Requesting Consent to Changes in Core Account Investment Options

Transcription

1 Member FINRA/SIPC Requesting Consent to Changes in Core Account Investment Options April 13, 2017 N&A LINE1 N&A LINE2 N&A LINE3 N&A LINE4 N&A LINE5 N&A LINE6 Control Number: XXX-XX1234 Dear Valued Client: Securities Service Network, Inc. ( SSN, Broker/Dealer, we, our or us ) is writing to you to request your consent for important changes to the investments offered for the core account investment vehicle, or sweep, of available cash balances in your Brokerage Account. Beginning on May 16, 2017 (the Effective Date ), or as soon thereafter as practicable, we will no longer offer certain money market mutual funds as the core account investment vehicle for available cash balances in your brokerage account. Accordingly, we request your consent to have your available cash balances swept through the Bank Deposit Sweep Program ("BDSP" or "Program") into interest-bearing deposit accounts (the "Deposit Accounts") at one or more banks (each a "Bank"). The Program Bank List can be accessed on our website at the URL specified in Appendix A of the enclosed Disclosure Document or obtained from your Investment Representative. The Deposit Accounts are eligible for Federal Deposit Insurance Corporation ( FDIC ) insurance up to a maximum of $1.5 million (for an individual account) or up to a maximum of $3 million (for a joint account), subject to the total amount on deposit in an account, applicable FDIC rules, and Bank availability, as described below and in the attached Disclosure Document. On the Effective Date or as soon thereafter as we receive your consent, shares remaining in your Money Fund will be redeemed for cash and transferred to the Deposit Accounts, and the Money Funds will not accept any new monies. All debits created on or after the Effective Date, including securities purchases and charges, will be satisfied by deposits from the Program swept to your brokerage accounts. Similarly, all credits created on or after the Effective Date by deposits, sales, interest and dividends will be swept into the Program. The information contained in this letter is only a summary of the changes to your sweep investment options. The enclosed BANK DEPOSIT SWEEP PROGRAM (BDSP SM ) DISCLOSURE DOCUMENT ( Disclosure Document ), describes the Program which is offered by us in conjunction with Pershing LLC ( Pershing ), a New York Stock Exchange

2 ( NYSE ) and Financial Industry Regulatory Authority ( FINRA ) member whom we have engaged to provide custody and clearing services to us. Included in the Disclosure Document is information concerning the following: How the Program works Eligibility Available Sweep Options FDIC and SIPC Protection Program Bank List Rates of Return Changes to your Sweep Vehicle Duty to Monitor Benefits to your Broker/Dealer and Others (and its compensation) Please review the information in the Disclosure Document carefully. Your Investment Representative stands ready to assist you should you have any questions. If we do not receive your consent to sweep funds into the FDIC-insured BDSP, uninvested cash will remain in the current money market fund(s). The Disclosure Document explains in more detail the consequences of not having your funds swept into the Program. Additional information about your election and the core account investment options we continue to offer may be obtained from your Investment Representative or on our website at the URL referenced in Appendices A, B or C of the Disclosure Document. As more fully described in the attached Disclosure Document, your brokerage account is generally protected, up to applicable limits, by the Securities Investor Protection Corporation (the SIPC ). At the time funds are deposited with a Bank(s) through the Bank Deposit Sweep Program, your investment in the Bank Deposit Sweep Program is eligible to be insured, up to applicable limits, by the Federal Deposit Insurance Corporation (the FDIC ). Funds in the Deposit Accounts at each Bank usually are eligible for deposit insurance by the FDIC. Most deposits are insured up to $250,000 in principal and accrued interest per depositor in most insurable capacities (e.g., individual, joint, etc.) when aggregated with all other deposits held in the same insurable capacity at a Bank. For example, funds in the Deposit Accounts at a Bank held by an individual are insured up to $250,000, and funds in the Deposit Accounts at a Bank held jointly by two or more individuals are insured up to $250,000 per joint account owner. For IRAs and certain other self-directed retirement accounts, funds in the Deposit Accounts at each Bank are eligible for deposit insurance up to $250,000 principal and accrued interest per depositor in the aggregate. Funds deposited in Deposit Accounts are not eligible for coverage by the Securities Investor Protection Corporation. Please note however, that, under the Program, unless you are otherwise informed by us, we will deposit the available cash in your brokerage account in Deposit Accounts at each Bank on the Program Bank List up to $246,500 for individual, agency or trust accounts irrespective of the capacity in which you hold your brokerage account, $493,000 for joint accounts of two or more owners and $246,500 for one individual retirement account, irrespective of the fact that the maximum applicable FDIC insurance coverage available may be greater; for example, joint accounts are eligible for FDIC insurance of up to $250,000 per owner even if there are more than two owners, but the Program will only deposit up to $493,000 for any joint account. Once these maximum deposit amounts have been deposited in each Bank on the Program Bank List, any additional funds will be deposited in a designated Excess Bank without limit and without regard to maximum available FDIC insurance coverage. The Program Bank List is subject to change. Generally, you will receive notification of any material change to the Program. We may also notify you that a change will be forthcoming and direct you to your Investment Representative or to the URL referenced in Appendices A, B or C of the Disclosure Document for specific information on such change. While we will endeavor to provide advance notice of changes, we may be unable to do so in some cases. We will provide you with notice of such changes as soon as is reasonably practical. It is your obligation to monitor your accounts, your FDIC coverage and your FDIC insurance eligibility. Changes to the Program Bank List will be posted at the URL referenced in Appendix A of the Disclosure Document and you should consult this site for the most up-to-date information about the Program. Other changes to the Program may be posted to this site as well and you should direct any questions you may have to your Investment Representative. 2

3 It is your responsibility to inform your Investment Representative of any Banks that you do not wish to receive your funds. The annual percentage yield ( APY ) and interest rate on the Deposit Accounts as well as the yield on your current core account investment option are set forth in the chart below. Interest rates/apy on the Deposit Accounts will be determined based on prevailing economic and business conditions. The interest rate/apy will vary and may be higher or lower by the Effective Date. This and other differences between an investment in the existing core account investment options and the Program are as follows: Investment Pershing Prime Reserves (FRFXX) ¹ Pershing Government Account (GRFXX)¹ Federated Capital Reserves (FRFXX)¹ Federated Government Reserves P (GRFXX)¹ FDIC or SIPC APY Sales Charge (Load) Mgmt Fees Distribution/Service (12b-1) Fees Other Expenses Waiver Total Annual Operating Expenses SIPC % 3 None 0.20% None 0.49% 0.21% 1.25% SIPC % 3 None 0.20% 0.25% 0.45% 0.17% 1.20% SIPC % 3 None 0.20% 0.55% 0.49% 0.21% 1.25% SIPC % 3 None 0.20% 0.55% 0.45% 0.17% 1.20% Summary of Investment Objectives The Fund is a money market fund that seeks to maintain a stable net asset value (NAV) of $1.00 per Share. The Fund s investment objective is to provide current income consistent liquidity. A money market mutual fund seeking to provide current income consistent liquidity by investing in a portfolio of U.S. Treasury and government securities maturing in 397 days or less and repurchase agreements collateralized fully by U.S. Treasury and government securities. The Fund is a money market fund that seeks to maintain a stable net asset value (NAV) of $1.00 per Share. The Fund s investment objective is to provide current income consistent liquidity. A money market mutual fund seeking to provide current income consistent liquidity by investing in a portfolio of U.S. Treasury and government securities maturing in 397 days or less and repurchase agreements collateralized fully by U.S. Treasury and government securities. Federated Municipal (MUTXX)¹ Dreyfus Insured Deposit Program Bank Deposit Sweep Program SIPC % 3 None 0.20% 0.55% 0.51% 0.23% 1.26% FDIC 2 Tier 4 None N/A N/A N/A N/A N/A N/A FDIC 2 Tier 4 None N/A N/A N/A N/A N/A N/A A money market mutual fund seeking to provide current income (exempt from federal regular income tax) consistent with stability of principal by investing primarily in a portfolio of high-quality, tax-exempt securities maturing in 397 days or less. 1 An investment in the MONEY MARKET FUND (the Fund ) is not insured or guaranteed by the FDIC or any government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund, including loss of principal. Please read the prospectus carefully. 3

4 2 Subject to applicable limitations per account. Please contact your Investment Representative for details about SIPC protection or FDIC insurance. You may also visit the FDIC s website for information at At the time of deposit with Broker, and until such funds are deposited with a Program Bank they are protected by SIPC. Upon deposit at a Program Bank, your funds are eligible for FDIC insurance. SIPC does not protect against investment losses that may be incurred with respect to securities or other investments held in your brokerage account. 3 This rate reflects the 7-day effective yield as of Feb 1, This rate fluctuates due to underlying investments in the fund and/or market conditions generally. Other important information that you should consider about the Fund (including costs, expenses, risks and objectives) is contained in the Fund s prospectus. If you would like a prospectus for the Fund to review, please contact your Investment Representative. 4 The rates for the Dreyfus Insured Deposit Program and Bank Deposit Sweep Program as of the date listed above each respective table are set forth below; all interest accrues daily and is paid monthly. Amounts reflecting interest paid will be presented on your brokerage account statements. The rates are subject to change at any time, without notice to you. For a current list of complete rates, please contact your Investment Representative. Dreyfus Insured Deposit Program - B (DIDB) 3/10/17 Deposit Account Total Balance Rate $1,000,000 or greater 0.24% $500,000 up to $1,000, % $100,000 up to $500, % $50,000 up to $100, % Less than $50, % APY/Interest Rate Tiers for the Bank Deposit Sweep Program: Bank Deposit Sweep Program 3/15/17 Deposit Account Total Balance Rate $2,000,000 or greater 0.01% $750,000 up to $1,999, % $250,000 up to $749, % $100,000 up to $249, % $25,000 up to $99, % $10,000 up to $24, % Less than $10, % * Important Note: Individual Deposit Account balances over $1.5 million exceed the maximum applicable FDIC Deposit insurance amount and would NOT be eligible for FDIC insurance coverage. Your balances will earn the same rate of interest regardless of the Program Bank with which your funds are deposited. Your interest rate is based upon your Program Deposits in accordance with the tiers that are established under the Program (described below in the Disclosure Document Appendix B). The rate of interest paid is tiered based on the value of your Program Deposits, which are currently evaluated on a daily basis. Please note that you may be able to receive different or better rates by establishing a deposit relationship with a Bank directly. If you do establish a separate direct depositary relationship with a Bank that account will not automatically link to your brokerage account and uninvested cash in your brokerage account will not automatically sweep into that account. Please carefully read the enclosed Disclosure Document for important details about the Bank Deposit Sweep Program regarding, among other details, benefits to your Broker and others, the relationships between us, Pershing and the Bank(s), their compensation for providing services under the Program and other important information. Changes to Your Account Agreement In connection with these changes, we are making several changes to your account agreement. The amendments, among other things, include changes to the terms and conditions relating to cash balances and a notice provision allowing us to make changes to your Core Account Investment Vehicle on 30 days notice. Upon your consent, the following provisions will replace the sections in your account agreement that refer to core account and/or the money market sweep program: 4

5 Core Account Investment Vehicle. I understand that my account includes a core account investment vehicle that is used for settling transactions and holding credit balances. Amounts credited to the core account investment vehicle will be invested in the core account investment vehicle that is indicated on my account application(s). I understand that if I do not select a core account investment vehicle, I authorize my Broker/Dealer to use my Broker/Dealer s default option as the core account investment vehicle. This will either be a specific money market mutual fund in which event my Broker/Dealer will provide the prospectus for that fund, or a bank sweep product in which event my Broker/Dealer will provide a disclosure document describing that product in detail ( Disclosure Document ). Different core account investment vehicles may have different rates of return and different terms and conditions, such as FDIC insurance or SIPC protection. I understand that if I do not select a core account investment vehicle, my Broker/Dealer may not consider these differences when selecting a default core account investment vehicle for me. I understand that if I choose a bank sweep product as my core account investment vehicle, cash balances in my account will be automatically swept into an interest-bearing deposit account at one or more federally insured banking institutions selected by my Broker/Dealer (the Bank(s) ). My cash balances held at each Bank will be eligible for FDIC insurance coverage up to $250,000 (principal plus accrued interest) per depositor per insurable capacity, in accordance with applicable FDIC rules. All deposits (for example, deposits I may make at a Bank outside of the bank sweep product plus the bank sweep cash balance) held by an individual in the same right and legal capacity at the same Bank are insured up to $250,000. Special rules apply to FDIC insurance of trust deposits. All FDIC insurance coverage is in accordance with FDIC rules. I understand that my Broker/Dealer and Pershing will not monitor the amount of my bank sweep balance to determine whether it exceeds the limit of available FDIC insurance. I understand that I am responsible for monitoring the total amount of my assets on deposit with the Bank (including accounts at the bank held in the same right and legal capacity) in order to determine the extent of deposit insurance coverage available to me on those deposits, including my bank sweep balance held at the Bank. If I am a trustee, I understand that I am responsible for determining the application of FDIC insurance for myself and my beneficiaries. I agree to contact Broker/Dealer regarding the selection of the core investment account vehicle. Where permitted by Applicable Law, I hereby authorize Broker/Dealer to change or replace the core account investment vehicle available to me at its discretion. Broker/Dealer will give me advance notice of any such change in the core account investment vehicle. Unless I notify Broker/Dealer of an objection to any such change within 30 days of such notice, I authorize Broker/Dealer to withdraw cash or redeem securities maintained in the prior core account investment vehicle and to invest or place the resulting proceeds in the replacement core account investment vehicle. I understand that I will be bound by the terms and conditions for the core account investment vehicle that is associated with my Account, as described in the Disclosure Document. Please sign the attached form to acknowledge your acceptance of these changes, and return the signature page to us in the enclosed postage paid envelope. Again, we would like to remind you that if you have any questions, please contact your Investment Representative. We appreciate the opportunity to continue to serve your financial needs. Sincerely, Securities Service Network, Inc. 5

6 BDSP Acknowledgement Form By signing below, you are consenting to the changes in the Core Account Investment Vehicle described above and you are acknowledging the following amendments to your SSN Account Agreement for your Control Number: XXX-XX1234 The amendments, among other things, include changes to the terms and conditions relating to cash balances and a notice provision allowing us to make further changes to your Core Account Investment Vehicle on 30 days notice. Upon your consent, the following provisions will replace the sections in your account agreement that refer to core account and/or the money market sweep program: Core Account Investment Vehicle. I understand that my account includes a core account investment vehicle that is used for settling transactions and holding credit balances. Amounts credited to the core account investment vehicle will be invested in the core account investment vehicle that is indicated on my account application(s). I understand that if I do not select a core account investment vehicle, I authorize my Broker/Dealer to use my Broker/Dealer s default option as the core account investment vehicle. This will either be a specific money market mutual fund in which event my Broker/Dealer will provide the prospectus for that fund, or a bank sweep product in which event my Broker/Dealer will provide a disclosure document describing that product in detail ( Disclosure Document ). Different core account investment vehicles may have different rates of return and different terms and conditions, such as FDIC insurance or SIPC protection. I understand that if I do not select a core account investment vehicle, my Broker/Dealer may not consider these differences when selecting a default core account investment vehicle for me. I understand that if I choose a bank sweep product as my core account investment vehicle, cash balances in my account will be automatically swept into an interest-bearing deposit account at one or more federally insured banking institutions selected by my Broker/Dealer (the Bank(s) ). My cash balances held at each Bank will be eligible for FDIC insurance coverage up to $250,000 (principal plus accrued interest) per depositor per insurable capacity, in accordance with applicable FDIC rules. All deposits (for example, deposits I may make at a Bank outside of the bank sweep product plus the bank sweep cash balance) held by an individual in the same right and legal capacity at the same Bank are insured up to $250,000. Special rules apply to FDIC insurance of trust deposits. All FDIC insurance coverage is in accordance with FDIC rules. I understand that my Broker/Dealer and Pershing will not monitor the amount of my bank sweep balance to determine whether it exceeds the limit of available FDIC insurance. I understand that I am responsible for monitoring the total amount of my assets on deposit with the Bank (including accounts at the bank held in the same right and legal capacity) in order to determine the extent of deposit insurance coverage available to me on those deposits, including my bank sweep balance held at the Bank. If I am a trustee, I understand that I am responsible for determining the application of FDIC insurance for myself and my beneficiaries. I agree to contact Broker/Dealer regarding the selection of the core investment account vehicle. Where permitted by Applicable Law, I hereby authorize Broker/Dealer to change or replace the core account investment vehicle available to me at its discretion. Broker/Dealer will give me advance notice of any such change in the core account investment vehicle. Unless I notify Broker/Dealer of an objection to any such change within 30 days of such notice, I authorize Broker/Dealer to withdraw cash or redeem securities maintained in the prior core account investment vehicle and to invest or place the resulting proceeds in the replacement core account investment vehicle. I understand that I will be bound by the terms and conditions for the core account investment vehicle that is associated with my Account, as described in the Disclosure Document. The foregoing is agreed to and accepted. Signature Date Print Name For joint accounts: Signature Date Print Name 6