Compliance Consulting Agreement – Annual Compliance Program Gold Package (5 Hours) – Monthly Payments
RIA COMPLIANCE CONSULTANTS, INC.
COMPLIANCE SERVICES AGREEMENT
ANNUAL COMPLIANCE PROGRAM (GOLD PACKAGE)
This Compliance Services Agreement, which includes and incorporates the attached schedules and/or addendums, (the "Agreement") is between RIA Compliance Consultants, Inc., a Nebraska corporation located at 6910 Pacific Street, Suite 102, Omaha, Nebraska 68106 ("RCC" or “RIA Compliance Consultants”), and investment adviser as identified below (the "Client").
Section 1. Scope of Engagement & Compliance Services Are Limited
This scope of this engagement and the compliance services available from RCC under this Agreement are limited as described in Exhibit A attached hereto and incorporated herein (“Compliance Services”). The term “Securities Regulator” as used in this Agreement refers to the primary U.S. securities regulator of Client as an investment adviser. RCC does not provide any assistance with or services for compliance requirements of foreign securities regulators.
Section 2. Fees & Term
RCC's fees, expenses, initial retainer, method of payments, billing practices, replenishment of retainers, term and refunds for this engagement are described in Exhibit B attached hereto and incorporated herein and the Minimum Fixed Fee and Hourly Rate Schedule attached hereto and incorporated herein.
Section 3. Client’s Duties
(a) Client recognizes the value and usefulness of the Compliance Services of RCC are dependent upon the accuracy and completeness of the information provided by Client to RCC. Client will provide RCC with all requested information and documents that RCC may reasonably request in order to prepare any mutually agreed upon investment advisor documents and perform RCC’s Compliance Services. Client will affirmatively disclose to RCC (without RCC making a specific request) any material information related to the Compliance Services being provided to Client. Depending upon the particular services being provided to Client, the following are examples of material information which should be shared with RCC: (i) any conflicts of interest of Client, Client’s supervised persons and Client’s parent company/owner, subsidiaries, and affiliates; (ii) any deficiencies or violations (known to Client or Client’s executives, staff or investment adviser representatives) of Client’s code of ethics or supervisory procedures and policies; (iii) any deficiencies or violations (known to Client or Client’s executives, staff or investment adviser representatives) of applicable rules, regulations or laws; (iv) any current or prior inquiries or investigations by Client regarding violations of Client’s code of ethics or supervisory procedures and policies, any rules, regulations and laws, or industry practices; (v) any current or prior customer disputes, arbitrations or lawsuits related to Client or Client’s executives, staff or investment adviser representatives; and (vi) any regulatory or criminal inquires, investigations or proceedings regarding Client or Client’s executives, staff or investment adviser representatives. RCC will not be responsible for the verification of the information and documentation provided by Client. RCC will not be responsible for verifying the accuracy or truthfulness of any information, document or statements provided by the officers, staff, investment adviser representatives or outside professionals (such as attorneys and accountants) of Client.
(b) It is Client’s responsibility to fully disclose in advance to RCC all material facts related to Client’s investment advisor. Moreover, it is Client’s duty to review, understand, add, edit and revise if necessary, implement and update any documents (e.g., disclosure document, policies, procedures, checklists and code of ethics) provided or prepared by RCC. To the extent that Compliance Services involve written supervisory procedures or code of ethics, Client understands that the template and customized written supervisory policies and procedures and code of ethics provided or prepared by RCC are based generally upon the published investment adviser rules of Securities Regulator but should not be considered as exhaustive, comprehensive or definitive list of Client’s obligations under the investment adviser laws and rules; the template and customized written supervisory policies and procedures and code of ethics provided or prepared by RCC may not necessarily address every topic, policy or procedure that may need to be covered by Client. RCC offers no warranty or guaranty that the written supervisory procedures or code of ethics provided by RCC is current or addresses all topics, conflicts of interest, rules, policies and procedures required by Securities Regulator. RCC strongly recommends that Client review all of the specific statutes and regulations of Securities Regulator for an investment adviser. Any template and customized written supervisory policies and procedures and code of ethics provided or prepared by RCC are not a substitute for Client fully understanding the applicable investment adviser laws and rules. The written supervisory policies and procedures and code of ethics should be treated by Client as a living and breathing document that should be regularly referred to and updated by Client. In other words, Client should not place its written supervisory policies and procedures and code of ethics on a shelf and let it gather dust. Client understands that due to changes of investment adviser laws and rules, Client’s written supervisory policies and procedures or code of ethics may need to be updated. Client acknowledges that RCC is not responsible under this Agreement for notifying Client of changes to the investment advisor laws and rules, and it will be Client’s duty to update the written supervisory policies and procedures and code of ethics.
(c) Upon initial presentment and prior to using with a securities regulator, investment advisory customers or the public, Client will thoroughly review all investment advisor documents prepared by RCC to ensure that such documents are factually accurate and consistent with Client’s actual practices. Client will ensure that all documents have been fully customized to be consistent with Client's actual business model. Additionally, Client will ensure that proposed documents make full and fair disclosure of all material facts necessary for informed decision making by investors, especially where a possible conflict of interest is involved, irrespective of whether such disclosure is called for by a specific item of a regulatory document. Client will immediately advise RCC of any inaccuracies, omissions of material facts or inconsistencies that Client finds in such documents. If Client does not understand any particular disclosure or term within such documents, Client will immediately inform RCC. Client understands that by providing any document prepared by RCC to customers, securities regulators, and the general public, Client is acknowledging the accuracy of the information contained in all such documents prepared by RCC and used by Client. It will be Client’s responsibility to fully review, understand and resolve the deficiencies identified by RCC. RCC will not be responsible under the Compliance Service of this Agreement for drafting or implementing any recommendations identified during the assessments of the investment advisory documents and compliance program.
(d) Client will provide detailed information to RCC regarding, but not necessarily limited to, Client’s preferred business model, investment advisory services, fee structure, and custodian or money managers. Although RCC at its discretion may discuss various options or offer examples regarding how the Client could structure its investment advisory services, Client understands RCC’s Compliance Services are limited to compliance matters.
(e) Client will be responsible for designating a principal or employee of Client to serve as the administrator of Client’s IARD/Web CRD account. If Client desires RCC to file documents (approved by Client) via IARD or CRD systems, Client will authorize RCC to serve as a user (non-administrator) of Client’s IARD/Web CRD account.
(f) Client will be solely responsible for funding the IARD/Web CRD account.
(g) Client understands that the Compliance Services do not include RCC verifying the existence and/or safekeeping of the assets held by Client or a third-party custodian. The Compliance Services will not include RCC contacting investment advisory customers of Client.
(h) Client will designate at least one individual at Client’s firm to receive, review, and take action on RCC’s newsletters, blog posts on RCC’s website and other electronic notices sent by RCC via email or RCC’s customer portal. Client acknowledges that such notices will include important information that could require Client’s immediate action. RCC is not responsible for Client’s failure to read, understand, or respond to important notices and communications sent by RCC.
(i) Client understands that the Compliance Services do not include RCC providing any evaluation of the suitability or risk of asset allocations, investment and trading strategies or investment recommendations made by Client. The Compliance Services do not include an investigation or analysis of whether Client has an adequate basis for recommending/selecting an investment, whether the investment advisory customer is over concentrated in the investment or asset class, whether a customer is over-leveraged, whether the time horizon of the investment is consistent with the investment advisory customer’s time horizon, whether a particular investment or portfolio is too volatile for a customer and whether such investment is in the investment advisory customer’s best interest. Likewise, the Compliance Services do not include a review or analysis of the pre-approval or exception report systems utilized by Client to supervise the investment recommendations and selections made by its supervised persons. Additionally, RCC does not conduct due diligence of investment products, securities issuers, fund managers, other investment advisors, qualified custodians or other vendors utilized by Client. RCC does not offer investment advice.
(j) Client understands that an actual examination of Client’s investment advisor by a securities regulator is likely to be more staff intensive and broader in scope than the Compliance Service offered by RCC, and consequently, a securities regulator is highly likely to detect deficiencies and violations, which were not uncovered during assessment of Client’s investment advisory documents or compliance program as part of the Compliance Service.
(k) Client will retain legal counsel to prepare or review Client's investment advisory customer agreement. RCC will not provide Client with any sample investment advisory customer agreements and will not review any existing investment advisory customer agreements presented by Client.
(l) Fees paid to RCC will never cover any of the following: Client’s expense associated with acquiring a surety bond (if required by the Securities Regulator); the costs of registration, examination, licensing and user fees charged by the applicable Securities Regulators and IARD system; and the fees charged by other professionals, such as an accountant or lawyer, hired by Client.
(m) To the extent that Client requests RCC to prepare and/or file the Form ADV to register or notice file Client’s investment adviser or the Form U4 or Form U5 to register/de-register an individual as an investment adviser representative of Client’s investment adviser, Client is solely responsible for verifying that RCC in fact prepared and filed such document with the applicable securities regulator. Since failure to register or notice file can result in an adverse regulatory enforcement proceeding, Client cannot merely rely upon RCC to prepare or file such document without further verification by Client that such request has been completed.
(n) It is Client’s sole responsibility to monitor whether a prospective investment adviser representative’s securities examination is approaching the applicable state’s expiration date and whether the Form U4 has been filed before such expiration date. Likewise, if Client’s investment adviser representative has marked on his or her Form U4 that he or she is utilizing a professional designation in lieu of a securities examination as the pre-requisite, Client is solely responsible for ensuring that such professional designation is continuously in good standing. RCC will not be responsible for verifying or monitoring whether a securities examination is approaching expiration or a professional designation for an investment adviser representative of Client is not in good standing.
(o) Client will follow and comply with all laws and rules of the applicable securities regulators.
Section 4. Nature of Compliance Consulting Relationship
RCC is a compliance consulting and services firm. Although RCC has an affiliate that is a law firm known as Bryan Hill Law (“BHL”) and RCC may have an individual on its staff that is also licensed as an attorney offering legal services in a completely separate capacity and through BHL, RCC is not a law firm or an attorney and does not provide legal services. RCC is not serving as Client’s attorney.
In general, a licensed attorney is regulated by his or her state supreme court through the use of rules of professional conduct and ethical requirements, minimum education and examination requirements, mandatory professional liability insurance coverage, client trust account procedures and trust account audits and a disciplinary process. Unlike a client of an attorney, a client of RCC will not receive the advantages of such regulatory oversight since the compliance consultant occupation is not licensed by state government.
A compliance consulting relationship with RCC is not provided those legal and professional protections that normally exist under an attorney-client relationship such as the following: (i) privileged communication between an attorney and client; (ii) the requirement for an attorney to use a client trust account for safekeeping of legal fees paid in advance by a client; (iii) the requirement for an attorney to maintain professional liability insurance; or (iv) prohibitions preventing an attorney from having impermissible relationships with clients, representing other persons with conflicting interests, receiving referral fees from third-party vendors, or prospectively limiting liability for malpractice through contractual provisions in a client agreement.
Unlike an attorney, RCC does not utilize a client trust account for the retainer or consulting fees paid in advance by a client, does not follow trust accounting procedures (and is not supervised by a regulator or third-party) for such retainer or consulting fees paid in advance, and either prohibits or severely limits the circumstances and time period for refunds, and consequently this arrangement with RCC lacks the safeguards associated with an attorney's client trust account. Due to limitations in the software used by RCC to prepare invoices, there may be references located on requests and/or invoices to a “trust” account; however, Client acknowledges that despite any such references, RCC does not utilize a client trust account.
Unlike an attorney, RCC is not fiduciary. Unlike an attorney, RCC is not required to maintain professional liability insurance. Unlike an attorney, RCC is utilizing several contractual provisions within this Agreement in which Client waives any and all liability for certain claims and agrees to limit the extent of RCC’s liability for malpractice for other claims. Unlike an attorney, RCC receives referral fees from vendors participating in the Strategic Alliance Program and other referral programs of RCC.
If RCC provides Client with comments regarding an investment advisory agreement or other agreement, this does not constitute and should not be deemed as legal advice. Such comments provided by RCC are not a substitute for a review, revision and approval of Client's investment advisory agreement or other agreement by an attorney in Client's jurisdiction. Client understands that any comments provided by RCC regarding Client's investment advisory agreement or other agreement have not been prepared by an attorney to comply with the laws of Client's local jurisdiction. Client acknowledges that by relying upon comments provided by RCC without local legal counsel's review and approval, Client is undertaking the risk that Client's investment advisory agreement or other agreement is not legally enforceable and may fail to best protect Client's interests.
In the event that a securities regulator initiates an enforcement proceeding against Client claiming Client violated applicable law, Client will need to retain legal counsel to represent Client before the securities regulator. Although RCC may serve as an expert resource to Client and Client's legal counsel regarding industry practices, RCC is not a substitute for retaining appropriate legal counsel.
There is no guarantee that consulting work performed by RCC will be favorably received by the applicable securities regulators.
RCC strongly recommends that prior to executing this Agreement, Client should retain an attorney, who is not affiliated with RCC, to review and provide Client with independent advice regarding the terms of this Agreement.
Client's Initials
Section 5. Non-Exclusive Relationship with RCC
Client does not have an exclusive client relationship with RCC. RCC may have other clients receiving services from RCC which are competitors of Client and/or include former supervised persons of Client. RCC may also have other clients that have a business alliance, broker-dealer or vendor relationship with Client or Client’s associated persons.
Section 6. Strategic Alliance Program & Other Referral Arrangements
RCC has established the Strategic Alliance Program and other referral arrangements whereby RCC has agreed to publicize the services and/or products of Strategic Alliance members and certain third-party vendors and refer or introduce such Strategic Alliance members and third-party vendors to Client. Depending upon the third-party vendor, Client may receive discounts or special offers from the Strategic Alliance member or third-party vendor. RCC receives compensation from each Strategic Alliance member and third-party vendor referred or introduced by RCC which may include an annual fixed fee and/or a percentage of the fee charged by the third-party vendor to Client. This creates a conflict of interest for RCC and biases the objectivity of RCC and its employees when referring, introducing, referencing or otherwise discussing such Strategic Alliance Members and third-party vendors. Client is under no obligation to utilize the services and/or products of Strategic Alliance members and other third-party vendors referred or introduced to Client by RCC.
RCC is not affiliated with the Strategic Alliance members and any other third-party vendors and does not control or supervise the services or products of the Strategic Alliance member or other third-party vendors. Client acknowledges that RCC’s referral, introduction, discussion or other reference to these Strategic Alliance members or third-party vendors does not mean that RCC has performed any level of due diligence on the services or products of the Strategic Alliance members or other third-party vendors referred or introduced by RCC. Client acknowledges and agrees that RCC is not liable for any damages that result to Client from the actions or inactions of a Strategic Alliance member or third-party vendor referred or introduced by RCC.
RCC is not making any recommendation to Client about whether Client should utilize the services or products of a Strategic Alliance member or other third-party vendor. Client acknowledges that Client’s determination to use the services or products of a Strategic Alliance member or any other third-party vendor is an important decision and should not be based upon a third-party vendor’s participation in the Strategic Alliance Program or referral, introduction or reference by RCC. As with any service provider, RCC recommends that Client perform its own due diligence on each Strategic Alliance member or third-party vendor referred or introduced by RCC. Before engaging the services or utilizing the product of a Strategic Alliance member or third-party vendor referred or introduced by RCC, Client agrees to perform its own independent investigation and evaluation to make sure that the applicable service or product of the Strategic Alliance member or third-party vendor is the best fit for Client and meets Client’s performance requirements and regulatory and cybersecurity obligations.
Section 7. Non-Solicit of RCC Employees
Without the written consent of the president of RCC, during the term of this Agreement and for a period of twelve months after this Agreement's termination, Client and Client's affiliates will not engage in any of the following activities: (1) directly or indirectly solicit, contact, negotiate with, or in any manner attempt to induce any individual, who is currently employed by RCC and personally works or worked with Client while affiliated with RCC, to terminate his or her employment with RCC; nor (2) hire or engage any individual, who is currently employed with RCC and personally worked with Client while at RCC, as an employee or a compliance consultant (outside of an engagement through RCC). Under no circumstances will this section prevent a Client from soliciting or hiring a current or former RCC employee, who is licensed as an attorney, to serve as the Client's attorney.
Section 8. Client's Confidential Information
In providing Compliance Services, RCC will acquire information of a confidential nature relating to Client's business activities and its investment advisory customers. RCC hereby agrees to maintain the confidentiality of Client's information and shall not use, publish, or otherwise disclose any such confidential information pertaining to Client without Client’s express written consent.
If Client provides RCC with possession of any investment advisory related document, Client will redact (blackout or remove) at least partially the legal name of each investment advisory customer and any full or complete brokerage account numbers, bank account numbers, policy numbers, credit card numbers, driver's license numbers, passport numbers, visa numbers, social security numbers, tax identification numbers, passwords and dates of birth of investment advisory customers before providing RCC with possession of such document containing this confidential information. For example, if Client intends to provide RCC with a document which includes name of investment advisory customer (e.g., Thomas Andrew Smith) with a full date of birth (01/14/1973), Client will redact or black-out the investment advisory customer’s name to only show “Smith” (or a customer number if utilized by the firm) and date of birth to only show “1973”.
RCC recognizes that Client may be subject to the provisions of the Securities and Exchange Commission's Regulation S-P, or other privacy rules promulgated under the Gramm-Leach-Bliley Act (the "GLBA"). RCC represents that it is a nonaffiliated third-party service provider that is excepted from the notice and opt-out requirements pursuant to the GLBA.
To the extent that Client is utilizing RCC to assist with registering and/or notice filing as an investment adviser or investment adviser representative, Client authorizes RCC to disclose, as reasonably necessary, confidential information about Client’s business activities to the applicable securities regulators as part of the investment advisor registration process.
Nothing in this Section will diminish or restrict RCC's right, as later described in this Agreement, to use for the benefit of another party any materials that are the same (except for Client's name, CRD number or associated persons' names) as or similar to the materials prepared by RCC for Client under this Agreement.
Section 9. Not Work Made for Hire & Limited, Non-Exclusive License
RCC shall retain sole ownership of the copyright of all materials prepared by RCC under this Agreement. After removing Client’s name, Client’s CRD number and the names of Client’s associated persons, RCC may use the materials prepared by RCC under this Agreement for parties or investment advisors other than Client without any limitations, restrictions or charges to RCC. Under no circumstances shall any materials prepared by RCC pursuant to the Agreement constitute works made for hire under copyright law. Client will execute any necessary forms or papers that RCC considers necessary to secure RCC’s copyright with no charge to RCC.
RCC shall grant Client a limited, non-exclusive license to use the materials prepared by RCC under this Agreement in the following manner and under only these conditions:
Section 10. Not Intended to Detect Fraud
Client understands that RCC is not a fraud examiner and the Compliance Services provided under this Agreement are not intended to detect or prevent fraud including but not limited to inaccurate or false calculation or valuation of assets under management, false statements of the Form ADV, bribery, extortion, identity theft, forgery, misrepresentation, collusion to circumvent internal controls, selling away, unlawful sale of unregistered securities, failure to register as an investment adviser or an investment adviser representative thereof, failure to register as a securities broker-dealer or a registered representative thereof, Ponzi schemes, insider trading, undisclosed outside business activities, inaccurate or false fee calculations, a loan from an investment advisory customer, a bribe, insider trading, front running investment advisory customer trades, cherry picking profitable trades for personal accounts, misappropriation of limited investment opportunities owed to customers, cybersecurity breach, identity theft, wire fraud, unauthorized disbursement, theft, embezzlement, misappropriation or unlawful conversion by Client or Client’s owners, directors, officers, employees, investment adviser representatives, solicitors, custodians, third-party money managers, vendors or outside professionals.
Section 11. Miscellaneous
(a) Counterparts. The parties may execute this Agreement on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument.
(b) Severability. If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected by such determination, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid.
(c) Force Majeure. In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God (including fire, flood, tornado, earthquake, storm, hurricane or other natural disaster), terrorism, war, cyberwar, invasion, espionage, cyber espionage, act of foreign enemies, rebellion, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other party resulting from such failure to perform or otherwise from such causes.
(d) Headings. Section and paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement.
(e) Representation of Signatories. Each of the undersigned expressly warrants and represents that they have full power and authority to sign this Agreement on behalf of the party indicated and that their signature will bind the party indicated to the terms hereof.
Section 12. Acknowledgements, Disclosures Limitations, Requirements & Terms of Schedules & Addendums
Client has read, understands and agrees to the acknowledgements, representations, disclosures, limitations, requirements, and terms made by RCC to Client within the attached Exhibits, Disclosures, Schedules and Addendums or any RCC revisions of these documents provided to Client.
Section 13. No Third-Party Beneficiary
This Agreement and the Compliance Services provided under this Agreement are for the exclusive benefit of Client. The materials prepared under this Agreement are not provided for the benefit of a third-party such as a broker-dealer, custodian, or investment adviser that has a business relationship with Client or an individual or entity who is a recipient or customer of Client’s investment advisory services.
Section 14. Choice of Law and Venue
This Agreement shall be governed by and construed according to the laws of the State of Nebraska without giving effect to its choice of laws principles. The parties agree that all actions and proceedings arising out of or relating directly or indirectly to this Agreement or any ancillary agreement or any other related obligations shall be litigated solely and exclusively in the state or federal courts located in Omaha, Nebraska.
Section 15. Client Should Independently Evaluate Whether to Hire RCC
Client understands that the determination to use a third-party compliance services provider is an important decision and should not be based solely upon advertisements or self-proclaimed expertise. A description or indication of limitation of RCC’s Compliance Services does not mean that an agency or board has certified RIA Compliance Consultants, Inc. as a specialist or expert in investment advisor compliance. RCC has not been certified by an agency or board as a specialist or expert in investment advisor compliance. Client acknowledges that RCC recommended that Client conduct an independent investigation and evaluation of RCC prior to executing this Agreement.
Section 16. Limitation of Liability
IN NO EVENT WILL RCC'S AGGREGATE LIABILITY TO CLIENT FOR ANY AND ALL CLAIMS RELATING TO THE COMPLIANCE SERVICES PROVIDED UNDER THIS AGREEMENT, WHETHER IN CONTRACT OR NEGLIGENCE, EXCEED THE FEES PAID BY CLIENT FOR THE COMPLIANCE SERVICES PROVIDED UNDER THIS AGREEMENT.
Section 17. Agree to Above Terms of Engagement
The parties hereto agree to the above terms and have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized persons.
Exhibit A - Scope of Engagement & Compliance Services
RCC will provide investment advisor compliance services to Client during the Agreement Period as set forth herein Exhibit A ("Compliance Services").
Client and RCC will agree mutually upon a timeline which reasonably distributes the work associated with the Compliance Services during the term of the Agreement.
In the event Client would like to modify the Compliance Services listed in Exhibit A after execution of this Agreement, a written request must be provided to RCC. Changes to the Compliance Services listed are contingent upon the written agreement of both RCC and Client.
Compliance Calendar & Reminders (Sample) - Sample annual compliance calendar checklist and general reminders of certain ongoing compliance requirements delivered periodically via email.
Regulatory Notices – Compliance updates and notice provided through RCC’s newsletter and email notices. Client will be responsible for reviewing all notices sent by RCC and will contact an RCC Consultant if Client is unsure whether it applies to Client’s business model and whether any documents should be updated.
Compliance Webinars (Live & Recorded) - Access to any live webinars hosted by RCC during the term of the engagement or any recorded webinars previously presented by RCC and available on RCC’s website during the term of the engagement.
IARD Annual Renewal Service - RCC will provide an outline of important dates and follow-up reminders throughout the annual IARD renewal period; RCC will retrieve from the CRD system and provide Client with a copy of the CRD Rep Roster Report; RCC will provide Client with IARD funding information; RCC will retrieve from the IARD system and provide Client with a copy of the Client’s initial and final renewal statements; and RCC will monitor Client’s IARD renewal account and to verify that the account is funded in a timely manner, if funding is not credited specific reminders will be provided.
Client’s responsibilities with annual IARD Renewals include, but are not limited to, the following:
If Client is a state registered investment adviser, Client acknowledges that (a) the state may have a net capital or net worth requirement for investment adviser and require Client to submit annually financial statements and other documents directly to the state securities regulator (outside of the IARD/CRD system), (b) it is Client’s obligation to check with the state securities regulator as to the state’s net capital or net worth requirements and any documents required to be submitted (outside of the IARD/CRD system) to the state securities regulator on an annual basis and also to carefully review any communication from the state regulator with respect to such annual submissions outside of the IARD/CRD system, and (c) Client will be responsible for the submission of such financial statements and other non-IARD/CRD documents as required by the state securities regulator.
Client is responsible for reviewing the Form ADV’s instruction with respect to defining/categorizing regulatory assets under management and making any decisions as to whether certain assets meet the definition of regulatory assets under management. Client will be solely responsible gathering and documenting the information regarding the various categories of assets under management and verifying the information provided to RCC by Client is consistent with Form ADV’s instructions for defining/categorizing regulatory assets under management. RCC will not verify the source of such information, the accuracy of any calculations and the underlying documentation supporting the calculations.
RCC will require certain deadlines of Client for returning questionnaires and for reviewing drafts sent by RCC. Client agrees to comply with any deadlines published by RCC in order for RCC to ensure that the amendments are filed no later than 90 days after the Client’s fiscal year end. In the event Client misses a deadline published by RCC for returning a questionnaire or reviewing the initial draft Form ADV filing, RCC cannot offer any assurances that the Form ADV amendment will be filed timely and RCC will bill Client an additional $255 to process the late submission or response.
The ADV Annual Amendment Service does not include, among other things, the following: (1) the addition of Investment Adviser Representatives (IARs); (2) the termination of IARs; preparing and submitting additional documentation, if required, directly to the state securities regulators; (3) updating Item 7B of Form ADV Part 1A and Section 7B of Schedule D; (4) preparing information required in Item 7B of Form ADV Part 1A and Section 7B of Schedule D for a private fund or other pooled investment vehicle; (5) preparing disclosure events on Item 11 of ADV Part 1 or Item 2 of ADV Part 1B, if applicable; paying IARD, State, and IAR filing fees; (6) preparing Form ADV Part 2 amendments (except for updates to Item 4E of the Form ADV Part 2A); (7) preparing or updating Form ADV Part 3 client relationship summary; or (8) identifying, disclosing and mitigating conflicts of interest. Regardless of any assistance proved by RCC, Client is solely responsible for identifying conflicts of interest and disclosing/mitigating such conflicts and correspondingly re-reviewing its policies/practices, business relationships/arrangements and outside business activities for conflicts of interest. If requested by Client and RCC is available, additional services will be billed at the RCC staff member’s standard hourly billing rate subject to its Minimum Fixed Fee and Hourly Rate Schedule.
Consulting Service (Budgeted) - RCC’s compliance consultants will be available to Client for up to 5 hours (“Budgeted Hours”) for each 12 month Service Period for purposes of providing advice solely in response to any particular concerns that Client raises regarding compliance with the applicable regulations and rules specifically for registered investment advisers under the state securities act and the Investment Advisers Act of 1940 as amended. Additionally, if not otherwise specifically provided for under Compliance Services, Client may request RCC’s assistance and utilize Budgeted Hours, if available, for Form ADV revisions, updates to Client’s existing compliance manual, licensing, compliance review of advertising and materials and adding or terminating investment advisor representatives via CRD system. Client understands that it will be incumbent upon Client to identify to RCC those particular compliance issues and tasks described above that the Client would like RCC's advice or assistance. RCC reserves the right to decline providing advice or assistance on any particular concern or request raised by Client.
Sample Forms Service - RCC will provide Client with electronic access to certain sample forms available on RCC’s online sample forms library which includes a variety of non-customized, generic compliance forms and checklists as designated by RCC for Client’s particular annual compliance subscription package (e.g. Forms, Value, Bronze, Silver, Gold and Platinum). Client acknowledges the following: (a) the particular sample forms available at no additional charge to Client are limited, do not include all sample forms offered by RCC and may change from time to time at RCC discretion; and (b) there are certain sample forms (as indicated on the webpage of RCC’s online store or Client’s online subscription account) which will only be available to Client for an additional or a la carte fee. If Client requests assistance from RCC in customizing or consulting on a sample form, RCC will deduct from the Budgeted Hours the time the RCC consultant spends providing such assistance. If the Client exceeds the Budgeted Hours or this Agreement does not include Budgeted Hours, time spent providing such assistance will be billed at the RCC consultant’s standard hourly billing rate as described in Exhibit B of this Agreement subject to RCC’s Minimum Fixed Fee & Hourly Rate Schedule.
Compliance Manual Section Updates - RCC will release periodically compliance manual updates or new sections depending upon regulatory activity. The compliance manual updates and new sections will be made available to Client through Client’s online subscription account at RCC. The compliance manual updates and new sections are general in nature which have not been customized to Client. The Compliance Manual Section Updates is not comprehensive and not a substitute for Client periodically reviewing and customizing its WSP/CoE. Any consulting regarding and/or customized drafting of new or updated template compliance manual sections will be charged at an hourly rate or applied against Budgeted Hours.
Compliance Review with Assistance from Consultant - RCC will provide Client with access to RIA Express – Compliance Review’s electronic questionnaire during each Service Period for purposes of Client completing a compliance review for one (1) registered investment advisor. The scope of the questionnaire will focus solely on gathering information about Client’s investment advisor’s compliance program as it relates to the requirements of the Investment Advisers Act of 1940 as amend and the rules of the U.S. Securities and Exchange Commission. The electronic questionnaire is not specific to any particular state securities regulator’s requirements. Client will complete (without assistance from an RCC consultant, unless Client chooses to use some of the “Budgeted Hours” previously referenced in (a) of this section) a detailed questionnaire about Client’s investment advisory personnel, business model, procedures and practices. Upon completion of electronic questionnaire, Client can prepare a report to document the Client’s review of its compliance program and any findings or recommendations generated by RIA Express – Compliance Review.
The electronic questionnaire will cover various compliance topics. RIA Express – Compliance Review questionnaire, findings and recommendations may not cover all practices, policies, procedures, business models or other variables specifically related to Client’s investment advisor. Rather, the questionnaire is written to cover many of the compliance topics that generally apply to the majority of investment advisors. Clients should use the RIA Express – Compliance Review questionnaire, findings and recommendations as a tool to assist Client with conducting the annual compliance review. Client should not assume that the questionnaire, findings and recommendations will cover all areas that should be reviewed as part of the Client’s annual compliance review process.
A consultant of RCC will be available at Client’s request to spend approximately 10 hours (“Budgeted Compliance Review Hours”) for answering Client’s questions about information requested by RIA Express – Compliance Review or other investment adviser compliance issues identified by Client and discussing any deficiencies, corrective actions or best practices associated with the finding of RIA Express – Compliance Review. The assistance from the RCC consultant will be provided offsite without visiting Client’s offices. In the event that RCC does not utilize all of the Budgeted Compliance Review Hours after completing the Compliance Review, any unused Budgeted Compliance Review Hours are not available to Client for other tasks or consulting.
Client will be solely responsible for making sure it understands the information requested and provided in the questionnaire; if Client does not understand requested information or findings or best practices, Client will contact the assigned RCC consultant. Client will be responsible for assessing the results of the questionnaire, determining any corrective actions that may need to be taken and implementing such correction actions or best practices.
Exhibit B – Fees & Terms
Consulting Fee
The consulting fee ("Consulting Fee") for the Compliance Services during the Service Period is $6,300. A Service Period is 12 months and refers to either an Initial Service Period or a Renewal Service Period as defined by this Agreement. The Consulting Fee for a Service Period is non-refundable once such a Service Period commences.
The Consulting Fee for a Service Period will be divided into 12 equal monthly installments paid by Client via recurring credit card charges or ACH withdrawals. The monthly installment payment of the Consulting Fee will automatically be charged to Client’s credit card or bank account at approximately the same time each month beginning with the first monthly installment payment charged upon execution of this Agreement. If Client cancels the credit card or closes the bank account on file with RCC or the credit card on file expires during the duration of the Agreement, Client will either pay promptly the outstanding balance of the Consulting Fee by check or provide RCC with another valid credit card or bank account to use for payment of the Consulting Fee.
If Client requests RCC to perform additional compliance consulting work exceeding the Budgeted Hours or compliance tasks/activities beyond the Compliance Services during the Service Period, RCC may require Client to pay a retainer in advance (“subsequent retainer amount”) and will charge Client an hourly fee at the RCC consultant’s standard hourly billing rate or fixed fee subject to our Minimum Fixed Fee Schedule. If Client pays a subsequent retainer amount in addition to the Consulting Fee, this subsequent retainer amount is non-refundable and must be utilized for compliance consulting within 12 months of such payment; Client is solely responsible for monitoring the 12-month anniversary of each payment of the subsequent retainer amount and determining whether to utilize RCC for additional services within this 12-month period. RCC does not utilize a client trust account, and subsequent retainer amounts paid to RCC are not maintained in a separate account for the benefit of Client; a retainer payment is a general asset of RCC upon RCC’s receipt of such retainer payment. In the event that RCC does not require Client to pay a retainer payment in advance for the compliance consulting exceeding Budgeted Hours or compliance task/activity beyond the Compliance Services, all charges will be due immediately upon presentment of the invoice.
If Client terminates this Agreement prior to the end of the Initial Service Period, the Consulting Fee is non-refundable, and any remaining or outstanding balance of the Consulting Fee is due immediately. Client authorizes RCC to charge Client’s credit card for the full remaining balance of the Consulting Fee.
Term of Engagement & Auto Renewal
The initial term of this engagement will be for the twelve (12) months ("Initial Service Period"). For purposes of determining the start of the Initial Service Period, the day that the initial installment payment of the Consulting Fee is received by RCC will be used as the beginning of the Initial Service Period. However, the Agreement between RCC and Client will not be effective and RCC will not be obligated to begin providing services to Client until both the initial payment of the Consulting Fee and the executed Agreement have been received by RCC.
Upon last day (“Renewal Date”) of the Initial Service Period or any subsequent Renewal Service Period as described below, the terms of this Agreement will continue to automatically renew for another period of twelve (12) months (“Renewal Service Period”) unless written notice of termination is received from Client or RCC provides Client with written notice of termination prior to the Renewal Date. At the time of renewal, RCC reserves the right to raise the Consulting Fee after giving the Client notice at least 30 days prior to the Renewal Date. If Client does not provide notice of termination by the Renewal Date, Client agrees to pay the Consulting Fee for the Renewal Service Period and authorizes RCC to charge the Consulting Fee against Client’s credit card or bank account on file with RCC unless Client provides RCC with updated credit card or bank account information or sends a check to RCC for the Consulting Fee.
If Client terminates this Agreement after the beginning of any Renewal Service Period and prior to the end of the Renewal Service Period, the Consulting Fee for the Renewal Service Period is non-refundable, and any outstanding balance of the Consulting Fee is due immediately. If Client utilized a credit card or bank account to pay the previous Initial Service Period or Renewal Service Period, Client authorizes RCC to charge Client’s credit card or bank account for the full remaining balance of the Consulting Fee for the current Renewal Service Period.
Payment via Credit Card
RCC can accept payment via credit card or ACH withdrawal. Client agrees that if Client has a dispute with RCC, Client will not raise this dispute with Client's credit card company/ACH processor or seek adjudication of any dispute with RCC through or by Client's credit card company/ACH processor. Client agrees that if Client pays the consulting fees via credit card or ACH, Client will not instruct Client's credit card company, ACH processor or bank to reverse such charges. If Client cancels the credit card or bank account on file with RCC or the credit card on file expires during the duration of the Agreement and subsequent payments are still due, Client will provide RCC with another valid credit card or bank account to use for payment of the Consulting Fee.
Invoice Delivery
RCC will deliver the invoice electronically to Client, and Client will be responsible for paying the outstanding amount, if any, within 30 days of presentment of invoice.
Schedule 1 – Disclosures & Compliance Service Limits
The following are important disclosures by RIA Compliance Consultants, Inc. (“RCC”) and limitations related to the service provided by RCC and acknowledgements and representations by Client under this Agreement.
Client acknowledges that state securities regulators typically require an individual who is a direct or indirect owner of a state registered investment adviser firm to register as an investment adviser representative, and RCC cannot offer any assurances that the owner of Client’s state registered investment adviser firm will not be subject to such requirements.
If Client is a state registered investment adviser, Client acknowledges that (a) the state may require Client to submit annually certain documents directly to the state securities regulator (outside of the IARD/CRD system), (b) it is Client’s obligation to check with the state securities regulator as to whether there are any documents required to be submitted (outside of the IARD/CRD system) to the state securities regulator on an annual basis and also to carefully review any communication from the state regulator with respect to such annual submissions outside of the IARD/CRD system, and (c) Client will be responsible solely for the submission of such documents as required by the state securities regulator.
Client acknowledges that certain solicitor activities on behalf of a private fund and/or private fund manager may constitute acting as a broker-dealer under the Securities Exchange Act of 1934 as amended depending upon the facts. Client further acknowledges such analysis and advice regarding this issue is outside the scope of the Compliance Services under this Agreement, and to the extent that Client provides solicitor services to a private fund or utilizes solicitors for a private fund, Client agrees to retain legal counsel to provide advice to Client regarding the broker-dealer registration requirements.
Client understands that if Client provides investment advisory services through an investment adviser representative who is also an insurance agent and/or registered representative of a broker-dealer and such investment adviser representative discusses advisory, broker-dealer and insurance services and products in combined fashion at a single meeting (depending upon the facts and circumstances), there is a risk that an investment advisory customer or a securities regulator may try to hold Client and/or such investment adviser representative as a fiduciary as it relates to these other non-advisory capacities (e.g., insurance, broker-dealer). Client acknowledges that the services of RCC do not include providing compliance advice as to Client about how to provide such non-advisory services or products in accordance with any fiduciary duty or applicable standard of care.
If Client refuses to eliminate or correct a deficiency in the final version of the Securities Regulator’s examination letter (after Client was given an opportunity to explain or clarify), there is a high likelihood that the examiner of the Securities Regulator will make a referral of such matter to the enforcement division of the Securities Regulator, which could (depending upon the circumstances) result in an administrative enforcement action against Client. Client should follow all applicable laws and regulations, and RCC strongly recommends that Client specifically eliminate or correct any deficiencies identified by the Securities Regulator during an examination or obtain a formal legal opinion from its attorney regarding such matter. A decision to refuse to eliminate or correct a deficiency identified in the final version of the Securities Regulator’s examination letter (after Client was given an opportunity to explain or clarify) should not be made by Client without first receiving advice from legal counsel about such matter.
RCC will not be responsible for the verification of the information and documentation provided by Client. RCC will not be responsible for verifying the accuracy or truthfulness of any information, document or statements provided by the owners, directors, officers, employees, investment adviser representatives, custodians, third-party money managers, vendors or outside professionals (such as attorneys and accountants) of Client. RCC will not be responsible for verifying statements in the Form ADV are accurate and truthful. Client will be solely responsible for verify the accuracy and truthfulness of all documents prepared by RCC on Client’s behalf.
Client acknowledges that Client is solely responsible for both (a) identifying and bringing to RCC’s attention Client’s business practices and outside business activities which are in conflict with an investment advisory customer’s interest and/or Client’s fiduciary duty and (b) then verifying that any such conflicts have been eliminated or disclosed and mitigated and that Client is meeting its fiduciary duty. RCC offers no assurances that RCC will identify revenue streams, business practices, arrangements and/or outside business activities which are in conflict with an investment advisory customer’s interest or otherwise a breach of Client’s fiduciary duty; moreover, due to the nature of a consulting relationship, RCC anticipates that depending upon the circumstances, there will be some conflicts of interest and/or breaches of fiduciary duty which RCC does not identify to Client. RCC is not a substitute for Client and Client’s directors, officers, managers, employees and representatives from regularly and carefully reviewing Client and its affiliate’s sources of revenue, business practices, arrangements and outside business activities for purposes of identifying conflicts of interest and breaches of fiduciary duty.
Client understands that RCC does not serve as a supervisory principal, the compliance department or the chief compliance officer of Client. Client’s compliance with applicable laws and rules for an investment adviser is not being outsourced to RCC under this Agreement. In order to meet Client’s regulatory obligations, Client’s executive officers and staff must devote significant time and focus to compliance each week and be actively involved in Client’s compliance program. Client’s executive officers and staff are solely responsible under this Agreement for whether Client is meeting its regulatory obligations.
Furthermore, Client acknowledges that Client as an investment adviser has a fiduciary duty to eliminate conflicts of interest and prevent an investment adviser from taking unfair advantages of a investment advisory customer. If a policy or practice, internal or external business relationship/arrangement or outside business activity creates a conflict of interest, Client is fully aware that Client must make full and fair disclosure of all material facts and mitigate the conflict of interest, and Client must act in investment advisory customer’s best interest at all times.
Client understands that a securities regulator is not approving or offering an opinion of specific conflict of interest disclosure language and mitigation measures in the Form ADV when Client’s application to register as an investment adviser is approved by the securities regulator, and a previous examination by a securities regulator with no applicable findings does not mean that the securities regulator has approved of the specific conflict of interest disclosure language or mitigation measures in Client’s Form ADV. Client acknowledges that regulatory focus and priorities change over time and whether a securities regulator views a conflict of interest as especially problematic for an investment adviser can change from year to year. Likewise, a securities regulator’s expectation of acceptable disclosures/mitigations by an investment adviser also can change from time to time. Due to this ever-changing environment, Client should regularly review and re-review its business practices for conflicts of interest on a regular basis and any conflict of interest disclosure language and mitigation measures in light of the most recent regulatory developments.
Although RCC may assist Client with identifying conflicts of interest, RCC does not take responsibility for identifying, disclosing and mitigating conflicts of interest. Regardless of any assistance or advice provided by RCC, Client is solely responsible for identifying conflicts of interest and disclosing/mitigating such conflicts and correspondingly re-reviewing its policies/practices, business relationships/arrangements and outside business activities for conflicts of interest.
RCC strongly recommends that Client make every attempt to avoid and prohibit any internal policy, procedure or practice, internal or external business relationship/arrangement with an affiliate or third-party or outside business activity of supervised persons which creates a conflict of interest. Client acknowledges that it is solely Client's responsibility to identify and determine whether to avoid/prohibit a particular conflict of interest. RIA Compliance Consultants has no responsibility to advise Client to refrain from the underlying activity or arrangement causing the conflict of interest. To the extent Client does not avoid/prohibit the policy, procedure, practice, relationship/arrangement or outside business activity creating the conflict of interest, Client acknowledges that an investment adviser firm must explicitly disclose, in writing, all conflicts of interest using robust and reasonable disclosure language that the investment adviser firm's investment advisory customers will fully and sufficiently understand in a clear and concise manner, and Client must also disclose its policies and procedures to control for and mitigate the conflicts of interest so Client is able to evidence that it is acting in the investment advisory customer's best interest. Any assistance or advice provided by RCC regarding the identification of a conflict of interest, the drafting of disclosure language/mitigation procedures of a conflict, or the assessing/testing of such disclosure/mitigation of a conflict is not a recommendation, endorsement or safe harbor by RCC that Client should engage in such conflict of interest. RCC offers no assurance that any advice, draft language or procedure or assessment/test provided by
RCC with respect to a conflict of interest will be effective and meet the expectations of a securities regulator. Client hereby releases RCC and its affiliates, directors, officers and employees from any and all liability associated with or related to identification, disclosure and mitigation of Client’s conflicts of interest. In the opinion of RCC, the most prudent practice is for Client to avoid and prohibit any policy/procedure, internal or external business relationship/arrangement with affiliates or third-parties or outside business activity which creates a conflict of interest.
Minimum Fixed Fee & Hourly Rate Schedule
Annual Compliance Program Packages
To the extent that Client is currently subscribed to a standard (non-customized) Annual Compliance Program package of RIA Compliance Consultants, Inc. (“RCC”), the following is the monthly rate for the packages listed below which will be effective upon the renewal date of the Annual Compliance Program:
RCC reserves the right to change the annual fee by giving Client 30 days’ notice prior to the renewal date of the Annual Compliance Program.
Sample Forms
To the extent that Client requests a sample form available on RCC’s Online Store for Compliance Tools and Services or requests RCC customize such a sample form, RCC may charge Client the current published price for the sample form (if not available to Client under Client’s current Annual Compliance Program subscription) plus the additional hourly work by RCC’s staff to discuss such form with Client and customize the sample form to Client’s specifications and/or requirements. Client agrees that Client will review and abide by RCC’s published disclosures regarding the sample form limitations before utilizing such sample forms. RCC reserves the right to change the availability under an annual compliance program package and the a la carte fixed fee for sample forms effective immediately with no advance notice to Client.
Hourly Rates
To the extent that Client is subject to an hourly fee arrangement or has exceeded budgeted consulting hours (or is outside the scope of Compliance Services) under a fixed fee arrangement and is currently subject to an hourly fee arrangement with RCC, the following are the current hourly rates of RCC’s staff billed in five-minute increments:
The assignment of a particular staff person of RCC to work on a task or project is at RCC's sole discretion and will be based upon availability, skills and expertise of each staff person.
Tasks/Activities Subject to Minimum Fixed Fee
To the extent that Client is subject to an hourly fee arrangement or has exceed budgeted consulting hours (or is outside the scope of Compliance Services) under a fixed fee arrangement and is currently subject to an hourly fee arrangement with RCC and RCC performs a task/activity or set of tasks/activities listed below on the Minimum Fixed Fee Schedule, Client will be charged the greater of the hourly fees incurred using the current hourly rates or the minimum fixed fee listed below on the Minimum Fixed Fee Schedule. RCC reserves the right to add, change and delete the tasks/activities and corresponding fees of the Minimum Fixed Fee Schedule effective immediately upon RCC giving Client notice of applicable additions, changes or deletions.
Investment Adviser Representative Documents
Advertising
Other Registration Documents & Filings
Subsequent Changes to Minimum Fixed Fees & Hourly Rates
RCC reserves the right to raise the minimum fixed fees or hourly rates indicated in the Minimum Fixed Fee & Hourly Rate Schedule after giving the Client a 30-day advance notice of the new minimum fixed fees and hourly rates.
Other Tasks/Activities Not Listed under Tasks/Activities Subject to Minimum Fixed Fee
In addition to the Tasks/Activities Subject to Minimum Fixed Fee, RCC also may offer a fixed fee in lieu of an hourly rate for certain other specific tasks or activities not stated above. Prior to charging a fixed fee which is not already listed under the Tasks/Activities Subject to Minimum Fixed Fee stated above, RCC will provide a quote of the fixed fee in writing for Client's approval prior to beginning of such task/activity.
Schedule for Sample Forms
Disclosures & Limitations
To the extent that the Compliance Services of RIA Compliance Consultants, Inc. (“RCC”) under this Agreement includes our sample forms and documents, Client acknowledges and agrees to the following disclosures and limitations:
Schedule for RIA Express - Compliance Review Tool
To the extent that the Compliance Services of RIA Compliance Consultants, Inc. (“RCC”) under this Agreement involve the use the compliance tool/software known as RIA Express – Compliance Review Tool, Client acknowledges and agrees to the following disclosures and limitations:
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The parties hereto agree to the above terms and have caused this Agreement, including all attached Exhibits, Schedules and/or Addendums, to be executed in their names and on their behalf by and through their duly authorized persons.
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Signed by Bryan Hill Signed On: 12/23/2021
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Document Name: Compliance Consulting Agreement – Annual Compliance Program Gold Package (5 Hours) – Monthly Payments
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