In accordance with the regulations set forth by the USA PATRIOT Act, the Bank Secrecy Act (BSA) and the rules of the Office of Foreign Assets Control (OFAC), the Financial Crimes Enforcement Network (FinCEN), the U.S. Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), B. Riley FBR has in place a program to identify and report suspicious activities that could be related to money laundering or other illegal activities and to monitor and verify the identities of our customers.
What this means for you: When you open an account, we may ask for your corporate formation documents or other information that will allow us to positively identify you/your entity. We may also ask to see your driver’s license or other identifying documents.
B. Riley FBR reserves the right to refuse to open any account, or close an existing account, at any time if information requested pursuant to an AML inquiry is refused.
Subject to applicable regulatory requirements, B. Riley FBR may execute your order in more than one transaction over a period of time, or, in certain markets, aggregate your order with other orders. In such instances, B. Riley FBR will provide you with a confirmation noting the aggregate amount of securities purchased or sold in your account at a single “average price”. B. Riley FBR will provide you with information about the individual executions at your request without charge. Please notify your sales representative at the time you place your order if you do not want your order to be reported to you at a single average price. Should you elect this option, you will receive a confirmation for each individual execution.
B. Riley FBR provides you with access to the Bank Deposit Sweep Program (“BDSP”) which is a core account investment vehicle used to hold a cash balance that is awaiting initial investment or reinvestment. If you choose to participate, cash balances in your account will be automatically swept into interest-bearing deposit accounts at one or more federally insured banking institutions that participate in B. Riley FBR’s BDSP. All deposits held at each bank will be eligible to be insured by the Federal Deposit Insurance Corporation (the “FDIC”) generally up to a total of $250,000 principal and accrued interest per depositor. For more information about this program and a complete list of disclosures, please contact the Compliance Department.
B. Riley FBR seeks to execute its customers’ orders at the most favorable terms reasonably available under prevailing market conditions. B. Riley FBR is responsible for overseeing the selection of the best market for each trade and for ensuring that the customer receives the best price. Details regarding our routing of U.S. equity and option orders are made publicly available, at no cost to you, on a quarterly basis. Please refer to the section entitled “SEC Rule 606: Quarterly Report on Routing of Customer Orders” for more information. B. Riley FBR conducts regular reviews to ensure that clients are getting the best executions on trades.
B. Riley FBR, Inc. (“B. Riley FBR”) has a business continuity plan to protect the interests of our clients, shareholders and employees, and to facilitate the recovery of our core businesses in the event of a significant business interruption. The plan outlines core functions and the resources required to conduct them. It also details what we plan to do to recover them in the event of a disaster that affects our ability to function at our main locations.
Our business continuity plan addresses: data backup and recovery; mission critical systems; financial and operational assessments; alternative communications with customers, employees and regulators; alternate physical locations of employees; critical supplier, contractor, bank and counter-party impacts; regulatory reporting; and customer assurance of prompt access to funds and securities if B. Riley FBR becomes unable to continue its business.
B. Riley FBR is an introducing firm and does not perform its own or others’ clearing functions. We do not hold customer’s securities or funds. B. Riley FBR employs National Financial Services LLC (“NFS”) as the clearing agent for its broker-dealer operations. In this capacity, NFS compares, allocates, clears and settles all B. Riley FBR transactions. NFS maintains our customers’ accounts, and in the event of disaster, can grant customers access to them to deliver securities and funds.
NFS has implemented a business continuity plan whose primary objectives are to meet the needs of customers. Each NFS department has developed the capabilities to recover both operations and systems. All continuity plans are designed to account for disruptions of various lengths and scopes, and to ensure that critical functions are recovered to meet their business objectives. Critical business groups operate from multiple sites. Dedicated teams within our technology organizations ensure that critical applications and data have sufficient redundancy and availability to minimize the impact of an event.
In the event of a significant business interruption that prevents us from remaining in business, we will assure our customers’ prompt access to any funds and securities custodied by our clearing agent. In such a catastrophic event, clients are directed to call NFS at (800) 801-9942 to inquire about their holdings and/or place orders.
We intend to communicate with customers about the status of our disruptions through our website or by means of telephonic recordings.
Personal checks and wire transfers are the only form of monetary deposits that will be accepted into your account. All incoming checks or wires from third parties must be confirmed with the client at the time of deposit to determine the business reason behind the third-party deposit. B. Riley FBR reserves the right to refuse any deposit.
If you have granted discretionary trading over your account to a third party, you can revoke such discretionary authority for any of your accounts at any time. Should you wish to cancel such discretionary handling of your account, please contact the Compliance Department as listed above.
By transacting with B. Riley FBR, you consent to a pre-dispute arbitration clause in which you agree as follows:
- All parties have given up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.
- Arbitration awards are generally final and binding; a party’s ability to have a court reverse or modify an arbitration award is very limited.
- The ability of the parties to obtain documents, witness statements, and other discovery is generally more limited in arbitration than in court proceedings.
- The arbitrators do not have to explain the reason(s) for their award unless, in an eligible case, a joint request for an explained decision has been submitted by all parties to the panel at least 20 days prior to the first scheduled hearing date.
- The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.
- The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.
- The rules of the arbitration forum in which the claim is filed, and any amendments thereto, have been incorporated into this agreement.
All controversies that may arise between you, B. Riley FBR and NFS, concerning any subject matter, issue or circumstance whatsoever (including, but not limited to, controversies concerning any account, order or transaction, or the continuation, performance, interpretation or breach of this or any other agreement between you, B. Riley FBR and NFS whether entered into or arising before, on or after the date this account is opened) shall be determined by arbitration in accordance with the rules then prevailing of FINRA or any United States securities self-regulatory organization or United States securities exchange of which the person, entity or entities against whom the claim is made is a member, as you may designate. If you designate the rules of a United States self-regulatory organization or United States securities
exchange and those rules fail to be applied for any reason, then you shall designate the prevailing rules of any other United States securities self-regulatory organization or United States securities exchange of which the person, entity or entities against whom the claim is made is a member. If you do not notify B. Riley FBR in writing of your designation within five (5) days after such failure or after you receive from B. Riley FBR a written demand for arbitration, then you authorize B. Riley FBR and/or NFS to make such designation on your behalf. The designation of the rules of a United States self-regulatory organization or United States securities exchange is not integral to the underlying agreement to arbitrate. You understand that judgment upon any arbitration award may be entered in any court of competent jurisdiction.
No person shall bring a putative or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a putative class action; or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied; or (ii) the class is decertified; or (iii) the customer is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein.
Monthly account statements and physical trade confirmations for DVP/RVP accounts or master/sub-accounts can be suppressed upon receipt of authorization by the account owner or authorized individual. In order to elect this option, an NFS DVP/RVP Account Statement Mailing Suspension Consent Form is required to be completed, signed and returned to Operations@brileyfbr.com.
This suspension shall remain in effect until such a time as B. Riley FBR is notified to reinstate the delivery of statements. Any suppressed statements are available to the account owner promptly upon request. For more information or to receive the required form, please email your request to Operations@brileyfbr.com.
All trades should be affirmed by the contra firm no later than the settlement date. In the event that a trade is not affirmed or is unknown (commonly called “dk’d” or “don’t know”), post-settlement interest charges may be incurred and passed along to you as the customer.
In the event that you or your firm is short a position and cannot deliver in a timely fashion, please notify Operations@brileyfbr.com. Should a potential buy-in occur we will make every attempt to notify you, the customer, at least 24 hours in advance.
Pursuant to the Securities Exchange Act of 1934 Release No. 36345 (Oct. 1995) and Release No. 37182 (May 1996) and the terms of your customer agreement, you have consented to receive prospectus delivery electronically. Generally, a prospectus will be sent via email with a hyperlink to the actual prospectus included in the body of the email. If you do not consent to the electronic delivery of prospectuses, please notify Operations@brileyfbr.com.
Any recommendation contained in any email may not be suitable for all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. B. Riley FBR, Inc. may make markets and effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein (or options with respect thereto) and may also have performed investment banking services for the issuers of such securities. In addition, employees of B. Riley FBR, Inc. may have positions and effect transactions in the securities or options of the issuers mentioned herein and may serve as directors of such issuers. For additional information, contact B. Riley FBR, Inc. at (888) 295-0155. All rights reserved by B. Riley FBR, Inc., Member FINRA & SIPC.
This disclosure is provided to customers who will engage in trading outside normal market hours. Such trading involves certain risks explained below.
- Risk of Lower Liquidity. Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities, and as a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended hours trading as compared to regular market hours. As a result, your order may only be partially executed, or not at all.
- Risk of Higher Volatility. Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a security, the greater its price swings. There may be greater volatility in extended hours trading than in regular market hours. As a result, your order may only be partially executed, or not at all, or you may receive an inferior price in extended hours trading than you would during regular market hours.
- Risk of Changing Prices. The prices of securities traded in extended hours trading may not reflect the prices either at the end of regular market hours, or upon the opening of the next morning. As a result, you may receive an inferior price in extended hours trading than you would during regular market hours.
- Risk of Unlinked Markets. Depending on the extended hours trading system or the time of day, the prices displayed on a particular extended-hours system may not reflect the prices in other concurrently operating extended hours trading systems dealing in the same securities. Accordingly, you may receive an inferior price in one extended-hours trading system than you would in another extended-hours trading system.
- Risk of News Announcements. Normally, issuers make news announcements that may affect the price of their securities after regular market hours. Similarly, important financial information is frequently announced outside of regular market hours. In extended hours trading, these announcements may occur during trading, and if combined with lower liquidity and higher volatility, it may cause an exaggerated and unsustainable effect on the price of a security.
- Risk of Wider Spreads. The spread refers to the difference in price between what you can buy a security for and what you can sell it for. Lower liquidity and higher volatility in extended hours trading may result in wider than normal spreads for a particular security.
Risk of Lack of Calculation or Dissemination of Underlying Index Value or Intraday Indicative Value (“IIV”). For certain Derivative Securities Products (such as exchange-traded funds, ETFs), an updated underlying index value or IIV may not be calculated or publicly disseminated in extended trading hours. Since the underlying index value and IIV are not calculated or widely disseminated during the pre-market and post-market sessions, an investor who is unable to calculate implied values for certain Derivative Securities Products in those sessions may be at a disadvantage to market professionals.
Created by FINRA in 1988, and formerly known as the Public Disclosure Program, FINRA BrokerCheck provides investors with an easy, free way to learn about the professional background, business practices, and conduct of FINRA-registered firms and their brokers. To request information under this program, visit the FINRA Web site at http://brokercheck.finra.org, or call (800) 289-9999. Through this internet site or hotline, you can request a public report of background information on FINRA registered firms and their brokers. This report reflects information provided by the broker, the firms, and regulators as part of the securities industry’s registration and licensing process.
Should you have any complaints or disputes relating to your account please contact ControlRoom@brileyfbr.com.
Customers with a minimum of $250,000 in assets in their B. Riley FBR accounts may be eligible to participate in a fully-paid lending program offered by our clearing firm. In a “fully paid” transaction you can lend a specific security to our clearing firm and in return you will receive collateral in the form of cash and securities held at a custodial bank. In addition, you receive an interest rate-based fee. Participation in this program is optional and requires the completion of additional paperwork. Please note that there are risks associated with participation in this program some of which include:
- Fully-paid securities on loan are not covered under the provisions of the Securities Investor Protection Act of 1970.
- Under the securities lending agreement you relinquish your ability to exercise voting rights.
- Fully paid securities on loan are no longer eligible for margin treatment or buying power calculations.
- Securities that pay dividends will be paid as “cash-in-lieu” which may have different taxable consequences than receipt of actual dividends.
For a full list of disclosures or for more information on this program please contact the Compliance Department as listed above.
Personal checks and wire transfers are the only form of monetary deposits that will be accepted into your retail brokerage account. All incoming checks or wires from 3rd parties must be confirmed with the client at the time of deposit to determine the business reason behind the 3rd party deposit. B. Riley FBR reserves the right to refuse any deposit.
When you place an order with your sales representative, you may specify that your order is handled on either a “not held” or “held” basis. A “not held” order means that you have given B. Riley FBR discretion as to the price and time of execution of your order. If given a “held” order, B. Riley FBR will not have discretion on handling your order and must execute it at the prevailing market price; or, if it’s a “held” limit order, any execution will take place at the limit price or better, if available.
As “not held” orders give B. Riley FBR the flexibility to work your order to seek to obtain the best execution reasonably available under the prevailing circumstances, your orders will be treated as “not held” unless we are specifically instructed to treat the order differently. Please note that, under FINRA Rules, a “not held” order does not have price protection. Consequently, there is no Limit Order Protection (i.e. no Manning obligation) for these orders and B. Riley FBR is not required to match incoming market orders with unexecuted better-priced limit orders. Nonetheless, any purchase and sale transactions must be consistent with our efforts to provide best execution of your orders. Please notify your sales representative at the time you place your order if you wish your order to be treated other than “not held”.
High yield debt securities (also known as “junk bonds”) generally involve a higher degree of risk and are typically rated BB or less by Standard and Poor’s or Ba or below by Moody’s. The following disclosures apply to these securities:
- The bond may default resulting in loss of investment.
- Markets for such bonds may be relatively illiquid, impacting the investor’s ability to sell and the price of the bond.
In a low-interest, low-yield environment, there may be a compression of risk premium resulting from investors bidding up prices and driving down yields while default rates remain high.
You agree to indemnify B. Riley FBR from, and hold B. Riley FBR harmless for, any losses (meaning claims, damages, actions, demands, investment losses, or other losses, as well as any costs, charges, attorneys’ fees, or other fees and expenses) resulting from your actions or failures to act, whether intentional or not, including losses resulting from actions taken by third parties, except to the extent that any losses described above result solely from the gross negligence or willful misconduct of B. Riley FBR.
Beyond taking reasonable steps to verify the authenticity of instructions, B. Riley FBR has no obligation to inquire into purpose, wisdom, or propriety of any instructions we receive.
Information is an asset. The Firm has a duty and responsibility to protect. The confidentiality, integrity and availability of complete and accurate information is essential to the Firm functioning in an efficient manner and providing products and services to clients. The Firm holds and processes confidential and personal information on private individuals, employees, partners and suppliers, and information relating to its own operations. In processing information, the Firm has a responsibility to safeguard information and prevent its misuse.
The purpose and objective of the Information Security Policy is to set out a framework for the protection of the Firm’s information assets:
- to protect the firm’s information from threats, whether internal or external, deliberate or accidental,
- to enable secure information sharing,
- to encourage consistent and professional use of information,
- to ensure that everyone is clear about their roles in using and protecting information,
- to ensure business continuity and minimize business damage,
- to protect the firm from legal liability and the inappropriate use of information.
The Information Security Policy covers the following areas:
- Information Security Risk Management
- Information Classification and Handling
- Access Control
- Password Policy
- Hosted Services Security
- Network Security
- Server Security
- Application Security
- Database Security
- Endpoint Security
- Security Patching
- Cryptographic Controls
- Incident Response Management
Pursuant to FINRA Rules 5130 & 5131 (the Rules), B. Riley FBR may not sell or cause to be sold a new issue (as defined in the Rules; generally, initial public offerings (“IPOs”) of equity securities) to any account in which a restricted person holds a beneficial interest unless the account qualifies for a general exemption under the Rule. In addition, there is a restriction that applies to sales to executive officers or directors of a public company or covered non-public company.
B. Riley FBR requires that you sign and return an IPO Certification annually indicating whether or not your account is eligible to purchase IPO shares in accordance with the Rule. In addition, in connection with any new issue, you hereby represent that you will not act as a finder (i.e., a person who receives compensation for identifying potential investors in an offering) or in a fiduciary capacity to any managing underwriter of any new issue and that you shall notify B. Riley FBR immediately in the event that such representation ceases to be true and correct. IPO Certifications can be returned to Operations@brileyfbr.com.
Please note that any instant message sent from or received by B. Riley FBR personnel is subject to archiving, monitoring and production to third parties as required by applicable rules, regulations and law. Instant messages and emails may be reviewed by someone other than the intended recipient.
Institutional Suitability Certification: Affirmative Indication of Exercise of Independent Judgment (Pursuant to FINRA Rule 2111)
In connection with any recommended (as defined in FINRA rules), transaction or investment strategy by B. Riley FBR, you have acknowledged on behalf of your Institution that:
- It is an Institutional Account as defined in FINRA Rule 4512(c);
- It (1) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; and (2) will exercise independent judgment in evaluating the recommendations of B. Riley FBR or its associated persons, unless it has otherwise notified B. Riley in writing;
- It will notify B. Riley FBR if anything in this Certification ceases to be true;
You have acknowledged that the above statements are accurate but do not waive any rights afforded under U.S. federal or state securities laws, including without limitation, any rights under Section 10(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
This shall apply with respect to all recommended transactions and investment strategies involving securities that are entered into by your Institutional Account as named on the B. Riley FBR Institutional New Account Form, whether for the account of such Institutional Account or for the account of any beneficial owner that has delegated decision making authority to such Institutional Account.
Investment Advisors may request the establishment of certain subaccounts with B. Riley FBR for the purpose of executing transactions that will clear or settle at another financial institution. The limited information that is provided to B. Riley FBR is to be used primarily to assist the Investment Advisor with its recordkeeping and to hold positions for a limited duration to facilitate the transfer of assets to another financial institution. All transactions in these subaccounts will be initiated by individuals authorized to transact on behalf of the Investment Advisor, there will be no interaction with the beneficial owners of the accounts, and in fact the beneficial owners shall have no direct control over subaccounts opened with B. Riley FBR.
Investment Advisors that maintain subaccounts with B. Riley FBR attest that they have in their files client authorizations to direct orders to B. Riley FBR, in a fully discretionary manner, or otherwise, for all accounts for whom they may place orders through B. Riley FBR. Investment Advisors are authorized to place orders with B. Riley FBR to purchase and sell securities, to deliver and receive securities and to request and receive payment of funds on behalf of each account. In lieu of furnishing B. Riley FBR with specific evidence of authority in connection with each account in which an order with respect to securities is given to B. Riley, the Investment Advisor agrees to indemnify and hold B. Riley FBR harmless in the event that any such account should make claim against B. Riley FBR that its execution of any order, on the basis of the Investment Advisor’s instructions, was without authority.
Furthermore, B. Riley FBR may rely upon the Investment Advisor’s assurance that it has examined any trust instruments, corporate resolutions or other authorizing documents, and is satisfied that the person or persons who signed such document(s) were themselves properly authorized by the entity they represent. Moreover, based upon the review of such documents and other relevant information regarding its clients, the Investment Advisor is satisfied that any investment or investment decision executed through B. Riley FBR is suitable for the relevant client. Investment Advisor agrees to indemnify B. Riley FBR and hold B. Riley FBR harmless in the event that any such account should make claim against B. Riley FBR that any investment or investment decision was not suitable.
If you or your account is a large trader as defined by Rule 13h-1 under the Securities Exchange Act of 1934, you agree to provide B. Riley FBR with your large trader identification number (“LTID”). Should you no longer qualify as a large trader you agree to notify Operations@brileyfbr.com.
The Limit Order Display Rule obligates the Firm to reflect the price and full size of a customer’s limit order (whether the Firm’s customer or the customer of another broker-dealer) in the Firm’s quote, if the order would improve the Firm’s quote. The Rule applies to common stock, preferred stock, and convertible preferred stock. In addition, if the Firm’s bid or offer is equal to the National Best Bid or Offer, the size of any customer limit order that equals the bid or offer and represents more than a de minimis change in size must be displayed.
One exception to this Rule allows for customers to request that their limit orders not be displayed, either at the time of the order or prior thereto, pursuant to agreements with our customers. B. Riley FBR will treat your limit order as “not displayed” unless specifically told to display the order. Please notify your sales representative at the time you place your order if you wish your limit order to be displayed.
- Riley FBR is furnishing this disclosure to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you should carefully review this Margin Disclosure and the margin agreement provided to you by B. Riley FBR.
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from your brokerage firm. If you choose to borrow funds in connection with your account, you will be required to open a margin account which will be carried by B. Riley FBR. Securities purchased on margin are collateral of B. Riley FBR and our clearing firm, NFS, for the loan to you. If the securities in your margin account decline in value, so does the value of the collateral supporting your loan. As a result, B. Riley FBR is required to take action, such as issue a margin call and/or sell securities or other assets in any of your accounts, in order to maintain the required level of equity in the account.
It is important that you fully understand the risks involved in trading securities on margin. These risks include but are not limited to the following:
- You can lose more funds than you deposit in the margin account.
- The firm can force the sale of securities or other assets in your account(s).
- The firm can sell your securities or assets without contacting you.
- You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call.
- The firm can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice.
- You are not entitled to an extension of time on a margin call.
- You can lose proxy voting rights for securities held in margin accounts.
- You can risk receiving payments-in-lieu of dividends where shares are lent past the ex-dividend date.
B. Riley FBR has entered into a fully disclosed clearing agreement with NFS pursuant to which NFS may perform certain processing, clearing, custodial, and financing functions for your brokerage firm with respect to your account. NFS extends the margin credit to you and carries your margin loan. NFS is a beneficiary of your representations, warranties, acknowledgments, and covenants in the margin agreement (including, without limitation, your authorizations, indemnifications, waivers, and releases) to the same extent as if they were made directly by you to NFS. NFS, in its own name and for its own benefit, is entitled to exercise and enforce directly against you the margin agreement, all other rights granted to your brokerage firm, and the rights of the “firm” and “brokerage firm” described in this disclosure statement.
B. Riley FBR is a market maker in a number of NASDAQ and OTC Markets securities; as such we have the capability to execute orders on a “net” basis. A “net” transaction is defined as a principal transaction in which a market maker, after having received an order to buy (sell) an equity security, purchases (sells) the equity security at one price (to/from another broker-dealer or another customer) and then sells to (buys from) the customer at a different price.
Unless instructed otherwise at the time the order has been placed, B. Riley FBR may treat your order as a “net” transaction. Trades will be confirmed on a net basis with the following understanding: The price per share or other unit of trading will reflect a net price which includes the addition of any mark-up for purchase transactions or the deduction of any mark-down for sale transactions, where mark-ups or mark-downs apply. In the event a transaction includes a commission, the net price will reflect any added commission for purchases or deducted commissions for sales. If the above is not consistent with your desire for confirming trades on a net basis, please notify your sales representative at the time you place your order that you do not want your order to be transacted on a “net” basis.
Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD). It explains the characteristics and risks of exchange traded options. Copies of this document can be viewed at https://www.theocc.com/about/publications/character-risks.jsp, or may be requested by contacting your B. Riley FBR representative for physical delivery.
Remuneration in the form of cash, liquidity rebates, order swapping or other reciprocal arrangements may be received by B. Riley FBR for directing orders to specific brokers and dealers or market centers for execution. When such remuneration is received it is considered compensation to the firm. The source and amount of such remuneration, if any, will be furnished to you upon written request. Absent specific instructions from customers, all orders received that are the subject of payment for order flow are directed to the source that offers customers the best execution.
Notwithstanding the previous paragraph regarding payment for order flow, B. Riley FBR selects certain market centers to provide execution of over-the-counter and exchange-listed securities transactions which agree to accept orders, transmitted electronically up to a specified size, and to execute them at or better than the national best bid or offer (NBBO). On certain larger orders, or if the designated market centers do not make a market in the subject security, B. Riley FBR directly contacts market centers to obtain an execution. The designated market centers to which orders are automatically routed are selected based on the consistent high quality of their executions in one or more market segments and their ability to provide opportunities for executions at prices superior to the NBBO.
Penny stocks are low-priced shares of small companies. Penny stocks may trade infrequently which means that it may be difficult to sell penny stock shares once you have them. Because it may also be difficult to find quotations for penny stocks, they may be impossible to accurately price. While penny stocks generally trade over-the-counter, they may also trade on U.S. securities exchanges, facilities of U.S. exchanges, or foreign exchanges. You should learn about the market in which the penny stock trades to determine how much demand there is for this stock and how difficult it will be to sell.
Investors in penny stock should be prepared for the possibility that they may lose their whole investment. Additional information about low-priced securities–including penny stocks–is available on the SEC’s Web site at https://www.sec.gov/reportspubs/investor-publications/investorpubsmicrocapstockhtm.html. B. Riley FBR will send you a copy of this information upon request.
In addition to the privacy policies of our clearing firm, NFS, (http://fiiscontent.fidelity.com/769536.pdf) B. Riley FBR has in place policies and procedures to ensure that our client’s privacy is protected.
It is the policy of B. Riley FBR not to disclose our clients’ nonpublic personal information except to our affiliates servicing your account, to non-affiliated third-party service providers as allowable by law, or in response to inquiries from regulators or government authorities. Information is shared with our affiliates and vendors servicing your account only in the ordinary course of business. In all other cases where information is shared, express written consent must be acquired from the client. Any party that receives this information will use it only for the services required and as allowable under law and is not permitted to share this information for any other purpose.
In the normal course of business, information pertaining to your account may be shared with non-affiliated third parties that perform various services for us such as clearing firms, custodians, auditors and attorneys, and other non-affiliated third parties as required or permitted by law, such as regulatory bodies. Non-public information that B. Riley FBR receives from you on your new account documents and/or other forms, includes, but is not limited to, your name, address, telephone number, occupation, social security number or tax identification number, and information pertaining to your financial status (i.e. net worth, annual income, etc.). Access to client information within B. Riley FBR will be limited to those employees and service providers who are involved in offering or administering the products and services that we offer. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic information.
B. Riley FBR will adhere to these policies for both current and former clients and will notify customers of our policy at the time the relationship is established and annually thereafter. In the event that it becomes necessary to disclose any nonpublic information in a means inconsistent with this policy, we will provide you with advanced notice so that you will have the opportunity to opt out of such disclosure should you choose.
Monthly statements and trade confirmations generally reflect a code or group name about the registered representative assigned to your account. To inquire as to the specific sales representative within B. Riley FBR that is responsible for servicing your account please email your request to Operations@brileyfbr.com.
Pursuant to Securities Exchange Act Rule 15c3-5, broker-dealers with market access are obligated to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage financial, regulatory, and other risks of this business activity. This includes: preventing the entry of orders that exceed appropriate pre-set credit or capital thresholds in the aggregate for each customer. In order to set appropriate customer trading threshold, we may require certain information about your Firm’s trading activities and Assets Under Management (“AUM”). This information may be requested at the time of account opening and annually thereafter.
Rule 605 of SEC Regulation NMS requires “market centers” to publicly disclose, on a monthly basis, certain statistical information relating to the quality of executions provided to eligible client orders. The information generally depicts how orders of various sizes are executed relative to public quotes existing at the time of order receipt, and also attempts to measure speed of execution. The monthly Rule 605 reports can be found at https://brileyfbr.com/legal/legal_disclosures/.
Rule 606 of SEC Regulation NMS requires broker-dealers receiving non-directed client orders to publicly disclose, on a quarterly basis, the top execution venues to which such orders are routed for execution. Non-directed orders are any order that the client has not specifically instructed to be routed to a particular venue for execution and that B. Riley FBR will select the execution venue on your behalf.
The Rule 606 report is divided into four sections: one for securities listed on the New York Stock Exchange, one for securities listed on the NASDAQ Stock Market, one for securities listed on the American Stock Exchange or regional exchanges, and one for exchange-listed options. For each section, this report identifies the venues most often selected by B. Riley FBR, sets forth the percentage of various types of orders routed to the venues, and discusses the material aspects of B. Riley FBR’s relationship with the identified execution venues. The quarterly Rule 606 reports can be found at https://brileyfbr.com/legal/legal_disclosures/.
THIS MESSAGE CONTAINS INSUFFICIENT INFORMATION TO MAKE AN INVESTMENT DECISION. This material is a product of the B. Riley FBR, Inc. (“B. Riley FBR”) Equity Sales and Trading department. It is not a product of B. Riley’s Research Department, and is not to be regarded as research or a research report. Unless otherwise specifically stated, any views or opinions expressed herein are solely those of the individual author and may differ from the views and opinions expressed by B. Riley’s Research Department or other B. Riley FBR departments, divisions and affiliates.
B. Riley FBR and/or its affiliates may trade or make markets for its own account on a principal basis in the securities referenced in this communication. B. Riley and/or its affiliates may engage is securities transactions that are inconsistent with this communication and may have long or short positions in such securities. The information and any opinions contained herein are as of the date of this material and B. Riley FBR does not undertake any obligation to update them. All market prices, data and other information are not warranted as to the completeness or accuracy and are subject to change without notice. Past performance is not indicative of future results, and no representation or warranty, express or implied, is made regarding any matter including future performance.
This material does not constitute investment advice, does not take into account individual client circumstances, objectives, or needs, and is not intended as a recommendation to any particular clients. Information conveyed in this material, including references to strategies, securities or other financial instruments, may not be suitable for all investors. In reaching a determination as to the appropriateness of any proposed transaction or strategy, clients should undertake a thorough independent review of the legal, regulatory, credit, accounting and economic consequences of such transaction in relation to their particular circumstances and make their own independent decisions.
B. Riley FBR does not provide tax advice. As such, any information contained in Equity Sales and Trading department communications relating to tax matters were neither written nor intended by B. Riley FBR to be used for tax reporting purposes. Recipients should seek tax advice based on their particular circumstances from an independent tax advisor.
Subject to certain limited exemptions, before placing a short sale, you are required to borrow, arrange to borrow, or otherwise have reasonable grounds to believe that the security sold short can be borrowed for delivery by settlement date. Prior to executing a short sale order on your behalf B. Riley FBR will require confirmation from you that a borrow has been secured and from whom. This process is commonly referred to as “obtaining a locate.” A locate is an indication that, as of the time the locate is obtained, B. Riley FBR has reasonable grounds to believe that securities will be available for borrowing on the settlement date. A locate is not a guarantee that securities will actually be available for lending and delivery on the settlement date or that the lender will not thereafter require the return of the borrowed securities at any time. If a sufficient quantity of securities is not available from our clearing firm’s inventory, B. Riley FBR or our clearing firm may, among other things, contact third-party lenders to ascertain whether they have securities available for lending. If B. Riley FBR or our clearing firm determines that there are reasonable grounds to believe that a sufficient quantity of securities is borrowable, B. Riley FBR may proceed to execute the short sale on behalf of your account. If B. Riley FBR or its clearing firm is unable to determine that the shares can be borrowed, the order will not proceed at that time.
If the order is executed and the securities are not available for borrowing for any reason by the settlement date, you as the seller will “fail to deliver” to the purchaser. A purchaser or securities lender may, in addition to other remedies and at any time after the giving of any required notice, buy-in the securities that were not timely delivered, and you will be responsible for all losses and costs of the buy-in.
B. Riley FBR and NFS are members of the Securities Investor Protection Corporation (SIPC), a nonprofit, congressionally chartered, membership corporation created in 1970. SIPC plays an important role in the overall system of investor protection in the United States by, in certain specified situations, restoring funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms.
As a member of the SIPC, funds are available to meet customer claims up to a ceiling of $500,000, including a maximum of $250,000 for cash claims.
Additionally, securities in accounts carried by NFS, a Fidelity Investments company, are protected in accordance with the SIPC up to $500,000 (including up to $250,000 for cash awaiting reinvestment). NFS also has arranged for coverage above these limits. Neither coverage protects against a decline in the market value of securities, nor does either coverage extend to certain securities that are considered ineligible for coverage.
Note that SIPC coverage is not the same as, nor is it a substitute for, FDIC deposit insurance. Securities purchased through our brokerage firm are not FDIC-insured; however, cash in some account types may be covered by FDIC insurance and not by SIPC coverage.
While our internal policies generally prohibit B. Riley FBR from executing principal orders when there is customer order on the same side of the market, there may be circumstances where this activity would be allowable. As such we are required to disclose that as permissible under FINRA Rule 5320 B. Riley FBR may trade a security on the same side of the market for its own account at a price that would satisfy a customer order for an “institutional account” or for orders of 10,000 shares or more (unless such orders are less than $100,000 in value). Should you choose to opt in to the protections afforded in Rule 5320 for all or any portion of your order(s) please notify your sales representative at the time you place your order.
The material located on the B. Riley FBR website is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. Information included on our website is subject to change at any time. The firm does not guarantee the timeliness, sequence, accuracy or completeness of information included on this website. Past performance should not be taken as an indication of guarantee of future performance and no representation, express or implied, is made regarding future performance.
The firm can only conduct business if registered in states where registration is required or if business is exempt under State requirements. Check with your representative or contact our Compliance Department to get a list of states we are currently registered in. B. Riley FBR is a member of Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC).
B. Riley FBR does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax matters.
B. Riley FBR does not take responsibility for content contained at hyperlinked sites.
B. Riley FBR may make markets and effect transactions, including transactions contrary to any recommendations herein, or have positions in the securities mentioned herein (or options with respect thereto) and may also have performed investment banking services for the issuers of such securities. In addition, employees of B. Riley FBR may have positions and effect transactions in the securities or options of the issuers mentioned herein and may serve as directors of such issuers.
For additional information, please contact B. Riley FBR at (310) 966-1444.