Exhibit 6
FULLY DISCLOSED CLEARING AGREEMENT
OF
SPEAR, LEEDS & XXXXXXX
This AGREEMENT is made and entered into as of this 9th day of November by and
between Spear, Leeds & Xxxxxxx ("SLK") and Alexander, Wescott & Co., Inc.
("Broker").
1. Subject to the approval of the New York Stock Exchange, from the
opening of business on or about November 9, 1999 until the termination
of this Agreement as provided for in Paragraph 17, hereof, SLK will
carry the cash and margin accounts of the customers introduced by
Broker to SLK, and accepted by SLK, and will clear transactions on a
fully disclosed basis for such accounts, all as more specifically
provided in Paragraph 3 hereof, and subject to the terms and conditions
hereinafter set forth.
All references made to margin accounts in this agreement shall apply
only if the introducing firm introduces such accounts.
2. REPRESENTATIONS AND WARRANTIES
(a) Broker represents and warrants that:
Broker is duly registered and in good standing as a
broker/dealer with the Securities and Exchange Commission and
the NATIONAL ASSOCIATION OF SECURITIES DEALERS ("NASD").
Broker has ail requisite authority, whether arising under
applicable federal or state laws or the rules and regulations
of any securities exchange or regulatory authority to which
Broker is subject, to enter into this Agreement and to retain
the services of SLK in accordance with the terms hereof; and
Broker and each of its employees is in substantial compliance,
and during the term of this Agreement will remain in
substantial compliance, with the registration, qualification,
capital financial reporting, customer protection, and other
requirements of every securities exchange of which Broker is a
member, of the NASD, of the Securities and Exchange Commission
and every state to which jurisdiction Broker and each of its
employees are subject.
(b) SLK represents and warrants that:
SLK is duly registered and in good standing as a broker/dealer
with the Securities and Exchange Commission and is a member
firm in good standing with the New York Stock Exchange
("NYSE").
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SLK has all requisite authority, whether arising under
applicable federal or state laws, or the rules and regulations
of any securities exchange or regulatory authority to which
SLK is subject, to enter into this Agreement; and
SLK is in substantial compliance, and during the term of this
Agreement will remain in substantial compliance, with the
registration, qualification, capital, financial reporting,
customer protection requirements and other requirements of
every regulatory and self-regulatory organization to which
jurisdiction SLK is subject.
3. SERVICES TO BE PERFORMED BY SLK
SLK, acting as Broker's agent, shall carry the customers' cash and
margin accounts introduced by Broker on a fully disclosed basis, and
perform the following services:
(a) Execute transactions in the customers' accounts and release or
deposit money or securities to or for the accounts, only upon
Broker's instructions.
(b) Prepare and mail confirmations and summary monthly statements
to Broker's customers on forms disclosing that the account is
carried on a fully disclosed basis for the Broker.
(c) Settle contracts and transaction in securities (i) between
Broker and other brokers and dealers, (ii) between Broker and
its customers and (iii) between Broker and third persons.
(d) Per-form cashiering functions for such customers' accounts,
including receipt and delivery of securities purchased, sold,
borrowed and loaned; make and receive payments therefore,
provide custody and safekeeping of securities and cash, and
handle margin accounts, dividends and exchanges, rights,
warrants, redemptions, and tender offers with respect to such
securities.
(e) Mail to each customer a copy of the Notice to Customers as
required by New York Stock Exchange Rule 382(c).
(f) Complete the transfer of securities and accounts on behalf of
customers.
(g) Seek to ensure compliance with restricted and control
securities under the Securities Act of 1933.
(h) Pursuant to NYSE Rule 382(d), SLK will furnish any written
customer complaint it receives regarding Broker, or Broker's
associated persons, and relating to Broker's obligations and
responsibilities under this Agreement, directly to:
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(1) Broker; and
(2) Broker's Designated Examining Authority (or, if none,
to its appropriate regulatory agency or authority).
SLK will also notify the complaining customer, in writing,
that it has received the complaint, and that the complaint has
been furnished to the parties listed in h(l) and h(2) above.
(i) Pursuant to NYSE Rule 382(e):
(1) At the commencement of this Agreement, and annually
thereafter, SLK will furnish Broker with a list of
reports (i.e., exception reports and/or other
reports) that it can provide Broker, upon Broker's
written request, to assist Broker in its supervision
and monitoring of customer accounts.
(2) SLK will retain and preserve copies of the reports
requested by and/or supplied to Broker pursuant to
NYSE Rule 440 (Books and Records), or will have the
ability to either recreate copies of these reports or
provide the report format and data elements contained
in the original.
(3) Annually, within thirty (30) days of July 1st of each
year, SLK will give written notice to Broker's Chief
Executive Officer and Chief Compliance Officer
indicating: (a) the list of reports offered by SLK to
Broker described above; and (b) the specific reports
actually requested by and/or supplied to Broker as of
that date.
SLK will also provide a copy of this written notice
to Broker's Designated Examining Authority (or if
none, to its appropriate regulatory agency or
authority).
Notwithstanding subparagraph (a) through (i) above, SLK may, in its
sole discretion, for good cause shown, refuse to open an account for a
specific customer-, close an account already opened-, refuse to confirm
and/or cancel a confirmation-, reject a delivery or receipt of
securities and/or money-, refuse to clear any trade executed by
Broker-, or refuse to execute any trade for the account of a customer
introduced by Broker. Broker acknowledges that in connection with the
performance of the above described services, SLK may retain, at its
option, one or more independent data processing service bureaus to
perform any of the required functions, and agrees that SLK shall not be
responsible for any losses, damages, liability or expenses incurred by,
or claims made by, the Broker or its customers wising from the failure
of any such service bureau to perform said functions accurately, in
accordance with specifications, or within the customary time periods.
SLK's only obligation will be to cause any such service bureau to
correct any processing error in its next regularly scheduled
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processing, and to deliver any overdue work as soon as reasonably
practicable. In no event shall SLK be responsible for indirect or
consequential damages.
4. SERVICES FOR WHICH SILK IS NOT RESPONSIBLE
Unless otherwise expressly agreed in writing, SLK will not provide, nor
be responsible for providing, any services specifically enumerated in
this Paragraph:
(a) Accounting, bookkeeping or record keeping, cashiering, or
other services involving commodity transactions, or any other
transaction not involving securities;
(b) Preparation of Broker's payroll records, financial statements
or any analysis thereof;
(c) Preparation or issuance of checks in payment of Broker's
expenses, other than expenses incurred by SILK on behalf of
Broker pursuant to this Agreement;
(d) Payment of commissions to Broker's salesmen;
(e) Preparation or filing of any of Broker's reports to the
Securities and Exchange Commission, any state securities
commission, or any securities exchange, securities association
or other membership to which Broker is subject. However, SLK
will, at the request of Broker, furnish Broker with any
necessary information and data contained in records kept by
SLK, and not otherwise available to Broker, for use in making
such reports by Broker.
(f) Verification of address changes of Broker's customers.
(g) Rendering investment advice to customers.
5. DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF BROKER
(a) INFORMATION TO BE SUPPLIED BY BROKER:
Broker will provide SLK with such basic data and documents, as
shall be necessary or appropriate to permit SLK to discharge
its service obligations hereunder, including, but not limited
to, copies of records of any receipts of customers' funds and
securities received directly by Broker. In all cases, such
data and documents must be compatible with the requirements of
SLK's bookkeeping system. In addition, Broker will furnish SLK
with such information and signatures as are requested by SLK
for the opening and carrying of customer accounts on forms
that have been approved by SLK All accounts shall be opened in
accordance with SLK's requirements, and the acceptance of an
opening of an account without such requirements being
fulfilled shall not be deemed to be a waiver of such
requirements.
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A duly authorized principal executive officer of Broker
will approve in writing the opening of each customer's
account. Broker shall be responsible for maintaining proper
customer addresses and SLK may, for all purposes, rely on
such addresses as they are furnished by Broker.
Pursuant to NYSE Rule 382(e)(1), after receiving SLK's list of
available exception reports and/or other reports, Broker must
promptly notify SLK, in writing, of those specific reports
offered by SLK that Broker requires to supervise and monitor
its customer accounts.
Pursuant to NYSE Rule 382(f), in those instances where SLK
permits Broker to issue checks, whether to Broker's customers
or to third parties (i.e., parties other than Broker's
customers), Broker shall represent to SLK IN WRITING, that
Broker maintains, and shall enforce, supervisory procedures
with respect to the issuance of such checks. Such supervisory
procedures must be acceptable to SLK.
(b) RECEIPT OF MONEY AND SECURITIES:
In all cash accounts, Broker shall be responsible for all
customer purchases until actual and complete payment therefor
has been received by SLK, and, in the case of checks
representing such payment received by SLK, Broker shall be
responsible until the proceeds are actually received and
credited to SLK by its bank. SLK agrees to use due diligence
in depositing such checks promptly.
Broker shall be responsible for all sales until acceptable
delivery of the securities to SLK has been made. Broker agrees
to promptly turn over to SLK funds or securities received by
Broker from its customers, together with such information as
may be relevant or necessary to enable SLK to promptly and
properly record such remittance and receipts in the customers'
respective accounts. Broker shall arrange for timely
settlement of "delivery versus payment" transactions, and
shall not introduce any retail or individual accounts
requiring settlement, on "delivery vs payment" or "receive
versus payment" basis without first obtaining the prior
written approval of the customer allowing SLK to accept
"partial deliveries" and to abide by other clearance
arrangements as may be directed by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., or the
NASD. SILK may, at its option, charge for late payments or
deliveries, any interest incurred by it accrued at its then
prevailing "Brokers Call" rate plus 1% on the principal amount
of trade, or at such other interest rate as may be agreed upon
in writing, above the Broker's Call rate.
SLK reserves the right to give prior oral or written notice to
Broker, and to any customer, of SLK's intention to take
remedial action for failure to make timely settlement.
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(c) DUTIES OF BROKER WITH RESPECT TO CUSTOMERS:
The customer shall remain the customer of Broker, and Broker
shall be responsible for obtaining all of the essential facts
relative to every customer, every cash or margin account,
every order, and every person holding power of attorney over
any account accepted by Broker. Broker shall also be
responsible for the conduct of customer accounts and the
supervision thereof, including, but not limited to, assessing
the suitability of a transaction for the customer when
required under applicable rules, the authenticity of all
orders, signatures and endorsements, the frequency of trading
by a customer, and the genuineness of all signatures,
certificates and papers, the status under the Securities Act
of 1933 of securities proposed to be sold or margined by a
customer, and reviewing the accounts for, among other things,
manipulative practices and xxxxxxx xxxxxxx, and compliance
with all federal, state, securities exchange and association
laws, rules and regulations to which the Broker and customer
are subject.
Broker undertakes to comply with NYSE Rule 405 (1), (2) and
(3), and with other rules of regulatory organizations having
jurisdiction over Broker. It is understood that Broker will
establish adequate procedures regarding Rule 405 and will make
a diligent attempt in every case to conform to this rule.
Broker shall diligently supervise compliance through the use
of a compliance manual or other written procedures.
Broker must notify SLK in each case where Broker and a
customer authorize a Registered Representative of Broker to
exercise discretion in an account. In addition, Broker will
advise SLK at the time an order is placed if such order is for
a discretionary account of one of Broker's Registered
Representatives.
Broker warrants that, to its best knowledge, the customers
introduced to SILK by Broker shall not be minors and shall not
be such as to come under prohibitions referred to in NYSE Rule
407, or in any other law, rule or regulation of any other
regulatory authority,- that Broker's customers shall in fact
be the owners of accounts opened by SLK in their names, and
that any orders and instructions given by Broker or any of
Broker's employees shall have been fully and properly
authorized.
Prior to engaging in option trading for any of Broker's
customers, Broker shall deliver to such customer the most
recent copy of the booklet titled "Characteristics and Risks
of Standardized Options", or its successor, together with any
effective supplements thereto. A current prospectus of the
Option Clearing Corporation is option@L Broker will take all
appropriate steps to assure that customers engaging in such
trading are sophisticated investors, fully aware of the risks
involved, and that option trading is suitable for such
customers. Broker will comply in all respects with SLK's
options compliance program, including the obtaining of
information, written approval of option accounts by the Senior
Registered Options Principal of Broker,
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and execution of forms required by SLK. SLK shall not be
required to endorse any put or call options for any account
unless the account is satisfactory to SLK.
This agreement places the responsibility for "knowing the
customer" and "suitability" on the Broker. It permits SLK to
satisfy itself, for its own benefit, that Broker has the
ability to comply itself, for its own benefit, and that Broker
has the ability to comply and has complied with the
requirements of NYSE Rule 405 and the comparable requirements
of similar rules of any other self-regulatory organization to
which Broker belongs. It is understood that the preparation
and/or possession by SLK of surveillance records or any new
data, including exception reports, on behalf of, or for the
use of Broker, shall neither obligate SLK to review such
material nor make SLK responsible to know its contents.
(d) FINANCIAL DATA
Broker agrees to furnish SLK with a copy of all FOCUS Reports
upon request.
(e) Broker shall make and maintain reports, records and regulatory
filings required to be kept by the Broker by any entity that
regulates it, including any reports and records required to be
made or kept under the Currency and Foreign Transactions
Reporting Act of 1970, the Money Laundering Act of 1986, and
any rules and regulations promulgated pursuant thereto.
(f) Broker shall assume all responsibility for reviewing customer
orders prior to execution, and errors in execution.
6. BROKER INDEMNIFICATION
Broker hereby agrees to indemnify, defend and hold harmless
SLK from and against all claims, demands, proceedings, suits
and actions made or brought against SLK, and to indemnify
SLK's liabilities, losses, damages, expenses, attorneys' fees
and costs arising out of one or more of the following (except
for those claims arising out of SLK's willful misconduct):
(a) Failure of Broker or the Broker's customer to make payment
when due for securities purchased, or to deliver when due,
securities sold for the account of Broker or the Broker's
customers;
(b) Failure of a customer of Broker to meet any initial margin
call or any maintenance call, except that SILK shall be
responsible only for the portion of any such losses that are
directly attributable to SLK's failure to give proper and
timely notification to the customer of any call;
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(c) Failure of Broker to properly perform its duties, obligations
and responsibilities with respect to customer accounts (as
set forth in Paragraph 5, above), it being understood that
the participation of any employee of SLK in any transactions
referred to in Paragraph 5 shall not affect Brokers
indemnification obligations hereunder, unless such
participation by SLK's employee was fraudulent;
(d) Any dishonest, fraudulent, negligent or criminal act or
omission on the part of any of Brokers' officers, partners,
employees, agents or customers,
(e) All claims or disputes between Broker and its customers with
respect to the matters set forth in this Agreement, it being
understood: (i) that Broker guarantees the validity of
customer orders in the form such orders are transmitted to
SLK by Broker, and guarantees to SLK that each customer will
promptly and fully perform his commitments and obligations
with respect to all transactions in all of his accounts
carried by SLK hereunder, and (ii) that checks received by
SLK from Broker's customers shall not constitute payment
until they have been paid and the proceeds actually received
and credited to SLK by its bank;
(f) Any adverse claims with respect to any customer securities
delivered or cleared by SLK, it being understood that SLK
shall be deemed to be an intermediary between Broker and
customer and shall be deemed to make no warranties other than
as provided in Section 9-306(3) of the Uniform Commercial
Code;
(g) The default by any over-the-counter broker with which the
Broker deals on a principal basis, giving up SLK for
Clearance;
(h) The default by any third-party broker with whom the Broker
deals rather than using SLK to execute a transaction for
itself or a customer;
(i) The negligence, malfeasance, or mistakes of an employee of
Broker with respect to the use of any check-signing authority
that may be granted to Broker by SLK,
(j) The breach by the Broker of any warranty, representation, duty
or obligation under this Agreement;
(k) SLK's guarantee of any signatures with respect to transactions
in the accounts of Broker's customers;
(l) The failure of Broker's customers to fulfill their obligations
to the Broker or to SLK (whether or not such failure is in the
Broker's control).
7a. OMNIBUS ACCOUNT
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To further assure Broker's performance of its obligations under
this Agreement, including but not limited to its indemnification
obligations under Paragraph 6, Broker shall, on or before the
execution of this Agreement, establish an account at SLK to be
designated as the Broker's Omnibus Account (the "Account"). The
Account shall at all times contain cash, securities, or a
combination of both, having a market value of $ 0. Broker shall be
paid interest on the cash balances in the Account at the rate of 100
basis points below the Broker Call rate. The Account may be used by
Broker to trade securities on a proprietary basis.
7b. CLEARING DEPOSIT
If SLK requires a clearing deposit, the Account shall at all times
contain cash, securities, or a combination of both, having a market
value of $500,000. The clearing deposit shall be returned within 30
days after cancellation of this agreement. This deposit does not
represent an ownership interest.
If SLK shall suffer any loss or incur any expense for which it is
entitled to be indemnified pursuant to this Agreement, and Broker shall
fail to make such indemnification within five business days after being
requested to do so, SLK shall deduct the amount of such claim, loss or
expense from the commissions then credited to Broker pursuant to
Paragraph 8. If the amount of said commissions is less than the amount
of such claim, loss or expense, SLK shall have the right to withdraw
from the Account cash or securities (or both) having a market value
equal to the amount of such deficiency. Broker shall then be obligated
to immediately deposit in the Account cash or securities sufficient to
bring the Account back to a market level of at least $ 500,000.
Upon the termination of this Agreement, or as soon as practical
thereafter, SLK will pay and deliver to Broker the funds and securities
in the Account, less any amounts which it is entitled to withdraw under
the preceding paragraph; provided, however, that SLK may retain in the
Account an amount to protect it from any claim or proceeding of any
type, then pending or actually threatened, until the final
determination thereof is made. If within a reasonable time after the
termination of this Agreement, a threatened claim or proceeding is not
resolved, or a legal action or proceeding is not instituted, the amount
retained with respect to such threatened claim or proceeding shall be
paid or delivered to Broker.
8. COMMISSION PAYMENTS
(a) SLK shall charge each of Broker's customers the commission
that Broker directs it to charge for each transaction. If
specific instructions are not received with respect to a
specific transaction in the time period required by SLK to
implement same, SLK shall charge the customer the commission
prescribed in the basic commission schedule delivered to SLK
by Broker. Such basic schedule may be amended from time to
time by Broker by written instructions delivered to SLK;
provided, however, that such changes shall be implemented
only to the extent they are within the usual
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capabilities of SLK's data processing and operations systems
and only within such reasonable time limitations as SLK may
deem necessary to avoid disruption of its normal operating
capabilities. For purposes of confirmation preparation, Broker
will also furnish from time to time the source and amount of
any commission or other payment received by Broker in
connection with transactions in the customers' accounts.
(b) Commissions charged Brokers customers shall be collected by
SLK and credited to broker, after deducting SLK's compensation
referred to in Paragraph 9 (and any other amount owed to SLK
pursuant to this Agreement). Such commissions shall be
credited to the Account on a monthly basis, on the fifth
business day after the final settlement date of the month.
9. COMPENSATION
As compensation for services provided hereunder by SLK, there shall be
deducted from the commissions charged Broker's customers the amounts
set forth in the fully disclosed pricing schedule attached hereto. Said
compensation schedule may be changed as may be agreed to by both
parties.
10. MARGIN ACCOUNTS
(a) Any transaction for a customer will be considered a cash
transaction until such time as Broker has furnished SLK with
an executed customer's margin agreement and consent to loan of
securities in a form acceptable to SLK
(b) All margin accounts introduced by Broker shall be subject to
SLK's "house margin requirements." SLK currently imposes a
40% maintenance requirement, but said requirement, and other
margin requirements, may be changed at any time by giving
the Broker 10 days prior written notice of such change. In
all such margin accounts, Broker shall be responsible for
the initial margin requirement for any transaction until
such initial margin has been received by SLK in acceptable
form. SLK reserves the right to refuse to accept any
transaction in a margin account after the initial
transaction, without actual receipt of the necessary margin,
and to impose a higher margin requirement, when, in SLK's
opinion, the past history or nature of such account or the
securities therein justifies such action. SLK shall endeavor
to notify Broker in advance of all margin calls, and shall
provide Broker with copies of such calls. In the event that
satisfactory margin is not provided within the time
specified by SLK, SLK shall be at liberty to take such
actions as SLK may, in its judgment, deem appropriate. After
such initial margin has been received, subsequent margin
calls may be made by SLK. Broker agrees to cooperate with
SLK in complying with and obtaining margin on subsequent
calls.
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(c) Interest charged with respect to debit balances in customers'
accounts shall be determined in accordance with the fully
disclosed pricing schedule attached hereto.
(d) Broker shall be responsible for any failure on the part of a
customer to meet a "maintenance call", except to the extent
directly attributable to SLK's failure to give proper and
timely notification to the customer. An officer of Broker
who has been designated by Broker (and acknowledged in
writing by SLK) may request, to the extent permitted by the
margin rules, that SILK withhold temporarily any
contemplated action, or "Sell-out" or "Buy-in", for accounts
which have failed to meet a margin call. Such requests shall
be made in writing and shall clearly set forth the period of
time during which the contemplated action is requested to be
withheld. Should SLK comply in whole or in part with such
request, Broker guarantees to reimburse SLK immediately for
the maximum amount of loss or liability which SLK may
sustain or incur by reason of any compliance with such
request, by depositing sufficient funds with SLK in a
reserve or other appropriate account at a bank of SLK's
choosing over which SLK shall be signatory, to reimburse SLK
for the loss or unsecured indebtedness held in the account
of the particular customer~ provided, however, that
compliance with such a request shall not be deemed a waiver
by SLK of any of its rights hereunder, including but not
limited to, the right to close out a contract or position
if, in SLK's judgment, changing conditions render such
action advisable.
(e) Broker shall be responsible for sending each margin customer a
written statement at the time of the opening of a margin
account in compliance with Rule 10b-16 of the Securities
Exchange Act of 1934.
(f) Broker shall obtain a margin agreement from each margin
account introduced to SLK, including a hypothecation
authority, in a form and substance acceptable to SLK
11. UNSECURED DEBITS OR UNSECURED SHORT POSITIONs
Unsecured debits or short positions (on a "marked to market" basis) in
a customer's account that are not resolved by payment or delivery
within thirty calendar days shall be charged to the account of the
Broker maintained by SLK, and to which SLK credits the Broker with
commissions due. Such unpaid debits or short positions shall be netted
against commissions due on a monthly basis. Any excess of such unpaid
debits or short positions over commissions due shall be applied against
Broker's Account and shall be considered a claim against Broker
pursuant to paragraph 7 of this Agreement.
12. RESPONSIBILITIES AND RIGHTS OF SLK
SLK will maintain prescribed books and records of all transactions
executed or cleared through it. SLK also undertakes to perform in good
faith the services agreed to be performed
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in this Agreement, including the foregoing, but shall not be bound to
make any investigation into the facts surrounding any transaction that
it may have with Broker or that Broker may have with its customers or
other persons, nor shall SLK be under any responsibility of compliance
by Broker with any laws or regulations which may be applicable to
Broker.
Nothing herein shall be deemed to restrict in any way the right of SLK,
or any affiliate of SLK, to compete with Broker in any or all aspects
of Broker's business.
13. SLK INDEMNIFICATION
SLK shall have no liability to any of Broker's customers for any loss
suffered by any customer. SLK's liability will be only to Broker, and
then only to the extent herein expressly set forth. SLK hereby agrees
to indemnify, defend and hold harmless Broker from and against all
claims, demands, proceedings, suits and actions, and all liabilities,
expenses, attorney fees, and costs in connection therewith, arising out
of any dishonest, fraudulent, or criminal act or omission on the part
of any of its officers, partners or employees with respect to the
services provided by SLK under this Agreement.
14. EMPLOYEES
Without the prior written consent of the other, neither party will
during the period of this Agreement and for one year thereafter, hire
or attempt to hire any person who is employed by the other on the
termination of this Agreement, or whose employment with the other
terminated within the one year period prior to the termination of this
Agreement.
15. CONSTRUCTION OF AGREEMENT
Neither this agreement nor the performance of the services hereunder
shall be considered to create a joint venture or partnership between
SLK and Broker, or between Broker and other brokers for whom SILK may
perform the same or similar services. Neither SILK nor Broker will
utilize the name of the other in any way without the other's consent,
and under no circumstances shall either party employ the other's name
in such a manner as to create the impression that the relationship
created or intended between them is anything other than that of
clearing broker and correspondent broker.
During the term of this agreement, Broker will not enter into any other
similar Agreement or obtain the services contemplated by this agreement
from any other party.
16. CONFIDENTIALLY
Broker and SLK agree not to disclose the terms of this Agreement to any
outside parties, except to regulatory bodies with appropriate
jurisdiction and to authorized employees of the Broker or SLK on a
need-to know basis. Any other publication or disclosure of the terms
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of this Agreement may be made only with the prior written consent of
the parties.
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17. TERMINATION
This agreement shall continue until terminated as hereinafter provided:
(a) Upon any unilateral change by SLK of more than 10% per annum
in the compensation schedule referred to in Paragraph 9 of
this Agreement, or upon the unreasonable rejection by SLK of
any customers or trades pursuant to Paragraph 3, Broker may,
upon fifteen (15) days prior written notice to SILK, terminate
this Agreement as of the effective date of such unilateral
change.
(b) This Agreement may be terminated by either party, without
cause, upon thirty (30) days written notice delivered in
person or by registered or certified mail.
If either party terminates the Agreement pursuant to this
subparagraph, SLK shall have the right to impose reasonable
limitations upon Broker's activities during the period between
the giving of notice and the transfer of Broker's account.
(c) In the event either party defaults in the performance of its
obligations under this Agreement, the non-defaulting party may
terminate this Agreement on the following terms and
conditions. Written notice must be delivered to the defaulting
party specifying the nature of the default and notifying the
defaulting party that unless the default is cured within a
period of ten (10) days from receipt of the notice, this
Agreement may be terminated without further proceedings by the
non-defaulting party.
(d) This Agreement may be terminated by SLK or Broker immediately
in the event that the other party is enjoined, disabled,
suspended, prohibited or otherwise unable to engage in the
securities business, or any part of it, as a result of any
administrative or judicial proceeding or action by the
Securities and Exchange Commission, any state securities law
administrator or any self-regulatory organization having
jurisdiction.
(e) Termination of this Agreement, however caused, shall not
release Broker or SLK from any liability or responsibility to
the other with respect to transactions effected prior to the
effective date of such termination, whether or not claims
relating to such transactions shall have been made before or
after such termination.
(f) If Broker terminates this Agreement pursuant to subparagraph
(b) above within the first year of the date of this Agreement,
or SLK terminates this Agreement pursuant to subparagraph (c)
or (d) above, Broker will pay to SLK a termination fee equal
to the reasonable expenses incurred by SLK (i) in establishing
systems procedures and capacity for servicing Broker and its
customers, and (ii) in discontinuing the clearing arrangement.
However, in no event shall said termination fee be less than
$5,000 or
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more than $10,000. Said fee shall be paid ,.within 10 days
after receipt of SLK's statement setting forth, in reasonable
detail, the expenses incurred by SLK
18. ACTION AGAINST CUSTOMERS; CUSTOMER COMPLAINTS
SLK shall have the right at all times, in its sole discretion, and at
its sole expense, to institute and prosecute in its name, upon notice
to Broker, any action or proceeding against any of Brokers customers as
to any controversy or claim arising out of SLK's transactions with
Broker or with Broker's customers, and nothing contained in this
Agreement shall be deemed or construed to impair or prejudice such
right in any way whatsoever, nor shall the institution or prosecution
of any such action or proceeding relieve Broker of any liability or
responsibility which Broker would otherwise have had under this
Agreement. Broker shall assign its rights against its customers to SLK,
to the extent requested by SLK and necessary to carry out the intent of
this Paragraph.
In addition to SLK's obligations regarding customer complaints pursuant
to NYSE Rule 382(d), set forth in Paragraph 3(h) of this Agreement, SLK
and Broker shall each communicate to the other any complaint/inquiry
regarding the other.
19. NOTICES
Any notice or request that is required or permitted to be given under
this Agreement shall be sufficient if in writing, and sent by hand or
certified mail, in either case, return receipt requested, to the
respective parties at the following addresses:
Broker:
Alexander, Wescott & Co., Inc.
00 Xxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Xxxx X. Xxxxxxx-President
SLK:
Spear, Leeds & Xxxxxxx
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
20. AMENDMENTS
This Agreement represents the entire Agreement between the parties with
respect to the subject matter contained herein. This Agreement may not
be changed orally, but only in a writing signed by both parties.
15
21. EXCHANGE REGULATION
The parties acknowledge that they will be subject to the rules of the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
any other securities exchanges or associations of which either party is
or may become a member, and of any governmental agencies to whose
jurisdiction either party may be subject.
22. ASSIGNMENT
This Agreement shall be binding upon, and shall inure to the benefit
of, the respective successors and assigns of Broker and SLK.
23. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
24. ARBITRATION DISCLOSURE
- ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN
COURT, INCLUDING THE RIGHT TO JURY TRAIL.
- PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN
AND DIFFERENT FROM COURT PROCEEDINGS.
- THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR
TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY
LIMITED.
- THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY
OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE
SECURITIES INDUSTRY.
25. ARBITRATION AGREEMENT
ANY CONTROVERSY BETWEEN SLK AND BROKER ARISING OUT OF THE BUSINESS OR
THIS AGREEMENT SHALL BE SUBMITTED TO ARBITRATION CONDUCTED BEFORE THE
NEW YORK STOCK EXCHANGE, INC., OR THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC., AS SLK MAY ELECT, AND IN ACCORDANCE WITH THE
RULES OF THE SELECTED ORGANIZATION.
16
ARBITRATION MUST BE COMMENCED BY SERVICE UPON THE OTHER PARTY OF A
WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN NOTICE OF INTENTION TO
ARBITRATE, THEREIN ELECTING THE ARBITRATION TRIBUNAL.
26. This Agreement shall be submitted to and/or approved by any National
Securities Exchange, or other regulatory and self-regulatory bodies
vested with the authority to review and/or approve this Agreement or
any amendment or modifications hereto. In the event of any disapproval,
the parties hereto agree to bargain in good faith to achieve the
requisite approval.
27. If any provision or condition of this Agreement shall be held to be
invalid or unenforceable by any court, or regulatory or self-regulatory
agency or body, such invalidity or unenforceability shall attach only
to such provision or condition. The validity of the remaining
provisions and conditions shall not be affected thereby, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision or conditions were not contained herein.
28. For purposes of the Securities and Exchange Commission's financial
responsibility rules and the Securities Investor's Protection Act, the
Broker's customers will be considered customers of SLK and not
customers of the Broker. Nothing herein shall cause the Broker's
customers to be construed or interpreted as customers of SLK for any
other purpose, or to negate the intent of any other section of this
agreement, including, but not limited to, the delineation of
responsibilities as set forth elsewhere in this Agreement.
29. PRIME BROKERAGE:
(a) ESTABLISHMENT OF AN ACCOUNT
SLK agrees to establish on its books and records an account in
the name of a prime broker for introducing firm's clients and
to maintain same providing SLK receives from said client SIA
Form 151 "Executing Broker Customer Agreement" and all other
documents SLK may deem appropriate.
The introducing firm shall provide SLK with the Prime Broker
tax ID number and the full street address of it's client, the
"SIA Form 151 " as well as, the necessary settlement
instructions.
(b) CUSTOMER QUALIFICATIONS
By introducing Prime broker accounts to SLK, the introducing
firm confirms that it is aware that their client maintains a
minimum net equity of $500,000 in cash or securities with a
ready market for trades executed on behalf of an account not
managed by an advisor or $100,000 in cash or securities with a
ready market for trades executed on behalf of a customer
account managed by an investment advisor
17
registered under Section 203 of the Investment Advisors Act of
1940. The introducing firm understands that if for any reason
the account falls below such minimum net equity SLK has the
right to refuse to process trades as a prime broker
transaction. Each time you enter an order you hereby represent
that your client shall be in compliance with such minimum net
equity or will notify SLK otherwise.
In the event that any prime broker diS2ffirms any trade you
have executed you hereby agree to be responsible and liable to
SLK for settling such transaction.
(c) RESTRICTIONS ON ACCOUNT
You understand that SLK in its sole discretion may refuse to
accept Prime Broker Transactions on your client's behalf or
restrict or prohibit trading of securities in your client's
account or refuse to clear your client's transactions.
(d) CONFIRMATIONS
Unless otherwise instructed in writing, SLK shall confirm
transactions to your client, as well as to the prime broker,
by the morning of the next business day after the trade date.
The introducing firm agrees to notify SLK in a timely manner
of the contract amount of the transaction, the security
involved, the number of shares or units, whether the
transaction is a purchase or sale, and if a sale, whether the
transaction was 2 short or long sale. Introducing broker is
responsible for complying with all applicable rules and
regulations of the SEC and applicable self-regulatory
organizations governing the execution of short sales.
30. PROPRIETARY ACCOUNTS OF INTRODUCING BROKERS ["PAIB"]:
The parties agree to the following conditions and provisions as set
forth in the SEC No-Action Letter dated November 3, 1998 relating to
the net capital treatment of assets in the proprietary account of an
introducing broker ("PAIB") and to permit Introducing Broker to use
PAIB assets in its Net Capital Computations.
1. SLK shall perform a computation for PAIB assets ("PAIB Reserve
Computation") of Introducing Broker in accordance with the
customer reserve computation set forth in Rule 15c3-3
("customer reserve formula") with the following modifications:
A. Any credit (including a credit applied to reduce a
debit) that is included in the customer reserve
formula may not be included as a credit in the PAIB
reserve computation;
B. Note E(3) to Rule 15c3-3a which reduces debit
balances by 1 % under the basic method and
subparagraph (a)(1)(ii)(A) of the net capital rule
which
18
reduces debit balances by 3% under the alternative
method shall not apply; and
C. Neither Note E(1) to Rule 1 5c3-3a nor NYSE
Interpretation/04 to item 10 of Rule 15c3-3a
regarding securities concentration charges shall be
applicable to the PAIB reserve computation.
2. The PAIB reserve computation shall include all proprietary
accounts of Introducing Broker. All PAIB assets shall be kept
separate and distinct from customer assets under the customer
reserve formula in Rule 15c3-3.
3. The PAIB reserve computation shall be prepared within the same
time frames as those prescribed by Rule 15c3-3 for the
customer reserve formula.
4. SLK shall establish and maintain a separate "Special Reserve
Account for the Exclusive Benefit of Customers" with a bank in
conformity with the standards of paragraph (f) of Rule 15c3-3
("PAIB Reserve Account"). Cash and/or qualified securities as
defined in the customer reserve formula shall be maintained in
the PAIB Reserve Account in an amount equal to the PAIB
reserve requirement.
5. If the PAIB reserve computation results in a deposit
requirement, the requirement may be satisfied to the extent of
any excess debit in the customer reserve formula of the same
date. However, a deposit requirement resulting from the
customer reserve formula shall not be satisfied with excess
debits from the PAIB reserve computation.
6. Within two business days of entering into this PAIB Agreement,
Introducing Broker shall notify its designated examining
authority in writing (with a copy sent to SLK upon request)
that it has entered into this PAIB Agreement.
7. Commissions receivable and other receivables of Introducing
Broker from SLK (excluding clearing deposits) that are
otherwise allowable assets under the net capital rule are not
to be included in the PAIB reserve computation, provided the
amounts have been clearly identified as receivables on the
books and records of the Introducing Broker and as payables on
the books of SLK.
8. If. Introducing Broker is a guaranteed subsidiary of SLK or if
Introducing Broker guarantees SLK (i.e., guarantees all
liabilities and obligations) then the proprietary accounts of
Introducing Broker shall be excluded from the PAIB Reserve
Computation.
9. Upon discovery that any deposit made to the PAIB Reserve
Account did not satisfy its deposit requirement, SLK shall by
facsimile or telegram immediately notify its
19
designated examining authority and the Securities and Exchange
Commission ("Commission"). Unless a corrective plan is found
acceptable by the Commission and the designated examining
authority, SLK shall provide written notification within 5
business days of the date of discovery to Introducing Brokers
that PAIB assets held by SLK shall not be deemed allowable
assets for net capital purposes. The notification shall also
state that if Introducing Broker wishes to continue to count
its PAIB assets as allowable, it has until the last business
day of the month following the month in which the notification
was made to transfer all PAIB assets to another clearing
broker. However, if the deposit deficiency is remedied before
the time at which the Introducing Broker must transfer its
PAIB assets to another clearing broker, the Introducing Broker
may choose to keep its assets at SLK.
10. The parties shall adhere to the terms of the No-Action letter,
including the Interpretations set forth, in all respects.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPH 24. BROKER
ACKNOWLEDGES THAT IT HAS RECEIVED, AND READ, A COPY OF THIS AGREEMENT, AND
AGREES TO BE BOUND BY THE TERMS AND CONDITIONS CONTAINED HEREIN.
SPEAR, LEEDS & XXXXXXX
By: _______________________
Name: _______________________
Title: _______________________
Alexander, Wescott & Co., Inc
By: _______________________
Name: _______________________
Title: _______________________
Update 8/9/99 [CS]
20
October 28, 1999
Alexander, Wescott & Co., Inc.
00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, 'NY 10005-3001
Dear Chief Compliance Officer:
As you know, New York Stock Exchange Rule 382 and NASD Rule 3230, governing the
relationship between clearing firms and introducing firms, were recently
amended. Pursuant to the amended Rules, upon your request Spear, Leeds & Xxxxxxx
("SLK") will provide you with copies of certain exception reports and other
reports. A list of the specific reports SLK can provide, along with a brief
description of each report, is set forth below. Please place a check xxxx next
to each report you would like to receive, sign this letter in the place
indicated, and return the letter to us.
Please note, some reports are available for retail accounts only and some are
available for professional accounts only.
If your firm is interested in obtaining certain customized reports or reports
not listed below, SLK's Clearance Services Department will be pleased to discuss
both your firm's needs and the available methods of transmission and delivery of
the reports.
REPORTS AVAILABLE FOR RETAIL ACCOUNTS ONLY:
A_____ ITEMS FOR ATTENTION REPORT (CR364-01)
This report is a summary report. It reflects all significant exceptions
(i.e., discrepancies, missing items, improper positions, etc.) in an
account. For example, among other things, this report lists: missing
option and margin agreements, large debit balances, overdue items, etc.
B_____ EXCEPTION STATUS REPORT (CR331-48)
This report reflects all account activity, positions, balances equity,
buying power, cash available and margin maintenance requirements.
C_____ OPEN MARGIN CALLS (WITH BREAKDOWN BY DATE) (CR310-01)
This report reflects open margin calls. It shows the dollar amount of
the margin call that remains open from the initial date Of Occurrence,
and it also shows the type of margin
call (i.e., Fed call, Exchange call and/or House call).
D_____ MARGIN CALLS (CR301-12)
This report reflects present open margin calls.
E_____ OPTION SUITABILITY EXCEPTION REPORT (CR301-17)
This report lists an account's approved option trading strategies, and
indicates option trading that is Outside of Current approval.
F_____ 200 CONTRACTS REPORT (CR301-01)
This report lists accounts that have an option position of 200 or more
contracts in a given security.
G_____ CONCENTRATED ACCOUNTS (CR301-07)
This report lists accounts that have a concentrated position. It
reflects the percentage of equity a concentrated position encompasses
for such account, as well as the market value of the concentrated
position, and the prior night's closing price for that particular
security.
H_____ UNSECURED ACCOUNTS (CR301-37)
This report reflects accounts that have an unsecured balance/negative
equity.
I_____ MONEY LINE BY REGISTERED REPRESENTATIVE (CR331-45)
This report reflects cash balances on trade date and settlement date,
total market value, SMA, cash available, and buying power.
J_____ CASH OVERDUE BY AGE (CR301-04)
This report reflects accounts with overdue cash items. It lists the age
of the overdue cash item.
K_____ STOCK OVERDUE BY AGE (CR301-25)
This report reflects accounts with overdue Securities. It lists the age
of the overdue securities.
L_____ COMMISSION DAILY DETAIL (PS915-01)
2
This report reflects commissions by branch and registered
representative. It shows the number of shares traded, the price per
share, the commission earned, and the commission percentage the account
is maintained at.
REPORTS AVAILABLE FOR PROFESSIONAL ACCOUNTS ONLY:
M______ DAY TRADE EXCEPTION SUMMARY REPORT (DTAP0702-3)
this report is a snapshot of day trading margin calls sorted by company
code.
N______ DAY TRADE EXCEPTION ANALYSIS REPORT (DTAP0702-4)
This report is a daily day trading detail of margin violations.
O______ MARGIN CALL REPORT (When Available)
When available, this report will reflect all margin calls (Fed calls,
Exchange calls and/or House calls) aged by date and containing a daily
xxxx on House calls.
Finally, SLK is required to update its customer records. Please print the
following current information:
Your firm's Designated Examining Authority ["DEA"]: _________________________
Your firm's Coordinator at its DEA: Name:____________________
Phone:___________________
Your firm's Chief Executive Officer ["CEO"]: Name:____________________
Phone:___________________
Your firm's Chief Compliance Officer: Name:____________________
Phone:___________________
Please place an authorized signature below acknowledging your firm's receipt of
this letter. and return the letter to us.
ACKNOWLEDGED:
Introducing Broker: ___________________________
3
By: ___________________________
Print name: ___________________________
Title: ___________________________
Date: ___________________________
4
November 22, 1999
Xx. Xxxxxxxx Xxxxx
Vice President
Assistant Compliance Director
Spear, Leeds & Xxxxxxx,
Dear Xx. Xxxxx:
As required by NYSE Rule 382 the Exchange has completed its review of your
firm's fully disclosed clearing agreement with Alexander, Wescott & Co., Inc.
and finds it acceptable. The copy of the clearing agreement has been retained
for our files.
As a reminder, irrespective of the specific allocations of responsibilities
provided for in the clearing agreement, both the Securities and Exchange
Commission and the New York Stock Exchange, Inc., for purposes of the Securities
Investor Protection Act and SEC Rules 15c3-1 and 15c3-3, consider the Customers'
accounts to be those of the carrying/clearing firm.
Additionally, your organization may have entered into an agreement With the NYSE
to receive Consolidated Network A last sale and quotation information and other
types of market data. The agreement stipulates that you will use market data for
your individual business needs and will neither furnish said information to any
other person, nor retransmit market data within or outside of your premises.
Any questions concerning this restriction should be discussed with Xx. Xxxxxx
Xxxxx, Manager of Subscriber Services at (000) 000-0000.
Very truly yours
Xxxx Xxxx
Surveillance Assistant
c: Xx. Xxxxxx Xxxxx
Ms. Xxxx Xxxxxxxxx
