the initial handling of all
Customer complaints. Any customer who initiates a complaint with ▇▇▇▇▇▇ will be
referred by ▇▇▇▇▇▇ to Correspondent. ▇▇▇▇▇▇ will forward any complaints received
to Correspondent's Designated Examining Authority ("DEA"). ▇▇▇▇▇▇ will also
notify the Customer in writing that the complaint was received and was forwarded
to Correspondent and to Correspondent's DEA. If any such complaint is based upon
an alleged act or failure to act by ▇▇▇▇▇▇, Correspondent will notify ▇▇▇▇▇▇
promptly of such complaint and the basis therefor; and will consult with ▇▇▇▇▇▇;
and the parties will cooperate in determining the validity of such complaint and
the appropriate action to be taken.
16. REMEDIES CUMULATIVE
The enumeration herein of specific remedies shall not be exclusive of
any other remedies. Any delay or failure by any party to this Agreement to
exercise any right, power, remedy or privilege herein contained, or now or
hereafter existing under any applicable statute or law, shall not be construed
to be a waiver of such right, power, remedy or privilege, nor to limit the
exercise of such right, power, remedy or privilege, nor shall it preclude the
further exercise thereof or the exercise of any other right, power, remedy or
privilege.
17. GUARANTEE
The corporation or individual(s) who guarantee the obligations of
Correspondent under this Agreement by executing the signature lines designated
for such purpose at the end of this Agreement (the "Guarantor's)"), in
consideration of ▇▇▇▇▇▇'▇ entering into the Agreement, do(es) hereby personally
guarantees) (jointly and severally, if more than one) the performance by
Correspondent of the provisions of the Agreement (including without limitation
the idemnification provisions of Section 10) and shall promptly pay any amount
that is not paid by Correspondent to ▇▇▇▇▇▇ under the Agreement. This is an
absolute, unconditional and unlimited guarantee of payment and may be proceeded
upon by ▇▇▇▇▇▇ or a ▇▇▇▇▇▇ Indemnified. Person before fling any action against
Correspondent or after any action against Correspondent has been commenced
Guarantor(s) grants to ▇▇▇▇▇▇ a first lien and security interest on any and all
money and securities of a Guarantor(s) held
Page 13
by ▇▇▇▇▇▇. ▇▇▇▇▇▇ shall have the unlimited right to set-off any amounts owed to
it by Guarantor(s) against any obligation of ▇▇▇▇▇▇ to Guarantor(s) ▇▇▇▇▇▇ also
shall have the unlimited right to set-off any amounts owed to it by Guarantor(s)
against any obligation of ▇▇▇▇▇▇ to Guarantor(s) ▇▇▇▇▇▇ also shall have the
absolute and unlimited right to sell, transfer, or liquidate any of the assets
in any of Guarantor(s)' accounts with ▇▇▇▇▇▇ for any amounts owed to it by
Correspondent or Guarantor(s). The obligations of the Guarantor(s) shall not be
discharged or impaired or otherwise affected by the failure of ▇▇▇▇▇▇ or a
▇▇▇▇▇▇ Indemnified Person to assert, claim, demand or enforce any remedy under
this Agreement, nor by waiver, modification or amendment of this Agreement or
any compromise, settlement or discharge of obligations of Correspondent under
this Agreement, or any release or impairment of any collateral by ▇▇▇▇▇▇ or a
▇▇▇▇▇▇ Indemnified Person.
18. RESPONSIBILITY FOR ERRORS; LIMIT ON LIABILITY; NO CONSEQUENTIAL DAMAGES
In the general course of business, ▇▇▇▇▇▇ and Correspondent shall each
be responsible for correcting their own errors. In any action by Correspondent
against ▇▇▇▇▇▇ for any claim arising out of the relationship created by this
Agreement, ▇▇▇▇▇▇ shall only be liable to Correspondent in cases of gross
negligence or willful misconduct, and in such cases ▇▇▇▇▇▇ shall only be liable
for the amount or actual monetary losses suffered by Correspondent.
Correspondent shall not, in any such action or proceeding, or otherwise, assert
any claim against ▇▇▇▇▇▇ for consequential damages on account of any loss, cost,
damage or expense which Correspondent may suffer or incur related to
transactions in connection with this Agreement or otherwise, including, but not
limited to, any lost opportunity claims.
19. PAIB PROVISION
(a) PAIB Reserve Calculation. As the clearing broker for
Correspondent, ▇▇▇▇▇▇ agrees to perform the calculation for
PAIB assets ("PAIB reserve computation") in accordance with
the customer reserve computation ("customer reserve formula")
set forth in SEC Rule 15c3-3 with the following modifications:
(i) Any credit (including a credit applied to reduce a
debit) that is included in the customer reserve
formula will not be included as a credit in the PAIB
reserve computation.
(ii) Note E(3) to Rule 15c3-3a which reduces debit
balances by 1% under the basic method and
subparagraph (a)(1)(ii)(A) of the net capital rule
which reduces debit balances by 3% under the
alternative method will not apply to the PAIB reserve
computation.
(iii) Neither Note E(1) to Rule 15c3-3a nor NYSE
interpretation/04 to Item 10 of Rule 15c3-3a
regarding securities concentration charges will be
applied to the PAIB reserve computation.
(b) Reserve Computation Time Frames. The PAIB reserve computation
will be prepared within the same time frames as those
prescribed by Rule 15c3-3 for the customer reserve formula.
(c) PAIB Assets. The PAIB reserve computation will include all of
the proprietary accounts of Correspondent covered by this
Agreement. All PAIB assets will be kept
Page 14
separate and distinct from customer assets under the customer
reserve formula in the Customer Protection Rule.
(d) PAIB Reserve Account. ▇▇▇▇▇▇ will maintain a separate "Special
Reserve Account for the Exclusive Benefit of Customers" with a
bank in conformity with the standards of paragraph (f) of Rule
15c3-3 ("PAIB Reserve Account"). Cash and/or qualified
securities as defined in the customer reserve formula will be
maintained in the PAIB Account in an amount equal to the PAIB
reserve requirement.
(e) PAIB Credits
(i) Credits included in the PAIB reserve computation that
result from the use of PAIB securities pledged to
meet intra-day margin calls in a cross margin account
established between The Options Clearing Corporation
and any regulated commodity exchange can be reduced
to the extent that the excess margin held by the
other clearing corporation in the cross margin
relationship is used the following business day to
replace the PAIB securities that were previously
pledged. In addition, balances resulting from a cross
margin account which are segregated pursuant to the
Commodities Future Trading Commission regulations
need not be included in the PAIB reserve computation.
(ii) Deposits received prior to a transaction pending
settlement which are $5 million or greater for any
single transaction or $10 million in aggregate can be
excluded as credits from the PAIB reserve computation
if such balances are placed and maintained in a
separate PAIR Reserve Account by 12 noon eastern time
(ET) on the following business day. Thereafter, the
money representing any such deposits may be withdrawn
to complete the related transactions without
performing a new PAIB reserve computation.
(f) Deposit Requirements. In the event the PAIB reserve
computation results in a deposit requirement, the requirement
can be satisfied to the extent of any excess debit in the
customer reserve formula of the same date. However, a deposit
requirement resulting from the customer reserve formula will
not be satisfied with excess debits from the PAIB reserve
computation.
(g) Credit Balances. A credit balance resulting from a PAIB
reserve computation can be reduced by the amount that items
representing such credits are swept into money market funds or
mutual funds of an investment company registered under the
Investment Company Act of 1940 prior to 10 a.m. ET on the
deposit date provided that the credits swept into any such
fund are not subject to an right, charge, security interest,
lien, or claim of any kind in favor of the investment company
or ▇▇▇▇▇▇. Any credits which have been swept into money market
funds or mutual funds must be maintained in the name of
Correspondent or for the benefit of Correspondent. This
treatment of credit balances applies only to the PAIB reserve
computation.
(h) Exclusions from PAIB reserve computation
(i) Commissions receivable and other receivables of
Correspondent from ▇▇▇▇▇▇ (excluding clearing
deposits) that are otherwise allowable assets under
the
Page 15
Net Capital Rule will not be included in the PAIB
reserve computation, provided the amounts have been
clearly identified as receivables on the books and
records of the Correspondent and as payables on the
books of ▇▇▇▇▇▇.
(ii) The proprietary account of Correspondent that is a
guaranteed subsidiary of a clearing broker or who
guarantees a clearing broker (i.e. guarantees all
liabilities and obligations) will be excluded from
the PAIB reserve computation.
(i) Clearing Deposits. Clearing deposits required to be maintained
at ▇▇▇▇▇▇ may be included as debits in the PAIB reserve
computation to the extent the percentage of the deposit which
is based upon ▇▇▇▇▇▇'▇ aggregate deposit requirements that
relates to the proprietary business of the Correspondent can
be identified.
(j) Notification Requirements
(i) Within two business days of the execution of his
Agreement, Correspondent will notify its designated
examining authority ("DEA") in writing that it has
entered into such agreement with ▇▇▇▇▇▇.
(ii) Upon discovery that any deposit made to the PAIB
Reserve Account does not satisfy its deposit
requirement, ▇▇▇▇▇▇ shall by facsimile or telegram
immediately notify its DEA and the Securities and
Exchange Commission ("SEC"). Unless a corrective plan
is found acceptable by the SEC and the DEA, ▇▇▇▇▇▇
will provide written notification within 5 business
days of the date of discovery to Correspondent that
PAIB assets held by ▇▇▇▇▇▇ will not be deemed
allowable assets for net capital purposes. In the
event Correspondent wishes to continue to count its
PAIB assets as allowable, it will have until the last
business day of the month following the month in
which notification is made to transfer all PAIB
assets to another clearing broker. However, if the
deposit deficiency is remedied before the time at
which Correspondent must transfer its PAIB assets to
another clearing broker, Correspondent may choose to
keep its assets at ▇▇▇▇▇▇.
20. MISCELLANEOUS
(a) Tax Reporting. ▇▇▇▇▇▇ shall be responsible for providing IRS
Form 1099 (or any successor form) and other information
required to be reported by federal, state or local tax laws,
rules or regulations, to Accounts solely with respect to
events subsequent to the effective date of this Agreement and
for the mailing of same at ▇▇▇▇▇▇'▇ expense.
(b) Scope of Services. ▇▇▇▇▇▇ shall limit its services pursuant to
the terms of this Agreement to those services expressly set
forth herein and related thereto.
(c) Modification. This Agreement may be modified only by a writing
signed by both parties to this Agreement. Such modification
shall not be deemed as a cancellation of this Agreement.
Subject to the NASD's Conduct Rules, this agreement and all
modifications may be required to be submitted to the NASD for
approval prior to
Page 16
effectiveness. It is expressly understood that brokerage
services cannot be provided by Correspondent under this
Agreement until such approval, if required, is received.
(d) Assignment. This Agreement shall be binding upon all
successors, assigns or transferees of both parties hereto,
irrespective of any change with regard to the name of or the
personnel of Correspondent or ▇▇▇▇▇▇. Any assignment of this
Agreement shall be subject to the requisite review and/or
approval of any regulatory or self regulatory agency or body
whose review and/or approval must be obtained prior to the
effectiveness and validity of such assignment. No assignment
of this Agreement shall be valid unless the non-assigning
party, in its sole discretion consents to such an assignment
in writing. Neither this Agreement nor any operation hereunder
is intended to be, shall not be deemed to be, and shall not be
treated as a general or limited partnership, association or
joint venture or agency relationship between Correspondent and
▇▇▇▇▇▇.
(e) Account Documentation. Applicable laws and regulations require
that ▇▇▇▇▇▇ must have proper documentation and support for any
Account opened on its books. If, after reasonable requests,
the necessary documents to enable ▇▇▇▇▇▇ to comply with such
account documentation requirements of the laws and regulations
have not been received by ▇▇▇▇▇▇, Correspondent shall receive
notification that no further orders will be accepted for the
Account involved.
(f) Construction. The construction and effect of every provision
of this Agreement, the rights of the parties hereunder and any
questions arising out of the Agreement, shall be subject to
the statutory and common law of the state of Texas.
(g) Arbitration. In the event of a dispute between the parties,
such dispute shall be settled by arbitration before
arbitrators sitting in Dallas, Texas, in accordance with the
rules of the Arbitration Committee of the NASD then in effect.
The arbitrators may allocate attorneys' fees and arbitration
costs between parties, and such award shall be final and
binding between the parties and judgment thereon may be
entered in any court of competent jurisdiction.
(h) Headings. The headings preceding the text, articles and
sections hereof have been inserted for convenience and
reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
(i) Entire Agreement. This Agreement shall cover only the types of
services set forth herein and is in no way intended nor shall
it be construed to bestow upon Correspondent or ▇▇▇▇▇▇ any
special treatment regarding any other arrangements, agreements
or understandings that presently exist between Correspondent
and ▇▇▇▇▇▇ or that may hereinafter exist. Correspondent shall
be under no obligation whatsoever to deal with ▇▇▇▇▇▇ or any
of its subsidiaries or any companies controlled directly or
indirectly by or affiliated with ▇▇▇▇▇▇, in any capacity other
than as set forth in this Agreement. Likewise, ▇▇▇▇▇▇ shall be
under no obligation whatsoever to deal with Correspondent or
any of its affiliates in any capacity other than as set forth
in this Agreement
(j) Severability. If any provision or condition of this Agreement
shall be held to be invalid or unenforceable by any court, or
regulatory or self-regulatory agency or
Page 17
body, such invalidity or unenforceability shall attach only to
such provision or condition. The validity of the remaining
provisions and conditions shall not be affected thereby and
this Agreement shall be carried out as if any such invalid or
unenforceable provision or condition were not contained
herein.
(k) Force Majeure. In addition to any excuse provided by
applicable law, all parties hereto shall be excused from
liability for non-performance of this Agreement arising from
any event beyond any party's control, whether or not
foreseeable by either party, including but not limited to,
labor disturbance, war, fire, accident, adverse weather,
inability to secure transportation, governmental act or
regulation, inability to obtain raw materials or other causes
or events beyond either party's control, whether or not
similar to those enumerated above.
(l) Interpleader. If ▇▇▇▇▇▇ receives conflicting claims from
Correspondent, a Customer and/or other persons regarding
money, securities or other property held by ▇▇▇▇▇▇, ▇▇▇▇▇▇
may, in its sole discretion, tender such money, securities or
other property to a court of competent jurisdiction and
institute an action in interpleader or other appropriate legal
proceeding to determine the rights of the respective
claimants. ▇▇▇▇▇▇ shall have no liability to Correspondent or
Customers in connection with any such action, and shall be
entitled to reimbursement for its costs and expenses in
connection with such action from Correspondent.
(m) Notice. For the purposes of any and all notices, consents,
directions, approvals, restrictions, requests or other
communications required or permitted to be delivered
hereunder, ▇▇▇▇▇▇'▇ address shall be:
Attention: ▇▇▇▇▇▇ ▇. Son
President
▇▇▇▇▇▇ Financial Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and Correspondent's address shall be:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
Rushmore Securities Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Either party may provide such notice or change its address for
notice purposes by giving written notice pursuant to
registered or certified mail, return receipt requested, of the
new address to the other party.
(n) Counterparts: NASD Approval. This Agreement may he exerted in
one or more counterparts, all of which taken together shall
constitute a single agreement. When each party hereto has
executed and delivered to the other a counterpart, this
Agreement shall become binding on both parties, subject only
to any required approval by the NASD. If required by the NASD,
▇▇▇▇▇▇ will submit this Agreement to the NASD promptly
following execution and will notify
Page 18
Correspondent, or cause Correspondent to be notified promptly
upon receipt of such approval
Page 19
MADE AND EXECUTED AT Dallas THIS 31 DAY OF October, 2000.
▇▇▇▇▇▇: ▇▇▇▇▇▇ FINANCIAL SERVICES, INC.
By: /S/ ▇▇▇▇▇▇ ▇. Son
-----------------------------------
▇▇▇▇▇▇ ▇. Son, President
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
CORRESPONDENT:
INDIVIDUAL: -----------------------------------
[Signature]
-----------------------------------
[Print name]
-----------------------------------
[Address]
-----------------------------------
ENTITY: RUSHMORE SECURITIES CORP.
-----------------------------------
[Name]
Corporation
-----------------------------------
[Type of Entity, i.e., corporation,
partnership, etc.]
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Its: President
-----------------------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
-----------------------------------
[Address]
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------
Page 20
GUARANTEE: The undersigned individual(s) or corporation hereby guarantee(s) the
obligations of Correspondent under the Agreement as provided in Section 17 of
the Agreement.
CORPORATE GUARANTOR: RUSHMORE FINANCIAL GROUP, INC.
-----------------------------------
[Name of Corporation]
By: /s/ ▇.▇. (▇▇▇▇▇) ▇▇▇▇▇, Jr.
-----------------------------------
Its: Chairman & CEO
-----------------------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
-----------------------------------
[Address]
Suite 650
-----------------------------------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------
Page 21
SCHEDULE A
To Clearing Agreement Between ▇▇▇▇▇▇ Financial Services, Inc. ("▇▇▇▇▇▇")
and Rushmore Securities Corporation. ("Correspondent")
This Schedule A shall be effective for transactions beginning October 24, 2000
The required clearing deposit of Correspondent as of the date of adoption of
this Schedule A pursuant to Section 9 of the Agreement shall be 25,000.00. The
parties hereto agree that ▇▇▇▇▇▇'▇ charges for services to Correspondent and/or
Correspondent's Customers shall be as follows:
Customer Transactions (Retail Tickets)
Listed Equities $18.00 per ticket plus Floor Brokerage
Floor Brokerage
Non billable 0.5 cents per share
Billable 1.375 cents per share
Listed Bonds $20.00 per ticket plus $1.50 per bond
Listed Options $18.00 plus $.75 per contract
OTC Equities $18.00 per ticket
Municipal Bonds $20.00 per ticket
OTC Corporate Bonds $20.00 per ticket
U.S. Treasuries & $20.00 per ticket
Agencies
All Other Securities $20.00 per ticket
Clearing charge reduction on customer trades, excluding mutual funds (monthly
count):
500-999 tickets $ 1.50 per ticket
1,000-2,000 tickets $ 3.00 per ticket
2,000 - 3,000 tickets $ 5.00 per ticket
Over 3,000 tickets $ 6.00 per ticket
Inventory Transactions (Dealer Tickets)
All transactions between another broker dealer and a correspondent's
inventory are $8.50 per ticket.
Page 22
Mutual Funds (includes UITS)
Mutual fund ticket charges are based upon the principal dollars
involved in the transaction, in accordance with the following schedule:
Principal Ticket charge
$0 - 2,000 $3.50
$2 - 5,000 $6.50
$5 - 25,000 $10.00
$25,000 - 75,000 $15.00
Over $75,000 $20.00
Active Day Trading Transactions:
Internet and active day trading transactions will be determined by the software
used by the Customer. Active day trading transactions will be executed by
Customers using the Level II execution platform developed by Correspondent.
Active day trading transactions in OTC and listed equities will be charged $3.25
per ticket, adjusted for volume in accordance with the following schedule, plus
floor brokerage, if applicable, in accordance with the above floor brokerage
rates:
Volume discounts (tickets per day)
2,001-3,000 tickets $0.25 per ticket
3,001-4,000 tickets $0.50 per ticket
4,001-5,000 tickets $0.75 per ticket
5,001-6,000 tickets $0.85 per ticket
6,001-7,000 tickets $0.95 per ticket
7,001-8,000 tickets $1.05 per ticket
8,001-9,000 tickets $1.15 per ticket
9,000-9,999 tickets $1.25 per ticket
Over 9,999 tickets $1.35 per ticket
Note #1: For the purposes of this section, OTC active day trading tickets will
be defined in the following fashion:
1. Total OTC shares for the month will be determined, with transactions
in excess of 1,000 shares counting as only 1,000 shares toward the
total.
2. Total OTC shares will be divided by 1,000, to determine adjusted OTC
tickets.
Note #2: If the average share per OTC trade is less than 750, there will be a
$1.00 per ticket charge for the excess trades, which shall be determined by
subtracting 75% of the actual trades from the adjusted trade total.
Option transactions in active day trading accounts will be $10 per ticket, plus
floor brokerage as defined above. All other transactions in active day trading
accounts will be charged at the same rate as retail transactions. For the
purposes of calculating tickets per month for the various discount schedules,
adjusted active daytrading tickets and retail tickets as well as internet
tickets will be agreggated for discount purposes.
Page 23
Internet Transactions
Internet and active day trading transactions will be determined by the software
used by the Customer Internet transactions will be executed by Customers using
the retail browser based software platform developed by Correspondent
Listed Equities $4 per ticket plus floor brokerage as defined above
Listed Options $4 per ticket plus floor brokerage as defined above
OTC Equities $4 per ticket
Clearing charge reduction on Internet equity and option trades (monthly count)
5,000 - 10,000 tickets $1.00 per ticket
10,001 - 15,000 tickets $1.50 per ticket
15,001 - 20,000 tickets $2.00 per ticket
Over 20,000 tickets $2.50 per ticket
All other securities Charged as retail customer transactions
Transactions of syndicate orders through ▇▇▇▇▇▇:
With customers: 7% of the selling group's gross shall be charged,
with a minimum of 3 cents per share, in addition to
the ticket clearing charge.
Interest Rebates:
▇▇▇▇▇▇ will pay correspondent fifty basis points on average monthly
debit balances charged the ▇▇▇▇▇▇ standard margin interest rate. Any
increases/decreases in this rate will be added to/taken from the correspondent's
fifty basis points.
▇▇▇▇▇▇ will pay correspondent on average money fund balances according
to the following schedule:
0 - 10 million in average balances 15 basis points
10 - 20 million in average balances 20 basis points
over 20 million in average balances 25 basis points
Minimum clearing charges:
$2,500.00 per month based on the previous 6 months' average
ADDITIONAL CHARGES WILL BE BILLED AS FOLLOWS:
144 Sales: $35.00 surcharge
Accommodation Transfers: $10.00 plus certificate fees
Page 24
Automated Customer Account Transfer
(ACAT): $ 5.00 per account transferred from ▇▇▇▇▇▇
Cancels & Corrections: $10.00 per confirmation
Certificate Charges: At cost
Foreign Securities: Transfer fees and transaction fees at cost.
Government Bond Fee: A $15.00 miscellaneous fee will be charged
to the customer on all purchase and sale
transactions of government and government
backed securities, other than treasury
bills. A $5.00 fee will be charged on
treasury ▇▇▇▇ transactions. DVP accounts
will have these fees added to the ticket
charge.
Legal Deposits: $10.00 per item
Postage & Handling: $2.00 per confirmation (charged to customer.
This charge does not apply to DVP accounts.)
Prepays on Customer Trades: $10.00 plus interest to settlement date.
Reg "T" Extension: $10.00 per request plus interest from
settlement date until paid
Reorg Items and Tenders: $15.00 per item per account
Research & Statement Copies: $15.00 per hour with a minimum of one hour
Returned Checks: $20.00 plus interest from the earlier of the
settlement date or date of deposit.
Safekeeping Charge: Customer accounts with securities in the
account, and with less than two trades
during a calendar year, will be subject to a
$25.00 charge.
Securities Purchase against Non-
Cleared Funds: Interest on balance
Taxpayer ID Penalties At cost
Transfer Fees At cost
Wire Funds: $15.00
▇▇▇ Accounts: Annual fee waived subject to ▇▇▇▇▇▇ being
able to make corresponding money
market/credit balance % rate adjustments
necessary to be cash flow neutral to ▇▇▇▇▇▇.
Page 25
SCHEDULE B
To Clearing Agreement Between ▇▇▇▇▇▇ Financial Services, Inc. ("▇▇▇▇▇▇")
and Rushmore Securities Corporation. ("Correspondent")
PLEASE SEE ATTACHED LIST OF REPORTS PROVIDED BY ▇▇▇▇▇▇ TO CORRESPONDENTS FOR
COMPLIANCE AND SUPERVISORY PURPOSES.
Page 26
Sungard Reports
---------------
These reports are emailed daily to our correspondents, unless otherwise noted.
If a correspondent does not generate any information for a report, the report
will not be emailed out for that day.
RPTO19 - TD Daily RR Blotter
This report displays gross and net commissions to the correspondents. It
displays all daily trades and commission adjustments, with commission totals by
office/registered representative, and firm. It shows gross and net commissions
for the day, month to date, and year to date. It a1so shows the month-to-date
and year-to-date trade counts by commission category. If a commission is not
entered on the Trade Entry or Order Entry screen, a commission program
determines the commission categories. In addition to displaying trade detail,
such as trade date, trade number, and account number, the report also shows the
percentage of payout and an indicator that the trade was processed with a split
representative.
RPTO4l - Customer Money Line
This report provides the correspondents with information about current and
future customer balances. It displays, in office/registered representative order
within account number order, trade and settlement date balances, free cash in
the account, money fund balance (only if account has a balance on the PHASE3
system), the SMA in the margin account, and the total of dividends credited to
the account but held in the check file. In addition, it displays projected
settlements, which include the net amount of trades settling tomorrow and the
day after tomorrow.
RPTO44 - Customer Cash Balance Summary
This report provides the sales force with information about customer balances.
It displays, in office/registered representative order within account number
order, trades and settlement date balances, available cash in the account, money
fund balance (all balances even if there is no balance on PHASE3), the SMA in
the margin account, and the total of dividends credited to the account but held
in the check file. It also includes column totals, as well as totals by
registered representative, office, and a grand total. It shows office and grand
totals on separate pages. Additionally, the report totals debit and credit
interest accounts by account type, by registered representative, and by office
and grand total. The debit column lists accounts as unsecured, partially
secured, partially unsecured, or secured.
RPTO73 - Requirement Report
This report shows, in office/registered representative order, which accounts
have a requirement such as money due, securities due, or fed call. It displays
trade, settle and free balances, credit interest amount, margin account, market
value, and margin fee cash. For Money Fund subscribers, if the system tried to
sweep money the previous day, the report shows the amount. If the account has
sold securities in the cash account that are held in the margin account, an
asterisk (*) appears in the MG column.
RPT169 - Trade Date Inventory
This report lists by trade date the inventories, their trades and positions at
the end of the day.
RPT202 - Cash/Securities Due Report
Page 27
This report details all trade-related fails in the customer account number range
for all non-DVP accounts Fields determine when fails should appear ("S-O"
through "S-3") and the frequency (daily, weekly, or monthly) of the report. Note
that:
S-3 = settlement date - 3 business days
S-2 = settlement date - 2 business days
S-1 = settlement date - 1 business day
S-O = settlement date
RPT313 - Weekly Required Documents
This is a weekly report (run on Friday night) which lists, in registered
representative and account number order, the required agreements/documents owed
to your firm by a customer. A page break separates registered representatives.
RPT325 - SD Monthly Clearing Fee Blotter
This report is created at settlement date end of month. It displays, in office
and entity order, all trades and correspondent payout information for accounts
associated with a correspondent. The report provides totals by office and
entity, as well as a firm total.
RPT519 - TD Clearing Fee Blotter
This daily report lists all trades and payout information for accounts
associated with a correspondent. It lists all trade date correspondent trade
information, which is then totaled by commission income category within office,
and then within entity. Firm grand totals also appear.
RPT682 - Daily Activity Report
Grouped by buys and sells, and listed in symbol order, this report shows all
orders entered and/or executed in the system the previous day. It details
quantity, price, order date and number, time of entry, account number,
registered representative number, short name, time in force, the destination
order, and execution, as well as any action taken, whether executed, canceled,
rejected, nothing done, or added to the GTC file.
▇▇▇▇▇▇ Reports
These reports are emailed out daily and are Daytrading reports, unless otherwise
noted.
PFSOO1 - SEC Fees
This branch report will give a daily list of SEC Fees charged. The fee total
includes any past trades that are run on that date.
PFSOO2 - Production Statistics Report
This is a daily branch report that also gives month to date infom1ation based on
trade date month. It displays Gross Commission Number of Trades, Trade Average
and Number of Shares. Please note the Number of Trades is computed by the
Number of Shares divided by 1000.
PFSO03 - Shortlist
This list will display all stocks that are shortable and the amounts. If a stock
would like to be added to the list, you must contact the Short Approval
Department.
PFSO04 - Account Summary Report
Page 28
This report separates each customer account with a page break. It displays Fees
Summary and Trade Summary.
PFS006 - ECN Charges
This is a branch report that breaks down the charges for the different ECNs for
the previous day and the reporting period. This report also lists the SOES and
SNET information. The reporting period is for the trade date month.
PFS009 - Combined Hedge Report
This report shows each account's equity, market value, maintenance requirement,
maintenance excess, buying power and overnight buying power. It will also show
the positions held overnight in the account. This report does not reflect equity
for type 1 positions held overnight.
PFSO13 - Daytrader Buying Power Summary Report
This is a branch report that shows the same information as the PFS009, without
the positions.
PFS024 - Customer Equity Summary
This branch report will show the total equity in the account based on the Trade
Date Cash Balance and the Market Value. The balances in the different account
types will be displayed individually. The type codes are 1 - cash, 2 - margin,
3 - short, C - credit interest, and M - Money Market.
PFS043 - Confirmations
This is the trade confirmation for each account. This confirmation also shows
any trades from a previous day that are cancelled, corrected or entered. A copy
of this confirmation is mailed to the customers.
PFS055 - Position Report
This reports shows each accounts overnight positions. It will also display the
account type, the Unhedged Quantity and the Unhedged Market Value.
PFS056 - Special Call Report
This report is a daily report that shows the overnight maintenance requirements
for Internet Stocks and the calls they generate. This is only applicable in
accounts where the market value of Internet Stocks exceeds the total equity in
the account. This report is for both Traditional and Daytrading offices
PFS060 - Confirmations (No Cover)
This is a copy of the trade confirmation without the cover page of the customer
information.
PFS061 - Margin Report
This report shows each account's trades and the call generated for each trade.
It will also show the biggest Daytrading Call and the ending Reg T Call (if
applicable).
U/Procedures Manual/Sungard Reports
Page 29
AMENDMENT TO THE FULLY DISCLOSED CLEARING AGREEMENT
BETWEEN
▇▇▇▇▇▇ FINANCIAL SERVICES. INC
AND
GRO CORPORATION
---------------
(Name of Correspondent)
This is an Amendment dated November 16, 1999, ("Amendment") to the Fully
Disclosed Clearing Agreement ("Agreement") between ▇▇▇▇▇▇ Financial Services,
Inc., and GRO Corporation name of Correspondent)
BACKGROUND
----------
In light of recent comments from the NASD regarding the treatment of clearing
deposits as an allowable asset for purposes of calculating net capital of
correspondent Broker/Dealers, revisions have been made to certain provisions of
the Agreement to incorporate these comments.
As such the following provisions of the Agreement are hereby amended to read as
follows (revisions are noted in bold print)
9. DEPOSIT
Contemporaneously with the signing of this Agreement, Correspondent
will deliver cash or securities to ▇▇▇▇▇▇, as specified in Schedule A attached,
for deposit in an account maintained by ▇▇▇▇▇▇ (the "Deposit Account") If at any
subsequent time ▇▇▇▇▇▇, in its sole discretion, requires an additional deposit,
Correspondent will deposit additional cash or securities in an amount specified
by ▇▇▇▇▇▇. Instead of making such additional deposit, Correspondent may reduce
Correspondent's business volume or modify the nature of the securities involved
in the Correspondent's transactions ("business mix") as specified by ▇▇▇▇▇▇. Any
failure by ▇▇▇▇▇▇ to demand compliance with the requirement that Correspondent
either deposit additional amounts or modify Correspondent's business mix shall
not act as a waiver of Person's right to demand compliance with such
requirements at any time. If the deposit is not adequately funded as required by
▇▇▇▇▇▇, ▇▇▇▇▇▇ may, in addition to all other rights under this Agreement,
transfer cash or securities of Correspondent held by ▇▇▇▇▇▇ to the Deposit
Account. Correspondent agrees that if ▇▇▇▇▇▇, at its sole discretion, determines
it to be necessary, ▇▇▇▇▇▇ shall accept only liquidating transactions for
Customer Accounts and that Correspondent will give notice of such fact to
Customers. If such notice is not given to Customers by Correspondent,
Correspondent agrees that ▇▇▇▇▇▇ may give such notice to Customers. Person shall
be entitled to set-off against any deposit in addition to any and all other
nights or remedies ▇▇▇▇▇▇ may have under this Agreement or otherwise. The
deposit will be refunded to the Correspondent within thirty (30) days after
cancellation of the Agreement provided there has been no claim that does or
could give rise to a claim for indemnification under Section 10 of this
Agreement, thereby invoking the rights set forth under Section 10(c) of this
Agreement. Correspondent agrees that if this Agreement is terminated for any
reason, ▇▇▇▇▇▇ may liquidate securities deposited and deduct from such deposit
any amounts Correspondent owes ▇▇▇▇▇▇ because of failure to meet any of
Correspondent's obligations under this Agreement.
19. PAIB PROVISION
(i) Clearing Deposits. Clearing deposits required to be maintained
at ▇▇▇▇▇▇ may be included as debits in the PAIB reserve
computation to the extent the percentage of the deposit which
is based upon ▇▇▇▇▇▇'▇ aggregate deposit requirements that
relates to the
ANTI-MONEY LAUNDERING ADDENDUM
TO THE FULLY DISCLOSED CLEARING AGREEMENT
This Anti-Money Laundering Addendum (the "Addendum) to the Fully
Disclosed Clearing Agreement entered into by and between ▇▇▇▇▇▇ Financial
Services, Inc. ("▇▇▇▇▇▇") and GRO Corporation ("Correspondent"), (the
"Agreement") is entered into July 11, 2002 by and between the undersigned
parties to establish the delegation of responsibilities in compliance with the
US requirements of anti-money laundering regulatory rules passed in furtherance
of the USA Patriot Act.
In consideration of the mutual promises contained herein and the
consideration for the Agreement, the parties hereto agree to amend and revise
the Agreement as follows:
1. Anti-Money Laundering.
(a) ▇▇▇▇▇▇ and Correspondent agree to conduct business only
with clients who are engaged in legitimate and lawful business activities, to
engage in financial transactions using funds that are derived solely froze
lawful activities and legitimate sources, and not to have involvement in any
activity that facilitates money laundering or the funding of terrorist or other
criminal activities. ▇▇▇▇▇▇ and Correspondent will each comply with applicable
anti-money laundering laws, including relevant provisions in, and rules
promulgated pursuant to, the U.S. Criminal Code (18 U.S.C. ▇▇.▇▇. 1956, 1957),
the Bank Secrecy Act and the USA Patriot Act.
(b) ▇▇▇▇▇▇ and Correspondent each represent that they have in
place an anti-money laundering compliance program based on the laws of their
respective jurisdictions, and further agree to provide, each party to the other,
a copy of such program.
(c) ▇▇▇▇▇▇ and Correspondent agree to allocate their anti-money
laundering responsibilities, with regard to the fully disclosed clearing
arrangement between ▇▇▇▇▇▇ and Correspondent, in the following manner:
(1) Know Your Customer
------------------
a) Correspondent shall be responsible for obtaining
and maintaining adequate information regarding customers for whom it introduces
trades to ▇▇▇▇▇▇. Such information shall include, but not be limited to,
verifying client identity, performing background and credit checks of clients,
assuring that clients are not prohibited under the Patriot Act (e.g. foreign
shell banks), and, on a regular basis, consulting lists of known or suspected
terrorists or terrorist organizations maintained by U.S. government agencies to
determine whether a person seeking to open an account, or a person for whom an
account is maintained, appears on such lists. 1
___________________
1 The following websites and any lists maintained thereon should be considered
Office of Foreign Asset Control ("OFAC") - www ▇▇▇▇▇▇▇.▇▇▇/▇▇▇▇; Financial
Crimes Enforcement Network ("FinCEN") - www ▇▇▇▇▇▇▇.▇▇▇/▇▇▇▇▇▇;
b) ▇▇▇▇▇▇ shall be responsible for consulting lists of
known of suspected terrorists or terrorist organizations maintained by US
government agencies on a regular basis to determine whether a person seeking to
open an account, or a person for whom an account is maintained, appears on such
lists.l
c) By submitting accounts for opening with ▇▇▇▇▇▇,
Correspondent represents that all customers for whom accounts are being
submitted have been subject to stringent due diligence procedures as required in
(1) a) above, the identities of such customers have been verified, and based on
Correspondent's analysis of information obtained, such customers are not
involved in activity that facilitates money laundering or the funding of
terrorist or other criminal activities.
d) Correspondent shall be required to maintain all
records of the information used to verify a person's identity in an easily
accessible place for at least two years and to make such information available
to ▇▇▇▇▇▇ upon request.
(2) Suspicious Activity Monitoring and Reporting
a) ▇▇▇▇▇▇ shall be responsible for monitoring customer
accounts for any suspicious transactions that involve, in the aggregate, at
least $5000 in funds or other assets. In this regard, ▇▇▇▇▇▇ will monitor, on a
regular basis, among other things, customer trades introduced by Correspondent
for clearing, wire transfers into accounts maintained on behalf of customers,
and the deposit of and withdrawal from customer accounts of funds or other
assets.
b) Correspondent shall notify ▇▇▇▇▇▇ of any suspicious
transactions it detects or of which it is aware with respect to the accounts of
customers for whom it introduces transactions to ▇▇▇▇▇▇.
c) ▇▇▇▇▇▇ shall be responsible for filing with the
Department of Treasury any resulting Suspicious Activity Reports as required by
the Patriot Act. Such reports will be filed pursuant to the relevant procedures
set forth in ▇▇▇▇▇▇'▇ anti-money laundering compliance program.
d) ▇▇▇▇▇▇ shall be responsible for filing with the
Internal Revenue Service joint FinCEN/IRS forms, as required by the Patriot Act,
with respect to transactions in which it receives more than $10,000 in currency
or coins, Such reports will be filed pursuant to the relevant procedures set
forth in ▇▇▇▇▇▇'▇ anti-money laundering compliance program.
(3) Information Sharing
a) ▇▇▇▇▇▇ shall be responsible for establishing and
maintaining information-sharing procedures to provide for the sharing of
information between ▇▇▇▇▇▇ and Correspondent as necessary to identify and report
activities that may involve terrorist activities or money laundering activities.
________________________________________________________________________________
Financial Action Task Force on Money Laundering ("FATF") - www ▇▇▇▇.▇▇▇/▇▇▇▇ and
the Securities and Exchange Commission ("SEC") (www ▇▇▇.▇▇▇).
b) Correspondent shall agree to comply with the
requirements set forth in the information-sharing procedures developed by ▇▇▇▇▇▇
pursuant to (3)a).
2. To the extent this Addendum shall be deemed to be inconsistent with
any terms or conditions of the Agreement or any exhibits or attachments
thereto, the terms of this Addendum shall govern.
IN WITNESS WHEREOF, each of the undersigned hereby acknowledges
having read this Addendum, understands and consents to be bound by all of its
terms, and agrees it shall become effective the 11 day of July, 2002.
▇▇▇▇▇▇: ▇▇▇▇▇▇ FINANCIAL SERVICES, INC.
By: /S/ ▇▇▇▇▇▇ ▇. Son
------------------------------------
▇▇▇▇▇▇ ▇. Son, President
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
CORRESPONDENT:
INDIVIDUAL: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
-----------------------------------
[Signature]
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
-----------------------------------
[Print name]
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
-----------------------------------
[Address]
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------
ENTITY: GRO Corporation
-----------------------------------
[Name]
-----------------------------------
[Type of Entity, i.e., corporation,
partnership, etc.]
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
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Its: Chairman & CEO
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3000 Weslayan St.
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[Address]
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE A
To Clearing Agreement Between ▇▇▇▇▇▇ Financial Services, Inc. ("▇▇▇▇▇▇")
and Rushmore Securities Corporation. ("Correspondent")
This Schedule A shall be effective for transactions beginning January 1, 2002.
The required clearing deposit of Correspondent as of the date of adoption of
this Schedule A pursuant to Section 9 of the Agreement shall be $50,000.00 The
parties hereto agree that ▇▇▇▇▇▇'▇ charges for services to Correspondent and/or
Correspondent's Customers shall be as follows:
Customer Transactions (Retail Tickets)
Listed Equities $18.00 per ticket plus Floor Brokerage
Floor Brokerage
Non billable 0.5 cents per share
Billable 1.375 cents per share
Listed Bonds $20.00 per ticker plus $1.50 per bond
Listed Options $18.00 plus $.75 per contract
OTC Equities $18.00 per ticket
Municipal Bonds $20.00 per ticket
OTC Corporate Bonds $20.00 per ticket
U.S. Treasuries & $20.00 per ticket
Agencies
All Other Securities $20.00 per ticket
Clearing charge reduction on customer trades, excluding mutual funds (monthly
count):
500-999 tickets $ 1.50 per ticket
1,000-2,000 tickets $ 3.00 per ticket
2,000-3,000 rickets $ 5.00 per ticket
Over 3,000 tickets $ 6.00 per ticket
Inventory Transactions (Dealer Tickets)
All transactions between another broker dealer and a correspondent's
inventory are $8.50 per ticket.
Mutual Funds (includes UITS)
Mutual fund ticket charges are based upon the principal dollars
involved in the transaction, in accordance with the following schedule:
Principal Ticket charge
$0 - 2,000 $3.50
$2 - 5,000 $6.50
$5 - 25,000 $10.00
$25,000 - 75,000 $15.00
Over $75,000 $20,00
Active Day Trading Transactions
Active day trading transactions will be charged in accordance with the
following schedule, plus floor brokerage, if applicable, in accordance with the
floor brokerage rates defined above:
OTC and listed equity transactions
0 - 150 million shares per month $0.00200 per share
150 to 200 million shares per month $0.00190 per share
Over 200 million shares per month $0.00180 per share
With a $0.50 per ticket minimum, and a $5 per ticket maximum
Option transactions in active day trading accounts will be $2.50 per ticket,
plus floor brokerage as defined above. All other transactions in active day
trading accounts will be charged at the same rate as retail transactions.
Internet Transactions
Internet and active day trading transactions will be determined by the software
used by the Customer. Internet transactions will be executed by Customers using
the retail browser based software platform developed by Correspondent.
Listed Equities $4 per ticket plus floor brokerage as defined above
Listed Options $4 per ticket plus floor brokerage as defined above
OTC Equities $4 per ticket
Clearing charge reduction on Internet equity and option trades (monthly count)
5,000 - 10,000 tickets $1.00 per ticket
10,001 - 15,000 tickets $1.50 per ticket
15,001 - 20,000 tickets $2.00 per ticket
Over 20,000 tickets $2.50 per ticket
All other securities Charged as retail customer transactions
Transactions of syndicate orders through ▇▇▇▇▇▇:
With customers: 7% of the selling group's gross shall be
charged, with a minimum of 3 cents per
share, in addition to the ticket clearing
charge.
Interest Rebates:
▇▇▇▇▇▇ will pay Correspondent fifty basis points on average monthly
debit balances charged the ▇▇▇▇▇▇ standard margin interest rate. Any
increases/decreases in this rate will be added to/taken from the correspondent`s
fifty basis points.
▇▇▇▇▇▇ will pay Correspondent on average money fiend balances according
to the following schedule:
0 - 10 million in average balances 15 basis points
10 - 20 million in average balances 20 basis points
over 20 million in average balances 25 basis points
Minimum clearing charges:
$2,500.00 per month based on the previous 6 months' average
ADDITIONAL CHARGES WILL BE BILLED AS FOLLOWS:
144 Sales: $35.00 surcharge
Accommodation Transfers: $10.00 plus certificate fees
Automated Customer Account Transfer
(ACAT): $5.00 per account transferred from ▇▇▇▇▇▇
Cancels & Corrections: $10.00 per confirmation
Certificate Charges: At cost
Foreign Securities Transfer fees and transaction fees at cost.
Legal Deposits: $10.00 per item
Postage & Handling: $2.00 per confirmation (charged to customer.
This charge does not apply to DVP accounts.)
Prepays on Customer Trades $10.00 plus interest to settlement date.
Reg "T" Extension: $10.00 per request plus interest from
settlement date until paid
Reorg Items and Tenders: $15.00 per item per account
Research & Statement Copies: $15.00 per hour with a minimum of one hour
Returned Checks: $20.00 plus interest from the earlier of the
settlement date or date of deposit.
Safekeeping Charge: Customer accounts with securities in the
account, and with less than two trades
during a calendar year, will be subject to a
$25.00 charge.
Securities Purchase against Non-
Cleared Funds: Interest on balance
Taxpayer ID Penalties At cost
Transfer Fees At cost
Wire Funds: $15.00
▇▇▇▇▇▇ Financial Services: Rushmore Securities Corp:
/S/ ▇▇▇ ▇▇▇▇▇▇▇
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