3141 Hood Street; Suite 650 Dallas, TX Daniel Harvey: July 2011

Transcription

1 3141 Hood Street; Suite 650 Dallas, TX Daniel Harvey: This brochure provides information about the qualifications and business practices of. If you have any questions about the contents of this brochure, please contact Mr. Harvey at and/or 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 also is available on the SEC s website at

2 Material Changes : Fees and Compensation: Added more detail on how pricing is charged. Refund policy was added when client terminates during a quarter Methods of Analysis, Investment Strategies and Risk of Loss: More detail added on Patronus strategy of using asset allocation. The discussion of risk to the strategy Patronus uses was expanded to cover market risk, purchasing individual securities, use of leveraged and inverse ETFs and the risk of clients not providing accurate and timely information.

3 Table of Contents Advisory Business... 1 Fees and Compensation... 1 Performance-Based Fees and Side-By-Side Management... 2 Types of Clients...2 Methods of Analysis, Investment Strategies and Risk of Loss... 2 Disciplinary Information... 3 Other Financial Industry Activities and Affiliations... 3 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading... 3 Brokerage Practices... 5 Review of Accounts... 7 Client Referrals and Other Compensation... 7 Custody... 7 Investment Discretion... 7 Voting Client Securities... 7 Financial Information... 8 Requirements for State-Registered Advisers... 8

4 ADVISORY BUSINESS Advisory Firm Description ( Patronus or the Firm ) has been in business since May The firm is co-owned by John Prewit and Daniel Harvey. Types of Advisory Services Asset Management Services Patronus offers asset management services in which Patronus will manage a client s account based upon a client s individual investment goals, objectives, risk tolerance and investment time horizon. After determining these criteria for each client, Patronus will determine and present to the client an asset allocation specific to his/her needs. Upon the client s authorization, Patronus will implement the asset allocation and manage the account on a continuous basis, making recommendations for changes as appropriate for the client s investment profile. Tailored Advisory Services Clients may place restrictions on the Firm s discretion in writing. Client Assets Under Management At December 31, 2010, Patronus had $26,109,058 of discretionary assets and $5,077,066 non-discretionary assets under management. FEES AND COMPENSATION Clients pay Patronus for its asset management services by paying a percentage of assets which Patronus manages. Fees are not based upon a share of capital gains, capital appreciation or any other portion of securities holdings in the client portfolio. Fees are charged quarterly in advance and are based upon assets as valued by the custodian at market close on the last trading day of the quarter. Each client s fee is determined at the time of execution of the investment management agreement. In rare circumstances, the fee is negotiable when considering items such as size and complexity of the portfolio. All of a client s accounts under management with Patronus will be aggregated together to determine the fee, which will not exceed 1.5% of assets under management per year. Patronus fees are usually deducted from client accounts unless the client has made other arrangements. If the relationship is terminated during a quarter, Patronus will refund to the client all unearned fees for the days remaining in the quarter. In addition to the advisory fees above, a client may pay fees to the custodian for custodial services, account maintenance fees, transaction fees and other fees associated with maintaining the account. Patronus does not share in any portion of these additional fees. Clients may also pay internal fees to mutual, ETF and money market fund managers. These fees are listed in each fund s prospectus (which is Page 1

5 provided by the account custodian) and are not indicated on any custodial statements. These internal fees are not shared with Patronus. Some broker/dealers charge transaction fees for the convenience of being able to trade across various fund families in one account. This fee would not be incurred if the client were to trade directly with each separate mutual fund family. PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT Patronus does not charge performance-based fees to any accounts, so it does not manage accounts paying those fees beside accounts that do not (side-by-side management). TYPES OF CLIENTS Patronus provides portfolio management services to individuals, families and trusts. The Firm has a preferred minimum account size of $250,000. METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS Patronus uses a combination of the following types of analysis in evaluating investments for client accounts: Charting Analysis of charts of past stock performance Fundamental Analysis of financial attributes of a company, such as revenue growth, debt to equity ratio, inventory turnover, etc. Technical Analysis which assumes past performance is a predictor of future performance Cyclical Analysis based on business, industry, calendar or historical cycles Patronus uses the following sources of information in its analysis: Financial newspapers and magazines Research materials prepared by others Annual reports, prospectuses, filings with the Securities and Exchange Commission Company press releases Patronus manages its clients accounts on an individual basis, tailoring each account according to the client s investment objective, risk tolerance, financial needs and personal preferences. Patronus believes in asset allocation as the driver of account performance. To this end, Patronus invests in open-ended mutual funds, Exchange Traded Funds, equities, and individual bonds on behalf of its clients. Patronus also has the ability to use leveraged and inverse ETFs where appropriate as a hedge. Clients are advised that transactions in the account, account reallocations and rebalancing may trigger a taxable event for the client, with the exception of IRA accounts, 403(b) accounts and other qualified retirement accounts. Page 2

6 The investment strategies Patronus employs in managing clients accounts incur market risk, in that a portfolio may rise and fall in value as the market rises and falls. Open end mutual funds and ETFs incur additional fees which are not present in the purchase and sale of individual equities and bonds. Leveraged and inverse ETFs may incur loss at an accelerated rate during quickly dropping markets. US companies may have global risk because they are often times multi-national. Similarly, changes domestically can cause changes across the globe. Patronus develops portfolios for clients based upon its understanding of the client s requirements, so the company depends upon the accuracy of this information throughout the term of the relationship. If the client has not informed Patronus of changes in his/her situation, the portfolio may not meet the client s changed needs. Patronus does not guarantee the future performance of any client s account or any specific level of performance, the success of any investment decision or strategy that the Firm may use, or the success of the Firm s overall management of the account. Investment decisions made for a client s account by the Firm are subject to various market, currency, economic, political and business risks, and those investment decisions will not always be profitable. Investing in any security entails risk of loss. DISCIPLINARY INFORMATION There have been no disciplinary actions against Patronus, Mr. Harvey or Mr. Prewit. OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS Patronus has no affiliated entities. Mr. Prewit sells insurance to his clients as appropriate. This creates a potential conflict of interest with the Firm s clients, as he is likely to receive a commission on insurance products he recommends to clients. CODE OF ETHICS, PARTICIPATION OR INTEREST IN CLIENT TRANSACTIONS AND PERSONAL TRADING Code of Ethics Patronus has adopted a Code of Ethics which describes the general standards of conduct that the Firm expects of all Firm personnel (collectively referred to as employees ) and focuses on three specific areas where employee conduct has the potential to adversely affect the client: Misuse of nonpublic information Personal securities trading Outside business activities Failure to uphold the Code of Ethics may result in disciplinary sanctions, including termination with the Firm. Any client or prospective client may request a copy of the Firm s Code of Ethics which will be provided at no cost. Page 3

7 The following basic principles guide all aspects of the Firm s business and represent the minimum requirements to which the Firm expects employees to adhere: Clients interests come before employees personal interests and before the Firm s interests. The Firm must fully disclose all material facts about conflicts of interest of which it is aware between itself and clients as well as between Firm employees and clients. Employees must operate on the Firm s behalf and on their own behalf consistently with the Firm s disclosures and to manage the impacts of those conflicts. The Firm and its employees must not take inappropriate advantage of their positions of trust with or responsibility to clients. The Firm and its employees must always comply with all applicable securities laws. Misuse of Nonpublic Information The Code of Ethics contains a policy against the use of nonpublic information in conducting business for the Firm. Employees may not convey nonpublic information nor depend upon it in placing personal or clients securities trades. Personal Securities Trading Patronus or individuals associated with the Firm may buy, sell or hold in their personal accounts the same securities the Firm recommends to its clients. Such trades may occur simultaneously with or the day after trades are placed on behalf of clients. Clients must receive the same or better pricing. To mitigate conflicts of interest, the Firm has established the following policies: Trading by Patronus personnel in personal accounts is subject to review and, in many cases, prior approval by the CCO. All securities are expected to be held for a minimum of 30 days. Personnel are prohibited from taking positions contrary to any client s position (long versus short or short versus long). Personnel are not allowed to purchase or sell securities that are held in the portfolio on the last day of the month. Personal securities trades for assets other than open-ended mutual funds (including trades of IPOs and private placements) and any amount over $20,000 in ETFs must be pre-approved by the managing partner and/or CCO. An officer, director, or employee of shall not buy or sell securities for a personal portfolio when the decision to purchase is substantially derived, in whole or in part, by reason of employment with the Firm, unless the Page 4

8 information is also available to the investing public on reasonable inquiry. Patronus personnel may not anticipate trades to be placed for clients. Employees are required to submit reports of personal securities trades on a quarterly basis, and securities holdings annually. These are reviewed by the Chief Compliance Officer to ensure compliance with the Firm s policies. Outside Business Activities Employees are required to report any outside business activities generating revenue. If any are deemed to be in conflict with clients, such conflicts will be fully disclosed or the employee will be directed to cease this activity. BROKERAGE PRACTICES Patronus recommends that clients use the brokerage services provided by Charles Schwab & Co., Inc. ( Schwab ), which include custodian and trading services. In recommending a custodian, Patronus considers: the range and quality of the products the custodian offers, the technical support provided, execution quality, commission rates, the financial responsibility and responsiveness of the custodian to both the Firm and its clients. Patronus recognizes its responsibility to attain best execution, and recognizes that limiting its custodial relationships may affect its ability to provide best execution on a trade-by-trade basis. Patronus is not required to select the broker that charges the lowest transaction cost, even if that broker provides execution quality comparable to other brokers, and Patronus may at times pay more than the lowest transaction cost available in order to obtain for itself and/or its clients services and products other than securities transactions execution. Research and Other Soft-Dollar Benefits Soft dollars is a term applied to commission revenue generated by client trades which is then used to pay for services provided to an investment advisor. These services must apply to benefit clients and include research and other related services as defined by Section 28(e) of the Securities and Exchange Act of Patronus has no formal soft dollar relationships in which a portion of each transaction fee generated by trades in client accounts pays for services to Patronus. However, Schwab makes available to Patronus products and services that benefit Patronus but may not benefit its clients accounts. As a fiduciary, Patronus endeavors to act in its clients best interests. Patronus recommendation that clients maintain their assets in accounts at Schwab may be based in part on the benefit to Patronus of the Page 5

9 availability of some of the foregoing products and services and not solely on the nature, cost or quality of custody and brokerage services provided by Schwab. Such an arrangement may create a potential conflict of interest with Patronus clients, since Patronus recommends Schwab as its primary custodian. Some of these other products and services assist Patronus in managing and administering clients accounts. These include software and other technology that provide: access to client account data, such as trade confirmation and account statements; the facilitation of trade execution and allocation of aggregated trade orders for multiple client accounts; research, pricing information and other marked data; facilitation of payment of Patronus fees from its clients accounts; and assistance with back-office functions, recordkeeping and client reporting. Many of these services generally may be used to service all or a substantial number of Patronus accounts, including accounts not maintained at Schwab. Schwab also makes available to Patronus other services intended to help Patronus manage and further develop its business enterprise. These services may include consulting, publications and conferences on practice management, information technology, business succession, regulatory compliance and marketing. In addition, Schwab may make available, arrange and/or pay for these types of services rendered to Patronus by independent third parties. Schwab may discount or waive fees it would otherwise charge for some of these services or pay all or a part of the fees charged by a third party providing these services to Patronus. These services might assist Patronus with its administration of client accounts, and thus slightly help its profitability, creating a potential conflict of interest with clients. Patronus believes this is not a material conflict. Brokerage for Client Referrals Patronus does not direct trades to particular brokers in exchange for receiving client referrals. Directed Brokerage If the client has engaged Patronus to provide asset management services, Patronus will select a broker-dealer to execute transactions involving the account. Schwab is the only one used at this time. Order Aggregation Patronus will generally aggregate brokerage orders for clients and allocate the securities purchased or sold among the participating accounts, with each account receiving the same terms. The proportion in which participating accounts will share transactions will be determined by the portfolio manager(s) on the basis of investment objectives, cash availability, expected cash and liquidity needs, and other relevant factors. The overarching principle for that allocation is that no client is intentionally favored over another client that is similarly situated. Page 6

10 REVIEW OF ACCOUNTS John Prewit, Managing Member, and Daniel Harvey, Managing Member and Chief Compliance Officer, conduct all reviews of managed accounts as a matter of course at least quarterly. All clients are encouraged to meet with the firm at least annually. Additional reviews may be triggered by events such as a client meeting, change in a client s risk tolerance, financial position or investment objective, change in a company or fund s management, unusual market or economic circumstances or other unforeseen events. Clients will receive regular account statements (usually monthly, sometimes quarterly, depending on the nature of the investment) from the custodian in possession of the securities under management showing holdings and transactions, including any disbursements from the account. At year-end, clients will receive from the custodian an annual statement of income, sales and investment management fees paid. CLIENT REFERRALS AND OTHER COMPENSATION Patronus does not compensate anyone for client referrals. CUSTODY Patronus recommends qualified custodians for clients accounts, with each client signing a separate agreement with the custodian. Because Patronus generally has the authority to instruct the account custodian to deduct the investment management fee directly from the client s account, Patronus is considered to have custody of client assets. Custody is defined as having any access to client funds or securities. This limited access is monitored by the client through receipt of account statements directly from the custodian. These statements all show the deduction of the management fee from the account. Otherwise, Patronus may only direct the movement of funds from one account in the client s name to another such titled account, but has no other access to funds. INVESTMENT DISCRETION The agreement that clients execute provides that the client grants Patronus discretion (through a Limited Power of Attorney) to determine both the securities purchased and sold and the amounts of those purchases and sales. Nondiscretionary accounts are managed for clients not willing or unable to provide limited power of attorney to Patronus. VOTING CLIENT SECURITIES Patronus does not vote client securities. Clients receive proxy material directly from their account custodian by either or U.S. mail. Clients may address questions concerning a proxy matter to Firm personnel. Page 7

11 FINANCIAL INFORMATION Patronus is not required to provide financial information. There is no current financial condition that might impair its ability to provide services to its clients. REQUIREMENTS FOR STATE-REGISTERED ADVISERS Please see the brochure supplement for information regarding the Firm s owners, John Prewit and Daniel Harvey. Nobody in the Firm has been involved in any arbitration claim or proceeding involving unethical practices. Patronus does not have any relationships or arrangements with any issuer of securities. Page 8

12 John C. Prewit 3141 Hood Street; Suite 650 Dallas, TX This brochure supplement provides information about John C. Prewit that supplements the brochure. You should have received a copy of that brochure. Please contact Daniel Harvey at if you did not receive Patronus Advisors, LLC s brochure or if you have any questions about the contents of this supplement. Additional information about John C. Prewit is available on the SEC s website at

13 Part 2B of Form ADV: Brochure Supplement EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE John C. Prewit, born 1969 Business Background:, President and Managing Member, May 2008 present Capital Advisors, Inc., Investment Advisor Representative, August 2007 May 2008 Minshall & Company, Inc., Registered Representative, August 2007 May 2008 Paine Webber, UBS Financial Services, Inc., Financial Advisor, December 1997 August 2007 Education: New Mexico Military Institute, A.A., 1990 University of Texas at Austin, B.S., 1996 DISCIPLINARY INFORMATION Mr. Prewit has had no disciplinary or legal events that would be material to a client or prospective client. OTHER BUSINESS ACTIVITIES John C. Prewit is actively engaged in selling insurance. He receives a portion of the client s premium if the client chooses to use this service, although clients are free to purchase life insurance elsewhere. Approximately 5% of Mr. Prewit s time is spent on insurance products. ADDITIONAL COMPENSATION Mr. Prewit receives no compensation beyond that disclosed above under Other Business Activities. SUPERVISION Mr. Prewit and Daniel Harvey, Chief Compliance Officer and Managing Member, collaborate on all market and portfolio management decisions. All clients are shared and are not handled independently. Mr. Harvey and Mr. Prewit meet in person regularly to review all accounts, discuss financial markets and propose portfolio changes based upon each client s risk tolerance. All trades are conducted by Daniel Harvey, including those recommended by John Prewit. Mr. Harvey can be reached at REQUIREMENTS FOR STATE-REGISTERED ADVISERS Mr. Prewit has not been found liable in an arbitration claim, nor has he been found liable in a civil, self-regulatory organization, or administrative proceeding. Mr. Prewit has not been the subject of a bankruptcy petition. Page 1

14 Daniel Harvey 3141 Hood Street; Suite 650 Dallas, TX This brochure supplement provides information about Daniel Harvey that supplements the brochure. You should have received a copy of that brochure. Please contact Daniel Harvey at if you did not receive Patronus Advisors, LLC s brochure or if you have any questions about the contents of this supplement. Additional information about Daniel Harvey is available on the SEC s website at

15 Part 2B of Form ADV: Brochure Supplement EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Daniel Harvey, born 1980 Business Background:, Chief Compliance Officer and Managing Member, May 2008 present Assetdynamx Healthcare, Regional Manager, October 2007 May 2008 Highland Homes, Construction Superintendent, September 2005 October 2007 UBS Financial Services, Financial Advisor, August 2003 September 2005 Education: University of Texas at Austin, B.S., 2003 DISCIPLINARY INFORMATION Mr. Harvey has had no disciplinary or legal events that would be material to a client or prospective client. OTHER BUSINESS ACTIVITIES Mr. Harvey is not actively engaged in any other investment-related business or occupation. ADDITIONAL COMPENSATION Mr. Harvey receives no additional compensation. SUPERVISION Mr. Harvey and John Prewit, President and Managing Member, collaborate on all market and portfolio management decisions. All clients are shared and are not handled independently. Mr. Harvey and Mr. Prewit meet in person regularly to review all accounts, discuss financial markets and propose portfolio changes based upon each client s risk tolerance. All trades are conducted by Daniel Harvey, including those recommended by John Prewit. Mr. Prewit can be reached at REQUIREMENTS FOR STATE-REGISTERED ADVISERS Mr. Harvey has not been found liable in an arbitration claim, nor has he been found liable in a civil, self-regulatory organization, or administrative proceeding. Mr. Harvey has not been the subject of a bankruptcy petition. Page 1