Arapaho Asset Management, LLC

Transcription

1 Form ADV Part 2A Investment Advisor Brochure Arapaho Asset Management, LLC 101 W Main Street Suite 107-L Frisco, Colorado (800) Revised June 2011 This brochure provides information about the qualifications and business practices of Arapaho Asset Management LLC. If you have any questions about the contents of this brochure, please contact us at (800) The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Additional information about Arapaho Asset Management LLC (CRD #133944) also is available on the SEC s website at i

2 Item 2 - Material Changes Annual Update This section of our brochure will be updated annually when material changes occur since the previous release of our brochure dated February Material Changes since the Last Update Rules issued by the U.S. Securities and Exchange Commission in July 2010 require investment advisors to write ADV Part 2 in a narrative plain English format. Full Brochure Available If you would like to receive a complete copy of our most recent brochure, please contact us at: (800) ii

3 Table of Contents Item 1 Cover Page Item 2 - Material Changes Item 3 - Table of Contents i ii iii Item 4 - Advisory Business 1 Item 5 - Fees and Compensation 1 Item 6 - Performance-Based Fees and Side-by-Side Management 2 Item 7 - Types of Clients 2 Item 8 - Method of Analysis, Investment Strategies and Risk of Loss 2 Item 9 - Disciplinary Information 2 Item 10 - Other Financial Industry Activities and Affiliations 2 Item 11 - Code of Ethics, Participation or Interest in Client Transactions and Personal Trading 3 Item 12 - Brokerage Practices 4 Item 13 - Review of Accounts 4 Item 14 - Client Referrals and Other Compensation 5 Item 15 - Custody 5 Item 16 - Investment Discretion 5 Item 17 - Voting Client Securities 5 Item 18 - Financial Information 6 Item 19 Requirements for State-Registered Advisors 6 iii

4 Item 4 - Advisory Business Form ADV Part 2A: Investment Advisor Brochure We are a Colorado-registered investment advisor providing ongoing financial consulting and money management to our clients. Recommendations are based on dynamic asset allocation models and may be implemented on a limited discretionary basis. Clients may impose restrictions on investing in certain securities. As of March 31, 2011, we had $1,366,905 assets under management on a discretionary basis and no assets under management on a non-discretionary basis. Arapaho Asset Management, LLC was formed in We are privately owned by Rachel Namoff and Todd Walker. Item 5 - Fees and Compensation Investment Advisory Services Fees are charged as a percentage of plan assets. The percentage charged is negotiable but typically follows the schedule outlined below. $ Value of Assets Maximum Fee (Annualized) $5000 to $1,000, % $1,000,000 to $3,000, % $3,000,000 to $5,000, % Over $5,000, % Fees are charged quarterly in arrears. The client may terminate the investment advisory agreement at any time by providing written request, effective on the date of receipt of such request. If notice of termination is received within five (5) business days of the signing of the agreement, services will be terminated without penalty (i.e., no fees are due and a complete refund will be paid of any fees paid in advance). Clients owe fees on a pro rated basis. Clients can choose to pay fees directly through credit card payments or they can choose to deduct the fees from their custodial account. We do not have custody of client funds or securities, except for authorized fees, as the services of a qualified, independent custodian will be used. In addition to our fees, clients assets may be subject to custodial fees, transaction fees, and mutual funds fees. We do not share in any portion of the fees or transaction charges imposed by the custodian or mutual funds. See Item 12 Brokerage Practices for additional information. Financial Planning Fees We prepare comprehensive plans for clients based on information provided by each client in a personal interview. The plan may include recommendations on a variety of investment-related areas from asset allocation to specific investments. The fee for such a plan is a flat fee negotiated beforehand, not exceeding the expected hours required multiplied by $250. Any additional services desired are billed at no more than $250. Financial planning fees are due with the following schedule: 50% up front, 50% upon delivery and receipt of financial plan. However, we do not require the prepayment of more than $1200 six months in advance. 1

5 Item 6 - Performance-Based Fees and Side-by-Side Management We do not charge performance-based fees, which are fees based on a share of capital gains on or capital appreciation of client assets. Item 7 - Types of Clients We provide investment advisory services as well as financial planning to individuals and their businesses, trusts, estates, and charitable organizations. We do not have a minimum account size. Item 8 - Method of Analysis, Investment Strategies and Risk of Loss We advise on a number of investment types including exchange-listed securities, over-thecounter securities, municipal securities, variable life insurance, variable annuities, mutual fund shares, real estate investment trusts, and equipment and leasing products. We may advise clients on any other type of investment deemed appropriate based on the client s stated goals and objectives. We employ a number of different security analysis methods including fundamental analysis, charting, and technical and cyclical analysis. We use corporate rating and timing services, and we also review Annual Reports, prospectuses, SEC filings, and company press releases. Additionally, we review research materials prepared by others. Our investment strategies are based upon each client s stated objectives. We may use longterm purchases (securities held at least a year) or short-term purchases (securities sold within a year) to implement our investment advice. Clients must understand that all investing involves risk of reduction in value of assets. Clients should be aware that short term purchases and frequent trading may result in increased brokerage fees, trading costs, and taxes. Item 9 - Disciplinary Information Investment advisors are required to disclose legal or disciplinary events material to a client s evaluation. Neither Arapaho Asset Management, LLC, nor any supervised person has been involved in any activities resulting in any material legal or disciplinary events requiring disclosure. Item 10 - Other Financial Industry Activities and Affiliations While on occasion we provide investment advisory services for certain clients, our investment advisory services are only a part of our business. All of our investment adviser representatives are also registered representatives of broker-dealer Centaurus Financial. Clients are offered the choice of doing business through Centaurus Financial, though they are not required to. When clients use Centaurus Financial to make trades, our employees may earn sales commissions in 2

6 their capacities as registered representatives for Centaurus Financial. This represents a conflict of interest. We have a fiduciary duty to our clients. Clients are free to select any broker-dealer or sales agent they wish to implement recommendations. In addition to our investment advisory business, we also provide financial education. Our employees offer educational workshops and classes at local colleges on investing, financial planning and retirement planning. We neither provide investment advice nor advise on securities as part of our financial education workshops and classes. We sometimes obtain business through our classes. Bruce Miller and Tom Miller use our name when teaching financial education classes. Bruce and Tom are not investment adviser representatives and are not our employees. Bruce and Tom are registered representatives of Centaurus Financial. If Bruce or Tom obtain brokerdealer business through classes taught in our name, we may obtain commissions through Centaurus Financial for any such business. We are also affiliated with Financial What LLC, a Colorado limited liability company. Financial What LLC provides financial education for corporations and large entities. Some of our investment advisor representatives are licensed agents and/or brokers of various insurance companies. Therefore, in addition to making recommendations on insurance products, they are in a position to implement these insurance recommendations. Clients should understand that investment advisor representatives, acting as an insurance agent/broker, will likely receive separate and typical compensation for insurance and/or annuity contract sales in addition to any advisory fees charged. This is a conflict of interest. However, we have a responsibility to put the clients interests first. Clients are not obligated to utilize the services of our investment advisor representative to purchase any insurance product. Clients are free to purchase insurance products through any person they choose. Item 11 - Code of Ethics, Participation or Interest in Client Transactions and Personal Trading We have adopted a code of ethics that sets forth standards of conduct and required compliance with securities laws. Clients and prospective clients can obtain a copy of our code of ethics (which includes our insider trading policy) and other compliance policies and procedures by making a request to our client service representatives. Although certain of our directors, officers and employees sometimes purchase or sell securities that we recommend to clients, such purchases and sales are effectuated in accordance with our code of ethics and insider trading policy. In general, individuals associated with us can direct the purchase or sale of any security without our knowledge and previous approval. Our code of ethics requires us to exercise our authority and responsibility for the benefit of our clients, to place the interests of our clients first, and to refrain from having outside interests that conflict with the interests of its clients Individuals associated with us are required to report all personal securities transactions to us, and we review such reports regularly. In order to ensure that our directors, officers and employees strictly adhere to the highest standards of conduct and integrity in conducting 3

7 business on behalf of our clients, we have each director, officer and employee sign our code of ethics and insider trading policy. We are in and shall continue to be in total compliance with The Insider Trading and Securities Fraud Enforcement act of Specifically, we have adopted a firm wide policy statement outlining insider trading compliance by us and our associated persons. Further, we have adopted a written supervisory procedures statement highlighting the steps which shall be taken to implement our policies. There are provisions adopted for (1) restricting access to files, (2) providing continuing education, (3) restricting and/or monitoring trading on those securities of which our employees and associated persons may have non-public information, (4) requiring all employees and associated persons to conduct their trading through a specified broker or reporting all transactions promptly, and (5) monitoring the securities trading our employees and associated persons. Item 12 - Brokerage Practices We suggest custodians and will use brokers that provide the best execution and service for our clients. We generally recommend custodians based on the most appropriate custodian for the client s anticipated investments. Best execution is determined on a trade-by-trade basis, and should result in the best qualitative execution, not necessarily the lowest possible commission cost. In determining which brokers or dealer provide clients the best service, we consider the full range and quality of a broker s services, including, but not limited to, execution capability, the value of research provided, commission rate, financial responsibility, and responsiveness to us and effectiveness in clearing and settling trades. We generally recommend that clients use Centaurus Financial as their broker-dealer. Clients are not required to use Centaurus Financial. All of our investment adviser representatives are also registered representatives at Centaurus Financial and may receive commissions from Centaurus Financial when executing a trade. Although this creates a conflict of interest as our relationship gives us an incentive to recommend Centaurus Financial, we have a fiduciary duty to our clients to put their interests first. We typically do not aggregate multiple orders of the same security. This is commonly known as block trading. Only one custodian of annuities provides us the ability to block trade. In the instance that we do block trade, we will decide to block trade when doing so will reduce the costs of the transaction for our clients. Each client participating in the block trade receives the same price per share, which is the price of the annuity as of closing on the day of the trade, and pays a proportionate share of the transaction costs. Item 13 - Review of Accounts All Investment Advisory accounts are reviewed by Todd Walker upon the opening of the account. Yearly reviews are performed by Todd to assure continued compliance with client goals and objectives. The custodian will submit written quarterly reports to each client. If a 4

8 client has more than one custodian, we prepare quarterly consolidated reports. Quarterly, we also send written statements to clients reflecting our fees. We review Financial Planning accounts yearly at the request of the client. We send each client a reminder to call us so that we can discuss their account. We also send a questionnaire requesting updated information about the client and their financial situation. Item 14 - Client Referrals and Other Compensation We may receive referral fees for recommending an investment adviser to our clients. It is our policy to disclose the nature of the relationship and the amount of compensation. Clients referred by us do not pay higher advisory fees. However, this arrangement creates a conflict of interest because we receive compensation for our referrals. Still, we put the interests of our clients first. We do not receive economic benefits (other than normal compensation) from any person for providing our investment advisory services. Item 15 - Custody We do not have custody of client assets except to the extent that clients may authorize us to debit fees directly from their accounts. In that case, the client must provide written authorization permitting the custodian to debit our fees from the client s account. The custodian will send quarterly statements to clients. Each time a fee is directly deducted from a client s account, we will concurrently (i) send an invoice to the custodian specifying the amount of the fee and (ii) send an invoice to the client specifying and itemizing the fee, including the formula used to calculate the fee, the amount of assets under management upon which the fee is based, and the time period covered by the fee. Clients should compare the custodian s statements and our invoices. Item 16 - Investment Discretion We usually obtain discretionary trading authority from our clients at the beginning of an advisory relationship. If we receive such authority, we are authorized to purchase and sell securities without obtaining specific client consent. However, we will only exercise such discretion in a manner consistent with the client's stated investment objectives and risk tolerance. Clients must execute a discretionary trading authorization before we assume this authority. Item 17 - Voting Client Securities We generally have authority to vote client securities unless such power to vote has been retained by the client or the client has appointed another person to vote client securities. We exercise this discretion in the best interest of the client. Clients may direct how we will vote their proxies, but we do not accept direction regarding the voting of proxies over which we have discretion from any third party. Similarly, we will not be influenced by sources whose 5

9 interests conflict with the interests of our clients. We resolve conflicts of interest in favor of our clients. To the extent that we reasonably believe that we cannot resolve a conflict of interest involving a client account, we shall endeavor to communicate with the client to reach a just resolution of the conflict, and then vote (or abstain) accordingly. Item 18 - Financial Information We are not required to provide further financial information because we (i) do not solicit prepayment of more than $1200 in fees per client, 6 months in advance and (ii) have not been the subject of a bankruptcy petition at any time during the past ten years. We do not have any financial condition that is likely to impair our ability to meet our contractual commitments to our clients. Item 19 Requirements for State-Registered Advisors Management Persons Our principal executive officers and management persons are Todd Walker, Rachel Namoff and Julie Barlow. Todd Walker and Rachel Namoff founded Arapaho Asset Management in Todd Walker Todd Walker co-founded Arapaho Asset Management with Rachel Namoff. He is also an investment advisor representative and more information about Mr. Walker can be found on Form ADV Part 2B Investment Advisor Brochure Supplement. Rachel Namoff Rachel Namoff (born 1976) co-founded Arapaho Asset Management with Todd Walker. Ms. Namoff has been with us since our formation and is in charge of public relations and marketing. She received her B.S. from Tufts University in 1999 and her B.F.A. from Museum School in Prior to January 1, 2011, Rachel was our chief compliance officer. Julie Barlow Julie Barlow (born 1976) has been with us since 2007 and is our chief compliance officer. She received her B.S. from the University of Kansas in Other Business Activities Our investment advisory services make up only a small part of our business. We spend about ten percent of our time providing investment advisory services. The remainder of the time we are providing financial education and providing services as registered representatives for Centaurus financial. Additionally, some of our employees are licensed to sell insurance. Please see Item 10 Other Financial Industry Activities and Affiliations for additional information about our other business activities. 6

10 Form ADV Part 2B Investment Advisor Brochure Supplement Todd Walker Arapaho Asset Management, LLC 101 W Main Street Suite 107-L Frisco, Colorado (800) Revised June 2011 This brochure supplement provides information about Todd Walker that supplements the Arapaho Asset Management LLC brochure. You should have received a copy of that brochure. Please contact Julie Barlow if you did not receive Arapaho Asset Management LLC s brochure if you have any questions about the contents of this supplement. Additional information about Todd Walker (CRD # ) is available on the SEC s website at 1

11 Form ADV Part 2B: Investment Advisor Brochure Supplement Educational Background and Business Experience We require all individuals involved in determining or giving investment advice have no less than two years financial planning, advisory or brokerage related, or equivalent experience that we deem appropriate. Each investment advisor representative must be licensed in the appropriate jurisdiction(s). Supervised Persons Todd W. Walker Todd Walker (born 1969) graduated from Lambuth University in Mr. Walker has worked as an investment advisor representative for Arapaho Asset Management since it was founded. He has been in the financial industry since Disciplinary Information Mr. Walker has not been involved in any activities resulting in any material legal or disciplinary events requiring disclosure. Other Business Activities Mr. Walker is also a registered representative of Centaurus Financial. If clients choose to place trades through Mr. Walker as a registered representative, Mr. Walker may earn a commission. This represents a conflict of interest. All persons associated with us are required to put client interests first, and clients are not required to use our services to implement recommendations. Mr. Walker is licensed to sell insurance. Mr. Walker typically receives compensation when he acts as an insurance agent/broker. This is a conflict of interest. Mr. Walker and all persons associated with us owe a fiduciary duty to clients. Moreover, clients are not obligated to utilize the services of Mr. Walker to purchase any insurance product. Mr. Walker also teaches financial education classes for us and for Financial What LLC. He neither provides investment advice nor advises on securities as part of the financial education workshops and classes. Additional Compensation Todd may receive compensation for referrals made to investment advisers. It is our policy to disclose the nature of the relationship and the amount of compensation. Clients referred by Todd do not pay higher advisory fees. Todd does not receive economic benefits (other than normal compensation) from any person for providing investment advisory services. Todd may receive commissions when Todd executes trades as a registered representative of Centaurus Financial. Additionally, Todd may receive override fees when Centaurus registered representatives execute trades for clients referred to them by Todd. Supervision Both Todd Walker and Julie Barlow, chief compliance officer of Arapaho Asset Management LLC supervises all supervised persons. Todd Walker and Julie Barlow maintain supervision by regularly reviewing client reports, s, trading tickets as well as personal securities transactions. Todd and Julie may be reached at (800)