Last updated: November 18, 2022
This document is intended to provide a brief overview and explanation of important information regarding your brokerage account relationship with Prime Number Capital, LLC, (“PNC”). We encourage you to review this information carefully, along with any applicable account agreement(s) and disclosure documentation you may receive from us.
As you review this information, we would like to remind you that we are registered with the U.S. Securities and Exchange Commission (SEC) as a broker/dealer, providing brokerage services. Our brokerage services are the primary focus of this document. This document contains important information about the types of services we offer along with general information related to compensation, conflicts of interest, disciplinary action and other reportable legal information. Please carefully review and consider the information in each section below.
For purposes of this Prime Number Capital investing document, the terms “PNC”, “we,” “us “and “our” refer to Prime Number Capital, a broker/dealer registered with the U.S Securities & Exchange Commission (“SEC”), a member of the Financial Industry and Regulatory Authority (“FINRA”) and the Securities Investor Protections Program (“SIPC”) and a licensed insurance agency.
The terms “Account Holder,” “you” and “your” refer to the owner of a brokerage account (“brokerage account” or “account”) held with Prime Number Capital. For joint accounts, these terms refer to all owners, collectively, and individually. For accounts owned by entities, such as trust or business accounts, these terms refer both to the entity and to all beneficial owners of the account and all persons authorized to transact with the account.
Prime Number Capital is an introducing broker/dealer which clears its securities transactions through Velox Clearing (“Velox”), an independently owned SEC registered broker/dealer and member of FINRA and SIPC, or such successor clearing firm as we shall choose from time to time. Custody of securities held in your account is maintained with Velox. The respective functions allocated between Prime Number Capital and Velox related to Brokerage Accounts are specified in the clearing agreement between Prime Number Capital and Velox and are summarized in the noticed provided to customers by Velox at account opening pursuant to FINRA Rule 4311. In the case of direct relationships with issuers, sponsors, and other investment providers, custody of your investments is maintained by you directly with such providers.
Prime Number Capital offers a limited selection of brokerage services and products to retail customers. In acting as your broker/dealer, Prime Number Capital and its account representatives are acting as your agent. Under applicable laws, rules and regulations, when making investment recommendations to retail customers, Prime Number Capital and other securities brokers have a duty to act in your best interest. Acting in your best interest, however, is not the equivalent of acting in a traditional fiduciary relationship and when acting in their capacities as your securities broker, Prime Number Capital and its account representatives have conflicts of interest with respect to their investment recommendations and other relationships with you and other companies such as investment providers we represent. All recommendations regarding purchases or sales in your brokerage account will be made by your Prime Number Capital representative in a broker/dealer capacity only.
You will pay PNC and/or your PNC representative for services PNC provides to you in your brokerage account through sales commissions and payments PNC receives from third parties. Based on the nature of your investments, PNC receives direct or indirect compensation in connection with the services PNC provides to you.
Please see the materials which follow as well as the additional material referenced in this document for additional information or ask your account representative to answer any questions you may have concerning our obligation to make investment recommendations in your best interest and/or our conflicts of interest in making such recommendations.
Your brokerage relationship with PNC is a transactional relationship and unless all parties expressly agree otherwise in writing:
1) Prime Number Capital and its account representatives shall have no discretionary authority to buy, sell, or otherwise transact with regard to investments or other assets held in your brokerage account (or otherwise directly with an investment provider; and
2) After each transaction in your brokerage account (or directly with and investment provider) made by your or any other agent who is authorized to transact in your account is completed, we shall not have any continuing or ongoing obligation to review or make recommendations unless agreed upon by you, for the investment of securities, cash, annuities, insurance policies, guaranteed investment contracts, or any other form of investment held in or through your brokerage account.
Securities available to PNC brokerage account clients (“our platform”) include equities, corporate bonds, exchange traded funds. Other unlisted investments available to PNC brokerage account clients are limited to investments which are investments whose sponsors or affiliates have contracted directly with us to provide selling agency and other distribution services. The fact that an investment is available on our platform is not any form of investment recommendation. All investments are subject to market risks and fluctuate in value, so that an investor’s shares, when redeemed may be worth more or less than their original cost. Our platform does not include all possible investments.
Commission rates and other investments available to your PNC brokerage account through our platform will vary in accordance with (1) your type of brokerage account relationship with PNC, and (2) your account type (IRA or taxable).
In a limited-service brokerage relationship, in addition to acting as your agent to complete securities and other investment transactions at your direction and on your behalf, PNC and/or your PNC account representative will provide you with the investment recommendations and other services which are tailored to your specific investment goals and circumstances.
Limited-service brokerage accounts are eligible to invest only in listed and over the counter equity securities, corporate bonds, and exchange traded funds. We do not offer other securities on our platform.
We provide brokerage services through either a cash brokerage account or margin brokerage account, based on your eligibility and selection. In a cash brokerage account, you must pay for your purchases in full at the time of purchase. In a margin brokerage account, you must eventually pay for your purchases in full, but you may borrow part of the purchase price from our clearing firm, Velox Clearing. This is generally referred to as a “margin loan.” The portion of the purchase price that is loaned to you is secured by securities in your account, also referred to as “collateral.” You will incur interest costs as a result of your margin activity. While many securities are eligible to be used as collateral for a margin loan, some assets are not available for margin collateral purposes.
Given that a margin-enabled brokerage account has specific eligibility requirements, unique costs, and governing regulatory requirements, our default brokerage option is our cash brokerage account. You must execute a separate margin agreement before engaging in margin brokerage activity. Included with your margin agreement is a copy of the Margin Disclosure Statement. This statement contains important information you should understand and consider before establishing a margin brokerage relationship with us. For more information on our margin brokerage services, contact your financial professional.
Within your brokerage account, we may also provide other incidental services recommendations to buy, sell, or hold assets. When we make a securities recommendation, investment strategy recommendation or recommendation to rollover assets from your Qualified Retirement Plan (QRP) to an Individual Retirement Account (IRA), the recommendation is made in our capacity as a broker-dealer unless otherwise stated at the time of the recommendation. Any such statement will be made orally to you. Moreover, when we act in a brokerage capacity, we do not agree to enter into a fiduciary relationship with you.
It is important for you to understand that when our account representative makes a brokerage recommendation to you, we are obligated to ensure the recommendation is in your best interest, considering reasonably available alternatives, and based on your stated investment objective, risk tolerance, liquidity needs, time horizon, financial needs, tax status, and other financial information you provide us. You may accept or reject any recommendation. It is also your responsibility to monitor the investments in your brokerage account, and we encourage you to do so regularly. We do not commit to provide on-going monitoring of your brokerage account. We occasionally, and without any formal agreement or obligation, review your brokerage account to determine whether to recommend investments.
Please also consider that from time to time we may provide you with additional information and resources to assist you with managing your brokerage account. This may include but is not limited to educational resources, and sales and marketing materials. When we offer these services and information, we do so as a courtesy to you. These activities are not designed to monitor specific investment holdings in your brokerage account, they do not contain specific investment recommendations about investment holdings, and you should not consider them a recommendation to trade or hold any particular securities in your brokerage account. Upon your request, we will review such information and reports with you and may provide you with investment recommendations, but we are not under a specific obligation to do so.
There is no minimum initial account balance required to open a brokerage account with us. However, if you either fail to fund your account or do not return account opening documents as required, your account will be closed. In addition, some types of brokerage accounts have minimum account activity requirements and/or minimum on-going balance requirements that must be maintained, or your brokerage account will be closed. These requirements are detailed in the account agreement(s) you receive when/if you open your brokerage account. You should also understand that our financial professional may have their own minimum account balance requirements for the brokerage accounts they service. For example, a dedicated financial professional may choose to service only those brokerage account clients who satisfy account-specific or total household asset conditions. Minimum asset requirements are disclosed to you orally by your financial professional.
Alternative Investments are securities products such as private placements, private equity funds, hedge funds, venture capital, and real estate funds. Alternative Investments are more complex than traditional investment vehicles. They often have higher fees associated with them and are more volatile than traditional investments such as stocks, bonds and mutual funds. The majority are invested in illiquid investments making them difficult to exit and price on a regular basis.
Our Firm performs due diligence for each type of alternative investment in which our Firm and Account Representatives participate. As part of our due diligence, we perform an analysis of each alternative investment to determine if the investment would be suitable for our clients. As each alternative investment is structured differently, the fees and commissions we earn on each sale are disclosed in the offering documents for the specific investment. These fees can range from 0.0% to 2%, is paid by the Sponsor directly to PNC and does not come out of your investment. Your Account Representative is not compensated from this fee. Your Account Representative may receive fees that range from 0.0% to 7% which is paid by the Sponsor. Depending on the product sponsor, sometimes the fee your Account Representative receives may be deducted from your initial investment into the fund. Any ongoing fees or upfront commission paid to us will vary based on the particular interest or share class selected. You should make sure you talk to your Account Representative regarding the fees, expenses and risks prior to investing in an alternative investment.
To the extent alternative investments provide differing levels of compensation to Prime Number Capital and your PNC Representative, this creates a conflict of interest as your Account Representative may be incentivized to favor one alternative investment over another. PNC discloses this conflict of interest to you and supervises your PNC Representative’s recommendations with respect to alternative investments to ensure one investment is not favored over another. Additional information is provided in each alternative investment’s prospectus or other offering material regarding the fund’s structure, fees, expenses and risks. We encourage you to fully read the prospectus or offering material prior to purchasing shares of an alternative investment.
Your brokerage account includes a core account that is used for settling transactions and holding free credit balances (“core account”) Your free credit balances of cash are automatically transferred to the Cash Sweep Program. Your un-invested cash balances in your core account will be automatically transferred (“swept”) to an interest-bearing deposit account at a Program Bank and/or other banks and/or money market mutual funds participating in the Sweep Program where it earns a variable rate of interest and is eligible for FDIC insurance. You may elect to opt-out of the cash sweep program in which you need to inform your Account Representative.
The Bank Sweep Program creates financial benefits for PNC and Velox. Velox receives fees from each Program Bank in connection with the Program and a portion of these fees may be paid to PNC and your Account Representative. The revenue generated by the Program may be greater than revenues generated by sweep options at other brokerage firms and may be greater than other core account investment vehicles currently available to you or possible core account investment vehicles that we have used in the past or may consider using in the future. The fees PNC and your Account Representative receive vary based on the interest rate set by the Federal Reserve Bank. The fees PNC and your Account Representative may receive can range between 0.0% to 1%. This creates a conflict of interest for PNC and your Account Representative because this creates an incentive for you to invest more cash into the sweep program. PNC mitigates this conflict of interest by disclosing it to our clients and supervising the PNC Account Representatives recommendations of cash into the cash sweep program.
Equity Securities, ETFs and Options are traded on one of the U.S exchanges and the customer is generally charged a commission as set forth in the Firm’s commission schedule, which is provided to you at account opening. All commissions charges on equities and options are based on the type of security, liquidity of the security, and size of the order. Where these fees apply, the more transactions you enter into, the more compensation that we and your financial professional receive. This compensation creates an incentive for us to recommend that you buy and sell, rather than hold, these investments. We also have an incentive to recommend that you purchase investment products that carry higher fees, instead of products that carry lower fees or no fees at all. In order to mitigate this conflict of interest, PNC is disclosing this conflict to its clients, and supervises the recommendations of your PNC Representative.
Corporate Bonds are also traded on the U.S exchanges and the customer is charged a fee which is called a “markup or markdown “on the bond purchased. The markup and markdown will be shown on your confirmation as a percentage and dollar amount which reflects the amount you pay. The amount of fees charged on bonds are based on the type of bond, liquidity/availability of the bond, size of the order, and specific bond characteristics. Where these fees apply, the more transactions you enter into, the more compensation that we and your financial professional receive. This compensation creates an incentive for us to recommend that you buy and sell, rather than hold, these investments. We also have an incentive to recommend that you purchase investment products that carry higher fees, instead of products that carry lower fees or no fees at all. In order to mitigate this conflict of interest, PNC is disclosing this conflict to its clients, and supervises the recommendations of your PNC Representative.
An equity/debt syndicate (an “Equity/Debt Syndicate”) is a group of underwriters who jointly underwrite equity or debt securities (both initial public offerings and follow-on offerings). The Syndicate purchases the securities from the issuer or selling shareholder, and then resells the securities to investors. Numerous factors, both fundamental and technical, are taken into consideration by the Equity Syndicate when determining the price of the offering.
We may offer and recommend securities that are part of a public offering in which PNC may act as the lead or co-underwriter, or part of the underwriting syndicate or selling group or has otherwise been engaged by the issuer as placement agent or in a similar capacity to offer and sell the securities. As an integral part of any new issue offering, where PNC serves as an underwriter or placement agent under the federal securities laws for the transactions it participates in and performs pricing, due diligence, and allocation functions as part of the offering.
Our Firm performs due diligence for every IPO in which our Firm and Account Representatives participate. As part of our due diligence, we perform an analysis of each investment to determine if the investment would be suitable for our clients. As each public offering is structured differently, the fees and commissions we earn on each sale are disclosed in the prospectus for the specific investment. These fees can range from 5% to 9%, are paid by the Issuer directly to PNC and does not come out of your investment. Your Account Representative is not compensated from this fee. You should make sure you talk to your Account Representative regarding the fees, expenses, and risks prior to investing in a public offering.
To the extent the public offering provides differing levels of compensation to Prime Number Capital and your PNC Representative, this creates a conflict of interest as your Account Representative may be incentivized to favor one investment over another. PNC discloses this conflict of interest to you and supervises your PNC Representative’s recommendations with respect to public offerings to ensure one investment is not favored over another. Additional information is provided in each prospectus or other offering material regarding the structure, fees, expenses, and risks. We encourage you to fully read the prospectus or offering material prior to purchasing shares of a public offering.
For more information on our CRS: compliance@pncps.com
