1
EXHIBIT 3.1
CLIENT ACCOUNT AGREEMENT
EFFECTIVE AUGUST, 1998
THIS AGREEMENT CONTAINS IMPORTANT TERMS AND CONDITIONS GOVERNING XXXX
XXXXXX XXXXXXXX ACCOUNTS INCLUDING ALL SECURITIES ACCOUNTS, ACTIVE ASSETS(R)
ACCOUNTS AND MARGIN LOAN ACCOUNTS. PLEASE READ IT CAREFULLY AND KEEP IT FOR
FUTURE REFERENCE. ANY QUESTIONS YOU HAVE REGARDING THIS DOCUMENT OR YOUR ACCOUNT
SHOULD BE DISCUSSED WITH YOUR FINANCIAL ADVISOR.
THIS AGREEMENT IS AUTHORIZED FOR DISTRIBUTION TO ACTIVE ASSETS
ACCOUNT(R) CLIENTS ONLY WHEN PRECEDED OR ACCOMPANIED BY AN ACTIVE ASSETS TRUST
PROSPECTUS.
XXXXXX XXXXXXX XXXX XXXXXX IS A SERVICE XXXX OF XXXXXX XXXXXXX XXXX
XXXXXX & CO. SERVICES ARE OFFERED THROUGH XXXX XXXXXX XXXXXXXX INC., MEMBER
SIPC.
XXXXXX XXXXXXX XXXX XXXXXX
The Client Account Agreement presents the terms and conditions
governing accounts established at Xxxx Xxxxxx Xxxxxxxx Inc. (Xxxx Xxxxxx
Xxxxxxxx). Your signature on the Xxxx Xxxxxx Xxxxxxxx Account Application or the
Active Assets Account(R) Application confirms that you agree to abide by the
terms and conditions outlined in this Agreement. Section I applies to all
accounts; Section II to Active Assets(R) Accounts.
I. GENERAL ACCOUNT INFORMATION FOR ALL XXXX XXXXXX XXXXXXXX CLIENTS.
ACCOUNT OPENING INFORMATION
ACCOUNT REGISTRATION
The account registration selected determines who will have an interest
in the Account. Clients should consult with their own legal advisors to
determine the type of account registration that best meets their needs.
Individual Accounts may be opened in the name of an individual who has
attained the legal age of majority. Only this individual has authority to give
account instructions.
Custodian Accounts are established under the Uniform Gift to Minors Act
("UGMA") or the Uniform Transfers to Minors Act ("UTMA"). The custodian
exercises fiduciary control over assets owned by a minor. Assets contributed to
an UGMA/UTMA are irrevocable gifts and cannot be withdrawn for the benefit of
the custodian.
Joint Accounts may be held in one of five forms:
Joint Tenants with Right of Survivorship. If one owner of the account
dies, the account passes in its entirety to the surviving owner(s) and is not
counted as part of the probate estate of the decedent. Only individuals are
eligible for this ownership.
Tenants by the Entirety. Similar to (a) above, but available only to a
lawfully married couple residing in a state which permits this form of ownership
(AR, DE, DC, FL, HI, MD, MA, MI, MO, PA, TN, VT, WY). Generally it prevents
creditors of only one spouse from seizing account assets.
Community Property. If one owner of the account dies, that person's
share of the assets passes to his or her estate as of the date of death.
Available only to a married couple residing in a community property state (AZ,
CA, ID, LA, NV, NM, TX, WA). Note: Depending on individual circumstances, use of
this designation alone may not conclusively establish ownership of assets in the
account as community property.
Community Property with Rights of Survivorship. Similar to (a) above,
but available only to married couples residing in Arizona. Note: Depending on
individual circumstances, use of this designation may not conclusively establish
ownership of assets in the account as community property.
Tenants in Common (without Rights of Survivorship). If one owner of the
account dies, that person's percentage shares of the assets passes to his or her
estate as of the date of death. Any legal entity may be a tenant in common.
Joint and Individual Liability. For all forms of joint ownership, each
owner of the account has full and independent authority:
2
a. to buy, sell and trade assets in the account;
b. to receive confirmations, statements and other communications;
c. to deposit and withdraw money, securities and other property; and
d. generally to act as if each were the sole account owner, all
without notice to other owners. Xxxx Xxxxxx Xxxxxxxx may treat
notice to one owner as notice to all owners. Each account
owner is jointly and severally liable for the account.
Subject to its policies, Xxxx Xxxxxx Xxxxxxxx may follow the
instructions of any one account owners and, if inconsistent instructions are
received or Xxxx Xxxxxx Xxxxxxxx reasonably believes instructions from one
account owner may not be mutually agreeable to all, may do any of the following:
(a) choose which instructions to follow and which to disregard; (b) suspend all
activity in the account until written instructions signed by all owners are
received; (c) close the account and deliver all securities and other property,
net of debits or liabilities, to the address of record; and/or (d) take other
appropriate legal action.
Upon death of an account owner, the survivor(s) agree to immediately
provide Xxxx Xxxxxx Xxxxxxxx with written notice. Before or after receiving such
notice, Xxxx Xxxxxx Xxxxxxxx may take such proceedings, require such papers and
inheritance or tax waivers, retain such portion and/or restrict transactions in
the account as it deems advisable to protect Xxxx Xxxxxx Xxxxxxxx against any
tax, liability, penalty or loss under any present or future law or otherwise.
Transfer On Death ("XXX"). The privilege of opening accounts in XXX
form is created by state law and is only available in certain states. Read the
XXX Client Agreement carefully if you are contemplating a XXX account.
Trust Accounts. Clients must have executed an independent written trust
agreement prior to the trustees completing Xxxx Xxxxxx Xxxxxxxx'x "Trustee
Certification of Investment Powers."
Other Registrations. The required documentation is available through
your Financial Advisor for all other registrations including:
1. Corporations 4. Investment clubs
2. Partnerships 5. Institutions
3. Charitable organizations 6. Guardianships
CLIENT AFFILIATIONS
Industry regulations require clients to notify Xxxx Xxxxxx Xxxxxxxx if
they hold a key position in a publicly traded firm or are affiliated with a
financial services firm.
Clients who are a director, 10% or greater shareholder, or
policy-making executive of a publicly traded firm must notify us of their
position and identify the firm. Clients must do the same if they are affiliated
with or work for a bank, an insurance company, a trust company or a securities
firm.
SUBSTITUTE W-8
Federal income tax regulations require Xxxx Xxxxxx Xxxxxxxx to obtain a
Social Security or Tax ID number for every account. Use this guide to select the
appropriate number:
--------------------------------------------------------------------------------
Account Type Social Security # Tax ID#
--------------------------------------------------------------------------------
Individual The individual
--------------------------------------------------------------------------------
Joint (2 or more) The actual owner or if
combined funds, the
first individual.
--------------------------------------------------------------------------------
Custodian (UGMA/ The minor or the
UTMA)or Guardian beneficiary xxxx.
--------------------------------------------------------------------------------
Trust, estate or The legal entity
pension plan
--------------------------------------------------------------------------------
Corporate The corporation
--------------------------------------------------------------------------------
Partnership The partnership
--------------------------------------------------------------------------------
Sole Proprietorship The owner
--------------------------------------------------------------------------------
3
THE XXXX XXXXXX XXXXXXXX SECURITIES ACCOUNT
Xxxx Xxxxxx Xxxxxxxx clients may open a standard securities account or
an Active Assets Account(R) (See Section II) to purchase, sell or hold
securities on either a cash or margin basis. Securities accounts are subject to
federal and state law and the rules and customs of the NYSE, the NASD, and other
industry self-regulatory organizations and exchanges.
ACCOUNT SERVICING CHARGE
Xxxx Xxxxxx Xxxxxxxx applies an annual $50 maintenance fee, assessed in
January, to all accounts except: (a) Account Assets(R) Accounts, CHOICE
accounts, Xxxx Xxxxxx Xxxxxxxx custodial and managed accounts (e.g., IRAs, VIPs,
RPMs and ICS); (b) accounts open for less than one year; (c) accounts which
during the previous calendar year either generated $100 or more in transaction
revenue, dividend reinvestment fees and/or margin interest or belong to a
"household" (same address) of accounts which jointly generated $150 or more in
transaction revenue, account fees, and/or margin interest; (d) accounts holding
$25,000 or more in Xxxxxx Xxxxxxx Xxxx Xxxxxx Advisors Inc. mutual funds at
year-end; and (e) accounts holding only non-deliverable or book-entry
securities. The account servicing charge is separate and distinct from other
fees, such as but not limited to, transaction fees, certified check fees,
Federal funds wire transfer fees, etc. Xxxx Xxxxxx Xxxxxxxx reserves the right
to alter its fees, with advance notice to clients, and, for certain groups or
categories of customers, to modify the features of and fees charged for
accounts.
MARGIN PRIVILEGES
Clients contemplating margin trading should be certain they understand
the operation of a margin account under various market conditions. Margin
trading is not for everyone and the increased leverage of margin privileges may
heighten both risks and rewards. Clients wishing to apply for margin privileges
should read Section III, Margin Privileges, carefully and discuss any questions
with their Financial Advisor.
OPTIONS TRADING
Options trading is available for eligible clients. While relatively
conservative methods of trading options are common, options trading can be
highly speculative. Some strategies expose the options investor to the risk of
losing far more than their original investment, and unexpected events or unusual
market volatility can make it extremely difficult and costly for an investor to
close out open options positions. Xxxx Xxxxxx Xxxxxxxx cannot be responsible for
conditions beyond its control including extreme market volatility or trading
volume, governmental restrictions, or exchange and marketplace rulings including
trading halts. Clients considering options trading should be convinced that they
possess the requisite investment experience; have the financial resources to
bear any potential losses their trading strategies could expose them to; and
have concluded options trading is suitable within the overall context of their
investment objectives. Applications for options trading are available upon
request.
COMMUNICATIONS; SUSPECTED ERRORS
Until Xxxx Xxxxxx Xxxxxxxx receives a written notice of a different
address, all communications -- including margin and maintenance calls -- sent to
the address of record are presumed to have been given to the client personally
whether or not actually received.
4
Clients suspecting an error on their monthly statement or a trade
confirmation should promptly contact the manager of the branch servicing that
account. Xxxx Xxxxxx Xxxxxxxx may presume the statement correct unless it
receives written notification about the suspected error within 10 days. It is
the client's responsibility to seek immediate clarification about entries that
the client does not clearly understand.
TERMINATION OR RESTRICTION OF ACCOUNTS
A client may terminate an account at any time but will remain
responsible for any charges to the account. Xxxx Xxxxxx Xxxxxxxx likewise may
terminate an account at any time or place limitations on available services,
including the nature, volume and timing of transactions.
Active Assets(R) clients who decline to continue Active Assets(R)
status will automatically have their assets transferred to a standard Xxxx
Xxxxxx Xxxxxxxx securities account unless other instructions are received.
Because the Active Assets(R) money funds and Insured Account are integral
components of the Active Assets(R) program, all such funds will also be
liquidated and transferred (at no charge)to the standard Xxxx Xxxxxx Xxxxxxxx
securities account in the form of free credit balances. Clients may then choose
to invest these funds in Xxxx Xxxxxx Xxxxxxxx money market funds under the terms
described in the prospectuses for those funds.
GOVERNING LAW
No provision of this Agreement may be amended or waived unless agreed
to in writing and signed by an authorized officer of Xxxx Xxxxxx Xxxxxxxx. If
any provision of this Agreement becomes inconsistent with any applicable current
or future law, that provision will be deemed amended to conform with the law,
but all other provisions will remain in effect. This Agreement and its
enforcement will be governed by the law of the State of New York without regard
to conflict of laws provisions.
This Agreement shall cover individually and collectively all accounts,
joint, single or in a fiduciary capacity, which are held by Xxxx Xxxxxx Xxxxxxxx
for the client. This Agreement shall be binding upon the present Xxxx Xxxxxx
Xxxxxxxx organization and any successor organizations and their respective
assigns: it shall be binding upon the current account owner(s) and the heirs,
executors, administrators, trustees, receivers, successors and assigns of the
account.
SIPC PROTECTION
Securities held in Xxxx Xxxxxx Xxxxxxxx accounts are protected by the
Securities Investor Protection Corporation ("SIPC") for up to $500,000 per
account holder which includes protection for up to $100,000 in uninvested cash.
Through Travelers Casualty and Surety Company ("Travelers"), Xxxx Xxxxxx
Xxxxxxxx provides additional coverage for securities up to their full net equity
value as well as an additional $900,000 in protection for uninvested cash.
Of course, neither SIPC nor Travelers coverage provides protection
against losses due to market fluctuations. In addition, neither SIPC nor
Travelers cover money market funds or mutual funds.
Clients should understand that Xxxx Xxxxxx Xxxxxxxx does not provide
tax or legal advice. Clients should always consult their own accountant or
attorney with questions.
II. THE ACTIVE ASSETS ACCOUNT(R)
Xxxx Xxxxxx Xxxxxxxx'x Account Assets Account(R) offers integrated
financial services linking together a securities account, a no-load money market
trust or a federally insured bank account, checkwriting privileges and a VISA(R)
debit card. It also offers summarized tax and portfolio information, 24-hour
account information, an electronic funds transfer service, a dividend
reinvestment service, and direct deposit capability.
5
The annual program fee is $80 for Active Assets(R) Accounts and $100
for Business Active Assets(R) Accounts. Xxxx Xxxxxx Xxxxxxxx reserves the right
to change annual program fees and services at any time.
THE COMPONENTS OF THE ACTIVE ASSETS(R) PROGRAM
THE SECURITIES ACCOUNT
The securities account is a conventional margin or cash brokerage
account which may be used to purchase and sell securities on margin or on a
fully-paid basis. The General Information about securities accounts provided in
Section I of this Agreement also applies to Active Assets Accounts; clients
should make sure they read and understand that information. Active Assets(R)
clients who are eligible and approved for margin privileges should also be sure
to carefully read Section III of this Agreement which outlines the terms and
conditions governing the use of margin privileges.
MONEY MARKET FUNDS
A money market fund or FDIC insurance account is an integral part of
every Active Assets Account(R). On each business day, an account's free credit
balances, as of the previous close of business, are automatically invested in
the money market vehicle chosen by the account holder. "Fee credit balances"
means any cash that could be withdrawn from the securities account without
creating a negative balance or giving rise to interest charges; it does not
include any credit balance generated from the short sale of securities.
Active Assets Account(R) holders may select any one of the following
money market vehicles:
a. The Active Assets Money Market Trust
b. The Active Assets Government Trust
c. The Active Assets Tax-Free Trust
d. The Active Assets California Tax-Free Trust
e. The Insured Account, which is FDIC insured, is maintained at
MountainWest Financial Corporation, which has entered into an
agreement with Xxxx Xxxxxx Xxxxxxxx to participate in the Active
Assets(R)Program. Account holders selecting this option will be
sent a separate document containing the terms governing the
Insured Account. FDIC insurance is provided for up to $100,000
per depositor. (Note: Not available to residents of Connecticut
or for profit entities including: corporations, partnerships and
investment clubs.)
Each Active Assets Trust is a diversified open-end management
investment company seeking high current income, preservation of capital and
liquidity from investment in short term securities. Trust shares are neither
insured nor protected by the FDIC, SIPC or any other governmental or private
agency. An investment in Trust shares is a security purchase and is not the same
as a bank deposit.
The price of Trust shares is the per share net asset value next
determined after a purchase or redemption order is entered. While each Trust
seeks to maintain a $1.00 net asset value, there is no guarantee that this
objective will be met. More complete information about Trust shares may be found
in the accompanying Trust prospectus given to all Active Assets Account(R)
holders.
In view of the Active Assets(R) program annual account fee, investors
seeking solely to invest cash in a money market, government or tax-free fund,
and not wishing to use the automatic investment and other special features of
the Active Assets Account(R), should consider alternative means of purchasing
money funds.
6
CHECKWRITING PRIVILEGES
Free checkwriting privileges are also available through the Active
Assets Account(R) from Bank One, Columbus, N.A. under Bank One's rules and
applicable state and federal laws. Business Active Assets(R) Accounts may write
50 checks a month free and thereafter pay $.15 per check. Active Assets(R)
checks may be used for any purpose including transferring funds between
brokerage accounts, but federal regulations prohibit their use for the direct
purchase of securities. All accounts are subject to nominal fees for such items
as reorders of checks, orders of special style checks, stop payment requests,
copies of cancelled checks and dishonored checks. Clients may retrieve copies of
3 cancelled checks per year free; each additional retrieval is $5. Investors
should be aware that the checking feature is intended to provide clients with
easy access to the assets in their accounts; the Active Assets Account(R) is not
a bank account.
VISA(R) DEBIT CARDS
A VISA(R) debit card is available at no additional cost from Bank One
and may be used to purchase merchandise, services or to receive cash advances.
Xxxx Xxxxxx Xxxxxxxx will debit an account directly to pay VISA transactions
upon notice from Bank One. All VISA transactions will be reflected on the Active
Assets Account(R) monthly statement; no separate monthly VISA xxxx will be sent.
Xxxx Xxxxxx Xxxxxxxx and/or Bank One may when necessary answer or make inquiries
about a cardholder's credit history. Use of the VISA card is governed by VISA
and BANK ONE regulations as well as applicable state and federal law.
The VISA card may also be used to access Active Assets Account(R) funds
through Automatic Teller Machines ("ATMs") at any VISA network machine
worldwide. Amounts up to $1,000 per day may normally be withdrawn; however,
local bank regulations may limit this amount. Xxxx Xxxxxx Xxxxxxxx will impose a
$1.00 fee for each ATM withdrawal. Local bank fees may also apply. Clients
expecting to make ATM withdrawals will need Personal Identification Numbers
("PINs"). Information on PINs is available by calling 0-000-000-0000.
VISA charges incurred in a foreign currency will be converted by VISA
International into a U.S. Dollar amount. The currency conversion rate used is
either a wholesale market rate or a government mandated rate in effect one day
prior to the processing date, increased by one percent (1%) in each case. The
conversion rate on the processing day may vary from that when the transaction
occurred.
Questions on VISA transactions. If a client believes a statement is
wrong, or if more information about a VISA transaction is required, clients
should telephone 000-000-0000 or write to Xxxx Xxxxxx Xxxxxxxx, X.X. Xxx 00,
Xxxxxxx Xxxxx Xxxxxxx, Xxx Xxxx, XX 00000 no later than 60 days after the FIRST
statement on which the questioned transaction appeared.
Complaints will be investigated and, in case of error, corrected
promptly. If the investigation takes more than 20 business days, the account
will be recredited for the amount in question so that the funds are available to
the client during the time it takes to complete the investigation.
Clients subscribing to the Active Asset(R) service may be liable for
the unauthorized use of their VISA card in an amount up to $50. The owner of a
VISA card will not be liable for any unauthorized use which occurs after Bank
One has been notified orally or in writing of a loss, theft or possible
unauthorized use. If shares of a Trust are redeemed for the unauthorized use of
the VISA card, such shares shall be reinstated as if never redeemed and Xxxx
Xxxxxx Xxxxxxxx will indemnify the Trust against any losses caused thereby.
--------------------------------------------------------------------------------
IF A VISA CARD IS LOST OR STOLEN, THE ACTIVE ASSETS(R) CLIENT SHOUld
REPORT THE LOSS IMMEDIATELY BY PLACING A COLLECT CALL TO BANK ONE AT (614)
248-4242 ANY TIME, DAY OR NIGHT, SEVEN DAYS A WEEK.
--------------------------------------------------------------------------------
When an Active Assets Account(R) is closed, all VISA cards and unused
checks must be promptly destroyed. Clients must notify the Xxxx Xxxxxx Xxxxxxxx
branch office that they have done so to avoid a delay in the disposition of the
account's assets.
7
THE AUTHORIZED LIMIT
The Authorized Limit in the Active Assets Account(R) is the total
amount available for investments, checkwriting and VISA transactions. It is
calculated as the sum of:
a. free credit balances in the account; plus
b the value of any Active Assets Trust shares or Insured Account
balance; plus
c. the available margin loan value; minus
d. any debit amount owed Xxxx Xxxxxx Xxxxxxxx.
The Authorized Limit is accessed in the above order; its value may
fluctuate on a daily basis and is dependent upon such factors as the collection
of checks deposited, the market value of securities, the status of securities
transactions, and the time required to transmit and confirm data between
financial institutions. The Authorized Limit is immediately reduced at the time
Bank One is notified of the use of the VISA card, not at the time applicable
sales or cash advance drafts are paid. Xxxx Xxxxxx Xxxxxxxx may withhold access
to the proceeds of checks deposited until collected and until federal funds
become available. If a VISA transaction or a check is rejected because of an
insufficient Authorized Limit, Xxxx Xxxxxx Xxxxxxxx will not be liable for any
consequences of the rejection.
Debits to the Account will be satisfied in the following order of
priority:
a. securities transactions, including margin maintenance calls and
other account fees;
b. VISA debit card transactions; and
c. Bank One checking transactions.
If any debit in the account remains after Xxxx Xxxxxx Xxxxxxxx has
requested payment, then Xxxx Xxxxxx Xxxxxxxx is authorized to sell, liquidate,
transfer or otherwise apply any asset of the account holder held by Xxxx Xxxxxx
Xxxxxxxx to satisfy the liability without requiring further notice or demand
before such action is taken. Liability for such obligations shall survive
termination of the account.
OTHER ACCOUNT FEATURES
The Active Assets Account(R) program offers other special features at
no additional charge, including
o Direct deposit of social security, payroll or other recurring
income.
o Automatic xxxx payment for items requiring regular, periodic
payments such as mortgages or insurance premiums.
o Monthly mailing of interest and dividends generated by securities
held in your account.
o Coding of checks to allow for easier monthly and year-end
recordkeeping.
o Comprehensive monthly and annual summary statements providing a
record of all transactions.
o Dividend reinvestment service.
o Electronic funds transfer service.
o Gain and loss summary for a monthly review of realized and
unrealized gains and losses ($45 fee for accounts with less than
$250,000. The gain and loss summary is not for tax purposes.)
8
o Two free certified checks per year ($18 each thereafter).
Xxxx Xxxxxx Xxxxxxxx may add, modify or delete special features from
time to time. More information about any of these features is available from
your Financial Advisor.
In Case of Errors or Questions About Your Electronic Transfers
Telephone us at 0-000-000-0000 or
Write Us at Special Products, Attn: Customer Service
0 Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
as soon as you can, if you think your statement or receipt is wrong or if you
need more information about a transfer listed on the statement or receipt. We
must hear from you no later than 60 days after we sent the FIRST Statement on
which the problem or error appeared.
(1) Tell us your name and account number (if any).
(2) Describe the error or the transfer you are unsure about, and
explain as clearly as you can why you believe it is an error or
why you need more information.
(3) Tell us the dollar amount of the suspected error.
If you tell us orally, we may require that you send us your complaint or
question in writing within 10 business days.
We will tell you the results of our investigation within 10 business
days after we hear from you and will correct any error promptly. If we need more
time, however, we may take up to 45 days to investigate your complaint or
question. If we decide to do this, we will credit your account within 10
business days for the amount you think is in error, so that you will have the
use of the money during the time it takes us to complete our investigation. If
we ask you to put your complaint or question in writing and we do not receive it
within 10 business days, we may not credit your account.
If we decide that there was no error, we will send you a written
explanation within three business days after we finish our investigation. You
may ask for copies of the documents that we used in our investigation.
III. MARGIN PRIVILEGES
This section only applies to those clients eligible and approved for
margin privileges. Margin clients should read with particular care. "You" refers
to the owners of the account and "we" refers to Xxxx Xxxxxx Xxxxxxxx.
MARGIN PRIVILEGES
Margin trading is not for everyone. You should examine your investment
objectives, financial resources and risk tolerance to determine whether margin
trading is appropriate for you. Margin privileges involve the extension of
credit by Xxxx Xxxxxx Xxxxxxxx to you, secured by the collateral in your account
and the amount borrowed will appear as a debit balance on which you will be
charged interest at varying rates as described on this page. The increased
leverage which margin provides may heighten both risks and awards.
PLEDGE OF SECURITIES
Xxxx Xxxxxx Xxxxxxxx may borrow money to lend to margin customers,
including you, and may pledge customers' securities and other assets as
collateral for such loans. You give Xxxx Xxxxxx Xxxxxxxx permission, without
notice to you, to pledge and hypothecate your securities and other property,
separately or together with assets of other margin customers, as collateral for
any outstanding loans you may have from us at that time.
In return for the extension or maintenance of credit by Xxxx Xxxxxx
Xxxxxxxx in connection with your account, you acknowledge that the securities in
your margin account, together with all attendant rights of ownership, may be
lent to Xxxx Xxxxxx Xxxxxxxx or lent out to others. In connection with such
loans, and in connection with securities loans made to you to facilitate
9
short sales, Xxxx Xxxxxx Xxxxxxxx is authorized to receive and retain certain
benefits (including interest on your collateral posted for such loans), to which
you will not be entitled. In certain circumstances, such loans may limit, in
whole or in part, your ability to exercise voting rights of the securities lent.
ADEQUATE MARGINS & REPAYMENT
In the interest of maintaining a sound financial condition, a
securities broker-dealer must be able to act appropriately and promptly with
respect to each extension of credit it has made. Economic and market conditions
change, often rapidly, and the values of individual securities can be volatile.
In light of such conditions, we retain absolute discretion in determining when
additional collateral will be required from you.
You agree at all times to maintain such margins for your account with
Xxxx Xxxxxx Xxxxxxxx as required by law or custom, or as we may deem necessary
or advisable. You also promise to discharge your obligations to Xxxx Xxxxxx
Xxxxxxxx upon demand; this obligation survives termination of your account with
Xxxx Xxxxxx Xxxxxxxx. Any oral agreement to the contrary will be unenforceable.
No Financial Advisor, branch office manager or branch employee has any authority
to waive or modify Xxxx Xxxxxx Xxxxxxxx margin call or postpone sell-outs or
buy-ins.
LIQUIDATIONS & COVERING POSITIONS
If for any reason, in our sole discretion, we deem it necessary or
advisable, you authorize us:
a. to require additional collateral or equity from you;
b. to sell or transfer any or all of your securities and other
property, from any of your accounts;
c. to buy in (or "cover") any securities and other property of which
your accounts may be short; and
d. to cancel any outstanding orders or close out any commitments
made on your behalf.
Circumstances prompting Xxxx Xxxxxx Xxxxxxxx to take such action could
include, but are not limited to:
a. extreme market volatility or trading volume;
b. your failure to promptly supply additional collateral upon
request;
c. filing of an attachment, levy or petition of bankruptcy against
you, your accounts, or assets in your accounts; or
d. your incapacity or death.
Notwithstanding Xxxx Xxxxxx Xxxxxxxx'x general policy of giving notice
of a margin deficiency, and despite any specific incidents or prior course of
conduct between us, you understand we may and authorize Xxxx Xxxxxx Xxxxxxxx to
liquidate securities and other property to satisfy margin maintenance
requirements without notice to you and without any prior request for additional
margin from you.
We may perform such sales or transactions according to our judgement
and discretion -- with or without prior notice or advertisement -- on the
exchange or other market where such business is usually transacted; or at public
auction or private sale (including transactions with Xxxx Xxxxxx Xxxxxxxx for
its own account); and you waive any right of redeeming the proceeds of such
transactions without our consent.
10
SHORT ACCOUNT -- MARKING TO MARKET
Short securities will be "marked to the market" periodically. If a
security which you sold short (or "short against the box") appreciates in
market value over the selling price, your margin account will be debited, and if
the security depreciates in value your margin account will receive a credit.
RATE OF INTEREST CHARGED; CREDIT TERMS
Securities and Exchange Commission Rule 10b-16 requires a broker who
extends credit to a customer in connection with a securities transaction or
otherwise to furnish specified information detailing the terms and conditions
under which interest will be charged.
The interest rate charged by Xxxx Xxxxxx Xxxxxxxx on amounts you owe
will range from .75% to 2.50% above Xxxx Xxxxxx Xxxxxxxx'x "Base Lending Rate"
depending on the total size of your debit balance as follows:
Average Daily Percentage added to
Debit Balance Base Lending Rate
--------------------------------------------------------------
$0 - $24,999 +2.50%
$25,000 - $40,999 +2.50%
$50,000 - $99,999 +1.25%
$100,000 + + .75%
Xxxx Xxxxxx Xxxxxxxx sets its Base Lending Rate in light of market
conditions. The Base Rate reflects the broker call rate, the prime rate, the
federal funds rate, and other commercially recognized interest rates. The
interest rate a client is charged will increase or decrease without notice as
the Base Rate increases or decreases. If Xxxx Xxxxxx Xxxxxxxx increases the rate
charged you for any other reason, you will be given at least 30 days advance
written notice.
We reserve the right to charge your account a rate higher than stated
above in light of factors such as high concentrations of a security, low-priced
or speculative securities, account activity, or purpose of borrowing.
INTEREST COMPUTATION
Xxxx Xxxxxx Xxxxxxxx computes interest on debit balances as:
average applicable # of days with net
daily x interest x debit balance
debit balance rate ------------------
360
Each time the Base Rate changes, the interest charge is computed and
added to your debit balance and a new interest computation begins. If the
interest rate has not changed during a calendar month, the interest charge is
computed as of the last day of the month and added to the debit balance. Your
monthly statement will reflect the average outstanding debit balance (if any),
the applicable interest rate or rates with the period each rate was in effect,
and the resulting dollar charge. Days on which the net balance is zero, or a
credit, will be disregarded entirely for purposes of the interest computation.
Clients may find it advisable to give consideration to paying their
interest charges on a periodic basis, thereby reducing the likelihood of margin
calls due to increasing debits.
ARBITRATION
Arbitration Disclosures: Industry regulations require that the
following disclosures appear in conjunction with the arbitration agreement
which immediately follows:
A. ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
B. THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL.
C. PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND
DIFFERENT FROM COURT PROCEEDINGS.
D. THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO
SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY
LIMITED.
11
E. THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
F. 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; 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; (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.
ARBITRATION OF CONTROVERSIES
You agree that all controversies between you or your principals or
agents and Xxxx Xxxxxx Xxxxxxxx or its agents (including affiliated
corporations) arising out of or concerning any of your accounts, orders or
transactions or the construction, performance or breach of this or any other
agreement between us, whether entered into before or after the date an account
is opened, shall be determined by arbitration only before the New York Stock
Exchange, Inc.; the National Association of Securities Dealers, Inc.; or the
Municipal Securities Rulemaking Board, as you may elect. If you make no written
election addressed to us by registered mail within five days after receiving a
written demand for arbitration from us, then you authorize us to elect one of
the above listed forums for you.
Unless rules of the arbitral forum dictate otherwise, any arbitration
proceeding between us shall be held at a location at which the selected forum
regularly conducts such proceedings nearest to the Xxxx Xxxxxx Xxxxxxxx office
carrying your accounts at the time the claim arose; this venue shall apply even
if you have related disputes with other parties which cannot be resolved in the
same locale. Except for simplified proceedings (small claims), any arbitration
proceeding between us shall be heard and decided by a panel of not fewer than
three arbitrators.
The law of the State of New York will apply in all respects, including,
but not limited to determination of applicable statutes of limitation and
available remedies. The award of the arbitrator or a majority of them shall be
final, and judgement on the award may be entered in any state or federal court
having jurisdiction.
If you have any questions about margin privileges make sure to discuss
them with your Financial Advisor.
