Please continue to review the terms and conditions located here: www.janney.com/cash.
Janney Montgomery Scott LLC (“Janney”) offers a Cash Sweep Program that provides you with the opportunity to earn income on available otherwise uninvested cash balances held in each account Janney carries or maintains for you (each, an “Account” or “Accounts”). Janney’s Cash Sweep Program consists of two options whereby, subject to eligibility, your available cash will be automatically: (i) deposited into account(s) maintained at one or more banks (the “Insured Sweep Option” or “Insured Sweep”), or (ii) used to purchase shares of one or more money market mutual funds that Janney makes available through the Cash Sweep Program (the “Money Market Sweep Option” or “Money Market Sweep”).
Each option has distinctive features and certain eligibility requirements. Janney may change the products available under the Cash Sweep Program from time to time with notice to you. If Janney makes any change to the products or services available, there is no guarantee that such change will provide an equal or greater rate of return to you during any given period, and the rate of return may be lower than the product or service previously offered.
Janney clients affirmatively consent to participation in Janney’s Cash Sweep Program by signing the Janney Client Agreement and Disclosures (the “Agreement”) with Janney, but may revoke this consent at any time by contacting a Janney Financial Advisor. If you decline participation in the Cash Sweep Program, the cash portion of your Account will remain as a free credit balance until you instruct your Janney Financial Advisor to invest such balance. For additional information on free credit balances, please refer to the section below entitled “Uninvested Cash (Free Credit Balances)”.
1. Discretionary Advisory programs at Janney currently includes: Compass, Pioneer, Investor Select, Keystone, ETF Advantage, Russell, Goals-Based Portfolio Solutions, Advisers, Janney UMA, Classic and Janney Capital Management Direct. Discretionary Advisory IRA Accounts include only Non-Corporate Accounts.
CASH SWEEP PROGRAM OVERVIEW
This Disclosure contains information about the characteristics and administration of the Insured Sweep Option and the Money Market Sweep Option available under the Cash Sweep Program. You will find information about Program eligibility and options, Program fees, conflicts of interest, rates of return, and account protections available under each option available under the Program.
YOUR OPTIONS WITHIN THE CASH SWEEP PROGRAM
As discussed above, the Cash Sweep Program consists of two options: Insured Sweep or Money Market Sweep. Each option in the Cash Sweep Program is subject to unique risks and is afforded different protections as described herein. The rates of return for Deposit Accounts available through the Insured Sweep Option are different, and may be lower or higher, than the yields and rates of return available through the Money Market Sweep Option or vice versa.
For Accounts utilizing the Insured Sweep Option, if you have a Discretionary Advisory IRA , you will find information regarding fees and conflicts in the subsection entitled “INSURED SWEEP – DISCRETIONARY ADVISORY IRA ACCOUNTS”. For other accounts that utilize the Insured Sweep Option, you will find information regarding fees and conflicts in the subsection entitled “ACCOUNTS OTHER THAN DISCRETIONARY ADVISORY IRA ACCOUNTS”.
You should also note that the Insured Sweep Option operates differently for Accounts that are owned by individuals or trusts, certain retirement accounts, and other non-corporate accounts (“Personal Accounts”) than for accounts owned by certain entities (“Corporate Accounts”). See the Section below entitled “THE INSURED SWEEP OPTION’S PROGRAM BANKS AND PROGRAM ADMINISTRATORS” for more information.
YOUR OPTIONS OUTSIDE OF THE CASH SWEEP PROGRAM
Other cash equivalent investment options, which may provide a greater yield or higher rate of return, are available to you through your Account. However, such other investments are not part of Janney’s Cash Sweep Program and will not offer an automatic sweep feature. Contact your Janney Financial Advisor for more information on these options.
1. THE CASH SWEEP PROGRAM’S INSURED SWEEP OPTION
BASICS OF THE INSURED SWEEP OPTION
All Accounts, other than ERISA Advisory Accounts, are eligible to participate in the Insured Sweep Option. Under the Insured Sweep Option, available otherwise uninvested cash in your Account (i.e., as a result of deposits or the sale of securities) is automatically deposited or “swept” into an interest-bearing Federal Deposit Insurance Corporation (“FDIC”) eligible bank deposit account (“Deposit Account”) at one or more FDIC-insured depository institutions participating in the Program (each, a “Program Bank”). Once your cash balance has been swept to a Program Bank, it is referred to as your “Program Deposit.” Please note that your ability to access your Program Deposits may be limited, as more fully described herein. Unless your Account is an ERISA Advisory Account or you have selected the Money Market Sweep Option, where available, you authorize and direct Janney to enroll your Account in the Insured Sweep Option.
THE INSURED SWEEP OPTION’S PROGRAM BANKS AND PROGRAM ADMINISTRATORS
Under its Insured Sweep Option, Janney utilizes two separate third-party administrators (the “Administrator(s)” “Administrator”). Your eligible Account(s) will be assigned to an Administrator based on whether the Account is a Personal Account or a Corporate Account.
- Personal Accounts enrolled in Janney Insured Sweep include Accounts owned as individual Account, joint Account, trust or estate Accounts, and retirement Accounts. For clarification, Personal Accounts mean all Accounts other than Corporate Accounts.
- Corporate Accounts enrolled in Janney Insured Sweep means Accounts owned by corporations, limited partnerships, limited liability companies, foreign institutions, banks, trust companies, investment clubs, insurance companies, religious organizations, fraternal/charitable organizations and non-profit organizations. For clarification, Corporate Accounts may be referred to herein as participating in the “Corporate Insured Sweep Option” or “Janney Corporate Insured Sweep”.
For Personal Accounts, participating Program Banks are organized into a number of Program Bank lists (“Program Bank List(s)”), which are divided by the type of Account and the state or geographic region based on the mailing address of your Account statements. The Program Bank List that applies to your Account is based on the address you provided to Janney for the Account. For Person Accounts, cash balances are generally allocated to (and pulled from) in the order of the assigned Program Bank List, subject to the limitations and restrictions discussed below.
For Corporate Accounts, there is a separate and distinct Program Bank List, which is organized by alphabetical order, although this is not necessarily the order in which these Program Banks will accept your Deposits. Available cash in your Corporate Accounts will be allocated among the Program Banks according to a methodology that considers the amount of Deposits that each Program Bank agrees to accept at the time of deposit. The Program allocates deposits to each Program Bank based upon a minimum, maximum and target balance set by each Program Bank. A rules-based methodology established by the Administrator determines the sequence of allocation by the percentage that each actual Program Bank’s aggregate deposit balance under the Program differs from the Program Bank’s targeted balance, as agreed to under its agreement to participate in the Program.
Program Bank Lists will, as discussed more fully below, be amended/modified from time to time, and current lists are available from your Janney Financial Advisor or at www. janney.com/cash. You may not change the Program Banks on the assigned Program Bank List, the order of Program Banks on the assigned Program Bank List, where applicable, the order in which Program Banks will accept your Deposits, or the applicable deposit limit at any Program Bank. You may opt-out of or designate a Program Bank as ineligible to receive your cash, in which case, monies that would otherwise be deposited to that ineligible bank will simply be deposited to the next eligible bank on the applicable Program Bank List, as identified by your Account’s Administrator under its applicable allocation methodology. If you already have deposits at any Program Bank on your Account’s assigned Program Bank List and would like to designate that Program Bank as ineligible so that no additional cash is allocated through the Cash Sweep Program to that Program Bank, please notify your Janney Financial Advisor.
You are responsible for monitoring whether you have other accounts, assets and deposits (including, demand accounts, money market bank accounts and CDs) at any of the Program Banks on your Program Bank List that can, when aggregated with cash held through the Insured Sweep Option, limit the amount of FDIC insurance coverage available to you under the Cash Sweep Program’s Insured Sweep Option. It is important that you monitor all of your accounts and deposits to maximize your available FDIC insurance coverage. Please notify your Janney Financial Advisor if you want to opt out of using a Program Bank or wish to remove an opt-out previously made. If you designate one or more Program Banks as ineligible (i.e., an opt-out), the maximum amount of FDIC insurance for which your cash balances will be eligible in the Insured Sweep Option will be reduced accordingly. Participation in the Insured Sweep Option requires at least one (1) Program Bank to remain eligible to receive your cash deposits. Thus, you may not opt out of all Program Banks on your Program Bank List.
The Administrator will deposit available cash in your Account into a Deposit Account at each of the participating Program Banks, as designated by the Program Bank List up to the applicable deposit limit, but not to exceed the maximum FDIC insurance coverage limit of $250,000 for all account types ($500,000 for Joint Accounts of two or more individuals) (the “Individual FDIC Bank Deposit Limit”). Once your cash in the Deposit Account at a Program Bank reaches the Individual FDIC Bank Deposit Limit (or where allocated under the Corporate Accounts methodology), Janney, as your agent (for purposes of facilitating the deposit), will open a Deposit Account for you at the next Program Bank(s) on the Program Bank List, as applicable, and place your additional cash in the Deposit Account at such Program Bank(s). The Administrator will then continue to allocate deposits of available cash in your Account into the Deposit Accounts in order to permit such cash to be eligible for the greatest possible FDIC insurance coverage, subject to the capacity limits of each Program Bank and any opt-out directions you may provide. Once cash amounts equal to the Individual FDIC Bank Deposit Limit have been deposited in a Program Bank on the Program Bank List, additional cash up to the Individual FDIC Bank Deposit Limit will be deposited into the next Program Bank on the Program Bank List, where available, for Personal Account (or available Programs Banks under FDIC limits for Corporate Account), and so on, until your Account has reached the maximum deposit threshold (the “Aggregate Deposit Limit”). It is possible that at times one or more Program Banks on the Program Bank List may not be able to accept your deposits up to the Individual FDIC Bank Deposit Limit, in which case your cash will be deposited into the next Program Bank on the Program Bank List for Personal Accounts, and that for such time the number of Program Banks on the Program Bank List accepting deposits may not be sufficient to provide FDIC insurance coverage up to the Aggregate Deposit Limit.
As discussed in more detail below, a money market mutual fund (“Money Fund”) will be used when your Account has reached the Aggregate Deposit Limit or if the Program Banks have insufficient capacity to accept additional deposits under the Insured Sweep Option. The Money Fund currently used for this purpose is the Dreyfus Government Cash Management Fund. See the section below titled, “When There is Not Enough Capacity at the Program Banks to Accept Deposits in the Insured Sweep Option”.
Cash in your Account above the stated program limit (referred to herein as “excess cash balances”) of $2.5 million for individual accounts, certain retirement accounts and corporate accounts and up to $5.0 million for joint accounts (“Program Limit”) will continue to be deposited into additional Program Banks meaning that it is possible, though not guaranteed, that you could receive FDIC insurance coverage above the Program Limit when excess cash balances are invested in Program Banks. Our ability to sweep your cash balances to a Program Bank depends on the Program Bank’s capacity to accept the deposits. If a Program Bank has insufficient capacity to accept additional sweep deposits, or otherwise reduces its capacity to accept sweep deposits, and sweeping additional deposits to any other Program Bank is unfeasible, cash balances in your Account that cannot be swept to any Program Bank will automatically be invested in shares of the Money Fund.
JANNEY’S ROLE AND YOUR RELATIONSHIP WITH THE PROGRAM BANKS IN THE INSURED SWEEP OPTION
Janney will act as your agent and custodian for purposes of establishing and maintaining the Deposit Accounts at each Program Bank for your benefit. You will not have a direct relationship with the Program Banks. Information about the Deposit Accounts at which your Account cash is deposited may be obtained from Janney, not the Program Banks. For the Insured Sweep Option, an omnibus account will be established for the exclusive benefit of Janney clients, into which your available cash balances will be deposited. Account ownership in the omnibus account will be in book-entry form, in the account records of each Program Bank, and no passbook or other certificate will be issued by Program Banks or Janney. Deposits or withdrawals, as well as your balance(s) held at each Program Bank, will be reflected in your Account at Janney and described in your Account statement. Please refer to your Account statement for (i) a list of the balances at each Program Bank as of the last business day of each statement period; (ii) details on sweeps to and from the Deposit Accounts during the statement period; and (iii) details on the interest credited to your Account. Janney is responsible for the accuracy of your Account statement, not the Program Banks. Your Janney Financial Advisor can assist you in understanding your Account statement and can answer any questions you may have about your Account statement. The Deposit Account at the Program Bank is a direct obligation of the Program Bank and not an obligation of Janney. While the Program Banks are not affiliated with Janney, Janney may, from time to time, own securities issued by the Program Banks and may have other business relationships with them.
If either you or Janney terminate your use of the Insured Sweep Option, or if one or more Program Banks with which you have deposits cease to participate in the Insured Sweep Option, you may establish a direct depository relationship with each such bank, subject to its rules with respect to maintaining deposit accounts. Establishing the deposit account directly in your name at a bank will separate the deposit accounts from your Account. If you establish a direct depository relationship with a bank, the deposit accounts will no longer be reflected in your Account statement and Janney and the Administrator will have no further responsibility concerning the deposit account.
Neither we nor the Administrator guarantee in any way the financial condition of the Program Banks or the accuracy of any publicly available financial information concerning such Program Banks. You can obtain publicly available financial information concerning each Program Bank at https://www.ffiec.gov/ or by contacting the FDIC Public Information Center by mail at L. William Seidman Center, Virginia Square, 3501 North Fairfax Drive, Arlington, Virginia 22226 or by phone at 703-562-2200.
WHEN YOU HAVE MULTIPLE ACCOUNTS IN THE INSURED SWEEP OPTION (COMBINED INSURABLE ACCOUNTS)
If you have more than one Account in the same capacity (e.g., more than one Account in your own name, more than one Account held jointly with the same person, etc.), allocation services for the cash in your Accounts will be provided for FDIC insurance purposes and your Accounts will be held in the same insurable capacity with Janney (“Combined Insurable Accounts”). The available cash from the Combined Insurable Accounts will be deposited into Deposit Accounts so that the aggregate amount of cash in the Combined Insurable Accounts deposited into each Program Bank on the Program Bank List does not exceed the applicable Deposit Limit. With Combined Insurable Accounts, you are still responsible for monitoring the total amount of deposits that you have with each Program Bank, in order to determine the extent of FDIC deposit insurance coverage available to you.
You are responsible for monitoring the total amount of deposits that you have with each Program Bank in order to determine the extent of FDIC insurance coverage available to you. Depending on the amount of deposits that you have at a Program Bank apart from your Program Deposits, you may wish to direct that one or more Program Banks be excluded from the Program Bank List applicable to you, as discussed above. Excluding or opting out of a Program Bank from your Program Bank List will reduce the maximum FDIC limits otherwise available under the Insured Sweep Option.
CHANGES TO THE INSURED SWEEP OPTION PROGRAM BANK LISTS
From time to time, one or more of the Program Banks included on the Program Bank Lists may be replaced with a bank not then currently included on a Program Bank List, a Program Bank may be deleted from a Program Bank List without replacements or the order of Program Banks on a Program Bank List may change for Personal Accounts. Janney will generally provide you with advance notice prior to a change in a Program Bank List. There are some circumstances in which advance notice may not be feasible, such as if a Program Bank is no longer able to accept deposits for regulatory or other reasons or the Program Bank withdraws from the Program. In such circumstances, Janney will provide you notice as soon as practicable. If you receive notice that the Program Bank List has changed, it is your obligation to review the Program Bank Lists on our website or obtain the Program Bank Lists from your Janney Financial Advisor. Additional information may be provided upon written request. The current Program Bank Lists are available from your Janney Financial Advisor or at www.janney.com/cash. Please review the Program Bank List(s) applicable to your Account(s), or consult your Janney Financial Advisor, periodically throughout the month for recent updates and information regarding how these changes may impact your Account.
For Personal Accounts, in the event that the order of Program Banks on the Program Bank List has changed, your previously-deposited cash will not be reallocated based on the new sequence. Deposits and withdrawals of your cash made after a change to the Program Bank List will be made in accordance with the updated Program Bank List and as described herein.
WHEN THERE IS NOT ENOUGH CAPACITY AT THE PROGRAM BANKS TO ACCEPT DEPOSITS IN THE INSURED SWEEP OPTION
Our ability to sweep your cash balances to a Program Bank depends on the Program Bank’s capacity to accept the deposits. If a Program Bank has insufficient capacity to accept additional sweep deposits, or otherwise reduces its capacity to accept sweep deposits, and sweeping additional deposits to any other Program Bank is unfeasible, cash balances in your Account that cannot be swept to any Program Bank will automatically be invested in shares of a Money Fund, as discussed above. Purchases of shares of the Money Fund will be made within one business day after new cash balances are in your Account at the then current net asset value of the Money Fund. You may obtain a copy of the prospectus for that Money Fund by contacting your Janney Financial Advisor. Should Program Bank capacity become available, shares of the Money Fund will be liquidated, with advance notice to you, and the cash proceeds will be swept to one or more of the Program Banks pursuant to your applicable Program Bank List, and new cash balances in your Account will again automatically be swept into deposits with one or more Program Banks.
If neither the Program Banks nor the Money Fund have sufficient capacity to accept additional deposits or investments, the cash in your Account will be held in your Account as a free credit balance and earn no interest. When sufficient capacity in the Program Banks, or the Money Fund, has been restored, we will sweep the free credit balances in your Account to one or more of the Program Banks, or the Money Fund, as applicable.
During times when you have cash invested in the Money Fund and free credit balances cash in your Account, and you use cash in your Account (i.e., make an investment or take a withdrawal), it will first be deducted from the free credit balances cash balance in your Account, then redeemed from the Money Fund, and finally withdrawn from your balances in Program Banks, as applicable..
ACCESS TO CASH IN THE DEPOSIT ACCOUNTS ESTABLISHED THROUGH THE INSURED SWEEP OPTION
As required by federal banking regulations, each Program Bank has reserved the right to require seven (7) calendar days’ prior notice before permitting a withdrawal of any cash from Deposit Accounts. So long as this right is not exercised, your ability to access your cash, including the ability to write checks against your Account, should not be impacted. Your interest in a Deposit Account is not transferable. Notwithstanding the foregoing, you remain responsible for all obligations arising from your Account, including, but not limited to, margin balances, settlement of transactions, checks, wires, and debit card purchases.
When cash is needed to cover transactions in your Account, it will first be deducted from the free credit balances in your Account, if any, then redeemed from the Money Fund, if any, and finally withdrawn from your balances in Program Banks, as applicable. For the avoidance of doubt, it is understood that Insured Sweep Option is intended to exclusively utilize deposits with the Program Banks and that any cash held in the free credit balances or the Money Fund are only due to capacity or other limitation on Program Banks taking additional deposits.
OPERATIONAL DETAILS OF THE INSURED SWEEP OPTION
- For Personal Accounts, when sweeping cash into Program Banks, a Deposit Account will be opened on your behalf that is comprised of a money market deposit account (“MMDA”), which is a type of savings deposit, and a linked transaction account (“TA”). The MMDAs and TAs are made available at each Program Bank and are non-transferable. Available cash balances will be deposited in the MMDA at each Program Bank as set forth previously in this Disclosure. All withdrawals will be made from the TA at a Program Bank. A debit is created to satisfy a securities purchase or a request for a withdrawal of cash from your Account, such as when you write a check on your Account, make payments via the online bill pay service or withdraw cash through your debit card. Checks written on your Account are not drawn directly against the Deposit Accounts established for you at the Program Banks.
- For Corporate Accounts, either a MMDA or a TA will be opened, but not both. Deposit Accounts are non-transferable. As necessary, Janney, Deposit Accounts at other Program Banks on the Program Bank List will be opened and your additional cash will be deposited in those Program Banks. All withdrawals will be made from your Deposit Accounts as necessary to satisfy debits or deficiencies in your brokerage account. Withdrawals to cover debits or deficiencies in your Accounts will be made from one or more Deposit Accounts at the Program Bank(s) in which your funds have been deposited.
If your Account has reached the Aggregate Deposit Limit or if the Program Banks have insufficient capacity to accept additional deposits, for any reason, you may be invested in shares of the Money Fund. For additional information, please refer to the previous section titled “When There is Not Enough Capacity at the Program Banks to Accept Deposits in the Insured Sweep”.
- For Personal Accounts, if you have shares of the Money Fund and a withdrawal of cash is necessary to satisfy a debit, shares of the Money Fund in which you are invested will be liquidated before cash is withdrawn from your TAs at the Program Banks on the Program Bank List. If you do not have cash invested in shares of the Money Fund, cash will be withdrawn from your TAs at the Program Banks on the Program Bank List beginning with the lowest priority Program Bank at which your cash has been deposited. If there is insufficient cash at that Program Bank, cash will be withdrawn from each Program Bank in the sequence (lowest priority to highest priority) until the debit is satisfied. If cash in the TA at the Program Bank from which cash is being withdrawn is insufficient to satisfy a debit, cash in the related MMDA at that Program Bank will be transferred to the TA to satisfy the debit, plus cash to maintain any TA minimum, or “threshold,” amount, as determined by the Program Bank and Janney in their discretion to satisfy debits in your Account. If there is insufficient cash in the Deposit Accounts at the Program Banks on the Program Bank List to satisfy the debit, Janney will first withdraw cash from and Account’s free credit balance and next from other sources such as an Account’s available margin balance. Additionally, Janney may, if necessary and in its discretion at any time, close any or all of your Accounts and, without further notice, liquidate assets in any or all of your Accounts by public or private sale or purchase or both in an amount sufficient to pay such indebtedness, buy in (cover) short positions, cancel outstanding orders in whole or in part, and take any other appropriate or necessary action without incurring any liability whatsoever.
Federal banking regulations limit the transfers from an MMDA to a total of six (6) during a monthly statement cycle. At any point during a month in which transfers from an MMDA at a Program Bank reach the transfer limit, all cash will be transferred from that MMDA to the linked TA at the Program Bank until the end of the month. Deposits for the remainder of the month into such Program Bank will be made to the TA. At the beginning of the next month, cash on deposit in the TA will be transferred to the MMDA, minus any threshold amount to be maintained in the TA. The regulations on MMDA transfers will not limit the number of withdrawals you can make from cash on deposit at Program Banks in aggregate or the amount of FDIC insurance coverage for which you are eligible.
Pursuant to federal banking regulations, the Program Banks must reserve the right to require seven (7) days’ prior written notice before you withdraw or transfer funds from a MMDA. TAs are not subject to this restriction. The Program Banks have informed us that they do not currently intend to exercise this right against MMDAs.
You may instruct Janney at any time to withdraw all or a portion of the monies invested through the Program.
INTEREST RATES FOR THE INSURED SWEEP OPTION
Interest rates you receive through the Insured Sweep Option may be higher or lower than interest rates available to depositors making deposits directly with the Program Banks or other depository institutions in comparable accounts.
All Accounts, Other Than Discretionary Advisory IRA Accounts. Interest rates paid on your cash balances in the Insured Sweep Option are determined daily based upon a variety of factors including the interest rate paid by the Program Banks on the aggregate balances of the Deposit Accounts, the fees charged by Janney and the Administrator and prevailing economic and business conditions. Generally, the yields and rates of return for Deposit Accounts will differ and will be tiered based on your “household” balance. A “household” is defined as one or more Accounts with the same mailing address or Social Security/Taxpayer Identification Number that are serviced by the same Financial Advisor or team of Financial Advisors. Janney determines your household balance by aggregating the Account balances that make up the household. Advisory Accounts, other than Discretionary Advisory IRA Accounts, will receive the interest rate determined as if they were in the highest Interest Rate Tier available at the time of investment regardless of actual household balance.
The tier applicable to your household Accounts will be determined by Janney on a monthly basis calculated as of the last business day of the preceding calendar month. The interest rate tiers are currently as follows:
| Interest Rate Tier | Total Aggregate Asset Level (of household accounts) |
|---|
| Tier 4 | > $1 Million |
| Tier 3 | $500,000 - $999,999 |
| Tier 2 | $250,000 - $499,999 |
| Tier 1 | < $250,000 |
The interest rate tiers and the total aggregate asset level for each tier are current as of the date referenced at the top of this Disclosure but may change over time with notice to you. Cash balances in new Accounts will be placed into Tier 4 through the end of the month in which the Account is opened. Thereafter, the cash balances will earn interest in accordance with the applicable tier level based on the aggregate value of the assets in your household accounts (minus any liabilities).
Interest accrues and is compounded daily beginning on the day the Program Bank receives cash deposits from Janney. Accrued interest is credited to your Account on the last business day of the month. If you make a withdrawal, interest will be paid through the day prior to the day of withdrawal.
For current interest rate tiers and applicable interest rates, go to www.janney.com/cash. Your Program Deposits will earn the same rate of interest regardless of the Program Bank with which your cash is deposited. Over any given period, the interest rate you receive on your Program Deposits will be lower than the total amounts paid by the Program Banks on Program Deposits and will likely be lower than the rate of return on other account sweep options, if available, that are not FDIC-insured, including the Money Fund, and on bank deposits and other cash equivalent investments offered outside the Insured Sweep Option. Janney not responsible for ensuring that you receive such rates on your Program Deposits. Janney is not obligated to offer you any sweep account investment options or to make available to you bank deposit sweep investments (or similar investments) that offer a rate of return that is equal to or greater than other comparable investments.
Program Banks do not have a duty to offer you the highest rates available, or rates that are comparable to the Money Fund or other money market mutual funds, and Janney is not responsible for ensuring that you receive such rates on your Program Deposits. The Program should not be viewed as a long-term investment option. If you desire, as part of an investment strategy or otherwise, to maintain a cash position in your Account for other than a short period of time and/or are seeking the highest yields currently available in the market for your cash balances, contact your Janney Financial Advisor to discuss investment options that may be available outside of the Insured Sweep Option that may be better suited to your goals.
As discussed herein, interest rates on Program Deposits will vary based upon prevailing economic and business conditions. By comparison, money market mutual funds generally seek to achieve the highest rate of return consistent with their investment objectives, which can be found in their prospectuses. The information in this Disclosure applies, unless otherwise indicated, to each eligible Account for which you are an owner.
Discretionary Advisory IRA Accounts. (All Advisory IRA Accounts Other Than Partners Advisory). The method for calculating the interest rate on cash balances in discretionary advisory IRA Accounts in the Insured Sweep Option is different from the methodology referenced above. The interest rate on these Accounts is determined by the amount of interest the Program Banks are willing to pay on the aggregate balances in the applicable Deposit Accounts minus the (i) fixed account-level fee you agree to pay Janney for sweep services (discussed below) and (ii) the fees paid to other parties. For these accounts, the rate is determined without regard to household account balance.
More information about the Insured Sweep Option, including the interest rate tiers and yields, is available from your Janney Financial Advisor or by visiting www.janney.com/cash.
INSURED SWEEP — FEES AND RELATED CONFLICTS OF INTEREST
1. INSURED SWEEP — ACCOUNTS OTHER THAN DISCRETIONARY ADVISORY IRA ACCOUNTS
Program Banks will pay Janney a fee equal to a percentage of the average daily deposit balance in your Deposit Accounts at the Program Bank. Janney reserves the right to increase, decrease, or waive all or part of these fees at any time. The fee may vary from Program Bank to Program Bank. The amount of fee received by Janney and the Administrator will affect the interest rate paid by the Program Bank on your Deposit Accounts.
The Program Bank payments cover the fee for the Administrator(s), our fees, and interest payable to participating Accounts. You have no rights to the fees paid by the Program Banks to Janney or the Administrator, other than the interest credited to your Account, as described above.
Your Account’s use of the Insured Sweep Option is an important source of significant revenue for Janney. will receive fees for your account’s use of the Program. In most interest rate environments, Janney will generally earn a higher fee if you participate in the Insured Sweep Option than if you invest in other cash-like products, such as a money market mutual. This creates a conflict of interest because it provides an incentive for us to offer the Insured Sweep Option and to designate the Program as the default (or sole) cash sweep option for eligible Accounts. The fees received by Janney and the Administrator with respect to the Insured Sweep Option will be greater than, and negatively affect, the interest rate you receive on your Deposit Accounts. Current Insured Sweep Option interest rates can be obtained on our website.
Cash balances in your Account help support administration of the Insured Sweep Option and fees to Janney and the Administrator. Therefore, Janney has a conflict of interest and incentive to recommend you maintain cash in your Account, which will be included in the Insured Sweep Option, and increase compensation to Janney. Janney addresses this conflict by disclosing it to you, not sharing any compensation it receives from the Insured Sweep Option with your Janney Financial Advisor, and making other non-sweep investment options available to you, such as money market mutual funds. The Program Banks do not have a duty to offer the highest rates available or rates that are comparable to money market mutual funds, those offered by other depository institutions or deposits held at Program Banks outside of the Insured Sweep option.
Janney also receives an economic benefit for shares held in the Money Fund and amounts held as fee credit balances.
In addition to the fees referenced herein, your Account is subject to additional fees and transaction charges that apply to brokerage and securities accounts maintained by Janney, pursuant to your account agreements and other related documents. If you are investing through an Advisory Account, the fees that Janney receives from the Program Banks are in addition to Janney’s advisory fee. This means that Janney earns two layers of fees on the same cash balance in your Janney Advisory Account. Janney also has an incentive to assign your Account(s) to the Program Bank List that earns Janney higher fees. As deposit capacity becomes available, Janney assigns such capacity and arranges the order of the Program Banks on the Program Bank List(s) in its sole discretion. Janney has a conflict of interest with respect to allocations of sweep capacity and arrangements that will increase its compensation. Janney sets its advisory program fees and other fees with the expectation that it will receive fees and benefits from the Insured Sweep Option.
2. INSURED SWEEP – DISCRETIONARY ADVISORY IRA ACCOUNTS
For this category of Accounts, Janney receives a level monthly fee for each Account in the Insured Sweep Option. This amount is determined based on a fee schedule indexed to the Federal Funds Target Rate (“FFT”). Janney’s per account monthly fee is administratively managed to be no less than $0.50 and no more than $12.00. Janney anticipates that this monthly fee will be offset by the total amounts paid by the Program Banks to Janney. If Janney does not receive sufficient payments each month from the Program Banks, we reserve the right to debit the Account for the amount of any shortfall.
For its services, the Administrator will charge a monthly fee. This fee will be paid from the amounts the Program Banks pay in respect of the aggregate Discretionary Advisory IRA Account Program deposits and will vary from month-to-month. The Administrator’s fee consists of a fee expressed in basis points on the average daily cash balances at the Program Banks. The Administrator’s actual fee will be subject to adjustment as described below.
- For each month, the Administrator’s actual fee will be the amount that remains after deducting the interest paid to participating Accounts and the aggregate amount of our per Account fee from the amounts paid by the Program Banks on participating Account Program deposits (“Administrator Actual Fee”). Thus, the Administrator Actual Fee will vary from time-to-time due to changes in the amounts paid by the Program Banks, the interest paid on deposits, and the aggregate amount of Janney’s per Account fee.
- The Administrator Actual Fee will be compared to or measured against the Administrator’s annual targeted fee, which will be an asset-based fee expressed in a fixed number of basis points on the average daily cash deposits (“Administrator Target Fee”). If, after the end of any month, the cumulative net difference (positive or negative), on a rolling basis, between the amount actually received by the Administrator versus the Administrator Target Fee (“Cumulative Administrator Fee Difference”) reaches or exceeds a predetermined amount, the interest rates to be paid to participating Accounts will be appropriately adjusted by the Administrator, effective the next month, for the purpose of bringing the amounts actually received by the Administrator back in line with the Administrator Target Fee. The adjustment is determined by a formula and is intended to result in the Administrator’s compensation over time to closely approximate or equal the Administrator Target Fee; though it is understood that the Administrator’s actual fees will vary from month to month.
Accordingly, the Administrator may, from month-to-month, temporarily collect more or less than the Administrator Target Fee during certain periods, such as when necessary to help ensure that the amounts paid by the Program Banks for participating Program Accounts during the period are sufficient to cover the applicable disclosed client interest rate(s) and the aggregate amount of our per Account fee for the period. For example, under such circumstances, the Administrator will be entitled to increased fees in future periods to recover the difference with the goal of aligning its actual compensation with the Administrator Target Fee on the deposits. You authorize and direct the Administrator to deduct its fees for its services from the amounts paid by the Program Banks.
Based on the calculation method set forth above, the Administrator will calculate the fees due to us. For our Insured Sweep Option services to Discretionary Advisory IRA Accounts, including making the Program available, we receive a per Account fee each month, however we reserve the right to reduce our fee in months having less than thirty-one (31) days. Our compensation will vary depending on the FFT Rate as described above; however, it is not affected by the actual amounts held in your Account(s). Although it is generally anticipated that our fees for the Discretionary Advisory IRA Accounts, as discussed in this section, will be offset by the amounts paid by the Program Banks, as discussed above, and you hereby direct the Administrator to collect such fees from the Program Banks and remit such amounts over to Janney. Janney reserves the right to withdraw the monthly Account fee, or portion thereof, from your Account, in the event, or to the extent that, the amount received from the Program Banks (and paid over to us by the Administrator) for the period is less than our fee for the same period.
The FFT Rate used to calculate our per Account fee can be expressed as either a single value or a range of values. When the FFT Rate is expressed as a single value, then FFT for purposes of the calculations will equal such value. In time periods, where the FFT Rate is represented as a range, then the FFT for purposes of the above calculations will equal the midpoint of such range rounded to the nearest basis point.
The current FFT Rate can be found here: http://www.federalreserve.gov/monetarypolicy/openmarket.htm. If an Account is opened during a month, the monthly fee will be prorated for the portion of the month the Account was funded.
The monthly per Account fee will not generally be seen on your statement due to the manner in which Janney recoups its fee from the Program Banks payments, as discussed above. Janney Financial Advisors do not receive any of the fees received by us from the Program Banks. The Insured Sweep fees may be greater than the fees we receive from other sweep investment options.
The amounts paid to us and the Administrator reduce the interest rate paid on your cash deposits. As with all Advisory Accounts, the fees that Janney receives from the Program Banks are in addition to the advisory fee that you pay Janney and your financial advisor. This means that Janney earns two layers of fees on the same cash balances in your Janney Discretionary Advisory IRA Account. Therefore, we have an incentive to encourage you to enroll in the Cash Sweep Program.
3. THE CASH SWEEP PROGRAM’S MONEY MARKET SWEEP OPTION
BASICS OF THE MONEY MARKET SWEEP OPTION
If you selected the Money Market Sweep Option available for your account type or the Account is an ERISA Advisory Account, you authorize Janney to open a Money Market Sweep account in a designated Money Fund, as described below.
If you selected the Money Market Sweep Option, Janney offers you taxable and tax-exempt sweep money market mutual funds (each a “Money Fund”) that are managed by Dreyfus Cash Investment Strategies (“Dreyfus CIS”), a division of BNY Mellon Investment Adviser, Inc. The list of Money Funds used as a Money Market Sweep Option is available at www.janney.com/cash or you may contact your Janney Financial Advisor.
If your Account is an ERISA Advisory Account, you authorize and direct Janney to invest available cash balances in the Dreyfus Government Cash Management Fund - Institutional Shares (DGCXX), which is the only Money Market Sweep Option for ERISA Advisory Accounts.
Money Funds may impose a fee upon the sale of shares (a liquidity fee) or may temporarily suspend your ability to sell shares (a redemption gate) if the Money Fund’s liquidity falls below required minimums because of market conditions or other factors. The board(s) of the Money Funds has no intention to impose liquidity fees or redemption gates. You may obtain further details about any particular Money Fund by requesting the Money Fund’s prospectus from your Janney Financial Advisor.
MONEY MARKET SWEEP – DIVIDEND RATES
Cash swept to Money Funds will earn dividends based on the interest and income realized by the Money Funds’ underlying investments. The dividends earned on the shares in the Money Funds will not be payable in cash but will be reinvested each month in additional shares of the applicable Money Fund at the then current net asset value. Rates of return you receive will vary from Money Fund to Money Fund, because such rates are based on the investments made by the Money Fund net of such Money Fund’s operating expenses. Some Money Funds invest in certain securities, the income from which is exempt from federal and/or state income tax. The rates of return on Money Funds will differ from the interest rates available in the Insured Sweep Option. For a complete list of Money Funds available to your Account, go to www.janney.com/cash or contact your Janney Financial Advisor.
MONEY MARKET SWEEP - FEES AND RELATED CONFLICTS OF INTEREST
For all Money Funds other than Dreyfus Government Cash Management Fund – Institutional Shares, Janney will receive a monthly fee from the Money Fund, or its distributor, for distribution and shareholder services provided by Janney in connection with the sale of Money Funds available under the Money Market Sweep Option. The fee is based on a fixed percentage rate applicable to each Money Fund and the cash invested in each such Money Fund. These fees paid to Janney defray the various costs of offering the Money Market Sweep Option to Janney clients, including those associated with (a) Money Market Sweep Option features, such as the daily sweep arrangement, purchases, redemptions, dividend reinvestments, and transfers; and (b) Money Fund investments, including sub-account, statement preparation and distribution, distribution of Cash Sweep Program materials, and responding to investment-related inquiries.
As described in this section, the Cash Sweep Program creates financial benefits for Janney.
FURTHER INFORMATION ABOUT THE CASH SWEEP PROGRAM
TIMING AND WITHDRAWAL OF ASSETS FROM YOUR ACCOUNT - FOR THE INSURED SWEEP AND THE MONEY MARKET SWEEP
For the Insured Sweep Option, the cash balance in your Account will be automatically swept from your Account into the Deposit Accounts on the business day following the day your Account reflects a cash balance. In this context, business day generally means a day on which the applicable Program Bank is open for business. Available cash balances will not begin to earn interest or be eligible for FDIC insurance until swept into a Deposit Account at a Program Bank.
For the Money Market Sweep Option, any cash balance in your Account will be automatically swept into the Money Fund after the close of business on that business day and generally will not begin earning dividends until the following business day.
You may make a withdrawal from any of the Cash Sweep Program options on any business day. Withdrawals may be made through any of the features available to your Account (e.g., check, ATM/debit card) or by contacting your Janney Financial Advisor.
CHANGES TO YOUR CASH SWEEP PROGRAM OPTION BASED ON ACCOUNT TYPE CONVERSION
If at any time you change your Account from a Brokerage Account to an Advisory Account (other than an ERISA Advisory Account), it may be necessary for Janney to change the sweep option for your Account to Insured Sweep and you authorize and direct Janney to do so. If at any time you change your Account from an Advisory Account to a Brokerage Account, it may be necessary for Janney to change the sweep option for your Account to Insured Sweep, and you authorize and direct Janney to do the same. The aforementioned changes may not be required in all cases. You should contact your Janney Financial Advisor with any questions. Notwithstanding the foregoing, if you transition to an ERISA Advisory Account, you authorize and direct Janney to change your sweep option to the Money Market Sweep.
ADDITIONAL INFORMATION ON INTEREST RATES AND YIELD ON CASH SWEEP PROGRAM OPTIONS
Yields fluctuate and past performance is no guarantee of future results. For more information about the current dividend rate you are receiving in the Money Market Sweep Option and current interest rates offered by the Insured Sweep Option, please go to the “Daily Cash Sweep Rates” link available at www.janney.com/cash or contact your Janney Financial Advisor. You should compare the terms, eligibility, applicable fees, and other features of the Cash Sweep Program with other accounts or vehicles for your short-term investments.
UNINVESTED CASH (FREE CREDIT BALANCES)
Uninvested cash held in your account, referred to as free credit balances, may be used by us in the ordinary course of our business subject to the requirements of Rule 15c3-3 under the Securities Exchange Act of 1934. Janney does not pay interest on free credit balances in any Accounts. The use of client free credit balances generally generates revenue for us in the form of interest and income, which we retain as additional compensation for our services to our clients. We will generally earn interest or a return based on short-term market interest rates prevailing at the time. We do not share this compensation with you. We do not share this compensation with your Janney Financial Advisor. Free credit balances held in your account are not insured or guaranteed by the FDIC or any other government agency, but are protected by Securities Investor Protection Corporation (“SIPC”). For additional information on SIPC, please see the section titled “Account Protections - General”.
If you are acting on behalf of a retirement account, the responsible plan fiduciary agrees that it has independently determined that holding cash balances as a free credit balance, which may not earn income for the Account, is both (i) reasonable and in the best interests of the Account and (ii) that the Account receives no less, nor pays no more, than adequate consideration with respect to this arrangement.
ACCOUNT PROTECTIONS - GENERAL
Your Account at Janney is generally protected, up to applicable limits, by SIPC. This includes free credit balances (i.e., cash) in your Account as a result of cash deposits or the sale of securities which have yet to be “swept” into a Cash Sweep Program option. SIPC currently protects these funds and securities up to $500,000, including $250,000 for claims for cash. We have also arranged for coverage above these limits. In the highly unlikely event that Janney should ever fail and your assets with us not be recovered through properly segregated assets under the U.S. Securities and Exchange Commission (the “SEC”) customer protection rule (SEC rule 15c3-3) or under standard SIPC protection limits, this additional insurance covers your account subject to a limit of $24.5 million per client and an aggregate loss limit of $100 million. Excess SIPC insurance for your account is provided through underwriters at Lloyd’s of London. If you maintain more than one account at Janney in separate capacities (i.e., individually, jointly or as a trustee), each account is protected by SIPC and excess SIPC insurance if required. Accounts held in the same capacity per client are combined for the purposes of SIPC protection limits.
SIPC coverage does not cover fluctuations in the market value of your investments. Any securities held in your Account (as opposed to the Program Deposit held by a Program Bank) are investment products, and as such: (i) are not insured by the FDIC; (ii) carry no bank or government guarantees; and (iii) are subject to investment risk, including loss of principal amount invested.
At the time cash is deposited in Deposit Accounts with one or more Program Banks through the Insured Sweep Option, your deposits are eligible, subject to the limitations described herein, to be insured by the FDIC.
1. INSURED SWEEP PROTECTIONS
Your cash balance awaiting reinvestment is only eligible for FDIC insurance once it is deposited in a Deposit Account at a Program Bank. Cash in the Deposit Accounts at each Program Bank is generally eligible for deposit insurance by the FDIC up to a total of $250,000 principal and accrued interest per depositor, for each account ownership category in most insurable capacities (e.g., individual, joint, etc.) when aggregated with all other deposits held in the same insurable capacity at a given Program Bank. This does not include free credit balances (i.e., cash) in your Account as a result of deposits or the sale of securities which have yet to be “swept” into a Deposit Account at a Program Bank.
Cash deposited in the Deposit Accounts at Program Banks are not subject to market risk and value loss but are subject to the risk of a Program Bank’s failure. In the unlikely event that a Program Bank fails, the balances in the Deposit Accounts are insured by the FDIC up to FDIC deposit insurance coverage limits and are not covered by Janney or SIPC. Under the Insured Sweep Option, your cash balances may be deposited at more than one Program Bank, increasing the potential amount of FDIC insurance available to you.
The Insured Sweep Option seeks to provide up to $2.5 million of FDIC coverage for individual accounts, up to $5.0 million of FDIC coverage for joint accounts, up to $2.5 million for certain retirement accounts, and up to $2.5 million for corporate accounts (the “Maximum Applicable FDIC Deposit Insurance Amount”), subject to the total amount on deposit in an account, applicable FDIC rules, and Program Bank availability. Cash deposited in Deposit Accounts are not eligible for coverage by the SIPC.
Other deposits, including certificates of deposit, which you maintain directly with a Program Bank or through an intermediary (such as Janney or another financial services firm) in the same capacity, regardless of the number of Accounts, will be aggregated with deposits in the Insured Sweep Option for purposes of calculating the FDIC deposit insurance coverage limit. You are responsible for monitoring the total amount of deposits at each Program Bank to determine the extent of FDIC insurance coverage available to you under the Insured Sweep Option.
Once cash equal to the Maximum Applicable FDIC Deposit Insurance Amount has been deposited for you through the Insured Sweep Option in each Program Bank on the Program Bank List, any excess cash balances exceeding the Program Limits ($2,500,000 for individual accounts, certain retirement accounts and corporate accounts and $5,000,000, for joint accounts) will continue to be deposited into additional Program Banks except in circumstances contemplated by the section above titled “When There is Not Enough Capacity at the Program Banks to Accept Deposits in the Insured Sweep Option”.
The above description of the availability of FDIC insurance for available cash deposited at the Program Bank(s) is not a comprehensive discussion of the FDIC insurance rules that may apply to your situation. Additional FDIC information may be obtained by contacting the FDIC call center at 1-877-ASK-FDIC (1-877-275- 3342, 1-800-925-4618[TDD]), by letter (FDIC, Deposit Insurance Outreach/ Division of Supervision and Consumer Protection, 550 17th Street, N.W., Washington, DC 20129-9990), or by accessing the FDIC website at fdic.gov.
2. MONEY MARKET SWEEP PROTECTIONS
Money Funds are registered with the SEC pursuant to the Investment Company Act of 1940, which imposes special rules on such funds. Money Funds invest in high quality, short-term securities and seek to maintain a stable net asset value, but are subject to market risks and potential loss of value. Prior to or upon investing in a Money Fund you will receive a prospectus describing the Money Fund. You should consider the investment objectives, risks, charges and expenses of each Money Fund carefully before investing. This and other information can be found in the Money Fund’s prospectus or summary prospectus. Assets invested in Money Funds are not held in bank accounts nor are they deposits of, insured or guaranteed by, the U.S. government, any financial institution, the FDIC or the Federal Reserve Board. Investments in Money Funds are covered by SIPC.
Visit www.sipc.org for more information. Although a Money Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Money Fund. Yields fluctuate and past performance is no guarantee of future results.
Janney, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
ADDITIONAL INFORMATION
For additional information, visit www.janney.com/cash or please contact your Janney Financial Advisor.