FULLY DISCLOSED CLEARING AGREEMENT OF PERSHING LLC ([FINRA MEMBER])
EXHIBIT 10.1
OF
PERSHING
LLC
([FINRA
MEMBER])
THIS
AGREEMENT is made and entered into this 21st day of April, 2008 by and between
Pershing LLC (“Pershing”), a limited liability company, and Broadpoint
Securities, Inc. (“Broker”), a _New York corporation.
1.0 APPROVAL
This
Agreement shall be subject to
approval by the Financial Industry Regulatory Authority (“FINRA”) and
by any other self-regulatory organization vested with the authority to review
or
approve it. Pershing shall submit this Agreement to the FINRA and
Broker shall submit the Agreement to any other such organization from which
Broker is required to obtain approval. In the event of disapproval,
the parties shall bargain in good faith to achieve the requisite
approval.
From
the date of this Agreement until
the termination of this Agreement as provided in Paragraph 23 hereof, Pershing
shall carry the proprietary accounts of Broker and the cash and margin accounts
of the customers of Broker introduced by Broker to Pershing, and accepted by
Pershing, and shall clear transactions on a fully disclosed basis for such
accounts, in the manner and to the extent set forth in this
Agreement.
3.0 ALLOCATION
OF RESPONSIBILITY
Pursuant
to NYSE Rule 382,
responsibility for compliance with applicable laws, rules, and regulations
of
the Securities and Exchange Commission (“SEC”), the FINRA, the NYSE, and any
other regulatory or self-regulatory agency or organization (collectively the
“Rules”) shall be allocated between Pershing and Broker as set forth in this
Agreement. To the extent that a particular function is allocated to
one party under this Agreement, the other party shall supply that party with
information in its possession pertinent to the performance and supervision
of
that function.
Pershing
shall provide services under
this Agreement to Broker only to the extent explicitly required by specific
provisions contained in this Agreement and shall not be responsible for any
duties or obligations not specifically allocated to Pershing pursuant to this
Agreement. Broker shall enter into appropriate contractual
arrangements with customers on its own behalf, and such agreements shall make
Broker, and not Pershing, responsible to customers for the provision of
services. Broker shall not be deemed to be an agent of Pershing for
any purpose, nor shall Pershing be deemed to have a fiduciary relationship
with
any of Broker’s customers. Broker acknowledges that Pershing does not
control the business or operations of Broker.
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4.1 Broker. Broker
represents and warrants that:
4.1.1 Corporation
Duly
Organized. Broker is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its
incorporation.
4.1.2 Registration. Broker
is duly registered and in good standing as a broker-dealer with the
SEC.
4.1.3 Authority
to Enter Agreement. Broker has all requisite authority, whether
arising under applicable federal or state law or the rules and regulations
of
any regulatory or self-regulatory organization to which Broker is subject,
to
enter into this Agreement and to retain the services of Pershing in accordance
with the terms of this Agreement.
4.1.4 Material
Compliance with Rules and Regulations. Broker and, to the best of
its knowledge, each of its executive officers, directors, general securities
principals in charge of one of Broker’s principal divisions, and Chief Financial
and Operation Principals (the aforementioned individuals collectively referred
to as the “Broker Executives”) is in material compliance with, and during the
term of this Agreement shall remain in material compliance with, the
registration, qualification, capital, financial reporting, customer protection,
and other requirements of every self-regulatory organization of which Broker
is
a member, of the SEC, and of every state to the extent that Broker or any of
the
Broker Executives is subject to the jurisdiction of that state.
4.1.5 No
Pending Action, Suit, Investigation, or Inquiry. Broker has
disclosed to Pershing every material action, suit, investigation, or proceeding
pending against Broker, any of its affiliates, or any of the Broker Executives
,
by or before any court or other tribunal, any arbitrator, any governmental
authority, or any self-regulatory organization of which any of them is a
member. Broker shall notify Pershing promptly of the initiation of
any action, suit, investigation, inquiry, or proceeding that will have a
material adverse impact on the capital of Broker, unless such notification
is
prohibited by law.
4.1.6 Broker
Responsibility. Broker shall be responsible for all internal operations
related to its business including without limitation (i) all accounting,
bookkeeping, record-keeping, cashiering, commodity transactions, or any other
transactions not involving securities; or any matter not contemplated by the
Agreement; (ii) preparation of Broker’s payroll records, financial statements,
or any analysis thereof; (iii) preparation or issuance of checks in payment
of
Broker’s expenses, other than expenses incurred by Pershing on behalf of Broker
pursuant to this Agreement; and (iv) payment of commissions to Broker’s sales
personnel.
4.2 Pershing. Pershing
represents and warrants that:
4.2.1 Duly
Organized. Pershing is a Limited Liability Company duly
organized, validly existing, and in good standing under the laws of the state
of
Delaware.
4.2.2 Registration. Pershing
is duly registered and in good standing as a broker-dealer with the SEC and
is a
member firm in good standing of FINRA.
4.2.3 Authority
to Enter Agreement. Pershing has all requisite authority, whether
arising under applicable federal or state law, or the rules and regulations
of
any regulatory or self-regulatory organization to which Pershing is subject,
to
enter into this Agreement and to provide services in accordance with the terms
of this Agreement.
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4.2.4 Compliance
with Registration. Pershing and , to the best of its knowledge, each of its
employees, executive officers, directors, general securities principals in
charge of one of Pershing’s principal divisions, and Chief Financial and
Operation Principals (the “Pershing Executives” and each of its employees) is in
material compliance with, and during the term of this Agreement shall remain
in
material compliance with the registration, qualification, capital, financial
reporting, customer protection, and other requirements of every self-regulatory
organization of which Pershing is a member, of the Securities and Exchange
Commission (“SEC”), and every state.
5.1 Acceptance
of New Accounts. Broker shall be responsible for opening and
approving new accounts in compliance with the Rules.
5.1.1 Pershing
reserves the right to reject any account that the Broker may forward to Pershing
as a potential new account for commercially reasonable reasons, including but
not limited to, credit and reputational considerations. Pershing also
reserves the right to terminate any account previously accepted by it as a
new
account for commercially reasonable reasons, including but not limited to,
credit and reputational considerations.
5.2 Maintenance
of Account Information. Pershing may rely without inquiry on the
validity of all customer information furnished to it by
Broker. Possession of any such documents or information, however
provided, concerning Broker’s customers does not create a duty on the part of
Pershing to review or understand the content of those documents.
5.3 Pershing
Operations Manual. Broker acknowledges receipt and familiarity
with the Pershing “Quick Reference Guide” and “Bulletins” and agrees to
familiarize itself with any modifications or supplements to such documents
that
may be issued upon reasonable prior notice to Broker from time to
time. Broker further agrees to abide by Pershing’s “Quick Reference
Guide” and “Bulletins” and any modifications or supplements to such documents
that may be issued upon reasonable prior notice to Broker from time to time
and
delivered or made available to Broker.
6.1 Responsibility
for Compliance. Broker shall be solely responsible for compliance
with suitability, “Know Your Customer” rules, and other requirements of federal
and state law and regulatory and self-regulatory rules and regulations governing
transactions and accounts. Possession by Pershing of surveillance
records, exception reports, or other similar data shall not obligate Pershing
to
review or be aware of their contents. Pershing shall not be required
to make any investigation into the facts surrounding any transaction that it
may
execute or clear for Broker or any customer of Broker.
6.2 Compliance
Procedures. Broker agrees to supervise compliance with the
Rules. Broker shall review transactions and accounts to assure
compliance with prohibitions against manipulative practices, xxxxxxx xxxxxxx,
market timing and late trading of mutual fund shares and other requirements
of
federal and state law and applicable regulatory and self-regulatory rules and
regulations to which Broker or its customer are subject. Without
limiting the above, Broker shall be responsible for compliance with the
supervisory requirements in Section 15(b)(4) of the Securities Exchange Act
of
1934, as amended, FINRA Rule 3010, NYSE Rules 342, 351 and 431, and similar
rules adopted by any other regulatory or self-regulatory agency or organization,
to the extent applicable.
6.3 Knowledge
of Customer’s Financial Resources and Investment
Objectives. Broker shall comply with Rule 405(1) of the FINRA or
comparable requirements of similar rules of any other regulatory or
self-regulatory organization to which Broker is subject. Broker shall
obtain all facts it deems necessary in order for it to perform its
responsibilities under applicable laws and rules relating to each customer,
each
cash and margin account, each order, and each person holding a power of attorney
over any account, in order to assess the suitability of transactions (when
required by applicable rules), the authenticity of orders, signatures,
endorsements, certificates, or other documentation, and the frequency of
trading. Broker warrants that, to the best of its knowledge, Broker
will not open or maintain accounts for persons who are minors or who are
otherwise legally incompetent and that Broker will comply with FINRA Rule 407
and other laws, rules, or regulations that govern the manner and circumstances
in which accounts may be opened or transactions authorized.
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6.4 Furnishing
of Investment Advice. Broker shall be solely responsible for any
recommendation or advice it may offer to its customers.
6.5 Discretionary
Accounts. Broker shall be solely responsible for obtaining
customer approval for and supervising discretionary accounts.
6.6 Obligations
Regarding Certain Disclosures. Unless otherwise agreed between
the parties, Broker shall make any disclosures and obtain any agreements from
its customers required by applicable law or regulation, including, without
limitation, any disclosures or agreements required for margin, listed options,
IPO’s, mutual funds, xxxxx stocks, derivative securities, account transfers or
conversions. The cost of making such disclosures or obtaining such
agreements shall be borne by Broker.
7.1 Presumption
of Cash Account. Pershing may, but is not required to, permit customers of
Broker to purchase securities on margin, but all transactions for a
customer will be deemed to be either RVP/DVP or cash transactions, and
payment for those transactions will be required in the manner applicable to
either RVP/DVP or cash transactions, unless, on or prior to settlement,
Broker has furnished Pershing with an executed margin agreement and consent
to loan of securities.
7.2 Margin
Requirements. Margin accounts introduced by Broker shall be subject to
Pershing's margin requirements as in effect from time to time. Pershing
reserves the right to refuse to accept any transaction in a margin account
without the actual receipt of the necessary margin and to impose a
higher margin requirement for a particular account when, in Pershing's
commercially reasonable discretion, the past history or nature of the
account or other factors or the securities held in it warrant such action.
In
all instances, Broker may require higher margin than imposed by Pershing for
any
particular account, group of accounts, or all accounts introduced by Broker
to Pershing. In any case where Broker requests Pershing to extend
credit upon control or restricted securities, pursuant to Rule 144under the
Securities Act of 1933, as amended ("Rule 144"), or otherwise; Broker shall
submit to Pershing such documentation, agreements and information as shall
be reasonably required by Pershing to decide to extend such credit. Any
extension of credit so approved shall be subject to Pershing's credit
policies as shall be in effect from time to time.
7.3.1 Initial
Margin. Broker shall be responsible for the initial margin requirement for
any transaction until such initial margin has been received by Pershing in
acceptable form.
7.3.2 Margin
Calls. After the initial margin for a transaction has been received,
subsequent margin calls may be made by Pershing at its discretion. Pershing
shall calculate the maintenance requirement and notify Broker of any
amounts due. Broker shall be responsible for forwarding the margin call to
its customer and obtaining the amount due directly from Broker's customer.
If Broker fails to take the appropriate action, Pershing reserves the right
to collect the amount due directly from Broker's customer. Broker agrees to
cooperate with Pershing in complying with and obtaining margin in response
to
such calls.
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7.3.3 Actions
upon Failure to Meet Margin Calls or Deliver Securities. In the event that
satisfactory margin is not provided within the time specified by Pershing,
or securities sold are not delivered as required, Pershing may take such
actions as Pershing deems appropriate, including, but not limited
to, entering orders to buy-in or sell-out. Broker shall cooperate with
Pershing by entering orders to buy-in or sell-out securities. Compliance
with a request to withhold action shall not be deemed a waiver by Pershing
of any of its rights under this Agreement.
7.4
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Charging
of Interest and Disclosures Pursuant to Rule 10b-16 and NASD Rule
2341. Interest charged by Pershing to Broker's clients with
respect to debit balances in customers' accounts shall
be determined in accordance with Schedule A attached to this
Agreement and in accordance with Pershing’s standard disclosure under NYSE
Rule 382. Broker shall send each margin customer a written Margin
Disclosure Statement and other written disclosures, in a form acceptable
to Pershing, at the time of the opening of a margin account as
required by SEC Rule 10b-16 and NASD Rule 2341. If not already
delivered to each margin customer by Pershing in connection with
the
delivery of the written new account Disclosure Statement in
accordance with NYSE Rule 382, Broker agrees to deliver a written
disclosure statement to its customer as required by SEC Rule
10b-16. 7.5 Unsecured Debits or Unsecured Short Positions. Pershing
shall charge against the accounts of Broker an amount equal to the
value of any unsecured debit or short position (on a "xxxx to
market" basis) in a customer account if that position has not been
promptly resolved by payment or delivery. Any remaining debit may be
charged against Broker pursuant to Paragraph 20 of this
Agreement.
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7.5
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Unsecured
Debits or Unsecured Short Positions. Pershing shall charge against the
accounts of Broker an amount equal to the value of any unsecured
debit or short position (on a "xxxx to market" basis) in a customer
account if that position has not been promptly resolved by payment
or
delivery. Any remaining debit may be charged against Broker pursuant
to Paragraph 20 of this Agreement.
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7.6.1
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Nonpurpose
Credit. Pershing may, but is not required to, extend and
maintain nonpurpose credit to customers of Broker not for purposes
of
purchasing, carrying, or trading in securities, but all extensions
of
credit to a customer will be deemed to be purpose credit subject
to
Regulation T unless, prior to extending the credit, Broker has furnished
Pershing with an executed Federal Reserve Form
T-4.
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7.6.2
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Nonpurpose
Lending Requirements. Nonpurpose credit extended by
Pershing shall be subject to nonpurpose lending requirements as
established and modified by Pershing from time to
time. Pershing reserves the right to refuse to extend
nonpurpose credit without the actual receipt of the necessary underlying
collateral and to impose a higher underlying collateral value requirement
for a particular account when, in Pershing's discretion, the past
history
or nature of the account or other factors or the securities held
in it
warrant such action. In all instances, Broker may require a
lower loan advance rate to collateral value than imposed by Pershing
for
any particular account, group of accounts, or all accounts introduced
by
Broker to Pershing. In any case where Broker requests Pershing
to extend nonpurpose credit upon control or restricted securities,
pursuant to Rule 144 under the Securities Act of 1933, as amended,
or
otherwise; Broker shall submit to Pershing such documentation, agreements
and information as shall be reasonably required by Pershing to decide
to
extend such credit. Any extension of nonpurpose credit so
approved shall be subject to Pershing’s credit policies as shall be in
effect from time to time.
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7.6.3 Managed/Advisory
Accounts as Underlying Collateral
7.6.3.1
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Managed/Advisory
Account Eligible to Support Extension of Non Purpose
Credit
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Pershing
may, but is not required to, allow accounts meeting the following criteria
to
participate in the non-purpose credit program and to be pledged by customers
of
Broker to support the extension of non-purpose credit:
a)
Separately managed accounts managed
by a third party money manager or managers,
b)
Mutual fund wrap programs where the
Broker acts as Corporate Registered Investment Advisor (“RIA”)
c)
Advisory programs where Broker acts
as Corporate RIA
d)
Advisory programs where a Turnkey
Asset Management Provider (TAMP) acts as Corporate RIA,
e)
Advisory programs where an
individually registered RIA manages clients’ assets on a fully discretionary
basis.
f)
Advisory programs where
Representatives of Broker have the ability to adjust the actual client
investments, on a discretionary basis, within a set of parameters
set
forth, approved and
overseen by the Corporate RIA (the Corporate RIA maintains the ADV agreement
with the end customer).
7.6.3.2 Utilization
of Managed/Advisory Accounts as Underlying Collateral. Broker will be
responsible for ensuring that managed/advisory account(s) pledged to support
the
extension of non purpose credit continue to meet the requirements of a
managed/advisory account at all times. Accounts listed on the Federal Reserve
Form T4 will be recognized by Pershing as separately managed/advisory accounts.
In the event that a managed/advisory account(s) pledged to support the extension
of non purpose credit cease to be classified as a managed/advisory
account(s), the Broker agrees to notify Pershing immediately and take the
necessary actions to ensure compliance with Regulation T. Upon such
notification, Pershing may, but is not required to maintain the pledge
relationship.
In
the
event the Broker fails to take necessary actions to ensure compliance with
Regulation T, Pershing may remove the managed account from the non-purpose
credit program and may require immediate full payment of the loan. In
the event that the removal from the program or the requirement of immediate
full
payment of the loan results in a margin call, the Broker shall be responsible
for taking the necessary actions to satisfy the margin call as prescribed in
the
Agreement.
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7.6.4.1
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Initial
Underlying Collateral. Broker shall be responsible for the
initial underlying collateral requirement for any extension of nonpurpose
credit until such initial underlying collateral has been received
by
Pershing in acceptable form.
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7.6.4.2
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Underlying
Collateral Calls. After the initial underlying collateral
for an extension of nonpurpose credit has been received, subsequent
underlying collateral calls may be made by Pershing at its
discretion. Pershing shall calculate the maintenance
requirement and notify Broker of any amounts due. Broker shall
be responsible for issuing the underlying collateral call to its
customer
and obtaining the amount due directly from Broker's
customer. If Broker fails to take the appropriate action,
Pershing reserves the right to collect the amount due directly from
Broker's customer. Broker agrees to cooperate with Pershing in
complying with and obtaining underlying collateral in response to
such
calls.
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7.6.4.3
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Actions
Upon Failure to Meet Underlying Collateral Calls or Deliver
Securities. In the event that satisfactory underlying
collateral is not provided within the time specified by Pershing,
or
securities sold are not delivered as required, Pershing may take
such
actions as Pershing deems appropriate, including, but not limited
to,
entering orders to buy in or sell-out. Broker shall cooperate
with Pershing by entering orders to buy-in or sell-out
securities. Compliance with a request to withhold action shall
not be deemed a waiver by Pershing of any of its rights under the
Agreement.
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7.6.5
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Charging
of Interest and Disclosures Pursuant to Rule
10b-16. Interest charged with respect to the extension of
nonpurpose credit shall be determined in accordance with Schedule
A
attached to this Agreement. Broker shall send each customer a
written disclosure statement, in a form acceptable to Pershing, at
the
time of the extension of nonpurpose credit as required by SEC Rule
10b-16.
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7.6.6
Unsecured Debits. Pershing shall charge against the accounts
of Broker an amount equal to the value of any unsecured debit (on a “xxxx to
market” basis) in a customer account if that position has not been promptly
resolved by payment or delivery. Any remaining debit may be charged
against Broker pursuant to Pershing’s right to offset in the
Agreement.
7.6.7
Equal Credit Opportunity Act (“ECOA”). In all cases, the
introducing Broker/Dealer shall abide by all Federal Law rules & regulations
as it pertains to the (“ECOA”). More specifically, this law is designed to
prohibit discrimination in the extension or terms of credit to creditworthy
applicants on any one of the following “prohibited bases”: race, color,
religion, national origin, sex, marital status, or age (provided that the
applicant has the capacity to contract) or on the basis that all or part of
an
applicant’s income is derived from a public assistance program or the fact that
the applicant has, in good faith, exercised any “rights” under the Consumer
Credit Protection Act, of which (“ECOA”) is a part. Under (“ECOA”) and
Regulation B, the introducing Broker/Dealer may not discriminate against any
applicant on a prohibited basis “regarding any aspect of a credit
transaction”.
7.6.8
Deduction or Withholding for Tax. All payments made by a
borrower, who participates in Pershing’s non-purpose credit program, shall be
made without any deduction or withholding for or on account of any tax imposed
by any laws, other than US state or federal laws, applicable to any payment
under this agreement (“Local Laws”). The undersigned shall indemnify
Pershing against any tax levied or imposed upon Pershing by Local Laws in
respect of any payment under this agreement in the event such tax is not
otherwise paid.
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8.1 Stock
Records. Pershing shall maintain stock records and other
prescribed books and records of all transactions executed or cleared through
it
on a basis consistent with generally accepted practices in the securities
industry and with applicable laws and rules governing clearing
brokers. Pershing shall maintain, and make available to Broker, such
books and records after termination of this Agreement for so long as Pershing
is
required to maintain such books and records as required by and in accordance
with applicable law. To the extent not required by law, Pershing will
make such books and records available to Broker after the termination of this
Agreement upon Broker’s reasonable request so long as Pershing has retained such
books and records set forth above. Broker shall reimburse Pershing for its
costs
and expenses in retrieving such books and records.
8.2 Regulatory
Reports and Records. Broker shall prepare, submit, and maintain
copies of all reports, records, and regulatory filings required of Broker by
any
entity that regulates it, including, but not limited to, copies of all account
agreements and similar documentation obtained pursuant to Paragraph 5 of this
Agreement and any reports and records required to be made or kept under the
Currency and Foreign Transactions Reporting Act of 1970, (the “Bank Secrecy
Act”), and any rules and regulations promulgated pursuant
thereto. Pershing will promptly provide Broker with any
information regarding Broker’s accounts in its possession necessary to enable
Broker to prepare any such reports.
8.3 ANTI-MONEY
LAUNDERING, OFFICE OF FOREIGN ASSETS CONTROL, AND ANTI-TERRORIST FINANCING
OBLIGATIONS
8.3.1 Broker’s
Responsibilities:
a. Anti-Money
Laundering Obligations. Broker hereby agrees and acknowledges
that it is obligated to and hereby represents and warrants that it now does
and
will continue to comply with anti-money laundering laws and regulations,
including any future obligations that may be imposed on Broker by laws or
regulations, to know its customers, their source and use of funds, and to
monitor for and identify suspicious activity.
b. Anti-Money
Laundering Program. Broker represents and warrants that it has
established and maintains an anti-money laundering program, consisting of,
at a
minimum, written internal policies, procedures and controls including a means
for monitoring and identifying suspicious activity, the designation of an
anti-money laundering compliance officer (whose identity shall be made known
to
Pershing and to the FINRA), an ongoing employee training program, an independent
audit function to test such programs annually, and any additional requirements
set forth in the rules of any self-regulatory organization of which Broker
is a
member. Broker will allow Pershing access to such information as
Pershing deems necessary in order for Pershing to test Broker’s adherence to
Broker’s anti-money laundering program. To the extent the testing
would be conducted at Broker’s office, Pershing needs to provide Broker with
reasonable prior notice (at least three business days) and the testing needs
to
be done on a business day and during regular business hours.
8.3.2 Broker
to File CTRs and Provide Copies to Pershing. Broker is
responsible for filing currency transaction reports (“CTRs”) and will provide a
copy of all such reports to Pershing at the same time as they are filed in
accordance with applicable regulations.
a. Suspicious
Activity Reports. Broker shall be responsible for reviewing for
suspicious activities and filing suspicious activity reports on Form SAR-SF
and
shall coordinate such filing with Pershing. Broker shall, as soon as
practical after identifying a suspicious activity and in any event prior to
filing a suspicious activity report on SAR-SF, notify Pershing’s Anti-Money
Laundering Compliance Officer and shall communicate with Pershing about the
transaction for purposes of sharing information about the transaction and
determining whether Broker or Pershing shall file the SAR-SF, unless such
sharing of information is prohibited by law. Broker will provide
Pershing with copies of all SAR-SFs and other communications it files with
respect to accounts held at Pershing, unless prohibited by law. In
addition, Broker shall promptly notify Pershing regarding any account activity
Broker reasonably believes to be suspicious, not legitimate, not having a
reasonably apparent explanation, or could support the filing of a Form
SAR-SF.
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b. Other
Transaction Reports. Prior to filing any report with the Treasury
Department, the IRS, the U.S. Customs Service or any regulatory body or
organization relating to the reporting of currency transactions or the transfer
of currency or monetary instruments into or outside of the United States,
including, but not limited to, CTRs, CMIRs and SAR-SFs, Broker shall notify
Pershing’s Anti-Money Laundering Compliance Officer (unless such notification is
prohibited by law) and cooperate with Pershing as Pershing may deem
appropriate. Broker will provide Pershing with copies of all reports
and other communications with respect to accounts held at Pershing that Broker
files with the Treasury Department, the IRS, the U.S. Customs Service, or any
regulatory body or organization relating to the reporting of currency
transactions, the transfer of currency or monetary instruments into or outside
of the United States, or in regard to any suspicious activity, including, but
not limited to, CTRs, CMIRs and SAR-SFs, unless the provision of such reports
or
communications is prohibited by law.
8.3.3. Reports
by Pershing. Pershing has the obligation and reserves the right
to make and file such suspicious activity or other reports as listed in
Paragraph 8.3.2 when it deems it necessary or appropriate; and Broker recognizes
that when Pershing does so, Pershing does not thereby assume any responsibility
for making and filing reports on behalf of Broker or relieve Broker of its
own
responsibility for making and filing reports as necessary under U.S. or other
laws and regulations. Pershing will provide Broker a copy of any such
report that relates to an account of the Broker or a customer of the Broker,
unless prohibited by law from doing so.
8.3.4. Restrictions
and Conditions on Certain Accounts. Broker hereby agrees and
acknowledges that it is obligated to comply with restrictions and conditions
on
opening and accepting certain accounts, including but not limited to, the
following:
a. Know
Your Customer and Government List Obligations, Including OFAC. At
the time of the opening of any new account, Broker must obtain sufficient
information (but no less than the minimum required under Section 326 of the
USA
PATRIOT Act) from its customer in order to reasonably identify and verify the
identity of the client and the source of the client’s funds. Broker
also must satisfy itself that opening the account would not violate the
provisions of various Executive Orders and regulations administered by the
U.S.
Treasury Department’s Office of Foreign Assets Control (“OFAC”) or be subject to
other restriction based on such relevant government lists as may be published
from time to time. Broker will promptly inform Pershing of the
existence of any account subject to an OFAC or government list
restriction. Pershing uses interdiction software and will provide
such relevant information as may from time to time be available to assist Broker
in detecting possible OFAC and government list violations.
b. Non-Resident
Alien Accounts Carried Directly or Through an Investment
Advisor. For any account opened for a non-resident alien, Broker
shall record the customer’s passport number and obtain a copy of the government
document used to verify the individual’s identity at the time the account is
opened. Broker shall also obtain a copy of a passport or other
governmental identification for any of the following: the grantor/settlor of
a
foreign trust; and any beneficial owner of an offshore corporate account if:
(1)
the account is a personal holding company or private investment company; or
(2)
the beneficial owner of the entity which maintains the account holds more than
a
10% interest in the entity. Broker shall not open any introduced
account for a personal holding company or private investment company if one
or
more beneficial owners are U.S. persons. With respect to those
accounts involving registered investment advisers, Broker shall obtain, record
and verify information as outlined above about the adviser’s customer, including
ascertaining the identity of each beneficial owner, of any such account prior
to
opening the account unless Broker has ascertained that the investment adviser
meets the exception set forth in SEC No Action letter dated February 13, 2004
relating to reliance on investment advisers or other SEC guidance
applies.
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c. Restrictions
on Numbered Accounts. Broker will not establish or maintain
specially coded or numbered accounts.
d. Source
and Use of Funds. Broker will use reasonable efforts to ascertain
that the source of a customer’s funds are purportedly from customer, the
customer is not engaged in unlawful activities, the assets being invested have
been legitimately obtained, and any disbursements to a customer or third party
are for legitimate purposes.
e. Transaction
Reports and Transaction Monitoring Systems. In order to detect
suspicious activity, Broker shall utilize the transaction reports and
transaction monitoring systems provided by Pershing or shall otherwise perform
its own transaction monitoring in order to detect suspicious
activity.
f. CIP. In
order to induce reasonable reliance by Pershing on Broker with respect to
Broker’s customer identification program (“CIP”), Broker represents and
warrants: (1) it has a written CIP consistent with Section 326 of the USA
PATRIOT Act and the rules thereunder; (2) it is subject to a rule
implementing 31 U.S.C. 5318(h); (3) it is regulated by a Federal functional
regulator as that term is defined under 31.C.F.R. § 103.120(a)(2); and
(4) it will certify annually to Pershing that it has implemented an
anti-money laundering program and will perform the requirements set forth in
Broker’s written CIP.
g. Shell
Bank Accounts, Foreign Bank Accounts, and Private Banking
Accounts. Broker, working in conjunction with Pershing, shall
implement the provisions of sections 312, 313, and 319 of the USA PATRIOT Act
as
set forth in Informational Bulletins disseminated by Pershing from time to
time. Copies of all certifications obtained by Broker shall be
forwarded to Pershing.
8.3.5 Pershing’s
Responsibilities:
a. Anti-Money
Laundering Obligations. Pershing hereby agrees and acknowledges
that it is obligated to comply with anti-money laundering laws and regulations,
including any future obligations that may be imposed on Pershing, and that
it is
responsible to combat money laundering and terrorist
financing. Pershing shall (1) make available to Broker such
information as it may from time to time recognize as potentially useful through
use of Pershing’s various interdiction monitoring tools to assist Broker in
detecting possible money laundering and terrorist financing schemes, and (2)
conduct various manual and systematic screenings to assist Broker in order
to
detect suspicious activity and OFAC and other government list
violations. The actual systems and tools used for these purposes may
vary from time to time, at Pershing’s discretion.
b. Anti-Money
Laundering Program. Pershing has established and shall continue
to maintain an anti-money laundering compliance program in accordance with
§ 352 of the USA PATRIOT Act as well as NYSE and FINRA
rules. Pershing further represents and warrants: (1) it has written
anti-money laundering policies and procedures including procedures to identify
and report suspicious activity; (2) it has a designated Anti-Money Laundering
Compliance Officer (whose identity has been made known to Broker and the FINRA
and FINRA); (3) it provides continuous anti-money laundering training to its
employees; and (4) its anti-money laundering program is independently audited
on
an annual basis.
c. Transaction
Reports. Pershing shall provide Broker with anti-money laundering
and other activity reports that can be used to detect suspicious activity in
order to assist Broker to meet its obligations. Pershing will offer
training in the use of such reports. Pershing will also, upon
request, provide Broker with relevant information in Pershing’s possession that
the Broker needs in order to file various required reports, including Forms
CTR,
CMIR, and SAR-SF and will provide such further assistance as may be required
in
the filing of such reports.
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d. Transaction
Monitoring Systems. Pershing shall make available to Broker
various information pertinent to Broker’s anti-money laundering efforts,
including certain systematic transaction monitoring tools such as The Rules
Enginetm
anti-money laundering rules. Pershing will provide training in the
use of such system to assist Broker in detecting suspicious activity and in
screening electronic customer account data stored by Pershing on behalf of
Broker against various databases through third-party service providers, for
purposes of detecting names of OFAC prohibited individuals, entities in
countries and other adverse information about the customer (“negative
verification”).
e. Notification
if Pershing Detects Suspicious Activity. Through its trained
employees and the use of automated systems, Pershing will review for (including,
but not limited to, the items set forth in f through j below) and may detect
suspicious activity utilizing a risk-based approach. Pershing’s
review does not relieve Broker of its own responsibilities to review for
suspicious activity which may involve the use of reports and systems listed
in c
and d above. In such circumstances when Pershing detects suspicious
activity, Pershing will contact Broker about the transaction for purposes of
sharing information about the transaction, unless Pershing believes that Broker
itself may be engaged in suspicious activity or Pershing would be prohibited
by
law from sharing with Broker information about the suspicious
transaction. Nothing in this Paragraph shall be read to prohibit
Pershing from filing its own suspicious activity and other reports, as it
believes necessary or appropriate. Broker shall take such steps as
Pershing may reasonably request in connection with any potential suspicious
activity in an account, including closing the account.
f.
Incoming FedWires. For all incoming federal fund wires
(“FedWires”), Pershing shall initially check relevant information, including the
remitter’s name, address, and account number, and the originating bank’s name
and address (to the extent provided on an incoming wire) to detect possible
OFAC
restrictions.
g. Outgoing
FedWires for Third Parties. Requests for third-party wires are
processed by Pershing on an exception basis using a risk-based
approach. When allowed, for outgoing FedWires ordered to the delivery
of a person or entity other than the account holder, Pershing shall review
relevant information, including the payee’s name, address, and account number,
and the recipient bank’s name and address, to detect possible violations of OFAC
restrictions.
h. Incoming
Securities. For securities received, Pershing shall review the
names of the specified holder of the security to detect possible violations
of
OFAC restrictions in those circumstances when the registration on the security
received is different than the name on the account into which the securities
are
deposited.
i.
Outgoing Securities for Third Parties. For outgoing securities
to third parties, Pershing shall check the names and addresses of the third
party to whom the security is to be delivered to detect possible violations
of
OFAC restrictions.
j.
Systematic Daily Screening, Government Lists Including
OFAC. On a daily basis, Pershing shall compare all new accounts
opened on its systems and all substantial changes made to account data resident
on its systems to determine if any such new or changed account may be subject
to
an OFAC or other designated government list. In addition, Pershing
shall compare its existing customer database to added restrictions as may be
published by the Federal Government from time to time. Further,
periodically Pershing shall compare its existing customer database to the
existing OFAC government lists. In the event that Pershing’s
comparisons indicate that an account may be subject to an OFAC or government
list restriction, Pershing will notify Broker if it believes there is a
match. Broker shall cooperate fully with Pershing to determine
whether, in fact, the account is subject to any such
restriction. Broker will cooperate with Pershing in implementing any
such action as may be determined by Pershing to be necessary or
appropriate. Broker acknowledges that Pershing may rely on a
third-party vendor to provide current OFAC and other government restricted
list
data, and Pershing shall not be held liable for any errors or omissions caused
by such third-party vendor.
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k.
Funds Transfer Rule and Travel Rule. Pershing represents it
has systems designed to comply with the electronic transfer of funds rules,
specifically the “Funds Transfer Rule” and the “Travel Rule,” 31 C.F.R.
103.33(f) and (g), when processing disbursements on behalf of
Broker. Pershing shall comply with these rules based on information
provided by Broker.
8.3.6 Bulletins
and Other Informational Memoranda. Pershing shall from time to
time issue Bulletins or other informational memoranda to Broker setting forth
Pershing’s policies and procedures regarding anti-money laundering and terrorist
financing. Pershing agrees to give Broker written notice of any
changes in such policies and procedures prior to their effectiveness and Broker
agrees to become familiar with such Bulletins and informational memoranda and
to
abide by them.
8.3.7 Cooperation. Consistent
with Section 314(b) of the USA PATRIOT Act and this Agreement, Broker and
Pershing shall cooperate with each other and exchange information to assist
each
other in detecting money laundering and terrorist financing. Broker
and Pershing shall each submit to FinCEN the notice set forth in 31 CFR Part
103.110(b)(2) and shall renew such notice each year. Each instance of
information sharing shall constitute a confirmation by Broker to Pershing and
by
Pershing to Broker that the requisite notice has been filed. Pershing
and Broker agree to consult with each other from time to time on each other’s
anti-money laundering responsibilities.
8.3.8 No
Party to Cause Violation by the Other. Neither Pershing nor
Broker shall knowingly take any action to cause the other party to be in
violation of any anti-money laundering laws or regulations.
9.1
Receipt and Delivery of Funds and Securities.
9.1.1
Cashiering Functions. Pershing shall perform cashiering
functions for accounts introduced by Broker. These functions shall
include receipt, delivery and transfer of securities; receipt and payment of
funds owed by or to customers; and provision of custody for securities and
funds; the handling of margin accounts; the receipt and distribution of
dividends and other distributions; and the processing of exchange offers, rights
offerings, warrants, tender offers and redemptions. Broker shall
provide Pershing with the data and documents that are reasonably necessary
or
appropriate to permit Pershing to perform its obligations under this Paragraph,
including but not limited to copies of records documenting receipt of customers’
funds and securities received directly by Broker. Such data and
documents must be compatible with the requirements of Pershing’s data processing
systems. To the extent Broker is unable to provide data and documents
that are compatible with the requirements of Pershing’s data processing systems,
the parties agree to attempt to resolve in good faith the provision of such
information in a mutually acceptable format.
9.1.2
Purchases. Broker shall be responsible for purchases
(including transactions on a “when issued” basis) made for customers until
actual and complete payment has been received by Pershing. Broker
shall not introduce accounts requiring settlement on a “delivery versus payment”
or “receive versus payment” basis unless such account utilizes the facilities of
a securities depository or qualified vendor as defined in FINRA Rule 387 for
all
depository eligible transactions.
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9.1.3
Sales. Broker shall be responsible for sales (including those
on a “when issued” basis), until Pershing has received, in acceptable form, the
securities involved in the transaction. If Pershing does not receive
delivery of securities in an acceptable form, Pershing may buy-in all or part
of
the securities.
9.1.4
Funds and Securities Received by Broker. Broker shall promptly
deposit with Pershing funds or securities received by Broker from its customers,
together with such information as may be relevant or necessary to enable
Pershing to record such remittances and receipts in the respective customer
accounts.
9.1.5
Failure to Settle or Pay. In the event of a failure to timely
deposit required funds or securities, Pershing may take appropriate remedial
action. Without waiving or otherwise limiting its right to take other
remedial action, Pershing may at its option charge interest at rates as agreed
in Schedule A (“Fully Disclosed Pricing Schedule”) to this
Agreement. Broker may pass such charges on to its customers but
Broker remains responsible therefor until actually paid.
9.1.6 Check
Writing Authority. Pershing may, but is not required to,
authorize certain of Broker’s employees to sign checks to Broker’s customers for
amounts due to, and requested by them, with respect to their
accounts. Broker shall designate, in writing, the names of any
employees it wishes to receive the authorization described in this
Paragraph. All checks must be signed by two employees who have
received written authorization from Pershing. No check or checks
totaling more than $100,000 shall be provided to any customer by Broker on
the
same business day. All expenses incurred in connection with the
issuance of checks under the authority described in this Paragraph shall be
charged to Broker. Broker remains responsible for the disbursement
and delivery of such checks to its customers. Any lien on the
customer’s property granted by the customer to Broker or Pershing shall extend
to any funds which may be segregated in a separate account in connection with
the exercise of the authority described in this Paragraph. Broker has
established, and shall maintain and enforce, supervisory procedures with respect
to the issuance of such instruments as required by applicable law or
regulation.that are satisfactory to Pershing.
9.2 Restricted
and Control Stock Requirements. Broker shall be responsible for
determining whether any securities held in Broker’s or its customer accounts are
restricted or control securities as defined by applicable laws, rules, or
regulations. Broker is responsible for assuring that orders and other
transactions executed for such securities comply with such laws, rules, and
regulations.
9.3 Corporate
Action Requests/Soliciting Dealer Agreements. Broker requests and
authorizes Pershing to execute as Broker’s agent-in-fact any and all Soliciting
Dealer Agreements (except as provided in Paragraph 13.8) for corporate actions
involving securities or other interests held by Broker’s customers on the books
of Pershing. Pershing agrees to provide a written advice of the
pending corporate action to Broker at its designated
locations. Pershing further agrees to collect and submit corporate
action requests from Broker and submit them to the soliciting party in
accordance with the instructions received from the soliciting
party. Pershing agrees to use commercially reasonable efforts to
communicate corporate action information to Broker and, where applicable,
Broker’s customers, but shall not be liable for a) any delays in the
communication of corporate action information or b) delays in the transmission
of collected corporate action requests to the soliciting party unless caused
by
Pershing’s negligence. All fees received from the soliciting party
will be credited to Broker. In consideration of providing this
service to Broker, Broker agrees to indemnify and hold harmless Pershing, its
affiliates, officers, agents and employees from all claims, suits,
investigations, damages and defense costs (including reasonable attorney’s fees)
that arise in connection with this Paragraph, except to the extent that such
claims, suits, investigations, damages and defense costs result from the
negligence of Pershing, its affiliates, officers, agents and/or
employees.
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Except
as otherwise provided in this
Agreement, Pershing shall be responsible for the safekeeping of all money and
securities received by it pursuant to this Agreement. However,
Pershing will not be responsible for any funds or securities delivered by a
customer to Broker until such funds or securities are actually received by
Pershing or deposited in bank accounts maintained by Pershing.
11.1 Preparation
and Transmission of Confirmations and Statements. Pershing shall
prepare confirmations and summary periodic statements and shall, to the extent
required by the Rules, transmit them to customers and Broker in a timely fashion
except to the extent the parties agree in writing that Broker may transmit
confirmations to customers. Confirmations and statements shall be
prepared on forms disclosing that the account is carried on a fully-disclosed
basis for the Broker in accordance with applicable rules, regulations, and
interpretations. Broker will have the ultimate responsibility for
compliance with the prospectus delivery requirements of the Securities Act
of
1933, as amended, regardless of its retention of a prospectus fulfillment
service (including as may be provided by Pershing) to perform delivery of
same.
11.2 Examination
and Notification of Errors. Broker shall examine all
confirmations, statements, and other reports in whatever medium provided to
Broker by Pershing; provided however that if Broker is unable to examine
such reports in the provided medium, Broker and Pershing shall attempt to
resolve the issue in good faith . Broker must notify Pershing of any
error claimed by Broker in any account; as to purchase and sales transactions
prior to settlement date and as to all other transactions within the time in
which Pershing is able to, without violating applicable law, reverse the
transaction. If Broker fails to do so, Broker shall be deemed to have
waived its right to make any claim against Pershing with respect to such
error.
12.1 Responsibility
to Accept or Reject Trades. Pershing shall execute transactions
in customers’ accounts and release or deposit money or securities to or for
accounts only upon Broker’s instructions. Pershing reserves the right
to accept written or oral transaction orders from Broker’s customers in
circumstances where it determines that either (i) the customers are unable
to
execute those transactions through Broker or (ii) Pershing is required to do
so
by applicable or relevant law. Notwithstanding any instructions to
the contrary, Pershing may, after notifying Broker orally or in writing: (i)
refuse to confirm a transaction or cancel a confirmation; (ii) reject a delivery
or receipt of securities or money; (iii) refuse to clear a trade executed by
Broker; or (iv) refuse to execute a trade for the account of a customer or
Broker.
12.2 Responsibility
for Errors in Execution. Broker shall be responsible for
transmission to Pershing of all orders and for any errors in the Broker’s
recording or transmission of such orders.
12.3 Best
Execution. In accordance with the Rules, Pershing will provide
best execution on all transactions routed to the desk of Pershing or of a
Pershing affiliate.
13.1 Disciplinary
Action, Suspension, or Restriction. If Broker or any of the
Broker Executives becomes subject to disciplinary action, suspension, or
restriction by a federal or state agency, stock exchange, or regulatory or
self-regulatory organization having jurisdiction over Broker or Broker’s
securities or commodities business, Broker shall give notice to Pershing
promptly in writing, and provide Pershing a copy of any decision relating to
such action, suspension, or restriction, unless such notice is prohibited by
law. Pershing may take any action it reasonably deems to be necessary
(i) to assure that it will continue to comply with all applicable legal,
regulatory, and self-regulatory requirements, notwithstanding such action,
suspension, or restriction; and (ii) to comply with any requests, directives,
or
demands made upon Pershing by any such federal or state agency, stock exchange,
or regulatory or self-regulatory organization. Notwithstanding the
foregoing, Broker need not notify Pershing of “minor rule violations” (as that
term is defined in connection with Form U-5) of Broker or Broker
Executives.
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13.3 Provision
of Financial Information. Broker shall furnish Pershing copies of
FOCUS Reports, audited annual financial statements for the current fiscal year,
the executed Forms X-17a-5 (Parts I and IIA) filed with the SEC, any material
amendments to Broker’s Form BD, and any other material regulatory or financial
reports Pershing may from time to time reasonably require, unless prohibited
by
law. Broker shall provide such reports to Pershing at the time Broker
files such reports with its primary examining authority, or promptly
thereafter.
13.4 Executing
Brokers. If Broker wishes to act as an “Executing Broker” as such
term is understood in that certain letter dated January 25, 1994, from the
Division of Market Regulation of the SEC, as the same may be amended, modified
or supplemented from time to time (the “No-Action Letter”), then all terms
herein shall have the same meaning as ascribed thereto either in the Agreement
or in the No-Action Letter as the sense thereof shall require. Broker
may, from time to time, execute trades (either directly or through Pershing)
for
Prime Brokerage Accounts in compliance with the requirements of the No-Action
Letter. (The No-Action Letter requires, inter alia, that a contract
be executed between Pershing and Prime Broker, and between Broker and Prime
Brokerage Customer prior to the transaction of any business
hereunder.) Broker shall promptly notify Pershing, but in no event
later than 5:00 p.m. New York time, of trade date in a mutually acceptable
fashion, of such trades in sufficient detail for Pershing to be able to report
and transfer any trade executed by Broker on behalf of a Prime Brokerage Account
to the relevant Prime Broker. Broker understands and agrees that if
Prime Broker shall disaffirm or “dk” any trade executed by Broker on behalf of a
Prime Brokerage Account, Broker shall open an account for such Prime Brokerage
Account in its range of accounts and shall transfer or deliver the trade to
such
account at the risk and expense of Broker to the same extent as for any account
introduced by Broker pursuant to this Agreement. Broker understands
and agrees that all Prime Brokerage Accounts shall be conducted in accordance
with the requirements of the No-Action Letter and any relevant agreement between
Broker and a Prime Brokerage Customer or between Pershing and relevant Prime
Broker. Broker further agrees to supply Pershing with such documents,
papers and things, which from time to time are reasonably required by Pershing
to carry out the intention of this Paragraph. Broker agrees that it
shall know its customer, obtain appropriate documentation, including new account
form, conduct its own credit check and determine the availability of shares
as
required for processing of any short sales. Broker shall maintain
facilities to clear any disaffirmed trades.
13.5 Protection
of Intellectual Property. Each party shall use all reasonable
efforts to preserve and protect the other party’s and its affiliates’ patent,
trade secret, copyright and other proprietary rights in such party’s or its
affiliates’ products, services, trademarks and tradenames, at least to the same
extent used by the party to preserve and protect its own proprietary data or
information and to notify the other party of any action by any third party
known
by such party to constitute an infringement of the other party’s or any of its
affiliates’ proprietary rights and to cooperate with such party in protecting
such rights. Without limiting the foregoing, and subject to the
permission required by Paragraph 22 hereof, Broker shall note Pershing’s or its
affiliates’ patent, trade secret, copyrights, trademarks and trade names when
Broker makes reference to or distributes products or services provided by
Pershing or its affiliates, as applicable.
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13.6 Currency
Fluctuation. If Broker directs Pershing to enter into any
transaction to be effected on any securities exchange or in any market on which
transactions are settled in a foreign currency, (i) any profit or loss arising
as a result of a fluctuation in the rate of exchange between such currency
and
the United States Dollar shall be entirely for Broker’s account and risk, (ii)
all initial and maintenance margin deposits required or requested by Pershing
shall be in the currency required by the applicable marketplace or clearing
agency in such amounts as Pershing in its sole discretion may require, and
(iii)
Pershing is authorized to convert funds in the Account into and from such
foreign currency at rates of exchange prevailing at the banking or other
institutions (including affiliated financial institutions including
The Bank of New York with which Pershing normally does
business.)
13.7 Execution
Away from Pershing. Broker may place for execution with firms
other than Pershing orders for its customers’ accounts. Pershing will have no
responsibility for the transmission or execution of any such orders, and Broker
agrees to assume full responsibility for resolving any disputes and for bearing
any losses resulting from transactions with firms with which Broker executes,
giving up Pershing for clearance. Broker also agrees that, with
respect to any such orders, it will report executions promptly to Pershing
for
clearance in accordance with Pershing’s procedures.
13.8 Mutual
Fund Shares. Broker shall be responsible for obtaining and
executing dealer agreements with any principal underwriter for mutual funds
from
which Broker seeks to purchase mutual fund shares for its Customers’
accounts. Broker shall provide copies of such agreements to Pershing
upon Pershing’s request.
14.1 Use
of Third-Party Services. Pershing may, at its reasonable option,
and consistent with common industry practice, retain one or more independent
data processing or other service bureaus to perform functions (including, but
not limited to, pricing services or proxy mailing services) assigned to Pershing
under this Agreement.
14.2 Tax
Withholding. Broker hereby agrees to take necessary measures to
comply with the income tax withholding requirements of Section 3406 and Sections
1441 through 1446 (the nonresident alien withholding requirements) of
the Internal Revenue Code of 1986, as amended (“IRC”) with respect to its
customer accounts. Broker agrees to furnish to Pershing any tax
information, e.g., taxpayer identification numbers and certifications provided
by the customer on IRS Forms X-0, X-0XXX, X-0XXX, X-0XXX, W-8ECI, W-9, or any
acceptable substitute in its possession relating to each customer account
transferred to Pershing and to each future customer account
opened. Broker acknowledges that Pershing will rely on such
information for purposes of determining Pershing’s obligation to withhold
federal income tax pursuant to Sections 1441 through 1446 and 3406 of the
Internal Revenue code. Broker hereby authorizes Pershing to employ
any procedures permitted under applicable law or regulation to achieve
compliance with its withholding obligations under federal income tax
law.
14.3 Retirement
Account Distributions. For retirement accounts for which Pershing
makes designated distributions pursuant to Section 3405 of the IRC or any
successor provision thereto, Broker shall (1) obtain customer
authorization to execute Form W-4P (or an acceptable substitute) on behalf
of
such customer, and (2) electronically provide such Form W-4P or a copy thereof
to Pershing.
15.0 ORDER
AUDIT TRAIL SYSTEM (OATS)
Pursuant
to FINRA Rules 6950
through 6957 (Order Audit Trail System (“OATS”) Rules) and the OATS Reporting
Technical Specifications, it is hereby agreed between Broker and Pershing that
Pershing shall synchronize Pershing system clocks in accordance with the
National Institute of Standards and Technology clock and periodically monitor
such clocks for performance within any deviation time frame tolerance level
permitted by the OATS Rules.
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Unless
otherwise directed in writing by Broker, Pershing will record and transmit
to
the FINRA, on Broker’s behalf, all order information that is required to be
recorded pursuant to the OATS Rules and the OATS Technical Specifications
(including any modifications thereto) (the “Order Information”) for orders
entered on or linked to Pershing’s proprietary electronic order entry systems
(including Trade Order Processing System, BrokerView Order Entry, BrokerView
Direct Order, NetExchange ProTM, NetExchange
ClientTM,
Telexchange ProTM, and Telexchange
ClientTM and
any other electronic order entry system as Pershing may develop and implement
from time to time) (collectively “the Front-End Products”) and routed to a
market using Pershing’s routing routine. Pershing will also record
and transmit to the FINRA information that is received via the Front-End
Products by Pershing in connection with modification or cancellation of any
Order Information previously entered into the system.
Unless
specifically agreed to in writing, Pershing will not capture information or
transmit Order Information for orders that are not entered on the Front-End
Products or called in for execution or where Pershing does not determine the
order routing routine.
For
trades not entered on Front-End Products, Broker is responsible for providing
information necessary for Pershing to report on Broker’s
behalf. Broker agrees that Pershing may pass any out-of-pocket costs
associated with development and/or maintenance of this system on to
Broker.
Broker
acknowledges and agrees that Pershing shall not be responsible for any Order
Information that is not received by Pershing.
Pershing
shall be responsible for repairing any rejections of OATS data it receives
or is
made aware of for data Pershing previously reported to the OATS reporting
authorities. Broker agrees to notify Pershing of any rejection of
OATS data that it receives or is made aware of for data previously reported
to
the OATS reporting authorities by Pershing.
Notwithstanding
the foregoing, nothing contained herein shall relieve Broker of its reporting
obligations under paragraph (c)(3) of OATS Rule 6955.
16.1 General
Broker Functions. Broker may, from time to time, collect and
transmit to Pershing orders and other instructions to Pershing from Broker’s
prime brokerage customers (“Prime Brokerage Orders”) and provide Pershing with
such reports, data and services as Pershing requires in order to act as prime
broker with respect to such Prime Brokerage Orders, consistent with the SEC
No-Action Letter dated January 25, 1994 (“No-Action Letter”) and applicable
rules and regulations.
16.2 Trading
Activity Functions. Broker shall perform the following functions
as introducing firm for its prime brokerage customers:
a.
|
Report
all trading activity for the accounts of Broker’s prime brokerage
customers (whether executing with Pershing or away) to Pershing via
iPartner, NetExchange Advisor (or other agreed upon method) on trade
date
by a time to be determined by Pershing and Broker from time to
time.
|
b.
|
Assure
that access to iPartner is limited to authorized persons
only.
|
c.
|
Accept,
via electronic mail (or telephone) on T+1, information regarding
all trade
breaks and respond to the Investment Management Services (“PIMS”) group of
Pershing regarding resolution of such trade breaks by 12:00 noon
(NYC
time) on T+1.
|
d.
|
Obtain
pre-approval from Pershing for any short sales directed by Broker’s prime
brokerage customers.
|
e.
|
Provide
all information to Pershing related to the eligibility of any of
Broker’s
customers to receive or to continue to receive prime brokerage
services.
|
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16.3 Other
Prime Brokerage Functions. Broker shall perform the following
additional functions as introducing firm for its prime brokerage
customers:
a.
|
Obtain
and deliver to Pershing an executed Prime Brokerage Client Agreement
in
substantially the form provided by Pershing to Broker, for each prime
brokerage customer of Broker.
|
b.
|
Obtain
and deliver to Pershing an executed Prime Brokerage Investment Advisor
Agreement in substantially the form provided by Pershing to Broker,
for
any investment advisor with discretion over an account of a prime
brokerage customer of Broker (the “Investment
Advisor”).
|
|
c.
|
Deliver
to Pershing for acceptance or rejection the name of, and any information
requested by Pershing regarding, each Executing Broker that Broker
proposes to utilize to execute prime brokerage trades. Broker
acknowledges that Pershing does not select any Executing Broker,
and makes
no representation regarding the financial condition or ability
of any
Executing Broker.
|
d.
|
Obtain
and deliver to PIMS an executed Schedule A for each prime brokerage
agreement between Pershing (as Prime Broker) and each Executing Broker
accepted by Pershing, showing each prime brokerage customer of Broker
for
whose Account Prime Brokerage Orders will be placed and, thereafter,
deliver to PIMS executed Forms 1 to Schedule A to reflect additions
and
deletions of prime brokerage customers as
appropriate.
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e.
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Perform
any other functions reasonably requested by Pershing to facilitate
Pershing’s performance of the prime brokerage services hereunder and as
contemplated by the No-Action
Letter.
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16.4 Broker
Acknowledgements Regarding Prime Brokerage. Broker acknowledges
that Pershing may disaffirm or DK transactions of any prime brokerage customers
of Broker. Broker will be responsible for resolving all unmatched
items, and advising PIMS of their status in a timely manner. Broker
acknowledges that PIMS shall monitor the net equity of accounts of Broker’s
prime brokerage customers carried by Pershing, and shall notify Broker who
in
turn shall notify the relevant prime brokerage customers on Broker’s letterhead
whenever such customers’ net equity falls below the minimum required by
Pershing. If an account falls below the minimum net equity set by
Pershing, the account will not be permitted to place any further Prime Brokerage
Orders until the net equity is increased to the level required by
Pershing. Broker agrees to provide access to its personnel and
records, and submits to the supervision of Pershing for the purpose of complying
with Pershing’s obligations as Prime Broker under the No-Action Letter and
applicable laws, rules and regulations in relation to the provision of the
prime
brokerage services.
16.5 Compensation. In
consideration of Pershing acting as Prime Broker, Broker agrees to pay the
amounts set forth in Schedule A hereto.
16.6 Limitation
of Liability. Except as otherwise provided in Section 18 of this
Agreement, Broker acknowledges and agrees that:
x.
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Xxxxxxxx
accepts no responsibility for the Prime Brokerage Orders received
from the
Broker via iPartner (or other agreed upon method) except in the event
of
gross negligence or willful misconduct by Pershing or its
employees.
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x.
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Xxxxxxxx
accepts no responsibility and disclaims all liability for any
communication linkage failure associated with the transmittal of
Prime
Brokerage Orders except in the event of gross negligence or willful
misconduct by Pershing or its
employees.
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x.
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Xxxxxxxx
is not responsible for fraudulent or unauthorized access to iPartner
that
may cause any loss, damage or liability to Broker, Pershing, Broker’s
prime brokerage customers, or a third
party.
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d.
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Any
notice by Pershing hereunder or as required to perform prime brokerage
services to prime brokerage customers of Broker shall be made to
Broker,
whether on Broker’s behalf or on behalf of such customers. Any
notice made to Broker shall be deemed to be made to, or done for,
Broker’s
prime brokerage customers, as applicable. Broker shall be
responsible for all communication with Broker’s prime brokerage customers
regarding all services to be performed hereunder. Pershing is
not responsible for communication failure between Broker and Broker’s
prime brokerage customers.
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e.
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In
connection with this Paragraph 16.6, Pershing disclaims liability
not only
for direct damages to the Broker, Pershing, Broker’s prime brokerage
customers or a third party, but in addition disclaims any and all
liability for special, indirect or consequential or incidental damages
whether in tort or in contract even if Pershing has been advised
of the
possibility of such damage except in the event of gross negligence
or
willful misconduct by Pershing or its
employees.
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16.7 No
Joint Venture. Nothing contained in the Agreement (i) shall
constitute Pershing and Broker as members of any partnership, joint venture,
association, syndicate, unincorporated business or other separate entity, (ii)
shall be construed to impose any liability as such on any of them or (iii)
shall
be deemed to confer on any of them any express, implied or apparent authority
to
incur any obligation or liability on behalf of the others.
16.8 Representations
and Warranties. In addition to, and no way in limitation of,
Broker’s representations and warranties as contained elsewhere in this
Agreement, Broker represents and warrants that:
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a.
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Broker
has been duly appointed and authorized by Broker’s prime brokerage
customers to transmit Prime Brokerage Orders to
Pershing.
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b.
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All
Broker’s customers whose accounts will participate in prime brokerage
activities have been advised, via client agreements or otherwise,
that
their accounts will engage in prime brokerage activities, Pershing
will
act as Prime Broker for their accounts, and said customers or the
Investment Advisor thereof may place orders for the execution of
trades
for their accounts at Executing Brokers, all in conformity with applicable
provisions of the No-Action Letter.
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As
between the parties, neither party
shall be liable for special, indirect, incidental, consequential or punitive
damages, whether such damages are incurred or experienced as a result of
entering into or relying on this Agreement or otherwise, even if the parties
have been advised of the possibility of such damages. Broker and
Pershing each agree not to assert any claim for punitive damages against the
other.
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18.1.1 Disclaimer
of Warranties. Broker expressly agrees
that Broker’s use of Pershing’s Services, including the Systems as defined by
Paragraph 30.1 and software products as defined herein, is at Broker’s sole
risk. Except as otherwise provided in this Agreement, neither
Pershing nor any of its directors, officers, employees, agents, contractors,
affiliates, information providers, licensors, or other suppliers providing
data,
information, services or software, including but not limited to the FINRA,
warrants that the services will be uninterrupted or error free; nor do any
of
them make any warranty as to the results that may be obtained from the use
of
the services or as to the timeliness, sequence, accuracy, completeness,
reliability or content of any data, information, services, or transactions
provided and Pershing shall not be responsible for any losses liabilities or
damages caused by the acts or omissions of those third party agents,
contractors, information providers or other suppliers beyond any amount which
Pershing is able to recover pursuant to its agreement with such
entity. Except as specifically set forth in this Paragraph 18.1,
Pershing’s services are provided on an “as is,” “as available” basis, without
warranties of any kind, either express or implied, including, without
limitation, those of merchantability, fitness for a particular purpose, and
non-infringement, other than those warranties which are implied by and incapable
of exclusion, restriction or modification under the laws applicable to this
Agreement.
18.1.2 Pershing
Indemnification. In addition to any other obligations it may
possess under other provisions of this Agreement, Pershing shall indemnify,
defend, and hold harmless Broker and any controlling person of Broker, from
and
against all allegations, claims, demands, proceedings, suits
and actions (“Claims”) and all liabilities, expenses, reasonable
attorney’s fees (including fees and costs incurred in enforcing Broker’s right
to indemnification), and costs in connection therewith arising out of any
negligent, reckless, dishonest, fraudulent, or criminal act or omission on
the
part of any of Pershing’s officers or employees or contractor agents performing
job typically done by employees (“Contractor Agents”) with respect to the
services provided by Pershing under this Agreement.
18.1.3 Right
to Compete. Nothing in this Agreement shall be deemed to restrict
in any way the right of either party or any affiliate to compete with the other
party in any or all aspects of the other party’s business.
18.2.1 Broker
Indemnification. In addition to any other obligations it may
possess under other provisions of this Agreement, Broker shall indemnify, and
hold harmless Pershing, and any controlling person of Pershing, from and against
all allegations, claims, demands, proceedings, suits, and actions (“Claims”) and
all liabilities, expenses, attorney’s fees (including fees and costs incurred in
enforcing Pershing’s right to indemnification), and costs in connection
therewith arising out of one or more of Broker’s or any of its contractor
agent’s or employee’s negligent, dishonest, fraudulent, or criminal act, or
omission including related to the following:
18.2.1.1 Failure
to Make Payment or Deliver Securities. A check received by
Pershing from a customer shall not constitute payment until it has been paid
and
the proceeds are actually received and finally credited to Pershing (without
any
subsequent charge back) by its bank.
18.2.1.2 Margin
Calls. Failure of a customer to meet any initial margin call or
any maintenance call, except that Pershing shall be responsible for the portion
of any such loss or damage that was attributable to Pershing’s failure to give
notification to Broker as required in Paragraph 7.3.2 of this
Agreement.
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18.2.1.3 Broker’s
Failure to Perform. Failure of Broker to perform in a material
respect any duty, obligation, or responsibility with respect to customer
accounts as set forth in this Agreement. Broker’s indemnification
obligation under this Paragraph shall not be affected by the participation
of
Pershing or any person controlling it or controlled by it within the meaning
of
the Securities Exchange Act of l934, as amended, in any transaction giving
rise
to such an obligation, unless such participation constitutes negligence,
recklessness, fraud, or criminal conduct.
18.2.1.4 Improper
Conduct by Agents. Any negligent, dishonest, fraudulent, or
criminal act or omission on the part of any of Broker’s officers, directors,
employees, or agents.
18.2.1.5 Failure
of a Customer to Perform Obligations. Any failure by any of
Broker’s customers to perform any commitment or obligation with respect to a
transaction carried by Pershing under this Agreement.
18.2.1.6 Customer
Claims and Disputes. Except to the extent such claim or dispute
relates to the negligent, reckless, dishonest, fraudulent, or criminal act
or
omission on the part of any of Pershing’s officers or employees or contractor
agents, any claim or dispute between Broker and a customer with respect to
services provided under this Agreement, including, but not limited to, any
claim
or dispute concerning the validity of a customer order in the form the order
was
transmitted to Pershing by Broker and any claim arising in connection with
Pershing’s guarantee of any signature of any customer of Broker or at the
request of Broker.
18.2.1.7 Warranties. Any
adverse claim with respect to any security delivered or cleared by Pershing,
including a claim of a defect in title with respect to securities that are
alleged to have been forged, counterfeited, raised or otherwise altered, or
if
they are alleged to have been lost or stolen. The parties agree that
Pershing shall be deemed to be an intermediary between Broker and customer
and
shall be deemed to make no warranties other than as provided in Section 8-306(3)
of the Uniform Commercial Code.
18.2.1.8 Default
of Third-Party Broker. Any default by a third-party broker with
whom the Broker deals on a principal or agency basis in a transaction either
not
executed by Pershing or not cleared by Pershing.
18.2.1.9 Check
Signing. Any negligence, fraud, malfeasance, or error of any
employee of Broker with respect to the use of the check-signing authority
granted under Paragraph 9.1.6 of this Agreement.
18.2.1.10
Prior Self-Clearing Arrangements. Any guarantee,
indemnification, or hold harmless agreement in connection with Broker’s business
or customers that Pershing may provide to the National Securities Clearing
Corporation, the Depository Trust Company, or any other clearing, depository,
or
self-regulatory organization with respect to transactions self-cleared by Broker
prior to transfer of such functions to Pershing.
18.2.1.11
Breach of Warranty by Broker. Any breach by Broker in a
material respect of any material representation or warranty made by it under
this Agreement.
18.2.1.12
Deposit of Checks to Customer Accounts. Any failure to
exercise due diligence in reviewing checks received from customers to ensure
that same are in proper form, or in the issuance of instructions to Pershing
regarding the accounts into which checks are to be deposited.
18.2.1.13
Infringement of Intellectual Property Rights. Any act or
omission of Broker, its agents or employees which infringes on any
patent, trade secret, copyright, trademark, or other intellectual property
right
of Pershing or any violation of the terms set forth in Paragraph 30
hereof.
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18.2.1.14
Misuse of Passwords and Unauthorized Access. The misuse, loss
or unauthorized access to the Systems and Software Products using the
Identification Devices (as that term is defined in Paragraph 30.1 of this
Agreement) provided to Broker or its customers.
18.2.2
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Defense
of Claims by Broker. Broker will institute defense against
any Claims at the sole expense of Broker and using counsel reasonably
acceptable to Pershing. Broker will keep Pershing informed of
the status of the defense of such Claims, and Broker will not agree
to any
settlement without consent of Pershing, which consent will not be
unreasonably withheld. Notwithstanding the foregoing, Pershing
will have the right to assume the defense of such Claims at the sole
expense of Broker if (i) Broker has not employed counsel to
conduct the defense of Pershing and (ii) Pershing shall have reasonably
concluded that, as between Pershing and Broker, there may be a conflict
of
interest requiring separate counsel or counsel selected is not competent
to represent Pershing.
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18.2.3
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Defense
of Claims by Pershing. Pershing will institute defense against any
claims
against Broker for Pershing’s actions requiring indemnity under section
18.1.2 at the sole expense of Pershing and using counsel reasonably
acceptable to Broker. (i) If Pershing has not employed counsel to
conduct
the defense of Broker and (ii) Broker shall have reasonably concluded
that, as between Broker and Pershing, there may be a conflict of
interest
requiring separate counsel or counsel selected is not competent to
represent Broker.
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19.1 Commissions. Pershing
shall charge each of Broker’s customers the commission, markup, and any other
charge or expense that Broker instructs it to charge for each
transaction. If instructions are not received with respect to a
transaction in the time period required by Pershing to implement those
instructions, Pershing shall charge the customer the commission, markup, or
other charge or expense prescribed in the basic commission schedule delivered
to
Pershing by Broker. This basic schedule may be amended from time to
time by Broker by written instructions delivered to
Pershing. Pershing shall only be required to implement such
amendments to the basic schedule to the extent such amendments are within the
capabilities of Pershing’s data processing and operations systems and only
within such reasonable time limitations as Pershing may deem necessary to avoid
disruption of its normal operating capabilities.
19.2 Miscellaneous
Charges. Broker agrees to pay Pershing the fees and charges
described in Schedule A hereto. Notwithstanding the foregoing, Broker
may instruct Pershing to pass through such fees to Broker’s
customers.
19.3 Fees
for Clearing Services. As compensation for services provided
pursuant to this Agreement, Pershing shall deduct from the commissions, xxxx-up,
xxxx-down, or fees charged Broker’s customers the amounts set forth in the
fully-disclosed pricing schedule attached hereto as Schedule A.
20.1 Establishment
of Deposit Account. To further assure Broker’s performance of its
obligations under this Agreement, including but not limited to its
indemnification obligations under Paragraph 18, Broker shall, on or before
the
execution of this Agreement, establish an account at Pershing to be designated
as the Broker’s Deposit Account (the “Deposit Account”). The Deposit
Account shall not represent an ownership interest by Broker in
Pershing. The Deposit Account shall at all times contain cash,
securities, or a combination of both, having a market value of at least the
amount set forth in Schedule A. The securities placed in the Deposit
Account shall consist only of direct obligations issued by or guaranteed as
to
principal and interest by the United States Government. In the event
of a material adverse change in the nature and extent of Broker’s business
operations, Pershing may require that an additional amount be deposited promptly
in the Deposit Account upon reasonable prior written notice to
Broker. If such a deposit is not made in the amount specified within
a reasonable time period after Broker’s receipt of notice of the increase,
whether or not Broker agrees that the amount is justified under this Paragraph,
Pershing may terminate this Agreement forthwith.
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20.2 Pershing’s
Right to Offset. If (i) Pershing shall have any claim against
Broker or a customer of Broker which has not been resolved within ten business
days after Pershing presents such claim to Broker; or (ii) if Pershing shall
suffer any loss or incur any expense for which it is finally judicially
determined that it is entitled to be indemnified pursuant to this Agreement,
and
Broker shall fail to make such indemnification within ten business
days after being requested to do so, Pershing may deduct the amount of such
claim, loss, or expense from any account of Broker. Pershing may
withdraw cash or securities (or both) having a market value equal to the amount
of such claimed deficiency. If those funds are withdrawn from the
Deposit Account, then Broker shall be obligated to make a prompt deposit in
the
Deposit Account of cash or securities sufficient to bring the Deposit Account
back to a value of at least the amount required by Schedule
X. Xxxxxxxx shall give prior written advice to Broker of all
deductions from the Deposit Account made hereunder.
20.3 Termination
of Deposit Account. Within thirty (30) days of termination of
this Agreement, Pershing shall pay and deliver to Broker, the funds and
securities in the Deposit Account, less any amounts to which it is entitled
under the preceding Paragraph; provided, however, that Pershing
may: (i) retain the Deposit Account for such period of time until
transfer of all customer and proprietary accounts of Broker has been completed
and (ii) retain in the Deposit Account such amount for such period as it deems
reasonably appropriate for its protection from any claim or proceeding of any
type, then pending or threatened, until the final determination of such claim
or
proceeding is made. If a threatened claim or proceeding is not
resolved or if a legal action or proceeding is not instituted within a
reasonable time after the termination of this Agreement, any amount retained
with respect to such claim, proceeding, or action shall be paid or delivered
to
Broker.
21.0 PROPRIETARY
ACCOUNTS OF INTRODUCING BROKERS AND DEALERS (PAIB)
Pershing
shall establish a separate
reserve account for proprietary assets held by Broker so that Broker can treat
these assets as allowable assets under SEC Rule
15c3-1. Pershing
agrees to perform the required computation on behalf of Broker in accordance
with the following provisions, procedures, and interpretations set forth in
the
SEC’s No-Action Letter regarding Proprietary Accounts of Introducing Brokers and
Dealers (PAIB) dated November 3, 1998 (the “No-Action Letter”):
21.1 Pershing
will perform a separate computation for PAIB assets (PAIB reserve computation)
of Broker in accordance with the customer reserve computation set forth in
SEC
Rule 15c3-3 (customer reserve formula) with the following
modifications:
a.
Any credit (including a credit applied to reduce a debit) that is included
in
the customer reserve formula will not be included as a credit in the PAIB
reserve computation;
b.
Note E(3) to Rule 15c3-3a, which reduces debit balances by one percent under
the
basic method and subparagraph (a)(1)(ii)(A) of Rule 15c3-1, which reduces debit
balances by three percent under the alternative method, will not apply;
and
c.
Neither Note E(I) to Rule 15c3-3a nor NYSE Interpretation /04 to Item 10 of
Rule
15c3-3a regarding securities concentration charges is applicable to the PAIB
reserve computation.
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21.2 PAIB
reserve computation will include all the proprietary accounts of Broker. All
PAIB assets will be kept separate and distinct from customer assets under the
customer reserve computation set forth in SEC Rule 15c3-3.
21.3 PAIB
reserve computation will be prepared within the same time frames as those
prescribed by Rule 15c3-3 for the customer reserve formula.
21.4 Pershing
will establish and maintain a separate “Special Reserve Account for the
Exclusive Benefit of PAIB Customers” with a bank in conformity with the
standards of Rule 15c3-3(f) (PAIB Reserve Account). Cash
and/or qualified securities as defined in the Rule will be maintained in the
PAIB Reserve Account in an amount equal to the PAIB reserve
requirement.
21.5 If
the PAIB reserve computation results in a deposit requirement, the requirement
can be satisfied to the extent of any excess debit in the customer reserve
formula of the same date. However, a deposit requirement resulting
from the customer reserve formula cannot be satisfied with excess debits from
the PAIB reserve computation.
21.6 Within
two business days of entering into this Agreement, Broker shall notify its
designated examining authority (“DEA”) in writing that it has entered into a
PAIB agreement with its clearing broker-dealer.
21.7 Upon
discovery that any deposit made to the PAIB Reserve Account did not satisfy
its
deposit requirement, Pershing will immediately notify its DEA and the SEC by
facsimile or telegram. Unless a corrective plan is found to be
acceptable by the SEC and the DEA, Pershing will provide written notification
within five business days of the date of discovery to Broker that PAIB assets
held by Pershing will not be deemed allowable assets for net capital
purposes. The letter will also state that if the Broker wishes to
continue to count its PAIB assets as allowable, it has until the last business
day of the month following the month in which notification was made to transfer
all PAIB assets to another clearing broker. However, if the deposit
deficiency is remedied before that time at which Broker must transfer its PAIB
assets to another clearing broker, the Broker may choose to keep its assets
at
Pershing.
21.8
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To the extent applicable, commissions receivable and other receivables
of
Broker from Pershing (excluding clearing deposits) that are otherwise
allowable assets under the net capital rule are not to be included
in the
PAIB reserve computation, provided the amounts have been clearly
identified as receivables on the books and records of the Broker
and as
payables on the books of Pershing.
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21.9
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The parties shall adhere to the terms of the No-Action Letter, including
the interpretation set forth therein, in all
respects.
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22.1 Notice
to Customers. Pershing shall, upon the opening of an account
pursuant to Paragraph 5 of this Agreement, mail to each customer a copy of
the
notice to customers required by NYSE Rule 382(c).
22.2 Customer
Complaint Reporting and Customer Notification. Broker authorizes
and instructs Pershing to forward promptly, to the extent required by applicable
law or regulation, any written customer complaint received by Pershing regarding
Broker and/or its associated persons relating to functions and responsibilities
allocated to Broker under this Agreement to a) Broker and b) Broker’s DEA
designated under Section 17 of the Securities and Exchange Act of 1934, as
amended, or, if none, to Broker’s appropriate regulatory agency or
authority. Further, to the extent required by applicable law or
regulation, Broker authorizes Pershing to notify the customer, in writing,
that
Pershing has received the complaint, and the complaint has been forwarded to
the
Broker and the Broker’s DEA (or, if none, to the appropriate regulatory
agency).
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22.3 Restriction
on Advertising. Except as may be required by law, neither
Pershing nor Broker shall utilize the name of the other in any way without
the
other’s prior written consent except to disclose the relationship between the
parties. Neither party shall employ the other’s name in such a manner
as to create the impression that the relationship between them is anything
other
than that of clearing broker and introducing broker. Broker shall not
hold itself out as an agent of Pershing or as a subsidiary or company controlled
directly or indirectly by or affiliated with Pershing except as provided in
this
Paragraph.
22.4 Linking
Between Sites. Without express written authorization, neither
party may provide or allow an electronic hyperlink directly from its service
or
site on the Internet or another site over which that party has control to the
service or site on the Internet of the other party.
This
Agreement shall continue
until terminated as hereinafter provided:
23.1 Termination
upon 90-Day Notice. This Agreement may be terminated by either
party without cause upon ninety days prior notice. If either party
terminates the Agreement pursuant to this Paragraph, Pershing shall have the
right to impose reasonable limitations upon Broker’s activities during the
period between the giving of Notice and the transfer of Broker’s
accounts.
23.2 Termination
upon 60-Day Notice. Either party may terminate this Agreement
upon sixty days prior written notice to the other party in the event that:
(i)
the other party breached a material provision of this Agreement and such breach,
if curable, shall continue without remedy for a period of 10 days after written
notice from the non-defaulting party is transmitted in accordance with Section
26 of this Agreement, (ii) any material representation, warranty or covenant
of
the other party in this Agreement is false or misleading in any material
respect; (iii) any of Broker Executives, is enjoined, prohibited, disciplined
or
suspended as a result of administrative or judicial proceedings, or proceedings
of a self-regulatory organization of which Broker is a member, from engaging
in
securities business activities constituting all or material portions of Broker’s
securities business
23.3 Immediate
Termination. This Agreement may be terminated by Pershing or
Broker immediately in the event that (a) the other party is enjoined, disabled,
suspended, prohibited, or otherwise becomes unable to engage in the securities
business or any part of it by operation of law or as a result of any
administrative or judicial proceeding or action by the SEC, any state securities
law administrator, or any regulatory or self-regulatory organization having
jurisdiction over such party or (b) the other party (i) becomes or is declared
insolvent; (ii) voluntarily files or is the subject of, a petition commencing
a
case under any chapter of Title 11 of the United States Code; (iii) makes a
general assignment for the benefit of its creditors; (iv) Pershing is enjoined
,
prohibited or suspended as a result of administrative or judicial proceedings,
or proceedings of a self – regulatory organization of which Pershing is a
member, from engaging in securities business activities constituting all or
material portions of Pershing’s securities business.(vi) files an application or
consents to the appointment of, or there is appointed, any receiver, or a
permanent or interim trustee of that party or any of its subsidiaries, as the
case may be, or all or any portion of its property, including, without
limitation, the appointment or authorization of a trustee, receiver or agent
under applicable law or under a contract to take charge of its property for
the
purpose of enforcing a lien against such property or for the purpose of general
administration of such property for the benefit of its creditors; (vii) files
a
petition seeking a reorganization of its financial affairs or to take advantage
of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute or files an answer admitting the material
allegations of a petition filed against it in any proceeding under any such
law
or statute; or (viii) takes any corporate action for the purpose of effecting
any of the foregoing, in each of the foregoing instances, the particular
petition or order is not dismissed within 30 calendar days after such
filing.
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23.4 Conversion
of Accounts. In the event that this Agreement is terminated for
any reason, Broker shall arrange for the conversion of Broker’s and its customer
accounts to another clearing broker or to Broker if it becomes
self-clearing. Broker shall give Pershing Notice (the “Conversion
Notice”) of: (i) the name of the broker that will assume responsibility for
clearing services for Customers and Broker; (ii) the date on which such broker
will commence providing such services; (iii) Broker’s undertaking, in form and
substance satisfactory to Pershing, that Broker’s agreement with such clearing
broker provides that such clearing broker will accept on conversion all Broker
and customer accounts then maintained by Pershing; and (iv) the name of an
individual or individuals within new clearing broker’s organization whom
Pershing may contact to coordinate the conversion. The Conversion
Notice shall accompany Broker’s notice of termination given pursuant to this
Paragraph. If Broker fails to give Conversion Notice to Pershing,
Pershing may notify Broker’s customers as Pershing deems appropriate of the
termination of this Agreement and may make such arrangements as Pershing deems
appropriate for transfer or delivery of customer and Broker
accounts. In such event, the expense of notifying those customers and
making such arrangements shall be charged to Broker.
23.5 Survival. Termination
of this Agreement in any manner shall not release Broker or Pershing from any
liability or responsibility with respect to any representation or warranty
or
transaction effected on the books of Pershing.
[23.6
Termination Fee. Unless otherwise agreed in writing by Broker
and Pershing, if Broker terminates this Agreement pursuant to Paragraph 23.1
above, or Pershing terminates this Agreement pursuant to Paragraph 23.2 or
23.3
within the period specified in Schedule A, Broker shall pay to Pershing a
termination fee and will reimburse Pershing for Deconversion Expenses as stated
in Schedule A].
23.7 Termination
Under S.I.P.A. In the event that Broker is the subject of the
issuance of a protective decree pursuant to the Securities Investor Protection
Act of 1970 (15 U.S.C. § 78aaa-111), Pershing’s claim for payment of a
termination fee under this Agreement shall be subordinate to claims of Broker’s
customers that have been approved by the Trustee appointed by the Securities
Investor Protection Corporation pursuant to the issuance of such protective
decree.
24.0 CONFIDENTIALITY
24.1 “Confidential
Information” of a party shall mean all data and information submitted to the
other party or obtained by the other party in connection with the services,
including information relating to a party’s customers (which includes, without
limitation, Non-Public Personal Information as that term is defined in
Securities and Exchange Commission Regulation S-P), technology, operations,
facilities, consumer markets, products, capacities, systems, procedures,
security practices, research, development, business affairs, ideas, concepts,
innovations, inventions, designs, business methodologies, improvements, trade
secrets, copyrightable subject matter and other proprietary
information.
24.2 All
Confidential Information relating to a party shall be held in confidence by
the
other party to the same extent and in at least the same manner as such party
protects its own confidential or proprietary information. Neither
party shall disclose, publish, release, transfer or otherwise make available
Confidential Information of the other party in any form to, or for the use
or
benefit of, any person or entity without the other party’s
consent. Each party shall, however, be permitted to disclose relevant
aspects of the other party’s Confidential Information to its officers, agents,
subcontractors and employees to the extent such disclosure is reasonably
necessary for the performance of its duties and obligations under this Agreement
and such disclosure is not prohibited by Xxxxx-Xxxxx-Xxxxxx Act of 1999
(“GLBA”), which amends the Securities and Exchange Act of 1934, as it may be
amended from time to time, the regulations promulgated by the Securities and
Exchange Commission thereunder or other applicable law; provided, however,
that
such party shall take all reasonable measures to ensure that Confidential
Information of the other party is not disclosed or duplicated in contravention
of the provisions of this Agreement by such officers, agents, subcontractors
and
employees. The obligations in this Paragraph shall not restrict any
disclosure by either party pursuant to any applicable law, or by order of any
court or government agency (provided that the disclosing party shall give prompt
notice to the non-disclosing party of such order to the extent such notice
is
not prohibited by such order) and shall not apply with respect to information
which (i) is developed by the other party without violating the disclosing
party’s proprietary rights; (ii) is or becomes publicly known (other than
through unauthorized disclosure); (iii) is disclosed by the owner of such
information to a third party free of any obligation of confidentiality; (iv)
is
already known by such party without an obligation of confidentiality other
than
pursuant to this Agreement or any confidentiality agreements entered into
between the parties before the effective date of this Agreement; or (v) is
rightfully received by a party free of any obligation of
confidentiality. If the GLBA, the regulations promulgated by the
Securities and Exchange Commission thereunder or other applicable law now or
hereafter in effect imposes a higher standard of confidentiality to the
Confidential Information, such standard shall prevail over the provisions of
this Paragraph.
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24.3 Broker
acknowledges that the services Pershing provides hereunder involve Broker access
to proprietary technology, trading and other systems, and that techniques,
algorithms and processes contained in such systems constitute trade secrets
and
shall be safeguarded by Broker, and that Broker shall exercise reasonable care
to protect Pershing’s interest in such trade secrets. Broker agrees
to make the proprietary nature of such systems known to those of its
consultants, staff, agents or clients who may reasonably be expected to come
into contact with such systems. Broker agrees that any breach of this
confidentiality provision may result in its being liable for damages as provided
by law.
24.4 Paragraphs
24.1 through 24.3 shall survive the termination of this Agreement.
Xxxxxxxx
may, in its sole discretion
and at its own expense and, upon written notice to Broker, institute and
prosecute in its name any action or proceeding against any of Broker’s customers
in relation to any controversy or claim arising out of Pershing’s transactions
with Broker or with Broker’s customers. Nothing contained in this
Agreement shall be deemed either (i) to require Pershing to institute or
prosecute such an action or proceeding; or (ii) to impair or prejudice its
right
to do so, should it so elect, nor shall the institution or prosecution of any
such action or proceeding relieve Broker of any liability or responsibility
which Broker would otherwise have had under this Agreement. Broker
assigns to Pershing its rights against its customer as necessary to effectuate
the provisions of this Paragraph.
Any
Notice required or permitted to be
given under this Agreement shall be sufficient only if it is in writing and
sent
by hand or by certified mail, return receipt requested, to the parties at the
following address:
Broker:
Broadpoint
Securities, Inc.
Xxx
Xxxx
Xxxxx, 00x Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Rob
Fine, President
Cc: General
Counsel
Pershing:
Pershing
LLC
Xxx
Xxxxxxxx Xxxxx
Xxxxxx
Xxxx, XX 00000
Attn: Mr.
Michael Row, Managing Director
cc: Legal
Department
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27.0 ARBITRATION
27.1 Arbitration
Requirement. Any dispute between Broker and Pershing that cannot
be settled shall be taken to arbitration as set forth in Paragraph 27.3
below.
27.2 ARBITRATION
DISCLOSURE.
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ARBITRATION
IS FINAL AND BINDING ON THE
PARTIES.
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THE
PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE
RIGHT TO JURY TRIAL.
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PRE-ARBITRATION
DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT
PROCEEDINGS.
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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.
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THE
PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO
WERE OR ARE AFFILIATED WITH THE SECURITIES
INDUSTRY.
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27.3 ARBITRATION
AGREEMENT.
ANY
CONTROVERSY BETWEEN US ARISING OUT OF YOUR BUSINESS OR THIS AGREEMENT SHALL
BE
SUBMITTED TO ARBITRATION CONDUCTED BEFORE THE NEW YORK STOCK EXCHANGE, INC.,
OR
FINRA DISPUTE RESOLUTION, INC. (OR THEIR SUCCESSOR FIRMS), AND IN ACCORDANCE
WITH THE RULES THEN OBTAINING OF THE SELECTED ORGANIZATION AND SHALL BE
CONDUCTED AS A BROKER TO BROKER OR MEMBER VS MEMBER
DISPUTE. ARBITRATION MUST BE COMMENCED BY SERVICE UPON THE OTHER
PARTY OF A WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN NOTICE OF INTENTION
TO
ARBITRATE, THEREIN ELECTING THE ARBITRATION TRIBUNAL.
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 AND WHO IS A MEMBER OF A PUTATIVE
CLASS AND 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.
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In
the event of a breach or threatened
breach of any of the provisions of this Agreement a party, or any
employee or representative of such party, such party acknowledges that the
other
party shall be entitled to seek preliminary and permanent injunctive relief
to
enforce the provisions hereof. In addition, both parties acknowledges
that a breach of the terms regarding confidentiality of information and
ownership of the other party’s intellectual property would cause irreparable and
incalculable damage to such party. Nothing herein shall preclude the
parties from pursuing any action or other remedy for any breach or threatened
breach of this Agreement, all of which shall be cumulative.
29.1 Successors
and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the respective successors and assigns of Broker and
Pershing. Except to an affiliate with a a net capital amount similar
to Broker or Pershing respectively, no assignment of this Agreement or any
rights, including those to indemnification hereunder by either party shall
be
effective unless the other party’s written consent shall be first
obtained.
29.2 Severability. If
any provision of this Agreement shall be held to be invalid or unenforceable,
the validity or enforceability of the remaining provisions and conditions shall
not be affected thereby.
29.3 Counterparts. This
Agreement may be executed in one or more counterparts, all of which taken
together shall constitute a single agreement.
29.4 Entire
Agreement Amendments and Duties Not Specifically Enumerated
Herein. This Agreement represents the entire agreement
between the parties with respect to the subject matter contained herein and
all
prior discussions, agreements, and promises, written or oral, are merged
herein. This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties. Pershing shall not be
responsible or liable for failure to perform any duties not specifically
enumerated herein.
29.5 Captions. Captions
herein are for convenience only and are not of substantive effect.
29.6 Choice
of Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to the conflicts of laws or principles thereof. This Agreement
shall not be governed by the United Nations Convention on the International
Sale
of Goods.
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29.7 Citations. Any
reference to the rules or regulations of the SEC, FINRA, the NYSE, or any other
regulatory or self-regulatory organization are current citations. Any
changes in the citations (whether or not there are any changes in the text
of
such rules or regulations) shall be automatically incorporated
herein.
29.8 Construction
of Agreement. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture or partnership
between Pershing and Broker or between Broker and other brokers for whom
Pershing may perform the same or similar services.
29.9 Third-Parties. This
Agreement is between the parties hereto and is not intended to confer any
benefits on third-parties including, but not limited to, customers of
Broker.
29.10 Non-Exclusivity
of Remedies. The enumeration herein of specific remedies shall
not be exclusive of any other remedies. Any delay or failure by a
party to this Agreement to exercise any right, power, remedy, or privilege
herein contained, or now or hereafter existing under any applicable statute
or
law, shall not be construed to be a waiver of such right, power, remedy, or
privilege. No single, partial, or other exercise of any such right,
power, remedy, or privilege shall preclude the further exercise thereof or
the
exercise of any other right, power, remedy, or privilege.
29.11 SIPA;
Rule 15c3-3. All introduced customers are the customers of Broker
except as provided under the Securities Investor Protection Act (“SIPA”) and SEC
financial responsibility rules where the customers shall be considered customers
of Pershing. Nothing in this Paragraph will otherwise change or
affect the provisions of this Agreement which provide that the customer account
remains Broker’s customer account for all other purposes, including but not
limited to, supervision, suitability and indemnification.
29.12 United
States Postal Service Documents. Broker hereby appoints Pershing
as its attorney-in-fact for the purpose of executing such documents as are
necessary to allow Broker and its customers to participate in the FASTforward
program of the United States Postal Service. This may include, but
not be limited to Pershing’s execution, on an annual basis, on Broker’s behalf,
of the FASTforward Processing Acknowledgment Form.
29.13 Provision
of Reports and Exception Reports. Beginning on or before the
effective date of this Agreement and before July 31 of each calendar year
thereafter, Pershing shall provide to Broker, pursuant to NYSE Rule 382(e),
a
list of all reports (e.g. exception-type reports) it offers to
Broker. Broker shall promptly advise Pershing, in writing, of those
specific reports it elects to receive. Pershing and Broker each
represent that their obligations relative to exception reports, pursuant to
NYSE
Rule 382(e) have been completed.
29.14 Force
Majeure. Pershing shall not be liable for any loss caused,
directly or indirectly, resulting from any circumstances beyond its reasonable
control, including without limitation, labor disputes, riots, sabotage,
insurrection, fires, flood, storm, explosions, earthquakes, electrical power
failures, telecommunications system failures, Internet failure, outbreaks of
computer viruses, worms, parasites and the like, acts of God or nature, war,
both declared or undeclared, or acts of terrorism (each a “Force Majeure Event”;
collectively, “Force Majeure Events”). In addition, Pershing shall
not be liable for any loss caused, directly or indirectly, resulting from the
acts or omissions of third parties over which it has no control.
29.15 Audio
Taping of Telephone Conversations. Each party understands that
for quality control, dispute resolution or other business purposes, the parties
may record some or all telephone conversations between them. Each
party hereby consents to such recording and will inform its employees,
representatives and agents of this practice. It is further understood
that all such conversations are deemed to be solely for business
purposes.
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30.1 Definitions. For
purposes of this Paragraph 30, the following terms have the meanings ascribed
to
them.
“Access
Device” means any type of computer,
personal digital assistant (PDA), beeper, television, telephone or any other
communications device, including, without limitation, any
software Broker uses on such device whether Pershing provided such software
to
Broker or otherwise, that enables Broker to access and use the Pershing Services
via a wired or wireless connection to any wireless network, the Internet, the
World Wide Web or any other computer or telecommunications network.
“Authorized
User” means each customer, employee and/or agent of Broker designated as
authorized by Broker to access the Software, Systems and Services.
“Identification
Devices” means any passwords, codes, certificates, and other identification
devices and security processes or measures necessary to access and use the
Systems and Software.
“Intellectual
Property Rights” with respect to any intellectual property means all applicable
copyrights (including without limitation, the exclusive right to reproduce,
distribute copies of, display and perform the copyrighted work and to prepare
derivative works), rights in trademarks, rights in patents and patent
applications, tradenames, mask-work rights, trade secrets, moral rights,
authors’ rights, domain names and universal resource locators (“URLs”), TCP/IP
addresses, metatags, all renewal and extensions thereof, and the like,
regardless of whether any such rights arise under the laws of the
United States, or any other state, country or jurisdiction.
“Services”
or “Pershing Services” means the services to be provided by Pershing and/or its
Third Party Providers to Broker under this Agreement, including Internet-based
services, through the Software and Systems, including, without limitation,
(a)
communication and content services, (b) access to account and financial
information, (c) securities trading, and other services to be provided by
Pershing to Broker under this Agreement.
“Software”
means the software, including, without limitation, any and all documentation,
home page design(s), methodologies, techniques, know-how and software libraries,
and the code comprising the same, as such may be revised from to time to include
any upgrades, updates, new versions and other modifications, improvements and
enhancements made by or for Pershing in accordance with this
Agreement.
“Systems”
means the data access, account information, trading and order entry, and report
generation systems, and related know-how, as such may be revised from to time
to
include any upgrades, updates, new versions and other modifications,
improvements and enhancements made by or for Pershing in accordance with this
Agreement.
“Third
Party Providers” means Pershing’s suppliers, vendors or providers that have
entered into third-party agreements with Pershing.
30.2 License
to
Use Systems and Software. Pershing hereby grants to Broker a
non-exclusive, non-transferable, non-assignable license for the term of this
Agreement to access and use the Software and Systems for the limited purpose
of
enabling Broker to obtain the Services. Pershing shall have the right
to terminate or suspend such license and the provision of the Systems and
Software to Broker in the event of breach of this Agreement that is not cured
within thirty (30) days of Brokers’ receipt of Pershing’s notice of such
breach.
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30.3 No
Reverse Engineering. Broker shall not, directly or indirectly,
modify the features or functionality of, copy or create derivative works using
all or any portion of, analyze or remove semiconductor components from,
decompile, or otherwise reverse engineer or attempt to reverse engineer or
derive source code, techniques, algorithms or processes from the Systems or
Software or permit or encourage any third-party to do so.
30.4
Ownership. Except for the license granted in
Paragraph 30.2 herein, nothing herein shall be construed to transfer to Broker
any rights, title and/or interest in and to the Software, Systems and Services,
including, without limitation, the Intellectual Property Rights
therein. Except to the extent that any Intellectual Property Rights
in the Software, Systems and Services are published or otherwise matters of
public record, the Systems and Software Products are trade secrets of Pershing
and its affiliates. As between Broker and Pershing, Pershing shall at
all times be and remain the sole and exclusive owner of the Systems, Software
and Services.
30.5 Web-based
Communications. The Services shall be provided through various
means, including, without limitation, a site or pages of a site on the World
Wide Web that are accessible through an Internet address unique to Broker,
but
which shall not be required to be a domain name unique to Broker.
30.6 Revisions
and Modifications. From time to time during the term of this
Agreement Pershing may in its sole and absolute discretion revise or modify
any
Software, Systems or Services to include any patches, upgrades, updates, new
versions and other modifications, improvements and enhancements made by or
for
Pershing (any of which patches, upgrades, updates, new versions and other
modifications, improvements and enhancements are collectively referred to in
this Agreement as “revisions and modifications” or “revisions or modifications”,
as the context requires). To the extent that any such revisions or
modifications are made, Schedule A shall be deemed to be revised to include
such
revision or modification and any associated fees only upon reasonable prior
written notice of such revisions or modifications to Broker. (Associated fees
under this section shall not be increased more than 10% unless such fees relate
to regulatory or security related upgrades).
30.7 Business
Continuity. Pershing agrees to maintain a written
business continuity plan identifying procedures relating to an emergency or
significant business disruption in accordance with applicable industry
regulations.
30.7.1 Pershing
shall, from time to time,
provide Broker with Identification Devices for accessing and using the Software,
Systems and Services.
30.7.2 Broker
shall be responsible for
designating Authorized Users. [Broker shall provide Pershing with a
list of Authorized Users so designated by Broker and shall provide Pershing
with
changes to this list.]
30.7.3 Broker
shall be solely responsible for
the assignment and distribution to Authorized Users, and the maintenance of
all
Identification Devices. Broker agrees not to assign and/or distribute
any Identification Devices to individuals who are not Authorized
Users.
30.7.4 Each
party shall be responsible for and
shall provide the same level of security as it applies to its own proprietary
and confidential property in the protection, maintenance, and distribution
of
those Identification Devices and codes within its organization and to its agents
and customers, but in no case less than the security that a reasonably prudent
person would use to protect their own proprietary and confidential
property.
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30.7.5 Broker
shall
report to Pershing any loss, theft, or discovery of any Identification Devices
immediately and Broker shall be responsible for any unauthorized use, and for
any loss resulting from unauthorized use, of any Identification Device
attributable to Broker prior to the time the loss, theft, or discovery of the
Identification Device is reported to Pershing.
30.8.1 Quotes,
news and research data, including market information (collectively, “Market
Data”) displayed on the Pershing Service may be based on or derived from
different Third Party Providers and may be updated at different time intervals,
and accordingly, the various trade status reports, including intraday updates
of
balances and positions information, available via any Access Devices, which
incorporate such Market Data information, may differ due to the different Market
Data and sources and their update intervals. Similarly, different
Access Devices may incorporate different Market Data and sources, and they
may
differ for the same reasons.
30.8.2 The
Software, Systems, and design of the Pershing Service are the property of
Pershing. The content, including both its form and substance,
included in the Pershing Service is the property of either Pershing or one
or
more of its Third Party Providers (“Third Party Provider
Services”). Broker shall have no rights in or to the Software,
Systems, or Pershing Service or Third Party Provider Services, except as
expressly provided herein, and Broker agrees not to take any action inconsistent
with Pershing’s rights in the Software, Systems, or Pershing Service or the
Third Party Providers’ rights in their Third Party Provider
Services.
30.8.3 All
of
the materials in the Pershing Service are protected by United States and
international copyright, trademark and other intellectual property
laws. Broker’s right to use the Pershing Service, including the Third
Party Provider Services, is limited to use in connection with Broker’s
account(s) and for Broker’s personal benefit only (“Internal
Use”). Broker may not modify, rent, lease, loan, sell, assign,
distribute, display, perform, publish or create derivative works based on any
of
the content, materials or the like contained in the Pershing Service, in whole
or in part. Broker may not copy, modify, create derivative works
from, reverse engineer, reverse assemble or otherwise attempt to discover the
source code of any software or techniques, algorithms or processes that are
part
of the Pershing Service. Broker may print out a reasonable number of
copies of the materials on the Pershing Service as is necessary for Broker’s
Internal Use, provided that Broker does not delete any copyright, trademark
or
other intellectual property notices contained in such
materials. Broker may prepare hard copy reports incorporating Third
Party Provider Services and download Third Party Provider Services into
commercially available spreadsheet software programs or delimited text files;
Broker may not, however, disseminate in electronic form or use Third Party
Provider Services for the construction of other products or
services.
30.8.4 Broker
acknowledges and agrees that the license to use the Software, Systems and
Services granted by Paragraph 30.2 does not diminish Broker’s responsibility for
compliance with all applicable rules as set forth in Paragraph 6 of this
Agreement.
30.9.1 Pershing
shall indemnify, defend, and
hold Broker harmless from and against all claims, demands, proceedings, suits,
actions, liabilities, expenses, and reasonable attorney’s fees, and costs in
connection therewith (collectively, “Losses”) arising out of a claim that the
Software and/or Systems, or Broker’s authorized use thereof, as set forth in
this Agreement, infringes upon any Intellectual Property Rights of any third
party. This Paragraph 30.9.1 shall survive any termination of this
Agreement; provided, however, that any indemnity provided under this
Paragraph 30.9.1 shall only be in respect of events occurring during the term
of
this Agreement.
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30.9.2 Broker
shall not be entitled to any
indemnification under Paragraph 30.9.1 hereof to the extent that the Losses
in
respect of which such indemnification is sought is attributable to Broker’s
negligent activities and/or misuse of Pershing Services, as set forth in this
Agreement (“Unauthorized Use”) or to the extent of such Losses due to a delay in
providing notice of the circumstances giving rise to such
Losses. Broker shall indemnify, defend, and hold Pershing harmless
from and against all claims, demands, proceedings, suits, actions, liabilities,
expenses, and reasonable attorney’s fees, and costs in connection therewith
(collectively, “Losses”) arising out of such negligent activities by Broker,
Broker’s Unauthorized Use of Pershing Services or such delay by Broker in
providing such notice. This Paragraph 30.9.2 shall survive any
termination of this Agreement.
THE
PERSHING SERVICE IS PROVIDED ON AN
“AS IS”, “AS AVAILABLE” BASIS, WITHOUT WARRANTY OF ANY KIND, TO THE MAXIMUM
EXTENT PERMITTED BY APPLICABLE LAW. PERSHING DISCLAIMS ALL
WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NON-INFRINGEMENT. THERE IS NO WARRANTY THAT ANY INFORMATION PROVIDED
THROUGH PERSHING, THE PERSHING SERVICE OR THE SYSTEM WILL FULFILL ANY PARTICULAR
PURPOSES OR NEEDS.
TO
THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW AND EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, IN NO EVENT
SHALL PERSHING, ANY OF ITS AGENTS, AFFILIATES, THIRD PARTY PROVIDERS OR ANYONE
ELSE INVOLVED IN CREATING, PRODUCING, DELIVERING OR MANAGING THE DELIVERY OF
THE
PERSHING SERVICE BE LIABLE TO BROKER OR ANYONE ELSE FOR ANY DIRECT, INDIRECT,
INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE OR ANY OTHER DAMAGES WHATSOEVER
(INCLUDING WITHOUT LIMITATION DAMAGES FOR LOST PROFITS, TRADING LOSSES, DAMAGES
RESULTING FROM INCONVENIENCE OR LOSS OF USE OF THE WEB SITE), EVEN IF THEY
HAVE
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF THE USE OF
OR
INABILITY TO USE THE PERSHING SERVICE OR FOR ANY BREACH OF ANY
WARRANTY.
Quotes,
news and research data,
including market information displayed on any Access Device (collectively,
“Market Data”) are obtained from sources Pershing believes to be
reliable. HOWEVER, ALL MARKET DATA IS PROVIDED “AS IS” AND
“AS AVAILABLE”, AND THERE MAY BE DELAYS, OMISSIONS AND INACCURACIES IN SUCH
DATA. NEITHER PERSHING NOR ITS AGENTS, AFFILIATES, OR THIRD PARTY
PROVIDERS OR ANYONE ELSE INVOLVED IN CREATING, PRODUCING, DELIVERING OR MANAGING
THE DELIVERY OF SUCH DATA, INFORMATION OR SERVICES (COLLECTIVELY, THE
(“Disseminating Parties”) CAN GUARANTEE, NOR DO PERSHING OR THEY GUARANTEE, THE
CORRECTNESS, QUALITY, ACCURACY, SEQUENCE, TIMELINESS, CURRENTNESS, RELIABILITY,
PERFORMANCE, COMPLETENESS, CONTINUED AVAILABILITY, MERCHANTABILITY, FITNESS
FOR
A PARTICULAR PURPOSE, TITLE OR NON-INFRINGEMENT OR OTHERWISE OF ANY MARKET
DATA
OR THIRD PARTY PROVIDER SERVICES, AND PERSHING AND THEY HEREBY DISCLAIM ANY
SUCH
EXPRESS OR IMPLIED WARRANTIES. Pershing also reserves the
right to filter the Market Data provided to Broker through the Pershing
Service. The Disseminating Parties shall not be liable to Broker or
to anyone else for any loss or injury, whether or not caused in whole or in
part
by their negligence or omission, in procuring, compiling, editing, writing,
reporting or delivering any Market Data or Third Party Provider Services through
Pershing or by any Force Majeure Event or other cause beyond their
control. The Disseminating Parties will not be liable to Broker or
anyone else for any decision made or action taken by Broker in reliance on
such
Market Data or for direct, indirect, incidental, special, consequential,
punitive or any other damages whatsoever (including without limitation damages
for lost profits, trading losses, damages resulting from inconvenience or loss
of use of the Pershing Service) even if Pershing or its Third Party Providers
have been advised of the possibility of such damages.
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Except
as otherwise
provided in this Agreement, Broker agrees that neither Pershing, nor its Third
Party Providers shall be liable in any way for, any liability, costs, damages
or
loss caused directly or indirectly by government restrictions, exchange or
market rulings, suspension or delay of trading, equipment failure, communication
line failure, system failure, security failure, unauthorized access, theft,
Force Majeure Event or any problem, technological or otherwise, that might
prevent Broker from accessing or utilizing the Services.
This
Agreement contains a pre-dispute arbitration clause in Paragraph
27. Broker acknowledges receiving a copy of this
Agreement.
Broadpoint
Securities, Inc:
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By:
Rob Fine /s/
Rob Fine
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Title: President
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PERSHING
LLC
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By:
Xxxxx Xxxxxxxxx
/s/Xxxxx Xxxxxxxxx
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Title: Director
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