RED FLAG SERVICES AMENDMENT
Exhibit (k)(4)(i)
This Red Flags Services Amendment (“Amendment”) is being entered into as of Xxxx 1, 2009
(“Effective Date”), by and between PNC Global Investment Servicing (U.S.) Inc. (formerly known as
PFPC Inc.) (“PNC”) and the undersigned investment company (the “Fund”) and amends the agreement
between PNC and the Fund pursuant to which PNC provides transfer agency services to the Fund, as
amended to date (“Existing Agreement”).
IN CONSIDERATION of the mutual covenants made herein and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties, intending to be legally bound,
hereby agree to amend the Existing Agreement as follows:
1. Modifications to Existing Agreement. The Existing Agreement shall be modified as
follows:
(a) The term “PFPC Inc.” shall be replaced each place it may occur with “PNC Global Investment
Servicing (U.S.) Inc.” and the defined term “PFPC” shall be replaced each place it may occur with
“PNC”.
(b) A new section which reads in its entirety as follows shall be added to the end of the Existing
Agreement:
Red Flag Services (the “Red Flag Section”).
(a) PNC agrees to provide the Fund with the “Red Flag Services”, which is hereby defined to mean
the following services:
(i) PNC will maintain written controls reasonably designed to detect the occurrence of Red
Flags (as defined below) in connection with (i) account opening and other account activities
and transactions conducted directly through PNC with respect to Direct Accounts (as defined
below), and (ii) transactions effected directly through PNC by Covered Persons (as defined
below) in Covered Accounts (as defined below). Such controls, as they may be revised from
time to time hereunder, are referred to herein as the “Controls”. Solely for purposes of
the Red Flag Section, the capitalized terms below will have the respective meaning ascribed
to each:
(A) “Red Flag” means a pattern, practice, or specific activity or a combination of
patterns, practices or specific activities which may indicate the possible existence of
Identity Theft (as defined below) affecting a Registered Owner (as defined below) or a
Covered Person.
(B) “Identity Theft” means a fraud committed or attempted using the identifying
information of another person without authority.
(C) “Registered Owner” means a natural person who is the owner of record of a Direct
Account on the books and records of the Fund maintained by PNC as registrar of the Fund
(the “Fund Registry”).
(D) “Covered Person” means a natural person who is the owner of record of a Covered
Account on the Fund Registry.
(E) “Direct Account” means an account holding Fund shares established directly with and
through PNC by a natural person as a registered account on the Fund Registry and through
which the owner of record has the ability to directly conduct account and transactional
activity with and through PNC..
(F) “Covered Account” means an account holding Fund shares established by a financial
intermediary for a natural person as the owner of record on the Fund Registry and through
which such owner of record has the ability to conduct transactions in Fund shares
directly with and through PNC.
(ii) PNC will provide the Fund with a printed copy of or Internet viewing access to the
Controls.
(iii) PNC will notify the Fund of Red Flags which it detects and reasonably determines to
indicate a significant risk of Identity Theft to a Registered Holder (“Possible Identity
Theft”) and assist the Fund in determining the appropriate response of the Fund to the
Possible Identity Theft.
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(iv) PNC will (A) engage an independent auditing firm or other similar firm of independent
examiners to conduct an annual testing of the Controls and issue a report on the results of
the testing (the “Audit Report”), and (B) furnish a copy of the Audit Report to the Fund;
and
(v) Upon Fund request, issue a certification in a form determined to be appropriate by PNC
in its reasonable discretion, certifying to PNC’s continuing compliance with the Controls
after the date of the most recent Audit Report.
(b) The Fund agrees it is responsible for complying with the Red Flag Requirements, for
determining the applicability of Section 114 of the Fair and Accurate Credit Transaction Act of
2003 and regulations promulgated thereunder by the Federal Trade Commission (the “Red Flag
Requirements”) to the Fund and the extent to which the Red Flag Services assist the Fund in
complying with the Red Flag Requirements, and for furnishing any supplementation or augmentation
to the Red Flag Services it determines to be appropriate, and that PNC has given no advice and
makes no representations with respect to such matters. This Red Flag Section shall not be
interpreted in any manner which imposes a duty on PNC to act on behalf of the Fund or otherwise,
including any duty to take any action upon the occurrence of a Red Flag, other than as expressly
provided for in this Red Flag Section. The Controls and the Red Flag Services may be changed at
any time and from time to time by PNC in its reasonable sole discretion to include commercially
reasonable provisions appropriate to the Red Flag Requirements, as they may be constituted from
time to time. The Fund shall be obligated to pay, and PNC shall be entitled to receive, the fee
for Red Flag Services as established by PNC from time to time by written notice. Other than the
initial fee which shall be payable as of the Effective Date, the Fund shall be obligated to pay
any revised fee commencing thirty (30) days after the Fund’s receipt of such written notice.
The Fund’s sole remedy in the event it does not agree to a revised fee is to terminate the Red
Flag Services.
(c) Notwithstanding any other provision of the Agreement:
(i) PNC shall not be liable for any consequential, special or indirect losses or damages,
whether or not the likelihood of such losses or damages was known by PNC or its affiliates
and PNC’s cumulative, aggregate liability to the Fund for all losses, claims, suits,
controversies, breaches or damages for any cause whatsoever and regardless of the form of
action or legal theory shall not exceed the lesser of $100,000 or the fees received by PNC
for the Red Flag Services during the six (6) months immediately prior to the date of the
last such loss, claim, suit, controversy, breach or damage; and
(ii) In the event of a material breach of this Red Flag Section by PNC, the Fund shall be
entitled exclusively to terminate the Red Flag Services by complying with the notice and
cure period provisions in the Agreement applicable to a material breach of the Agreement,
but shall not be entitled to terminate the Agreement.
2. Remainder of Existing Agreement; Governing Law. Except as specifically modified by this
Amendment, all terms and conditions of the Existing Agreement shall remain in full force and
effect. The governing law of the Agreement shall be the governing law of this Amendment.
3. Entire Agreement; Facsimile Signatures; Counterparts. This Amendment constitutes the
final, complete, exclusive and fully integrated record of the agreement of the parties with respect
to the subject matter herein and the amendment of the Existing Agreement with respect to such
subject matter. This Amendment may be executed in one or more counterparts; such execution of
counterparts may occur by manual signature, facsimile signature, manual signature transmitted by
means of facsimile transmission or manual signature contained in an imaged document attached to an
email transmission; and each such counterpart executed in accordance with the foregoing shall be
deemed an original, with all such counterparts together constituting one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly
authorized officers, as of the day and year first above written.
| PNC Global Investment Servicing (U.S.) Inc. | Highland Funds | |||||||
By:
|
/s/ Xxxxxxx XxXxxxxx | By: | /s/ M. Xxxxx Xxxxxxxxx | |||||
Name:
|
Xxxxxxx XxXxxxxx | Name: | M. Xxxxx Xxxxxxxxx | |||||
Title:
|
Exec. VP and Senior Managing Dir. | Title: | Treasurer | |||||
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