Relationship Disclosure Document

 

R.J. O’Brien & Associates Canada Inc. (RJOC) believes the best way to help you meet your trade and risk objectives, and for us to keep serving you as a valued client, is to provide you with the account type(s) and access to markets in a way that best suits your needs.

 

We want to help you manage your trade strategies in the way that you are most comfortable in today’s changing environment. We think we can do this most successfully if we both know what to expect from each other. For this reason, we would like you to have a sound understanding of the products and services we offer; the features of your account(s) and how it/they operate(s); and our responsibilities to you.

 

We also want you to understand how your input through the “Know Your Client” (KYC) form you complete is critical to our meeting your expectations. Securities regulators have recommended that we promote active client participation for a mutually successful relationship. Regulatory guidance NI 31-103 suggests that we ask you, the client, to:

 

  • Keep us up to date. Clients should provide full and accurate information to the firm and the registered individuals acting for the firm. Clients should promptly inform the firm of any change to information that could reasonably result in a change to the types of trade strategies or volumes that may be appropriate for them, such as a change to their income, risk tolerance, or net worth.
  • Remain informed. Clients should understand the potential risks of their positions and only trade in contacts that they fully understand. They should carefully review sales literature provided by the firm. Where appropriate, clients should consult professionals, such as a lawyer or an accountant, for legal or tax advice.
  • Ask us questions. Clients should ask questions and request information from the firm to resolve questions about their account, transactions, or their relationship with the firm or a registered individual acting for the firm.
  • Stay on top of your positions and accounts. Clients should settle margin calls promptly. They should review all account documentation provided by the firm and regularly review risk strategies employed and positions held.

 

RJOC will update the Relationship Disclosure (RD) when there are material changes and subsequently refer you to our website for our most current (RD). If you later have any questions related to the contents of this document, or need to change your KYC information, please contact your Account Executive. You will be provided with a copy of the KYC information that we get from you at the time of account opening and when there are materials changes to the information.

 

 

SERVICE(S) AND PRODUCTS RJOC OFFERS

 

RJOC provides only advised accounts for its retail clients. In the future RJOC may offer managed accounts.

 

Products

 

We offer the following products:

 

  • Retail, full-service commodity futures & futures options accounts
  • Retail, Suitability-exempt commodity futures & futures options account
  • Institutional Order Execution accounts

 

Your advisor can explain these products to you, as well as how they work, their risks and possible returns, and whether they are appropriate for you.

 

 

ACCOUNT(S) YOU HAVE AND HOW THEY OPERATE

 

RJOC offers its retail clients both advisory and self-directed accounts for commodity futures & futures options.  RJOC offers order execution services for Institutional clients. Your advisor is responsible for providing suitable and unbiased recommendations to you that meet the standard of care expected of a trained investment professional based on the KYC information that you provided to us. You (or your authorized representative) direct(s) all trading and is (are) responsible for all trade decisions in your account.

 

 

FEES YOU MAY BE PAYING AND HOW THEY ARE CALCULATED

 

All fees are disclosed as required by regulations and vary depending on the accounts and services you use. We currently offer only commission-based accounts.

 

Commission-based account

 

RJOC charges a commission for each trade made in your account, based on a flat dollar amount that is negotiated between the client and the advisor servicing the account, and is negotiated before the trade is executed in your account. The commission will be disclosed on your daily statement.

 

Interest charge

 

If your account(s) is (are) in a debit position, we will deduct an interest charge from these account(s). The interest rates are available upon request.

 

Foreign Exchange

 

Exchange rates are available upon request.

 

SERVICE CHARGES AND FEES

 

Other Service Charges

Full Account Transfer-out $100
Wire Transfer $25
Certified Cheque $25
Cheque- Not Sufficient Funds $75
Cheque Stop Payment $25
Bank Wire-In Fee $10

 

Minimum Account Fees

 

RJOC reserves the right to charge a minimum account fee. The account holder will be notified of the minimum asset level and the fee amount, no less than 60 days prior to the charging of the fee.

 

Miscellaneous Fees

 

Any miscellaneous fees for service provided by other institutions, such as for 3rd party trading platforms, will be charged through at cost. Details available upon request.

 

 

HOW RJOC ASSESSES THE SUITABILITY OF YOUR TRADING

 

Before we provide you with recommendations as to which futures or futures options contracts to purchase, or if you ask us to buy or sell a specific futures or futures option contract, we will first see if we believe that trade is suitable for you according to our understanding of the information you have given us when you completed the KYC form.

 

That is why keeping this KYC form up to date and accurate is very important. If the information provided on your KYC form is not up to date, we might determine that the order you provided to us is not suitable for you in the context of our overall assessment of that information. In that case, we must advise against proceeding with the order.

 

The suitability factors that guide us in our decision as to a product’s suitability include what we understand by your current:

 

Financial situation

 

What financial assets (deposits and investments) and liabilities (debt and mortgage) you have and the sources and amount of your income – we will consider the size of any transaction compared to the overall value of your net financial assets (assets minus liabilities).

 

 

There is significant leverage available in trading commodity futures, much more so than securities, and it is therefore necessary to ensure that you have the available liquidity to ensure that commodity futures and/or foreign exchange trading is suitable for you.

 

Futures/Futures Options/Foreign Exchange Trading Knowledge (experience)

 

It is expected that over a period of time with increasing exposure to various products your level of experience should increase as you would have more exposure to different markets and how different contracts trade. We therefore ask how many years of trade experience you have as a further guide on what would be suitable for your account.

 

Risk tolerance

 

Risk tolerance for your accounts is a function of both ability to take risk and willingness to take risk. We make this determination based on whether you have a full-service advisory account or whether it is a suitability-exempt self-directed account.

 

Full service risk tolerance: As noted on your NAAF, we assign what is called “risk capital” to your account. This is defined as the amount of money you can reasonably afford to risk, if you lost the entire amount, without affecting your standard of living. This is why it is critical that we have accurate information as to your total financial overall picture. It should also be noted, that for this same reason, a client may request a specific risk capital figure, but our analysis will not permit that total figure and will grant a lesser amount. Under no circumstances, however, will a risk capital figure be assigned that is higher than that requested by a client unless that client has agreed to that higher figure in writing, and it has been approved by RJOC Compliance.

 

Online Risk Tolerance: As noted on the NAAF, we assign what is called “net loss tolerance figure” to this type of account. This is very different than the “risk capital” that is assigned to full-service accounts, and this is because these types of accounts are suitability- exempt due to the fact that you are conducting your own trading without the assistance or advice of an industry professional.

 

Instead, the risk tolerance assessment is a function of a client’s overall liquidity. Again, this is why an accurate portrayal of your overall financial picture is critical to this assessment. We need to ascertain, with this type of account, that you have the liquidity available to cover your requested loss level. Our risk assessment at this level is firm risk, not client risk. From this assessment, we may not permit the entire requested net loss tolerance level if our assessment determines that your liquid assets may not protect the firm. Under no circumstances, however, will a net loss tolerance figure be assigned that is higher than that requested by a client unless that client has agreed to that higher figure in writing, and it has been approved by RJOC Compliance.

FUTURES, FUTURES OPTIONS & FOREIGN EXCHANGE ARE NOT INVESTMENTS

 

It is critical that our clients understand that futures, futures options, and our foreign exchange offerings are NOT investments, and we therefore do not consider your time horizon or investment objectives. Trading in futures, futures options, and foreign exchange on a speculative basis carries substantial risk of loss.

 

We operate only speculative and hedge accounts, and each is defined as follows:

Hedge Accounts: Excerpt from CFTC Rule 1.3(z) for a bona fide hedge trade is as follows:

General definition. Bona fide hedging transactions and positions shall mean any agreement, contract or transaction in an excluded commodity on a designated contract market or swap execution facility that is a trading facility, where such transactions or positions normally represent a substitute for transactions to be made or positions to be taken at a later time in a physical marketing channel, and where they are economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise, and where they arise from:

 

(i) The potential change in the value of assets which a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising,

 

(ii) The potential change in the value of liabilities which a person owns or anticipates incurring, or

 

(iii) The potential change in the value of services which a person provides, purchases, or anticipates providing or purchasing.

 

(iv) Notwithstanding the foregoing, no transactions or positions shall be classified as bona fide hedging unless their purpose is to offset price risks incidental to commercial cash or spot operations and such positions are established and liquidated in an orderly manner in accordance with sound commercial practices and, for transactions or positions on contract markets subject to trading and position limits in effect pursuant to section 4a of the Act, unless the provisions of paragraphs (z)(2) and (3) of this section have been satisfied.

 

The full details of the CFTC Rule can be accessed at the CFTC website: https://www.cftc.gov/

 

Speculative Accounts: This definition is much easier as it does not involve business interests of risk mitigation, but instead is, as defined by the CFTC:

 

“In commodity futures, a trader who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements.”

 

As noted earlier then, and in summary, this is why futures, futures options, and foreign exchange are NOT investments.

 

 

REPORTS THAT MONITOR YOUR FINANCIAL ASSETS, PERFORMANCE, AND FEES AND CHARGES

 

Daily Statements

 

We will provide you with written daily statements of the details of every purchase and sale in your account(s) by email on the day the transactions are completed, or by regular mail if you have so selected on your NAAF. Please review your statement as soon as you receive it as there are significant consequences if you do not report errors, omissions, or discretionary trading on a timely basis.

 

Account statements

 

We will mail you a monthly statement(s) for March, June, September and December at no cost to you. All month end statements will be sent free of charge via email or, at cost via regular mail, every month end where a transaction occurs.

 

Every daily and/or monthly statement or other communication sent by RJOC shall be deemed to have been acknowledged as correct, being approved upon, by the client. Unless we shall have received written notice to the contrary within two days after it is sent to the Client.

 

Risk Capital/Net Loss Tolerance

 

RJOC monitors for life-to-date profit and loss figures internally. While your statements will reflect month and year-to-date figures, you can request from your advisor at any time to provide you with your life-to-date loss figures for accounts that are held at RJOC. Regardless, RJOC will notify your advisor automatically when your account has hit either the risk capital (full service advisory accounts) or net loss tolerance figures (self-directed suitability exempt accounts) thresholds and it will be solely your determination at that point if you:

 

  • liquidate any existing positions with negative open trade equity
  • continue to hold these positions with the desire to “ride out the market”, and request a risk capital update (subject to an additional form stating this & the approval by Compliance of an updated risk capital/net loss tolerance figure)

 

If the form requesting open trades with negative open trade equity can be maintained, RJOC maintains its right to liquidate these positions upon notification of the client to mitigate our risk.

 

CHECKLIST OF DOCUMENTS TO BE PROVIDED TO YOU

  • Copy of your New Client Application Form (NCAF)
  • Disclosures:
  • RJOC’s written Complaint Handling Procedures
  • Canadian Investor Protection Fund (CIPF)
  • Making a Complaint – A Guide for Investors – Part 1 of 2
  • How Can I get My Money Back? A Guide for Investors – Part 2 of 2
  • Opening an Investment Account: A Guide for Investors
  • How IIROC protects investors
  • Introducing Carrying Broker Disclosure Statement (if applicable)
  • Options Agreement
  • Welcome letter from the President
  • Customer Relationship Disclosure

 

COMPLAINT HANDLING PROCEDURES

 

RJOC has created a process for documenting, handling and resolving complaints in an efficient and expedient manner.

 

The fair and timely handling of client complaints is vital to the overall integrity of the investment industry. RJOC regards the handling of all client complaints as an essential element of the proper servicing of client accounts generally, and believes an effective framework for dealing with client complaints is in keeping with appropriate standards of professionalism in the industry.  RJOC’s procedures requires that complaints be dealt with fairly and expeditiously through a fair and thorough investigation.

 

What Constitutes a Complaint?

 

  • A “complaint” can be against RJOC, the Account Executive on the account, or any other employee of RJOC.
  • A complaint is any verbal or recorded expression of dissatisfaction alleging misconduct.

 

Misconduct is defined as the following:

  • allegations of breach of confidentiality
  • theft, fraud
  • misappropriation or misuse of funds or securities
  • forgery
  • unsuitable investments
  • misrepresentation
  • unauthorized trading relating to the client’s account(s)
  • other inappropriate financial dealings with clients

 

Note that a mistake or oversight is not misconduct. In the unlikely situation that you have a complaint, RJOC encourages you to follow the steps outlined here.

 

Step 1 – Contact your Account Executive

In many instances, complaints may be simple misunderstandings and may be resolved quickly and over the telephone or in person. As a first step, please contact your Account Executive if you have questions or concerns about a particular issue.

 

Step 2 – Send us your complaint in writing

If the problem you have is not solved to your satisfaction after completing Step 1, please detail your complaint in writing and send it to us. A copy of your correspondence should be sent to the Account Executive, the Branch Manager (if applicable) at the branch office where the Account Executive is located and to the Chief Compliance Officer at the following address:

 

R.J. O’Brien & Associates Canada Inc.

195 Commerce Drive

Winnipeg, MB R3P 1A2

Canada

Attention:

Chief Compliance Officer/Designated Complaints Officer

 

Once we have your complaint in writing it will be handled in accordance with our complaint process. Within five business days of the receipt of your complaint you will receive an acknowledgement of your complaint from the Designated Complaints Officer with a description of next steps to be taken by RJOC as well as other information such as a designated contact person, complaint reference number, the protocol you should follow once you have sent your complaint to us and the timelines which we follow in order to process your complaint in a timely manner. The entire process should take no longer than 90 days before a client substantive response letter is mailed or correspondence will be provided to you acknowledging that we require additional time or information in order to complete our review.   If a decision is to be delayed longer than 90 days, RJOC will inform you of the delay, the reason for the delay, and provide a new date for the substantive response.

 

Once completed you will receive a substantive response letter from the Designated Complaints Officer, which will include the following information:

  1. A summary of your complaint
  2. The results of our investigation
  3. Our final decision on the complaint, including an explanation; and
  4. A statement describing available options should you not be satisfied with our response

 

 

Step 3 – Other options available

If, following Step 2, your complaint has not been resolved to your satisfaction other options available to you:

  1. Arbitration;
  2. A request to the Ombudsman for Banking Services and Investments (“OBSI”) must be made within 180 days from the date of our substantive response;
  3. A complaint to IIROC for assessment whether disciplinary action is warranted;
  4. Litigation/civil action;
  5. RJOC does not offer an internal ombudsman service;
  6. Services available through the AMF for Quebec residents,
  7. Other applicable options (as outlined in available brochures)

 

 

RJOC & APPROVED PERSON CONFLICTS OF INTERESTS

 

RJOC will disclose to our clients any existing and potential material conflict that cannot be avoided. This document and ‘’CONFLICTS OF INTEREST’’ section outlines RJOC’s procedures, handling and disclosures regarding conflicts of interest.

 

RJOC has a responsibility to identify any existing and/or potential conflicts of interest that may arise between the interests of the firm, or its employees, and the interests of our clients.

 

The general types of conflicts of interest which can arise are:

  • Conflicts of interest between a client & the firm,
  • Conflicts of interest between a client and our other clients, and
  • Conflicts of interest between our firm and our related and associated companies.

 

Where an employee of RJOC becomes aware of an existing or potential material conflict of interest, this perceived conflict must be reported to the Compliance Department of RJOC immediately.

 

The firm, and its employees must consider the implications of any existing or potential material conflict of interests involving a client, and must address the issue in a fair, equitable and transparent manner, and any resolution must be consistent with the best interests of the client or clients.  Any real or potential conflict, of interest that cannot be addressed in this manner must be avoided.

 

It will be the responsibility of the Compliance Department to disclose to the client any existing or potential conflict, and how this conflict will be mitigated.  If the conflict cannot be avoided, it may occur that the firm cannot accept the client(s).

 

All employees must be cognizant of any real or potential conflict of interest that may occur either prior to opening a client account, or any situation that may occur during your relationship with a client(s).  While RJOC will canvas employees on an annual basis to establish any perceived or potential conflicts of interest that may exist, it is the responsibility of each employee to remain vigilant with their client(s) to avoid these conflicts at all times, and report to the Compliance Department immediately should they have questions or concerns.

 

Any perceived or potential material conflict of interest must be disclosed a client in all cases where a reasonable client would expect to be informed :

  1. For new clients, prior to opening an account for that client; and
  2. For existing clients, either a the conflict of interest occurs, or in the case of a transaction related conflict of interest, prior to entering into the transaction with the client.

 

The Compliance Department will be responsible for this client notification and will be responsible for the supervision and approval of any identified conflict of interest.  Periodic reassessment of the conflict will be performed at least on an annual basis, or earlier as needed.

 

 

CONFLICT OF INTEREST

 

General Description

 

Actual, potential and perceived conflicts of interest exist in almost all human interactions. Our relationship with clients are no different. For instance, RJOC is a “for profit” business and has a responsibility to maximize economic returns for our shareholders. As well, RJOC has various other stakeholders, all of whom rely on RJOC to operate profitably in order to honor the interests of those stakeholders as expected under the Canada Business Corporations Act (“CBCA”) and pursuant to securities industry financial compliance regulations. We believe the best way to achieve our goals is to provide you with trusted advice and personalized financial solutions that help you achieve your financial goals. Our objective is to serve your trading (speculators) and risk management (hedgers) goals, which is our best way to retain your continued patronage and, in turn encourage you to recommend our services and products to others.

 

We have prepared these summaries as part of our commitment to conflict of interest management practices, and also to help you better understand conflict issues that may arise. In addition to our objective to serve your financial goals in alignment with our business interests, Canada has comprehensive and extensive securities regulatory rules and regulations, many of which are directed at protecting client interests, including dealing with conflicts of interest. We suggest that you refer to the websites and publications of the provincial securities commissions through the Canadian Securities Administrators (“CSA”) and Investment Industry Regulatory Organization of Canada (“IIROC”) for more information on how Canadian securities regulations address conflicts of interest in order to safeguard the investing public.

 

Description of Member Firm

 

RJOC is what is referred to as a “Futures Commission Merchant”, more familiarly known as an “FCM”. Our client accounts are held in our name, but in an omnibus arrangement with our affiliate FCM, R.J. O’Brien & Associates LLC (RJOUS), except for Montreal Exchange (MX) positions which are booked directly to RJOC. Trades shown on your client statements, regardless of account type, except for MX trades, are held by RJOUS in segregation from the accounts of other brokerage firms. RJOUS executes, settles, and reports all your trade activity to you and provides RJOC (and consequentially to you) with a contractual indemnity assuring you that the trades shown on your statements are held by them as custodian. If, under any circumstance, any trade activity for your account is not reported on a daily statement and/or your monthly statement, immediately report such omission to RJOC Head Office Compliance since such an event is a violation of our operating policies and procedures. Conflicts of interest may still arise despite the intentions of our strategic planning to limit them.

 

You can learn more about our firm at www.rjobrien.ca

 

 

 

 

 

Description of Role of a Futures Commission Merchant

 

As an FCM, our business model is to act solely as agent, we do not conduct principal trades (i.e.: where we take the opposite side of your transaction and therefore deal in our own “inventory” of positions). We simply facilitate transactions between you, as our client, and the exchange which acts as the other side of the transaction. Through such an “agency” trade we have no ownership interest in the contract traded. This financial intermediary role for our retail clients is RJOC’s sole line of business.

 

Management of Conflicts of Interest

 

In general, we deal with and manage relevant conflicts as follows:

 

  • Avoidance: This includes avoiding conflicts that are prohibited by law as well as conflicts that cannot effectively be addressed.

 

  • Control: We manage acceptable conflicts through means such as physically separating different business functions and restricting the internal exchange of information between these divisions and Advisors.

 

  • Disclosure: By providing you with information about conflicts, you are able to assess independently their significance when evaluating our recommendations and any actions you and we may agree to take.

 

The following information is intended to assist you in understanding and assessing material potential and actual conflicts of interest, including how we address them. This is an overview of a complex subject. Despite that, we believe the simplest control is the most effective. If you ever have any questions or concerns, whether they involve conflicts of interest or any other matter, do not hesitate to say so and ask your Advisor for an explanation and more information. If you are not satisfied with the response you receive, contact RJOC Compliance at our Head Office.

 

Possible Conflicts and how they are Managed

 

Specific examples of potential conflicts of interest include, but may be be limited to :

 

Conflict of Interest Address By How Conflicts Will be Addressed
We earn compensation by selling products and services to you for which you pay us. Disclose
Control
– We endeavour to be fully transparent in disclosing fees and commission, and to fully inform you in advance when possible, so that you know what you will be paying.

– Please refer to the Fee Schedule as disclosed in your NAAF

We would like you to use more of the services offered by an external organization or group; and/or buy more of the products offered by an external organization or group Disclose
Control
Avoid
– Where we use referral arrangements, we disclose and manage them according to regulatory standards.

– We have policies & procedures, against which we monitor our advisors’ activities, prohibiting recommendations solely for the purpose of generating revenue for us without any benefit to you.

RJOC does not produce its own research on commodity futures or futures options. RJOC distributes research that is produced by third parties. Control – Industry regulations provide for formal and required standards of practice to produce and distribute research. If RJOC begins to produce its own commodities research, we will comply with all regulations.

– IIROC regulations govern the distribution of third-party research and RJOC has written procedures to address such requirements.

Individuals may serve on board of directors or take on other activities that could take time or attention away from your account Avoid – Securities legislation prohibits an individual from serving as a director of another registered firm that is not an affiliate of our firm.

– When an advisor or representative sits on a board of directors of a charity or undertakes other community activities in any substantive way, they are subject to regulatory guidance on the disclosure and approval of outside business activities.

 

 

TRUSTED CONTACT PERSON

 

In accordance with regulatory changes, RJOC is required to ask whether you would like to add a Trusted Contact Individual (TCI) onto your account.  Accordingly, please be advised, that you may provide the name and contact information for a person that you trust (Trusted Contact Individual or TCI), so that we may contact your TCI to assist us in protecting your financial interests and assets in certain circumstances.

 

We may contact your TCI if we notice signs of financial exploitation or if you exhibit signs of diminished mental capacity which we believe may affect your ability to make financial decisions relating to your account(s).  We may also contact your TCI to confirm your contact information if we are unsuccessful in

 

contacting you after repeated attempts, particularly if our failure to contact you is unusual.  We may ask your TCI to confirm the name and contact information of a legal guardian, executor, trustee or any other personal or legal representative such as an attorney under a power of attorney.  In providing us with the name and contact information of your TCI, you confirm to us that you have your TCI’s permission to give us this information and your TCI has agreed to act in this capacity.  You will promptly notify us if you wish to change your TCI, otherwise we will assume your TCI is the individual you have designated in your most recent documentation.  Please contact your advisor for further information.

 

TEMPORARY HOLDS

 

If we have a reasonable belief that you are being financially exploited or that you are experiencing diminished mental capacity which may affect your ability to make financial decisions relating to your account(s), we may place a temporary hold on your account or a particular transaction.  We will provide you with a verbal or written notice explaining our actions, in addition to contacting your TCI, as above.  We will review the facts behind placing the temporary hold on a regular basis to determine whether the temporary hold should continue.   We may contact your TCI to discuss our reasons for the temporary hold.

 

 

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