Volatile Securities

Name of Supervisor (“designated Principal”):

Trade Desk Supervisor

And assigned supervisors/designated Branch Office Managers if applicable (see Section 3.5)

Frequency of Review: Daily

How Conducted: Transaction review and approval

How Documented: Limitations procedures; Trade records notated

3010 Checklist: Consolidated FINRA Rules 5131, 5260, 6120, 6121, 6190, 6435, 6440, 6181, 6623; Regulation M; Regulation NMS Plan to Address Extraordinary Market Volatility; Notices 99-11, 99-12, 03-16, 08-57, 08-74, 09-60, 10-30, 10-43, 11-37, 13-12, 13-13

12.5.1 Volatile Conditions

Conditions of extreme volatility can suddenly be experienced in one or more securities. The treatment of customer orders under these circumstances must remain fair, consistent and reasonable. When deemed necessary, the Trade Desk Supervisor will inform all Trade Desk Personnel that an extreme volatility condition exists in a

particular security. This condition may exist where the Company is experiencing a volume of orders more than 50% above its normal levels in the security, accompanied by general volume and price changes in the security more than 50% above its normal range.

12.5.2 Disclosures to Customers

The Company is committed to providing customers with adequate and clear disclosures about the risks of volatility and potential constraints on the Company’s ability to process orders in a normal manner. If applicable to the Company’s business, either the Company or its clearing firm will provide disclosures to all customers who trade securities. Such disclosures should include the following when applicable:

• High volumes of trading in a particular security or groups of securities at the opening or during the day may cause delays in execution or executions at prices significantly away from the market prices quoted;

• Normal automated execution processes are quite likely to be overridden during periods of high volatility, including manual executions and reductions of order size guarantees;

• Market orders must be executed promptly and therefore may be at prices and quantities that differ significantly from those expected or displayed;

• While limit orders must be executed at the required price and size, significant delays and even failures of execution may occur if limits are not reached; • Computerized or other electronic direct access by a customer to an account or

trading system do not guarantee that orders will be promptly processed or executed and customers should be aware of the risks of substantial halts or delays and lack of access during periods of extreme volatility, including lack of telephone access;

• While the Company believes that its systems and those of its clearing organization, if applicable are adequate to service all customers promptly during periods of extreme volatility, there is no guarantee that these systems will not be overloaded on occasion and therefore less effective than normal in providing required service;

• Initial Public Offering (IPO) securities are particularly likely to experience conditions of extreme volatility and investors in these issues should be particularly aware of the risks described above, including specifically the risk that the investor's order may be executed at a "top" from which the price thereafter experiences a precipitous decline. The Company has a policy of requiring all purchases of new issue stocks to be made only through a Registered Representative;

• The customer may experience that the Company has raised maintenance margin requirements in his or her account to make sure that there is enough liquidity to absorb volatile price changes, or eliminating margin altogether for certain securities; and

• The entering of duplicate "cancellation" or "replacement" orders by a customer in order to achieve better execution may lead to the customer being responsible for ALL orders entered.

The clearing firm has written disclosure information available and provides them to customers when their account is opened and annually with other important information about their account.

The designated Principal, during his/her review, shall review notes in customer files and related correspondence to ensure that disclosure is taking place and shall meet with registered representative to discuss circumstances where disclosure should have been made and there is no evidence in the file and will make notes regarding this discussion in the client file. Failure to provide required disclosure could result in disciplinary action against the representative, including heightened supervision.

12.5.3 Market-Wide Trading Halts: Procedural Reminders

During market-wide trading halts resulting from the triggering of circuit breakers, customer orders should be handled in the same manner as they would have been handled during other regulatory trading halts concerning only individual stocks. During market-wide trading halts of durations that will allow trading to resume on that same trading day, pending and new customer orders should be forwarded to the appropriate market for execution upon the resumption of trading. This should be done unless the member receives contrary instructions from the customer during the halt.

During market-wide trading halts with durations that will close the market for the remainder of the trading day, pending and new customer orders should be treated as follows:

• Absent customer instructions to the contrary, orders that are pending at the time of the halt, and new orders received after the halt has commenced, should be treated as "Good Till Cancelled" orders and be held by the Company for execution at the reopening of the next trading session.

• "At-the-Close" orders (including "Market at Close" orders) pending at the time trading is halted should be treated as cancelled orders. The Company should not accept, or forward to a market, any new orders related to closing prices received during a trading halt.

Consolidated FINRA Rule 5260 generally prohibits transacting in securities subject to a trading halt or trading pause. Neither the Company nor any of its associated persons will, directly or indirectly, effect any transaction or publish a quotation, a priced bid and/or offer, an unpriced indication of interest (including “bid wanted” and “offer wanted” and name only indications), or a bid or offer accompanied by a modifier to reflect unsolicited customer interest, in any security as to which a trading halt is currently in effect (there is an exception for certain displays of bids and offers under Reg. NMS Plan). These restrictions also apply to any future on a single stock when the underlying stock is subject to a regulatory trading halt and any future on a narrow-based securities index when one or more underlying securities that constitute 50% or more of the market capitalization of the index are subject to a regulatory trading halt. However, if FINRA halts OTC trading and quoting in NMS stocks due to real-time transmission problems with ADF or TRF, traders may trade through other markets where trading is not halted. The designated Principal will supervise and review trading activity during trading halts to ensure compliance with this Rule during trading halts.

12.5.4 OTC Halts

Under Consolidated FINRA Rule 6440, FINRA may also halt trading and quoting in OTC securities. Announced halts will be designed to protect investors and ensure a fair and orderly marketplace and may last up to 10 business days. During trading halts, Company trading personnel are prohibited from effecting, directly or indirectly, trades in any such security or from publishing a quotation, a priced bid and/or offer, an unpriced indication of interest (including "bid wanted" and "offer wanted" indications), or a bid or offer accompanied by a modifier to reflect unsolicited customer interest, in any quotation medium. The designated Principal will ensure compliance with this Rule during trading halts.

If the OTC equity security or the OTC ADR is listed on or registered with a foreign securities exchange or market, FINRA may impose halts in trading those securities when foreign exchanges, markets or regulators impose trading halts. FINRA may also halt trading and quotation in OTC equity securities if the security or ADR is a derivative or component of a security listed on or registered with a national securities exchange or foreign securities exchange or market (listed security) and that exchange or market imposes a trading halt in the listed security. Lastly, FINRA may impose a halt after learning from a reliable third party that an extraordinary event has occurred. In all of these cases, the halt may last longer than 10 business days.

Trading halts will be posted to the Trade Halt section of FINRA’s website and will be coded using established reason codes: it is the responsibility of the Trade Desk Supervisor to ensure dissemination of all relevant trade halt information to traders and to monitor trading and quoting activities for adherence to limitations.

12.5.5 Halts, Pauses and Circuit Breakers in NMS Stocks

FINRA Halts: Under Consolidated FINRA Rule 6120, FINRA may close the ADF

or TRF or halt trading otherwise than on an exchange in NMS stocks based on its own determinations or those of other major securities markets or the SEC, such as in the case of extraordinary market conditions. Halts will commence when announced by FINRA: trading may resume after notice is provided by FINRA and made known to Company traders.

Trading Pauses under Regulation NMS: A pilot plan (Regulation Plan NMS to

Address Extraordinary Market Volatility, or the “Plan”) is currently in effect. Consolidated FINRA Rule 6190 requires the Company to comply with the Plan if it is a “trading center” (a national securities exchange or national securities association that operates an SRO trading facility, an alternative trading system, an exchange market maker, an OTC market maker, or any other broker or dealer that

executes orders internally by trading as principal or crossing orders as agent). The

Company is not a “trading center” by definition and therefore procedures for compliance with the Plan are not included herein.

Market-Wide Circuit Breakers: During a pilot period coinciding with the Plan’s

pilot period, FINRA may halt trading in the event of certain Market Declines (level 1, 2 or 3) as described in Consolidated FINRA Rule 6121.02. A Market Decline

means a decline in the value of the S&P 500 Index between 9:30 a.m. and 4:00 p.m. on a trading day as compared to the closing value of the S&P 500 Index for the immediately preceding trading day. For level 1 or 2 declines, trading will generally resume on the same trading day; for level 3 declines, trading will resume the next trading day. The Rule should be consulted for details on FINRA’s authority to permit resumption of trading. As with all trading halts, the Trade Desk Supervisor will ensure proper dissemination of relevant information and will monitor activities for compliance.

12.5.6 Withdrawal of Quotes, per SEC Regulation M – Not Applicable 12.5.7 New Issues

New issues are inherently more volatile than securities with an established public trading history. Given the absence of an established trading market, the potential exists for a wide variance between the public offering price of a new issue and the price at which trading on the secondary market commences. As a result, investors who place market orders for an IPO may find their orders filled at prices beyond their reasonable expectations, and such transactions may further contribute to the unconstrained increase in the price of a new issue in the secondary market.

Market orders for new issue securities may not be accepted by the Company prior to the commencement of trading in such shares in the secondary market; such orders must be rejected prior to executing or routing them. Note:

• This restriction applies to both OTC Equity Securities and NMS stocks and applies to the acceptance of any market order—whether from a customer of the Company or of another BD, or from another BD itself;

• Company proprietary market orders sent to an exchange (not accepted by another BD) are not prohibited under this rule;

• ‘Commencement of trading’ in the secondary market of shares of a new issue that is an NMS Stock would be evidenced by the first trade on the national securities exchange listing the security, as indicated by the dissemination of an opening transaction in the security by that exchange. For OTC Equity Securities, commencement of trading in the secondary market would be evidenced by the first regular way, disseminated trade reported to the OTC Reporting Facility during normal market hours.

• “Not Held” orders (unpriced, discretionary orders voluntarily categorized as such by the customer, where he has granted the Company price and time discretion) are not considered ‘market orders’ under this rule; and

• Priced orders, such as limit orders, are not subject to this prohibition.

In addition, should any new issue shares be returned to the Company (as syndicate member), they must be disposed of properly, in accordance with the requirements of the Agreement among Underwriters (see the “Public Offering” section if applicable).