DriveWealth Disclosures and Disclaimers
Effective Date: August 23, 2019
You understand that DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any Transaction or investment strategy. DriveWealth only acts on instructions received from you and, where authorized, your Introducing Broker or Investment Advisor.
2. Fractional Shares
DriveWealth’s unique fractional share program allows you to purchase securities in dollar amounts rather than share quantities. Please be advised that trading in fractional shares has unique risks and limitations that you should understand prior to participation in DriveWealth’s Fractional Share Program.
Rounding. DriveWealth rounds all fractional holdings to eight decimal places. For all notional based orders, your Transaction will never exceed the order amount. Rounding may also affect your ability to be credited for cash dividends, stock dividends and stock splits. For example, if you own 0.00000001 shares of stock that pays a one cent dividend per-share, we will not credit your cash balance a fraction of a cent.
No Limit Orders. DriveWealth will only accept market orders for fractional shares at this time.
Trade Capacity and Execution. DriveWealth will comply in all respects with “best execution” on all orders executed through the DriveWealth in line with its regulatory requirements. This means that you will receive the National Best Bid or Offer (“NBBO”) as of the time of your order, for all full share and fractional share components of a Transaction. Any order greater than one share that includes a fractional share component will be executed in a mixed capacity. DriveWealth will act in either a principal or riskless principal capacity with respect to the fractional share components of the Transaction; DriveWealth will act in an agent capacity with respect to the full share component of the Transaction. Your trade confirmation will disclose the agent and principal/riskless principal capacities of a mixed capacity trade. If you enter an order solely for a fractional share, DriveWealth will execute your trade against its proprietary account at the then current NBBO. Orders entered outside of regular trading hours cannot be executed.
Transfer of Fractional Shares. Fractional shares are not transferrable. If you close your account or transfer your account to another firm, the fractional shares held in your account will need to be liquidated. Similarly, Fractional shares cannot be put into certificate form and mailed. Liquidations of fractional shares may result in additional charges.
3. Day Trading Risk
You should consider the following points before engaging in a day-trading strategy. For purposes of this notice, a “day-trading strategy” means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders that include purchase and sale Transactions in the same security or securities. Day trading can be extremely risky. Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success. Be cautious of claims of large profits from day trading. You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses. Day trading requires knowledge of securities markets. Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading. Day trading requires knowledge of a firm’s operations. You should be familiar with a securities firm’s business practices, including the operation of the firm’s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a Transaction. In addition to normal market risks, you may experience losses due to system failures. Day trading will generate substantial commissions, even if the per trade cost is low. Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 Transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses. Persons providing investment advice for others or managing securities accounts for others may need to register as either an “Investment Adviser” under the Investment Advisers Act of 1940 or as a “Broker” or “Dealer” under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirements.
4. Payment for Order Flow
Pursuant to SEC Rule 607, DriveWealth is required to disclose its payment for order flow practices. DriveWealth determines where to route order based on a number of factors including the size of the order, the opportunity for price improvement and the quality of order executions, and decisions are regularly reviewed to ensure the duty of best execution is met. In exchange for routing certain customer equity orders to exchanges, electronic communication networks, or broker-dealers during normal business hours, DriveWealth may receive monetary rebates. The amount rebated varies depending on the agreement reached with each market venue and will be furnished upon request.
5. SEC Rule 606 Disclosure
Policy for Routing Client Orders. DriveWealth, LLC primarily routes its order flow to one of its executing brokers, Cuttone & Co.*, a NYSE floor broker, who assess the quality of the markets to which its routes order flow to obtain the best execution of behalf if DriveWealth and its customers. In this regard, DriveWealth may, depending on several factors, including the security involved or the size of the order, execute the order with itself, as principal, or may route client orders to other broker-dealers, such as Cuttone & Co.
For orders executed in a principal capacity, DriveWealth does not receive payment for order flow. Separately, orders that are routed to our executing broker, DriveWealth will share in monetary rebates with our executing broker.
Orders sent to various OTC market makers in listed or OTC stocks may be exposed to certain exchanges and market centers for the purpose of obtaining price improvement. Orders sent to an exchange via an automated routing and execution system have the opportunity to be executed at prices better than the National Best Bid or Offer either pursuant to a computerized pricing algorithm (in the case of orders in a stock with a spread greater than $0.01) or order exposure features of such systems.
* Donato Cuttone, the CEO of Cuttone & Co., is a non-voting advisor to DriveWealth Holdings Inc.’s Board of Directors.
Order Routing Information is Available Upon Request. SEC Rule 606 provides all clients the opportunity to receive specific order routing information for their Transactions. Upon request, DriveWealth will provide the identity of the venue to which each of the client’s orders were routed for execution during the six months prior to the request. If you wish to receive this information, please contact firstname.lastname@example.org, or your DriveWealth representative. SEC Rule 606 also requires broker-dealers, including DriveWealth, to provide information on quarterly basis concerning order routing practices for NYSE, AMEX and Nasdaq securities. Broker-dealers are required to disclose their most frequent order routing destinations and to disclose any material aspects of their relationship with these venues including any payment for order flow arrangements. DriveWealth’s 606 report can be accessed on the internet at: https://drivewealth.com/sec-rule-606/.