Pinnacle Family of Companies Safety & Security Business Continuity Plan Disclosures

Safety & Security

The Safety of Your Assets

As an investor, you are entitled to understand the steps taken to give you confidence in the safety and security of your assets.

National Financial Services LLC: An Industry Leader

As you may know, Pinnacle Investments has an agreement with National Financial Services LLC (NFS) in which NFS provides trade execution, clearing, and other related services for your account. Established in 1983, NFS is an industry leader. It presently services over 14.4 million accounts and custodies over $1.3 trillion in assets. Regulatory Controls for Your Protection As a registered broker/dealer, NFS is subject to the rules and regulations of the Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE), the National Association of Securities Dealers (NASD), other exchanges of which NFS is a Member, and the Municipal Securities Rulemaking Board (MSRB). These regulatory organizations each have certain rules and regulations that NFS must follow to safeguard your assets. Their rules include: Keeping accurate records of your assets held at NFS Maintaining net capital at required levels Compliance is strictly enforced by the regulatory agencies and reviewed each year during the annual audit, which is performed by an independent public accounting firm. NFS is also subject to examinations by the SEC, NYSE, and other organizations to ensure that their regulations are met.

Securities Investor Protection Corporation

Pinnacle Investments and NFS are both members of the Securities Investor Protection Corporation (SIPC), which was created in 1970 to protect customers of member broker/dealer firms. The SIPC is a non-profit membership corporation funded by broker/dealers, which are required by law to be members. To cover assets such as yours, the SIPC fund is supported by: $1 billion line credit with bank consortium Borrowing power of up to $1 billion more from the U.S. Treasury through the Securities and Exchange Commission (SEC) Because the Securities Investor Protection Act of 1970 affords special benefits to SIPC-covered firms such as NFS, Pinnacle Investments' agreement with NFS provides your assets a high level of coverage. Within certain limits, SIPC coverage covers both investor securities held by NFS and cash on deposit for the purpose of purchasing securities or as a result of the sale of securities. This SIPC coverage protects is separate form the SIPC coverage which is available should we as your broker/dealer fail to meet our obligations. SIPC coverage also does not protect against a decline in the market value of securities. While analyzing your SIPC coverage, you should know additional facts, including: The maximum SIPC coverage is $500,000 for covered accounts Your cash balances awaiting reinvestment are protected up to $100,000, which is included in the $500,000 coverage These limits are on a per-customer basis as defined in the Securities Investor Protection Act Most types of securities held in a brokerage account at NFS are protected, including stocks, bonds, notes, debentures, certificates of deposit (CDs), and mutual funds held with the SIPC member.

Customer Asset Protection Company (CAPCO)

To supplement its SIPC coverage, NFS has arranged for additional protection for customers' cash and securities. CAPCO is an insurance company licensed by the state of Vermont and has an A+ financial strength rating from Standard and Poor's. CAPCO provides to participating securities broker/dealers “Excess SIPC“ net equity protection for institutional and individual clients' securities accounts. The excess SIPC protection is in excess of the protection provided by the Securities Investor Protection Act, which is administered by SIPC. Remember, this account protection does not cover declines in the market value of securities or apply to any failures by us as your broker/dealer to meet our separate obligations outlined in your welcome letter.

Further Safeguards

NFS is required by the SEC to file monthly and quarterly financial and operational reports (FOCUS reports) within 17 business days of the month's end. The quarterly report contains financial statements, including: Statement of financial condition Income statement and statement of changes in stockholder's equity regulatory schedules, including a computation of net capital, a reserve formula computation, and other key financial and operational data As a broker/dealer, NFS cannot use your fully paid customer securities for their own business. These securities must be held for your exclusive benefit and are subject to the instructions Pinnacle Investments as your broker/dealer provide to NFS. NFS must account for, and inspect, every physical security owned by an investor at least once every calendar quarter. Any difference must be recorded and corrected within specific time frames. Net customer cash balances not required for customer transactions must be maintained in a cash account segregated for the exclusive benefit of customers.

Business Continuity

In the event of a business disruption, Pinnacle Investments and NFS both have an extensive and sophisticated Business Continuity Plan in place to safeguard your assets and protect vital account information. Duplicate records and back-up systems are maintained at NFS's primary data processing facility in Dallas, Texas. Safeguards and redundancies were of primary importance in designing this state-of-the-art data processing complex, which was built to withstand the failure of any single component in the system.