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Product Sponsor and Vendor Compensation

July 2016 

In the normal course of business, ProEquities, Inc. and its registered representatives and investment adviser representatives receive compensation and other payments related to the sale of securities and to the financial planning, financial advisory, and asset management services provided by ProEquities and its investment adviser representatives. The investment advisory services offered by ProEquities and its investment adviser representatives include "sub-advisory" arrangements with third-party money managers. For the investment management services that ProEquities provides, it may receive compensation and other payments in the form of:

  • Advisory fees from our customers based on the amount of assets under management by our Firm (or by third-party money managers) or upon the financial planning and/or advice services provided by our investment adviser representatives.
  • Cash payments from product sponsors as reimbursement for training and educational expenses incurred by our investment adviser representatives when attending educational meetings or conferences that are held by ProEquities or by the product sponsor. 
  • Cash payments  from product sponsors through the Firm to its registered representatives as reimbursement for product marketing efforts or attendance at due diligence meetings (in accordance with FINRA rules).

If a client enters into an advisory agreement with a third party money manager, ProEquities may receive payments from such third party money manager for the advisory services ProEquities performs under its investment advisory services agreement with the client based upon the amount of Assets under Management (AUM) that is held with a particular manager.  

In addition to compensation that ProEquities receives for its advisory services provided to the client, ProEquities may receive compensation from the third party money manager based on any or all of the following: (i) the amount of assets invested with a particular third party manager in a given year; (ii) the amount of AUM that is held with a particular manager; (iii) a percentage of the total management fee charged by a manager; and (iv) a flat fee from the manager.  These compensation arrangements are typically known as “revenue sharing.”  In addition, ProEquities may receive greater compensation from certain third party money managers, compared with others, and that may give ProEquities incentive to choose one third party money manager over another.

Because ProEquities may receive revenue sharing from third party money managers, ProEquities has a financial interest in recommending that clients engage the investment advisory services of a third party money manager with whom ProEquities has an agreement. Clients should understand that entering into an advisory relationship with a third party money manager is voluntary, and that if the client chooses to do so, then ProEquities will have a financial interest in bringing together that relationship. However, all investments made by ProEquities clients, including those made with third party money managers, are evaluated by a supervising principal for suitability, based on the client’s individual needs and objectives.

ProEquities and its registered representatives sell a variety of securities, including mutual funds, options, money market instruments, variable products (variable annuities and variable life insurance), stocks, bonds, Section 529 college savings plans, and alternative investments (such as real estate investment trusts, oil and gas partnerships, Section 1031 exchange programs and similar programs).  ProEquities may execute transactions in these securities and receive compensation and other payments in the form of:

  • Commissions from product sponsors based on transactions effected.
  • Recurring distribution fees from product sponsors based on assets held in an investment, commonly referred to as trail commissions or 12b-1 fees.
  • Cash payments from product sponsors to ProEquities for research and due diligence associated with securities offered for sale by the Firm. 
  • Cash payments in the form of rebates and incentives from ProEquities' clearing firm, Pershing, to ProEquities for distribution assistance (including client asset levels maintained in certain money market sweep funds), and participation credits (monthly margin debit interest, free credit interest rebates and account inactivity fee rebates) on certain client account balances. ProEquities may also from time to time receive special incentives from Pershing for its participation in temporary marketing programs.  Examples of prior programs include incentives to increase the number of incoming account transfers and retirement account openings.  Because ProEquities receives rebates and incentives from Pershing as described above, ProEquities has a financial interest in recommending that you allocate a portion of your assets to certain money market sweep funds. ProEquities may also participate in temporary marketing programs for which it receives rebates and incentives from Pershing, and therefore may have a financial interest in recommending to you products or services included within the temporary marketing program.  You should understand that you may choose to allocate your assets to money market sweep funds that do not produce a cash incentive for ProEquities and you may choose not to participate in any temporary marketing program.
  • Other cash payments from our "product partners" to ProEquities, as discussed in more detail below. 

Markups of Certain Costs Charged by Third Party Service Providers. ProEquities’ clearing firm, Pershing, as well as other third party service providers, may assess certain incidental charges associated with account services, including but not limited to annual check writing and debit card fees on Corestone accounts, wire fees, check stop payment fees, returned check fees, ACH return fees, security transfer and redemption fees, reorganization processing fees, trade confirmation fees, outgoing account transfer fees, margin extension fees, margin debit interest, IRA annual maintenance fees, IRA termination fees, amounts charged to produce year­end statements and account reports, paper surcharge fees foreign security transaction fees, initial document review and ongoing annual service fees for special products, including but not limited to limited partnerships, mail courier fees, bank charges and/or transactions charges related to processing.  These charges are assessed against the customer’s account and may consist of both charges that ProEquities pays to the clearing firm or third parties as well as additional charges that ProEquities assesses for these account services.  ProEquities may also mark up any other charges passed through by its clearing firm or other third parties but not specifically identified above.

Product Sponsors. The product sponsor of a mutual fund, variable contract or alternative investment generally funds all or some portion of the commissions and distribution fees for the investment through fees and expense charges that are associated with that investment. These fees and expense charges are described in the prospectus, private placement memorandum, or other disclosure documents for that investment. Fees based on assets under management and for financial planning services are disclosed in the client’s investment advisory and financial planning agreements with ProEquities.

Product Partners. ProEquities has also entered into marketing arrangements with a number of mutual fund, variable contract and alternative investment product sponsors and third-party money managers. These “product partners” are sometimes invited to attend or participate in educational meetings and conferences for ProEquities registered representatives and investment adviser representatives, and may be featured more prominently on the ProEquities website or other communications than other product sponsors. As a result, these product partners may have greater access to our registered representatives than other product sponsors.

As of the date of this disclosure, the Firm's product partners include: 

 

The Firm’s product partners include: 
Allianz  Loring Ward
American Funds  MetLife
AssetMark  Nationwide
Atlas Energy  Pacific Life
Aurum  Principal Financial Group
Brinker Capital  Protective Life
CNL Investment Co.  Prudential
Epoch Properties  Resource Real Estate
First Trust Portfolios  Ridgewood Energy
Franklin Square  Sammons
Hamilton-Bates  Strategic Storage Trust, Inc
Hines Real Estate Securities  Transamerica
Inland Real Estate  Waveland Energy
Jackson National  WP Carey
John Hancock  Voya
Lightstone
Lincoln Financial Group  
   
   
   
   

 

ProEquities may add or eliminate product partners from time-to-time without prior notice.

Product partner marketing arrangements include provisions for cash payments to ProEquities. The cash payments may be based on a fixed amount per year, on a percentage of the amount that ProEquities customers have invested with the product partner, or both.  

ProEquities registered representatives and investment adviser representatives do not receive additional compensation for selling securities offered by a particular product sponsor, whether it is a product partner or not. Furthermore, they are not required to achieve a sales quota with respect to investments or services offered by any product sponsor. ProEquities also has a policy against accepting reimbursement through brokerage transactions directed to the Firm by product sponsors.

The Firm believes that, in general, the product partners offer investment and advisory products and services of a high quality. However, ProEquities does not guarantee that these products and services will perform better than others that may be available, and encourages its registered representatives, IARs and customers to consider any product sponsor or third-party money manager whose products and services might be suitable for the customer.

Registered representatives and IARs of the Firm who are associated with Everence may be eligible for incentives provided through Everence Trust (such as eligibility for deferred compensation and health benefit programs and matching certain charitable contributions made by the representative) based on their sales of Praxis Mutual Funds and other products (such as insurance) that are offered by Everence or its affiliates.