DriveWealth Disclosures and Disclaimers
Effective Date: February 1, 2021
1. SUITABILITY
You understand that DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any Transaction or investment strategy. DriveWealth only acts on instructions received from you and, where authorized, your Introducing Broker or Investment Advisor.
2. FRACTIONAL TRADING
Fractional Trading allows you to purchase securities in dollar amounts and for share increments of less than one whole share. Please be advised that Fractional Trading has unique risks and limitations that you should understand prior to participation in DriveWealth’s Fractional Share Program. Please refer to our Trading Disclosure for additional information.
3. OTC SECURITIES
The DriveWealth Platform supports listed securities that meet DriveWealth’s listing criteria. Over-The-Counter (“OTC”) securities are not available through DriveWealth and DriveWealth generally will not accept incoming transfers or deposits of OTC securities. If you hold a security in your account which becomes delisted and subsequently trades OTC, DriveWealth may, as an accommodation, facilitate liquidation only orders related to such position. DriveWealth does not support buy orders in OTC securities.
OTC sell orders must be received to DriveWealth by 2:30 pm EST in order to be processed that same trading day. Any instructions received after 2:30pm EST will be rejected, and you must resubmit your sell order the following trading day. OTC sell orders are generally processed twice per trading day – once in the morning and once in the afternoon.
By submitting your OTC sale order, you understand and acknowledge that your order will generally be processed as described above. You also acknowledge that your order could be delayed or even cancelled for various reasons outside of DriveWealth’s control, and that DriveWealth may, in its sole discretion, add, remove, or otherwise change OTC sell deadlines and/or processing times without notice.
4. DAY TRADING RISK
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 that include purchase and sale Transactions in the same security or securities. Day trading can be extremely risky. Day trading generally is not 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 with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 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 knowledge of securities markets. 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 likelihood that problems may be encountered in executing a Transaction. In addition to normal market risks, you may experience losses due to system failures. Day trading will generate substantial commissions, even if the per trade cost is low. Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 Transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses. Persons providing investment advice for others or managing securities accounts for others may need to register as either an “Investment Adviser” under the Investment Advisers Act of 1940 or as a “Broker” or “Dealer” under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirements.
5. EXCHANGE-TRADED FUNDS
Exchange-traded funds (“ETFs”) are securities that generally track a basket of other securities, without requiring that investors purchase those securities individually. ETF shares are bought and sold on an exchange. Among other things, ETFs combine features that are similar to stocks and mutual funds. For instance, like individual stocks, ETF shares are traded throughout the day at prices on the exchange that change based on market forces. Like mutual fund shares, ETF shares represent partial ownership of a portfolio that is assembled by professional managers.
There are a number of different types of ETFs, each with a different investment focus. ETFs can, for example, track widely followed stock market benchmarks, specific stocks, market sectors, or subsets of broader indices. Other ETFs are actively managed portfolio investments, which may include a variety of different types of securities that may change over time.
ETFs are subject to risks that are like those of other diversified investments. Investing in ETFs involves a variety of different risks, including, but not limited to, market risks and the possible loss of principal, liquidity risks, trading risks relating to transaction costs, and risks that the ETF will close and liquidate. Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying benchmarks or indices, they may not be able to replicate exactly that performance because of expenses and other factors. ETFs are required to distribute portfolio gains to shareholders at year-end, which may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading may also have tax consequences.
Certain types of ETFs may not be appropriate for all investors. An ETF’s prospectus describes its unique investment objectives, risks, charges, expenses, and other important information. Investors should read and carefully consider all the information in an ETF’s prospectus before investing in that or any other ETF.
The DriveWealth Steady Saver ETF prospectus can be found here. The DriveWealth Power Saver ETF prospectus can be found here.
6. PAYMENT FOR ORDER FLOW
Pursuant to SEC Rule 607, DriveWealth is required to disclose its payment for order flow practices. DriveWealth determines where to route order based on a number of factors including the size of the order, the opportunity for price improvement and the quality of order executions, and decisions are regularly reviewed to ensure the duty of best execution is met. In exchange for routing certain customer equity orders to exchanges, electronic communication networks, or broker-dealers during normal business hours, DriveWealth may receive monetary rebates. The amount rebated varies depending on the agreement reached with each market venue and will be furnished upon request.
