wwwfutuclearingcom - PDF document

1 www.futuclearing.com
www.futuclearing.com Page 1 Last Updated: July 2020 ANNUAL DISCLOSURE STATEMENT Contents Anti - Money Laundering ................................ ................................ ................................ ............................. 1 Privacy Statement ................................ ................................ ................................ ................................ ....... 2 Margin Disclosure Statement ................................ ................................ ................................ ..................... 2 Day Tr ading Risk Disclosure Statement ................................ ................................ ................................ ... 3 Extended Trading Hours Risk Disclosure ................................ ................................ ................................ 4 Business Continuity Planning ................................ ................................ ................................ .................... 5 SEC 606/607 ................................ ................................ ................................ ................................ ................. 6 SIPC Information ................................ ................................ ................................ ................................ ........ 6 FINRA BrokerCheck Hotline ................................ ................................ ................................ .................... 7 Anti - Money Laundering It is the policy of the Futu Clearing Inc. to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under the Bank Secrecy Act (BSA) and its implementing regulations. Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open an account, your firm must collect information that includes your name, address, date of birth, identif ication number (one or more of the following: social security number; taxpayer identification number; passport number and country of issuance; alien identification card number; government‐issued identification showing nationality, residence, and a photogra ph of you). A corporation, partnership, trust , or other legal entity may need to provide other information such as its principal place of business, local office, employer identification number, certified articles of incorporation, government issued busines s license, a partnership agreement , or a trust agreement. In addition, The United States Department of the Treasury, the United

2 States Securities and Exchange Commissi
States Securities and Exchange Commission, and the Financial Industry Regulatory Authority (“FINRA”) currently require you to pr ovide additional information , such as net worth, annual income, occupation, employment information, investment experience and objectives, and risk tolerance. If you don't provide the information requested or if your identity cannot be verified , your firm may be unable to open an account or process transactions for you. If your firm has already opened an account for you, it may be closed. www.futuclearing.com Page 2 Privacy Statement Futu Clearing Inc. understands that your privacy is important and is committed to maintaining your confidentiality. We carry your accounts as a clearing broker by arrangement with your introducing broker - dealer or registered investment adviser. To service your account and we collect certain “non - public information”. That information includes:  Information you included in application or other forms  Information about your transactions  Information from non - affiliated third - parties including consumer reporting agencies and credit bureaus  Information with your consent from affiliated part ies such as Futu Inc. or Moomoo Inc. Futu Clearing Inc. maintains safeguards to protect your nonpublic personal information. We do not disclose non - public information of current or former customers except as required by law. We may share your non - public in formation with affiliates and third - parties as necessary to facilitate and improve our services for your account. For example, we may share information with third parties that assist us with data processing, preparing monthly statements, or companies that help us service our products. With your approval, we may share information within the affiliated companies to improve your experience with us and to better serve your financial needs. Please review our Privacy Notice . Margin Disclosure Statement Futu Clearing Inc. is furnishing this document to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you shou ld carefully review the margin agreement provided by your firm. Consult your introducing broker regarding any questions or concerns you may have with your margin accounts. When you purchase securities, you may pay for the securities in full or you may bor row part of the purchase price from Futu Clearing Inc. If you choose to borrow funds from Futu Clearing Inc., your firm, you will need to open a margin account with Futu Clearing Inc. through your introducing broker.

3 The securities purchased are the f
The securities purchased are the firm’s collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan, and, as a result, Futu Clearing Inc. or your introducing broker can take action , such as issue a margin call and/ or sell securities or other assets in any of your accounts held with the member, in order to maintain the required equity in the account. It is important that you fully understand the risks involved in trading securities on margin. These risks include the following: • You can lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of thos e securities or other securities or assets in your account(s). www.futuclearing.com Page 3 • The firm can force the sale of securities or other assets in your account(s) . If the equity in your account falls below the maintenance margin requirements, or the firm’s higher “house” requirements, the firm can sell the securities or other assets in any of your account held at the firm to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale. • The firm can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contac ted them first. This is not the case. Most firms will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a marg in call, the firm can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to the customer. • You are not entitled to choose which securities or other assets in your account(s) are liqu idated or sold to meet a margin call. Because the securities are collateral for the margin loan, the firm has the right to decide which security to sell in order to protect its interests. • The firm can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Y our failure to satisfy the call may cause the member to liquidate or sell securities in your account(s

4 ). • You are not entitled to an
). • You are not entitled to an extension of time on a margin call. While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension. The firm may hypothecate the securities in your account. The firm may, without notice, pledge, repledge, hypothecate or re - hypothecate, your securities. Your securities may be borrowed by the firm or be lent to others. Day Trading Risk Disclosure Statement You should consider the following points before engaging in a day - trading strategy. For purposes of this notice, a “ day - trading strategy ” means an overall trading strategy characterized by the regular transmission by a customer of intra - day orders to effect both purchase and sale transactions in the same security or securities. Day trading can be extremely risky. Day trading generally is n ot appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day - trading activities wit h retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds www.futuclearing.com Page 4 required to meet your living expenses. Further, certain evidence indicates that an investment of less than $5 0,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success. Be cautious of claims of large profits from day trading. You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses. Day trading requires in - depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading. Day trading requires knowledge of a firm's operations. You should be familiar with a securities firm's business practices, including the operation of the firm's order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likel ihood that proble

5 ms may be encountered in executing a
ms may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures. Day trading generates substantial commissions even if the per trade cost is low. Day trading involves aggressive trading and generally you will pay commissions on every trade. The total daily commissions that you pay on your trades will increase your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions in a day, an investor would need to generate an annual profit of $111,360 just to cover the commission expenses. Day trading on margin or short selling may result in losses beyond your initial investment. When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short posi tion. Potential registration requirements. Persons providing investment advice for others or managing securities accounts for others may need to register as either an “investment Advisor” under the Investment Advisers Act of 1940 or as a "Broker" or "Dea ler" under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirements. Extended Trading Hours Risk Disclosure You should consider the following points before engaging in extended hours trading. “ Extended hours trading ” means trading outside of “regular trading hours.” “Regular trading hours” generally means the time between 9:30 a.m. and 4:00 p.m. Eastern Standard Time. www.futuclearing.com Page 5 Risk of Lower Liquidity. Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities, and as a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended hours trading as compared to regular trading hours. As a result, your order may only be partially executed , or not at all. Risk of Higher Volat ility. Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a securi

6 ty, the greater its price swings. There
ty, the greater its price swings. There may be greater volatility in extended hours trading than in regular trading hours . As a result, your order may only be partially executed , or not at all, or y ou may receive an inferior price when engaging in extended hours trading than y ou would during regular trading hours. Risk of Changing Prices. The prices of securities traded in extended hours trading may not reflect the prices either at the end of regular trading hours, or upon the opening the next morning. As a result, you may receive an inferior price when engaging in extended hours trading than y ou would during regular tradin g hours. Risk of Unlinked Markets. Depending on the extended hours trading system or the time of day, the prices displayed on a particular extended hours trading system may not reflect the prices in other concurrently operating extended hours trading sys tems dealing in the same securities. Accordingly, you may receive an inferior price in one extended hours trading system than y ou would in another extended hours trading system. Risk of News Announcements. Normally, issuers make news announcements that m ay affect the price of their securities after regular trading hours. Similarly, important financial information is frequently announced outside of regular trading hours. In extended hours trading, these announcements may occur during trading, and if combin ed with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of a security. Risk of Wider Spreads. The spread refers to the difference in price between for what price y ou can buy a security and at what pric e y ou can sell it. Lower liquidity and higher volatility in extended hours trading may result in wider than normal spreads for a particular security. Business Continuity Planning Futu Clearing Inc. has developed a Business Continuity Plan that describes how we will respond to events that significantly disrupt our business. Because the impact of business disruptions is unpredictable, we will have to be flexible in responding to actual events as they o ccur. With that in mind, we are providing you with this information on our business continuity plan. Our Business Continuity Plan Futu plans to quickly recover and resume business operations after a significant business disruption. We plan to respond by identifying responsible personnel in the event of a disaster; www.futuclearing.com Page 6 safeguarding employees’ lives and firm property; evaluating the situation and initiating appropriate action; providing customers with access to their funds and securities; and protecting books a nd records. In short, our business conti

7 nuity plan is designed to permit our fir
nuity plan is designed to permit our firm to resume operations as quickly as possible, given the scope and severity of the significant business disruption. Our business continuity plan addresses: data backup and rec overy; all mission critical systems; financial and operational assessments; alternative communications with customers, employees, and regulators; alternate physical location of employees; critical supplier, contractor, bank and counter - party impact; regula tory reporting; and assuring our customers prompt access to their funds and securities, if there is a significant disruption in our ability to provide you with our services. Varying Disruptions Significant business disruptions can vary in their scope in that they may affect just our firm, a single building housing our firm, or the business district where our firm is located, or the city where our firm is located, or the whole geographic region. Within each of these areas, the severity of the disruption ca n also vary from minimal to severe. Our response to the disruption will depend on the scope and severity of the business disruption. Depending o n the scope of the disruption, we will transfer our operations to an appropriate alternative location and resum e operations within one business day. We plan to continue in business and notify you through our web site f utu clearing .com . If the severity of the business disruption prevents us from remaining in business, we w ill assure our customer’s prompt access to their funds and securities. Contacting Us If after a significant business disruption you are unable to contact us at customersvc@futuclearing.com , you may call us at 972 - 913 - 4724. SEC 606 /607 SEC Rule 606 requires firms to make publicly available a quarterly report on the firm’s routing of non - directed orders and SEC Rule 607 require s firms to disclose its payment for order flow practices. We have arrange d with Abel Noser, LLC — an independent third - party — to disclose the required information to you. That information is available here: forthcoming . SIPC Information Futu Clearing Inc. is a member SIPC ( Securities Investor Protection Corporation ) which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org . www.futuclearing.com Page 7 FIN RA BrokerCheck Hotline The Financial Industry Regulatory Authority, Inc. offers investors information and education through the FINRA BrokerCheck Hotline at 800 - 289 - 9999 and FINRA website at www.fi nra.org . A n investor brochure that includes information describing FINRA BrokerCheck is available upon reque