Initial and Maintenance Margin Requirements and Other Obligations

The Company offers margin accounts to its customers, however, as it is a fully- disclosed introducing firm, it is the Company’s clearing firm that is extending credit to its customers.

Initial and Maintenance Margin: Federal Reserve Board Regulation T governs

the extension of credit to customers by broker-dealers and includes provisions concerning the initial margin requirements for most types of securities transactions. In general, Regulation T requires 50% initial margin for long purchases of marginable equity securities. In addition, Regulation T requires 150% margin for short sales of equity securities, of which 100% can be from sales proceeds. Consolidated FINRA Rule 4210(g) permits approved broker-dealers to margin certain products according to a prescribed portfolio margin methodology (see below for details).

Consolidated FINRA Rule 4210 imposes margin requirements on securities in customer accounts including those that do not meet the definition of ‘margin equity security’ (“non-margin eligible”) under Reg. T: the Company must adhere to the requirements of this Rule or Regulation T, whichever is greater (if Reg. T requires ‘good faith’ margin or has no requirements, then this FINRA Rule applies). Initial margin requirements vary depending on the type of account and securities in the account. In general, the minimum initial margin is $2,000; minimum equity levels must be maintained; however, in certain cases, they do not apply. Consolidated FINRA Rule 4210 and FINRA’s interpretations of the Rule should be referenced for specific, detailed initial and maintenance margin requirements.

The margin which must be maintained in all accounts of customers, except for cash accounts subject to other provisions of this Rule, is as follows:

(1) 25% of the current market value of all Reg. T margin securities, except for security futures contracts, “long” in the account.

(2) $2.50 per share or 100% of the current market value, whichever amount is greater, of each stock “short” in the account selling at less than $5.00 per share.

(3) $5.00 per share or 30% of the current market value, whichever amount is greater, of each stock “short” in the account selling at $5.00 per share or above.

(4) 5% of the principal amount or 30% of the current market value, whichever amount is greater, of each bond “short” in the account.

(5) The minimum maintenance margin levels for security futures contracts, long and short, shall be 20% of the current market value of such contract. (See paragraph (f)(10)) of this Rule for other provisions pertaining to security futures contracts.)

(6) 100% of the current market value for each non-margin eligible equity security held "long" in the account.

Extensions: Under SEA Rule 15c3-3(n) and Consolidated FINRA Rule 4230, firms

may request extensions of time for customers to buy-in or otherwise obtain possession or control of margined securities. Company personnel, if preparing extensions of time requests, should obtain supporting documentation. Customers are not entitled to such extensions; rather, extensions should only be requested in exceptional circumstances and should be deemed appropriate before requests are made. Reg. T extension requests must be submitted to FINRA via its online system (“REX” system). Since the clearing firm holds the Company’s margin accounts, it submits extension requests on behalf of the Company for its customers. The clearing firm is responsible for reviewing the daily reports available on the REX system that contain data on submitted extensions.

The Company’s clearing firm is also required under Consolidated FINRA Rule 4230 to file monthly reports indicating all broker-dealers for which it clears that have overall ratios of requested extensions of time to total transactions for the month that exceed a percentage designated by FINRA. The Company expects its clearing firm to comply with the specific requirements under this Rule, when required.

Daily Margin Record and Reporting: Under Consolidated FINRA Rule 4220, the

Company, if it carries margin accounts for customers, is required to establish records of initial and additional margin obtained in each customer’s account. The record must show the amount of margin required and the date when and manner in which cash or securities are deposited or the margin requirements were otherwise complied with. Individual entries constitute “records” and such entries need not be combined and kept as a separate record.

Also, under FINRA Rule 4521(d), the Company, if it carries margin accounts for customers, is required to submit, on a settlement date basis, as of the last business day of the month: (A) the total of all debit balances in securities margin accounts; and (B) the total of all free credit balances in all cash accounts and all securities margin accounts. This information must be filed through the Firm Gateway on the Customer Margin Balance Form and is due by the sixth business day of the following month. Penalties for late filings apply.

The Company’s clearing firm will make all required margin records and submit all required information on its behalf, since the clearing firm carries the Company’s customer margin accounts.

Net Capital Reminders: The Company’s’ clearing firm monitors all margin

accounts and its automated programs are designed to ensure proper calculations and enforcement of margin requirements. The Company, because it is an introducing

broker, does not mark to market, nor does it take capital charges related to its margin customers’ accounts.