II. UNDERSTANDING THE CAPACITY OF THE FIRM
Janney is registered with the SEC as a broker-dealer under the Exchange Act. Janney is also registered as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”). Janney is also a member of FINRA and the Securities
Investor Protection Corporation (“SIPC”). Janney offers both brokerage services, commonly known as “transaction-based” or “commission” and investment advisory services, commonly known as “fee-based”.
Depending upon your needs and investment objectives, your Janney Financial Advisor may assist you with brokerage services, investment advisory services or a combination of both.
Brokerage services are separate and distinct from advisory services. Janney’s brokerage and advisory services are governed by different laws and regulations and also different terms and conditions within your agreements with Janney. As a result,
Janney’s legal duties and contractual obligations to you will differ depending upon whether Janney is acting as broker-dealer or acting as investment adviser for you. Some of the primary differences between brokerage and advisory services are
Brokerage services and advisory services have different costs, levels of service, and expenses. They are designed to address different investment needs, and certain brokerage and advisory services may not be appropriate for you. For example, advisory
services may not be appropriate for you if you have low or no trading activity, maintain high levels of cash in your account, or tend to execute transactions without the recommendation or advice of an advisor. Before opening an account, you should
carefully consider and discuss with your Financial Advisor, in light of your particular circumstances, the services, risks, and expenses associated with the brokerage or advisory service.
Brokerage Services and Brokerage Accounts
Janney provides custody of your assets, executes securities transactions and provides other brokerage services. In addition to taking and executing your trade orders, Janney may also provide investment advice incidental to the brokerage services. Investment
advice considered incidental to brokerage services may include investor education, investment research, financial tools, information about investments and services, and recommendations about whether to buy, sell or hold particular securities. You
should also understand that any incidental investment advice offered by Janney or a Janney Financial Advisor with respect to a brokerage account is not provided as part of any financial plan or in connection with any financial planning services.
When processing your trade order, Janney will act as either agent or as principal. When acting as agent, Janney will route your order to a dealer, exchange or other marketplace. When acting as principal, Janney will sell a security from Janney’s
own inventory to you, or purchase a security from you for Janney’s own inventory, depending upon your order. Janney also acts in a principal capacity when it assists a corporation in bringing securities to market and sells those securities to
you as part of a public offering.
Janney will send you a trade confirmation following the execution of your trade order to the extent required. However, you can request not to receive trade confirmations for your discretionary fee-based advisory account. A confirmation is a written record
of the transaction that provides important information about the transaction including the date, quantity, price, and net amount of transaction.
Once your trade order has been executed by Janney, the transaction must be settled, which means that you must pay for the security purchased or must deliver the security sold. Generally, applicable rules require equity securities transactions to be settled
on or before the second business day following the trade date. For certain other securities, the required settlement date may be earlier or later than two business days. The required settlement date can be found on the applicable trade confirmation.
Janney will act solely in its capacity as a broker-dealer and not as an investment adviser in performing its duties with respect to your brokerage accounts. This means that Janney will only buy or sell securities based upon specific approval from you.
Janney does not make investment decisions for your brokerage accounts or manage them on a discretionary basis.
When acting as broker-dealer, Janney and its Financial Advisors will be paid based upon your purchases or sales of investments. Therefore, the revenue of both the Firm and your Financial Advisor will vary by investment and over time. As a result, Janney
and its Financial Advisors have a financial incentive to recommend certain investments based upon the payment received.
When Janney acts as broker-dealer, Janney generally does not have the same legal obligations that apply when Janney acts as investment adviser. For example, when acting as broker-dealer, Janney is permitted to trade with you on a principal basis without
obtaining your consent or providing prior notice. Janney’s obligation to act in your best interest as a brokerage client is different than if Janney acted as investment adviser to you as a fiduciary.
Advisory Services and Accounts
Janney offers a number of advisory services, including recommendations and investment advice about investment products and services, and either non–discretionary or discretionary fee-based account management.
When Janney acts as an investment adviser, Janney is subject to the Advisers Act. Janney has a fiduciary relationship with you when providing advisory services. When Janney acts as investment adviser, Janney’s duties and obligations include, among
others, the following:
- Janney must act with utmost care and good faith toward you.
- Janney has a duty to seek to obtain “best execution” of transactions for you.
- Janney must avoid or disclose to you material conflicts of interest.
Additional information about Janney advisory services is available in your investment advisory agreement and in Janney’s Form ADV Part 2A Brochure (“Janney Brochure”), including the terms, conditions, costs, expenses, risks and potential conflicts of interest associated with the applicable advisory service(s). You should review those documents carefully upon receipt if you
participate in any advisory service.
In What Capacity is your Financial Advisor Acting if you have both Brokerage and Advisory Accounts?
If you have one or more brokerage accounts and also have one or more advisory accounts, Janney will provide both services to you accordingly. The fact that you have an advisory account does not mean that Janney has fiduciary obligations to you when providing
brokerage services or handling your brokerage accounts. All recommendations regarding your brokerage account will be made in a broker-dealer capacity, and all recommendations regarding your advisory account will be made in an advisory capacity. Your
Financial Advisor will identify the account for which they are making a recommendation.
What is Janney’s Role for Retirement and Other Qualified Accounts?
When it comes to retirement and other qualified accounts including IRAs, 401(k) plans, HSAs, and educational savings accounts, and other similar accounts, fiduciary status is highly technical and dependent on the service you choose. The retirement laws
(the Employment Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code) limit the types of products and services we can offer and provide when we agree to act as a fiduciary to your retirement or other
qualified account. Unless we agree in writing, we do not act as a “fiduciary” under the retirement laws when we provide non-discretionary investment recommendations to you, including when we have a “best interest” or “fiduciary”
obligation under other federal or state laws.
If you would like us to act as a fiduciary under the retirement laws for your retirement and qualified accounts, please talk to your Financial Advisor about the services available through our advisory programs. If you have questions about our fiduciary
status, your Financial Advisor can help answer your questions.
Our Role and Fiduciary Acknowledgment for Retirement Accounts
Janney Montgomery Scott, (hereinafter, “Janney” or “we”), is providing you with the following acknowledgment for purposes of complying with the US Department of Labor’s (“DOL”) Prohibited Transaction Exemption 2020-02 (“PTE 2020-02”), where applicable. This acknowledgment will be effective when we begin relying on PTE 2020-02, which will be on February 1, 2022, or, if later, the date that the DOL Field Assistance Bulletin 2021-02 (or subsequent similar guidance) ceases to be in effect.
This acknowledgment applies when Janney or one of its representatives provides investment advice or recommendations to you regarding retirement and other tax-qualified accounts (including workplace retirement plans, IRAs, SEPs, SIMPLE IRAs, educational
savings accounts, and other similar accounts), which for purposes of this acknowledgement will all be called “Retirement Accounts.”
Fiduciary Acknowledgment. When we provide investment advice to you regarding your Retirement Accounts, we are fiduciaries within the meaning of Title I of the Employee Retirement Income Security Act and/or the Internal Revenue Code,
as applicable, which are laws governing Retirement Accounts. The way we make money creates certain conflicts with your interests, so we operate under a special rule that requires us to act in your best interest and not put our interest ahead
Under this special rule’s provisions, when providing certain investment recommendations, we must also:
- Meet a professional standard of care (give prudent advice);
- Not put our financial interests ahead of yours (give loyal advice);
- Avoid misleading statements about our conflicts of interest, fees, and investments;
- Follow policies and procedures designed to ensure that we give advice that is in your best interest;
- Charge no more than is reasonable for our advice and services; and
- Give you basic information about our conflicts of interest.
Limitations to our Acknowledgement of Fiduciary Status.This fiduciary acknowledgment does not create an ongoing duty to monitor your accounts or create or modify a contractual obligation or fiduciary status under state or federal laws
other than the retirement laws.
This disclosure is provided to comply with the DOL's PTE 2020-02. If there is a conflict between this disclosure and your Janney account agreement, this disclosure will govern.
Not all services or activities that we provide to your Retirement Accounts constitute fiduciary investment advice subject to the provisions above. As examples, we are not fiduciaries
under the retirement laws when we provide:
- General information and education about the financial markets, asset allocations, financial planning illustrations and the advantages and risks of particular investments;
- General information and education about issues and options that should be considered when deciding whether to rollover or transfer Retirement Account assets to us;
- Recommendations about investments held in accounts that are not Retirement Accounts (i.e., taxable accounts);
- Recommendations that you choose to execute at another financial institution other than for assets for which we act as broker of record;
- Transactions or trades you execute without a recommendation from us (e.g., unsolicited trades), or that are contrary to, or inconsistent with, our recommendation; and
- Recommendations that do not meet the definition of fiduciary “investment advice” in Department of Labor regulation section 2510.3-21. For your information, fiduciary investment advice means investment advice for a fee or other compensation
rendered on a regular basis pursuant to a mutual understanding that such advice will serve as a primary basis for your investment decision, and that will be individualized to the particular needs of your IRA or plan account.
Plan to IRA Rollovers and Transfers. We do not provide recommendations regarding your decision to roll assets out of a workplace retirement plan and into an IRA. We will only provide you with general
information and education about your options for you to make a decision based on your personal financial needs and savings objectives.
IRA to IRA Transfers. If Janney or one of its representatives recommends that you move assets from an IRA at another financial institution to Janney, they are required to consider, based on the information you
provide, whether you will be giving up certain investment-related benefits at the other financial institution, such as the effects of breakpoints or rights of accumulation, and has determined that the recommendation is
in your best interest because (1) greater services and/or other benefits (including discretionary management, asset consolidation, trust services, and holistic advice and planning) can be achieved with the Janney IRA; and (2) the costs
associated with the Janney IRA are justified by these services and benefits.
Advisory Services. If Janney or one of its representatives recommends that you add retirement assets to an advisory program at Janney, they determined it is in your best interest based on your stated investment profile because:
- The account services and features include one of more of the following: ongoing account monitoring, non-discretionary or discretionary management, holistic investment advice, access to affiliated/third party managers, and automatic account rebalancing;
- The asset-based costs associated with Janney advisory program(s) are justified by these services and features.
When providing non-discretionary investment advice or recommendations under an investment advisory program, we are fiduciaries under the retirement laws.
Brokerage Account Transfers. If Janney or one of its representatives recommends that you add retirement assets to a brokerage account at Janney, they determined it is in your best interest based on your stated investment profile
- The account services and features include one of more of the following: no or de minimis account minimums, fees paid on a transactional basis, and the ability to maintain concentrated and illiquid positions; and
- The transaction-based costs associated with a Janney brokerage account are justified by these services and features.
Notwithstanding whether a recommendation has been made, you understand and agree that with respect to any assets you decide to move into a brokerage or advisory account, you must: (1) evaluate the investment and non-investment considerations important
to you in making the decision; (2) review and understand the fees and costs associated with the account; (3) recognize that higher net fees (if applicable) will reduce your investment returns and ultimate retirement assets; and (4) understand
the conflicts of interest raised by the financial benefits to Janney and its employees resulting from your decision to move assets into the account.